Lundin Mining Corporation

Ladies and gentlemen, and welcome to the Lundeen Mining fourth quarter and full year 2022 results call and webcast. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, February 23, 2023. I would now like to turn the conference over to CEO Peter Rockendale. Please go ahead.

Thank you, operator, and thank you, everyone, for joining us today. I will draw your attention to the cautionary statements on slide two, as we will be making several forward-looking statements during the prepared remarks and likely during the Q&A. On the call to assist with the presentation and answer questions are Tyler Polson, our Senior Vice President and Chief Financial Officer, and Juan Andres Morel, our Senior Vice President and Chief Operating Officer. Beginning on slide four, I want to touch on a few of our 2022 achievements as they position Lundee Mining well to deliver on our strategy and industry-leading returns in the years ahead. We delivered solid production results in 2022. We substantially met our copper production guidance of 250,000 tons, and we achieved the upper end of our production guidance ranges for both nickel and gold. Our portfolio of high-quality operations produced over 400,000 tons of copper-equivalent metal. We generated significant adjusted EBITDA, operating cash flow, and free cash flow from our operations, despite challenging inflationary conditions and lower year-on-year metal prices. Throughout 2022, we made good progress advancing our many growth initiatives. While ramp-up of the Nevis Coral Zinc expansion project was slower than planned, It delivered sequential quarterly production improvements and is tracking well to our plans this year. At Candelaria, study work evaluating expansion of the underground mines to add roughly 20,000 tons of copper per year to the production profile has been completed. With the potential changes to mining royalties and taxation in Chile being moderated from earlier proposals, we're looking forward to a potential investment decision upon approval of the 2040 EIA. We announced the first mineral resource estimate for the Saouba deposit earlier this month. The maiden estimate is for nearly 180 million tons of indicated resource containing 1.3 billion pounds of copper and 1.1 million ounces of gold. We expect the estimate to increase with ongoing exploration efforts and influence our plans of how best to expand production at Chapada. The upper keel zone at Eagle and the sequential flotation project at Zincroon are now incorporated into our life of mine plans. With the upper kill zone included, Eagle's mine life now extends into 2027. Zinc Rubin's recoveries and concentrate rates are expected to increase later this year with the completion of the sequential flotation project. We made good progress in 2022 advancing our large-scale Jose Maria copper bullet project. Detailed engineering is now approximately 40% complete and we are on track to deliver an updated technical report in the second half of this year. We remain focused on value creation through disciplined growth and the prudent allocation of our shareholders' capital. Yesterday, our Board of Directors declared a regular quarterly dividend of $0.09 Canadian per share. The annualized dividend of $0.36 Canadian continues to be a leading return amongst our peers. We directly returned over $275 million in dividends in 2022 and indirectly returned a further $60 million to shareholders with the opportunistic repurchase of 10.8 million shares under our normal course issuer bid. Further, we increased the strategic and technical strength of our team this year with the addition of experienced and proven leaders to our executive and operational teams as well as our board of directors. In short, Lundin Mining is well positioned and focused on delivering on our strategy of operating, upgrading and growing a base metal portfolio that provides leading returns throughout the cycle. Moving to slide five, we previously released our production results earlier this year, so I'll speak briefly to some of the details provided in our full results yesterday. We produced 250,000 tons of copper in 2022, including over 56,000 tons in the fourth quarter, substantially meeting our production guidance. Chapada and Eagle met guidance, while Candelaria and Nevis-Corvo were modestly below. Candelaria and Nevis-Corvo's fourth quarter production were both impacted by throughput and to a lesser extent grade, partially offset by better than planned recoveries at Candelaria. Chapada had a strong second half recovering from the weather and COVID absenteeism, which impacted the start of 2022. We produced roughly 160,000 tons of zinc or within 5% of our guidance. While below plan, ZEPP delivered its fourth quarter of sequential production improvement and overall increased zinc production 25% over that of 2021. The ramp-up of Zest this year is tracking well to plan. Zinc-Gruven's fourth quarter zinc production was impacted by lower-than-plan zinc head grades and short-term re-sequencing of the MyPlan to the Knee-Gruven area. Eagle continues its reliable performance, producing over 17,000 tons of nickel in 2022 and achieving the upper end of the guidance range. The upper end of the guidance range was also achieved for gold, with production of over 154,000 ounces. Candelaria met and Chapada exceeded their gold production guidance ranges. Similar to copper, Chapada had a strong second half of the year, achieving better than planned gold recoveries in the fourth quarter. I will now turn the call over to Titor to provide a summary of our financial results.

Okay, thank you, Peter, and good morning, everybody. Moving to slide six, as Peter mentioned, we generated significant adjusted EBITDA, operating cash flow, and free cash flow from operations in 2022, despite the lower year-on-year average metal prices and inflationary conditions that we have experienced. Starting with the top line, we generated $3 billion in sales for the year, including over $810 million in the fourth quarter as metal prices strengthened. This compares to the record-setting 3.3 billion for the full year in 2021. Our sales remain predominantly leveraged to copper, with the metal generating 63% of the year's revenue. Zinc and nickel contributed 12% each, while gold contributed 7%. Other revenues include sales from lead, cobalt, PGMs, iron, and other byproduct metals from our operations. With metal prices finishing the year on a strong note, 2022's revenue was positively impacted by $30 million of prior period price adjustments, including nearly $75 million of positive adjustments for the fourth quarter. A summary of realized copper, zinc, and nickel prices for the year are presented in the bar charts on this slide. Ultimately, we realized prices of $3.75 per pound of copper $1.50 per pound of zinc and $12.15 per pound of nickel for the year, including the adjustments. At the end of the fourth quarter, approximately 90,000 tons of copper were provisionally priced at $3.79 per pound and remained open for final pricing adjustment. As did over 36,000 tons of zinc at $1.35 per pound and nearly 5,000 tons of nickel at $13.60 per pound. Moving to slide seven, production costs totaled close to $1.7 billion for 2022 and were approximately 20% higher than last year. The increase that we have seen this year has largely been a result of broad inflationary impacts on prices of consumables, particularly diesel and electricity, primarily at Candelaria, Chapata, and Nevis-Kirbel. The chart on this slide presents the relative impact of key drivers to the total operating and capital costs by each operation for the full year. The Candelaria's full year cash cost was impacted by the successful early agreement of labor contracts in the fourth quarter, as well as higher energy and maintenance costs and lower production volumes than forecast. Three-year labor agreements were reached with three of the unions late in the fourth quarter, well ahead of expiry of the existing agreements occurring this year. Candelaria's fourth quarter production cost and cash flow were impacted by $20 million with the pulling forward of the agreement bonuses. On a cash cost basis, this represents $0.06 per copper for the year and $0.27 per pound for the fourth quarter. Candelaria's costs are to benefit from the roughly 50% lower electricity rate under our new power purchase agreement, which commenced on 1 January. The new power purchase agreement also ensures a minimum of 80% renewables in the energy mix, prioritizing wind and solar. Cash cost guidance is for $1.80 per pound to $1.95 of copper in 2023, and includes the savings from the new power purchase agreement. Chapada's full-year cash cost was better than guidance, benefiting from greater than planned gold volumes in the fourth quarter. Cash cost guidance is for $2.55 to $2.75 per pound of copper in 2023, mainly reflecting the expectation of higher year-on-year average consumable costs and forecast lower production volumes. Nevis Corwell's full-year cash cost was above guidance, largely driven by a lower-than-planned volume of copper and zinc, as well as cost inflation, particularly for electricity. Cash cost guidance is for $2.10 to $2.30 per pound of copper in 2023, with improvements expected as zinc and lead production volumes increase with the continued ramp-up of SEP towards nameplate. Eagle's full-year cash cost was above guidance primarily due to lower byproduct copper volumes and prices than forecast, combined with inflationary increases in operating costs. Cash cost guidance is for $1.50 to $1.65 per pound of nickel in 2023, with the expected year-on-year increase primarily a reflection of the planned lower production volumes. Syncroin's full-year cash cost of $0.32 cents per pound of zinc was 40% better than guidance, owing mainly to greater lead and copper byproduct credits and more favorable for an exchange than planned. Cash cost guidance is for 60 to 65 cents per pound of zinc in 2023, net of the lead and copper byproduct credits. Total capital expenditure tracked well to our guidance with sustaining capex of $640 million compared to guidance of $670 million and total capex of $845 million including expansionary capital on set and to advance the Jose Maria project. Lastly on this slide, we have begun to realize the benefits of our foreign exchange hedging program intended to provide better visibility on our US dollar funding requirements of future operating costs and capex. In the fourth quarter, we realized a gain of $6 million and an unrealized gain of $63 million on our FX hedging contracts. Details of the program are available in the year-end financials. Our full year and fourth quarter key financial metrics are presented on this slide eight. Full year revenue, as I said, was over $3 billion, and the fourth quarter revenue was over $810 million. We generated adjusted EBITDA of $1.3 billion for the year, including nearly $355 million in the fourth quarter, which is greater than the adjusted EBITDA generated over the previous two quarters combined. Full year adjusted earnings were over $480 million, Adjusted operating cash flow was nearly $1 billion, and free cash flow from operations was over $380 million. Details of the adjustments are broken down in our MD&A. We remain in a strong financial position. We finished the year in a very modest net debt position, and today we remain in a modest net debt position of roughly $14 million. We have significant liquidity of approximately 1.7 billion today and recently received commitments from our leading lending syndicate to extend the term of our revolver by a year to April 2028, along with a modest reduction in our borrowing rate spreads. Slide 9 presents greater detail as to the sources and uses of cash in 2022. Before changes in working capital, our operations generated nearly a billion dollars in 2022, net of approximately 66 million expensed on the Jose Maria project in the second and third quarters, and just over $300 million of cash taxes relating to prior year settlement as well as tax installments for 2022. Cash and cash equivalent at year end were approximately 190 million, a decrease of roughly $400 million with cash flow from operations used to fund investments in our assets, the acquisition of Jose Maria, shareholder dividends of $275 million, and share buybacks of nearly $60 million. With that, I'll turn the call back to Peter. Thank you.

Thank you, Titor. Slide 10 highlights the meaningful scale and material growth potential of our copper portfolio. Yesterday evening, we filed an updated technical report for our Candelaria, Nevis Corvo, and Eagle operations. The reports each underpin our current guidance for the operations and the updated minimal resource and reserve statements announced earlier this month. Candelaria's life of mine has been extended to 2046, reflecting the base case plan and operating cash cost forecast in the current price environment. The base case plan does not yet contemplate the Candelaria underground expansion project known as QGIS. which has the potential to add roughly 20,000 tons of copper production per year, nor does it include the potential restart of the Al Caparosa mine. We announced the maiden indicated resource estimate for the Saúl discovery in early February and view it as the first of many iterations of increasing mineral estimates to come. We continue to evaluate potential expansion opportunities at Chapada to best exploit the significant mineral resource base and the growing Saúl deposits. I'll speak more to Sauva on the next slide. We continue to make good progress on our world-class Jose Maria Copper Gold project. Detailed engineering is now approximately 40% complete and an updated technical report remains on track to be published in the second half of this year. The project is being advanced in a deliberate and disciplined manner to minimize the risk and progress towards a construction decision at the appropriate time. Slide 11 shows the conceptual open pit outlines of the maiden SOVA mineral resource estimate, as well as highlights some of the assays received during the fourth quarter. The maiden indicated mineral resource is estimated to be nearly 180 million tons, grading 0.32% copper and 0.2 grams per ton gold, containing 1.3 billion pounds of copper and 1.1 million ounces of gold. Within the 180 million tons is a zone of 109 million tons, at 0.42% copper and 0.29 grams per tonne gold, which is 0.54 copper equivalent. This compares to the average head grade Chapada processed in 2022 of 0.26% copper and 0.16 grams per tonne gold. We continue to be very excited about this discovery and believe it supports our view that many opportunities exist to increase the size and quality of our mineral resource base at Chapada. The deposit remains open and we expect the resource estimate to continue to grow with our ongoing exploration efforts. Subsequent to the estimate cut-off date, over 8,500 metres were completed by year-end. Our 2023 exploration program is focused on increasing mineral resource and testing step-out anomalies along the broader Saúba Formiga trend and is to include 55,000 metres of further drilling. The potential implications this system may have for our ongoing expansion studies are being evaluated as Sauva continues to evolve with drilling. Moving to slide 12, Lending Mining is a top 15 producer of zinc and concentrate globally and well positioned on the industry cost curve. With the ramp-up of ZEPP to name plate capacity and improvements at zinc improvement, Zinc production is forecast to increase a further 45 to 50% to 225,000 to 240,000 times by 2025. As mentioned yesterday, an updated technical report was filed for Nevis Corvo. The report supports our ZEPP ramp-up expectations, our guidance for the operation, and the updated mineral resource and reserve estimates released earlier this month. Nemesh core production is forecast to increase over the course of this year as initiatives to enable ZEPP to consistently achieve nameplate capacity are executed and resulting in improved overall throughput and metal recovery rates. Zinc production is forecast to increase over the next three years as head grades are to increase on mine sequencing and metal recovery rates and concentrate grades are to improve the completion of the sequential flotation project this year. On slide 13, we also filed an updated technical report extending the life of the operation into 2027. Development of the upper keel is underway, having begun in early January of this year, and first ore is anticipated in 2024. We are evaluating the potential of including the mineralization of the lower keel zone in the production plans, as well as evaluating potential options to include a considerable amount of lower grade mineralization in the upper keel zone. While a smaller program than our other sites, we plan to complete over 15,000 meters of highly efficient drilling from underground at Eagle this year, with a focus on extending the life of mine by targeting conduits linked with Eagle East. Lastly, Jose Maria, Chapada, and Cebuva offer not only material copper growth potential, but significant gold production growth as well. With the development of Jose Maria, gold production is set to increase by over 130%, and then further with potential expansions at Chapada and the development of Sauva. In conclusion on slide 14, we have a very desirable portfolio of quality mines and are advancing meaningful growth projects. Despite the inflationary macroeconomic environment and site-specific challenges, we delivered solid performance, leading to strong operating cash flows and a strong financial position from which to grow. We remain well positioned both operationally and financially to deliver on our strategy of operating, upgrading and growing a base metal portfolio that provides leading returns for our strollers throughout the cycle. And with that operator, I would like to open the lines for questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the one on your touchtone phone. You will hear a three-tone prompt acknowledging your request. Should you wish to decline from the polling process, please press the star followed by the two. If you're using a speakerphone, please lift the hands up before pressing any keys. One moment, please, for your first question. The first question comes from Orist Wakado of Scotiabank. Please go ahead.

Hi, good morning. Hi, Peter. Can you please give us an update of of basically what kind of milestones we should expect to see with respect to Jose Maria in terms of what you need, what needs to happen in order to reach that sanctioning decision. And then I'm also curious on where the current thinking is on an ideal partnership structure with respect to ownership for Lundeen Mining.

Thanks, Doris. I guess answering that a couple of ways. As we point or mentioned in the presentation, so we are working towards having the updated technical report out on the second half of the year. Right now we're at about 40% on the engineering front. Most of the money this year is being spent on further engineering, a couple of small, if you will, long lead items, but upgrading to the roads, geotech work, some permitting, areas of that nature. But we won't really put out news on those specific items. So I think the biggest milestone will be when we come out with the updated technical report in the second half. I can say that we are working very much in parallel at the same time with a lot of the discussions on the partnerships, and it hasn't really deviated from the beginning, if you will, on who the ideal partners would be. So carrying a lot of those conversations, some of which will be occurring even next week, you can probably figure out where we are, and then throughout the year. A lot of people have made their way to come see us. There seems to be a lot of interest in the project, but it's hard to predict until we start getting a bit more engineering, quite frankly, that we can deliver to them as well to see where they stand.

Just as a follow-up, though, what about in terms of agreements with the government with respect to being able to repatriate cash and those kind of milestones?

Nothing's changed from what we have reported earlier. So, you know, we announced Decree 234 previously, and so that did change our ability to, I think historically you could only keep 20% of the capital outside of the country. Where we stand now is 60%. That being said, there are still a lot of items that we're working on with the government as we work towards this back half of the year. And, you know, going back to your question on the partnerships, I would say arguably it's mainly... Our focus has been on two areas, if you will. I mean, there's three different opportunities, but our focus has been on two, which would be kind of the well-known trading houses. You can probably figure out the short list of ones that are most interested, and then a handful of larger global mining companies as well.

Okay. Thank you very much.

No problem.

Thank you. The next question comes from Daniel Major of UBS. Please go ahead.

Hi there. Yeah, thanks. Thanks so much for the questions. First question's on Candelaria. You've obviously indicated 20,000 tons upside from the expansion relative to the capex profile, sorry, from the underground. Daniel Hamilton, related to the capex profile and the technical report, can you give us any sense of your ballpark how much additional capital, we would be required for that 20,000 tons incremental and, secondly, the kind of a reminder of the upside if Al Caparosa comes back into the mine plan that's the first question.

Al Caparosa, Thanks Daniel so yeah i'm cute yeah I would say that. You know, we obviously put a ballpark number in there, but it was 20 to probably 22,000 tons is what our initial studies are showing as far as what that could add. I don't think we've disclosed yet what the capex would be. We have a few different kind of options, if you will, on how to fund that, whether it be internally or externally, but we haven't disclosed what that number is yet. With respect to Alcaparosa, you know, we have had a lot of... support, which often doesn't make its way back to North America, but we were actually on the front page of the national paper down there last month with the Minister of Mines. They're very supportive, actually trying to get Al Caparosa open, but there are some things that we need to do from the technical side, from the permitting side. If we were able to get that back up and running in the next, or start the process in the next couple months, you'd probably be talking in the range of 4,000 to 6,000 tons that could be added for 2023. Okay, thanks.

And I'm assuming that would be consistent across the profile, around 5,000 tons, you know, over the profile of the future years. Is that correct?

Yeah, that's probably an accurate number to assume.

Okay, cool. Thanks. And then the second question on Nevis Corvo, looking at the operating cost profile from the technical report, you've got, I guess, a some implied improvement 2024, 2025 in ore costs per ton of ore milled as volumes lift, but absolute level of costs is reasonably stable. What sort of assumptions are you making within that on power cost normalization in Portugal?

Yeah, so a couple of things. One, which I'm just going to grab the tech report and maybe get Mark to help on that one. But what I will say as well is We are right now closely reviewing the possibility of implementing solar, and so there's a couple of proposals that are coming in, and we'll see how those trade off against some of the long-term pricing that we're able to get in Portugal. We are currently seeing relief on some of the longer-term pricing, but it has been extremely volatile, so it's difficult to come up with a year number, if you will. On the tech report, I know Mark was just grabbing a specific number.

Yeah, Dan, I think in the tech report, we do outline the electricity costs, the assumptions there. So we're talking about 16 million euros for 2023, and you can see it does normalize and come down from there. So it does assume, and we're taking certain strategies, as Peter was talking about, to make sure we do, I'll call it, normalize it or bring it down to Maybe not quite historic levels, but certainly not the average of last year. So it does partially include that. I'd say the majority of the gains, though, do come through really the economies of scale and actually hitting production volumes there. We have the people on site, the costs on site. So really, as you pointed out, the overall cost in aggregate should not be changing drastically, but we should be diluting that with greater production volumes.

Okay, great. Thanks. I didn't have quite time to sit through the 226 pages of the report. Yeah, thanks. And then just final one more, if I could, on the, on Jose Maria, when we think about the capital budget and the parameters you've, or the guidance you've given so far, is it fair to assume that the spend this year is in addition to, you know, the the final capital budget that you set?

Well, I think it would be part of the budget. Yeah, it's not going to be in excess of the budget.

We've guided $400 million for spend in 2023, and as you can see in our Q4 report, we spent about $170 million in 2022. So obviously, once the final investment decision is taken, we will guide the new number on a point forward basis from that decision point.

Okay, thanks a lot. No problem.

Thank you. The next question comes from Estefan Lanu of Cormark Securities. Please go ahead.

Hey, great. Thanks very much, guys. I'm just kind of curious. Anyway, the guidance for this year is across the portfolio, $1.1 billion spent on CapEx. Just wondering if you could maybe provide some sort of thoughts on maybe the cadence of that spending and how that's going to dovetail with your cash flow and maybe what you think about in terms of potentially drawing down your RCF.

Yeah, I mean, clearly this year's CapEx program has quite a lot of expansionary CapEx included in it, as I said, $400 million and then a little bit on the SEP as well. But if you take 2022 as a proxy, you know, we generated a billion dollars in from our operations. And that, by the way, actually includes $160 million spent on cash tax, which relates to 2021 sort of final tax settlements. And it also includes an expenditure of $66 million on Rosemaria. So in what was a relatively challenging year, we still generated, when you adjust for these items, over a billion dollars in cash flow from our producing assets. So in that context, you know, when you look at the capex we have and then exploration expenditure and also the dividend, I mean, it's very doable, the capital allocation program that we have, and also considering the strong balance sheet and the fact that we have $1.7 billion on drone credit lines, I think we're in a good position to motor ahead on this program.

I would add that just further to your question, from a cadence perspective, It is pretty equal. You're talking about probably a quarter. Q1, I think, is going to be the high. We're talking, I believe, just over $300. And then you're going to get lower as you're through the year. But Q2, Q3, and Q4 are pretty equal.

Okay, that's super helpful. And then just maybe housekeeping questions. Just on the Jose Maria spend itself, is it fair to assume that all of it's going to be actually capitalized this year? Because I know some of it was expensed last year.

Yeah, I think for all intents and purposes, the vast majority of it will be. There might be a few expense items, by and large, to be capitalized, yes.

Okay, great. That's super helpful. Thanks very much, guys. No problem.

Thank you. Once again, ladies and gentlemen, if you do have a question, please press star 1 at this time. The next question comes from Ioannis Masvoulis of Morgan Stanley. Please go ahead.

Ioannis Masvoulis Good morning and thank you for the presentation, Peter and team. A few questions left from my side. The first one, if we look at the production profile on slide 10, you show the Chapada expansion with salvo there, adding perhaps 50,000 to 60,000 tons. Is that the right sort of ballpark? And then what about gold?

Yeah, sorry, I was just looking at the page. Yeah, it's hard to put that specifically to scale, so I think it's to be determined. I mean, what we have right now is we have, as you've seen, a pretty good-sized resource there. It's open in all directions. I think I mentioned that if you take the more higher-grade core, it's 109 million tons of 0.54 copper equivalent, so quite a bit more than what we're currently mining there at Chapada. And we've got A backlog of about 8,500 meters right now with a lot of good results. There's one on the page that we've included that was quite recent. I think that's hole 238. So we've hit 90 meters of over 2% copper equivalent, and that's near surface. And then we've got another 55,000 meters we'll be drilling this year. But I'd say it's a bit premature, unfortunately, to determine what that incremental production rate would be.

Okay, understood. Thank you. Second question, just on some non-recurring items for 2022. Sinkhole costs $63 million. How much are you budgeting for 2023? And then if you can comment on the inventory write-down and the underlying reasons, that would be very useful. Thank you.

Yeah. I mean, on the sinkhole, we have expensed $63 million in 2022. of which around about $20 million is actually a cash cost incurred. And the rest is an accrual for work we have to do through 2023, so remediation work on the sinkhole itself, and we've also accrued for an element of potential fines within that number. On the stockpile on Chapada, this really relates to... higher input cost into the stockpile and also higher movement cost looking forward with an assumed higher diesel cost in particular. So that triggered an impairment of just over $60 million.

Yeah, this was a big debate, I would say, with the auditors because trying to determine a diesel price on a long-term stockpile is not the easiest thing to figure out. But in any case, they had their opinions and you know, diesel comes down, you can see that get right up back again.

Understood. Very clear. And maybe if I can squeeze one more on the Candelaria technical report. You have extended the mine life to 2046, but there is a meaningful step down in copper recoveries in the latter years. What explains that? I think it's about 10 percentage points drop in recoveries.

Tristan Marquez- You want to get just. Tristan Marquez- It is really driven by the metallurgical models there, so I mean as we get towards. Tristan Marquez- called the latter years of that current line plan and we're processing more stockpile that would really be. Tristan Marquez- The bulk of what's driving the expected recoveries at that time, but i'd say again that's that's the current plan so as we look to add or. Tristan Marquez- add potentially back Al Caparosa and extend some of those line lives, the further we can push those stockpiles on I think the better.

know recoveries we'd have for longer as well too so great thanks so much thank you thank you the next question comes from daniel major of ubs please go ahead hey guys sorry really quick follow-up just come from janice's question um uh just on the working capital you built um built some working capital again in the fourth quarter. I suspect that's associated with provisional pricing to an extent. But on the sinkhole P&L costs versus the accrual, is that sort of 40, 50 million of cash expected to flow out in 2022 with respect to the sinkhole? Will that sort of be flowing through as a working capital line?

Yeah, I mean, as I said, we spent already 20 million, and also in 22, we impaired around about 5 million, which also sits within that 63. So I think the potential cash element, I mean, this is an accrual that's not confirmed yet, but this is around about 38 million, I think, of cash impact for 2023, as we have currently accrued for. But, you know, the work is still to be executed, and let's see where we end up.

Okay, and just to follow up on that, on sort of broader working capital, you know, you saw an overall build last year. How would you expect the progression over 2023 or else equal in terms of kind of pricing?

Yeah, I mean, I think as a general rule of thumb, I think we can say in an increasing pricing environment, you tend to build up receivable and therefore you tend to build a working capital position. And when... which is a nice thing, of course. Then when prices weaken again, then you tend to online that foreign capital. So these are timing differences, and we tend to see 100 million plus or minus swings from quarter to quarter on these items.

Great. Thanks a lot.

Thank you. The next question comes from Jackie Presbelowski of BMO Capital Markets. Please go ahead.

Thanks very much for taking my question. Congratulations on the quarter. I just wanted to ask, I know you guys have talked about this before, but it's in the MD&A now that you're moving your head office to Vancouver in the second half of the year. Can you just talk a little bit about what you expect in terms of timing and personnel if you're expecting sort of any major changes to the head office team? Thanks.

Hi, Jackie. Yeah, so some people have already made their way out and they're kind of working between both offices as we speak. I think the majority of the transition will happen towards the end of August and there's been good buy-in from the key people within the company. There are some people for specific positions that will remain in Toronto as well as we have begun a process in Vancouver with a very strong reception, hiring some other people that won't be able to make the transition. So, you know, I can get into it in a bit more detail maybe on a separate call, but hopefully that answers your question.

Yeah, thanks very much, Peter. That's great.

Thank you. There are no further questions at this time. Please continue with closing remarks.

Okay, well, thank you, operator, and thank you, everyone, for joining today's call. As you can see, I think Lundy Mining had a very strong 2022, and I believe that we're in an excellent position as we enter 2023 and well-positioned to achieve our milestones. So we look forward to updating everyone on our next call, and should anyone have any questions in the interim, please feel free to reach out. Thank you very much, everyone.

Ladies and gentlemen, this does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.