Hudbay Minerals Inc . (NYSE: NYSE:HBM) announced robust operational and financial outcomes in its Third Quarter 2024 Results Conference Call, led by Vice President Candace Brule and President and CEO Peter Kukielski. The mining company reported a significant increase in copper and gold production, improved cash costs, and a substantial reduction in debt.
Hudbay's strategic initiatives have positioned the company for growth, particularly in the copper and gold sectors, with the Copper World project anticipated to start production in 2026, potentially becoming the third largest copper cathode producer in the U.S.
Key Takeaways
- Hudbay Minerals reported consolidated copper production of 31,000 tons and gold production of 89,000 ounces, marking a 52% increase in gold output from the previous quarter.
- Cash costs per pound of copper dropped significantly to $0.18, with production guidance confirmed and cash cost guidance adjusted to $0.65 to $0.85 per pound.
- Operating cash flow reached $186 million, and adjusted EBITDA climbed by 42% to $206 million, with free cash flow contributing to a nearly $300 million debt reduction over the past year.
- The company extended its revolving credit facility to November 2028, enhancing financial flexibility.
- Exploration efforts are focused on expanding mineralization in Peru and Manitoba, with significant drilling activities planned.
Company Outlook
- Hudbay expects to exceed its 2024 gold production guidance due to strong performance at New Britannia and higher grades from Lalor.
- The Copper World project is projected to begin production in 2026, aiming to position Hudbay as a key player in the U.S. copper market.
- The company is exploring options to enhance throughput at the Constancia mine, with trials for pebble rejection underway.
Bearish Highlights
- Lower stockpiled ore grades may result in slightly underperforming copper production guidance for 2024.
Bullish Highlights
- The New Britannia mill achieved record throughput, and Manitoba operations reported record gold production.
- The Copper World project has received the Aquifer Protection Permit, with the final air quality permit expected soon, allowing for a joint venture partnership in 2025.
Misses
- There were no specific misses reported during the call.
Q&A Highlights
- Hudbay clarified that the 63.6% gold recovery figure on Slide 7 represents recovery from concentrate only.
- The company invites further inquiries to the Investor Relations team for additional information.
In summary, Hudbay Minerals Inc. has demonstrated strong financial health and operational success in the third quarter of 2024, with significant advancements in its growth strategy, particularly in its copper and gold production sectors. The anticipation of the Copper World project and ongoing exploration initiatives signal a positive outlook for the company's future in the global markets.
InvestingPro Insights
Hudbay Minerals Inc.'s (NYSE: HBM) robust third-quarter results are further supported by key financial metrics and insights from InvestingPro. The company's market capitalization stands at $3.37 billion, reflecting its significant presence in the mining sector.
InvestingPro data reveals that Hudbay's revenue growth has been impressive, with a 59.49% increase over the last twelve months as of Q2 2024. This aligns with the company's reported increase in copper and gold production. The strong revenue growth is complemented by a healthy gross profit margin of 47.97%, indicating efficient operations and cost management.
An InvestingPro Tip highlights that Hudbay is trading at a low P/E ratio relative to its near-term earnings growth, with a PEG ratio of just 0.16. This suggests that the stock may be undervalued considering its growth prospects, particularly with the upcoming Copper World project.
Another relevant InvestingPro Tip notes that Hudbay has maintained dividend payments for 15 consecutive years, demonstrating financial stability and commitment to shareholder returns. This is particularly noteworthy given the company's significant debt reduction mentioned in the earnings call.
The company's strong performance is also reflected in its stock price, with InvestingPro data showing a remarkable 110.42% total return over the past year. This impressive gain aligns with the positive operational results and strategic initiatives outlined in the earnings report.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Hudbay Minerals, providing a deeper understanding of the company's financial health and market position.
Full transcript - Hudbay Minerals Inc (HBM) Q3 2024:
Operator: Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Hudbay Minerals Inc. Third Quarter 2024 Results Conference Call. At this time, all participants are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. [Operator Instructions] I would like to remind everyone that this conference call is being recorded today, November 13, 2024, at 11 a.m. Eastern Time. I would now like to turn the conference over to Candace Brule, Vice President, Investor Relations. Please go ahead.
Candace Brule: Thank you, operator. Good morning, and welcome to Hudbay's 2024 third quarter results conference call. Hudbay's financial results were issued this morning and are available on our website at www.hudbay.com. A corresponding PowerPoint presentation is available on the Investor Events section of our website, and we encourage you to refer to it during this call. Our presenter today is Peter Kukielski, Hudbay's President and Chief Executive Officer. Accompanying Peter for the Q&A portion of the call will be Eugene Lei, our Chief Financial Officer; and Andre Lauzon, our Chief Operating Officer. Please note that comments made on today's call may contain forward-looking information, and this information, by its nature, is subject to risks and uncertainties, and as such, actual results may differ materially from the views expressed today. For further information on these risks and uncertainties, please consult the Company's relevant filings on SEDAR+ and EDGAR. These documents are also available on our website. As a reminder, all amounts discussed on today's call are in U.S. dollars unless otherwise noted. And now, I'll pass the call over to Peter Kukielski.
Peter Kukielski: Thank you, Candace. Good morning, everyone, and thank you for joining us for today's call. In the third quarter, we delivered another quarter of strong operational and financial performance with steady free cash flow generation and continued debt reduction. This was largely a result of our unique copper and gold production diversification with strong operating cost control that provides attractive free cash flow generation, expanding margins, and strong leverage to higher metal prices. We saw record gold production in Manitoba, driven by new quarterly record throughput levels at the New Britannia mill. The Constancia mill performance was also very strong with higher levels of throughput achieved this quarter, and Copper Mountain achieved the highest copper recovery levels at the operation since inception. Our enhanced operating platform continued to deliver solid production and better-than-expected cost performance, enabling us to reaffirm our 2024 consolidated production guidance and announced yet another improvement in our consolidated cash cost guidance for the second quarter in a row. I'll go into more detail on our quarterly achievements throughout today's presentation, along with updates on our exciting growth initiatives that are underway. Slide 3 summarizes the impressive operating performance in the third quarter. Consolidated copper production was 31,000 tons in the quarter, in line with our mine plan expectations. Consolidated gold production was 89,000 ounces, well exceeding management expectations and representing a 52% increase from the second quarter. Stronger gold production was driven by higher gold grades and mill throughput in all operations, but most notably at the New Britannia mill in Manitoba. Consolidated cash costs were $0.18 per pound of copper in the third quarter, which significantly improved from $1.14 in the second quarter. Consolidated sustaining cash costs were $1.71 per pound, and all-in sustaining cash costs were $1.95 per pound, representing a similar meaningful improvement from the prior quarter. The lower cash cost reflects higher by-product credits, higher copper production and lower mining, milling treatment and refining costs as a result of strong cost control. With the production performance to date and the continued expectations of higher copper production in the fourth quarter of 2024, we are reaffirming 2024 consolidated production guidance for all metals. Consolidated copper production is expected to trend towards the lower end of the guidance range, while consolidated gold production is expected to trend towards the top end of the guidance range. As a result of the exceptional cost performance year-to-date, we are again improving our full year 2024 consolidated cash cost guidance to a range of $0.65 to $0.85 per pound of copper. This is a further reduction from the previously announced range of $0.90 to $1.10 per pound and the original guidance range of $1.05 to $1.25 per pound. We are also improving our consolidated sustaining cash cost guidance to a range of $1.75 to $2.20 per pound from the original guidance of $2 to $2.45 per pound. Operating cash flow before change in noncash working capital was $186 million, 53% higher than the second quarter due to higher gold production and sales volumes in Manitoba, strong operational cost performance across the business and higher realized gold prices. Similarly, adjusted EBITDA was $206 million, a 42% increase compared to $145 million in the prior quarter. This has resulted in trailing 12-month adjusted EBITDA of $840 million, substantially higher than the $499 million a year ago. Adjusted earnings attributable to owners was $0.13 per share in the third quarter and with $86 million of free cash flow generation in the quarter we have now delivered five consecutive quarters of meaningful free cash flow generation as a result of recent brownfield investments in our operations, continuous improvement efforts and steady cost control across the business. Turning to Slide 4. Our strong free cash flow generation has enabled us to make additional progress against our deleveraging targets with more than $65 million of debt and gold prepay liabilities paid back in the quarter, resulting in nearly $300 million in gross debt reduction over the past 12 months. This included $49 million of additional open market purchases of our senior unsecured notes during the quarter, bringing our long-term debt to $1.1 billion as of September 30. We also completed the final monthly payment to settle gold prepayment facility that was used to fund the New Britannia gold mill refurbishment project, now providing full upside to higher gold production and gold prices. While a majority of our revenues continue to be from copper, our unique copper and gold diversification adds further cash flow resiliency and strong leverage to higher metal prices. This is seen through the increasing portion of our revenues from gold, representing 36% of total revenues in the third quarter compared to 27% a year ago, further diversifying our revenue streams and enhancing our overall financial performance. As a result of the impressive cash flow generation and deleveraging efforts, we have reduced net debt by more than $500 million over the past 12 months. This brings our net debt-to-adjusted EBITDA ratio to 0.7x compared to 1.6x at the end of 2023. The improved balance sheet flexibility and accelerated debt reduction significantly advances our progress as part of our 3-P plan for sanctioning Copper World and result in the successful achievement of the targeted 1.2x net debt-to-EBITDA ratio well ahead of schedule. Subsequent to the quarter end, we took further action to improve long-term balance sheet resilience with a proactive three-year extension of our revolving credit facilities from October 2025 to November 2028. This provides increased financial flexibility to accretively maintain our 4.5% coupon bonds until maturity in 2026 and advance Copper World towards a sanctioned decision in accordance with the 3-P plan. The newly extended $450 million revolving credit facility includes an improved pricing grid, reflecting the enhanced financial position of Hudbay and features an opportunity to increase the facility by an additional $150 million at our discretion, providing additional financial flexibility. Looking at our Peru operations on Slide 5. We produced 21,000 tons of copper, 20,000 ounces of gold, roughly 650,000 ounces of silver and 362 tons of molybdenum. Copper, gold and silver production was higher than the second quarter as the operations continued to benefit from a strong mill throughput, achieving 88,000 tons per day in the third quarter. With the completion of the planned stripping program in Peru at the end of the third quarter, post-quarter production results have already delivered higher copper and gold grades as the mining of the high-grade zones at Pampacancha is underway, in line with the mine plan. We expect to achieve 2024 production guidance for all metals in Peru, with the fourth quarter expected to be the strongest quarter in Peru this year. Peru full year copper production is expected to trend towards the lower end of the guidance range due to lower-than-expected grades, while gold production is expected to trend towards the higher end of the guidance range, primarily due to a larger portion of the ore feed coming from Pampacancha stockpiles containing higher gold grades. Total (EPA:TTEF) ore mined in the third quarter decreased by 27% compared to the prior quarter, in line with the mine plan and the completion of the planned stripping program at Pampacancha in late September. Similar to the second quarter, total ore milled includes supplemental ore feed from stockpiles as the team completed the pit stripping activities. Milled copper and gold grades increased by 7% and 57%, respectively, compared to the second quarter as higher grades were mined in both the Constancia and Pampacancha pits, and there was an increase in ore mine from Pampacancha. Copper recoveries were relatively unchanged from the prior quarter, while gold recoveries increased to 68%. Peru's cash costs were $1.80, relatively unchanged from the second quarter as higher copper production offset higher mining and freight costs and lower by-product credits. Full year cash costs are expected to be favorably positioned at the lower end of the cost guidance range, primarily due to higher gold by-product credits. Slide 6 highlights the operational excellence achieved at our Constancia mill, a result of the team's commitment to continuous improvement and leading cost performance. When Hudbay commissioned the Constancia mill in 2014, a it was designed with a throughput capacity of 76,000 tons per day. Within five months, the team had the operations fully ramped up to targeted levels, and we have consistently operated the mill above the design throughput level since 2017. We have seen further increases in mill throughput this year, averaging 87,000 tons per day year-to-date, representing a remarkable 15% increase above name freight capacity. And as mentioned earlier, the mill processed 88,000 tons per day in the third quarter. The strong mill performance and focus on cost efficiencies has broadly positioned Constancia as the lowest cost open pit copper mine in South America. We are also evaluating opportunities to further increase mill throughput in the medium to long term after the government recently approved a regulatory change to allow mining companies to increase throughput by up to 10% above permitted levels. This opportunity has a potential to increase production volumes to partially offset grade declines following the depletion of Pampacancha later next year. Moving on to our Manitoba business on Slide 7. The operations delivered record results in the third quarter and continue to exceed expectations in performance and efficiency. Manitoba achieved a new quarterly record for gold production at 62,000 ounces, representing a 44% increase from the second quarter. The operations also produced 3,000 tons of copper, 8,000 tons of zinc and 281,000 ounces of silver during the quarter. The increased gold and silver production is due to our strategy of mining and allocating more Lalor gold ore feed to New Britannia to achieve higher recoveries combined with higher precious metal grades mined in the quarter. We now expect to exceed the top end of our 2024 gold production guidance range in Manitoba. This is driven by continued outperformance at New Britannia with throughput achieving new record levels, along with Lalor delivering better-than-expected gold grades by focusing on all quality improvements. Manitoba copper production is also expected to trend towards the higher end of the 2024 guidance range, and we are well on track to achieve zinc and silver production guidance. Total ore mined at Lalor in the third quarter was 7% higher than the second quarter with higher gold, copper and silver grades mined. The strong mine performance benefited from improved long-haul muck fragmentation and a consistent higher-grade mining sequence that surpassed our forecasted metal grades. We also completed planned maintenance to enhance the efficiency and reliability of the key mine infrastructure and performed ongoing modifications to stope design to further enhance marking efficiency throughout the life cycle of stopes. As mentioned, the New Britannia gold mill had another quarter of exceptional performance with throughput hitting new quarterly records of 2,080 tons per day, and recoveries remained strong at 90% for gold and 93% for copper in the third quarter. At the Stall base metal mill, the third quarter had slightly reduced throughput levels as more ore was diverted to New Britannia. Benefits from recent recovery improvement programs continue to be realized with gold recoveries of 71% achieved during the third quarter. We continue to optimize recoveries at Stall with the installation of new elongated cyclones in one of the two milling circuits late in the third quarter. These cyclones are designed to improve grind size and pending positive performance could be implemented across other circuits. Manitoba gold cash costs were $372 per ounce in the quarter, a meaningful decrease of 52% compared to the prior quarter. This improvement was due to significantly higher gold production and higher by-product credits, partially offset by higher milling, G&A and freight costs. We expect 2024 gold cash costs to be favorably positioned at the lower end of the cost guidance range, reflecting the strong cost control and gold production achieved to date. We are extremely proud of the success we've had at our New Britannia mill as summarized on Slide 8. In 2021, we completed the high-return brownfield investment in New Britannia and refurbished the mill with a nominal capacity of 1,500 tons per day to provide additional processing capacity at the Snow Lake operations. This also allowed us to achieve higher gold recoveries of approximately 90% as Lalor transitioned to the higher gold and copper areas of the mine plan. The mill has consistently exceeded performance expectations, achieving throughput levels of 1,650 tons per day in 2023, more than 1,850 tons per day in the first half of 2024 and reaching a new quarterly record of 2,080 tons per day in the third quarter. Plant availability continues to improve, supported by low capital projects aimed at further increasing throughput while continuing to achieve targeted gold recoveries of 90%. Notably, enhancements made in the elution and stripping cycles contributed to increased gold doré production in the quarter. As I mentioned in August, we completed the final payment under the New Britannia gold prepay facility, which further enhances our exposure to higher gold production in Snow Lake and leverage to higher gold prices. With approximately 2 million ounces of contained gold in current reserves and another 1.4 million ounces of contained gold in inferred resources, the New Britannia investment has unlocked significant value in Snow Lake. This could be further enhanced by regional exploration upside and the current strong gold price environment. Earlier this year, we received a permit to increase the production rate of New Britannia to 2,500 tons per day, which will provide the opportunity to process more Lalor ore at the New Britannia mill and create additional processing capacity at Stall for potential new regional discoveries in Snow Lake. Slide 9 discusses the benefits from our stabilization plans at the British Columbia operations since our acquisition in June 2023. Our stabilization efforts are focused on opening up the mine by reactivating the full mining fleet, adding additional mining faces, optimizing the ore feed to the plant and implementing plant improvement initiatives that mirror the successful processes at Constancia. In the third quarter, British Columbia produced 6,700 tons of copper, 6,300 ounces of gold and 56,000 ounces of silver. Copper production was in line with the prior quarter, while gold production increased by 41% and silver production decreased by 28%. This was a result of the head grades in the stockpiled ore that was used to feed the mill. Due to lower grades in stockpiled ore and the ramp-up of stabilization efforts throughout the year, we expect to be slightly below the low end of the 2024 guidance range for copper production in British Columbia. Gold and silver are expected to be within the 2024 production guidance ranges. Mill processed a total of 3.4 million tons of ore during the quarter, a 4% increase compared to the prior quarter. Mill availability averaged 95% while maintaining a stable throughput rate. A number of initiatives were advanced in the quarter to address identified milling constraints and improve throughput to targeted levels with the benefits expected to be realized in the fourth quarter of 2024. Copper recoveries of 84% were higher than the second quarter, exceeding management's expectations despite processing lower grades. This was the result of improvements in the regrind circuit constraint and implementation of flotation operational strategy improvements, including reagent selection and dose modification. Similarly, higher milled gold grades has resulted in higher gold recoveries of 67% in the third quarter. Cash costs were $1.81 per pound in the third quarter, 32% lower than the prior quarter. This was driven by lower mining and milling costs, higher production and the benefits from the various stabilization initiatives implemented over the course of this year. We have successfully achieved sequential quarterly improvements in unit operating costs and cash costs this year with the third quarter of 2024 being the lowest cost quarter at Copper Mountain since Hudbay's acquisition. While year-to-date cash costs are above the higher end of the 2024 guidance range in British Columbia, we expect fourth quarter costs to continue to improve and result in full year costs to be near the upper end of the cost guidance range. Slide 10 highlights some of the successes from the completion of our stabilization phase and the focus areas for our optimization phase. Mine ramp-up activities have been completed by successfully remobilizing all 28 haul trucks and adding five additional haul trucks this year to execute the planned accelerated stripping campaign at a lower cost and avoid contractor mining costs. This has successfully increased the total tons moved to 23 million tons in the quarter compared to 16 million tons in the same period last year. Mill stabilization activities have been completed and have resulted in stronger mill performance as demonstrated by record mill availability of 95% and record copper recoveries of 84% achieved in the third quarter. As a result, year-to-date mill performance has resulted in the highest mill availability and highest copper recoveries achieved at the Copper Mountain mine in the last decade. Our stabilization efforts have successfully reduced combined unit operating costs to CAD19.56 per ton year-to-date, significantly lower than CAD21.38 per ton milled in the second half of 2023. And the third quarter represented the lowest cost quarter at Copper Mountain since our acquisition at $15.58 per ton. We already achieved and exceeded the targeted $10 million in annualized corporate synergies earlier this year. As part of our optimization efforts to increase copper production and operating cash flow, mining activities will continue to execute the three-year accelerated stripping program to mitigate the reduced stripping that occurred over the four years prior to Hudbay's acquisition. The stripping program is intended to bring higher grade ore into the mine plan and further benefit operating costs. Mill throughput optimization activities will focus on advancing various engineering studies to increase mill throughput to its permitted levels of 50,000 tons per day earlier than was originally contemplated in the technical report. These capital growth projects include the potential conversion of the third ball mill to a SAG mill to alleviate capacity limitations. With efforts now focused on optimizing the operations throughout the balance of 2024 and into 2025, we are well on track to realize the three-year annual operating efficiencies target of $20 million. Our enhanced operating platform continues to deliver meaningful cash flow generation. And together with a significantly improved balance sheet and financial flexibility, we are well positioned to advance our many growth initiatives and unlock significant value in our copper pipeline. Slide 11 discusses Copper World, the next greenfield copper development project in our pipeline, which offers significant copper exposure and highly attractive project economics. Copper World is a stand-alone operation acquiring state and local permits and is expected to produce 85,000 tons of copper per year over the initial 20-year mine life in the first phase. Copper World is one of the highest-grade open pit copper projects in the Americas, with mineral reserves of 385 million tons at 0.54% copper in Phase 1. The project generates an NPV of $1.1 billion and an after-tax internal rate of return of 19% at a copper price of $3.75 per pound. We remain committed to prudently advancing Copper World in accordance with our 3-P plan as shown on Slide 12. In August, we achieved a significant milestone with the receipt of the Aquifer Protection Permit from the Arizona Department of Environmental Quality. We worked closely with the ADEQ throughout the process, ensuring transparency and providing comprehensive and detailed information. With the receipt of the Aquifer Protection Permit, we have commenced activities related to the preparation of feasibility studies. As previously announced, we increased growth capital spending in Arizona by an additional $25 million to account for this early feasibility work. The final required permit is the air quality permit, which was submitted to the ADEQ in late 2022 and has followed a similar robust process, including a public comment period that concluded in September 2024. Upon receipt of the final permit, we intend to commence a minority joint venture partnership process. The potential partner is anticipated to participate in the funding of definitive feasibility study activities in 2025 as well as in the final project design and construction of Copper World. We look forward to prudently advancing Copper World to a sanctioned decision, which is not expected until 2026 based on current estimated time lines. Once in production, Copper World is expected to be a meaningful copper producer in the United States domestic supply chain. The Made in America copper cathode anticipated to be produced is expected to be sold entirely to domestic U.S. customers and would make Copper World the third largest cathode copper producer in the United States. We have several exploration opportunities as part of our long-term growth pipeline, and we remain focused on advancing many of the high priority initiatives as noted on Slide 13. In Peru, our exploration activities surrounding the Maria Reyna and Caballito properties near Constancia continue to focus on permitting and drill preparation. As part of the drill permitting process, environmental impact assessment applications were submitted for Maria Reyna in November 2023 and for Caballito in April 2024. The environmental impact assessment for Maria Reyna was approved by the government in June 2024. And more recently, in September, the environmental impact assessment for Caballito was approved. This represents one of the several steps acquired as part of the drill permitting process, which we anticipate will be completed in 2025. In Manitoba, we continue to execute our large 2024 exploration program focused on extending known mineralization near Lalor to further extend mine life as well as find new anchor deposit within trucking distance of the Snow Lake processing infrastructure. The 2024 program included the largest geophysical program in the Company's history in the region, completing surface electromagnetic surveys over a 25 square kilometer area, detecting targets at depth of more than 1,000 meters. The Company had eight drill rigs turning in Snow Lake during the quarter, including two drills completing follow-up drilling at Lalor Northwest located within 400 meters of the existing Lalor underground infrastructure. The other six drill rigs were testing new geophysical targets and completing follow-up drilling at potential regional satellite deposits. One of the geophysical targets is a very strong deep anomaly located at Cook Lake North, approximately 6 kilometers from Lalor. Drilling activities are expected to continue throughout the winter season and assay results are pending. At the 1901 deposit, we continue to advance the exploration drift from the existing Lalor ramp, and the drift is expected to reach mineralization in early 2025. We plan to conduct definition drilling next year to confirm the optimal mining method, evaluate the ore body geometry and continuity and convert inferred mineral resources in the gold lenses to mineral reserves. In October, we initiated the development of an adjacent haulage drift to further derisk future full production from the 1901 deposit in 2027. Additionally, in Flin Flon, we continue to advance tailings reprocessing studies to evaluate the potential to repurpose the existing Flin Flon concentrator, which is currently on care and maintenance to reprocess tailings. The tailings reprocessing opportunity is expected to recover critical minerals and precious metals while creating environmental and social benefits for the region. An early economic study to evaluate the opportunity has confirmed the potential for a technically viable reprocessing alternative, so we have further engineering work underway. Including on Slide 14 Hudbay's leading corporate development and exploration pipeline and low-cost, stable operating platform in Tier 1 jurisdictions offers investors meaningful copper exposure, complementary gold exposure and strong near-term cash flow generation. We produced approximately 150,000 tons of copper per year, which is further augmented by our complementary gold exposure that offers cash flow resiliency in volatile pricing environments. We believe that copper has the best long-term supply and demand fundamentals in the sector as global copper mine supply will be unable to meet demand from global decarbonization initiatives and growing copper demands. Hudbay's strong operating platform and resilient balance sheet offers significant upside potential for further value creation at higher copper and gold prices. And with that, we are pleased to take your questions.
Operator: Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question is from Orest Wowkodaw with Scotiabank (TSX:BNS).
Orest Wowkodaw: My question is around the gold in Manitoba. Obviously, a very strong Q3. I'm just curious, is this -- are you -- with the gold price environment the way it is, are you reprioritizing the mining plan here to focus on the gold zone versus the base metal zone? And I guess I'm trying to figure out if you're seeing better-than-expected grades or if you're just focusing on the gold zone versus base to drive the better grades?
Peter Kukielski: Orest, this is Peter. Thanks very much for the question. And the answer to your question is no, not at all. We don't focus on those as gold zones. New Britannia is performing extremely well at the moment. So, we said what we can there, but Stall store is performing really well as well. You would have seen that we -- that recoveries at Stall have reached 70% of gold, whereas a long time ago, it was about 50%. But Andre, do you have any further comment for Orest?
Andre Lauzon: Sure. Sure. Orest, we -- like Peter said, we're not prioritizing. We're just following the mine sequence just naturally becoming more gold ridge over time as it transitions, the upper part of the mine was more base metal rich. Within the -- and I think we mentioned on the last quarterly calls, the teams have really put in place significant effort on dilution. And we sample all of our blasts. It's something that was new for us in the last year or so and really seeing a lot better benefits on our dilution control, and we're seeing better grades than that we are projecting in some of our block models.
Orest Wowkodaw: And what -- can you give us any kind of insight in terms of what gold grade you're anticipating for Dexter in Manitoba?
Andre Lauzon: We're still reiterated in the middle of wrapping up the final stages of our budgets for next year. But it's in -- it's very, very similar to the course of this year. And it's -- we're expecting that same sort of range. It's -- but we'll give some clarity on that as we get forward in the future.
Orest Wowkodaw: Okay. And just separately, if I could. You're languaging around the potential throughput expansion at Constancia. I feel like it's changed a bit from last quarter, where it sounded -- last quarter, it sounded like it was more imminent, potentially as early as '26. Your languaging in the release today talks more about medium- to long-term opportunity. Am I reading anything into that? Or has something changed?
Andre Lauzon: I'm not sure what you're reading to it. But what I would say is with the increased throughput that the governments have allowed us to do is immediately, actually, this month, we're doing trials on pebble rejection at Constancia looking for additional throughput and enhancing the grades with the capital raise that we did last year, right in the middle of engineering right now, pebble crushers for Constancia to, again, increase throughput, balancing off some higher ores post Pampacancha. So, the teams are actively looking at ways to hit that targeted throughput. It used to be a barrier for us. It's no longer a barrier, and we're working on it as we speak. So, it's not something that's as long dated as said.
Operator: The next question is from Ralph Profiti with Eight Capital. Please go ahead.
Ralph Profiti: I just want to piggyback off the last question and ask you, Peter, given the performance of Constancia, both from a throughput perspective and a cost perspective, if scaling up the operation beyond the 10% regulatory allowance is kind of something that's entering your mind on sort of the planning stage or the preplanning stage?
Peter Kukielski: Ralph, I think -- I mean I'll let Andre answer most of that, but I think that we've always looked at the idea of being ready with Constancia for such time as we bring some of the satellites into operation down the road. So having Constancia ready to operate at higher levels is a key component of that. Andre, any more details you want to provide?
Andre Lauzon: Sure. So, in addition to what I just mentioned to Orest was like the teams are in the middle of a permit application renewal. It's just normal course of business for us to do that. We're looking at things like expansion of our floatation to match the increased throughput that we're looking at, potential increases in grinding capacity. And then longer term, we have the modification for that's coming up that we're contemplating that permitting potentially for a third line. But we wouldn't sanction that until we are at a stage where success with Maria Reyna and Caballito. But we're definitely looking at how to -- have all of the permits in play and time at right when metal prices right or we have those potential great discoveries at Maria Reyna and Caballito.
Ralph Profiti: Okay. Okay. And just to follow up on what you mentioned. When is the team going to be in a position to kind of give us a picture on what an expanded drill program for Maria Reyna and Caballito look like? It sounds like something like towards the end of 2025, once those drill programs or permits are in place. Is that kind of how we were thinking about sort of how many meters and potentially that -- the cost of that expanded drill program?
Andre Lauzon: Well, we do expect to be drilling it in 2025 like you mentioned. There's a range of -- depending it could be upwards of up to 300 drill platforms at its peak. And so, it will be quite an exciting drill program for us. We're -- it's something we've been talking about for a little bit and really looking forward to. We see that as the future. The cost in terms of that program, I think we'll give guidance on that into the new year on our forecast for exploration as we're just finalizing the budget. And we'll have some better clarity by that time as we expect the government to go through the consultant previa process early in the new year.
Peter Kukielski: Ralph, to add to that, the -- we are in the final stages of permitting at this point, and we're permitting both the Maria Reyna and Caballito at the same time. So, in parallel right now to make it more efficient and to provide us with a little bit more optionality.
Operator: The next question is from John Tumazos with John Tumazos Very Independent (LON:IOG) Research. Please go ahead.
John Tumazos: Congratulations on the $0.5 billion debt repayment and all the great progress, including cutting the project finance debt target for Copper World of $350. If you just had half of the free cash flow in the future quarters, as you just had $86 million in the third quarter, you generate another almost $400 million of free cash by the time Copper World construction might start at the beginning of '27. Why sell 30% of it? Why not sell only 20% of it or keep it all? It might be better than the next project at Mason in Nevada? Or it's hard to find a substantially better projects?
Peter Kukielski: John, it's Peter. First, thank you for your kind words. And yes, Copper World is certainly a high-quality project. And yes, we don't need a partner. But for a variety of reasons, we likely will want one. Now we're not wedded to a number of 30%, for example. But there are several reasons why we might want one. I think it all comes down to value and maximizing returns and creating optionality around our broader pipeline of opportunities across the portfolio. But perhaps to give you a little bit more granular detail, I'll ask Eugene to address some of your questions.
Eugene Lei: Thanks, Peter, and thanks for your question, John. As Peter mentioned, I think what we're looking to do is maximize the risk-adjusted value creation for shareholders. And given the current market for minority pieces of scarce copper mines, we've already seen robust interest in Copper World, and we expect to receive a strong valuation for that minority piece, given its grade and capital intensity. This bringing in a partner provides us the opportunity to prudently build Copper World with lower leverage and with much lower leverage than we had to do with Constancia over a decade ago. Furthermore, the recent preemptive extension of our revolver allows us increased financial flexibility through the end of 2025 to determine the most attractive debt equity mix as we go forward. And that will be -- part of that consideration in 2025 will be some of the other projects within the pipeline is high-return brownfield projects in Peru and in Manitoba to allocate capital to, again, create value for shareholders on a balanced basis. But as Peter mentioned, this -- the extension of the revolver gives us that optionality to make those decisions on what is exactly the right mix and in terms of the partner and the value proposal that will be on the table for us to consider.
John Tumazos: So, there's more good news. It's going to come from Peru and Manitoba that's going to take some capital.
Eugene Lei: We hope so.
Peter Kukielski: Great targets.
Operator: Next (LON:NXT) question is from Dalton Baretto with Canaccord Genuity. Please go ahead.
Dalton Baretto: Congratulations on a great quarter. A couple of questions from me on Copper World, just given the incoming Trump administration. And I guess, first, I want to ask, do you think that you can accelerate any of the permitting process for Phase 2 over the next couple of years or the next four years, I guess?
Peter Kukielski: For Phase 2 -- first of all, thanks for the kind words, Dalton. I think that it's premature to say what might be possible with Phase 2. I think the first thing we'd look at to see whether the Mining Clarity Act actually passes through the Senate. If it does, then that probably makes Phase 2. It simplifies Phase 2 and it also simplifies Mason. I think you know that the NPV of Phase 2 is such that it's so enormous that the extent whereby we can bring it forward creates massive value for the Company and our shareholders, and we'll do everything that we can to do that. But also remember that we're going to -- we've got the concentrate leaching facility to put in place. But I have no doubt that once we're in operation, once we stabilize, once we ramped up, we'll turn our mines to getting Phase 2 underway or getting Phase 2 permitted as quickly as possible.
Dalton Baretto: Got it. And then my second question was, does Copper World qualify for the Section 45 Act advanced manufacturing credit? And is that baked into your estimates right now?
Peter Kukielski: No, it doesn't qualify for it. There's a possibility that the concentrate leaching facility would apply for it. And in fact, we did make a provisional sort of application to the government. It was favorably received, but it's too early to actually get it in the queue.
Dalton Baretto: Got it. And maybe I can squeeze one last one in. If President-elect Trump should cut the corporate tax rate to 15%, is there anything you can do to sort of lock in anywhere around that rate over the life of the mine?
Peter Kukielski: I don't think so, Dalton. We'd certainly take a look at it.
Operator: The next question is from Craig Hutchison with TD Cowen. Please go ahead.
Craig Hutchison: I was wondering if you could just provide any updates with regards to how the air permits going Copper World.
Peter Kukielski: It is Copper World?
Craig Hutchison: Yes.
Peter Kukielski: The air quality -- sorry, sorry. So, it is going well. I would say we have confidence in the state permitting process because, as we've told you several times, I believe that it's a scientific-based process. And we're working very closely with the Arizona Department of Environmental Quality to ensure that they've got all the data they need. It follows a similar process to that of the Aquifer Protection Permit and it's been progressing very well. As you know, the Aquifer Protection Permit was received in August, in line with our timing expectations. Now the public comment period for the air quality permit was completed in September. And we were very, very pleased with the level of local support that was received during that comment period. So, the permits on track to be received in late 2024. The ADEQ assures us that it's on track. So, we expect it to be delivered in late 2024. But honestly, with Thanksgiving and Christmas coming up, it would not surprise us if it slipped into early 2025, which will be no big deal, but we are assured by the ADEQ that it's on track.
Craig Hutchison: Okay. Great. And just on the joint venture partnering. Is there an expectation that you guys would be looking for some kind of upfront payment relative to the sunk cost to date? Or is the expectation just sort of a go-forward basis? You mentioned the feasibility study and obviously, anything going forward.
Peter Kukielski: Yes, I think that we would expect to receive an equity contribution for the value that the project represents. So, for sure, there will be an equity contribution, and then we would look -- and then plus whatever the required capital contribution for the project is.
Operator: [Operator Instructions] The next question is from Pierre Vaillancourt with Haywood Securities. Please go ahead.
Pierre Vaillancourt: Peter or Andre, wondering if you can give me a little more insight on Copper Mountain and specifically the time line to steady state. I mean, I recognize that mill availabilities improved. The throughput is rising, but it still seems to me like a long-time line to get to that point. And so maybe walk me through what the key issues going forward? And is there any kind of ability to accelerate that given your success here?
Peter Kukielski: So, I'll start off by saying that the team and I are sitting here at Copper Mountain right now. So, we're actually doing this conference call from the Copper Mountain office, and we're really, really pleased with what we're seeing over here. So, John Ritter and the team are doing an extraordinary job of bringing things along. We always said this wasn't going to be easy, but they're hitting it out of the park. Things are going pretty well. But for a little bit of granular detail on where things are and what's required, I'll let Andre respond to that.
Andre Lauzon: Sure. I'll give you the granular. So, thanks for the question, and it's an interesting one. And what I'd say as an echo what Peter says is we're quite pleased with the progress. So, it's on a number of fronts, whether it's increasing the mine throughput, whether it's record mill recoveries, the mill availability, like we said on other questions, we're really pleased with New Brit mill availability here as much. It's even higher than New Brit, 95%. The stabilization is almost complete. So, we're -- there's some puts and takes. There's a little bit although the stripping is definitely increasing, and we're very pleased with it. We still would like a little bit more, and the teams are working on with some additional trucks, and ramping up of people is a little bit slower, but overall, I'd say it's going as planned. It's a three-year project. So, when you say that is it going slow, it's something -- what it is, is we're in the middle of a construction project. The technical report showed us getting to 50,000 tons per day by 2027. And with the capital raise that we just did last year, the Board just approved as to some early works in preparing for what we call SAG 2, which is the conversion of ball mill three. And that is the next sort of stage of mill throughput to get to that 50,000 tons a day. So, we're in the process right now of ordering long lead items. Commissioning of that, we hope to have it done by the end of next year and commissioned into the mid-'26, which is ahead of the schedule that -- in the technical report of into 2027. So, I'd say when you look at it at a three-year window, we're on track. In fact, we're probably a little bit ahead. And there's just like any, call it, construction project, which is the way that we look at this. It's -- there's ups and downs, and the team is working really hard, and there's initiatives everywhere that you look in terms of the operation. And I would say the real focus right now is getting that mine throughput up over the next year because that unlocks the high-grade material in Pit 3. And the optimization and increase of throughput in the mill, which is that capital project. One thing I didn't mention is like we just recently put in place as well a new set of liners. It was engineered and designed. We expect higher throughput. Those are just installed, I think about a week ago, and we're in the middle of ramping up that as well, too. So, we're expecting some subtle ramp-ups in mill throughput towards the end of this year. But the big jump will be into next year and towards the end of the year with the commissioning of and conversion of ball mill three to a SAG mill.
Pierre Vaillancourt: Okay. And so, this year, are you going to reach 40,000 tons per day? Are you going to the exit [indiscernible] you’ll get there?
Andre Lauzon: I think we expect by the end of the year to be finishing out the year averaging about 40,000 tons per day, yes.
Pierre Vaillancourt: And Peter, in terms of -- I mean, I realize it's a bit of a moving target. But when you talk about securing a partner for Copper World, what's your target? Is that kind of second half of '25?
Peter Kukielski: I would say, Pierre, as soon as we have the air quality permit in hand, we'll launch a formal process, and I expect that process would take over the order of four months or so. So, we would have the partner on board, I expect in the first half of the year.
Operator: The next question is from a follow-up from Orest Wowkodaw with Scotiabank. Please go ahead.
Orest Wowkodaw: More of a housekeeping question on my end. Can you remind me, on Slide 7, your Manitoba operations review, where you show the combined statistics here. Can you just remind me why the gold recovery is at 63.6%? Why is it so much lower than the two mills reporting at 90% at New Brit and 70% at Stall?
Eugene Lei: Orest, it's Eugene here. The -- on Slide 7, that gold recovery is only the gold recovery from concentrate. So that's the 60-odd percent. At New Brit, it's the combined gold, copper and concentrate and doré is 90%. You'll see that in the MD&A that we actually -- there's a more specific line up. This is only the recovery from concentrate.
Operator: This concludes the question-and-answer session. I'd like to turn the conference back over to Candace Brule for any closing remarks.
Candace Brule: Thank you, operator, and thank you, everyone, for joining us today. If you have any further questions, feel -- please feel free to reach out to our Investor Relations team. Thank you.
Operator: This brings to close today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.
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