MMG Limited (1208) Earnings Call Transcript

Thank you for standing by, and welcome to the MMG Limited Fourth Quarter Production Report Teleconference. [Operator Instructions]. I would now like to hand the conference over to Mr. Jarod Esam, Head of Investor Relations. Please go ahead.

Hello, and welcome to MMG's quarterly production report teleconference. This report and today's discussion cover the operational performance of MMG sites for the fourth quarter of 2023 and the outlook for 2024. Joining us today are MMG Interim CEO, Mr. Li Liangang, and CFO, Mr. Ross Carroll, together with other ExCo members. I'll now hand over to Liangang, who will discuss the highlights in the report before we provide an opportunity to ask questions.

Thank you, Jarod. Good morning to everyone, and welcome to MMG's fourth quarter production report teleconference. As always, safety comes first. Our total recordable injury frequency for the fourth quarter is 1.13 per million hours worked and 1.97 for the full year 2023. The result was -- is a significant improvement compared to the previous quarter, with all sites demonstrating better execution of safety control. Safety is our top priority and fundamental to our success, and we remain committed to continuously improving our safety performance. Now let's turn to our production performance for the fourth quarter and 2024 -- 2023 full-year results. MMG finished the year with a strong fourth quarter. All MMG operations met or outperformed the latest production and revised guidance. In 2023, we produced more than 347,000 tonnes of copper and 203,000 tonnes of zinc. This was a 14% increase and a 9% decrease, respectively, compared to 2022. Las Bambas produced around 81,000 tonnes of copper in the fourth quarter, which was 11% higher than the same period in 2022, a number of operational improvements, including optimization of the third ball mill, contributed to a record-high quarterly mill throughput of around 14 million tonnes and the highest quarterly recovery rate since 2021. In 2023, Las Bambas produced around 302,000 tonnes of copper towards the top end of the latest guidance, marking the 19% increase compared to 2022. Annual mill throughput reached a record high around 53 million tonnes, a 20% increase compared to 2022. The strong performance was driven by mostly uninterrupted operations in 2023 and the operation of the third ball mill. The full year C1 costs outperformed the latest guidance at USD 1.60 per pound, mainly due to favorable moly prices, higher production and an increase in capitalized mine development. I also want to provide an update on community engagement and transport logistics. MMG remains committed to transparent and constructive dialogues with the government of Peru and the community members. We have made progress in discussions with the Huancuire community with 5 contracts signed with community companies. These companies have begun early works at Chalcobamba. The Las Bambas team is working with the Huancuire community towards enduring agreements for the development of Chalcobamba deposit. Since the removal of roadblocks in March, Las Bambas concentrate transport has been stable aided by the government's declared state of emergency. Total sales of the year reached 1.1 million tonnes of concentrate, the second highest annual sales volume since the commissioning of Las Bambas. Looking ahead to 2024, we anticipate Las Bambas copper production to be between 280,000 and 320,000 tonnes, which is a similar level to 2023 but subject to the timing of Chalcobamba development. C1 costs for 2024 are expected to a range between USD 1.60 and USD 1.80 per pound. This represents an increase compared to 2023 due to higher volume-driven costs and lower anticipated byproduct credits. Moving on to Kinsevere, the mine produced approximately 10,000 tonnes of copper cathode in the fourth quarter of 2023, making -- marking an 18% decrease compared to the same period in 2022. This was driven by a decline in the feed grade, resulting from a higher proportion of lower-grade stockpiles after the depletion of the high-grade oxide ores in the main Kinsevere oxide pit as well as reduced consumption of high-cost third-party ore. I'm pleased to report that Kinsevere cobalt plant was commissioned in the fourth quarter, producing 105 tonnes of cobalt contained in cobalt hydroxide. For the full year of 2023, Kinsevere's production of around 44,000 tonnes was in line with the latest guidance but 10% lower than the previous year. This reduction can be attributed to a lower annual ore milled throughput due to an unstable power supply from the national grid as well as a lower ore feed grade. The C1 costs for the full year were USD 3.29 per pound aligning with the latest guidance. Now let me provide an update on the Kinsevere expansion project. The construction of the project and a transition to mining and processing of sulfide ore remain on track. A new tailing storage facility was commissioned to support the ramp-up of the cobalt plant. Construction of the sulfide processing system continued with most civil work completed in the fourth quarter. The site has started receiving long lead equipment and materials, and mechanical and structural installation is underway. Moving forward, the focus will be on ramping up the cobalt plant, installation of the concentrator and the roaster, gas cleaning and acid plant and operational readiness-related work. The project will extend the mine life to at least 2035 and bring the annual production to approximately 80,000 tonnes of copper cathode and 4,000 to 6,000 tonnes of cobalt in cobalt hydroxide. We expect the first copper cathode from sulfide ore in the second half of 2024 and a full ramp-up in 2025. Looking into 2024, we expect Kinsevere copper cathode production to be between 39,000 and 44,000 tonnes. This range reflects a decrease in oxide ore supply from the main pit as the focus shifts to sulfide partly offset by an increase in the supply from Sokoroshe II. The C1 costs are anticipated to a range from USD 2.80 to USD 3.15 per pound. This represents an improvement comparing to 2023. We aspire product credits from cobalt production and the increased supply of ore from Sokoroshe II, reducing the need for third-party ore. Looking beyond 2025, the combination of higher copper production and cobalt byproduct credits is expected to significantly reduce the mine's C1 costs. I will now move on to our Australian operations, Dugald River and Rosebery. Dugald River produced around 47,000 tonnes of zinc and 7,000 tonnes of lead in the fourth quarter of 2023, an increase of 6% and 16%, respectively, compared to the same period in 2022. The production growth was supported by strong performance in ore mined and milled, head grades and recovery rates. Thanks to the stable operations since the ramp-up in the second quarter and continuous operational improvement. Full-year zinc production of around 152,000 tonnes exceeded the prior guidance supported by strong and stable operations in the fourth quarter. The annual recovery rate reached a record high of 19% -- 90%, continuing the year-on-year upwards trend has been achieved since the beginning of the operations. The full-year C1 costs were USD 0.93 per pound, outperforming the revised guidance, driven by strong operational performance and lower treatment charges on spot sales. Regarding 2024, we expect the mine's production to be in the range of 175,000 and 190,000 tonnes of zinc in zinc concentrate, reflecting performance supported by stable operations and continuous operational improvement. C1 costs in 2024 are expected to be in a range of USD 0.70 to USD 0.80 per pound. At Rosebery, the mine produced almost 17,000 tonnes of zinc in zinc concentrate and 6,000 tonnes of lead in lead concentrate in the fourth quarter, an increase of 5% and 24%, respectively, compared to the same period in 2022. This improvement was driven by higher volumes of ore mined and milled due to the mine sequence and increased recovery supported by continuous operational improvement. Full-year zinc production of around 52,000 tonnes met the revised guidance and exceeded the 2022 levels by 1%. Full-year C1 costs of USD 0.26 per pound outperformed guidance driven by the strong fourth quarter production and higher precious metals prices. Looking ahead to 2024, Rosebery expect zinc production to be in the range of 50,000 to 60,000 tonnes of zinc in zinc concentrate, showing improvement compared to 2023, mainly due to higher expected zinc grids including the contribution of byproduct metals, zinc equivalent production for 2024 is expected to be in the range of 115,000 to 130,000 tonnes. C1 costs for 2024 are expected to be in the range of USD 0.10 to USD 0.20 per pound. This is an improvement by higher anticipated production levels and lower zinc treatment charges. I would like to brief the update on the acquisition of the Khoemacau Mine in Botswana. On 20th (sic) [ 21st ] November 2023, MMT announced that it entered into a share purchase agreement to acquire the Khoemacau Mine in Botswana for USD 1.875 billion. The Khoemacau Mine is a large-scale long-life copper mine located in Northwest Botswana in the emerging Kalahari Copperbelt. On 22nd December 2023, approval was received from the Minister of Minerals and Energy of Botswana for the transfer of a controlling interest in the project licenses and prospecting licenses, linked to the Khoemacau copper mine. However, it is important to note that the acquisition is subject to the fulfillment of or waiver of certain other conditions and may not proceed to completion. To conclude, I would like to comment on recent changes on the composition of the Executive Committee, with effect from March 6, 2024, Ross Carroll will retire from his role as the CFO of MMG and will depart the company on the 1st of July 2024, following a transition period. I thank Ross for his significant contributions to the company over more than 8 years. On behalf of the entire MMG team, I wish Ross much success in his new chapter. Thank you, Ross. Additionally, from the 1st of February 2024, Song Qian will be appointed to the role of Executive General Manager Finance. Song brings to the role significant executive experience with China Minmetals Corporation and was most recently the CFO of Minmetals Innovation Investment Co., Limited. Prior to this role, he was the Vice President of Capital Markets of CMC from 2019 to 2022. Nang Wang, currently Executive General Manager Australia and Africa will be appointed to the role of Executive General Manager Operations. And Troy Hey's responsibilities as Executive General Manager Corporate Relations will be expanded. I'm confident that we have the right composition of skills and experience to ensure a successful integration of Khoemacau as well as the operational performance and future growth of our business. Thank you, and we are now happy to take any questions.

[Operator Instructions] Your first question comes from Jimmy Feng from Citi.

Thanks, Mr. Li, Ross, and Jarod for sharing. I have a few questions. My first question is regarding the production guidance for Las Bambas in 2024. So if we just simply analyze the fourth quarter Las Bambas output in 2023, the full-year production could exceed the upper band of production guidance in 2024. So I want to check whether the guidance is relatively conservative or have you factored in any potential transportation disruptions in this guidance? I will ask the questions one by one, so this is the first question.

Yes, thanks for the question, Jimmy. No, I wouldn't say that our guidance is conservative. And it actually includes a fairly significant contribution from Chalcobamba where we are yet to have formal access to commence mining at the pit. So yes, it's certainly not a conservative estimate. I mean we're very hopeful we'll get between the 300,000 and 320,000 tonnes. But I think if you've been on recent calls, we are facing a dilemma of forming grades in the Ferrobamba pit and that's where Chalcobamba becomes important to us, but it will contribute to higher grades. Now we do it -- we do make an [ allowance ] for some disruption to logistics, but we have enough surge capacity in the system. So if we do get a week or 2 stoppage, we're able to catch up. So basically, our sales and production aren't curtailed by logistics disruptions at all.

Okay. Got it. So how to further check the development of Chalcobamba. I think that the early works have been commenced. So does that mean the agreement has been reached with the Huancuire community? And how many volume contribution in 2024 from the Chalcobamba in the base case of production guidance have factored it in?

Thanks, Jimmy. It's -- at the moment, so we have been negotiation there as you are aware for some time. There were 3 areas, the substantive ones around labor rights and water rights. There was an integration into the supply chain, so community contracts and businesses and there was a third part, which was around compensation and benefits. So we've had, I think, good progress on the substantive. You're seeing the first of the 5 community contracts signed and underway. We call them early works because they are the kind of preparatory works that are happening on the Chalcobamba site. The site is clear. We have access to community groups. Our community companies are working well, but we're still to agree that final kind of compensation and benefits package and still to really have, what we call, full access to start mining. But that is where, as Ross said, we are very, very hopeful that we are very close. The signs are all very good in terms of the working relationship, the presence of the community companies on sites, the excellent start-up and performance so far. And so we -- and as Ross said, we've put guidance and that really looks from the commencement from February through to May, somewhere in that period. Early would be great. As we get later on, the guidance and the cost guidance both start to get little bit more at the lower end. But at the moment, good conversation, very good relationship with communities, business is working and on the ground but still some work to do on a final comprehensive agreement that we would like to have, and I think the community would like to have to mean we have uninterrupted and full access to develop Chalcobamba.

Okay. Okay. Got it. And I have a final question regarding the Kinsevere. I also want to check how many volume contribution from the sulfide ores in 2024 have been factored in? And also, we have seen a decline in TC/RC recently. I think for Kinsevere, it seems you need to purchase some third-party ore, so want to check whether the low TC/RC will have an impact on the profitability. And do you have some long-term contracts for the TC/RC and at which level for TC/RC for Kinsevere?

Yes. Jimmy, I'll probably talk about the TC/RC because Kinsevere we are producing copper cathodes. There's no TC/RCs applied to copper cathodes.