MMG Limited (1208) Earnings Call Transcript

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 Andrea Atell. Please go ahead.

Thank you, and thank you for joining us for MMG's quarterly production report teleconference. This report and today's discussion cover the operational performance of MMG sites for the fourth quarter and the full year ending 31 December 2024. Joining us for this call are Mr. Liang Cao, our CEO; Mr. Song Qian, our Chief Financial Officer, along with other members of the executive team. I will now hand over to Cao Liang, who will take us through the highlights of the report. Following his overview, we will open the call for questions. Thank you.

Thank you, Andrea. Good morning, and good afternoon, everyone. Welcome to MMG Fourth Quarter Production Report Teleconference. As you know, our production report was released yesterday. I will take it as read and provide a summary of our results and highlights. The management team and I will be more than happy to answer your questions at the end. At MMG, safety is our first value. In positive news, our safety performance continues to improve, with few injuries reported in the last quarter. The total recordable injury frequency, that's TRIF, for the first -- for the full year was 2.06 per million hours worked, with no high potential [ injuries ] reported in the past 7 months. While they are good results, we need to remain vigilant and keep progressing our improvement plans across all sites. I will now take you through our production results. Overall, it's been both a strong fourth quarter and full year result as we achieved a number of significant production milestones. MMG's operations delivered robust production performance in 2024, with copper production 15% higher than 2023 and zinc production 8% higher. Stronger copper production was driven by Las Bambas, which exceeded full year guidance, while all other operations delivered their annual targets. Our growth in copper was also driven by the inclusion of Khoemacau output. Cost performance was also favorable in 2024, with Las Bambas achieving lower-than-anticipated C1 cost due to higher production rates and increased byproduct credits from higher precious metals -- precious metal prices. MMG's zinc mine cost also benefited from higher precious metal prices and favorable zinc concentrate treatment charges as well. In the fourth quarter, Las Bambas achieved its highest quarterly production since 2019, an impressive result. The mine's 2024 annual production totaled 322,912 tonnes, marking a 7% increase year-on-year, driven by mining at the Chalcobamba pit and uninterrupted operations. It's worth highlighting the team's significant effort in community engagement and the real impact this is having on consistent operations at site and along the transport corridor. In 2025, copper production is expected to be [ 350,000 ] to 400,000 tonnes at Las Bambas. The higher end of this range represents full year operation at the Chalcobamba and Fuerabamba pits, assuming the absence of significant social interruptions. MMG remains committed to working closely with the government of Peru, the local government and the community members to ensure transparent and constructive dialogue. Production at Kinsevere was in line with expectations with a 1% increase from 2023. This was driven by the addition of the sulphide circuit in the fourth quarter, improved power supply stability and increased ore supply from Sokoroshe II pit. In positive news, Kinsevere expansion mechanical completion was achieved in September last year as scheduled. The focus is now on ramping up the concentrator and roasting system to gradually increase production. Copper cathode production is expected to increase significantly in 2025 this year with a forecast range of 63,000 to 69,000 tonnes. Khoemacau produced close to 31,000 tonnes of copper in concentrate for the period from 23rd March 2024, MMG's acquisition date. The team has focused on improving equipment availability and onboarding skilled labor, which improved operations and drove high mining and milling volumes. Accelerated underground development has expanded mining front, positioning the mine for high mining volumes and greater flexibility in the near and medium term. This year, our 2025 guidance is 43,000 to 53,000 tonnes in copper in concentrate. Planning for future growth at Khoemacau is underway with the feasibility study currently in progress to lift annual production to 130,000 tonnes per annum. The expansion project is expected to commence construction next year, with the first concentrate production in 2028, subject to a comprehensive assessment of timeline in the feasibility study. Moving to zinc. Our total zinc production reached almost 220,000 tonnes in 2024, an 8% increase from 2023. This result reflects our operational improvements at Dugald River and Rosebery. Our Australian operations have both performed strongly, with the production at Dugald River and Rosebery increasing by 8% and 9%, respectively, year-on-year. It was great to see Dugald River have a record metal production month in October and a record recovery rate of 91% in the fourth quarter. This achievement was due to the team's ongoing efforts to optimize operation and the benefit of higher ore feed grades. At Rosebery, ore mined and milled volume also reached record highs, with both exceeding 1 million tonnes. With a production strategy focused on zinc equivalent production, the mine also achieved more than 133,000 tonnes of zinc equivalent production. And finally, we announced that the mineral resources for our 5 mines had increased across all metals, including a 2.6 million tonne increase for copper and 1.4 million tonnes for zinc, net of milled depletion. The substantial gains detailed in MMG's 2024 mineral resources and ore reserves statement, representing our best organic result for mineral resources since MMG was established in 2009. This success is thanks to a multiyear commitment to exploration drilling and extending the life of our mineral deposit assets. In closing, our focus remains on generating more value from our operations and maximizing the growth potential of our assets. On behalf of MMG Executive Committee, I would like to sincerely thank our team for their hard work and commitment to safe operations. It is their efforts that we have made 2024 such a strong year and our recent production milestones possible. It's an exciting time for MMG, and we are looking forward to another successful year. This concludes our presentation. My colleagues and I are now happy to take your questions. I will hand it back to the moderator. Thank you.

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

Congratulations on the strong fourth quarter production report. I have three questions, and let me ask one by one. So for the first question, I noticed that for Las Bambas mine, there was 20,000 tonne copper inventory accumulation in 2024, mainly in the second half of '24. I want to check, will these inventories be reduced or sold in 2025, or any of them are the normal inventory for the operation of like Chalcobamba and Las -- Fuerabamba? This is my first question.

Thank you, Jimmy. Ivo, would you like to take?

Yes. Okay. Thank you, Jimmy, for the question. This is Ivo from Las Bambas. Yes. Actually, as you mentioned that we have inventory, is because of actually the grade of the concentrate of copper we produced because of the lower grade of the ore. So we have more volume of the concentrate, which means and we need to, with more trucks, to transport all the concentrate we have stocked. And also by the end of the year, we had some illegal mining protest against the government. They just had a lot of road blockage, which definitely also influenced all our transportation. So what we right now is have the authorization about 150 trucks per day to transport all the concentrate we have in stock. So normally, we can make the stock 0 by the end of March of this year, 2025, and just continue with our normal operation. I hope this could answer your question.

That's clear. And my second question is regarding the C1 cost for Las Bambas. I noticed that the C1 cost guidance in 2025 is higher than the actual cost in '24. You mentioned that 2 major reasons include the higher employee benefit and also the increased social program spending. So for these 2 parts, could you explain more like quantitatively, like how much is the increase in the social program spending and employee benefit, respectively, in 2025 compared with 2024? Do you have this number in value or in value production? And how should we expect it going forward? Like would this be a sustainable spending like into 2026 and later?

Song, would you like to take?

Yes. Thank you, Jimmy. The largest portion for that increase, as you mentioned correctly, is the employee benefits. In 2024 compared with this increase in 2025 guidance, this will count in $0.11 per pound. About $0.06 of this is due to increased profit incentive benefits to employees and approximately $0.05 is due to a one-time payment for a collective bargaining agreement, which won't happen next year. The benefit of -- yes, the benefit of the profit incentive will come as we increase our profit in Las Bambas, that will increase. Another significant factor of the reduction in the capitalized -- is the capitalized mining costs. Basically, because we are focusing more on ore mining instead of waste stripping, that will decrease our capitalized mining but increase our cash cost. That's only an accounting relocation of these items, not exact changes of our cash expenditures. And the other part is also regarding what you mentioned, the social program. That will increase $0.03 per pound, primarily due to the compensating for some delays for last year due to external reasons.

And another is -- I just want to check, so total is $0.03 plus $0.06 and those 2 parts totally should increase by $0.09 in the C1 cost in 2025 year-on-year, right?

Yes, you're right. That actually implies your calculation, because although our recognized C1 in 2024 was $1.81 per pound, but actually close to Q2, our production increased a lot, that implying C1 cost for the second half year would actually reach is below $1.40.

Okay. Okay. Got it. That's very clear. And my last question is regarding the Kinsevere. I'm happy to see that the C1 cost guidance is lower in this year because of the ramp-up for KEP. And I want to check when will this KEP be fully ramped up? Would that be in 2026? And how should we expect the C1 cost after the fully ramp-up of Kinsevere, the KEP project?

Yes. Thanks, Jimmy, for your question. This is Nan here. I'll address your questions on these. In terms of ramp-up timing, we look at some stage Q2, Q3 this year we ramp up the KEP project. In terms of the C1, obviously we provide the guidance for 2025. As we ramp up fully, reach to a stable operation conditions, and then we'll obviously review the C1 at that time, and then we'll sort of share with the market accordingly.

Your next question comes from Lawrence Lau with BOCI.

I also have three questions. First of all, I think just a follow-up on the Jimmy question on Las Bambas cost. One of the reasons you stated for the increase in C1 cost is the increased social program spending. I just would like to know, is it going to be one-off or you have changed the, say, payment to those social program on a per tonne or per pound basis? Secondly, in the announcement, you mentioned that there's some problem with the moly production in Las Bambas in 4Q. I just want to know, have the problem been solved? And also, finally, on Kinsevere, you also mentioned that you suspended the production of cobalt in 4Q because of market conditions. And now you have a more flexible way to do the production. I just want to learn more as to, say, is it -- say that if you suspend the production of cobalt for a period of time, is it that after you produce copper from the ore, you can set aside the residue, then you can process those residue when the market is good, or you just discard the residue?

Thank you, Lawrence. So Ivo will probably do the first question we are to take and then Nan following questions.

Okay. The first question is related to the social programs expenditures, and of course, we anticipate around $0.03 per pound increase in cost related to all the social programs, and driven by some delays to implementation of social programs. So we have this increase in 2025, this year, a lot of because of the external factors, we could not just implement that through 2024. So normally we have averaged around $30 million about the social investment, and we will have this increase for this year. And related to the second question about the moly, actually because we developed the second pit, the Chalcobamba, and they have a lower ore grade of moly actually, and also we have some elements that really impact the recovery of moly. And right now, we have taken several certain measures just to try to recover more moly and to maintain the production. This is one of our critical work for this year as well. So what we're trying -- we have a lot of solutions. But right now, we're just doing more tests, and we're trying to implement this year to have a higher recovery of moly.

Okay. Lawrence, I'll address the cobalt question for Kinsevere. As you mentioned, we adapt a flexible cobalt operation, mainly considering the cobalt price to -- currently, the cobalt price is quite low and impacted on the cobalt sort of production. And then with that strategy, we actually maintain our cobalt in our solutions. The solution is circling around within our processing water in the pregnant liquor. That will be part of the circuit. So at the moment, we're extracting the copper out from the solution. And then that cobalt component in the solution will be circling in the processing water and the tailings dam and then get pumped back to the processing facility. So when we're ready to extract cobalt, we'll turn on the cobalt plant and then we'll process the cobalt and extract that component. So that's the high-level description of the process.

Your next question comes from Chris Shiu with Balyasny Asset Management.

Congratulations on the great operating performance. I've got two questions. The first one is, could you give us some breakdowns for Las Bambas into Fuerabamba and also Chalcobamba in terms of the production and cost?