Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Capstone Copper Corp (CSCCF, Financial) achieved consolidated copper production of around 41,000 tonnes in Q2 2024, meeting H1 production guidance.
- The Pinto Valley and Cozamin mines performed well, with Pinto Valley producing 15,994 tonnes of copper at competitive C1 cash costs of $2.46 per pound.
- The company produced first saleable copper concentrates from the Mantos Blancos development project during Q2, with the project remaining on track and on budget.
- Capstone Copper Corp (CSCCF) released an updated feasibility study for the Santo Domingo project, enhancing the mine's economics and marking a major step towards creating a world-class district in Chile.
- Adjusted EBITDA in Q2 increased by 54% quarter over quarter and 186% year over year, driven by higher copper prices and lower costs.
Negative Points
- Consolidated C1 cash costs were $2.84 per pound, slightly exceeding cost guidance by $0.02.
- Production is trending below the midpoints of guidance, while costs are trending towards the upper end due to a two-month delay in reaching sustainable operating rates at Mantos Blancos.
- Net debt remained largely unchanged at $741 million as of June 30, 2024, indicating limited progress in debt reduction.
- The Mantos Blancos project experienced a one-month delay due to a faulty motor for the SAG mill, impacting the ramp-up schedule.
- Copper production from the sulfides at Mantos Blancos was disappointing in Q2 due to a localized geotechnical issue, resulting in lower grades and recoveries.
Q & A Highlights
Q: What milestones need to happen for the Santo Domingo project to move forward from the sanctioning decision, and what are your thoughts on going 100% versus bringing in a partner?
A: Our base case remains to seek a 30% partner at Santo Domingo. We intend to commence this process as soon as the full technical report is out. The project financing process will likely start early next year, aiming for a final investment decision towards the end of next year. We will also progress detailed engineering and place long lead-time orders to lock in costs and schedules. The final decision will consider our internal balance sheet position, cash flow generation, net debt, and the macro environment.
Q: Can you provide more color on the Mantos Verdes sulfides ramp-up, particularly on the run rate and recoveries?
A: We had an interruption due to a SAG mill motor issue, but we are now positioned to continue ramping up. In July, we saw throughput rates close to design capacity, and we produced concentrate throughout this period. We will take down the plant for a week or two in August to fix and correct punch list items, but otherwise, we are on track to ramp up to full capacity.
Q: Is the 55,000 tonnes per day rate at Pinto Valley sustainable, and can it be pushed further?
A: We are encouraged by Pinto Valley's performance and believe there is capacity to do a little more. We have implemented an asset integrity framework, and the team is confident in achieving higher throughput rates.
Q: What is the impact of the $2.15 billion CapEx at Santo Domingo with different desalination options, and how might this affect CapEx and operating costs?
A: The incremental capital cost difference between expanding the Mantos Verdes desalination plant and building a new one at Santo Domingo is not significant. We have considered a boot contract for the desalination plant, which would shift some costs from CapEx to OpEx. The estimated additional capital for building a new plant would be around $50 million.
Q: When do you expect Mantos Verdes to reach commercial production, and is there a risk to your guidance given the one-month delay?
A: We expect to hit commercial production in Q3, around September. The one-month delay does not change our guidance, and we are comfortable with our current knowledge and ramp-up progress.
Q: Can you provide any feedback from preliminary offtake discussions for the different grades of magnetite at Santo Domingo?
A: We have produced samples and shared results with potential off-takers, receiving positive feedback. We are confident in our ability to produce the specified grades, and the concentrator circuit is set up to handle two independent grades, maximizing recovery.
Q: What are your thoughts on the potential for additional resource expansion at Santo Domingo and the district?
A: We have significant exploration potential on our own property and in the district. We are confident in expanding our resource base over time, whether on our property or through acquiring stranded satellite deposits. We have at least 10 to 12 years before seeing any drop-off in grade, giving us ample time to explore and optimize resource utilization.
Q: How do you plan to manage the balance sheet and leverage in light of the Santo Domingo project?
A: We will evaluate the benefits of bringing in a partner and the optimal financing structure. Our decision will consider our balance sheet position, cash flow generation, net debt, and the macro environment. We aim to maintain a strong balance sheet and leverage position to support our growth plans.
Q: What are the next steps for the Pinto Valley district consolidation strategy?
A: We believe Pinto Valley will continue operating for generations to come. We are focused on maintaining asset integrity and exploring opportunities for district consolidation to extend the mine's life and enhance production capacity.
Q: How do you plan to address the geotechnical issues at Mantos Verdes and improve grades and recoveries?
A: We experienced a localized geotechnical issue that impacted mine sequence, resulting in lower grades and recoveries. We have addressed the issue and expect grades and recoveries to pick up in Q3. We are also ramping up to 20,000 tonnes per day capacity, which will further improve performance.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
