Thank you for standing by, and welcome to the MMG Limited Interim Results webcast. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Andrea Atell, General Manager, Corporate Affairs and Sustainability. Please go ahead.
Thank you. Good morning, and good afternoon. Welcome to MMG's 2024 interim results briefing. Presenting today are Mr. Cao Liang, our CEO, Mr. Song Qian, our CFO, and members of the company's executive committee. In this presentation, we'll cover MMG's performance highlights for the first half. We'll then detail our financial performance at an asset level and share insights into MMG's strategy and outlook. At the conclusion of the presentation, there will be an opportunity to ask questions. You'll be provided with details by the moderator on how to ask your question. I will now hand over to Mr. Cao Liang.
Thank you, Andrea. Hello, everyone. Thank you very much for attending today's meeting. I'm very pleased to share with you MMG interim results. Firstly, safety performance. Safety is our core value. Our commitment is that every employee and contractor across our organization will go home safely every day. For the first half of this year, we recorded a total recordable injury frequency, TRIF, of 2.44 per million hours worked. This is an increase compared to last year. The significant events with energy exchange frequency was 1.22 per million hours worked. Our company places a great importance on this matter and has implemented an improvement plan. The plan has a particular focus on critical controls around the vehicle and mobile equipment, and also improvement to contractor management. These matters have already shown results.
We've seen no high potential injuries in the past two months, and the TRIF in July shows a downward trend. Now, let's move on to discussing our performance in the first half of this year. MMG had an improvement in financial performance in the first half. The improvement is closely linked to stable production across all the sites, allowing us to benefit from higher commodity prices. Our CFO, Mr. Song Qian, will give you more details later. In this first half, we are actively pursuing growth and accelerating portfolio expansion. As you know, we successfully acquired the Khoemacau copper mine in Botswana, further expanding our presence in the copper business. At Las Bambas, for the first time, we shipped ore from the Chalcobamba pit to the processing plant in the second quarter.
The construction of the Kinsevere expansion project is progressing very well, and with mechanical completion anticipated by the end of this year. Also, in the first half, we successfully completed two significant asset restructuring activities. The first is the establishment of a Khoemacau joint venture. The second is the completion of rights issue. These actions are key milestones in optimizing our balance sheet and driving sustainable growth. Now, I will show an update on our asset portfolio. All of our assets have been performing well throughout the first half of the year. This is particularly true for our largest asset, Las Bambas. Although compared to the same period in last year, Las Bambas produced less copper in the first half of this year.
However, it was in line with our mining plan, with mining activity primarily occurred in the low-grade sectors in Ferrobamba pit. As we advance operations in the Chalcobamba pit, which is currently on the way, we are now having stronger production. This positive trend sets the stage for a stronger second half of the year, with Las Bambas annual production expected to be towards the high end of our guidance range of 320,000 tons of copper. We also anticipate improvement in Las Bambas' C1 cost, starting from the second half of the year. Turning our focus to our operations at Kinsevere in DRC, our initiatives during the first half of the year were dedicated to improving power stability for the processing plant and increasing mining activity at the Sokoroshe II pit.
A rise in self-mined ore supply has allowed us to significantly cut costs associated with the third-party ore. We anticipate this year's production to closely align our target range of 39,000-44,000 tons of copper. As I just mentioned, Kinsevere expansion is also advancing very well. Shifting to the Khoemacau mine, which has been included in our financial report for the first time. We expect copper production this year, starting from the completion of our acquisition on March twenty-third, to range between 30,500-40,500 tons of copper. We are dedicated to ramping up Khoemacau to reach an annual production of 60,000 tons of copper by 2026.
This goal will be supported by continuous mining development to enhance mining fronts, operational flexibility, and mine grades, alongside the completion of the primary ventilation vents and the paste fill projects. Furthermore, the company is promoting our expansion project at Khoemacau as well, aiming to boost our production capacity to 130,000 tons of copper. We expected to complete the project by 2028 and operate at full capacity by 2029. Further reduction in selling cost is also expected. Regarding zinc production, roaster production remaining very stable, while the Dugald River plant resumed operation in late July from the unplanned maintenance shutdown. We still maintain our target of 225,000-250,000 tons of zinc for this year.
Driven by strong metals, strong metal prices, including zinc and precious metals, and the lower treatment charges this year, we foresee a better profitability for our zinc mines. Now, I will talk in a little bit more detail about our accomplishment this year. For KCM, for Khoemacau, our initial step towards strengthening our balance sheet and lowering the gearing ratio was the establishment of our joint venture at Khoemacau. This strategic move positions the Khoemacau mine to more effectively deliver the expansion project, thereby promising long-term benefits for all of our shareholders. Let's turn our attention to our recent completed equity raising project, which served as the second step in our strategy to strengthening our balance sheet. Through this rights issue, MMG successfully raised a total $1.163 billion.
These funds have been directed towards the repayment of the short-term funding of the Khoemacau acquisition and additional debt repayment, leading to the immediate interest savings of approximately $8 million annually. As a result of this equity raising, MMG pro forma gearing ratio has achieved a record low since the acquisition with Las Bambas, now estimated around 45%. In terms of the community relationships at Las Bambas, during the first half, we continued to advance the implementation of the Corazón de Las Bambas program, our new social management approach. As part of this, we conducted extensive and constructive dialogue between Las Bambas and the communities and the local government as well. Through the implementation of this program, communities, including those along the Southern Road corridor and those nearby our site, will benefit from Las Bambas stable production.
In parallel with advancing dialogue tables, we started the development of the Chalcobamba Pit this year. With such progress, we will work towards Las Bambas annual production of 350,000-400,000 tons of copper from next year, 2025. We will provide, provide more details regarding the Corazón project as part of our sustainability briefing. For KEP, the Kinsevere Expansion Project, construction remains on track. Recent milestones include the completion of the construction of the sulphides concentrator and the mechanical completion of roaster of R&A plant, with commissioning on the way, currently on the way. First production of a copper cathode from a sulphides is expected in the second half of this year, and full ramp up is expected in next year.
This next phase of Kinsevere will extend the mine life to at least 2035. Moving forward, we will focus on the delivery of the Kinsevere Expansion Project and Chalcobamba Pit, and actively promote the organic growth, such as the Khoemacau expansion, with the goal of increasing copper production capacity by 150,000-200,000 copper over the next stretch of five years. Our ambition is to be a top 10 copper producer globally. I will stop here and hand over to Mr. Song Qian, our CFO, to talk about a little bit more about our financial performance.
Thank you, Cao Liang, and welcome everyone joining us on this conference today. In the first half of this year, MMG's EBITDA, which is E-B-I-T-D-A, increased to $779 million. We achieved the net cash flow from operations amounting to $515 million. This positive shift can largely be attributed to stable production across all sites and was further enhanced by rising metal prices. Now, let me take you through the financial performance of our five operations. Las Bambas generated an EBITDA of $590 million for the first half of this year. Operating expenses decreased during the period, driven by an increase in deferred mine capitalization costs, which is related to the Chalcobamba pre-stripping activities and a reduction in expenses allocated for the risk mitigation of social conflict.
With the stable production, the Las Bambas mine can generate very good operational cash flow. Its EBITDA margin reached 47% during the first half of this year. Kinsevere showcased the improved performance by generating a positive EBITDA of $41 million during the first half. This achievement was achieved by accelerated mining activities at Sokoroshe II, aimed at reducing our reliance on expensive and hybrid third-party ores. Looking forward, we anticipate even greater profitability as we move towards the commissioning and ramp up of the Kinsevere expansion project. For Khoemacau, beginning on March 22nd, 2024, when MMG completed the acquisition, it contributed $34 million in EBITDA through the first half. We are fully committed to supporting the ramp up of Khoemacau to achieve annual production of 60,000 tons of copper by 2026.
After that, we're completing the expansion to reach a production of 130,000 tons by 2028. Dugald River achieved an EBITDA of $80 million in the first half. We aim to further enhance Dugald River's profitability through continuous operational improvement initiatives. Rosebery Mine reported an EBITDA of $68 million. As a polymetallic mine, that generates a significant revenue from byproducts such as gold and silver. And Rosebery's profits were supported by the good price of precious metals. In recent years, MMG has continually reduced gearing ratio through strong cash flow generated from operations.
Particularly, after completing the acquisition of Khoemacau this year, by utilizing a series of financing methods, the company's pro forma gearing ratio is now estimated at around 45%, which is the lowest level since the acquisition of Las Bambas. In the current global high interest rate market environment, we will continue to take measures to consistently reduce our debt levels, thereby lowering our financial costs and enhancing the profitability. Next, I will discuss our outlook on capital expenditures. As you all know, in Las Bambas, Kinsevere and Khoemacau, we all have a promising expansion project. We believe that capital expenditures on these projects are crucial to ensure the increase of our copper production and the growth profit- profitabilities for our all the shareholders.
Our total capital expenditures for 2024 is expected to be between $850 million and $950 million. For Las Bambas, we are maintaining CapEx between $400 million and $460 million. This budget includes the expansion of the projects such as Las Bambas tailings dam facilities, Ferrobamba pit infrastructure, and the Chalcobamba execution. At Kinsevere, due to reduced capitalized mining costs, capital expenditure is expected to decrease by fifty million from the previous guidance, bringing the range to $200 million and $250 million. For Khoemacau, from March twenty-third, 2024, capital costs are anticipated to be in the range of $100 million-$150 million.
This includes capitalized underground mine development, continued expansion studies, paste, paste fill plant design and construction, and the installation of primary ventilation fans. The company's brownfield copper mine expansion projects are expected to add 150,000 tons to 200,000 tons of new copper capacity over the next five years, with a capital intensity of less than $10,000 per ton, which is significantly lower than the investment intensity of new copper mine projects globally. I will now hand back to Cao Liang to wrap up the presentation. Thank you.
Thanks, so, in summary, our sites are tracking well with the performance in line with, or exceeding our updated 2024 guidance. And we anticipate a more profitable second half. Looking ahead, we will continue to contribute to building a low carbon future in three key areas. First, we will manage our, existing assets to create more value. MMG has a world-class portfolio of copper assets in two major copper belts. We are focused on operational excellence of our existing mines, continuously promoting capacity expansion and achieving stable increased production. Second, effectively managing balance sheet. Now, our balance sheet is the strongest it's at, it's been in the last 10 years. Our business model, with the support from our major shareholder, China Minmetals Corporation, allows us to leverage the best of international and Chinese mining expertise to drive better financial outcome.
With improved performance, we will continue to strengthen our balance sheet. Third, we are committed to maintaining strong relationships with the stakeholders. Our team will continue to work with and support the local communities and apply our role in driving economic and social progress. We are hosting our sustainability briefing tomorrow, and the team will share more details about our approach and commitment for this important area. Finally, many thanks to our talented team for their hard work and commitment over the last six months. I look forward to working alongside them to grow our safety culture and achieve our operational goals. This concludes the results part of our call. I'm now happy to take your questions, and we'll hand back to the moderator. Thank you.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two, and if you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Jimmy Feng from Citi. Please go ahead.
Hi. Thanks, my friend, for the sharing. I have two questions. But firstly, for Kinsevere Mine, it's happy to see its EBITDA turned positive during the first half. So what, what's the outlook for the second half? Because I see there is a positive other operating expenses in the first half, which is caused by the increase in ore stocks. So how should we expect this item in the second half? Because this number is in a relatively large scale relative to the EBITDA for Kinsevere. So this is my first question.
Thank you, Jimmy. So Song or-
I'm okay.
Yep.
Sitting around this table, we have our COO, Nan Wang, and our EGM and the General Manager of operations, Jing Zhao, and our EGM, Troy Hey. So, I will address some of your questions, and maybe, Nan, you could add more on this.
Thank you, Jimmy. Your questions regarding Kinsevere's outlook. Yes, I share the same view with you that we see a very good result of the positive EBITDA in first half. I think, before I come into the details of your question, I think, in general, in Kinsevere, these two years are not a ordinary operational years.
Of course, we run out of the oxide ore, and due to the COVID influence our KEP, which the Kinsevere Expansion Project, which allows us to process the sulphide ore, hasn't been able to come into operation in time. Therefore, in this year and last year, our operation is actually very, very unusual. It's purely relied on the third party ore, which now with the Q1 copper price goes up, price goes up, their price goes up rapidly. If we do fully rely on their resources, we will be experiencing the very significant cost risk. Therefore, we pick up a satellite mine called Sokoroshe II, which is very high cost ore. Only makes sense in the high price of a copper market.
Therefore, we have a mine, and it speed up the mining of that process. Therefore, you will see the cost goes up quickly.
Yeah, Jimmy, just, yeah, adding on what Song just mentioned. So we fast-tracked Sokoroshe II, so we realized the mining costs now. Obviously, we're feeding the high grade to the plant to produce more copper for Q2, and then for remaining of this year. And then some of the stockpiles will remain there until later part of the life. So obviously, from the cost perspective, we'll realize that cost now. But later on, when we reprocess those stockpiles, the cost will be more favorable and beneficial. Yeah. Thank you.
Sure. Thanks for the answer, and that's very clear. I just a quick follow-up on this Kinsevere cost. How do you expect the cost in the next year, in 2025, if I may?
The guidance, we haven't published for now, but the outlook for Kinsevere will be good because starting this Q4, we already be able to process sulphide ore. And in next year, we will ramp up, hopefully by the end of 2025, it could resume the 80,000 tons of copper per annum. Then we will contribute. I believe they will contribute to profit.
Oh, sure, sure. Got it. Thanks. And my second question is regarding the financial expenses. After the repayment of debt, I think there will be some saving on the financial expenses. So what's the financial expenses outlook in the second half? Or, or what's the guidance for the full year of 2024?
You mean, what the second half of the financial part will look like, right?
Yeah, financial. Yeah, yeah, financial expenses. Yes, yes.
Yes. So, normally, we would see $300 million-$400 million of financial cost each year. But this year, we see first half of the finance total debt level goes up. That's purely because of the Khoemacau acquisition. So by the end of first half, you will see our total debt level, which is $66.6 billion. But in July, we repaid $800 million external debt from the shareholders, and hopefully by the year end, we will repay $1 billion. That will reduce our debt level significantly. Plus, with the capital raising the rights issue, we have repaid around $1 billion external debt.
This will help us to both reduce our debt level and reduce our gearing ratio, and also reduce our financial costs. For the whole year, we estimate the financial cost to stay at $400, around $400 million.
Sure. Got it. Thanks, and that's all for my question. I'm looking forward for the improvement of profitability, going forward. Thanks.
Thank you.
Thank you. Once again, to ask a question, please press star one. Your next question comes from Lawrence Lau, from BOCI. Please go ahead.
Hi, thanks for taking my questions. I think I have three questions. First of all, for the Kinsevere, we-- if we work out correctly, the realized price of cobalt in the first half was just around $14,000 per ton. It seems to be significantly lower than the market price. So I just wonder how, why the price so low? Or is the price going to be higher, into the second half of the year? And also, for this mine-
... we see a significant buildup of inventory, I think primarily cobalt. What's your view on this? Do you think you can sell all the cobalt you produce this year within the second half? And finally, regarding the interest rate, now the market generally expects U.S. to cut interest rate, I think later this year. But I understand we have some kind of interest rate swapped. So I just wonder, if U.S. really cut the interest rate, how fast we can feel the impact of the rate cut on our loans? Thank you.
Yeah, Chris, I'll address the first couple questions, and then I'll hand over to Qian for the last one. In terms of the cobalt price, obviously, it's very hard to predict. So, we are working closely with our marketing team to actually further investigate and then monitoring the market closely. And then obviously, higher the cobalt price will definitely benefit all the mining companies. In terms of the cobalt stock, so we are working closely with the potential buyers and then to looking for opportunities for the trial sales. Obviously, we're still at an early stage, we're trying to introduce our product to the market. So, so far, we're getting good feedbacks.
Yeah, so going forward, in the short term, we'll continue working with our potential customers and then to let them know our product specifications, and then also getting feedbacks to to further improve our product to suit their requirements. Over to you, Qian, for the third question. Thanks.
Thank you, Nan, and thanks, Lawrence, for the good question. Regarding the U.S. rates, yes, our first half, we realized the effective interest rate of 5.2% per annum. That's the annualized rate. We do will be able to benefit from the interest reduction if it really happens. So we-- I've already introduced all that level. So every one point of interest rate reduction help us a lot. However, in terms of the, you've also asked the swap, interest rate swap. That was a very good deal, we, the previous management team has achieved several years ago. But we settled that, finalized that, I, I, should last year.
Please, Sherry, would you come up after this to have the detail of that transaction? But, I believe we don't have interest swap so far at the moment. And, for the outlook of the interest rate, to be honest, you are much better in a position to explain this forecast. We would happy to see any real interest reduction in the market, but I don't have more than you think for explaining this.
Thank you.
Thank you. Your next question comes from Chris Xu from Balyasny Asset Management. Please go ahead.
Thank you very much, management team. I've got two questions. The first one regarding Khoemacau. So what sort of C1 cost trajectory should we be expecting over the next few years till 2029, when the production is expected to be expanded to 130,000 tons? That's the first question. Thank you.
Yeah, Chris, I just touched on this. In terms of our current C1, obviously, we're still trying to ramp up to 60,000 tons until 2026. So we're still working towards a stabilized operation, and then open up the mining fronts, and then stabilize the mining grade, and then to get to the main part of the ore body. So in terms of the guidance short-term wise, is pretty much in line with our guidance already provided. But going forward to 2029, you know, as we're getting from 60,000 tons- 130,000 tons production rate, as you can see the C1 will significantly improve.
But at this stage, we are still working hard on the life of mine estimation and then expansion study. So, we'll be able to provide more detailed range in the near future. Yeah. Thank you.
Got it. Yeah, and what sort of CapEx should we be expecting for the second stage expansion from 60 to 130?
That will be, 600 million- 800 million of capacity in total, but that will be happening in three years' time. So starting now, we are working on the feasibility, and, given us one year's time, we could bring this into execution. And hopefully by year 2028, we can deliver that and, have the ramp up to 130 ton per hour.
Got it. Thank you very much. My second question is regarding Izok. Is there any updates on that project and maybe the infrastructure around that area?
Sorry, I didn't catch your question.
For the Izok project. Izok ? The one in Canada.
Sure, thanks. So as you know, we've been working really closely for almost eight years now with the government of Canada, the local First Nations group, and a group called West Kitikmeot Resources, who have taken up the proponent role in the infrastructure project. We haven't changed our view that this is an outstanding project, excellent resource and reserves, and just really needs that infrastructure unlocked to make this a very viable and very attractive project. The good news, I think, is that we're seeing very good support and that project kicking into the work that needs to be done with feasibility. So we are very confident that that work will start up again in earnest.
There's a couple of years of work to get the pre-feasibility, to get it to what we call shovel-ready stage, which is when you'd be able to invest as owner of the infrastructure. We still have over CAD 20 million of Canadian government funding committed to the infrastructure to that work. It's advancing well. I would expect that next year you would see some really significant work on the infrastructure, and that gives us greater confidence to start thinking as MMG, in terms of looking at the project again, looking at its feasibility, and, and as we always planned, to follow behind the infrastructure work with feasibility work on that study. So we're confident, it's in a, probably the best place it's been for the last couple of years and, and look forward to keeping you updated.
Got it. Thank you very much.
Thank you. There are no further questions at this time. I'll now hand back to Mr. Cao Liang for closing remarks.
Okay, thank you again, and, thank you for joining us today. If you have any additional questions, please reach out to our investor relations and, or corporate affairs teams. So thank you for your time. Bye for now.
That does conclude our conference for today. Thank you for participating. You may now disconnect.