Thank you for standing by, and welcome to the MMG Limited 2023 interim results presentation. 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 one on your telephone keypad. I would now like to hand the conference over to Mr. Jarod Esam, Head of Investor Relations. Please go ahead.
Good morning, and welcome everyone to MMG's 2023 interim results briefing. Presenting today are MMG Interim CEO, Li Liangang, and CFO, Ross Carroll. The slides for today's presentation are being webcast in both English and Chinese. They can be accessed from the Investor and Media section from the MMG website. At the end of today's presentation, we will open the line for questions. For those wishing to ask questions, please ensure you're accessing the presentation via the teleconference details that were included in the invitation for today's session, and not just the webcast. I will now hand over to Liangang.
Thank you, Jarod. Good morning to everyone, welcome to MMG's 2023 interim results briefing. At MMG, safety is our utmost priority. Across the business, we are committed to eliminating the significant potential incidents that present injury risks by driving a culture that recognize the safety and well-being of our people above all else. In a tragic start to the year, two people employed by our mining contractor, Barminco, at the Dugald River mine, tragically lost their lives after a light vehicle they were traveling in fell into a stope on 15th of February, 2023. We extend our sincere and heartfelt condolences to their families and friends. For the first half of the year, MMG recorded a total recordable injury frequency rate of 1.20. This represents a decrease of 0.05 when compared to the full year of 2022.
In addition to our industry-leading trade performance, we also focus on significant events as leading indicators, particularly significant events with energy exchange, which have the highest potential to result in the loss of life. Our operation report and learn from these events so we can prevent serious injuries and fatalities. We continuously improve our risk management processes, ensuring that critical controls for material safety risks are always in place in our journey to eliminate fatalities from our business. Now, let's move on to our production and financial results. We are delighted to report that MMG achieved an increase of 31% in total copper production compared to the first half of 2022. Notably, during the second quarter, we experienced increased production at all of our four operations compared to the first quarter of 2023.
However, our total zinc production experienced a decline of 22%, primarily to 34-day suspension at Dugald River, caused by the fatal incident in February. On the revenue front, we achieved a significant increase of 35% in total revenue for the period. This growth was primarily driven by record sales volumes from our Las Bambas operation in the second quarter, with stability around the Southern Corridor since March 2023. MMG's revenue stream continues to be dominated by copper, contributing 76% of our total revenue in the first half of 2023. In terms of net cash flow from operations, we achieved a significant increase of 216% compared to the first half of 2022, totaling $426 million.
While we, we experienced some positive outcomes, we also faced challenges with lower prices for copper and zinc in the first half of 2023, higher consumption of third-party oxides considering to offset re- reduced, oxide ore mined during the transition to mining sulfide ores, and higher costs in line with the broader industry. Our total EBITDA decreased by 2% compared to the same period in 2022. I'm pleased to report that the construction progress for our Kinsevere Expansion Project is on track, with the first cobalt production expected this year. The majority of the structural and mechanical installation of the cobalt plant has already been completed. This project will extend the mine life of Kinsevere until 2035, and take annual production up to 100,000 tons of copper equivalent production.
As a member of the ICMM, we have aligned our approach to sustainability to the organization's mining principles and eight additional position statements, which provides the best practice framework for the mining and metals industry. In our efforts to reach net zero emissions by 2050, the operation of Dugald River Solar Farm commenced in the first half of the year, providing around [surplus loads for this new hybrid loaders.... Our internal carbon price has also been implemented for use in our annual mine and business planning processes. This will help us to assess potential decarbonization options at each mine, and make better informed business decisions. The aim of our social contributions is to drive social development by supporting our host communities and providing individual economic livelihoods through improved access to infrastructure, healthcare, education, and employment opportunities.
In 2022, we paid $567 million in taxes and royalties to our host governments, and our direct social spending in our host communities amounted to $31 million. Our Las Bambas operation has continues to face challenges, with social conflicts and uncertainty impacting our people, our operation, and our business more broadly. The team on the ground continues to work hard to manage these challenges, Las Bambas has decided it's time to seek a new path forward. The transaction basis of relationships is no longer sustainable. A new model and a significant change program is required. This program, this program will be called Corazon de Las Bambas, heart in English, as a reminder of the importance of Las Bambas for the communities and regions in which it operates. If the heart of Las Bambas beats, everyone benefits.
The program has been tasked, tasked with the implementation of the Las Bambas social and land, land access strategy, developed, approved by the ExCo of the company, and will consist of 8 key products. Now, moving on to our Kinsevere Expansion Project. The Kinsevere Expansion Project aims to significantly increase our production capacity to approximately 8,000 tons per year of copper, and between 4,000 and 6,000 tons per year of cobalt at full capacity. To support this expansion, we have allocated a capital expenditure budget in the range of $550 million-$600 million. The construction is progressing well. You can see from the progress, we have made through this picture of the cobalt plant, with the majority of the structural and mechanical installation already, completed.
We have achieved many milestones in the key projects execution, execution. Board approval was received in March 2022. We commenced the construction of the third TSF in November 2022. Earthworks started for the sulfide concentrator in March 2023. We are currently doing preparatory work at Sokoroshe II and progressing construction of the roaster and acid plant. As already mentioned, the majority of the construct, the majority of the structural and mechanical installation for the cobalt plant is already complete. Looking ahead, we anticipate the first cobalt production to commence in the second half of 2023, making a significant milestone in our Kinsevere Expansion Project. Subsequently, we expect the first copper cathode from sulfide, from sulfide ores to be produced in the second half of 2024. Moving on to our recent exploration results.
Firstly, I'm pleased to report significant progress at Las Bambas for Ferrobamba Deeps. Through our exploration efforts, we have successfully defined the depth, extension, and continuity of skarn and porphyry mineralization beneath the 2022 ore reserve pit design. This is an exciting development as it indicates the potential for a large tonnage deposit at Ferrobamba Deeps. We are thrilled with these results and believe they open up new possibilities for our operations at Las Bambas. Looking ahead, we have planned further drillings activities in 2023 and 2024, to continue evaluating the mineralization and determining potential mining methods. This could involve the expansion of pit, or the development of an underground mine, or a combination of those. At Rosebery, we started an accelerated drilling program in January 2023.
This program has already yielded promising results, including extensions to mine lenses, such as the V lens and T lens, as well as the discovery of new mineralized zones. These findings highlight the remaining potential within and around the Rosebery mine. Concurrently, with the Rosebery drilling program, we are conducting studies to identify a sustainable long-term tailings storage solution. This is an important step in extending the life of the Rosebery mine, ensuring its continued operation and contribution to our overall portfolio. For further details, please refer to the full report on these exploration results released on 13th of July. I will now hand over to Ross to take you through our 2023 interim financial results in more detail. Ross, over to you, please.
Thanks, Li Liangang, and welcome everyone joining us on the line today. I'll now provide an overview of MMG's performance for the first half of 2023. While we faced certain challenges during the period, there are also a lot of positives to take away. Firstly, we achieved a significant increase in total revenue, which rose by 35% compared to the first half of 2022. This improvement was primarily driven by higher sales volume from Las Bambas, as we were able to operate for longer periods than the first half of 2022, which more than offset the impact of lower copper and zinc prices. MMG also achieved a significant increase in net cash flow from operations, totaling $426 million. This represents an increase of 216% compared to the first half of last year.
This is primarily attributable to favorable working capital movements, including the inventory drawdown at Las Bambas in 2023, compared to a buildup of inventory in the first half of 2022. Additionally, lower tax payments for both Las Bambas and Kinsevere contributed positively to our net cash flow from operations. However, despite the positive impact of higher sales at Las Bambas, our total EBITDA experienced a 2% decrease compared to the first half of 2022. I'll explain it further on the next slide. This slide provides the EBITDA bridge between the first half of 2022 and the first half of 2023, offering investors some of the detail behind our change in the operating and financial performance.
There was an unfavorable impact of $170.6 million, driven by lower realized prices for copper and zinc. It is important to note that the price bearings includes mark-to-market adjustments on open sales contracts for 126,000 tons of copper and 20,000 tons of zinc. These adjustments were recognized based on the price on the last day of June, but will be finalized in the second half of the year when the contracts close. The largest positive impact in the first half came from higher sales volumes at Las Bambas, resulting in an increase of revenue of over $719 million compared to the previous year. This positive impact was partially offset by lower zinc concentrate sales volumes at Dugald River, due to the 34-day suspension in February.
Additionally, zinc and lead sales volumes at Rosebery were lower due to the timing of sales, with a couple of shipments slipping into the second half. Next, we have the impact of operating costs, which were mainly driven by the unfavorable stock movement at Las Bambas due to the drawdown of stockpiles compared to the buildup in the first half of 2022. Additionally, production costs at Las Bambas in the first half were higher due to the increase in the volume of material mined and milled. Kinsevere production cost increased as well, mainly driven by increased consumption of third-party ores to compensate for the reduced mining of oxide ores as we await the completion of devt, which will allow us to process sulphide ore. Moving on to an overview of our debt.
The chart on the left-hand side illustrates our updated term debt repayment profile. We have already repaid $318 million of our Las Bambas project facility in June 2023, and as we move forward, the repayments will reduce in 2024 and 2025. With the shareholder loan repayments, we have the flexibility to review them with our major shareholder as necessary. As the chart on the right shows, our effective interest rates for six months ended 30th of June was around 5.2%, remaining lower than the benchmarks due to the hedging done on our Las Bambas project facility and our shareholder loans being at fixed rates. Slide 17 provides an update on our capital expenditure.
As previously guided, we anticipate total capital expenditure in 2023 to be within the range of $700 million-$850 million. $350 million-$400 million is attributable to Las Bambas. It includes investment in the expansion of the Las Bambas tailings dam and the development of the Ferrobamba pit infrastructure. Additionally, at Kinsevere, we expect capital expenditure for the new plant to range between $200 million-$250 million. An additional $50 million-$100 million will be spent on the associated capitalized mining activities. The chart on the right demonstrates that our projects compare favorably to other greenfield and brownfield copper development projects that are planned to be commissioned over the next five years. Slide 18 highlights our earnings leverage to changes in commodity prices and FX.
Copper and zinc prices and the Australia to U.S. dollar exchange rate have the biggest sensitivity, with a $0.10 per lb move in the copper price having an $82 million impact on EBITDA. I will now provide a brief overview of some of the key points regarding our four operating sites. At Las Bambas, as we discussed earlier, we experienced a significant increase in production and sales in the first half of 2023, thanks to the stability along the Southern Corridor in the second quarter. Notably, we achieved record-high sales of approximately 417,000 tons of copper concentrate in the second quarter.
These increased sales volumes resulted in an 84% increase on Las Bambas' revenue and contributed to a 56% higher EBITDA compared to the first half of 2022. In terms of costs, the Las Bambas C1 costs of $160 per lb for the first half were below our guidance range of $170-$190 per lb . Las Bambas copper production in 2023 is expected to remain within the range of 265,000-305,000 tonnes, contingent upon continued access to the site for supplies, personnel, and logistics. The Las Bambas team is working hard towards the enduring agreements for the development of the Chalcobamba deposit with the Huancuire community. We are hopeful that the development of the deposit can commence by the end of 2023.
Moving on to Kinsevere, in the first half of 2023, we saw a slight decrease of 2% in copper cathode production, with 22,000 tonnes produced. This decrease was due to an unstable power supply from the national grid and a planned shutdown of the processing plant for the integration of the cobalt plant in the second quarter. During the first half of the year, we recorded an EBITDA loss of $14 million at Kinsevere, down from an EBITDA profit of $64 million in the same period for 2022. This loss can be primarily attributed to lower copper prices and the higher consumption of third-party ores to compensate for the reduced oxide ore mines during the transition period and higher sulfuric acid consumption. This also resulted in an increase in C1 costs for the first half of 2023 to $3.53 per lb
The construction of the Kinsevere Expansion Project is progressing as planned. The expansion project will contribute to higher production, and with the introduction of cobalt by-product credits, reduce unit costs. The Kinsevere team has made significant progress on the preparatory work at Sokoroshe II, and we expect that mined ore from Sokoroshe II will start to be transported to the Kinsevere main site in the second half of the year, allowing us to optimize the consumption of third-party ore. As such, we anticipate that the average C1 cost for Kinsevere in 2023 will be in the range of $3.15-$3.35 per lb which is lower than the cost incurred in the first half. I'll now move on to Dugald River. In the first half of 2023, Dugald River produced 57,000 tonnes of zinc. This represents a 28% decrease compared to the prior corresponding period.
The mine has been prioritizing the safe ramp-up of operations since restarting in late March, after a 34-day suspension due to the fatal incident in February, with full rates of mining and processing achieved in late May. Dugald River has successfully transitioned to an owner-miner model, with MMG executing production operations, while our new mining contractor, Redpath, is solely focused on development activities. We achieved the highest monthly advance rate on record in January, reaching 1,138 m of development. However, Dugald River recorded an EBITDA loss of $26 million in the first half of 2023, representing a decrease of 121% compared to the same period in 2022. This loss can be attributed to lower zinc prices and lower zinc and lead sales volumes due to the suspension of operations.
In terms of costs, Dugald River C1 costs were $130 per pound in the first half. Our annual guidance range is $105-$120 per lb with improved performance expected in the second half of the year, as we will operate at full capacity. We continue to implement improvement measures, with savings already realized from our long-term solar offtake agreement with energy provider APA Group, and ongoing plant optimization, delivering 89.7% zinc recovery in the first half of 2023. Finally, moving on to Rosebery, which continues to deliver after almost 90 years of operations. Rosebery mined 4% more ore in the first half of 2023 due to improved mine productivity and workforce availability, despite lost production in January resulting from the bushfire incident in late December.
However, production of 23,000 tonnes of zinc represents a 2% decline compared to the first half of 2022, reflecting lower grades, mainly attributable to the mining sequence. Revenue of $103 million was 27% lower than the same period last year due to lower base metal prices and lower sales volumes, partly offset by higher precious metals prices. Operating expenses were lower by 24%, reflecting a favorable stock movement with the buildup of zinc and lead concentrate stock due to the timing of sales. C1 of $18 is partly offset by higher production expenses. In line with our prior guidance, zinc production in 2023 is expected to be between 55,000-65,000 tonnes of zinc and zinc concentrate.
The 2023 average C1 costs are expected to be at the lower end of the prior guidance of $0.35-$0.50 a lb supported by higher by-product grades and strong precious metal prices. Looking forward, we are working hard to extend the mine life at Rosebery. The accelerated exploration program is already delivering encouraging results, as demonstrated in our recent exploration release. Currently, we are continuing to investigate potential options for a sustainable tailings storage solution, as well as potential options for safe and viable short-term capacity increases at our existing facilities, while awaiting the minister's decision on the proposed preliminary works for South Marionoak . I will now hand it back to Li Liangang to wrap up the presentation. Thank you.
Thank you, Ross. Let's move on to MMG's strategy and outlook. While the overall strategy remains consistent, our new vision sets a clear direction for us as a leading international mining company that plays a crucial role in providing the material essential for green energy transition. We recognize the importance of sustainable practices and are committed to contributing to the global effort towards a greener and more sustainable world. In line with our vision, our ambition focuses on growth and diversification. We aim to expand our portfolio of assets, commodities, and jurisdictions, bringing together the best of MMG and our Chinese and international expertise. Now, let's turn our attention to our approach to sustainability. At MMG, we understand the importance of delivering sustainable development and are committed to making a positive impact in the communities where we operate.
As a member of the International Council on Mining and Metals, and through our commitments to global sustainability-related initiatives, we prioritize sustainability in all aspects of our business. Our approach to sustainability encompasses three key areas: people and communities, environmental stewardship, and being a trusted and responsible producer. The data outlined on this slide demonstrates the significant demand outlook for our products. The need to take meaningful action and on climate change is becoming more urgent for every government, organization, and individual. The minerals we produce are essential to ensuring that we can successfully transition to a more sustainable world. We remain very confident in the medium to long-term outlook for copper, zinc, and cobalt as the global shift towards greener, green energy sources intensifies.
We intend to leverage this mega trend with the portfolio positions to outperform over the coming, upcoming decade. We will continue to focus our growth plans around future-facing metals. Looking beyond 2023, we remain confident about our overall markets, opportunities, and outlook. We will continue to pursue disciplined growth. Our Kinsevere expansion products and Tocopilla developments are expected to deliver additional copper equivalent production of more than 150,000 tons per annum compared with 2022. At Las Bambas, our focus is to build better partnership with our communities that are based on respect and mutual success. We believe that a new sustainable model that promotes greater participation and building meaningful relationships can take us a step forward to reduce social pressures at Las Bambas and support our growth so that all stakeholders can benefit.
Finally, on behalf of the MMG management team, I thank our shareholders, host communities, contractors, and all MMG employees for their support and efforts. Thank you for your time today. I will now, now hand over back to the moderator, who will open the line to questions.
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. If you're on a speakerphone, please pick up the headset to ask your question. Your first question comes from Jingshan Shang from Citi. Please go ahead.
Hi. Hi, management. Thank you for the presentation. I have a few questions. The first question is, related to the stock movement impact. Actually, you have this-
If you compare that to the end of last year, the 1st half of last year, we were building up inventory because even though when the mine reopened after the shutdown in April to June, the roads were still closed. We weren't able to, to ship at that stage. It's, it's quite an unusual period to make a comparison. Then with the C1 guidance, I, I, I would probably say there's a bit of conservatism built into our outlook for the full year, because we've had a, a very good run with the road being kept open since middle of March. Pleasingly, the government has just extended the state of emergency for another two months. Which means we'll have the roads open again until the middle of October at, at a minimum.
If things keep going well, at Las Bambas, and we, we don't have any major situations, we will probably exceed that cost guidance. There's just a, a little bit of conservatism building there at the moment. I, I hope that answers your question.
I got it. Yeah, that's, that's good. That's very clear. Thank you. Thank you for the answer.
Your next question comes from Lawrence Lau, from BOCI. Please go ahead.
Hi, can you hear me? I actually have two questions. First, about Dugald River. We see that the mining costs increased in the first half compared to last year, despite we have lower inputs. Can the company explain, explain more about that? We have moved to owner-miner model. Can the company explain or tell us more about the impact on the cost side with that change? My second question is about the Chalcobamba project. Do we have any estimation of the likely timeline that we can start to work on the project, given the progress we have regarding the communication with the local communities? Thank you.
Yeah, thanks for the question.
Yeah, Ross.
Okay. Yeah. Okay. Lawrence, the reason why our unit costs at Dugald River increased, well, there's probably two reasons. One is that the industry has been subject to, you know, widespread inflation over the last, you know, two years. I think you would see with most mining companies' costs that, that, you know, they've gone up by 10%-20%. That's reason number one. Reason number two, which is the primary driver, is that we were closed completely for 34 days following the incident in February, and but during that period, we still incurred fixed costs, and we still had to pay, pay our labor and standby costs for our contractors and so forth.
Even once we, we restarted operations, we proceeded very carefully and made sure that, you know, particularly the mental wellbeing of our employees was looked after. It, it basically took about a, and I think I said by mistake, end of May, was really towards the end of April, that we started to get back to full capacity. It, it meant from, I think it was the 21st of March, when we came back online, through to the end of April, we weren't operating at full capacity, even though we were incurring full costs. That's why the costs were very high for the 1st half. Lin, do you want to answer the question on the owner miner?
Yes, Ross. Thanks, Lawrence. In terms of owner mining cost impact, we do see the production, the C1 guidance, revised to be $1.05-$1.20. Mainly at the beginning of the ramp up, due to the incident, so the transition was interrupted in that, in that February post-February incident. At this stage, we look at the settle down once we reach to a bit of a full production, like Ross mentioned, towards the end of May. As you can see, the costs start to get down to lower part of that range. Yeah.
in terms the improvement with all the inflation considerations, we do see the C1 will continue heading down towards that lower part of the range. Yeah. Thank you.
Thank you.
If I could add to that, too, Lawrence, the reason why we've made the change is obviously we feel we can, you know, with this model, we can do it, more productively and at a, at a lower cost. You know, in the past, we were paying a margin to Barminco to do both the production and the development. Where now we're doing the development ourselves, so there's no margin payable. Then with Redpath, there's the new contract. Obviously, we're paying them a margin, but we expect that they'll be more productive, because it's focused purely on the development meters. The, yeah, the reason for the change is we believe it will reduce costs and increase productivity.
Yeah, Lawrence, if you are okay with the, your first question, I, I would like
Yeah, yeah, yeah.
Thank you.
It's quite clear with the first one.
Thanks, Lawrence. In terms of timeline, and just to remind where we are, we originally acquired the land for Chalcobamba back in 2013. We had a renegotiation in 2017 around commitments. We've achieved all of the... we have a land ownership. We've achieved the, all regulatory approvals. We've completed a consultant preview or a prior consultation process. We're now working with community on the social agreement that will govern development. It's been a long and, a difficult process. The good news is we're now working with the community weekly, in terms of meetings or working with different parts of the community on various aspects of, social development and commitments made. It's a constructive and active dialogue, which is where we haven't been for a number of years before this.
That said, we have a number of issues still to work through. We have dynamics on both sides that, that continue to change. We've put in, I think, in our release, that we are very hopeful of reaching an agreement this year for that, for that social access. We are absolutely committed to make that happen. I think for the, for the first time in a while, we have a community, a negotiating group, who are also working closely with us. It's very hard to give a definitive timeline, which is why we continue to give our best judgment. At the moment, that is, a very, a very intense dialogue and negotiation period over the next couple of months, with the hope that we will begin development this year.
That's about as best as I can give at the moment.
Okay. Thank you for the update.
The next question comes from Chris Chiu from Balyasny Asset Management. Please go ahead.
Hi. Thank you very much, management team. I've got two questions. The first one is, well, it's very exciting to see that MMG is back on growth again. At the same time, we are seeing rising financing costs, you know, rising interest rate environment, globally, or maybe except China. I'm just wondering, as what are the, you know, ways potentially to optimize the financing? What are the options available? How do we see the renminbi financing channels, be it renminbi borrowings or A share issuance or, you know, some other channels? That's my first question. Thank you.
Thanks, Chris. I think with regard to optimizing the finance, we're very fortunate to have the support of our major shareholder. That debt is all largely at fixed prices and in the 4s. You know, essentially, we've got a base cost and a margin built in that's less than what the cash rate is at the moment, so we can't really optimize that shareholder. Then with the external debt, which is largely the, well, profits facility, that data is getting sort of expensive again, and, you know, at the moment, it's up over 8%. Really, it's gonna be a little bit dependent, that if we have a clear run at operations, we may be able to renegotiate that debt.
If, if we end up having social issues again and the operations become unstable, it's very difficult for us. The, the only beauty is, I, I guess at the moment, we're generating a lot of cash, and we'll be hopefully in a position to pay that debt down sooner. You know, I think at the moment, you know, we're, we're pretty comfortable with where our debt's at. To be honest, it's, yeah, it's very competitive rates, thanks to both the Chinese banks and our major shareholder. In regards to the RMB financing, it's not something we actively look at, and the reason for that is we are a U.S. dollar-denominated company.
The problem was, if we borrowed money in RMB, we would actually have to hedge it against the U.S. dollar, then the hedging takes away any benefits we may get from the lower interest rates. There's not really any benefit because you've with I think the Chinese rates being roughly 2.5% and the U.S. rates, you know, sitting just over 5%, you lose that benefit through the hedging from the RMB to the U.S. dollar. Yeah, we prefer to keep it simple. The other thing is there's a tendency to be a natural hedge between the commodity prices and the strength of the U.S. dollar as well. You know, at this stage, we don't see the need for pursuing RMB financing.
Got it. Yeah. The second question is, so regarding dividends, so I understand that, I mean, currently, you know, we don't have, you know, any sort of, you know, dividend policy yet or dividend payments yet. How should we see the pathway to a potential dividend? I mean, is there any sort of level of net debts or maybe net debt to equity or maybe some other metrics, you know, that, you know, we should be focusing on?
The, the, the, it's probably a little bit more of a complicated question than sort of things. The issue we have is all the cash flow and the debt within Las Bambas is ring-fenced there. We'll probably get to a stage. Then with the other side of MMG, at the moment, we've got, you know, Kinsevere and Dugald River not performing that well, and then we're also spending a lot of cash on the KP project. That's the other side of the business. Now, for us to eventually be able to pay a dividend, we need to finish the KP project and get it. Then also it depends on, yeah, I think everyone's aware we have some tax disputes in. There's no clear pathway there at the moment.
You know, obviously, it's something we're very cognizant of, and we know that the shareholders want to, want a dividend, but we just need to get our balance sheet, put in the right space to do that.
Got it. Okay. Thank you very much.
Once again, if you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. Next question comes from Joy Zhang from Goldman Sachs. Please go ahead.
Hi, good morning. Thanks for holding the call. I have a very quick question about the realized price for both copper and zinc. I noticed that even we realized a very kind of a higher than expected sales volume from the Las Bambas. It seems that the realized price is still below the benchmark price a lot. I remember last year we kind of affected by this hedging activity, but it seems that similarly, this year is also, I think even though with a declining trend, more similar with benchmark price, are we still affected by this hedging activity, the realized price comparing to the benchmark price?
Yeah, thanks for the question, Joy. I, I think the, what you're seeing there is actually just the timing of when the sales are, because both our zinc and copper sales are at realized LME prices, so they're at the average LME price over the quotational period. Now, with Las Bambas at the moment, all our sales or, or the vast majority of our sales are on a 4-month QP period. You probably just also need to think about what happened during the first half of the year, in that the copper price was very strong in the first half. That was, I think, one of the big factors was all the social disruption in Peru.
In the 1st quarter, we were unable to sell any volume at all when the copper price was up around $4. When, you know, in the middle of March, when the logistics corridor opened again, we were selling, but we were selling into a $3.75 type market. Also the prices are considered a four-month quotational period, so a shipment we made in May, for instance, would get its final price calculated in September. There is a timing issue there. Fortunately, we had the same situation with zinc, where the prices were very strong in the 1st quarter. 2nd quarter, they dropped from $4.44, and unfortunately, for Dugald River, we didn't produce much in the 1st quarter because of the incident.
When we're selling in the second quarter, we're selling into a, a lower market. I, I think it, it's unfortunately just the timing, but we're gonna assure you they're fully, you know, their sales prices are linked to the LME benchmark. With the hedging, you know, there's no negative impact from hedging, so any hedges we've had in place, there's not a huge amount have all been profitable for us. That's not affecting the realized prices at all either. It's just bit of a, a long answer, but basically, it's a timing issue, and both mines were not operating when prices were high, and then when they opened up, prices dropped, so that's the reason for it.
Okay, that's very clear. Thank you, Ross.
Your next question comes from Eun Young Lee from DBS. Please go ahead.
Hi, thank you for giving me the chance for the questions. I have two question. First question is, what's the stock pile volume stock movement in the second half? What would be the impact to the earnings if there is question? Thank you.
Okay, thank you, Eun Young. I might answer the first question, and then, with the stockpiles at Las Bambas, as we speak, about 150,000 tons of concentrate, which would be, depending on the grade, between 35,000 tons-40,000 tons of copper metal. Now, we would expect that to pretty much be run down to normal levels, maybe around about 10,000 tons of metal by the end of the year. You'll see we should have, assuming things continue to go well for the rest of the six months, should have very strong cash flow for the rest of the year, and that will assist with our profitability as well.
Just getting back to Joy's question, obviously the copper price has come off of recent times, so, yeah, the fact could have an impact, too. You know, hopefully we'll see another second half, like the first half, where we're drawing down inventory and, you know, we should see some additional profitability because the inventory will be, you know, the lower value. Then I'll might hand over to Li Liangang to talk about the marketing, and if that's okay.
Yeah, talking about the marketing performance, I think especially for copper and zinc, we see quite a volatile performance starting from earlier this year until the end of July. I think that along with the Chinese economic policies, I think that we are looking forward to the stronger performance from from China. Also we see the stronger performance from other western countries as well. Specifically, the we feel quite strong support for the metal prices, both copper and zinc, at the present price level.
We are-- I think that's from the company of MMG, we are quite confident for these present price level. We see a strong support at present stage, and probably we can expect more stronger performance in the future coming months for 2023.
Thank you.
After that, if I could just add, because of our offsite agreements and the work our marketing team does, we don't have any issue about not being able to sell all our product. It's, it's not like if, if things did slow down, we'll be left with big stockpiles at the end of the year, we can sell all we've produced.
There are no further questions at this time. I will now hand back to Mr. Esam for closing remarks.
Thank you. Thanks, everyone, for participating in the call today. That brings us to the end of the call. Thank you, goodbye.