Thank you for standing by, and welcome to the MMG Limited Third Quarter Production Report. 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 Mr. Jarod Esam, Head of Investor Relations. Please go ahead.
Hello, and welcome to MMG Quarterly Production Report teleconference. This report and today's discussion cover the operational performance of MMG sites for the third quarter of 2023. 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 Li Liangang, who will discuss the highlights in the report before we provide an opportunity to ask questions.
Yeah, thank you, Jarod. Good morning to everyone, and welcome to MMG's Third Quarter Production Report teleconference. As always, at MMG, first value is safety. Our total recordable injury frequency for the third quarter is 2.83 per million hours worked. The high number of injuries in the quarter is concerning and is being closely monitored. Each site will continue reporting, investigating, and learning from actual and potential workplace incidents. Let's now turn to our production performance for third quarter of 2023. We achieved production of approximately 94,000 tons of copper and 59,000 tons of zinc, an increase in both metals compared to the previous quarter. Las Bambas copper production in the third quarter was 82,000 tons, representing a 1% increase compared to the same period last year.
Las Bambas operated at full capacity throughout the quarter, without transport interruptions and with higher throughput and recovery. Throughout the third quarter, transportation along the Southern Corridor has been stable, assisted by the government-declared state of emergency. Recently, the Peruvian government has announced an extension of the state of emergency for 60 days, until the 12th of December. As a result of stable transportation, Las Bambas has reduced the on-site inventory levels of concentrate. At the end of the second quarter, Las Bambas had approximately 60,000 tons of copper metal in on-site inventory. However, by the end of September, this inventory level had decreased to around 10,000 tons of copper metal. Now I will provide the update on community dialogue. MMG remains committed to working closely with the Government of Peru and community members for transparent and constructive dialogue.
Progress has been made in discussions with the Huancuire community on Chalcobamba, with an agreement on the regulations for the dialogue process reached on the 13th of September. With the participation of the Government of Peru and the new negotiating committee of the Huancuire community, formed in July, we have established the agenda and commenced the formal dialogue process on the 2nd of October. MMG is optimistic that more lasting agreements for the development of Las Bambas can be achieved. Now, turning to the Las Bambas budget for 2023. We anticipate Las Bambas copper production to be in the range of 285,000-305,000 tons. This revised guidance reflects the stability in operations since March and positions us at the higher end of our original guidance for 2023.
Additionally, C1 costs for Las Bambas are now expected to fall within a range of $1.65-$1.75 per ton. This reduction in cost is attributed to production being at the high end of the previous guidance range and higher by-product credits. Moving on to Kinsevere. During the third quarter, cobalt cathode production decreased by 16% compared to the same period in 2022, resulting in a copper production of around 12,000 tons. This decline was primarily attributed to lower throughput as a result of unstable power supply from the national grid. Power supply stability is increasing, and copper production increased by 8% on the second quarter of this year. I'm pleased to report that the construction progress of our Kinsevere expansion project remains on track.
During the fourth quarter, we completed the mechanical construction of the cobalt plant. The commissioning of the cobalt plant began in September and will continue in the fourth quarter. Additionally, the pre-stripping of Sokoroshe II is on track with the establishment of all mining construction infrastructure and the construction of 30 km haul road connecting the satellite site to the Kinsevere plant . The initial phase of Sokoroshe II contains oxide ore and is expected to contribute to reducing reliance on third-party ore. Moving forward, the primary focus will be on the sulphide plant construction, which includes the concentrator, roaster, gas cleaning, and acid plant facilities. We expect first-quarter cathode from sulphides to be produced in 2024, with full ramp-up completed in 2025.
The Kinsevere expansion project is projected to extend the mine life to 2035 and increase annual production up to 100,000 tons of copper equivalent production once we reach full ramp-up in 2025. Our expectation of full- year copper production has been adjusted to a range of 43,000-48,000 tons, which is towards the higher end of the previous guidance. We anticipate C1 cost to remain between $3.50 and $3.35 per ton. Sorry, that is, a range is $3.15 and $3.35 per ton. I will now move on to our Australian operations. Dugald River and Rosebery.
At Dugald River, we produced approximately 47,000 tons of zinc in the third quarter, which is 4% lower compared to the third quarter last year, but 30% higher than the previous quarter. Additionally, Dugald River achieved a 1% increase in lead production compared to the prior corresponding period, and a 51% increase compared to the previous quarter. The mine has achieved full production rates following the ramp-up in the second quarter. The processing plant's performance remained strong, achieving a zinc recovery rate of 90.6% and with a record high lead recovery rate of 69.3%, driven by continuous operational improvement activities.
Supported by the strong and stable operations during the third quarter, Dugald River now expects a production range of 140,000 tons-150,000 tons of zinc in zinc concentrate, which is towards the higher end of the previous guidance. The C1 cost in 2023 is expected to remain in the range of $1.05-$1.20 per ton. At Rosebery, we produced around 12,000 tons of zinc in zinc concentrate and 5,000 tons of lead in lead concentrate during the third quarter of 2023. This represented a 2% and 15% increase in zinc and lead production, respectively, compared to the prior corresponding period, primarily due to higher mineral grades resulting from the mining sequence, partially offset by lower mill throughput.
Rosebery is now expected to produce between 28,000 tons and 53,000 tons of zinc in zinc concentrate in 2023. This is below the prior guidance due to lost production time in the fourth quarter related to the bushfire incident, slow stock turnover reflecting challenges with mining at depth, and lower than expected mineral grades due to mining sequence. C1 cost at Rosebery is expected to be at the lower end of prior guidance of $0.25-$0.50 per ton, approximately due to high by-product grades and strong precious metal prices. I will now hand it over to the moderator to take your questions. 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. If you are using a speakerphone, please pick up the handset to ask your question. Your first question comes from Jimmy Feng from Citi. Please go ahead.
Hi. Hello, thanks, Mr. Li Liangang for sharing. I have a few questions. Can you hear me clearly? Hello? Hi, can you hear me clearly for my voice? Hello?
Pardon me, this is the operator. Did we have the speaker line still connected? You might be on mute.
Hi. Hello, hello.
Please hold while we reconnect the speaker line. Thank you for holding. We now have the speaker line reconnected. Jimmy Feng, please proceed with your question.
Hi, hi, thanks. Can you hear me clearly? Hi.
Hello.
Hello?
Yeah, Jimmy, can you hear us?
Oh, yeah, yeah. I can hear you. Yeah, it is very clear. Okay. Okay. Thank you. I just want to have a quick check, quick check for the cost guidance for last numbers. I have seen that the cost guidance had revised down, but it still implies a higher cost in the second half than the first half, despite a higher run rate in the second half. So I want to check, what's the main reason for a second, for higher cost in second half, and what should we expect regarding the last numbers into next year? This is the first question, and the second question for the current negotiation and also the Chalcobamba project.
So, if the development can commence by end of this year, let's say in November or December, when do you expect the Chalcobamba will contribute some copper volume? Thanks.
Yeah. Jimmy, I'll take the first. It's Ross. I'll take the first question on the cost guidance. Yeah, it is true, and part of the reason why the cost guidance is a little bit conservative is because we never quite know when we might get roadblocks and other sort of social type issues. Now that I think our expectation is with the state of emergency being extended into December, that we do expect this quarter to have a clear run at the operations. But, having said that, we probably are maintaining a bit of conservatism. And it's also, with this clearer run at the operations, we do spend more money in the community and development programs then as well, in addition to the sort of ongoing operating costs. So, yeah, hopefully everything goes well for this quarter.
You know, we should finish at the lower side of the guidance again. So I hope that answers your question.
Yeah. Yes. Yeah. Okay, that's good. Good to hear again.
Then I think with Huancuire, yeah, our plan is, I guess discussions have commenced with Huancuire, and our plan is, well, we're hoping to have access by the start of the year. Now, unfortunately, that would occur in the rainy season, so it would take us 3-4 months to do the development, and, you know, build roads and the like. So we're then hoping to get mining access in about April of next year and then have first ore sometime around July or August. So that's sort of the plan. I think, you know, hope that would be similar to what we gave, the message we gave at the last update.
Okay, got it. So, just want to confirm. So, the production will start in around July or August of next year. Is that right?
Yeah, that's right. Just we would, you know, do a pre-strip. Just, yeah, removing the waste in that sort of April to July period. So that's the plan, but obviously it's subject to us reaching agreement with the community.
Yeah. Got it, got it. Very clear. Thanks. Thanks for the sharing. I have no further questions.
Thanks, Jimmy.
Thank you. Once again, if you wish to ask a question, please press star one on your telephone. Your next question comes from Chris Cheung from Balyasny Asset Management. Please go ahead.
Hi, thank you very much, our management team, and congratulations on the upward revision for the guidance. My question is: so regarding the emergency period, so it's been extended to December 12th. Do you expect that to be further continued, and then has that been, you know, the main reason for the relatively, you know, peaceful and stable conditions at Las Bambas?
Thank you, Chris. There's no doubt the state of emergency has been a huge help during this year, and we're almost kind of down to normal stock levels at the site, which is fantastic. Alongside that, we haven't stopped the dialogue processes in the communities along the haul road, and we are working really hard with those communities to make sure that, you know, we could work successfully without a state of emergency. The government is working with us, and the state of emergency has been extended, if you like, to allow those conversations to take place, for us to reach a new agreement, if we put it with those communities, and to be able to operate like this in an extended period.
So, I don't want to attract the government's attention, it's up to them about what happens after December. What we're trying to do is work with the communities along the haul road, around the mine, to get those kind of agreements in place such that blocking the road is of no great interest to them because they've got a relationship with us that is working. And it has been a much better year on that progress along the haul road. And I think just while I'm here, the Huancuire negotiation also is underway, very intense at the moment and meeting regularly. And we're working really hard with those communities to come to an agreement.
We're not there yet, but as Ross said, we have a clear plan, and we're hoping to get the community across the line, to work with us.
Got it. Now, thank you very much. And one other question is regarding the DRC. So, given the upcoming election, do you see any sort of, you know, differences, you know, for the various, you know, candidates, you know, towards our operation exclusion in the DRC?
Yeah, Chris, at this stage, operation remains formal. We don't see any issues at this stage.
Got it. So you don't expect the election outcome to have, you know, any major impact on your operation one way or the other?
No, we don't anticipate any potential issues impact.
And Chris, we've been through a couple of elections in Congo, and we've never had a kind of site-based impact before. And this election is probably, you know, as far as the DRC elections go, not looking as controversial as many in the past, so we're in a good place, I think.
Got it. Thank you very much.
Thank you. Once again, if you wish to ask a question, please press star one on your telephone. We'll now pause a moment to allow for any final questions. The next question comes from Lawrence Lau, from BOCI. Please go ahead.
Hi, thank you for taking my questions. I have two questions. First of all, regarding Rosebery. It seems like that you are revising down the guidance for, in terms of output. I just wonder that mine, the output seems to be under pressure. Just, I wonder how long this mine can carry on, say, producing the, say, the metals at a similar output, as in 2023, for how long? Or actually, are you expecting gradually declining output for the, say, next few years? That's the first question. And second question is that, now it seems to the development of Chalcobamba seems to be delayed a bit. So can you offer an update regarding the CapEx for this year?
Is there any revision to that, because of that delay? Thank you.
Yeah, Lawrence, I'll answer the first one regarding the Rosebery production. So as we sort of currently majority of the ore source, zinc ore source is comes from lower part of the ore body, which is about 1.8 km below surface level. So at that depth, you know, obviously we're experiencing some production challenges in terms of ground pressures and then ground support, and then long haulage as well. But the team is busy working on other ore sources, you know, at the middle and then upper level of the mine. We still believe there's potential extensions from the previous working areas. So that program is in progress.
On the other hand, the Rosebery is always enjoy the precious metal by-product credit. We do see that by-product credit continue to be strong to support Rosebery going forward. You know, looking at the history of 80-odd years on Rosebery, so we certainly believe with the current work in hand, we'll continue to extend. You know, in terms of zinc, maybe we see a short- term, you know, there's a bit of an impact from the mining at depth, but overall, with the by-product, strong by-product credit, you know, we still see Rosebery will sustain the current operation and extend the life in the near future.
Yeah, and if I could add to that too, Lawrence, and then Nan has mentioned the byproduct credit. So Rosebery still has a very competitive C1 cost, and that then flows through to the C3 cost. So even though the zinc production has dropped, it is still profitable. So, sure, we'd like it to be more profitable, but it is still profitable, so it's not like the operation's in doubt. And in your last other question in relation to the Chalcobamba development, the Chalcobamba CapEx is not overly capital- intensive. It's really just a matter of building access roads and some minor infrastructure to the Chalcobamba pit, and then the ore gets carted back to Ferrobamba , where the main processing plant and concentrator is.
So, yeah, you'll probably see if Chalcobamba doesn't sort of commence major ramp-up, you know, in the balance of this year, the CapEx will be on the lower side of guidance. But Chalcobamba itself is not having a significant impact on CapEx. But, where the delay hurts, it's just the revenue and profitability.
Okay, thank you very much.
Thank you. The next question comes from Eunyoung Lee from DBS. Please go ahead.
Hi, thank you for giving me opportunity for questions, and congratulations on your good year production result. My question is about first one is Las Bambas. So how much what is your expectation of the production volume in the Las Bambas, including Chalcobamba in 2024? And what do you expect about the Chalcobamba C1 cost when the mine is fully ramped up? And that is the second question. And the third question is, I'm just wondering which part of production cost is most affected by inflation. And then also, what is your cost what is the contribution of labor cost to the your total production cost, too? That is the third question regarding the cost. And then last one, I'm wondering, is the company's outlook on the copper prices going forward?
That is the fourth question. Clear?
Yeah. Okay. Yeah, thanks for the questions. Firstly, in regards to 2024, we're doing our budget at the moment. Now, you know, roughly this year we're doing 300,000 tons, and we've said once we get Chalcobamba in the mix and at full capacity, we'd be up around the sort of 375,000-400,000 tons. Now, I've just described earlier that, you know, we're not gonna get ore from Chalcobamba, and this is the plan until August. So that means we're not going to see a full contribution from Chalcobamba next year. So I think you can expect it to be more like, sort of in the 320,000 sort of range or 300,000-ton range. But that, that's not a specific or approved number yet.
That's just a little bit of initial guidance. Now, as a result of that, we can't, we haven't got an estimate or a public estimate yet of our C1 cost for next year. So we will give that when we do the quarterly or the production report in January, which is once we've been compiled our budgets for next year as well. Now, when talking about the I think your next question was about what parts of or what inflationary aspects were we seeing with our costs. The major impact probably at the moment is still fuel costs are very volatile.
So we have had a reduction in costs, you know, during the middle part of the year, but now with the political situation in the Middle East, fuel prices have increased, and that has a major impact on us. And then we are seeing ongoing wages inflation as well. So they're probably the two major costs. But, as a general comment, and prior to the episode in the Middle East, we were seeing our costs start to flatten out a little bit. Now, you've asked a secondary question about the cost, which I couldn't quite pick up.
Okay, thank you so much. And then, what is the contribution of labor cost to your total production cost?
Oh, okay. Labor cost. Yeah, they're in the sort of, and this varies country by country, but in Peru, they're roughly 20% of our cash operating costs.
Okay. Okay. So, fine. Thank you. Thank you for answering the, my, for my question.
Yeah. Then I think your last question was about CapEx. Generally, the sustaining CapEx is between $400 million-$500 million a year at Las Bambas. Then if we are embarking on major projects or growth projects or new deposits, that will be on top of that amount. We'll make that clear when we give our guidance at the start of the year.
Okay. Thank you. Bye.
Thank you. There are no further questions at this time. I'll now head back to Mr. Li for closing remarks.
Yeah. Thank you very much, everyone, for your time. If you have any further questions, please feel free to follow up with our investor relations and also corporate affairs teams. With that, we come to the conclusion today. Thank you.
Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.