Thank you for standing by, and welcome to the MMG Limited First Quarter Production Report Conference Call. 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's Quarterly Production Report Teleconference. This report and today's discussion cover the operational performance of MMG's assets for the first quarter of 2023. Joining us today are MMG interim CEO, Mr. Li Liangang, and CFO, Mr. Ross Carroll, together with other ExCo members. I will now hand over to Liangang, who will discuss the highlights in the report, after which there will be an opportunity to ask questions.
Thank you, Jarrod. Good morning to everyone, welcome to MMG's 2023 First Quarter Production Report Teleconference. As always, at MMG, our first value is safety. We again extend our heartfelt condolences to the bereaved families, friends, and teammates of Trevor Davis and Dylan Langridge, who were fatally injured at the Dugald River mine on Wednesday, the 15th of February, 2023. An incident investigation is in progress, we will take every measure necessary to ensure events like this don't occur again. Mining and processing activities at Dugald River recommenced on the 21st of March, following approval by the relevant authorities with a safe and careful approach to reintroducing our workforce to the underground environment. Our total recordable injury frequency rate for the first quarter of 2023 is 1.46 per million hours worked.
This represents an increase on the full year 2022 TRIF of 1.25. Let's now turn to our production performance for the first quarter of 2023. During the quarter, we produced around 69,000 tons of copper and 31,000 tons of zinc. Las Bambas copper production in the first quarter was 58,000 tons. This represented a decrease of 50% on the prior comparable period last year. Las Bambas mining activity was impacted by widespread protests that restricted access to critical supplies. To mitigate the impact of reduced ore mine supply to the processing plant, we increased processing of low-grade ore stocks, resulting in lower average milled ore grades. On the 11th of March 2023, with the removal of roadblocks in the Velille district, we recommenced transportation of concentrate. Our site operations have since returned to full capacity.
With improved local security, situation, MMG is planning for the resumption of formal dialogue tables with the Fuerabamba community in the coming weeks. The Huancuire community has elected a new board of leaders and are now in the process of registration as the public registry. We continue to engage with the community at multiple levels and are planning for the resumption of formal dialogue tables once the board's registration is finished. Las Bambas is a significant contributor to the local, regional, and national economies in Peru. MMG remains committed to working closely with the government of Peru and the community members of transparent, for transparent and constructive dialogue, and is optimistic that more enduring agreements for the continued development of Las Bambas can be reached. Turning to the outlook for 2023.
In line with prior guidance, we expect Las Bambas copper production in the range of 265,000 tons and 3,000 tons and 5,000 tons this year. This subject to continued supply, people and logistics access to the site. Our development of the Chalcobamba deposit is targeted for the second half of 2023, subject to reaching a comprehensive agreement with the Huancuire community. Moving on to Kinsevere. Copper cathode production of around 10,000 tons in the first quarter was an increase of 5% from the same period in 2022. This improved performance was driven by increased supply of higher-grade third-party ore and the supply of mined ore following the resumption of mining activity in April 2022.
The contribution of these two positive factors was partially offset by lower mill throughput, which was impacted by poor power availability from the national grid in the first quarter. As you may be aware, Kinsevere is now in the transition period from the mining of oxide ore to sulfide ore as the High-grade oxide ore in the current mine phase is depleted. Kinsevere plans to secure more third-party ores and utilize lower grade ore stockpiles. I'm happy to report that the construction progress of Kinsevere Expansion Project is on track. During the first quarter, we awarded all the long-lead equipment packages for the concentrator plant, and the civil work broke ground on the third of March. Earthworks for the new tailings dam are also in progress.
Preparatory works, including civil and road improvement, have now commenced at Sokoroshe II. First cobalt production is expected in 2023, and the first copper cathode from surpassed in 2024. The project is expected to extend the mine life to 2035 and take annual production up to 100,000 tons of copper equivalent production once we reach full ramp up in 2025. In line with prior guidance, the expectation of copper production remains to be between 40,000 and 48,000 tons. I will now move on to our zinc operations, Dugald River and Rosebery. At Dugald River, zinc production of around 21,000 tons was 45% lower than the prior corresponding period due to a 34 days production suspension after the fatal incident.
We resumed mining and processing activities on the 21st of March, 2023, after receiving approval from the relevant authorities. The mine continues to ramp up with the focus on safety, returning our workforce to the underground environment. We have made additional available, we have made additional support available to our people as underground operations recommence. Regarding the Dugald River guidance, we have adjusted our production expectation in 2023 to be in the range of 135,000 tons-150,000 tons. Dugald River C1 costs in 2023 are now expected to be in the range of $1.05-$1.20 per pound. Higher than the prior expectation, reflecting the lower zinc production.
Dugald River has now transitioned to an owner miner model for production activities and to mitigate cost escalation and lower carbon emissions. We commenced our long-term solar offtake agreements with energy provider APA Group. Construction of the Dugald River solar farm completed in February 2023. I'm happy to report that commercial operations were achieved on the 21st of April. At Rosebery, the mine produced around 10,000 tons of zinc and around 3,000 tons of lead in the first quarter. This represents a decline of 18% and 27% respectively to the prior corresponding period.
During the first quarter, our mined and milled volume were impacted by lost production time related to the bush fire at the end of December 2022, and lower workforce availability as a result of increased competition for skilled mining labor in the region. Milled ore grades were also lower, largely due to mining sequence and a lower contribution from remnant stopes. In line with prior guidance, we expect Rosebery to produce between 55,000 tons and 65,000 tons of zinc in zinc concentrate in 2023.
The first quarter represented some significant challenges for MMG, particularly at Las Bambas and Dugald River. We have finished the quarter in a much stronger position with the return of operations and concentrate logistics at full capacity at Las Bambas and the safe return and ongoing ramp up of operations at Dugald River. We are now happy to take any 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 handset to ask your question. Your first question comes from Lawrence Lau with BOCI. Please go ahead.
Hi. Hi. Thank you, the management for the introduction. Actually have three questions, if I may. First of all, for Las Bambas, we see further pileup of inventory to 115,000 tons. What's the management views as to how realistically we can lower that inventory level by the end of this year, say, how, what's the inventory level we expect to be at the end of this year?
Secondly, in the presentation, the introduce you talking about the power supply problem in or power supply issue in Kinshasa. What's the management view on this part? Do you see further power supply disruption down the road?
Thirdly, for Dugald River, you mentioned you have signed a power offtake agreement with from solar, just wonder if the management can provide, say, estimate for cost saving from this part? Thank you.
All right. Yeah, thanks, Lawrence. It's Ross here. I might take the first question on LB inventory and then hand over to Nan to talk about the power supply at Kinshasa. Yeah, you're right. We have got 115,000 tons of metal at Las Bambas, copper metal. Now, if the logistics line or logistics route stays open continuously, we would expect to run that down to normal stock levels by the end of the year. That's obviously dependent on the ability of us to keep logistics rolling at optimal levels. Yeah, if all goes well, that would be run down by the end of the year. Perhaps, Nan, if you wanna take the next question on the power supply.
Yeah, thanks. Thanks, Ross, and hi, Lawrence. Yeah, thanks for the question. Regarding the power supply issue, in DRC, recently is more of a nationwide. We do see some infrastructure breakdowns and then, of course, the downtime and also some of the scheduled maintenance as well from the power supply company, SNEL. In terms of current power supply, we do see some recovery, and then stability, from the power supply company, in April. We're working closely with SNEL to make sure we have a stable power supply to site going forward. We're definitely watching the, in this space closely. Just to answer your third question on the solar for Dugald River.
The solar power accounts about 30% of power supply to Dugald River. In terms to C1 saving is roughly about $0.03 per pound, C1 cost saving. Yeah. Thank you.
Thank you. Thank you.
Lawrence, just one more comment on the solar farm from Dugald River. It's not only a cost saving, but also we are moving on the green energy path. MMG has a target for the carbon emission strategy. That's part of our strategy on that. Thank you.
Thank you.
Thank you. Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Your next question comes from Jingshan Feng with Citi. Please go ahead.
Hi. Hi. Thanks, Miss Lee and Ross. Thanks, management, for the presentation. I have a few questions. Firstly, could you give us some updates on the Chalcobamba project? So the expectation is that Chalcobamba starts construction in the second half or starts operation in second half. I'm asking this is wondering how long will it take for the construction of Chalcobamba project, as I think the construction can only be started after reaching the agreement with recurring community. Is that right?
The second question is that the production guidance for Las Bambas is, does that include any contribution from Chalcobamba project this year? Another question is for the KEP project. This is the last question.
I want to ask, is there any updates on the discussion with Gécamines about the, the issue? Thanks. That's all my question.
Okay. Thanks, Jimmy. I might take the first two questions and then let Nan talk about the KEP. First with the, yeah, the Chalcobamba project, We're hoping to start construction in the second half. While we are constructing, we can actually still extract small amounts of ore during the construction process. We're not obviously just building a satellite mine, so there's not a huge amount of infrastructure to be built there. The construction period is about 4 months. That is also a little bit subject to how heavy or how much we get into the wet season there because obviously it rains a lot during the wet season. All going well, we'd be hoping to have the construction started and mine a little bit of ore during this year.
You're right. It is dependent on us getting an agreement with Huancuire. I think we've, as we said in the report, we're hoping to start formal discussions with them again soon once their effectively the management of the Huancuire community is ratified. At this stage is about between sort of 10,000 tons and 15,000 tons of Chalcobamba ore included in our full year guidance for Las Bambas. If we can't get access and start producing from Chalcobamba, we won't lose the whole 15,000 tons because we'll bring lower grade Ferrobamba ore into the mix. You're probably looking at sort of, you know, if it's nicely 15,000 tons included, we'd probably lose about half of that if we're unable to progress Chalcobamba in time. Hopefully that answers those two questions for you.
Yeah, yeah, that's very clear. Thanks.
Yeah. I'll let Nan to talk about KEP.
Yeah. Hi, Jimmy. Thanks, thanks for the question. In terms of your question on the Gécamines discussion related with KEP project. Currently, we still in discussion with Gécamines to resolve the current issues. We welcome the support received from the new Gécamines management team. In terms the arbitration is still ongoing. MMG is still working closely with the new management team from Gécamines to conclude this matter. We are in the view to continue pursuing our long-standing relationship with Gécamines, to ensure a strong future for the Kinsevere asset. Thank you.
Okay. Thank you for my question. That's very clear. Thanks for the answer.
Thank you. Your next question comes from Chris Shiu with Balyasny Asset Management. Please go ahead.
Hi. Thank you very much, management team. I've got a couple of questions on Las Bambas. The first question is, what has been the key for the stabilization of the situation there? I mean, like, a few months ago, when we look at Las Bambas, it seemed to be, you know, pretty chaotic. Now it seems that, you know, the situation has become more stable. I mean, what has been the key to that change? That's my first question. Thank you.
Thanks, Chris. Thanks for the question. A couple of factors. One, the general level of protests in Peru has been reducing from a couple of months ago and now largely defined to the Puno region. Though there is still a lot of political unrest, it's not translating into on the ground protests. That's been a big help. Number two is the interim government, while in a difficult political position, is actually very administratively competent, and so are really working well with across the industrial sector and across Peru to put in, you know, three very distinct kind of economic recovery plans to make sure that the Peru economy is supported and backing to growth.
It's been really heartening to see the government come together and do a fantastic job of promoting economic activity. The third part is, while that the road corridor is declared a critical national asset and can be protected, a state of emergency has also been put in which gives additional ability for the government to mobilize both police and army support to make sure that any unrest is discouraged. That's led to that road being continuously open since it was declared in April.
A bit of social peace, a government that is really administratively quite competent and a greater effort on creating peace in the region has given us great confidence that the current situation will continue for some time, and it really allows us to reduce the stockpiles, as Ross said.
Got it. Yeah. My second question is, with the developments and also the contribution from Chalcobamba, what can we expect in terms of the C1 cost going forward?
Yeah. I think this year it'll have minimal impact, Chris. You know, we haven't sort of revised our numbers for next year, so, but where it does have the impact really is, you know, the initial Chalcobamba feed will be coming into the grade of about 1%. The, I guess the substitute Ferrobamba feed, if we can't mine Chalcobamba, is coming in at sort of 0.5%-0.6%. It is significant. You know, in 2024 and 2025, it starts to provide significant volumes. I think it will obviously help our C1, but you still need to bear in mind we are in a high inflationary environment in Peru and everywhere.
Once we've got those costs are in the system, they're very hard to get out. It's like if you give your labor force high wage increases, you know, they don't reverse. They sort of stay with you. Unfortunately, this round of cost inflation that we've seen is going to be largely sticky. Perhaps the one area where we may see some respite is, you know, oil prices 'cause that is elastic up and down, but a lot of the other costs stay with us.
Got it. Yeah. Lastly, regarding Sulfobamba, is there any thought as of now, for its potential development, especially given the, you know, very precious chance that we are in a relatively peaceful and stable situation now at Las Bambas? I mean, are we going to, you know, push it forward, you know, maybe earlier just to take advantage of this current situation now?
Yeah. It's sort of next in line after Chalcobamba, certainly the social team at LB is, you know, in discussions with the community that has the sort of the land rights over Sulfobamba, but I still think that'll be some years away. The first nut for us to crack will be Chalcobamba.
Got it. Okay. Thank you very much.
Thank you. We're showing no further questions at this time. I'll now hand back to Mr. Liangang for closing remarks.
Thank you. Thank you very much for your time. If you have any further questions, please feel free to follow up with our Investor Relations and Corporate Affairs teams. Thank you again.