Thank you for standing by, and welcome to the MMG Limited Q3 2022 production report. All participants are on 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 A tell. Please go ahead.
Thank you. Hello, and welcome to MMG's 2022 third quarter production report teleconference. This report and today's discussion cover the operational performance of MMG's assets for the September quarter of 2022. Joining us today are MMG Interim CEO, Mr. Liangang Li, 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, Andrea. Hello to everyone who is joining us today. As always, at MMG, our first value is safety. Our Total Recordable Injury Frequency Rate for the third quarter this year is 1.41 per million hours worked. I'm very pleased that we continue to rank right at the bottom for this index when compared to our global mining peers. Now moving on to the operation performance from different sites. In the third quarter of 2022, MMG produced around 96,000 tons of copper and 61,000 tons of zinc, in what was our strongest production quarter of this year. Las Bambas quarter production in the third quarter was around 81,000 tons, with the mine enjoying a period of relatively uninterrupted operations while dialogue tables with our neighboring communities continued.
Mining activity was strong, with a total material movement of 57 million tons, enabling us enabling some catch-up stripping activity and access to higher grade ores. Average recovery rate of the processing plant also increased to 85.6% from 84.9%, with an ongoing focus on optimization activities. Regarding the dialogue with communities, I wanted to provide an update on these discussions. As you would be aware, our Las Bambas colleagues have been committed to working closely with the government of Peru and the community members to reveal all existing commitments. We have made significant progress in the dialogue process during the third quarter, reaching agreements with four of six communities and moving towards the implementation of these agreements.
Our discussions with the two remaining communities, Chorobamba and Huancuire, are continuing to progress with the support of the government, and the process has been extended until the end of December. We are optimistic that more enduring agreements for the continuous development of Las Bambas can be reached by that time. Looking towards the end of the year, subject to no further prolonged operational disruptions, we now expect Las Bambas to produce around 250,000 tons of copper in concentrate for 2022. This exceeds the prior revised guidance of around 240,000 tons due to the quicker than anticipated restart in June, following the community protest. We expect that the current strong operational performance will be maintained throughout the fourth quarter.
C1 costs, however, are expected to be slightly higher in the range of $1.6-$1.65 per pound. The higher costs are mainly due to lower capitalized mining costs due to a change in mining sequence to compensate for ongoing Chorobamba delays, lower by-product credits due to lower commodity prices and general cost escalation across energy, consumables and labor. Moving on to Kinsevere. Copper cathode production of around 15,000 tons was 19% above the second quarter of 2022, and also the strongest production quarter of the year. The better performance was driven by the ramp up of mining activity and processing of the ore from the Kinsevere Central Pit, which improved average mill feed grades and reduced reliance on lower grade stockpiles that impacted the first half of 2022.
Processing plant performance remains strong, with the average recovery rate increasing to 96.5% in the third quarter, above the 96.1% average in the first half of the year. We expect higher production rates to continue in the fourth quarter due to higher ore grades and stable recovery rates. Copper cathode production for the full year of 2022 is expected to be at the higher end of the guidance range of 45,000-50,000 tons. In line with prior guidance, C1 costs are expected to be in a range of $2.5-$2.8 per pound, with a stronger second half production partly offset by rising industrial costs. The Kinsevere Expansion Project is also progressing well.
During the third quarter, we commenced civil works for the cobalt plant and are now manufacturing long lead time equipment. Major packages for the construction of the concentrator and roaster have been awarded. Through these projects, the mine will see a shift to the mining and processing of sulfide ores and the introduction of cobalt circuit, extending mine life by 13 years and taking annual production up to more than 100,000 tons of copper equivalent production. First cobalt production is expected in 2023, and the first copper from the sulfide feed in 2024. You may have become aware that following the earlier announcements in relation to Safi 2 and Nambulwa, we have filed an arbitral proceeding before the International Chamber of Commerce.
Since the operation of Safi 2 and Nambua mining leases by the military forces and third parties, there were issued agreements by Gécamines in breach of MMG's existing contract rights. MMG has been involved in regular engagements with Gécamines, the DRC government, the provincial government, and also the Chinese Embassy in the DRC. Due to lack of progress in discussions and the ongoing occupation of the sites, MMG is focused to commence arbitration proceedings in order to protect its interest. I will now move on to our zinc operations, Dugald River and Rosebery. At Dugald River, the mine achieved the strongest production in over 18 months with around 49,000 tons of zinc concentrate, 18% higher than the second quarter.
Mining performance improved sharply with greater full workforce availability and the strong support from our mining contract partner as we transition towards the end of this contract and prepare to in-source development work from 2023. In addition to the strong mining performance in the quarter, the processing team delivered a record high zinc recovery rate of 90.1% as they continue to drive incremental improvements through various optimization initiatives. We now expect Dugald River to produce 170,000-180,000 tons of zinc in zinc concentrate in the full- year of 2022. Meanwhile, C1 costs are anticipated to remain in the range of $85-$95 per pound. At Rosebery, zinc production remained stable at around 12,000 tons, which was in line with the first and second quarters of 2022.
Year-to-date production has been impacted by lower ore grades, which is a result of continuous resequencing of mining activity to manage geotech conditions in that mine. The geotech modeling and mining schedule review has now been completed, and towards the end of the quarter, mining rates and ore grades started to improve. Higher workforce availability also enabled us to mantain better compliance with the mine plan. This trend is expected to continue in the fourth quarter of the year. We now expect Rosebery to produce between 50,000 and 55,000 tons of zinc in zinc concentrate in the year 2022. Below the prior guidance due to COVID-19 impact earlier this year and the resequencing of mining activity in the second and third quarters.
As a result of the lower production rates and lower by-product prices, full- year C1 costs for Rosebery are expected to be in the range of $25-$35 per pound. I'm now happy to take your questions with my exco members. 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're on a speakerphone, please pick up your handset to ask the question. Your first question comes from Jack Shang with Citi. Please go ahead.
Oh, thank you. I'm glad to be the first one to ask a question. Congratulations for a good quarter of the operational results, first of all. A quick follow-up regarding Las Bambas . I see that the full year guidance has been revised up, but it implied the full Q actual quarter outputs are still like over 10% below third quarter's level. Management also mentioned that we expect the current run rate or high run rate to sustain into the end of the year. My question is, what are the considerations that the company hasn't really lifted the production guidance as last mentioned up to say 250 rather than 250?
There could be more upside potentially from the full Q production alone. That's the first question. A second one, a quick follow-up is related to the negotiation with the local community, right?
Assuming that we make some major progress, what is the lead time potentially required for us to really mobilize the workforces to develop the Chorobamba pit? What's the lead time before Chorobamba can actually take place? Yeah. Thank you.
Thank you, Jack, for your questions. I will have Jianxian Wei, the GM, Las Bambas, to take your first question regarding the production. I will have Troy to take your second question in terms of the community. Troy is now ex-Las Bambas.
The answer from Jianxian Wei is the reason we changed the guidance the production is because of the in the major forecast we were aiming to resume the operation in July. In reality, we have resumed the operation in June instead of July. There is an increase of the production for the guidance. This is the reason that we have changed the guidance of the production to the 215,000 tons of copper. The rest of the indicator has remained the same way as major forecast. Okay. The answer for the question is because of the Chorobamba reason.
In the major forecast, we were assuming that in the first quarter, we will have Chorobamba for the production. In reality, there is no contribution from the Chorobamba to this year. Also, we have made some change in the mining sequence for the Chorobamba. The first quarter production level will be a little bit lower than the third quarter.
That's clear. Thank you.
Yeah. Jack-
Yeah.
Jack, I think it's, there's also a bit of impact of lower grade, and obviously there's a little bit of conservatism in there as well because we don't know.
when the community issues can flare up again.
Yeah. Thank you, Ross.
Yeah.
Jack, it's Troy here. Thanks for the question. The good news is, I think we've begun the discussion with the Von Kruer community around access and getting into Chorobamba, which is good progress. It does depend in some ways on that, how that agreement runs and how that negotiation runs about what our entry to the development of Chorobamba is. Really until we reach an agreement on the state of that entry, we won't know exactly. It will take some time to get the access and infrastructure in place and mobilize contractors and then we would move to pre-stripping and first of all.
I think previously we said it's a couple of months from kind of getting a go ahead to really getting access to or out of the mine, but it really depends also on how that discussion and on what basis we come to an agreement with the community.
Yes. Thank you, Troy.
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 Chris Shiu with Baillie Gifford Asset Management. Please go ahead.
Hi. Thank you very much management. I've got a couple of questions. The first one is regarding Kinsevere. What exactly is Gécamines looking for? I mean, do you see any potential for escalation? Because we have seen in some other cases of companies operating there, like, for example, China Moly's Tankes project, the exports have been disrupted. What are we seeing there? That's the first question. Thank you.
I will have Nan with the GM for Australia and Africa operations to take this one.
Yeah. Hi, Chris. Yeah, we are aware of the directive given to Gécamines by the Inspection Générale des Finances to terminate contracts that are sort of older than 10 years and where insufficient work has been conducted. But this does not apply to MMG. As a company, so we comply with DRC Mining Code and then also conduct the works across all permits over the past 10 years. Also the impacted leases are intended to be mined as part of the Kinsevere Expansion Project and then also as part of the future development of Kinsevere operation. In terms of escalation, we already file the arbitration this morning. We'll go through the due process. Yeah. Thank you.
Got it. Thank you very much. The second question is, regarding CapEx. I mean, is there any change to the CapEx guidance due to all these, you know, unexpected delays to projects and these issues? Also related to that, on the financial side, I mean, do we see any potential ways of minimizing the impact of our rising interest rates on our financial costs? Thank you.
Yeah. Thank you, Chris. As far as CapEx, we haven't revised our guidance, but it's likely that we'll underspend a little there. Yeah, as I said, we haven't revised our guidance. In response to the interest rates, we do have interest rate hedging on half of the LB debt. That was hedged at a LIBOR, I think around 2.5%. The other major loans we've got are from China Minmetals, and the majority of them are at fixed rates. We're sort of reasonably well insulated against the interest cost. You know, obviously there will be some impact there. As I said, particularly with LB, we've got half of that hedged.
Got it. Yeah. Sorry, just one last question. Are we seeing more potential M&A opportunities, I mean, given the tougher macro environment?
Not really, Chris, because the miners have generally had it pretty good for the last couple of years. There's not too many of them are in sort of balance sheet troubles. You know, like in the past when there's sort of been downturns, people have had very stressed balance sheets which lead to some activity. The other reason why there's not a huge amount of, or huge number of, M&A sort of activity going on is there's a lot of political issues. You know, you've got tax increases in Chile. You've got the ongoing community issues in Peru. Most of the other undeveloped copper is either in Africa, and you've mentioned the China Moly issues and DRC.
Even in, you know, right through Latin America, there's tended to be sort of leftist governments have been elected. I think also the fact that the price has come off so suddenly, it means that people then also have a bit of trouble calibrating what price they want to put into bids or if you're a seller, what price you'd be willing to accept. I think on the whole, there's not a huge number of M&A opportunities at the moment. Obviously we're monitoring that and, yeah.
Got it. Okay. Thank you very much.
Thank you. Once again, if you wish to ask a question, please press star one. We'll now pause a moment to allow for any final questioners to register. Thank you. Your next question comes from Lawrence Lau with BOCI. Please go ahead.
Thank you, management. Just a couple of follow-up questions. First of all, regarding Kinsevere. In the announcement, you mentioned the two areas occupied by the army is actually part of the expansion projects. If the situation stays, will it affect the progress of your, say, expansion? Say, whether we can see the first output in, say, fourth Q 2023 as you have stated in the announcement. Second question is about regarding Las Bambas. Now you have reached agreement with four out of the six communities. Can you give us some idea as to what you have promised or will this agreement affect the future economics of the mine? Thank you.
Yeah. Thank you, Lawrence. Nan can take the first one.
Okay. Yeah. Thanks, Lawrence. Yeah, in terms of the impact to Kinsevere, KEP project and then production. The longer- term life of mine from longer term life of mine perspective, we're still working through the optimization options. But we're seriously concerned about our legal rights are taken away on these two tenements. If this sustains, it will impact the future of Kinsevere and our interest in DRC. Yeah. MMG sort of had a long history with DRC. We've had a lot of contribution to the government and the community. We like to maintain this positive involvement, collaboration with the government and the local community.
In terms of on-time production, so at this stage, we're still assessing, but we're aiming to resolve these issues as soon as possible, and then aim for the assigned production time. Yeah.
Lawrence, on the communities, the process of negotiation has been really focused on existing commitments. This was not a new commitment process, but it was about resolving concerns with existing commitments in those communities. The good thing is we're using those agreements to also get you know, better basics for ongoing relationships, and especially the agreement with Pumamarca, which was the last one of the four reached, also enables us to access some of the exploration land that we're really keen on in that community on a basis that has support from the community. We're very happy with the outcomes of the first four. They've been largely on existing commitments and making sure that we have a plan to implement those.
We're looking to build better relationships that allow us to grow together.
Okay, thank you.
Thank you. There are no further questions at this time. I'll now hand back to Mr. Liangang Li for closing remarks.
Yeah, thank you. Thank you very much, everyone for attending the QPR. Concerning the time constraint, if you have any further questions, please feel free to contact our investor relations and corporate affairs teams. Thank you again for the participants.
That does conclude our conference for today. Thank you for participating. You may now disconnect.