Thank you for standing by, and welcome to the MMG Limited fourth quarter production report teleconference. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Andrea Atell. Please go ahead.
Thank you, and thank you for joining us for MMG's Quarterly Production Report Teleconference. This report and today's discussion cover the operational performance of MMG's sites for the fourth quarter and the full year ending 31 December 2024. Joining us for this call are Mr. Liang Cao as CEO, Mr. Song Qian as Chief Financial Officer, along with other members of the executive team. I will now hand over to Liang Cao, who will take us through the highlights of the report. Following his overview, we will open the call for questions. Thank you.
Thank you, Andrea. Good morning and good afternoon, everyone. Welcome to MMG Fourth Quarter Production Report Teleconference. As you know, our production report was released yesterday. I will take it as read and provide a summary of our results and highlights. The management team and I will be more than happy to answer your questions at the end. At MMG, safety is our first value. In positive news, our safety performance continues to improve with a few injuries reported in the last quarter. The total recordable injury frequency that's achieved for the full year was 2.06 per million hours worked, with no high potential injuries reported in the past seven months. While they are good results, we needed to remain vigilant and keep progressing our improvement plans across all sites. I will now take you through our production results.
Overall, it's been both a strong fourth quarter and a full year result as we achieved a number of significant production milestones. MMG's operations delivered robust production performance in 2024, with the copper production 15% higher than 2023 and the zinc production 8% higher. Stronger copper production was driven by Las Bambas, which exceeded the full year guidance, while all other operations delivered their annual targets. Our growth in copper was also driven by the inclusion of a Khoemacau output. Cost performance was also favorable in 2024, with Las Bambas achieving lower than anticipated C1 cost due to higher production rates and increased by-product credits from higher precious metal prices. MMG's zinc mine cost also benefited from higher precious metal prices and favorable zinc concentrate treatment charges as well. In the fourth quarter, Las Bambas achieved its highest quarterly production since 2019, an impressive result.
The mine's 2024 annual production totaled 322,912 tons, marking a 7% increase year on year, driven by mining at Chalcobamba Pit and uninterrupted operations. It's worth highlighting the team's significant effort in community engagement and the real impact this is having on consistent operations at site and along the transport corridor. In 2025, copper production is expected to be 306,000-400,000 tons at Las Bambas. The higher end of this range represents full year operation at the Chalcobamba and the Ferrobamba Pits, assuming the absence of significant social interruptions. MMG remains committed to working closely with the government of Peru, the local government, and the community members to ensure transparent and constructive dialogue. Production at Kinsevere was in line with expectations, with a 1% increase from 2023.
This was driven by the addition of the sulfide circuit in the fourth quarter, improved power supply stability, and increased ore supply Sokoroshe II Pit. in positive news, Kinsevere expansion mechanical completion was achieved in September last year as scheduled. The focus is now on ramping up the concentrator and roasting system to gradually increase production. Copper cathode production is expected to increase significantly in 2025 this year, with a forecast range of 63,000-69,000 tons. Khoemacau produced close to 31,000 tons of copper in concentrate for the period from 23 March 2024, MMG's acquisition date. The team has focused on improving equipment availability and onboarding skilled labor, which improved operations and drove high mining and milling volumes. Accelerated on-the-ground development has expanded mining front, positioning the mine for high mining volumes and greater flexibility in the near and immediate term.
This year, our 2025 guidance is 43,000-53,000 tons in copper in concentrate. Planning for future growth at Khoemacau is underway, with a feasibility study currently in progress to lift annual production to 130,000 tons per annum. The expansion project is expected to commence construction next year, with the first concentrate production in 2028, subject to a comprehensive assessment of timeline in the feasibility study. Moving to zinc, our total zinc production reached almost 220,000 tons in 2024, an 8% increase from 2023. This result reflects our operational improvements at Dugald River and Rosebery. Our Australian operations have both performed strongly, with production at Dugald River and Rosebery increasing by 8% and 9% respectively year on year. It was great to see Dugald River have a record metal production month in October and a record recovery rate of 91% in the fourth quarter.
This achievement was due to the team's ongoing efforts to optimize operation and the benefit of a higher ore feed grade. At Rosebery, all mined and milled volume also reached record highs, with both exceeding one million tons. With a production strategy focused on zinc equivalent production, the mine also achieved more than 133,000 tons of zinc equivalent production. Finally, we announced that the mineral resources for our five mines had increased across all metals, including a 2.6 million ton increase for copper and a 1.4 million tons for zinc net of milled depletion. The substantial gains detailed in MMG's 2024 Mineral Resources and Ore Reserves Statements, representing our best organic result for mineral resources since MMG was established in 2009. This success is thanks to a multi-year commitment to exploration, drilling, and extending the life of our mineral deposit assets.
In closing, our focus remains on generating more value from our operations and maximizing the growth potential of our assets. On behalf of MMG Executive Committee, I would like to sincerely thank our team for their hard work and commitment to safe operations. It is their efforts that we have made 2024 such a strong year and our recent production milestones possible. It's an exciting time for MMG, and we are looking forward to another successful year. This concludes our presentation. My colleagues and I are now happy to take your questions. I will hand it back to the moderator. Thank you.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Jimmy Feng with Citi. Please go ahead.
Hi, thanks, management, for the sharing and congratulations on the strong fourth quarter production report. I have three questions, and let me ask one by one. For the first question, I noticed that for Las Bambas mine, there was 20,000 tonnes copper inventory accumulation in 2024, mainly in the second half of 2024. I want to check, will these inventories be reduced or sold in 2025, or any of them are the normal inventory for the operation of Chalcobamba and Ferrobamba? This is my first question. Thanks.
Thank you, Jimmy. Ivo, would you like to take?
Yeah, okay. Thank you, Jimmy, for the question. This is Ivo from Las Bambas. Yeah, actually, as you mentioned that we have inventory, it's because of actually the grade of the concentrate of copper we produced because of the lower grade of the ore. So we have more volume of the concentrate, which means. And we need to, with more trucks to transport all the concentrate we have stocked. And also, by the end of the year, we have some illegal mining protest against the government. They just had a lot of road blockage, which definitely also influenced all our transportation. So what we right now is have the authorization about 150 trucks per day to transport all the concentrate we have in stock. So normally, this weekend, make the stock by zero by the end of March of this year, 2025, and just continue with our normal operation.
I hope this could answer your question. Thank you.
Yeah, thanks. That's clear. And my second question is regarding the C1 cost for Las Bambas. I noticed that the C1 cost guidance in 2025 is higher than the actual cost in 2024. Two major reasons include the higher employee benefit and also the increased social program spending. So for these two parts, could you explain more quantitatively, how much is the increase in the social program spending and employee benefit, respectively, in 2025 compared with 2024? Do you have this number in value or in value portion, and how should we expect it going forward? Would this be sustainable spending into 2026 and later? Thanks.
Thank you. Song, would you like to take?
Yes. Thank you, Jimmy. The largest portion for that increase, as you mentioned correctly, is the employee benefits. In 2024, compared with this increase in 2025 guidance, this will come to $0.11 per pound. About $0.60 of this is due to increased profit incentive benefits to employees, and approximately $0.05 is due to a one-time payment for a collective bargaining agreement, which won't happen next year. The benefit of the profit incentives will come as we increase our profit in Las Bambas, then we'll increase. Another significant factor of the reduction in the capitalized is the capitalized mining cost. Basically, because we are focusing more on ore mining instead of waste stripping, that will decrease our capitalized mining, but increase our cash cost. That's only an accounting allocation of different items, not exact changes of our cash expenditures.
The other part is also regarding what you mentioned, the social program. That will increase our $0.03 per pound, primarily due to the compensation for some delay for last year due to external reasons.
Yeah. And another is, just want to check, so total is $0.03 + $0.06, and those two parts totally should increase by $0.09 in the C1 cost in 2025 year-on-year, right?
Yeah, you're right. That actually implies your calculation because although recognized C1 in 2024 is $1.51 per pound, but actually, because Q2, our production increased a lot. That implies a C1 cost for the second half year actually reaches below $1.4.
Okay. Okay, got it. Thanks. That's very clear. And my last question is regarding the Kinsevere. I'm happy to see that the C1 cost guidance is lower in this year because of the ramp-up for KEP. And I want to check, when will this KEP be fully ramp-up? Would that be in 2026? And how should we expect the C1 cost after the fully ramp-up of Kinsevere, the KEP project?
Yeah, Jimmy, thanks.
Yeah, thanks, Jimmy, for your question. This is Nan here. I'll address your questions on these. In terms of ramp-up timing, we look at some stage Q2, Q3 this year. We ramp up the KEP project. In terms of the C1, obviously, we provide the guidance for 2025. As we ramp up fully, reach to a stable operational conditions, and then we'll obviously review the C1 at that time, and then we'll sort of share with the market accordingly.
Great. Great. Okay. And thanks for sharing and congratulations again. Thanks. I have no more questions.
Thank you, Jimmy.
Thank you. Your next question comes from Lawrence Lau with BOCI. Please go ahead.
Hi. Thank you for taking my question. I also have three questions. First of all, I think just a follow-up on Jimmy's question on Las Bambas cost. One of the reasons you stated for the increase in C1 cost is the increased social program spending. I just would like to know, is it going to be one-off or you have changed the, say, payment to those social program on a per ton or per pound basis? Secondly, in the announcement, you mentioned that there's some problem with the moly production in Las Bambas in 4Q. I just want to know, have the problem been solved? And also, finally, on Kinsevere, you also mentioned that you suspended the production of cobalt in 4Q because of market conditions. And now you have a more flexible way to do the production.
I just want to learn more as to, say, is it, say, that if you suspend the production of cobalt for a period of time, is it that after you produce copper from the ore, you can set aside the residue, then you can process those residue when the market is good, or you just discard the residue? Thank you.
Thank you, Lawrence. So, Ivo, probably the first question we're to take, and then Nan follow the following questions.
Yeah. Okay. Thank you. The first question is related to the social program expenditures. And of course, we anticipate around $0.03 per pound increase in cost related to all the social programs, and driven by some delays to implementation of social programs. So we have this increase in 2025 this year. A lot of because of the external factors, we could not just implement that to 2024. So normally, we have average around $30 million about the social investment, and we will have this increase for this year. And related to the second question about the moly, actually, because we developed the second piece, the Chalcobamba, and they have a lower ore grade of moly, actually. And also, we have some elements that really impact the recovery of moly.
Right now, we have taken several certain measures just to try to recover more moly and to maintain the production. This is one of our critical goals for this year as well. We have a lot of solutions, but right now, we're just doing more tests, and we're trying to implement this year to have a higher recovery of moly. Thank you.
Okay, Lawrence, I'll address the cobalt question for Kinsevere. As you mentioned, we adopt a flexible cobalt operation, mainly considering the cobalt price. Currently, the cobalt price is quite low and impacted on the cobalt sort of production. And then with that strategy, we actually maintain our cobalt in our solutions. The solution is circling around within our processing water in the pregnant liquor. That will be part of the circuit. So at the moment, we're extracting the copper out from the solution, and then that cobalt component in the solution will be circling in the processing water and the recycling system, and then get pumped back to the processing facility. So when we're ready to extract cobalt, we'll turn on the cobalt plant, and then we'll process the cobalt and extract that component. So that's the high-level description of the process. Yeah.
Okay. Thank you.
Thank you.
Thank you. Once again, if you wish to ask a question, please press star one on your telephone. Your next question comes from Chris Shiu with Balyasny Asset Management. Please go ahead.
Hi. Thank you very much, management team, and congratulations on the great operating performance. I've got two questions. The first one is, could you give us some breakdowns for Las Bambas into Ferrobamba and also Chalcobamba in terms of the production and cost?
Thank you, Chris. Ivo and Nan, would you please take this? Thank you.
If I may jump in, and then Ivo can add as well. Yeah, Chris, thanks for your question. In terms of Ferrobamba and Chalcobamba, the production ratio, so because we have a higher grade at Chalcobamba, and then the grade at Ferrobamba is still reasonable at an average grade. So we're not really sort of preferring one pit and then using the other one. So what we're doing is a blending strategy and try to get the best value out of two pits. So really, the ratio we're looking at is around 50/50 for this year. And then at certain months, Chalcobamba might have a higher ratio, and then Ferrobamba might have a lower ratio. But in terms of overall production, it's balanced between the two. So high level, 50/50.
In terms of cost distribution, again, we optimize the mine as a whole. So we're not really counting one pit or another. So the C1 is actually the cash cost for the mine. Yeah. So we don't really split the two pits. Yeah. Thank you.
Got it. Thank you very much. So is it fair to say that the Chalcobamba pit is already fully ramped up by now?
Yes, we're fully ramped up. Obviously, any capital stripping, operating stripping is part of the normal operation. Yeah.
Got it. Thank you very much. And my second question is regarding CapEx. Is there any guidance for the 2025 CapEx as of now? Thank you.
Yeah. Thank you. Song, you got the number?
Yes. I do.
Oh, okay. Probably we'll provide it in the annual report in March.
Oh, yeah.
Okay. Yeah.
Got it. Understood. Thank you very much. That's it.
Thank you.
Thank you. Your next question comes from Yuji e Wang with Polymer Capital. Please go ahead.
Hi, Emmanuela. Thanks for the introduction. Two questions from my side. So the first one is about Khoemacau. Just wondering about I noticed you have an updated feasibility study for Khoemacau for the longer term, but just wondering about how should we think about Khoemacau, maybe the cost profile in 2026, 2027 during the process of ramp-up? This is my first question. Thanks.
Thank you.
Yes, thanks.
Yes, please.
Yeah, thanks, Yujie. Just in terms commenting on the feasibility study, the site is fully commenced on the feasibility study for the expansion. So that's our number one priority for the growth of the mine. In terms of the cost for 2026 and 2027, we are still working through the budget process. Obviously, we just finalized the 2025 numbers, which we're sharing with the market. So once we have those forecast information for the future years, like 2026 beyond, we'll share with the market. Yeah. Thank you.
Yeah, sure, sure. Yeah, got it. Just a follow-up question on this part. Because we know Khoemacau is going to further ramp up from here. So how should we think about the volume? I mean, should we expect a gradual ramp-up during the course between 2026 to 2028, or should we expect maybe a volume contribution to just start from 2026?
Yeah, absolutely. That's a great question. We are aiming to have a gradual improvement in terms of production profile. As we look at this year's guidance, we look at in terms of the volume, it's from 43 to 53 range. And then as we continue to ramp up the mine into 2026 and 2027, we get to the stage one, I call it, capacity to 60,000 tons. As part of the FS, what we aim for is a finished FS by this year and then start construction in the next two years. And then by 2028, we aim to ramp up to the 130,000 tons. So that's our copper profile going forward. Yeah.
Sure. So just wondering when you just complete the first stage expansion to 60,000 tons. Any cost guidance here?
Yeah. It's in our investment pack for when we fully ramp up to 60,000 tons. But as we get into that fully ramp-up, we'll have another final review of our costs, and then we'll share with the market accordingly. Yeah.
Sure, sure. Thanks. And my second question is about, yeah, we noticed that you have some additional resources in the reserve at Las Bambas. So just wondering about your latest thoughts on the further expansion of this mine. So any possibility to kind of increase the overall capacity and the overall copper volume in the future? Thanks.
If I may answer this question on LB growth, we're constantly working on our strategic plans and then looking at best value for Las Bambas and for MMG. With this increase in resources, at this stage, we're still going through part of our strategic planning process. So once we have that profile, again, we'll share with the market. Yeah.
Sure, sure. Thanks. No further question from my side. Thanks, Management. Thanks.
Thank you.
Thank you. There are no further questions at this time. I'll now hand back the conference to Andrea.
Thank you for joining us. If you have any additional questions, please reach out to our investor relations or corporate affairs team. Thank you for your time. Bye for now.
That does conclude our conference for today. Thank you for participating. You may now disconnect.