President of Africa Operations and Mr. Chen Xuesong , President of Las Bambas. Please take a moment to note the disclaimer on the screen. This presentation should be read together with the company's interim results announcement for the six months and 30th June 2026, released on 11th August 2026. The presentation contains forward-looking statements that are subject to risks and uncertainties, and actual outcomes may differ from those statements. We will start today's presentation. Today, we will cover the company's overall performance for the first half of 2026, our financial results, and our strategy and outlook. In addition, following a very strong period of resource growth, we will also provide a dedicated update on our latest resource growth results and what they mean for MMG's future development. The management team will take questions after the presentation. I will now invite our CEO, Mr. Ivo Zhao Jing, to begin.
Thank you, Godfrey, and welcome everyone to today's results presentation. In the first half of 2026, MMG remained focused on safety, operational stability, and growth. We continued to advance stable production across our mines, progress key projects, and improve costs while delivering a record interim result. I will begin with an overview of our performance for the first half. As always, I would like to start with safety. Safety is MMG's most important value and the foundation of everything we do. No matter the market environment or stage of growth, there is no trade-off between safety and results. In the first half of 2026, our safety performance improved compared with the same period last year. Our significant event frequency with energy exchange was approximately 0.6 per million hours worked. Total recordable injury frequency was approximately 2.1 per million hours worked.
At the same time, we recognize that every incident matters to the individual, their family, and their team. In the second half, we will continue to strengthen visible safety leadership, deepen critical risk management, particularly for vehicles and mobile equipment, embed safety more deeply into planning and execution, and further improve contractor safety management. Our goal remains unchanged. Every employee and contractor must go home safely. This is a core responsibility of management and our most important commitment to our people, their families, and the communities where we operate. Let me first share the company's overall performance for the first half. What stands out is that while maintaining safety and operational stability, MMG delivered record operational and financial performance and further strengthened its capacity for future growth. Revenue reached $4.54 billion.
Profit after tax was $1.37 billion, including close to $900 million attributable to equity holders of the company. Operating cash flow exceeded $2.2 billion, with profitability and cash generation both substantially stronger. Operationally, copper production reached 267,000 tons, the highest first-half level in nearly eight years. Our major operations remained steady and continued to progress towards full-year production targets. At the same time, stronger contributions from byproducts such as gold and silver further supported earnings quality and cost competitiveness. These results reflect a higher quality operating performance. They also strengthen our balance sheet, support our project pipeline, and reinforce the platform for long-term sustainable value creation. In summary, there are four areas from the first half that I would highlight. First, our operating foundation is stronger. Our mines continued to perform well overall. Las Bambas continued to demonstrate a scale, cost, and cash flow strength.
Kinsevere continued to ramp up its expansion project and release benefits. Khoemacau's operating performance improved while our two Australian operations further enhanced profitability through operational excellence and their multi-metal advantage. Second, our financial position has improved significantly. Strong operating cash flow, together with approximately $ 1.6 billion financing completed in June, further improved liquidity and capital allocation flexibility. With net debt significantly reduced, we now have a stronger balance sheet, greater funding capacity, and more strategic flexibility. Third, our copper growth pathway is becoming clearer. The Khoemacau 130,000 ton expansion is progressing steadily, and we are also actively evaluating the longer-term pathway to 200,000 tons. The significant resource growth achieved this year further expands our development options and provides a stronger foundation for future production growth and value creation. Fourth, we are building MMG for the future.
By advancing remote operations, automation, electrification, and digital platforms, and by scaling proven technologies across our global assets, we are improving safety, efficiency, and sustainability and strengthening the company's long-term competitiveness. Overall, the first half was not only about record financial results. More importantly, we strengthened our operating base, improved our financial capacity, and created more opportunities for future growth. Looking ahead, we believe the energy transition, electrification, digitalization, and new forms of infrastructure will continue to drive long-term demand for critical minerals. The metals we produce, including copper, zinc, gold, silver, molybdenum, nickel, and cobalt, are fundamental to these trends. They are used in power and data infrastructure, renewable energy, battery storage, and advanced manufacturing. This is an important reason why we remain confident in the long-term outlook for our industry. MMG's value is not based on a single commodity.
It is supported by a diversified metals portfolio that underpins energy transition and modern industrial development. As the Nickel Brazil transaction progresses, our future-facing metals portfolio will be further strengthened. Against this long-term backdrop, regarding our growth strategy, it is focused on increasing asset value and unlocking growth potential from a stable operating base. In copper, Las Bambas has operated stably for more than three years and remains a key pillar of cash flow and earnings. Kinsevere continues to release benefits from its expansion. The Khoemacau phase II expansion is under construction and will lift copper concentrate production capacity to 130,000 tons per year. We are also assessing the longer-term pathway to 200,000 tons. In zinc, Dugald River and Rosebery are more than zinc assets. Contributions from gold, silver, copper, and lead by-products continue to improve profitability and cost competitiveness, allowing us to create more value from each ton of ore.
Beyond organic growth, we will continue to expand our opportunity sets through exploration, development-stage investments, innovation-led improvements, and disciplined acquisitions while maintaining capital discipline. Growth depends not only on high-quality resources, but also on our ability to keep improving how we operate. Technology and innovation are not separate from operations. They are practical tools to improve safety, efficiency, and long-term competitiveness. In recent years, we have continued to advance remote operations, automation, electrification, and digitalization. The Las Bambas remote operation center, the Dugald River digital twin, electric equipment trials, and green energy projects are all practical examples of this strategy. Through these investments, we aim to operate more safely, more efficiently, and with a lower carbon footprint while replicating proven practices across our global asset base. Regarding community and sustainability, growth also depends on long-term trust with communities, governments, and other stakeholders.
We believe stable operations create more than production and financial returns. They also support employment, education, healthcare, infrastructure, and community capability. Over the past year, MMG continued to invest in communities across our operating regions, covering areas such as poverty reduction, health and wellbeing, education, and access to clean water. Community investment exceeded $60 million, with Las Bambas accounting for the majority. These investments support local development and also provide the foundation for long-term operational stability. We will continue to operate responsibly and create shared value in a stable, transparent, and sustainable way. Looking ahead, our vision is to become a leading international mining company for a low-carbon future. To achieve this, we are focused on three layers of growth. First, we will continue to increase the value and competitiveness of our existing assets through operational improvement, capital discipline, and technology innovation, improving safety, efficiency, cost, and cash flow.
Second, we will drive organic growth around our existing regions and core commodities, particularly copper, through expansions, optimization, and exploration-led resource growth. Third, within an appropriate risk framework, we will position the company in new regions and future-facing metals using development projects and quality acquisitions to preserve long-term growth options. Through this pathway, MMG will continue to play an important role as China Minmetals' overseas mining platform and contribute to the China Minmetals strategic target of reaching 1 million tons of copper production by 2030. Delivering these goals requires stronger earnings, cash flow, and balance sheet capacity. I will now invite our CFO, Ms. Song Qian, to present the company's financial results.
Thank you, Ivo. In the first half of 2026, MMG delivered a record interim result. Operational improvements, higher sales volumes, and stronger prices for key metals supported record first-half financial metrics. Revenue increased 61% to $4.54 billion.
EBITDA reached $2.73 billion, with EBITDA margin rising to 60%. Profit attributable to equity holders was approximately $900 million, up 164%. Net operating cash flow reached $2.23 billion, up 89%. At the same time, net debt fell to $610 million, and gearing reduced from 33% to 6%. Overall, profitability, cash generation, and the balance sheet all improved materially, providing a strong platform for the next phase of growth. Revenue growth was driven by two main factors. First, prices for major products, including copper, gold, and silver, remained at strong levels. Second, our operations remained stable and sales volumes improved, amplifying the benefits of higher prices. Copper remains our most important source of revenue and cash flow. At the same time, higher contributions from gold, silver, and molybdenum by-products improved earnings quality and added resilience to the portfolio. Higher earnings translated into stronger cash flow.
In the first half, operating activities generated $2.23 billion of cash inflow, reflecting significantly stronger cash generation. We also completed a financing transaction, further improving liquidity and financial flexibility. While continuing to support existing operations and growth projects, we increased our cash position and strengthened our capacity to fund future development. Looking at the individual operations, I will start with Las Bambas. Copper production reached 210,000 tons in the first half, and full year production guidance remains at 380,000 tons- 400,000 tons. Ferrobamba and Chalcobamba were mined at an integrated manner, supporting stable grades and recoveries. Increased contributions from precious metals and molybdenum byproducts further improved operating performance. Las Bambas delivered revenue of $3.31 billion, up 65%, with an EBITDA margin of 68%.
Three consecutive years of stable operations, together with a high-quality resource base and a strong cost position, mean Las Bambas remains MMG's most important source of earnings and cash flow. Kinsevere is moving into a phase of capacity release as the KEP project continues to ramp up. Copper production reached 34,000 tonnes in the first half, up 33% year-on-year. Mining volumes and throughput both improved significantly. Power reliability continued to improve, and the battery energy storage system expected in the fourth quarter should further strengthen power security. With higher production and improved operations, revenue increased 70% to $398 million, and EBITDA was four times the prior year level. As ramp-up continues and operational improvements take effect, the mine still has meaningful upside. Khoemacau produced 22,000 tonnes of copper in the first half. The mine continued to progress equipment mobilization and underground development.
Stable supply of high-grade ore from Zone 5 supported improving head grades. EBITDA was approximately $120 million, up 35%. At the same time, the 130,000-tonne expansion remains on track, with first copper concentrate targeted for the first half of 2028. As the expansion is delivered, Khoemacau will become an important engine of future copper growth for MMG. Dugald River. Despite weather impacts early in the year, Dugald River returned to normal operating and logistics rhythm in the second quarter. Zinc production reached 87,000 tonnes, up 3%. Higher throughputs and zinc recovery above 90% helped offset lower grades. Supported by higher byproduct volumes and stronger zinc and silver prices, Dugald River again demonstrated strong operational resilience and cash generation. Revenue increased 50% to $314 million, and EBITDA rose 92% to approximately $130 million. Finally, Rosebery. Zinc production declined 21% to 19,000 tonnes, reflecting lower grades in the deeper ore body.
However, on the zinc equivalent basis, production increased 3%, demonstrating the strength of Rosebery's multi-metal operating model. Higher silver and gold production, together with stronger metal prices, significantly increased byproduct credits. Revenue increased 73% to $244 million, and EBITDA reached $130 million. Rosebery once again showed that a multi-metal portfolio can continue to create value across different market conditions. In addition to improved earnings, our balance sheet was also strengthened. At the end of the first half, total borrowings were approximately $2.57 billion, and net debt had fallen to $610 million. In June, we completed approximately $1.6 billion of financing, which will be used to refinance existing loans and is expected to save approximately $30 million - $40 million on interest expense per year. This transaction further optimized our capital structure, improved liquidity, and created additional capacity for future growth.
With significantly stronger operating cash flow, a much stronger balance sheet, and an expanding set of growth opportunities, we believe it is important to provide greater clarity on our capital allocation principles and priorities. At MMG, capital allocation is ultimately about creating long-term value. On one hand, we continue to strengthen operating cash flow through our portfolio of high-quality, cost-competitive assets. At the same time, our diversified funding sources enhance financial flexibility and provide capacity to support future growth. Our capital allocation framework is built around five priorities. First, maintaining our existing operations. We will continue to invest in sustaining capital, safety, and asset reliability to ensure our operations remain safe, stable, and reliable. This is the foundation of long-term value creation, consistent production, and sustainable cash generation. Second, meeting our financing obligations and maintaining strong balance sheets.
Over recent years, we have significantly reduced net debt and strengthened our financial position. Today, our balance sheet provides strong support for future investment while enhancing our ability to navigate commodity cycles and capture new opportunities. Third, supporting growth. We will prioritize high-quality growth opportunities, including brownfield expansions, resource growth through exploration and investment opportunities that align with our strategic direction and creates long-term value. Together, these initiatives will continue to grow MMG's resource base and future production capacity in a low-carbon future. Fourth, technology and innovation. Through digitalization, automation, and smarter mining operations, we will continue to improve safety, sustainability, productivity, efficiency, and cost performance, strengthening the long-term competitiveness of our business. Fifth, shareholder returns. We will progressively establish a sustainable approach to shareholder returns, allowing shareholders to share in the benefits of MMG's future growth.
From a capital allocation perspective, MMG is in the strongest financial position it has been in for more than a decade. We have a significantly stronger balance sheet and are generating cash flow at levels we have not seen for many years. With the strong support of our major shareholder, China Minmetals, we also have the capability to execute our projects and deliver on our growth ambitions. Looking ahead, we do not see growth and shareholder returns as a trade-off. Supported by our strong balance sheet and growing cash generation, we believe MMG is well-positioned to pursue both. Supported by our strong balance sheet and growing cash generation, we believe we can continue to invest for growth while progressively establishing a sustainable shareholder return framework, allowing shareholders to share in the benefits of MMG's future growth.
We believe disciplined capital allocation, a strong balance sheet, and a clear growth pathway will provide the foundation for sustainable long-term value creation. I will now hand back to Ivo.
Thank you, Mr. Qian. For a mining company, resources shape both today's performance and tomorrow's potential. This year, MMG achieved significant growth in its resource base. This reflects the results of sustained exploration investment over recent years and further strengthens our long-term growth potential. Let me now take you through the latest resource and reserve updates. As at June 30, 2026, after depletion, mineral resources increased across all reported metals. Copper mineral resources reached approximately 20 million tonnes of contained metal, up 7%, with net increase of about 1.4 million tonnes. This marks the third consecutive year of copper mineral resource growth for MMG. Zinc, silver, gold, lead, molybdenum, and cobalt resources are also increased.
In ore resources, copper, zinc, silver, gold, and molybdenum all increased, demonstrating our ability to convert resource growth into future mineable value. The most important point on this slide is the approximately 1.4 million tonnes of newly added copper resources. That is equivalent to more than 10 years of production from a 100,000 tonne per year copper operation. Importantly, this growth was primarily generated through our own sustained exploration and resource evaluation work. It demonstrates our ability to create value through exploration and to support growth through resources. MMG's resource base spans South America, Africa, Australia, and North America, giving us a global and diversified resource portfolio. The standout achievement this year was the maiden mineral resource for the Kgwêbe copper-silver deposit at Khoemacau in Botswana. Kgwêbe contains about 1.4 million tonnes of copper and 90 million ounces of silver, significantly enhancing Khoemacau's long-term growth potential.
At the same time, the Izok Corridor project in Canada reported a maiden mineral resource for the High Lake East deposit, adding a new resource base for future development. In Australia, the Hercules Deposit at Rosebery was returned to the mineral resource for the first time since 2015, further supporting a longer operating future for the mine. These results show that we can continue to increase the value of our existing assets while also discovering and developing new growth opportunities. Resource growth does not happen by chance. It is the result of sustained investment over time. Over recent years, MMG has increased exploration expenditure from $19.1 million in 2020 to $100 million in 2025, with a further $56.3 million spent in the first half of 2026. This investment is creating value in three ways. First, it is creating value beyond our original expectations within existing assets.
Khoemacau is a good example. Since acquisition, sustained exploration has added approximately 2.2 million tonnes of copper resources and 124 million ounces of silver resources, significantly exceeding the original acquisition assumptions. This has materially enhanced the value of the asset and strengthened its future expansion for long-term growth potential. Second, it is extending mine life. The return of the Hercules deposit to the Rosebery mineral resource provides additional support for decades of future operations. Third, while this year we are celebrating the 90th anniversary of the Rosebery mine. Third, it is building the next generation of growth opportunities. The maiden resources at Kgwêbe and High Lake East, together with high-grade drilling results at Wallaroo near Dugald River, show there remains significant exploration potential around our existing assets.
Looking ahead, we will continue to pursue a value-led exploration strategy, linking resource growth with reserve conversion and project development more closely and turning resource potential into growth and long-term value. This final slide summarizes the latest resources and reserves across our major assets. From a portfolio perspective, Las Bambas remains our largest core asset and our strongest source of cash flow. Khoemacau has further strengthened its long-term growth potential through the Kgwêbe discovery and the progress of the expansion project. Our Australian assets continue to provide a stable multi-metal resource base, while Kinsevere and Izok Corridor provide important future options for the company. Overall, in the first half of 2026, MMG not only delivered record operating and financial performance, we also further strengthened our future growth capacity. We improved safety performance, maintained stable operations, strengthened balance sheets, advanced key projects, and delivered significant resource growth. Resources shape both today and tomorrow.
A third consecutive year of copper resource growth, together with a series of new discoveries, gives us confidence in MMG's long-term outlook. In the second half, we will remain focused on disciplined execution and delivery of our full-year targets. With a stronger balance sheet, a richer resource base, and a clearer growth pathway, we will continue to create long-term sustainable value for shareholders. Thank you. This concludes our presentation. We will now move to Q&A.
If you would like to ask a question, participants joining by phone should press star followed by one. Participants joining via Zoom or the webcast may click the raise hand button at the bottom of the screen to request to ask a question. Please update your display name to show your institution and name. Thank you.
If you would like to ask a question, participants joining by telephone should press the star key followed by one on their keypad. Participants joining via Zoom or the common portal should click the raise hand button at the bottom of the screen to request to speak. When asking a question, please update your display name to show your institution and name. Thank you. If you would like to ask a question, participants joining by phone should press star followed by one. Participants joining via Zoom or the webcast may click the raise hand button at the bottom of the screen to request to ask a question. Please update your display name to show your institution and name. Thank you. If you would like to ask a question, participants joining by telephone should press the star key followed by one on their keypad.
Participants joining via Zoom or the common portal should click the raise hand button at the bottom of the screen to request to speak. When asking a question, please update your display name to show your institution and name. Thank you. Chris of Balyasny, please go ahead.
Can you hear me, management?
Yes, you are very clear.
Okay. First of all, congratulations, management, for the very good results for the first half. I have two questions. First, regarding dividend, just now, Mr. Qian said that in the future, dividend is going to be sustainable. In the future, regarding dividend, company management is more inclined towards a fixed dividend ratio. Every year concerning the actual dividend, it is going to fluctuate according to results. Is this the way or are you going to set a fixed arrangement, so every year the dividend will not be lower than last year, so it is going to be a progressive dividend? So that's my first question. Thank you.
Mr. Qian, please.
Thank you, Chris. I have heard your two suggestions. They are very good suggestions. As you said, now we are working on solving some technical obstacles. Last year, there was the $500 million retained loss, and this year, in our report, we already said that in July, Las Bambas received the first dividend, and this had effectively lowered the retained loss to a certain level. It has been reduced by about $400 million. It is now at $400 million. In the second half, we'll continue this work. We'll make further improvements within the year.
Our target is that within this year, we hope to overcome the technical obstacle. After that, on that foundation, we will see what dividend capability we have so that we can deliver good returns to shareholders. As we disclosed just now, we have already decided on this, so we would like to achieve our company's growth as well as shareholder returns at the same time.
Thank you, Mr. Qian. My second question is also about finances. In the first half, CapEx was around $550 million. For the whole year, guidance is about $1.6 billion-$1.7 billion. Now we are already in mid of August. Regarding CapEx progress, how is it like? Are you really going to spend this much, $1.6 billion-$1.7 billion for the whole year?
Yes, Chris. At the beginning of the year, we made that estimate. While CapEx of various mines are in accordance with our plan and they progress gradually. For Las Bambas, many projects have to wait until Q3, Q4 to reach the peak. There is no change to our annual plan.
Thank you. Thank you, leaders.
Next, Jimmy of Citi. Please go ahead.
Mr. Qian, Mr. Chen, leaders. I am Jimmy from Citi. First of all, congratulations on your very good first half results. Looking at your balance sheet, it is improving. I have several questions. I will ask them one by one. My first question is about Kinsevere. The C1 cost of Kinsevere in Q1 comparing with Q2, increased quite a lot. For Q2 and Q1, can you explain the factors behind this increase and give us a breakdown? Full year guidance is $2.5 - $2.9 in the first half, $2.96. Is it true that for the second half, there will be a decline expectation? For this full year guidance, what kind of sulfuric acid price and diesel price is it based on? How are the prices right now in the second half? What are the factors leading to the decline in C1 cost? That is my first question. Thank you.
Thank you, Jimmy, for your question. We will ask Mr. Xia to answer the question.
For Kinsevere, in Q2, costs comparing with Q1 increased significantly. This is because of the impact from the Middle East war. For diesel and sulfuric acid, the price was pushed up, and then regarding explosives, that is another factor leading to a higher cost within our guidance range, higher than our guidance range. For the price estimate, last year, diesel price was around $ 1.5 -$ 1.7.
Now it is being adjusted by the government to about $ 3.15. Sulfuric acid at the beginning of the year, the budget was about $ 300, and now it is already $1,000 per tonne. Our guidance range did not change because in the second half of the year, when Middle East war came to an end, and also we are also bringing in energy storage, battery energy storage system. That will reduce our diesel consumption for sulfuric acid. When we increase production and our TMO system is in place, then sulfuric acid production capacity will be enhanced, referring to our roasting system. We have maintained the price at the guidance set at the beginning of the year.
Thank you. Second question is about subsequent acquisition. Now, looking at your balance sheet for this half year is very healthy. Gearing is down to 6%, and then your reserve has turned positive already in your statement. Concerning cash allocation, dividend payments and acquisitions, what is your guidance and direction for Nickel Brazil acquisition? Is there any update? Thank you.
Thank you. Ms. Guan.
Thank you. Let me answer the question on Nickel Brazil. Right now, it is still in the approval process by EU and all the documents required by EU had been submitted by us already. Subsequently, I believe that in the process, EU will continue to scrutinize information from us, and according to their process in the future, in the coming two to three months, they should be able to complete their scrutiny, and their vetting within the specified time. We will work with our counterparty and we hope to complete the EU approval and settlement as soon as possible.
When it comes to our preparation apart from EU, all the other administrative approval had been obtained and our capital is in place. Once EU approval is completed, then we can very quickly complete settlement of the project. That's the first question. Second question is about use of funds. Just now, Mr. Qian already commented. Overall speaking, we will strike a balance between shareholder returns and our company's business development. Regarding business development and future business growth, there is no way we can give a timetable. However, some time ago when we communicated with investors from our company strategies point of view, we are a growth style company. We'll continue to explore different pathways of development including M&A. For M&A, that would include projects in production and also greenfield projects or early-stage projects. We are still examining all these targets.
So far, there is not a definite timetable. If there is concrete progress, we will disclose to the market timely. Thank you.
Thank you, Ms. Guan. My last question is about Las Bambas community. Troy, my question is for you. Hi. Happy to see stable operations of Las Bambas in South America for over three years. It benefits from the significant improvement in social community relations in overseas. We know that MMG has mines in various countries and, could you share the experience in relationship management for community and other stakeholders in various regions? In addition, could you introduce the progress and the achievements in ESG fields in recent years? Thank you.
Thank you for the question, Jimmy. I think we've learned so much at Las Bambas since 2014 when we took over around the way we approach community, how we build relationships, and our approach. We're applying that increasingly to our operations in other countries. I think there is no doubt Las Bambas is one of the greatest challenges in global mining in terms of sharing benefits and involving community in that complex operation, and we've learnt a lot from looking to others, but also from the team we've built there. Now we are applying those approaches around the world, and particularly in Khoemacau, which is our next biggest challenge in terms of expanding that operation in a new country. I think what we call the Corazón Las Bambas project around building benefits for the country, for the community, for all stakeholders around our development.
We are applying those principles at Khoemacau now, and we really look forward to working with both communities, government of Botswana and others to make that model work. That goes to our sustainability practices generally. If you look at the way the world of sustainability is moving in mining, it is becoming increasingly demanding at an asset and at a national, at an international level around how we comply with all of the requirements of accreditation, whether that's tailings, whether that's compliance to international transparency, whether that's the geopolitical challenges of moving in a critical minerals world and investing in countries. MMG's position since its birth as an ICMM member has always been to do and to be at the benchmark, if not leading in terms of how we approach all aspects of sustainability management.
That is even more relevant now because governments, communities are looking at how projects are developed and how they participate in the benefits more than they ever have, including looking at how benefits are kept in country, including of beneficiation and downstream benefits. While we've come a long way in the years of MMG's existence, we also know that the expectations are rising all the time. We can see that in our group and in how we resource and how we approach all of the operations in the countries. We would say that I think when we look at the partners we will need to work with in the future, MMG is really well-positioned now, but we have a huge both compliance and relationship management challenge to keep working.
We have full support from China Minmetals as our major shareholder, and from the board and management of MMG to make this work, and we know that that is a critical enabler for us as a company to be successful in the future. Thanks for the question, Jimmy.
Thanks, Troy. Very clear and happy to see the great work in the community relationship.
Okay. Thank you, management. I do not have other questions. Thank you.
Thank you, Jimmy.
Hagen, please, can you please state your name and your organization? Please go ahead.
Hi. Hello. Can you hear me?
Yes, very clear. Please.
Yeah. It's Hagen Bahnemann from Mercury RC. Apologies, I've logged in from my personal account, couldn't update the profile name. Congratulations on a fantastic financial result. I just had a couple of questions. One was, where does the management team see the largest opportunities for efficiency and productivity coming from in the mining and processing activities over the next 12 months?
Okay. Yeah, thanks, Hagen. Just a good question. Nan, would you like to take the question?
Yeah, Hagen. This is Nan here. Thank you for the question. I guess as a mining company, the fundamental is our safety, and safety is the foundation of all our operations. That will ensure the continuity and the safety of our operations and also our people. Secondly, in terms of mining efficiency is in terms of our cost, and the mining productivity, mining rate, and how we leverage our existing equipment and capacities to maximize the production. So, in terms of resource, we want to look at sort of high-quality resources to support our production and support our long-term sustainability of the operation. So the stability and gradually improve our productivity, I think that's our focus.
Right. Okay. Thank you. The second question was just in relation to Dugald River zinc mine, and I understand that there's been some growth in copper resources at the site. Is that meaningful? If it is meaningful, is there any timeline around changes in mining activities to take advantage of that? If there is, will that require significant changes or capital to the processing facilities?
Yeah, thank you. I'll continue to answer that question, Hagen. In terms of that Wallaroo, the copper target was very significant for Dugald River as a zinc mine. That really diversified our view from zinc. At this stage, we can see a high-grade core and with some surrounding materials. So the geological feature is different from our zinc structure there. We still need a fair bit of analysis to understand that particular target and ore body. Right now, we'll do some background analysis and also further drillings. Hopefully, in the near future, we'll bring that into our resource book. After that, there is a further studies and look at what will be the best value proposition for Dugald and maybe some synergy between copper and zinc. Thank you.
Ah, fantastic. Thank you for that. That was all.
Next question is from Miriam of Bank of America. Please go ahead.
Mr. Zhao, Mr. Qian, good morning. I am Miriam from Bank of America. Congratulations on your excellent results. From the perspective of cash flow, balance sheet and also profits, we have seen your growth. I have several questions. First, for Las Bambas in July, you talked about your operations and you also discussed with us the guidance. In the first half, regarding copper production volume, it reached 52% for the whole year. For C1 cost in the first half is $ 0.55. Now if we look into the second half and compare it with the first half for production volume, do you think it will stay at the level in the first half? The next point is about Ferrobamba and Chalcobamba.
Will there be other factors that may affect production volume? Then for C1 cost, if we exclude the impacts of by-product cost, if we look at the other cost in the second half of the year, do you think you will be able to maintain the level in the first half of the year? My second question is, we have seen a very good growth on your part. Given that background, regarding inventory, are you going to keep the 130,000 tonne of reserve in 2028? For the Canada project, will there be further progress? My third question is regarding finances. Do you have plan for financing and for interest rate? After this year and last year financing, financial interest expenses came down. Do you have any assessment of the room of decline in financial costs for the second half of the year?
My next question is about your hedging policy. How is it like? Looking at your cash flow statement, there is a hedging outflow of $ 220 million. Are you going to make adjustment to your future hedging policy? Thank you.
Thank you, Miriam, for your questions. You asked many questions. We will answer them one by one. First, about operating cost of Las Bambas. We will ask Mr. Xia to take your question.
Okay, thank you for your questions. Regarding production volume, production volume will go according to the grade of the mine and also other conditions. In the first half of the year, our performance was better than expected and our budget will continue to maintain this current condition. As such as now, according to our mining sequence, there will be changes. This year, production volume will be maintained at 380,000 tonnes- 400,000 tonnes, this guidance range.
We will try our best to work towards 400,000 tonnes. Second question is about the two pits, Ferrobamba and Chalcobamba, the allocation of them. In the first half, Ferrobamba volume is bigger. Chalcobamba is of a lower volume. By-product volume is then better because Ferrobamba by-product grade is better. In the second half, we will make adjustment slightly, so there will be more from Chalcobamba and less from Ferrobamba. But for the whole year, basically they will be more or less the same. Chalcobamba, 52%, Ferrobamba, 48%. When we look at the split between these pits, we do not look at the prevailing production. We will also look at future production. Every year, we will do a whole life cycle plan so that we can maximize the value of the whole mine. The third question is about cost. In the first half, our cost was actually very good.
Thanks to by-product volume and our main product volume. In the first half, we maintained our guidance production volume. Overall speaking, it is close to our newly reported cost. There will be some other objective and unforeseeable factors like commodity price. We will make use of our own management to try our best to overcome cash flow pressure. The above is my answer regarding Las Bambas. Thank you.
Regarding Khoemacau, the newly added resource volume and reserve, Nan, please.
Thank you for your question. For Khoemacau increase in volume, the major discovery in the Kgwêbe area for resource volume that we have announced, it is as of June 30, and exploration still continues in the Kgwêbe area. Right now, our foremost task is to reach production volume of 130,000 tonnes. Regarding Kgwêbe increase in resource, we have incorporated that into the 200,000 tonnes of research, and research finding will be announced to the market in due course. Thank you.
Regarding the Izok, Canada project, please.
Yes. For the Canadian project, it is now in the exploration stage. Referring to our strategy, we have a three-year exploration plan, and now we are in the second year. This year, there are some good discoveries which are reflected in our resource and reserve reports. When we continue to implement our exploration plan in the future, we believe that prospect is going to be quite good. Looking at the overall development conditions in that region, there is not sound infrastructure to support our development yet. At this stage, our main focus is in the early-stage exploration, so as to enhance the resource volume. By doing that, we hope to enhance the value of the project.
Thank you, Ms. Guan. Mr. Qian, about financing and hedging. Thank you.
We have already disclosed our company's net debts of only $ 600 million as of the end of the first half. In the first half, we have operating cash flow of $ 2.2 billion. Very soon we can achieve zero debt, because our cash-generating capability is more than $ 300 million. The main source of funds will be from Las Bambas. Our internal structure is such that there are other expansion projects, including Khoemacau and also the future Nickel Brazil. They need funds. We need to provide funds for them from our headquarters.
Looking at Las Bambas and also the parent company into the consolidated statements, there is the need for some time and process in relation to corporate governance structure and legal and compliance. When you look at the consolidated cash flow with adequate cash, it doesn't reflect our headquarters' cash flow situation. There is still the need for a process. That's why we still have financing need. Regarding the development projects, there is still the need for input of funds in the future, and we'll do detailed assessment on our free cash flow to see whether it can support development or if the capital market is very good. For example, this time we issued CB at zero interest rate, and it is issued at a premium. This can improve our financial position, lower financial cost, and this is also good to shareholders' benefit.
We will consider doing such financing. In the second half, room for decline in financial cost, we have to take an overall view. In the financial statements, you can see some financial expenses. They will be more or less the same as the first half because we have the new $800 million CB issuance. There will be some finance expenses in relation to provisioning, but that is not cash flow expense. It is only on the basis of financial arrangement. Last year, there are also some finance costs in relation to the CB issue, but there won't be cash outflow. In the second half, there will only be $30 million-$50 million of cash outflow in finance expenses. From a financial statement point of view, it may reach $150 million, but this has not been announced yet.
This is about financing and hedging, financing and finance cost. Regarding hedging, your observation is correct. We have $220 million of cash flow, but there is also cash outflow. With our OCI assessment, we have made provision. There won't be big impact to this year's income and loss. Looking into the future, our company needs a stable operating cash flow guarantee. We will go according to market changes and our own funding needs. We will do dynamic assessment. Whenever it is reasonable, we will maintain a certain degree of hedging. Our hedging policy has to be approved by the board. There is complete process and stringent restrictions. We have also to make complete information disclosure. Thank you.
I don't know whether we have answered your questions, Miriam.
Yes. Yes. Your answers are very clear. I have no further question. Thank you very much for your clear answers, management.
Next question is from Tu Yaot ing from CITIC Securities, please.
Thank you, Mr. Zhao, Mr. Qian and management for the answers. I am from CITIC Securities, my name is Tu Yaoting. Congratulations on the record results on the first half of this year. I have two questions. First question is, just now, Mr. Zhao gave a detailed explanation on Khoemacau and this year it is the, you explained the new discovery of the new Kgwêbe area which will be the main increase of results we saw. There is 30,000 tonnes of current expansion and there is 200,000 tonnes mentioned in your feasibility study. What is the impact on that and what is the latest expansion plan? Just now, Mr. Qian said that this year, regarding the mining sequence, in the second half Chalcobamba will account for more share. So byproduct reserve of quantity is smaller than Ferrobamba. Is it higher in grade? Regarding cost of Las Bambas in the second half of the year, is there any outlook?
Thank you for your questions. First question will be taken by Mr. Wang Nan.
Yes, thank you.
Let me take your question on Kgwêbe discovery. For this discovery, for overall KCM and MMG's resource volume, it is highly meaningful. If you look at the total volume as of June 30 regarding the resource volume, it is slightly less than Zone 5 but exploration work is still continuing. So in the future, regarding resource volume, we will continue to report to the market. Regarding the expansion support for the whole mine, its volume is very large so it is incorporated into the 200,000 tonnes of feasibility study. For the 130,000 tonnes, basically, in the past we have already reported on it. For Kgwêbe, first of all, we need to do further exploration and then it will be incorporated into the 200,000 tonnes of research scope. For this 200,000 tonnes, it is now progressing in order and the next note will be at 18 months. Thank you.
On your second question. Chalcobamba grade is higher than Ferrobamba. However, our production is in an integrated way between the two pits. So when we start our work, we will first do a matching so that the grade will be within stable zone. Our recovery rates, as you know, we have to times our grade and also our recovery rates. So these three metrics are all important. Our goal is to maintain grades in a stable range so that our recovery rates can be higher. Now we are at around 90%, so our production effect is good. For Chalcobamba, it has more impurities. For Ferrobamba, impurities are less. Our milling and matching is to control the impurities and recovery rate. For the whole year, the two pits are in good percentage. So Chalcobamba 52%, Ferrobamba 48%.
Production volume is going to be towards the upper range of our guidance. We will try our best to reach that. Regarding cost, in the first half, cost was very good, but in the second half, we expect that cost had been reduced a bit, but it is difficult to reach the level in the first half of the year because there is diesel explosives, manual repair expenses. These will increase. However, we will try our best to offset such increase. So I think we will work towards the cost estimate that we already announced to the market in relation to repair and maintenance. Thank you for the questions.
I have no further question. Thank you.
Next question is from Joy of JS, please.
Can you hear me, management?
Yes, you are very clear.
I am Joy of Goldman Sachs. I have two questions. First, about Las Bambas. Regarding its byproduct volume, i n the first half of this year, byproducts, no matter whether it's molybdenum or gold, mainly molybdenum, comparing with the second half of last year and overall last year in the first half, there is an increase on the half-on-half basis. In the second half, for molybdenum production volume, what will be its amount? Looking at operations, comparing with the second half of last year, it remains flat. Looking at mining from the two pits, I think it is going to be rather balanced for the whole year.
In the second half, for byproduct volume, is it going to be more or less the same as the first half? Secondly, regarding Las Bambas, there is some copper inventory. What is your plan of pre-sale? For acquisition of Nickel Brazil, in terms of progress, it seems to be slower than previously expected. Looking at a wider dimension, in the future, regarding M&A decisions, will it be affected by this delay in acquisition? Which area of acquisition will be your main focus in terms of future acquisitions?
Thank you for your questions. First question will be taken by Mr. Xia, next question by Ms. Guan.
Okay. Thank you for your questions. In the second half, regarding byproduct production volume, in terms of mining sequence, it has been adjusted as compared with the first half. Molybdenum, copper, gold volume is lower than Chalcobamba, and also impurities are more. These are unfavorable factors. But by doing some matching and milling, we will solve the issue of impurities. Besides, we are continuing some technological innovation and optimization work in the first half. We started a series of work.
For example, we separate copper and molybdenum, and also, we have updated some use of chemicals. Then we have created a new auxiliary selection column. These will help improve our recovery rates. For Chalcobamba, there are some unfavorable factors. But with technological innovation achievements, in the second half, byproduct production volume will be more or less the same as our budgets and estimates. Looking at our whole year announcement, you can make your judgments. Regarding inventory is at normal level. We have increased inventory. Then regarding delivery, it is in accordance with production. Of course, there are some social factors impact, but our transportation capability can be adjusted. There is room for adjustment within certain range. If there is a redundant amount, then we can also ship out later. But we have to look at the Latin American situation, and also the shipment schedule.
Overall speaking, I think our inventory is at normal level. As of June 30, inventory is 10,000 tonnes, roughly, at the port. Thank you.
Let me take your question about M&A. As you said, for Nickel Brazil, the EU approval took longer time than expected, and it actually exceeded our expectation. Given this overall large environment, now various countries have formulated their key metal policies. Geopolitics have caused deeper, bigger impact to us. Now, this is actually a risk, and so we have to manage such risk in a better way. At the same time, from development point of view, we will also look at our current operation region. We will put the focus in the current region, mainly in Africa, Latin America and Australia. We already have mature operations there, and we have more operations there. We have experience with government relationships.
We have rich resources there as well. They are our focus regions in business development. Besides, we are making adjustment to our strategies. We will expand our scope of collaboration. We will try to identify more working partners so that together we can share geopolitical risk and business development risk. By making adjustments to our strategies, we hope that we can better manage and navigate these risks.
Thank you. A follow-up. You talked about collaboration. Is it true that you are going to identify some working partners? Will they be foreign companies or Chinese companies? Will you insist on controlling the operation or will you just make equity investment?
We are quite flexible in this regard. We will not rule out Chinese companies or international mining companies as our working partners. There is no problem with that. Will we insist on having controlling stake? We do not have a strict requirement on this. Our strategy is that we want to share our operation and development experience. Different types of equity structure can be considered. We are flexible and we have an open mind on that. Thank you.
Thank you, management.
Next question is from Wang Xiao fang from China Securities, please.
Management, good morning. Congratulations on your excellent first half results. I am more concerned about your Congo mine. In the first half, results are very good but then industry policy changes update in relation to cobalt quota and also copper concentrate export and also some byproduct tax. My question is, recently, given all these industrial policies in Congo, what impacts are there on you? How are you going to face up to that? Regarding future investments, what are your thoughts?
Thank you for your question. We will ask Mr. Xia to take your question.
Thank you for your questions. For Kinsevere, at present, our products are copper and cobalt hydroxide. Regarding Congo's policies on exports of copper-gold mine and cobalt gold mines, the downstream industry chain will be extended, but we will not be affected by this policy. Regarding investment in Democratic Republic of Congo, we will focus on exploration with our existing mining rights and also peripheral exploration opportunities. We are discussing with the authority to see whether there will be M&A opportunities around Kinsevere. Thank you.
I have a follow-up question regarding cobalt hydroxide project. It has been suspended for some time. Are there any ways for you to restart it given the cobalt policies, industrial policies of Congo, is there anything you can fight for?
Regarding the export quota system, it is still continuing. Can we start our cobalt production? It all depends on government policies. We have to see whether the quota policy can be relaxed.
Thank you. That's all from me.
Next question, Chen Junjie from Kaiyuan Securities, please go ahead.
Good morning, management. I am Chen Junjie from Kaiyuan. Congratulations on your first half results, which are excellent. I have two questions. First, Mr. Chen, my question is about Las Bambas. What is the overall operating situation in the first half? Have you encountered road blockade? Then in the second half of the year, after the new president took office, have there been problems and impacts on operations for Khoemacau? Your company has considered building a copper smelter in Botswana. Has there been any progress that you can share with us? If yes, then how much will be its CapEx, timetable and related information can you share more with us? Thank you.
Mr. Chen will take the first question. Mr. Xia will take the second question.
Okay. As Mr. Zhao mentioned earlier, for Las Bambas, in the first half of the year, our operations were very good. We exceeded our expectations on a number of metrics. Overall situation was quite good. You talked about road blockade or closure. For Las Bambas, there was no road closure. When it comes to our mine, it is as long as 700 km long of land transport or 400 km of land transport.
It is in the southern corridor. There are many mines there and we are the most inner one. The road closures for other mines would also affect us. In the first half, there was some time where there was road closure, but that was mainly related to transport ministry of the government and also some road repair in local communities. Road closure did not last long. It is only within one week and we will help to negotiate between the two sides and smooth path and smooth road overall speaking, was there and it did not impact our overall transportation in the first half.
Your second question is about the new president after he assumed position. Looking at his speeches, he seems to be friendly towards foreign investors in the private economy. We are making appointment with the relevant government departments so that we can report to them on the production and operation of Las Bambas. We can also report to them about the importance of communities and economy of Peru. Then we will assess the overall government's attitude towards us.
Overall speaking, we will continue to maintain the situation in the first half of the year so that there will be a relatively good external operating environment. We will not rule out some exceptional factors because this year there will be the Super El Niño phenomenon and we understand that this is a very big challenge to the new government. If they cannot handle this Super El Niño phenomenon and also the problems arising from it, then there may be instability and there will be some unstable impacts on, or to our external operating environment. That is from me.
Thank you for your question. For Khoemacau, are we going to build a smelter? For Botswana government, they have some expectation on the construction of smelter by Khoemacau. Are we going to do that? We have to do a feasibility study. We are working with The University of Queensland. We commissioned them to do a feasibility study in Q3 and Q4. Before Q4, the study will be submitted to us and together with the government, we hope that we can give them some sort of support. Thank you. I hope I have answered your question.
Thank you management. You have given very clear answers. I have no further questions. Thank you.
If you would like to ask a question, participants joining by phone should press star followed by one. Participants joining via Zoom or the webcast may click the raise hand button at the bottom of the screen to request to ask a question. Please update your display name to show your institution and name. Thank you.
If you would like to ask a question, participants joining by telephone should press the star key followed by one on their keypad. Participants joining via Zoom or the webcast portal should click the raise hand button at the bottom of the screen to request to speak. When asking a question, please update your display name to show your institution and name. Thank you.
Because of time, we will conclude the Q&A session now. We will hand the floor back to Mr. Zhao.
Thank you everyone for joining today's call. This concludes the meeting. If you have any further questions, please contact our IR team.