Earnings Call: H2 2020

Mar 4, 2021

Good afternoon, everyone, and welcome to MMG's 2020 annual results presentation. Joining us today are MMG CEO, Geoffrey Gao, and CFO, Ross Carroll. The slides for today's presentation are being webcast in both English and Chinese. They can also be accessed from the investor and media section of the MMG website. Before we get started, can I draw your attention to the disclaimer at slide 2? I will shortly hand over to Geoffrey and Ross to take you through today's presentation, at the end of which we will open the line up for questions. For those wishing to ask questions, please ensure you're accessing this presentation via the teleconference details that were included in the invitation for today's session and not just the webcast. I'll now hand over to Geoffrey Gao. Thank you, Blake. Thanks to everyone who has joined us today. As you will be aware, MMG released our 2020 full year results to the Hong Kong Exchange last night, and we trust that you have had a chance to read through this. I will shortly hand over to Ross to discuss the financial results in more detail. But before doing so, I will provide a brief overview of some of the highlights from 2020. The unique nature of the challenges that we have all faced over 2020 cannot be understated. COVID-19 has had significant impact on all aspects of our lives, and MMG has been no different. Despite COVID-19, however, our focus on safety and management of operational risks has seen us successfully navigate the challenges of the last 12 months and maintain continuous production at all of our operations. While the first half of 2020 was particularly difficult from operational and financial perspective, increases in production, sales volumes, and commodity prices during the second half have more than offset this. It has resulted in a pleasing 72% improvement on the full-year result attributable to equity holders compared to 2019. While uncertainty remains, the macroeconomic outlook for 2021 appears favorable as COVID vaccines are deployed and market confidence and economic activity return. Since late 2019, MMG has been undergoing a whole of business transformational process. Together with embedded growth optionality in our portfolio, the company is well-positioned to take full advantage of what we consider to be a very positive outlook, both at the macroeconomic and operational level. As you all know, MMG's number one value is safety. We have seen a 13% decrease in our total recordable injury frequency rate over 2020, with MMG continuing to lead the industry in safety performance. While this is an important lagging indicator, we are consistently pushing to improve our leading indicators with particular focus on the analysis and learning from significant incidents. Specifically, in relation to COVID, we adopted early learnings from our major shareholder in China to move swiftly to protect the safety of our people and minimize operational risk from the pandemic. We have also worked closely with authorities in our host communities to support local health and education initiatives and assist in preventing the spread of COVID. As a member of the ICMM, MMG remains committed to upholding key principles of sustainable development and is proud of the work we do to support our host communities. Consistent with our commitment to We Mine for Progress, the company has continued to engage with communities and local stakeholders throughout the year to promote initiatives that align with long-term regional development priorities. Further information on this is available at our We Mine for Progress website and in our soon-to-be-published sustainability report. We are also putting the finishing touches to our inaugural modern slavery statement, which will be released in the second quarter of the year. Moving to slide 8, I would like to provide an update on the current social and political situation in Peru, home to our flagship Las Bambas asset. This is important context before I move on to Las Bambas specific effects of this matter. Heightened political instability over the second half of 2020 arose following events that saw three national presidents in a little over one week. Central government weakness has provided opportunity for various interests and the community groups to take action and advance their causes. Roadblocks being a favored tactic. As at 31st December, there were 197 community conflicts recorded nationwide, only a fraction of which were in the areas surrounding Las Bambas. Community unrest in Peru is not just a Las Bambas issue, nor is it just a mining industry issue. It does, however, have a significant impact on our operations and is an increasing source of frustration. While we continue to enjoy the support of the government, strong and decisive action on infrastructure, investment, and respect for the rule of law is essential, not only for the mining sector but also in ensuring the post-COVID recovery of the Peruvian economy. Moving to slide 9, there are a few key points to highlight. The first relates to the map, which shows the southern road corridor used to transport Las Bambas concentrate. This illustrates a point that we have made before. The Las Bambas supply and logistics chain passes through over 70 individual communities, making this a complex situation. It is a situation that is not unique to Las Bambas, and as shown in the lower part of the slide, almost 25% of the transport days lost since 2016 were a result of events with no direct connection to Las Bambas. The bar chart sets out processing volumes on a quarterly basis. Other than COVID-related interruptions in Q1 and Q2 of 2020, these are relatively consistent, demonstrating that community disruption has a limited impact on site operations or production volumes. The key impact that arises is a restriction on sale of finished goods, evidenced in the site inventory chart. Inventory builds up align with key disruption events, creating what is essentially a working capital challenge. Based on current spot copper prices stockpiled at Las Bambas at the end of 2020, it is worth roughly $450 million. What the inventory chart also demonstrates is that when unrestricted trucking is possible, site stock balances can be quickly reduced, as evidenced in 2016. And low levels maintained, as evidenced over 2017 to 2018. We anticipate the existing stockpile, which peaked in early January, can be drawn down over the first half of 2021. As I said previously, we share the frustrations of our investors. We continue to pursue studies for alternative transport options, including extended rail or a concentrate pipeline, but these alternatives are not cheap or quick solutions. In the interim, we continue to work closely with governments at all levels as well as local communities to address concerns, minimize disruption, and ensure we can operate for the benefit of all stakeholders. Moving to slide 10. It is an exciting time for a company like MMG. Key announcements by major economies, in part accelerated by COVID-related stimulus plans, continue a focus on infrastructure renewal, decarbonization, and increased demand for green energy metals. Electric vehicles are a clear demonstration of this, utilizing on average 60 kilograms more copper than traditional internal combustion engine vehicles, with further incremental copper required for supporting infrastructure. Recent announcements by China to phase out traditional engine car sales by 2035, progress in region to cost effectiveness of batteries and lower emissions targets in Western Europe underpin expectations of compound annual growth in EV sales of around 25%. We should also not overlook the increasingly positive dynamics within the zinc market. While the emerging supply constraints are well understood, on the demand side, new technologies such as zinc-air batteries present an exciting alternative for large-scale storage at a substantial cost premium to lithium-ion technology. This is in addition to growth in zinc consumption associated with 5G, photovoltaic, electrified railways and galvanized steel, which is expected to become a significantly more common component in Chinese-manufactured automobiles as their quality improves. With exposure to copper, zinc, and potentially in the near future strategically critical cobalt, MMG is positioned to gain as these fundamental demand shifts continue to play out over the coming decade. Recent sharp increases in commodity prices are most welcome. While in the short term, we anticipate continued strength on the back of warehouse shortages and largely support services. We are conscious of the significant levels of global uncertainty that are likely to persist for much of 2021. Nonetheless, MMG's long-term view remains unchanged. With respect to copper and zinc, demand factors, as discussed on the previous slide, strongly tend towards a very positive outlook. Supply constraints remain, with a significant portfolio of supply requirements for both metals over the coming decade needing to come from currently uncommitted projects. As we have previously pointed out, many existing projects also face declining grades, sovereign risk, and pressure from environmental, social, and employee demands. In summary, the mid to long-term price outlook is highly favorable for MMG's core commodities and well timed for an expected return to higher production volumes at our operations and the anticipated expansion of our metal portfolio to include cobalt. Before I hand over to Rob, let me quickly touch on business-wide transformation program that we have been working on since late 2019. This program has changed the way we work at MMG. We have established a lean management structure and positioned ourselves closer to our China advantages. At the same time, we have put in place a supportive, simplified, and efficient operating structure that empowers our assets with direct accountability for delivering value and innovation. This structure will enable us to operate competitively into the future, capitalize on suitable growth opportunities as and when they arise, and deliver returns for our shareholders as we seek to achieve on our strategic ambitions. Something I will return to in the closing part of this presentation. I will now hand over to Rob to take you through our 2020 financial results in detail. Thank you, Geoffrey, and welcome everyone who is on the line with us today. As Geoffrey has flagged, 2020 was certainly a year with two very distinct halves. I am pleased that we are able to report we have returned the company to profitability with a modest full-year NPAT result of US$5.6 million. Now on slide 14, which sets out the key financial performance metrics for 2020. I will go into more detail on each of the components shortly, but at a high level, this slide shows that despite the many challenges of 2020, we have achieved a significant improvement in financial performance compared to where we were at the end of the first half and when compared to the prior year. On a full-year basis, revenue was largely in line with 2019, up by $22 million to a total of just over $3 billion. Full-year EBITDA was approximately $1.4 billion or 6% below the prior year, in large part as a result of the unfavorable year-on-year stock movements and FX losses, which offset other operational savings achieved during the year. Lower depreciation and reduced interest costs also significantly contributed to the profitable outcome. The final result attributable to equity holders, a US$64.7 million loss, represented a 72% improvement on the prior year and a second half profit attributable to equity holders in excess of $93 million. Looking at current commodity prices, it is reasonable to expect a return to positive territory on a full-year basis in 2021. Now moving to the waterfall chart on slide 15, which sets out the bridge from our 2019 net loss after tax of $196.3 million to a 2020 NPAT of $5.6 million. Beginning with revenue, as mentioned, this was broadly in line with 2019 levels. Despite significant volatility through the year, prices for copper, silver, and gold were on average above those of 2019. However, this was partially offset by weaker prices for zinc, lead, and moly, resulting in a net favorable price impact of $108 million. Offsetting price benefits to the tune of $85.6 million was the impact of our second half copper and zinc hedging program. These hedges were entered into following a significant surge in commodity prices after the lows of March and April. At that time, significant market uncertainty relating to COVID, geopolitical issues, and the U.S. election still persisted. On a company-wide basis, 2020 sales volumes were broadly in line with the prior year. At Las Bambas, lower tons adversely impacted profitability by approximately $82 million year on year. This was partially offset by increased moly sales volumes. Stronger production also supported increased sales volumes at Dugald River and Kinsevere. Moving to the right, cash production expenses reduced by $178 million year on year. At Las Bambas, lower mining costs of approximately $84 million were the result of an increase in deferred stripping, deferral of maintenance activities as a result of COVID, and lower processing costs due to reduced throughput. These savings were offset in part by $27.5 million of increased health and safety spend in relation to COVID-19. At Kinsevere, lower mining costs were consistent with the temporary suspension of mining from the end of September. Processing cost reductions due to favorable ore characteristics and lower third-party ore consumption also contributed to the savings. At Kinsevere, we incurred around $7 million of offsetting spend in relation to COVID. At Dugald River and Rosebery, production costs were reduced by $10 million on a combined basis. Moving further to the right, the US$14.5 million increase in selling and royalty costs were consistent with increased concentrate and cathode sales volumes at Las Bambas and Kinsevere. An unfavorable year-on-year stock movement of $203 million was the most significant offsetting factor to these production expense reductions. Again, this was largely driven by Las Bambas and Kinsevere. in 2019, Las Bambas reported a favorable stock movement with production exceeding sales due to ongoing community disruptions. The resulting stockpile largely remained in place at 31st of December 2020, with minimal stock variation this year compared to a very large credit in 2019 following the significant inventory build. This was partially offset by a credit due to build up in ore stockpiles during 2020, with mined ore exceeding processed volumes. At Kinsevere, a net drawdown in ore stockpiles of $25 million during 2020 resulted in an unfavorable year-on-year movement of $51 million, with the benefit of a $26 million ore build-up having been recognized in 2019. Moving on to depreciation, which was approximately $42 million below prior year levels. Lower mining volumes at Kinsevere and a reduction in mining and production at Rosebery were the key drivers. Moving further to the right, year-on-year FX movements represent a shift from a $3 million gain in 2019 to an FX loss of approximately $33 million in 2020. Exposures largely relate to the A-dollar-denominated Century Bank guarantee liability and the Peruvian sol-denominated tax receivables in Peru. Now the corporate and other costs. The unfavorable movement of $46.5 million largely represents the unwind of a favorable impact in 2019. This primarily arose from a one-off reversal of a tax provision in 2019, net higher insurance proceeds following a claim, and lease accounting adjustments, which were all favorable in 2019. Importantly, administrative and head office expenditure decreased by 12% in 2020, driven by cost and efficiency improvement initiatives across group and support functions. This was also reflected in these numbers. Turning now to net finance costs, which in 2020 were 22% below the prior year. I will discuss this further shortly, but the key drivers were lower LIBOR, which fell by around 150 basis points during 2020, contributing about $72 million to the lower interest. A further $36 million was a result of lower overall debt balances, partly offset by decreased interest income. Finally, an increase in profit resulted in an increase in tax expense for the year. Moving to slide 16, we provide an update on the estimated sensitivity of the company's 2021 EBIT to movements in key commodity and FX exposures. For example, for each cent movement in the price per pound of copper, we would anticipate a corresponding shift in EBIT for approximately $90 million. If we move on to the next slide, the practical impact of this becomes clear. We are all familiar with the volatility of commodity prices over the last 12 months. Copper and zinc have increased 17% and 3% respectively to date in 2021, and they are up by around 60% and 40% on their lows in March 9th, 2019. This is reflected in the variability between MMG's negative 2020 first half free cash flow of around $50 million, which contrasts significantly to the positive H2 cash flow of around $515 million. This impact is further demonstrated by the red columns, where you can see the significant free cash flow generating potential for the company over the 12 months at a selection of assumed prices for our key commodities. It is worth keeping in mind that under both of these scenarios, prices are below levels reached over recent weeks. Included in the appendices to this presentation are a couple of additional slides that further illustrate the free cash flow impact of various copper and zinc prices, including a work example based on 28th of February spot prices. Slide 18 provides some information on our CapEx program, which was significantly impacted by COVID during 2020. Sorry, apologies. 2020 was to be a year of development, particularly at Las Bambas, with the key capital spend and a transition to mining at Chalcobamba. COVID-related impacts on supply chains, workforce availability, and the permitting timeline for Chalcobamba meant that much of this work did not proceed, evident by the 2020 capital expenditure of $516 million, significantly below initial guidance of $650 million-$750 million. Much of the activity we had originally scheduled for 2020 will now fall into 2021, with expected capital expenditure of between US$750 million and US$800 million. The vast majority of this relates to Las Bambas, and we have given updated cost estimates in relation to some key project spend for 2021. These projects are essential for the delivery of future production volumes. Beyond 2021, we would anticipate a reduction to more modest sustaining capital expenditure of approximately $450 million a year before capitalized mining. Now to slide 19. This sets out our updated term debt repayment profile. There are a few key points that I would like to highlight. In 2020, we reduced our debt balances by $450 million, with strong financial performance in the second half crucial to the achievement of this outcome. In response to COVID-19 and the scheduled maturity of certain liquidity facilities, we negotiated well in excess of $1 billion of debt facilities across the group. As at 31st of December, we have $1.8 billion of low-cost standby facilities available. Term debt repayments of $600 million are scheduled for 2021. As mentioned earlier, the current market environment presents an opportunity for strong cash generation over 2021 and beyond, which will enable us to continue deleveraging the business, while at the same time benefiting from lower interest rates. Our effective interest rate reduced from 5% at the 31st of December 2019 to 3.9% at the end of 2020. With the base rate for the vast majority of MMG's floating rate debt being reset each June and December, the benefit of lower rates was only really applicable from July, so we anticipate the benefit of a full year of savings in 2021. The appendices to the presentation include further detail on the operational and financial performance of our assets. Before handing back to Geoffrey, I will quickly run through some of the highlights. Firstly, the Las Bambas, which is on slides 20 and 21. Significant COVID-related challenges, particularly in the first half, was a key driver of the reduced concentrate production volumes in 2020. As I have already mentioned, COVID and the general political situation in Peru have delayed much of the site development and permitting necessary to commence mining at Chalcobamba. Significant development of the pit is expected to commence in the first half of 2021. Although the majority of Las Bambas ore will continue to come from Ferrobamba, higher-grade contributions from Chalcobamba will be an important supplement, as you can see in the chart on slide 21. 2021 production will be supplemented by the sale of concentrate stockpile, which, as mentioned earlier, is worth around $450 million of revenue at current spot prices. After peaking early in January, the stockpile balance has fallen below 40,000 tons of metal by the end of February. Should we maintain current run rates, this will be fully drawn down within the next three to four months. Looking to the four years immediately beyond 2021, and with the benefit of the third ball mill and Chalcobamba ore, we expect production volumes to return to an average of 400,000 tons per year. Moving to Kinsevere on slide 22. Mining at the Central pit drove a strong recovery in production volumes. Together with higher copper prices, this drove 143% year-on-year increase in EBITDA. We have previously advised of the temporary suspension of mining activity from late September 2020. It is currently expected that mining will resume in the second quarter of 2021. The suspension over the wet season will allow for an optimized mine plan scenario to be developed in advance of the works commencing on the sulfide and cobalt project, subject to its approval. Significant ore stockpiles exist at Kinsevere, meaning the processing volumes will not be impacted by this decision. We are continuing to progress the approval process for the further development of Kinsevere. The project will result in processing of sulfide ores and the addition of a cobalt circuit. Once complete, the project is expected to result in a return to annual copper cathode production of around 80,000 tons per year, and annual production of between 3,000 and 5,000 tons of cobalt. Entry into the cobalt market will also build on the company's exposure to green energy metals. Approximately 10 years will be added to the life of the Kinsevere mine by this project. Moving on to Dugald River on slide 24. The strong ramp-up and efforts to debottleneck the mine and optimize the processing plant have resulted in record production volumes for both zinc and lead. Despite higher volumes, lower realized zinc prices drove a slight reduction in profitability when compared to 2019. Significant cost savings are expected in 2021 with respect to zinc treatment charges. However, a stronger Australian dollar can be expected to offset much of this benefit. Overall, we anticipate a stable cost profile for the year. We anticipate annual zinc production nearing 2,000 tons by 2022, with 2021 guidance a step up on the 2020 volumes. This view is supported by encouraging drill results, which result in the 14% increase of the primary zinc mineral resource at Dugald River, a result that has the potential to extend the mine life or support operational expansion. I am now on slide 26 with Rosebery, which is now in its 86th year of operation. Lower zinc grades were in line with expectation given the declining ore grades at depth. However, strong precious metal prices and increased gold and silver production offset the impacts of this and drove a 3% increase in EBITDA. This result was particularly impressive given that access to key areas of the mine was restricted for much of 2020 following seismic events in 2019. We remain fully committed to this operation. A resource extension drilling program is ongoing and the investigation into additional tailing storage options has commenced. I will now hand you back to Geoffrey to wrap up the presentation. Thank you. Thanks. As we begin to emerge from COVID, the outlook for MMG over the medium term is positive. In 2021, we expect to produce between 360,000 and 390,000 tonnes of copper and between 240,000 and 260,000 tonnes of zinc. At an average C1 cost of $1.31 and $5.51 per pound respectively. Benefiting from a strong recovery in commodity prices and highly favorable long-term structural factors, we expect to deliver strong financial performance and strong cash generation. Looking beyond 2021, the progress of key development projects of Las Bambas and Pantera, ongoing exploration success, and strong operational performance will see a return to higher production volumes and ongoing debt reduction as we continue to pursue growth opportunities. Looking further ahead at slide 30, MMG aims to double in size and value and then double again by the year 2030. This is an ambitious goal, but we sincerely believe it is possible. We set this ambition as part of a transformation, and as a first step, we are creating the culture, people, and processes and value focus necessary to realize this target. We realize it will take some bold decisions and new assets and partnerships to achieve. I look forward to providing you with further detail and regular updates as we progress this important work. In closing, let me say that we are grateful for your continued support. We look forward to contributing throughout 2021 and beyond to grow our company and maximize values for all of our stakeholders. I will now hand back to the operator who will open the line for questions. Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Lawrence Lau from BOCI Research. Please go ahead. Hi. Thank you. Thank you, Geoffrey, and thank you, Ross. Just a small question about the numbers. If you look at Las Bambas, we have the EBIT in 2020 declined by 4% to around $500 million. But if you look at slide 36 in the presentation, it stated the profit after tax, for your stake in Las Bambas, it actually doubled to $117 million. Can you explain what happened in between? Why you have decline in EBIT, but such a big jump in the profit attributable to your company from Las Bambas? Thank you. Sorry, Lawrence. We are just sorting through the numbers. It will be in the management discussion analysis. The $500 million is the full result, and that is 100% terms, and also before interest expense, where the number we have got on page 36 is profit after tax. Part of the reason why you are seeing an imbalance is because our interest expense dropped by over $100 million during the year. Therefore, the EBIT and the profit after tax have not moved exactly in concurrently in the same direction. I see. Okay. Thank you. Thank you. Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Your next question comes from Chris Xu from Horizon Asset. Please go ahead. Hi. Thank you very much for the presentation, Geoffrey and Ross. Two questions from me. The first question is regarding the plan to double and double again by 2030 and also to achieve 2 million tons of copper equivalent production. Could you give us a sense of, I know it's early stage, but roughly speaking, how much of that will be coming from copper, how much from zinc, and how much from cobalt? Also, what is the company's target gearing ratio? Given that we have been deleveraging, and the deleveraging may accelerate in this year and forward, we may again have the ability to take on more assets through M&A. Just would like to understand more regarding these. Thank you. Okay. Thank you, Chris. I will answer your question, and Ross may give additional comments after my answer. Yes, our ambitious growth target simply means as I mentioned before, we do M&A in order to create value for stakeholders. We don't grow for the sake of growth alone. Even though we set up a very ambitious target for next 10 years, this is aligned with our major shareholders ambitious target in the mining business. Our target as this company have got the full support of our major shareholders. If I talk this more specifically, the near term focus for us is still to maximize the value from our existing assets. That means that we are focusing on the productivity, efficiency, cost control, and also try to find additional resources in the nearby area of our current operations. Commodity in the short term to medium term, copper and zinc, possibly including cobalt, will be our core commodities. That's obvious. If we want to achieve that ambitious target of 2 million tons of copper equivalent production, then sooner or later, we will expand into other commodities. But currently, we don't have a concrete plan to say when we'll expand our portfolio into other commodities. M&A will be a very important means to achieve that target. In order to grow, we will be quite flexible in different ways of cooperation with other possible counterparties. That may include like world-class greenfield projects that need meaningful equity partners, divestment of existing assets or projects of the major players, or some kind of SOE consolidation in China or corporate M&A exploration projects. That's probably the answer to the first part about our strategic thinking for the growth. I may leave the second part of the question about gearing ratio to Ross. Thanks for the question, Chris. We're still hoping to get our gearing down to 30%-40%, and obviously, that's depending on what M&A activity we do as to when we can get there. But in response, if we do M&A, we wouldn't do anything that makes our gearing worse. I think you can assume from that we would have to raise equity to do M&A and that any significant transaction would be quickly followed by an equity raise of some type. Got it. Thank you very much. Also, a second question, if I may. If we look at page 21 of your presentation, there is a graph showing the contribution from Ferrobamba versus Chalcobamba for the Las Bambas project. If we take the midpoint of your guidance for this year for Las Bambas copper production, which is 320,000 tons for the year, and then if we look at that graph, which shows that Ferrobamba will be contributing something like 80% of the production of the projects. Then it means Ferrobamba production will be around 256,000 tons for this year. If we look at last year, in 2020, even with all the disruptions due to the COVID-19 impact and also, the disruptions due to protests and roadblocks and all that. But still the production was around something like 310,000 tons for 2020, right? From the fourth quarter production report, we saw that the production was around 95,000 tons. I assume that's just from Ferrobamba, right? So, what is driving the decline of something close to maybe 17% year-on-year for the Ferrobamba production for 2021 versus 2020? Thank you. Yeah. So, thank you. It's a good question. Yeah, your numbers are roughly right. There's two reasons for that. One is that the grade is dropping in Ferrobamba now. If you remember, a couple of years ago up at 0.9 and then, we're sort of 0.8 over the last couple of years now. That will drop reasonably significantly for Ferrobamba by itself for the next couple of years. Now, we'll continue mining at Ferrobamba, but then we also have to do a large cut back to access higher grade ore again. So that's why Chalcobamba is important to us because its grades are up near 0.8 and 0.9, so it drags the average up. So, two reasons for the Ferrobamba drop. One is the reduction in grade, and two is the fact that we have to do more stripping there to access the higher-grade phases. Does that answer my question? Thank you very much. Yeah. 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. We will now wait for any final questions to come through. Your next question comes from Yun Yung Lee from DBS Vickers. Please go ahead. Hi. Thank you very much for your detailed presentation. This presentation material is very helpful. I have a question about your cobalt. In my understanding, you are planning to produce cobalt in Kinsevere. Is there any production volume last year for the cobalt? What is your reserve or resources for cobalt and then development plan, and then production target for this year? I also would like to ask about the cost. Is the cobalt a by-product or does it actually have a kind of production cost additionally? That is all my question. Thank you. Thank you, Yun. Let me clarify. We do not produce any cobalt product at the moment. So there is no cobalt production for last year or for this year. As to our plan, we are planning to develop the sulfide deposit in Kinsevere. With that deposit, we do have some cobalt component in that. The plan is to, once we get this project approved by the board, then we will build a cobalt circuit to process the cobalt component from that sulfide ore. As mentioned by Ross, we expect, with that project in place, we can produce annually around 3,000 to 5,000 tons of cobalt. Compared with the main product of copper, cobalt will still be regarded as a by-product of that operation. So I hope I answered your question. Yeah, thank you so much. I have additional cost about your hedging position. So I understand the most of the position has been cleared by end of December, last year December. But I still have kind of positions for the, especially copper and zinc. In beginning of this year, our zinc prices has been increased significantly. So I just want to check, if there is any potential risk reduced from cobalt and then, do you have any additional hedging position, which is take in this year, not announced besides the position you announced already? Yeah, that is second question. Thank you. Yeah. No, thanks for that. I think at the moment, we have still got about, in the first quarter of 2021, we have got about $10 million of hedging losses to wash through from last year. Obviously, it is a small amount relative to the uptick we are getting from the high prices at the moment. We have not added any extra hedges this year. It is all the hedges that we reported last year. Certainly, if we were to do extra hedges, we would report them so the market is fully informed. Sure. Thank you so much. Thank you. Your next question comes from Joy Zhang from Goldman Sachs. Please go ahead. Hi. Thank you again for holding the call. My first question is, hedging policy for 2021 and beyond. How much of the percentage of the volume will we consider to be hedged? My second question is, can you give us the current updated stockpile level in the Las Bambas mine? How is the current transportation situation in Peru after the recent COVID-19 lockdown? Thank you. I will take the first one. The second is Ross. As a mining business, our policy regarding hedging has not been changed. We do want to keep the copper and zinc price exposure as our core exposure. Considering the possible volatility from the market and also considering the current gearing ratio of this business, we are not ruling out the possibility to do further hedge in 2021 to take the opportunity of very favorable commodity prices. If we are looking to any possible hedging instruments for this year, definitely we will give more attention on the instruments that can allow us to enjoy the upside potential of the price movement. That may be an answer to the question on the hedging policy. I hand over to Ross for the second part of the question. Joy, our stocks at Las Bambas were obviously very high. In the middle of January, we had about 70,000 tons of metal equivalent at the mine. That was the peak. At the end of February, we are down to about 40,000 tons. You see that it has moved pretty quickly during that time. At the moment, there is no particular roadblocks of any consequence, or we are not being stopped. We are very hopeful we can get the remaining 40,000 tons transported during the first half. Okay. I have a follow-up question about the hedging part. We saw that in 2020, we hedged the part of the mined copper and the zinc. If we do consider to hedge part of the volume, is there a maximum percentage that is maximum level that we have some target for the constraint of the scale that we need to hedge? Joy, let me confirm to you, we don't have any concrete plan at the moment for the hedging of 2021. Once we got the plan on this, then we will give the market update in due course. Just confirm, we don't have any concrete plan at the moment. Okay. Thank you. Thank you. There are no further questions at this time. I'll now hand back to Mr. Gao for closing remarks. Okay. Thank you. On behalf of the management, I want to thank all of you for your continued interest and support to MMG, and I look forward to speaking to you soon. If you have any further questions, please contact our investor relations or corporate affairs team. Goodbye. That does conclude our conference for today. Thank you for participating. You may now disconnect.