Earnings Call: Q2 2025

Jul 23, 2025

Earnings release

Summary

Q2 copper output rose 54% YoY and zinc output 12%, while expected H1 attributable net profit was ~$340 million. Las Bambas could exceed 400,000 tonnes of copper for FY if external disruptions are avoided; power and transport risks persist.

Thank you for standing by, and welcome to the MMG Limited second quarter production report teleconference. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Miss Andrea Atell, General Manager of Corporate Affairs and Sustainability. Please go ahead. Thank you, and thank you for joining us. Today's call covers the operational performance of MMG sites for the second quarter of 2025, with our report released yesterday. I am joined by Mr. Zhao Jing Ivo, our CEO, along with members of the executive committee. I will now hand over to Ivo, who will provide a brief overview of the quarter. The moderator will then facilitate your questions. Thank you, Andrea. Good morning and good afternoon. Thank you for joining us today. It is a pleasure to share our second quarter performance with you, a really strong result with some impressive milestones. Let me begin with an update on our safety performance. I am pleased to report a significant improvement in our total recordable injury frequency at 1.23, down from 2.40 in the first quarter. Our significant event with energy change frequency reduced to 0.49 from 1.08. These improvements reflect the focus and commitment of our teams to embedding critical controls and proactive safety practice across all sites. We must continue our journey towards a significant and ongoing safety and health improvement. On to our production results. Total copper output, including copper cathode and copper concentrate, increased significantly to just over 140,000 tons. This represents a 54% increase year-on-year, thanks to a strong performance across all three of our copper assets. Las Bambas set a new record by mining close to 22 million tons of ore. They delivered almost 115,000 tons of copper in concentrate, their second highest quarterly result on record. This excellent result was underpinned by improved ore grade and contributions from both the Ferrobamba and Chalcobamba pit. This impressive milestone was achieved despite the challenge the team faced towards the end of the quarter with intermittent road blockades on the Southern Road corridor. They were part of the nationwide protests by informal miners regarding the scheduled end of the REINFO program. We continue to maintain production at Las Bambas, and with the road blockades now cleared, sulphide concentrate is leaving site progressively. I'm pleased to share that Kinsevere and Khoemacau both delivered solid double digits for growth at 19% and 28% respectively. It's worth noting that Kinsevere's performance was constrained by regional power instability, which affected several other copper producers. In response, we're adding 12 MW of diesel generation capacity to help stabilize supply and support future throughput. The ramp-up of Kinsevere expansion project continues, with copper recovery at the sulphide concentrator exceeding 75% in June, while the calcine conversion rate of the roaster achieved 88%. At Khoemacau, planning for the 130,000-tonne per annum expansion continues to progress. A feasibility study is underway, with early work to establish infrastructure and personnel recruitment also having started. As part of a recently awarded five-year contract, JCHX Mining is now on site, with mobilization having gone smoothly. Moving to zinc. Total production for the quarter was just over 56,000 tons, a 12% increase compared to the same period last year. Dugald River produced over 43,000 tons, a 26% increase year on year. This reflects a recovery from unplanned maintenance and weather-related disruption earlier in the year and was supported by strong ore grades and continued improvements in mill performance. At Rosebery, zinc production declined by 20% compared to the second quarter of 2024. This was largely due to lower grades associated with mining sequence and challenges related to equipment reliability. Despite this, zinc equivalent production remained strong at nearly 30,000 tons, reflecting continued value from by-product metals. As a team, we are focused on delivering our production and cost targets for 2025. At Las Bambas and Rosebery, we have favorably adjusted the C1 cost range to reflect improved by-product credits and strong market conditions. With the improved profitability of the Las Bambas mine, I'm pleased to announce that the mine distributed dividends to MMG and its joint venture shareholders for the first time in the second quarter. This marks the first dividend payment from Las Bambas since its acquisition in 2014, representing a significant milestone in shareholder value creation. Additionally, Khoemacau made an early repayment of $500 million on its acquisition facility. This was funded through equity, each contribution from MMG and our joint venture partner, supported by the dividend distribution from Las Bambas. I would also like to congratulate Mr. Chen Xuesong on his appointment as the Interim President Las Bambas. We worked closely together during my time in Peru, and with his extensive mining background, I know he will do a great job at leading our local team and maximize the site's potential. Our ambition to become a top 10 global copper producer is within reach, and we're well-positioned to achieve this through operational excellence, disciplined capital allocation, and a continued commitment to responsible mining. Across our portfolio, we're proud to be making a positive impact by driving local employment and enabling social development, whilst at the same time supplying the critical materials and minerals needed for a low-carbon future. As we progress the integration of Nickel Brazil, we remain confident in the long-term value it will bring to our portfolio and growth outlook. Just before we close, I want to acknowledge our recent positive profit alert, where we announced an expected net profit after tax attributable to equity holders for the half year ended June 30th, 2025, of approximately $340 million. More details to be shared at the interim results presentation on August 13th. I hope you will join us. On behalf of MMG's executive committee, I would like to sincerely thank our team for their efforts and commitment to safe operations. It's been a really pleasing performance, and I look forward to building on this result as we close out the year. My colleagues and I are now happy to take your questions. I will hand back to the moderator. Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Jimmy Feng with Citi. Please go ahead. Hi. Thanks management for the sharing, and congratulate on a strong second quarter production report and also a strong first half profit alert. I have several questions. Let me ask one by one. First is for the Las Bambas output. The first half output is very strong at more than 200 KT. While I noticed that you keep the full year guidance at 360 to 400 KT. Want to check if there is no roadblock in Las Bambas in the second half. Would the full year output higher than the guidance or according to the mining sequence in the second half, the output would be lower than first half as planned? This is my first question. Thanks. Okay. I will give quick answer. There are no disruptions in the second half of the year, mainly talking about the external factors. I think 2025 production can exceed 400,000 tonnes, implying about 200,000 tonnes being produced during the second half of the year. But as you know, we're so close to the election year, which will be the next year in Peru. Recently, there are a lot of informal mining activities, trying to express their political requests. We are right now having a lot of challenges from all these political factors. Could be probably interrupt the transportation of all the materials and concentrates. This is what are now main concerns from our side. But without all of these external factors, we still try to achieve our maximum production on the target of the year at 400,000 tonnes. And you have something? Yeah. Okay. I hope this can answer your question, Jimmy. Sure. Yeah, thanks. Very clear. My second question is also related to Las Bambas. It is mainly for the C1 cost. I know that the first quarter C1 cost was very low at 1.26. I also see that you lower the guidance. We are happy to see, but the guidance is still higher than the first quarter. I am just wondering, what is the potential reason for higher C1 cost in the second half? Is that also because of the potential disruptions in Las Bambas? If there is no disruption, how should we expect the C1 cost? This is my second question. Thanks. Okay. I will answer the question first. Just as I mentioned, if there is no disruptions on the production in the second half, the C1 cost can approach the lower end of the range. As you know, we have a lot of external challenges, which can make the C1 cost higher. Taking one example, with all the logistics, probably we will have more standby expenses. That could be one of the big costs we will have. Additionally, probably we will have also other expenses. For example, the social expenses. As you know, normally we have the first half of the year as the planning, as the designing, and for the social expenses. Normally the second half of the year, we have more expenses for the social parts. Just take an example. Normally, just the second half of the year, we have a higher C1 cost, but we will try to just maintain at the end of the range. Got it. Thank you. My third question, last question, is about the Kinsevere. I know that there was an unstable power supply. I know the Kinsevere is also in the ramping up. What is the outlook for the power supply? Would that disrupt the Kinsevere from reaching the full capacity? What is the solution or the outlook for the power supply? Thanks. Yeah. Hi, Jimmy. This is Nan here. The power supply is definitely the area we pay a lot of attention. We are working closely with the local power supplier to make sure our supply is stabilized. This one is a national-wide power instability, so we do get impacted frequently at this stage. We will work again, going forward, all these trips and power outages will impact our ramp up, our production. By minimizing that, we have acquired additional 12 MW diesel generators, just try to pick up the shortfalls. With existing diesel generators and the new one coming later on this year, that will give us additional backups. We still work very hard, combine the diesel and a local grid, to secure our production going forward. Sure. Thanks. Thanks for the answer. That is very clear, and I have no further questions. Thanks. Thank you. Your next question comes from Lawrence Lau with BOCI. Please go ahead. Hi, thanks for taking my question. I also have quite a few questions. First of all, again, about Las Bambas. I just want to confirm that you have a very high ore grade in 2Q. The management just said that if we have no disruption, the second half production will be strong. Are you implying that the ore grade will still be high in the second half? Second question about Kinsevere. I noticed that, actually in the first half, you actually mill much more ore than you mined. I just wonder, are you milling third-party ore or there is some inventory carryover? Also, I noticed that you have sales of cobalt in 2Q. I understand that the government of the DRC actually suspended export of cobalt in late February. I just wonder, how can this happen? Then finally, about the Khoemacau. I noticed that you changed the mining contractor. Will it be somewhere in lower cost for the mine in the future? Thank you. I will go with the first one, with the Bambas. As you mentioned, just to actually, right now we have two pits, Ferrobamba and Chalcobamba. Obviously Chalcobamba has higher ore grades. What we are trying to do is to make a blending between all of this to make sure that all the inputs for the plant has a very stable grade. We try to maintain a reasonable ore grade just to feed the plant, to make sure that we achieve the target as 200,000 tons in the second half of the year. Okay, so this is what we do right now. Does that answer the next question is I am sorry, just say it- Ore grade. Huh? Ore grade. I said ore grade. Yes. I am sorry. Did I answer your question, Lawrence? I am sorry. Yeah, about Las Bambas. Yes. Okay. Yeah, Lawrence. Yeah, this is Nan here. I will address the question on Kinsevere and Khoemacau. For Kinsevere, the first half, yeah, we did mill more than mined. Majority of the ore contribution is from our ore stockpiles. We have a large sulfide stockpiles. Then some sort of low-grade oxide stockpiles. Together combined, we have some small third-party ores in the blend. But the large portion is from our stockpiles. In terms of the sale of cobalt in Q2, that was the cobalt en route. So after the government ban, there was no more sales. Going on to the question on Khoemacau, by changing to JCHX, that was going through a competitive tendering process. Then by reviewing the competitive results, we picked the JCHX. At this stage, I'm not in a position to actually disclose the detail of the contract. But I can say the new contractor will definitely bring value to KCM. Thank you. Thank you. Thank you. Your next question comes from Chris Xu with Baillie Gifford Asset Management. Please go ahead. Thank you very much, management team. I've got two questions. The first one is regarding Las Bambas. Could you compare the recent roadblocks by the informal miners? How do they differ from those in a previous community unrest or, to any extent, are they similar? That's my first question. Thank you. Okay. Related to the roadblocks, I think, compared to Las Bambas, as most of you know, we've suffered quite a lot of road blockades in the previous, I don't know, 10 years almost. Since 2022, when I first arrived there, it was quite challenging. All the communities. We take a lot of efforts to implementing the new social strategy, which is the heart of Las Bambas. We really engaged a lot with the communities. So right now, I think the risk with all the communities around Las Bambas, it's quite low, and we have maintained a very healthy relationship with all the communities around Las Bambas. This time it's a little different because the road blockage was raised by the informal mining activities. All of them not only blocked the roads in the southern roads corridor, but also in big cities. Take the second biggest city in Peru in the south part, which is Arequipa, and also Nazca, which caused all the city more than 170 kilometers road blockage. So it's an almost nationwide road blockage. A lot of mining companies have been affected, and the good thing is the operation of Las Bambas has never been suspended. We have full operational since now, so until now. Obviously we have been interrupted 2 weeks of the transportation of the copper concentrates. After the government set up a dialogue table with the informal mining, they had agreements, and they are going right now into another period to analyze possible alternatives to how to solve the problem with the informal mining activities. I think right now, just for Las Bambas, the more focus is how we can operate normally with all the mines we have and try to maintain also this good relationship with the community. So compared to the previous road blockage, this one first is not against Las Bambas. It's nationwide. It's within the government. Second, I think the government also had a lot of effort to sit down, talk with the communities, with all the informal miners, and they try to just sign an agreement. We need to wait another law, probably it's called MAPE in Peru, and could have a solution for all the informal miners. So this is the major difference between all the road blockages. I hope this can answer your question. Yes. Thank you very much for the very detailed answer. The second question is, you mentioned Nickel Brazil before, so can I just check, the expected completion time is still within the third quarter of this year? In terms of the financial contribution, would it only be consolidated from that completion date onward, or would it be kind of like backdated to the previous, the beginning of the year or maybe some other date? Thank you. Okay. I will give a quick answer, and probably Sandra can help me with that, because so far we didn't complete all the acquisition of Nickel Brazil. We cannot comment about all the value of the assets. Sandra will have some updates related to the acquisition of Nickel Brazil. Hi, Chris. This is Sandra. We are still going through the regulatory approvals for this acquisition. We still expect that we can close the deal by end of the year. In terms of the consolidation, I believe that we can only consolidate the financials post-acquisition. Got it. Thank you very much. Thank you. Your next question comes from Miriam Chan with Bank of America. Please go ahead. Hello. Thanks, management team, for your time. I have a few questions. First of all, the first question is a follow-up on Las Bambas. Understanding from your announcement that, and also you mentioned that the previous roadblock in the end June was around two weeks, and right now you have increased the number of trucks in order to increase the transportation. I just want to ask about the sales volume. If we assume no further roadblock, will the event in the past two weeks affect the sales volume in the third quarter? The second question on Las Bambas is, how do you evaluate the upcoming weeks? You also shared some already, but under what circumstances would you decide to lower the production volume to the lower end of your guidance? Thank you. I want to see if there is more visibility on this event. Thank you. Yeah. Hi, Miriam. This is Nan here. I will answer your question on the two. First of all, about the sale volume. Obviously, we are focused on transportation and then maximize our transport capacity as soon as the road remains open. Our intention is once the roads open up, then we will quickly use all our capacity to draw down the stock from site and then make the sale. That is definitely our intention going forward. In terms of your second question, H2, I think our CEO already commented on that earlier. In terms of if no external factors impact, we definitely plan to achieve the top end of our guidance. Thank you. Sure. Thank you. Second question on the capital management. I also see that Las Bambas has distributed its first dividend to MMG. On MMG perspective, I want to check what is your latest guidance on your CapEx and then your gearing ratio target, and also if there is any possibility in the future to distribute a dividend. Thank you, Miriam. Can I suggest that at this point, we don't touch base on more detailed financial data. I will write down this question. I will address this once we disclose our interim report. Let's talk in the next conference. Thank you. Sure. Thank you. My final question is on the copper price. Do you have any view on the outlook of the copper price in the second half? Thank you. It's a tricky question, actually. As all the copper producers always hope the pricing is going up. But actually, it depends on more the macroeconomy. Sorry to not give a really concrete answer to that. Sorry. Sure. No problem. Thanks for your answer. That's all my questions. Thank you. Thank you. Once again, if you wish to ask a question, please press star one. Your next question comes from Hagen Bahmann with Mercury RC. Please go ahead. Good morning. First of all, congratulations on a fantastic result for the quarter. I just had a question regarding the additional cash flows that are resulting from this. How do you intend to utilize that? Is that paying down debt or expansion of existing assets, further acquisitions? Thank you, Hagen. In current copper market and with our good production, yes, MMG has generated very good cash flow in the first half. We will consider our operation plan and also our growth plan to consolidate how we better utilize our cash flow. As we have disclosed that in the first half, Las Bambas has already started a dividend distribution to the MMG Limited. We will organize our other assets, like our remaining assets also to consider how we can better use our cash flow generated from the operation sites to support MMG Group in general. This will come into more detailed disclosures after our interim report. Thank you. Thank you very much. Thank you. Your next question comes from Sam Roy with FactSet. Please go ahead. Pardon me, Sam. Your line is now live. Please ask your question. Thank you. There are no further questions at this time. I will now hand back to Ivo for closing remarks. Okay. Thank you very much. I hope we have the next meeting just after the interim report, and probably we can catch up later if you have further questions. If you have any questions, you can contact our General Manager, Andrea Atell, for further questions. Thank you very much, all of you. Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.