Good morning. My name is Joelle, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Capstone Copper Q1 2023 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, please press star then the number two. Thank you. Mr. Mackenzie, you may begin your conference.
Thank you. I'm just gonna pass across to Jerrold Annett, for some introductory comments.
Good morning. I'd like to welcome everyone to Capstone Copper's Q1 2023 conference call. Please note that the news release and regulatory filings announcing Capstone Copper's 2023 first quarter financial and operational results are available on our website and on SEDAR. If you are logged into the webcast, we will advance the slides of today's presentation, which is also available in the investor section of our website. I'm joined today by our CEO, John MacKenzie, our President and COO, Cashel Meagher, our Chief Financial Officer, Raman Randhawa, and our Senior Vice President, Risk, ESG, and General Counsel, Wendy King. Following our brief remarks, there will be an opportunity for questions. Please note that comments made on the call today will contain forward-looking information within the meaning of applicable securities laws.
This information, by its nature, is subject to risks and uncertainties, and actual results may differ materially from the views expressed today. For further information on the risks and uncertainties pertaining to our business, please see Capstone's most recent filings, which are available on our website and on SEDAR. Finally, I'll just note that all amounts we will discuss today are in U.S. dollars unless otherwise specified. Now I'll turn the call over to John MacKenzie.
Thanks, Jerrold, and good morning, everyone. We're pleased to present our first quarter 2023 results and achievements. Most importantly, and we're now on slide five, we're pleased to report that construction at our transformational Mantoverde Development Project, or MVDP, remains on time and on budget with nearly 3 million tons of sulfide ore stockpiled to date, ahead of our ramp-up commencing late this year. The photo on the left shows some of the overall construction progress on the processing plant, while on the right, we can see sulfide ore being mined for the first time at Mantoverde. This year is pivotal for Capstone as we expect to complete MVDP construction in Q4, setting the stage for a doubling of consolidated cash flow and positioning us well for future growth.
I would also like to highlight that last week we reached a new collective agreement with the two labor unions at Mantos Blancos. This follows successful agreements with our labor unions at Mantoverde and Pinto Valley over the past 12 months. For all of these operations, we now have agreements in place that cover the next three years. Turning to slide six. From an operational standpoint, we experienced a challenging Q1 2023, marked by heavy rainfall at our Pinto Valley mine in Arizona. As a result, we produced a total of 40.7 thousand tons of copper at consolidated C1 cash costs of $2.96 per payable pound of copper produced. In addition to the weather-related challenges at Pinto Valley, at Mantos Blancos in Chile, an emphasis on preventative maintenance resulted in more downtime and lower throughput.
We were encouraged by very strong recoveries and continued strong grades. At Mantoverde, we mined lower grade oxides during the quarter, which had higher acid consumption. We carry over inventory with sulfuric acid at elevated prices. For the balance of this year, we are fixed for approximately 80% of sulfuric acid consumption at Mantoverde at $140 per ton. Spot prices recently have decreased to below $100 per ton versus prices above $280 in 2022. Should prices hold at the current levels of $100 per ton, our C1 cost for oxides could decline by as much as $0.40 per pound next year. At Cozamin, we were focused on development and the ramp-up of the paste backfill plant.
Despite the slow start, turning to slide seven now, we are reiterating our 2023 consolidated production, cost, and capital guidance. We anticipate production to increase sequentially quarter-over-quarter for the remainder of the year, with a commensurate decrease in costs. At Pinto Valley, the operations improved sharply in March, the operation is now set up well with no planned major shutdowns over the rest of 2023. At the same time, grades and throughput are forecast to increase, which can also be said for Cozamin. Lastly, at Mantos Blancos, we anticipate higher throughput over the rest of the year. I'll pass over to Raman for our financial results.
Thank you, John. We are now on slide eight. In Q1, we recorded copper sales of 37.5 thousand tons, which includes a sales lag of approximately 2.4 thousand tons due to the timing of shipments in Chile. We expect to catch up on those sales in Q2. LME copper prices during Q1 averaged $4 or $5 per pound, up 12% compared to $3.63 per pound in Q4 2022.
Given our QP hedging program hedges M plus one tied to our commercial contracts, our realized copper price of $4.17 a pound was slightly above the LME quarterly average. We recognized revenues in the quarter of $336 million. Adjusted EBIT in Q1 of $65.2 million was impacted by the sales lag, lower production, and higher costs due to heavy rainfall in Arizona and a carryover of higher Q4 2022 sulfuric acid inventory into Q1 2023. The adjusted EBIT figure also includes realized foreign exchange losses of approximately $9 million and derivative losses of $8 million. Without the FX and derivative losses plus the sales lag, the EBITDA would have been approximately $85 million. Moving on to slide nine.
On the left-hand side, we summarize our available liquidity, which as at March 31st, was approximately $529 million, including $101 million of cash and short-term investments, and $428 million of undrawn amounts on our $600 million corporate revolving credit facility. We are fully drawn on the $520 million project debt facility as well as the $60 million cost overrun facility with our Mantoverde partner, Mitsubishi Materials Corporation. As John mentioned earlier, we remain on track and on budget for completion of the Mantoverde Development Project by the end of the year. We ended Q1 with a consolidated net debt balance of $651 million and attributable net debt balance of $492 million. The chart on the right-hand side of the page illustrates our EBITDA sensitivity at various copper prices.
You can see that 2023 is overshadowed by the EBITDA generation with Mantoverde sulfides at full run rate production. At $4 per pound copper, we expect to generate approximately $400 million of EBITDA in 2023 and over $1 billion of annual EBITDA when Mantoverde Development Project is online. Although the Santo Domingo project is currently unsanctioned, the project has potential to further increase our EBITDA generation to above $2 billion per annum with metal prices at current levels. The EBITDA generation associated with Mantoverde will enable accelerated opportunity to delever our balance sheet and be below 1x net leverage at copper prices between $3.50 and $4 per pound, which provides additional liquidity to advance our future growth pipeline. I'll hand it over to Cashel for the operations review.
Thanks, Raman. We're on slide 10. Pinto Valley produced 12.8 thousand tonnes of copper at a C1 cash cost of $3.09 per payable pound during Q1, which is below our expectations, largely due to weather-related challenges. Specifically, heavy rainfall in February led to stickier wet ore, which is more challenging to process and impacted throughput. Most important, it also prevented us from accessing some of the lower benches in the pit with some higher grades. Looking ahead, we are encouraged by strong production through April, and we are reiterating our guidance as we expect sequential improvements quarter-over-quarter. We also note, as John mentioned, that we have no significant maintenance scheduled over the remainder of 2023. In terms of our growth at Pinto Valley, we are increasingly enthusiastic about district consolidation potential.
Our efforts are now focused on analyzing the impacts of potential district opportunities, and we have deferred our PV4 study. Moving to slide 11. Cozamin Mine had a transitionary production quarter, producing 5,200 tons of copper at C1 costs of $1.72 per payable pound. Over the remainder of the year, we expect throughput and grades at Cozamin to increase. Today, we have also released an updated technical report at Cozamin to reflect changes in the mining method that we disclosed last quarter. The technical report features average copper production of 20,000 tons at a C1 cash cost of $1.51 per pound and a higher average of 24,000 tons at a C1 of $1.46 per pound in the first five years. The new mine sequencing includes a combination of long hole stoping and cut and fill.
We've moved to this based on our experience with the ore body to date, and we believe this will provide for greater mining recovery than if we had continued utilizing only long hole mining methods. We also believe there are several opportunities to improve the life of mine plan, including exploration, refinement to cut and fill in order to reduce dilution and have the possibility of drift and fill methods to increase pillar and post-recovery. On the exploration side, the Mala Noche Footwall Zone deposit is still open to the northwest, southeast, and down dip. Our Mantos Blancos asset is highlighted on slide 12. Total sulfide and cathode production yielded 14.1 thousand tonnes of copper at a blended C1 cash cost of $2.68 per payable pound. The sulfide operation produced their strongest quarter to date, led by higher grades and recoveries.
Work now is focused increasing overall reliability and improving production uptime. On that note, production and costs were impacted by unplanned maintenance and process improvement initiatives in the quarter. In terms of growth, design work is ongoing with respect to Mantos Blancos Phase II. On to Mantoverde, slide 13 Q1 2023 oxide production was 8,500 tonnes of copper in cathode at elevated C1 cash costs of $4.02 per payable pound. As John had mentioned, costs were impacted by lower production and carry-over of high cost sulfuric acid in inventory. Most important, significant progress was achieved at MVDP during Q1. Project progress now stands at 83% with $654 million spent as of March 31st.
With many of the classical major escalator risks behind us and/or materially diminishing, the total expenditure for the project remains at $825 million and on schedule for year-end 2023 wet commissioning. The Mantoverde Development Project will deliver blended C1 costs of below $2 per pound and produce 120,000 tonnes of combined cathode and copper and concentrate with over 30,000 ounces of gold per year. Slides 14 through 18 show construction progress at several key areas of the Mantoverde Development Project. Slide 14 shows the primary crusher with the retaining wall and conveyances advancing well. Structural steel erection is also advancing well as evidenced from the progress on the copper filtration building, column cells, and rougher cells. All major components are procured and on-site and are now in the final tie-in stages.
Slide 15 shows the copper concentrate thickener and a different perspective on the copper filtration and load-out facility. The picture on the right clearly displays the advancement of the assembly of SAG and ball mills. The next slide 16 shows the truck shop, and the photo on the right shows the coarse ore stockpile and the reclaimed tunnels in preparation for the construction of the geodesic dome for dust control. On slide 17, we highlight the interior of the desalination plant on the left, where the expansion to 380 liters per second is on track for completion in Q2. The tailings facility can be seen on the right. Over to Wendy King for the sustainability review.
Thank you, Cashel. We're now on slide 18. In March, we were very pleased to announce our new sustainability development strategy, including specific greenhouse gas emission targets. The development of the strategy was a structured 12-month process with company-wide stakeholder participation and aligned with our purpose and values. We have a robust governance process for oversight and execution of the strategy. The strategy is reflection of our firm commitment to sustainability and sets out our priorities, actions, and targets over the next seven years, focused on five initial priorities: climate, water, tailings, biodiversity, and communities. In the climate priority, our target is to reduce greenhouse gas emissions from fuel and power by 30% by 2030 compared to the 2021 baseline levels.
For tailings, we target 100% of our tailings storage facilities to be independently assured for conformance with the Global Industry Standard on Tailings Management by year-end 2026. Turning to slide 19 and reviewing our quarterly sustainability highlights. At Mantos Blancos and Mantoverde, we have completed the self-assessment stage for the Copper Mark assurance process, allowing us to move forward with the independent review in Q2. We have also completed the human rights assessment update and our annual review of that grievance mechanism. Completed the Copper Mark gap assessment and began planning projects to formally fill any identified gaps to proceed with the Copper Mark assurance process at Pinto Valley. At Mantoverde, we've implemented retainers for concentrate shipments, which are considered best practice in the industry. Retainers are an ESG-friendly transportation solution as they provide for a dust-free operation.
The concentrate container is fitted with ISG's patented removable hard lid and sealed. The design also ensures no contaminants can build up and accumulate on the exterior of the containers. At Pinto Valley, we have a donation program with the Navajo Reservation, whereby some of our non-sellable copper is used for constructing jewelry and other crafts. We received the photo on the bottom right recently, showcasing some of the crafts created by students at the reserve. Our inaugural combined sustainability report, Growing Responsibly, is well underway and will be published in early Q3. We are working to incorporate more climate discussions in our mainstream disclosure documents beyond the sustainability report to deepen our disclosure on the four TCFD areas: governance, strategy, risk management, and metrics and targets. With that, I'd like to turn it back to John.
Thanks, Wendy. On slide 20, we highlight the significant catalysts we have over the next 2 years that support our sector-leading growth plans with further upside beyond this across our portfolio
We have a talented technical team in place and are working with strong engineering firms to execute on these studies. We look forward to releasing the results in the timelines shown on the slide. Specifically, by year-end, we plan to release our MVDP optimized study, which is targeting increasing throughput from 32,000 tons per day to up to 45,000 tons per day, with no major capital equipment upgrades required. We're also contemplating a potential further expansion, which could include the installation of a second processing line. Meanwhile, we are busy at Mantos Blancos evaluating the potential to increase throughput from the installed 7.3 million tons per annum to 10 million tons by the existing underutilized ball mills and processing equipment. To round out the year, we plan to release an updated feasibility study for Santo Domingo in December.
To conclude on slide 21, we reiterate that we are in the midst of a transformational year for Capstone. We remain laser-focused on the execution of our near-term growth profile, increasing copper production by 45% to approximately 260,000 tons following the ramp-up at the Mantoverde Development Project. After this, we have the fully permitted Santo Domingo project, which unlocks district synergies and generates an additional 45% of copper production to 380,000 tons per year, with further upside and expansions across our portfolio. With that, we're now ready to take questions.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the one on your touch-tone phone. You will hear a three-tone prompt acknowledging your request, and your questions will be pulled in the order they are received. Should you wish to decline from the polling process, please press star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment please for your first question. Your first question comes from Orest Wowkodaw with Scotiabank. Please go ahead.
Oh, hi, good morning. Nice to see the progress at the Mantoverde sulphide project. Given that you're, call it, within nine months of completion, can you maybe just walk us through sort of what the critical path here is and where you see the biggest risk to that year-end startup timeline at this point?
Yeah. Thanks for the question, Orest. I would sort of start off by just reiterating the fact that, you know, most of the kind of classical risks are behind us. The infrastructure is in place. The major equipment's on site. The major equipment is actually installed already. We're now into the sort of, you know, the pipe installation, the electricals, all of those pieces. Certainly what we see at this stage is nothing that gives us concern in terms of the timeline.
You know, I think projects can kind of spring surprises on you, but I think we feel that sort of we've got all of those elements under control, and we've basically sort of de-risked sort of on all the possible kind of contingencies that we could see arising. I'll just pass across to Cashel, see if he'd like to add anything further to that.
Yeah. John, I think you've outlined it well. The major risks or the we see in projects that are being executed in the last few years are usually the major one is usually a geotechnical risk, and we've made quite great progress on the major material movement required there. While we still watch that and evaluate that, we feel we're in a very good stead that the tailings dam and the associated geotechnical works are progressing really well. The other one, classically, we saw during the pandemic period was electrical and instrumentation, and I'm happy to say the electrical E-rooms have arrived, most of them, and they're in progress and being delivered.
What I would say is the major risks that we have seen in projects in the last few years are sort of behind us. Now they're the classical or the more rudimentary man-hours pulling cable, placing pipe and bore in place and those types of things, which are just the effective man-hours and efficiency of those man-hours on a project. It's, I would say right now we're at the boring risks with a project, and it's just getting the work done.
Yeah. I guess maybe one final comment is obviously the other, the other element that one always looks at is ramping up the mine itself. You know, our final pieces of additional mining equipment arrived some months ago. We're sort of fully now ramped up, and we're now actually stockpiling sulfide ore ahead of the plant. I think we said earlier, we've got around 3 million tons of sulfide ore stockpiled already. I think that also gives us a lot of confidence in terms of the subsequent ramp-up.
Thank you. Just as a follow-up, and by the way, boring is good on projects like this. What do you plan to do with the construction team once you finish here at Mantoverde? Like, I assume you're gonna pause before starting Santo Domingo, but do you demobilize and then remobilize in the future? How do you think about that right now?
Yeah, I think that's a really good question, Orest. We've obviously got sort of two elements to that. The one is our owner's team. We certainly intend to keep our owners team intact. I think we obviously I think for us, the sort of next step as we move to Santo Domingo is obviously ensuring we have Mantoverde fully ramped up. We obviously want to complete the financing of Santo Domingo, and we want to sort of have a look at the macro environment at the time. Those three items will sort of guide our timing on decision-making to sort of take a full notice to proceed on Santo Domingo. I think we can certainly keep our full project team well occupied during that time.
I think whilst we might not take a decision for full notice to proceed, that certainly doesn't stop us from progressing the engineering work, which in any event, is the sort of first stage of a project. Really moving the engineering work and increasing the confidence in all the parameters within the project. I think the other element is our key contractor and I don't know if you're aware, but recently we've changed contractors at Santo Domingo. We've moved from POSCO to Ausenco, who's the same contractor that we have at Mantoverde. The intention there is also to ensure that continuity of experience and people from Mantoverde across to Santo Domingo. I think, certainly the core elements of both teams, the intent is to have retained for the Santo Domingo project.
Thanks, John.
Your next question comes from Dalton Baretto with Canaccord. Please go ahead. Your next question comes from Bryce Adams with CIBC. Please go ahead.
Yeah, hi. Thanks, John and team for taking my question. Just one from me. I wanted to ask on Ausenco and the lump sum contract for Mantoverde. When we were on site last November, there was a discussion around inflation, such that Capstone was less ex- inflation because of the lump sum contract, and that Ausenco would be more exposed, but they were maintaining margin because of favorable FX rates. FX rates have changed since November, and I was wondering if that dynamic with Ausenco has also changed and if there was any increased counterparty risk from the change in FX. Obviously, the best contract is a win-win contract. Is that still the case with your partner?
Yes, it is, Bryce. I think very fortunately, you know, Ausenco had also locked in a lot of its, basically sort of underlying costs. Sort of all of its equipment, subcontracts, et cetera. You know, a lot of the, I guess sort of main exposure to FX, I think was earlier on in the project. At this stage, we certainly. I fully agree with your comment that, despite being a lump-sum turn-key contract, it's always, you know, important that everybody is making money. Certainly from what our discussions with Ausenco show is that, you know, the project is still working well for them.
Got it. Thanks so much.
Your next question comes from Craig Hutchison with TD Securities. Please go out ahead.
Hi. Good morning, guys. Just one question for me as well. Just on Mantos Blancos, you know, you guys have sort of bumped around the 15,000-16,000 tons per day for the last several quarters. I've recognized in your MD&A disclosed that you had, I think, 18 days at design of 20,000 tons per day, and there was some preventative maintenance done in the quarter. Can you just give some context as to what that preventative maintenance is and whether you feel confident that we can get to that 20,000 tons per day here in Q2 or the next quarter or so? Thanks.
Thanks, Craig. I'll refer that question across to Cashel.
Sure. Thanks, Craig. Yeah. Quite often, you know, starting with a clean slate, I think we've said this before, is easier than starting off with a sort of a combined brownfields development where you're utilizing old equipment with new equipment. There were certain constraints in the beginning of this project when it was under the private equity world. I think those are things we're working through and we have been working through. The way I describe the project is the major components are there, and they have been there since the beginning. They were designed well. They're capable of the throughput, but some of the interconnectivity might not have been engineered extremely well. We've been working our way through it on a basis of trial and error.
I think we've changed our tactics on those. I have much more confidence now that we've worked our way through many of the critical issues where some of these minor bottlenecks have interrupted some of our consistent production due to maintenance interruptions. We see that and we can track that by evaluating how much preventative maintenance we're doing versus breakdown maintenance we're doing. Those metrics are all, we're seeing the right side of those and seeing them through. It's working through, you know, where maybe a pump was overlooked or maybe a pipe was overlooked, and now we're starting to see the performance on a more consistent basis.
The bottle, the nameplate capacity is target is still 20,000 tons and we see ourselves reaching that very shortly and on a much more consistent basis. It's been a different type of ramp up than would be a brand new construction which has a different sort of level of engineering and evaluation applied to it. There's more of a learning curve on this one.
I guess no major capital would be required to kind of improve some of the efficiencies at this point. Is that correct?
No. That's the key is the initial project looked after the major capital. Now it's about the nuts and bolts and we're working our way through it. I'm, you know, I think we've got a great plan moving ahead here.
Sure. Thanks, guys.
Your next question comes from Dalton Baretto with Canaccord. Please go ahead.
Sorry, I dropped off there somehow. Want to start by asking about Mantoverde again. I apologize if these questions have been asked already. I just dove back in. You know, you're mining the sulfide ore now. You've got 3 million tons sitting on surface. How does that compare to your block model and what you were anticipating? Any surprises there?
I want to say initially, and then I'll pass across to Cashel. I think you know, one of the advantages we had was we really drilled up the sulphide ore body well beforehand. If you look at the full life of mine plan for the current Mantoverde project, we have 70% of the reserves in the proven category and 30% in the probable for the entire life of mine. That's, that's a higher confidence level than most mining companies have just for the next couple of years. It, it gives us a huge amount of sort of geological confidence in the reserve. So far, sort of what we have found is exactly in line with our model.
I would say that what we also are finding is, you know, in areas where we have not shown reserve or resource but that's interlinked between existing pits, we're also finding some really encouraging holes that are going into those as well. We do expect over time to add to those reserves and resources, and I think that'll certainly be accretive. Cashel, is there anything you'd add to that?
I mean, the only reconciliation of course we could have on a stockpile is blast hole data against diamond drill hole data and it more or less agrees. It's looking well, and it's given us the confidence. We have different stockpiles, we have transition material, we have high-grade sulfide material, and then we have run-of-the-mill material.
That's to sort of optimize our ramp up such that when we're at lower recoveries, we can put through material where we're not exposed to those lower recoveries to lose copper. Again, we have the high-grade material to put through when the plant has ramped up and we can get the revenues as soon as possible. They planned it out really well, and like John said, actually, you know, you might call the deposit over-drilled for a measured reserve. It's down to 25 or 35m in some places on the diamond drilling and has greatly reduced the risk of having surprises in grade or in quality of material.
Okay, great. thanks for the color there. Just kind of thinking about the studies on Mantoverde or study on Mantoverde that's coming out later this year. Just to clarify, will that study include both the optimization as well as the anticipated phase two expansion with the second line, or will it just be the optimization?
Ultimately, the MV optimization is obviously where we're putting our primary focus right now because, you know, that's the most immediate opportunity that we have. We, you know, we over-designed the crushers and the mills, such that those major pieces of equipment, we believe can process sort of 40,000-45,000 tons a day versus the current project design of 32,000 tons a day. Our expectation is to have that feasibility study completed by the end of this year. That's something which, you know, we don't foresee this being a major CapEx project, but obviously one which generates very, very significant additional returns. We would look to sort of permit and implement that kind of ASAP. With the Mantoverde Phase II, that we'd be looking at a full second line.
Those studies continue, but I would say it's a sort of obviously an earlier stage, and we ultimately wanna make sure that we optimize that project, according to the ultimate capability of the ore body. I think whilst our immediate focus will be on Mantoverde, optimized, in parallel, we'll also be sort of starting to drill up some of the sort of further parts of the ore body or well, of the concession area, just to make sure that sort of, you know, that second line is the optimal ultimate capacity to go to.
Got it. Okay. Sort of a similar question on Santo Domingo. You know, Ausenco is doing the study now. Are they gonna consider the broader district and, you know, all of the synergies, or are they gonna optimize Santo Domingo on its own?
Yeah. The Santo Domingo feasibility study is really being You know, the original feasibility was done in 2018. What we're doing is updating it for three elements. The first is sort of inflation. The second is exactly the point you're asking about, is the synergies that we have between Mantoverde and Santo Domingo. Then the third is actually some design optimizations. You know, the footprint, for example, at Mantoverde is sort of far smaller in terms of layout and more efficient than the previous design at Santo Domingo. We believe we can take out about 35% of the footprints just by a more efficient layout and design. Just going back to those synergies.
You know, this study will include some of the synergies that we identified in November last year. There are others that are more on the revenue side, and those are, for example, the processing of the Santo Domingo oxides, and the processing of cobalt at Santo Domingo. Those are studies in their own rights that are being run in parallel. I think from recollection, we're actually due to present those sort of more like in sort of 2024.
Okay, great. Just maybe if I can squeeze one more in. This deferral on the PV4 study, are you able to talk at all in terms of what you're thinking in terms of broader scope and opportunities as well as kinda timing and when all that could come together?
Yeah. Look, I'll answer your second question first. I guess in terms of timing, our immediate focus is completing the Mantoverde Development Project. From there, we'll be moving our focus across to Santo Domingo and probably doing the optimization at Mantoverde in parallel. That does give us time to really look at the Pinto Valley area and work out what is the optimal development plan for that as a district. You know, we've got enormous resources there, sort of, 1.5 billion tons sort of in total at Pinto Valley. We've been doing work sort of on BHP's Copper Cities site next door. We believe there's another sort of billion tons or so of resource there.
All of it sits at sort of a grade of, I think we're talking about 0.33% copper. Now, ultimately, our view is that by developing a large scale processing plant, one can actually achieve highly competitive costs. Obviously with these being porphyries, you know, we believe you could sort of get decades and decades of flatlining production there, without any grade decline, at highly competitive costs by the most sensible working out what is the most sensible scale and how does one fit that all together in the best and the most efficient possible way in that as a district. There's a lot of work to be done there.
I think we have kind of the time on our side to do so. I think finally, it's an area that's been mined for the sort of past 100 years at least. We believe there's a lot of benefit in terms of the plans we have to develop this district that would also have very significant environmental benefits in terms of mitigating some of the environmental issues that have arisen from past operations in that district. We think it's a real sort of win-win solution for that district.
Thank you for the call, John. That's all for me.
Ladies and gentlemen, as a reminder, should you have a question, please press star followed by the one. Your next question comes from Stefan Ioannou with Cormark Securities. Please go ahead.
Yeah, thanks very much, guys. Most of my questions have been answered or asked already. Just, I'm just curious on Cozamin, I'm just looking at the updated mine plan. Good to see. Just reading between the lines when I look at the sort of annualized mill throughput that's in it. Can I presume there's still a little bit of untapped capacity there? And is that just a function of maybe being a bit conservative on how much ore you can pull from the underground?
Yeah. Thanks, Stefan. I'll pass that one across to Cashel.
Yes. Stefan, hi. You're absolutely right. The plant itself is, the processing plant is capable of 4,500 tons a day, and so too is the paste plant dry stack facility we have. Truly the production bottleneck is the underground. Certainly we felt that sticking with the previous methodology of mining was limiting our opportunities to increase production there. As you've noted, the technical report is maintaining the current production profile. I think, you know, as we improve our competencies in the cut-and-fill methodology, it gives us a few other opportunities there in drift and fill, which will enhance our ability in the high-grade areas to get greater mineral recovery than the sort of 80% - 90% that we would have in a normal cut-and-fill environment.
That gives us the ability maybe to extract some higher grade pillars, and that would give us the ability to increase our mineral recovery and slow down some of our capital development. The other, of course, is the transverse mining method that we're including. We had solely a long-hole retreating method, sublevel retreat. The transverse mining method will give us higher, greater opportunity also to recover in a sequential fashion those pillars. We could do pillarless mining in some of the areas to be able to sequence with the paste backfill plant.
We were a little bit conservative, I would say. Those are your words, what we were is we were prudent in putting out a life of mine plan that is achievable, deliverable, and has been executed before. It'll now be the challenges to the mine to increase the opportunities given to them with the infrastructure at the paste backfill plant and the underground new mining methods to increase production out of there because certainly we have the capacity on surface to be able to mill more.
Okay. Okay, great. Got it. Thanks very much for that.
There are no further questions at this time. Please proceed.
Right. Well, thank you very much, and we look forward to updating you again in August with our Q2 results. Until then, keep well and feel free to reach out to Jerrold or Daniel if you have any further questions. Thank you for your continued support, and have a good day. Bye-bye.
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect.