Earnings Call: Q1 2021

Apr 29, 2021

Thank you, operator, and thank you, everyone, for joining Lanyon Mining's Q1 2021 Revolve Call. I would like to draw your attention to the cautionary statements on Slide 2, and we will be making several forward looking statements throughout the course presentation. On the call to assist with the presentation and answer any questions are Jinhee McGee, our Senior Vice President and Chief Financial Officer and Peter Richardson, our Senior Vice President and Chief Operating Officer. Across Lundin Mining, we continue our efforts to stop the spread of COVID-nineteen and aid our communities to recover from socioeconomic impacts of the pandemic. The photo on this slide shows representatives from Candelaria. It's Humberto Espejo and Christine Matus, who lead our health and safety team here being recognized last month by the Chilean the Association for the team's high performance in occupational health and hygiene during 2019 2020. On Slide 4, as the year begins, we are continuing the trend of strong and improving safety performance on almost all leading and lagging indicators. This includes continued strong performance in total recordable injury frequency rate as presented in the chart on this page. We are particularly proud of this achievement as our operations actively manage through 2nd and third waves of the pandemic. I would also like to highlight several areas in which Lundin Mining has further advanced our commitment to responsible mining over this past quarter, which include updates to our human rights standard and diversity policy as well as action on board renewal. I encourage those interested in additional detail and more information on our approach to visit our website and read our core documents, including our recently issued management information circular. And as always, please reach out to us with any questions. Our 2020 sustainability report, which will provide a full update on all of our activities results during the year is currently being assembled and we expect to publish this report in late June. I will now turn the call over to Jinhee to run through the summary results of the quarter. Thank you, Marie. During the quarter, Our operations produced nearly 102,000 tons of base metals and approximately 34,000 ounces of gold. We sold over 91,000 tons of payable based metals and approximately 33,000 ounces of payable gold, generating revenue of over 680,000,000 dollars. As the market price for our core metals we produce continue to increase, there was an aggregate positive pricing adjustment this quarter. The positive impact on revenue on settling of prior period sales was over $22,000,000 A large portion The settlements occurred earlier in the quarter, meaning that the pricing was skewed to this time. 1st quarter revenue was also impacted by the timing of sales with the delay of a vessel at Chapada resulting in a shipment that was scheduled for March scaling in the 1st week of April. At Chapada, we ended the quarter with over 18,500 tonnes of finished concentrate. Copper generated 70% of the quarter's revenue. This is up from 64% in the same quarter last year on a relative basis, primarily driven by increasing copper prices. Nickel contributed 10%, up from 6% in the same period last year on increasing production and prices. As seen in the 2 pie charts on this slide, we remain predominantly leveraged to copper and well diversified geographically. Slide 6 presents a summary of our quarter's results. We benefited significantly from higher base metal prices this quarter compared to the same period last year, which reflected the onset of the COVID-nineteen pandemic. In the Q1 of this year, we realized a copper price of $4.20 per pound. This is above the average market price, reflecting the $0.22 per pound of prior period adjustments. 1st quarter revenue of over $680,000,000 was 80% above that of the same quarter last year. And this is despite the delayed sales at Chapada, which held higher than normal inventories at quarter end. Attributable net earnings from operations were $0.18 per share. Adjusted earnings were $0.20 per share for the quarter, substantially above the net loss in the same quarter last year. Details of the adjustments are broken down in our MD and A. With our operations performing well and improved base metal prices, we generated adjusted EBITDA of approximately $355,000,000 nearly a 300% increase from the same quarter last year. Cash flow from operations was nearly $160,000,000 It was impacted by a building working capital given the lower than typical shipments in the Q4 last year and related receipts this quarter. Adjusted operating cash flow before changes in non cash working capital was $280,000,000 or $0.38 per share. Our Board of Directors declared a regular quarterly dividend of CAD0.06 per share or CAD0.24 per share on an annualized basis, an increase of 50% as announced earlier this year. Lundbean Mining is in a very strong financial position with cash and equivalents of $180,000,000 at quarter end and net debt of only $8,000,000 The company's financial position has further improved since the end of the and is now in a net cash position of approximately $25,000,000 with cash flow equivalents of $215,000,000 I will now turn the call back to Marie to discuss our operations and projects. Thank you, Junheen. So moving on to operations in Candelaria on Slide 7. Candelaria performed well in the quarter. It produced over 34,200 tonnes copper and 21,000 ounces of gold at a cash cost of $1.65 per pound of copper. Tonnes milled, ore grades and metal recovery were all in line with our plan. Ore processed was over 6,900,000 tons and this included the impact of maintenance downtime February on the crushing and the mill circuit. As discussed on previous calls, the mill feed grade was similar to that of the second half of last year as expected. We continue to forecast increased production over the remainder of the year, primarily on increasing mill feed grades. The Q1 cash cost of $1.55 per pound of copper, while above our guidance for the year, was better than our plan. Similar to production, the cash cost is forecast to significantly improve over the remainder of the year. We have reiterated Kendall Area's 2021 production guidance at 172,000 to 182,000 tonnes of copper and 95,000 to 100,000 ounces of gold at a cash cost of $1.35 per pound of copper. Our byproduct gold price assumption is unchanged at $700 per ounce of gold, while we have weakened our U. S. Dollar Chilean peso assumption to 700 from 675 previously. Candelaria remains well positioned to deliver meaningful production growth this year on improving copperhead grades and achievement of planned processing rates. Looking ahead, we continue to advance internal feasibility level studies on the Candelaria underground Expansion Project. These studies are evaluating an increase in the mining rate of the 2 Candelaria underground mines to a combined 26,000 tonnes per day from the current 14,000 tonnes per day. We aim to complete these internal studies this year. Moving on to Chapada on Slide 8. 1st quarter production totaled over 9,800 tonnes of copper and 13,000 ounces of gold at a cash cost of $1.33 per pound of copper. The operation performed well in the quarter with tons mined and tons milled in line with plan demonstrating our return to full production capacity. Mill throughput of 5,800,000 tonnes is the 2nd highest quarterly throughput since acquisition. There is some seasonality at Chapada and Q1 production was expected to be the lowest of the year given the planned grade profile and recovery expectations of the mill feed blend. Heavier than normal rains also meant that more ore was sourced from the stockpile than planned, which impacted our grades and recoveries. Gross and per ton milled operating costs were better than planned. However, the cash cost and financial results were impacted by lower sales due to the timing of sales as discussed previously by Jinhee and this was partially offset by our favorable foreign exchange rates. We have reiterated Chapada's 2021 guidance of 48,000 to 63,000 tonnes of copper and 75,000 to 80,000 ounces of gold at a cash cost of $1.10 per pound of copper. Our gold price assumption for 2021 remains unchanged at $1700 per ounce, while we have weakened the Brazilian real assumption to $5.10 to the U. S. Dollar from $4.75 previously. On the exploration front, we have had an excellent 1st few months of 2021. We completed nearly 11,000 meters of drilling and had an average of 6 rigs on-site in the first quarter. We're on track to complete our budgeted 60,000 meters for the year. We were very successful in the government land auction that concluded in early April. We were able to acquire 23 highly prospective near mine exploration licenses and that represents an 80% increase in our exploration land area. These lands included all of our high priority licenses and cost approximately $6,000,000 Chapada's 2021 exploration Our guidance has increased to $14,000,000 up from $8,000,000 reflecting the acquisition costs of the licenses. Looking on Slide 9, this view of Chapada outlines some of the near mine exploration drilling results. On the slide, you can see the surface expression of last year's measured and indicated mineral resource, which includes the proven and probable reserves as a subset. You can also see the inferred mineral resource and other areas we've determined to be highly prospective and priority for near mine exploration. The assay results are from select drilling all outside of the current mineral resource estimates with the exception of 1 hole in Surupa to the north. Our primary focus remains on near mine exploration to better understand and define mineral resource potential and inform our ongoing expansion studies. On Slide 10, I said we were highly successful in the government land auctions and the left hand side of this slide illustrates why. We acquired 23 highly prospective near mine exploration licenses and as I mentioned an 80% increase in the license land area. The new license areas are shown in green. We were able to acquire all of those that we determined to be our high priority licenses. On the right hand side of the slide are select assays from drilling completed on the Formiga target on our existing license. This exciting license is located approximately 15 kilometers to the north of the current plant. And with that, I will turn the call over to Peter to discuss European operations and the Zinc Expansion project. Thank you, Marie. Moving to Nevis Koro on Slide 11. 1st quarter production results totaled over 7,400 tons of copper, over 14,700 tons of zinc and nearly 1100 tons of lead at a cash cost of $2.61 per pound copper. Zinc production was impacted early in the quarter by rod mill realigner Replacement rescheduled for late 2020. The zinc mill feed grade was also lower than planned as mining was resequenced from the lumber to zinc cabinet to complete rehabilitation work. Mine development rates continued to improve in the quarter. Our contractor continued to mobilize resources Between the contractor and Nevis Corvo teams, development steadily increased month on month. Operating costs In aggregate and on per tonne milled unit basis, we're directly in line with the plan, both on a euro and a U. S. Dollar basis. On a cash cost unit basis, considering the Q1 production, operating cost per ton of copper was above plan, partially set by greater than planned zinc by product credit. We have reiterated Neves Corbus production guidance for the year at 35,000 to 40,000 tons of copper at 70,000 to 75,000 tonnes of zinc, primarily as feed grades of both metals are planned to improve. We have also reiterated the full year cash cost guidance of $2.20 per pound of copper. This considers a revised zinc by product price assumption of $1.15 per pound from $1 previously. The zinc expansion project that was officially restarted in early January of this year. Consistent with our previous guidance and timeline, construction is to be completed in stages over the course of As does our 2021 capital expenditure guidance of $70,000,000 with approximately $30,000,000 remaining to be spent in early 2022, primarily reflecting timing of payments. Slide 12 shows some of the progress being made on the underground aspects of the project. In the Q1, we restarted underground materials handling construction, shaft upgrade engineering. Slicing work on the underground conveyor systems began and contracts were awarded for the material handling, distillation system, Service water piping and shaft upgrades. Over the coming months, underground work is to focus on Starting installation of the reticulation system and service water piping, establishing the shaft shutdown, pre fabrication, pre assembly and structural and electrical works and commencing construction on the dumping base. Shaft upgrades are to be completed this year, currently contemplated for our Q3 timeframe. Time is being reviewed in light of COVID-nineteen restrictions on international travel. Moving to Slide 13. These pictures show some of the surface progress. The radial packer has been commissioned and in mid January we commissioned the SAG mill with ore to produce 1st concentrate. This equipment has been fully commissioned, however, is not being utilized at the moment as construction of other phases are being completed. Over the coming months, Surface work is to focus on starting construction of the new paste fill plant expansion, completing commissioning of the 3rd tailings paste thickener seen The photo here and resumption of construction of the 2nd and third phases of the flotation and filtration surface. On Slide 14, zinc equivalent continued to perform very well and is demonstrated by a record 334,000 tons of zinc ore processed in the quarter. In the Q1, production totaled over 18,600 tons of lead, nearly 480 tons of copper over 4,700 tonnes of lead at a cash cost of $0.76 per pound zinc. Zinc and lead mill feed grades were slightly lower than originally planned, grades are planned to increase modestly over the course of this year compared to the Q1. Operating costs in aggregate and on a per tonne milled unit basis were in line with plan both on a sec and a U. S. Dollar basis. On a cash cost unit basis, 1st quarter production operating cost per pound of zinc was modestly above plan, but partially offset Hydrated and planned copper byproduct credit. Our 2021 guidance for zinc Q1 is unchanged at 71,000 to 76,000 tonnes of zinc and 3000 to 4000 tonnes of copper at a cash cost of $0.65 per pound zinc. Exploration efforts continue with a focus on the extension of Derby and the areas between Burkland and New Zealand ore bodies. Over 6,300 meters of exploration drilling was completed in the Q1. Our 2021 program remains unchanged with 27,000 meters of drilling as a part of a $6,000,000 program. With that, I will turn the call back to Marie to discuss the Eagle and sum up. Thanks, Pierre. Lastly, the operations on Slide 15, Eagle had an excellent first quarter. Both the mine and the mill performed slightly above plan. As a result, 1st quarter production was over 5,300 tons of nickel and were in line with plan, while cash costs benefited from better than forecast copper byproduct prices and volumes. With minimal CapEx of $3,500,000 Eagle generated over $70,000,000 of cash in the quarter. Considering the strong start to the year, we have increased our nickel production guidance to 17,000 to 20,000 tonnes from 15,000 to 18,000 tonnes. Copper production guidance has been reiterated. Similarly to this, 2021 cash cost guidance has been improved to a negative $0.25 per pound of nickel from $0.50 previously, as a result of the exceptional Q1 and revision of our copper byproduct price forecast. We are now forecasting $3.75 per pound of copper for the remainder of the year from $2.95 previously. We anticipate spending more this year on underground development and drilling, including extra meters on the western extension of Eagle East ore body. We've increased our 2021 full year sustaining capital expenditure guidance by $5,000,000 to $20,000,000 With the production profile, current metal prices and low annual CapEx, Eagle is well positioned to generate significant free cash flow in the coming quarters years. On slide 16, a summary of our current guidance as discussed in the operational section. In the table on the left, as discussed, we are making improvements to Eagle's nickel production and cash cost guidance and reiterating production and cash cost guidance at all other operations. We have made a minor addition to 2021 capital expenditure guidance of $5,000,000 our original estimate of $610,000,000 with the $5,000,000 increase at Eagle being attributable to underground development and drilling. Full year exploration guidance remains at $40,000,000 Including the early April acquisition of exploration licenses, approximately $14,000,000 is to be spent at Chapada. The $6,000,000 has been reallocated from corporate and new business development expenditure to the Chapada expenditures. While we have not experienced significant disruptions shipments of concentrate or supply chains due to COVID-nineteen. We continue to caution that our guidance does not reflect any potential for suspensions or other significant disruption to operations due to COVID-nineteen. Turning to Slide 17. We have an excellent growing production profile from our current assets with clear exploration potential to expand or extend mine life at almost all of our operations. We have reiterated our 2021 copper production guidance with a midpoint of 287,000 tonnes. Zinc production is forecast to modestly increase in 2021 as the zinc expansion project is completed and fully ramped up, zinc production is set to increase 65% in 20 3 compared to 2020 and be roughly 230,000 tonnes per annum. Gold production is forecast to be 175,000 ounces at the point of guidance for this year, of which nearly 110,000 ounces are unencumbered and receive full market pricing. Lastly, on slide 18, the investments we have made over the past several years have positioned Lundin Mining very well to benefit from the current commodity price environment with multiple years of strong production, leading cash costs and free cash flow generation ahead. We are in a strong financial position and expect to finish the year in an even more enviable one given the current robust metal price environment. We will continue with our objective to create value by investing in low risk, high return opportunities in our own assets. The core aspect of our capital return strategy is our regular dividend. Our policy aims to ensure regular dividend is sustainable throughout the cycle and can be progressively increased as the asset base improves and grows. We have maintained our $0.06 per share quarterly dividend and expect to provide an update in July on the conclusions from the review of our dividend policy, which is currently underway. And with that, operator, I would like to open the lines for Thank you. At this time, we would like to take any questions you might have for us today. We have our first question from the line of Greg Barnes from TD Securities. Your line is now open. Thank you. A couple of questions. On the guidance, and I know you've reiterated that you had a fairly weak start of Candelaria, which is expected in Chapada. I guess what I have expected, but are you targeting the low end of the guidance range now or is the high end just a stretch? I would say in general that we're targeting the mid range as we were the beginning of the year. We were performing where we expected to for Candelaria. We're slightly behind, but within just around 1,000 tons of our plan for copper at to Chapada. So we're quite confident in the guidance there. And so we're still would be targeting the mid range. Okay. For Candelaria, you're going to have to see a meaningful step up in grade. It's 0.53 in Q1. And I think to get to the low end of the range, I had to put in 0 point 7 for the rest of the year. Is that along the lines where we should be? Yes. So the grades will be back end loaded. And do expect the second half to be considerably better than the first half, probably some modest improvement in Q2. But really it's the back end of the year where we see the significant increase. And I would say that in terms of the grade, going back to our technical report. I think it was 6,465, Peter, correct me if I'm wrong, for the year, which we would really expect to have something in that range. So yes, we do have an expectation for fairly good grades in the back half of the year. Okay. I just want to touch on Formiga, this new zone at Chapada. Given the grades there, obviously, you have no idea how much But in terms of the options you're looking for at Chapada, could you be looking at A new mill or an additional mill in another location midway between the current plant and wherever else you find substantial tonnage? Yes. So right now, for me, it is early stages and it's pretty exciting. We didn't really want to release any results prior to this because of the land auctions. And the area that's continuing on trend to the Southwest of Farmiga, we were able to acquire that in the auction and that was one of high priorities. So, we'll obviously do more and have more information on Formiga. But the current studies are not looking at like a midway type of plant. It's really looking at the existing resource. And if you see the One of the really key areas that was the number one priority, it's hard to see on the map because it looks like just a thin line, but it's the extension of Corpusul. There was a small band of property there that constrained us in terms of the continuation of the South Pit. And so that is removed and we expect that to have a good influence on our R and R for the year. But right now, we're looking at the drilling in and around is giving us really good results with the existing. So the existing expansion is looking at one of the possibilities is a new plant, but it is located in the area of the existing footprint. So that's what we're looking at the moment. And you can see wherever we put a drill hole there, we seem to be finding good mineralization. So the challenges to find places that don't have so that we don't end up putting infrastructure on mineralized zones. Call. Our next question is from the line of Jackie Przybylowski from BMO Capital Markets. Please go ahead. I just wanted to touch on the difference between your reduction in your sales in the quarter. Can you talk about I think we definitely saw it as Chapada on remarks call. Maybe more on the gold side, but it looked like you've got a few operations. Can you talk about any kind of shipment timing issues And if we should be expecting to see those being caught up next quarter or if there's another source for that difference between sales and production? Thanks. Yes. So there will be always some based on payabilities, in particular for nickel, when you look at the production versus the sales. But in terms of our inventories, we were carrying higher than typical inventories at Chapada as you've noted, but also at Nevesh. I think we had quite a bigger balance there. We did have a couple of shipments go in early April that we had expected to go in March for those 2 operations. And so those were really where we were seeing the inventory levels. Okay. So those essentially have already kind of been resolved, I guess, if the ships have already left? Well, we always target to have low inventories at the quarter end. So I think where we're seeing challenges right now is in the South American, mostly Brazil seaborne freight is that the spot prices are quite a bit higher than the long term prices under contract of affreightment. So getting the vehicles into port when you expect them has been challenging just because the providers are trying to take as many spot contracts as they can. So that was part of the challenge is the vessel availability for the quarter. That makes sense. Thanks for that color. Can I ask you another call? Your exploration opportunities there were probably exhausted. Can you give us a little more color on what you're drilling for there and How this new area sort of came to light? Yes. So I think where we are exhausted is on the expectation that would find a considerable regional play or something that's going to double mine life kind of thing. But like last year, We continue to drill on extensions to see if we can add a few months here, a few months there, because given the profitability of this location, every little bit adds significantly. Peter, did you want to give some color on what we're doing there in the various zones? Yes. So as you said, Marie, we're drilling On the zones, the edges of the known ore body of Eagle East, I'm just trying to identify and find potential continuations And adding tons. And as you said, Marie, months if you add a month here and there, that's all profitable. So that's what we're trying to identify. We know that there is a mineralization. It's just we need to identify and make sure that it's Enough to be mineable. So we're just following the non interest in that. Call. Okay, that's great. Thank you very much. That's all my questions. Thank you. Our next question is from Orest by Baukadau from Scotiabank. Please go ahead. Hi, good morning. Could we get a bit more color on sort of the operational update at Neves Corvo, specifically around the grade profile and the sequencing for the year. It seemed to me that the grades were fairly low in the Q1. And just wondering if we should expect kind of progressively improving revolver. Thinking copper grades as the year go on or whether there's some variation there? Sure. And there will be variability at Nevesh, just depending on which zone. So I think We'll follow the typical pattern that you see there where we historically have had a bit of a slow start to the year, then Q2 is typically good and this is for both of the European operations. Q3 is usually a bit of a slow quarter given especially in Sweden everybody disappears for the summer And then we have a strong Q4. So I would expect to see an increase for Q2 and Q4 in the grades. Peter, did you want to expand on anything there maybe for zinc breathing as well? No, it's we have our mine plan and we're following that mine plan sequence. And we know that the grades aren't Call? Content and the same. They will be going up and down depending on the scope sequences. But As we said, Marie, we should be expecting our plans higher grades throughout the year For Nevis Corvo and also a slight increase in the grade for zinc equivalent as well depending on mine sequencing. Okay. Thank you. And if I could also ask just on your corporate strategic priorities. I mean, you're already at a net cash position. You've already mentioned that your the dividend policy is going to be reviewed by July. But I'm just wondering, Given that the Capata expansion from call it a CapEx perspective still feels like it's a few years away. How big of a priority is M and A right now for Lundin Mining? And do you see room to add another asset into the portfolio perhaps For you're ready to build Chapada expansion? Yes. So in terms of our capacity to do a deal, we definitely have to do a deal. Our M and A our corporate development team has been working extremely hard and been very busy because there are A lot of different processes and a lot of interest happening behind the scenes. But For us, we don't see anything out there that we could acquire that would be accretive for shareholders or would upgrade our portfolio and put us in a better position. So while we have a lot of capacity, we do not see the opportunities that we would want to see. We don't have anything on the front burner there. So I wouldn't expect us to be looking at any acquisition. So we're really focusing on capital allocation, dividend strategy. And as you say, it'll be some time before we have to put money in to Chapada expansion and we'll have good cash flows in order to support that. So M and A right now is not looking like there's opportunities that would add value for us. Thank you. Thank you. Our next question is from the line of Abhi Agarwal from Deutsche Bank. Please go ahead. Yes. Hi, morning all. Thanks for the presentation. I have a couple of questions, if I may, please. Peter, at ZDP, you talked about action plans further improve productivity. Is this a normal start up post the COVID stoppages or is it something underlying? Sorry, I was trying to unmute. The productivity that I was speaking to there As the mine productivity. So we have been working hard on improving mine productivity to increase horizontal development and the availability of ore. And so that is something that we continue to work on We haven't seen I know the latest one, of course, was the stevedores went on strike at various ports. So Some of the ports continue to operate normally. Some of them did go on, I think it was a half day plus a day. So 5 shifts, I think it was 5 shifts that the ports went on strike. They're back to normal activity after that strike period. Our port workers did not participate in that strike, but the porta Caldeira did, which is where we would receive our diesel. But no impacts to us from that short duration strike. There is another strike that's been called generally by a worker National Workers Association has called for a national strike this Friday. Our unions are not associated with this group, but we would expect that there would be disruptions within the communities similar to in November 2019, it was a national day of action and a number of groups went on strike. So We continue to expect to see in the lead up to the elections more political activity. But at this point, we don't see any major disruptions for us. Got it. Thank you very much. Thank you. The next is from Jack O'Brien from Goldman Sachs. Your line is open. Great. Thanks. Good morning, everyone. First question, yes, just following up on the capital allocation. I just want to make sure I have the kind of order in mind. So obviously, we've got kind of completion of ZEP. Am I right in thinking the next obviously, you've got a variety of opportunities across the portfolio, but the next would then be Most likely to be Chapada and then followed up potentially by this expansion underground at Candelaria. Is that the right Sort of in terms of kind of prioritization of how you deploy your capital, is that the right way of thinking about it? And then secondly, call. To one of the previous questions on Chapada expansion potentially being a few years down the track, I mean, when If you were to go ahead with that, when would the first expected production come through? Yes. So in terms of priority, I think that's probably correct. I mean, ZEP, there's not a huge and left for ZEP and it's happening according to plan, easily funded from cash flow without with still a lot of excess free cash flow. And then of course the studies for Chapada. In terms of the Quejapa Kendall area, We expect to finish those studies this year, but we're not expecting that we would have a go decision on that this year. We do expect to see a good viable project there. But our focus is going to be on Taking cash from the operations, we've had a period of heavy investment there over a number of years. And so we would like to reestablish the baseline, do our post investment review that we do for all of our investments, major investments and focus on cash flow generation and returning cash to the partners. So that one will probably put on hold and reassess that in coming years. Assess that in coming years, but not as at the point of approval this year. Chapada, we're working through the studies. I think we've guided consistently that we would be coming to a decision probably early next This year, we're trying to accelerate that, but we're going through these steps to do that. And We would have to move to looking at the timelines then, but It's not going to be a start of construction in 2021, that's for certain. Got it. Okay. Thank you. Second question, a few investors are obviously kind of keeping an eye On the tax situation in Chile, and I know there's always 1 or 2 headlines and Perhaps the difference between reality and what's said, but any comments there? Yes. So this is one also that we've been following very closely. Obviously, there's been more discussion an activity around this. We're not surprised in the lead up to elections. We expected that there would continue to be a lot of noise. There were proposals raised back a few months ago. And a couple of days ago, obviously, There was a proposal that came from the Mining and Energy Committee of the Chamber of Deputies with an extremely punitive tax structure on mining. In it and this on top of the existing sliding scale, which is the 5% to 14% depending on your margin. So I think you'll hear a lot more on this. It'll probably go through Finance Committee and Assembly and get raised to Senate. There'll be a lot of rhetoric. There are electoral promises and it's very politicized right now. Everyone wants to curry favor with the electorate. The government has stated has no plans to introduce new taxes during their mandate, which of course the elections are in November. So we expected to hear different things coming out. We believe that the mining contribution is broadly known and appreciated not just by the right, but by the mainstream left as well and that it's pretty clear that this type of tax scheme would be very damaging to the industry and really make new investment projects in Chile very difficult. No one's going to take on a multi $1,000,000,000 CapEx project with no potential for upside. It's just it's going to put a lot of projects at risk there. So other countries have tried similar things like this and walk them back very quickly. We think it's a lot of rhetoric at the moment and we expected it. But we continue to monitor with the industry groups. We're in contact with the Mining Council. And basically, we'll watch with interest, but I think the potential harmful effects of this are very well known. I think the Finance Minister just gave the finance report, stated increases in the prices combined with the increased economic activity will lead them to about a 6% GDP growth this year and that the finance, the revenues coming from copper are expected to be able to allow them to have stable debt levels despite stimulus spending. So I think the industry has worked very hard throughout the pandemic to keep producing and people recognize it's a huge factor in keeping Chile ahead of its neighbors. So we'll continue to watch with interest. And as we've said in the past, we expect that There would be new taxes at some point and that they'll be reasonable and not cumulative to the industry. Great. And one just final, briefer question. Chapada, the ore milled during the Q1, You mentioned in the presentation very, very strong level. Just wondering if that's a sort of Sensible level we could now come to expect going forward? Or do you think that was slightly abnormally high, perhaps a catch up from the Q4? No, I think we've got some good operation in the mail there now. I don't think we would expect to have any drop off and we've actually just during the quarter commissioned the mobile crusher. So Peter, any color on that? No. I think it's according to what we planned. So a little bit better than what we planned and that's Great. Thank you very much. Thank you. Our next question is from the line of Daniel Major from UBS. Please go ahead. Hi, there. Thanks. A couple of questions. First one, at Chapada, you processed more from the stockpile. Does that mean you're behind on the mining schedule need to catch up due to the rains or is it more of a logistical issue? That's the first question. Yes. So it is seasonal there in terms of the rainy season and it wasn't particularly rainy February. So that meant not only that we would have excess water, but that the amount of evaporation days were less. So we were carrying more water than we typically would. So basically, as we go through the year, we'll be able to access the areas that we didn't have access to. But our mining rates were according to plan. Okay. And then second question, and it's sort of Perhaps asking the same question in a slightly different way around the timing of the Chapada expansion, news flow, etcetera. So 2 part. I mean, your midyear annual reserve and resource update, I'm assuming you're expecting to release a meaningful results. And then just on the basis of the drilling that you've done today over the past 12 months. And second, you had previously suggested you could release a study on the expansion Q4 of this year or early next year. Is there any change to that timeline? No change to the timeline, and we do expect to have some good results to incorporate into our R and R. And what's important in R and R is the near mine and the grade. So we can add tons, but right now It's a very long mine life. So adding 10 years at the end of 40 years doesn't really move the needle. It will be important to identify near mine sources that we can bring in sooner than later. So That's where we feel we'll have some success. Okay, great. And then just one more question, if I may, perhaps slightly Conceptual one, but there are costs at this stage of the cycle people calling for some form of regime change and a Higher forever kind of copper price. How are you as a company looking at your assessment of how review capital allocation going forward. Are you considering following that rhetoric and Putting $4.50 in forever, how are you looking at that? And what's your process for reviewing how You feed in commodity price assumptions to impact capital allocation? Yes. So we have not just put $4 forever into our model. But we will look at different scenarios. We typically would run upside, downside and base case. And at this point, we haven't changed our long term copper price assumption, but when we look at the possibilities, we'll look at different scenarios. We're fairly conservative as you probably saw from our F1 reforecast of our C1 byproducts, dollars 3.75 copper for the year, dollars 1.15 zinc It's fairly conservative, I think, in terms of pricing as compared to where we are. So We'd like to think it's higher for longer. There's differing opinions on that. And we'll be optimistic but conservative as we typically have in the past. Great. Thank you. Thank you. Our next question is from Lawson Winder from Boa Securities. Hey, Lawson, you might be on mute. Can you guys hear me now? Yes. Okay, great. Thanks, Maureen. Good morning and Thanks for the update. Just more specifically on the September R and R update, would it be fair to Assume that reserves at Chapada could be replaced, first of all. And then secondly, could we expect an initial resource for Omega. And could that would we be looking at an inferred or M and I level resource with that? Thanks. Well, on the first one, yes, definitely we should be able to at least replace mined and expect to fully expect to do that. On Formica, I think it's a little early on a resource there. Okay, great. And then on the exploration budget, Marie, you mentioned that $6,000,000 had been reallocated from corporate Chapada, so does that mean that Chapada's exploration budget for this year is now $14,000,000 plus $6,000,000 so $20,000,000 No, it's the 14. That's still the 14th. And would you expect spending that by the June 30 RRR cut off? Spending the $6,000,000 or No, the entire $14,000,000 No, not the full amount. No, we'll continue with the drilling throughout the year. So it'll be an even spend for the rest of the year probably. Call. It's a little light in the Q1 just because of the rain. It's harder to get the meters, but We usually pick up kind of mid year and have a very good back end in terms of drilling. But we'll continue to drill there and do as much drilling as we possibly can throughout the year. And if we can spend more than that budget, we will. Okay, great. And then just one final question on the guidance, more specifically to gold production though. At Chapada, One, can you remind us, are the gold grades positively correlated with the copper grades? And Would it be fair to expect a very, very material pickup in the gold grades in Q2, 3 and for at Chapada? Yes. I wouldn't say there's a direct correlation. I mean, there's areas that are gold like gold rich in areas that are copper rich. So there's not a direct correlation in terms of the grade. What we do see is obviously with stockpiles, there will be a recovery that you'll see the recovery on oxide material will be difficult on both gold and copper. So that's definitely the case. In terms of the gold, I'm just trying to think in terms of the we do have a pickup in the year on the gold grades as well in terms of being better in the back half than it is in the first half. But that's just access in different areas of the pit. But we do definitely see an uptick there. Peter, Any color you want to give there? No. As you said, there's no direct correlation. But we're also Expecting an uptick back in second half of the year on gold grade. And so that's then you're confident in meeting that gold production guidance for Chapada sorry, the middle of that gold production guidance for Chapada? Yes. Yes, we are. Yes. Okay. Thank you very much. Yes. Thank you. Our next question is from Stefan Ioannou from Cormark. Please go ahead. Okay. Yes, thanks guys. Thanks very much for taking the question. Most of my questions have been already sort of answered, but just maybe curious on the sort of thinking from an M and A point of view. You mentioned you haven't really seen a lot of accretive Opportunities out there. Just wondering, can you comment if the focus has been on sort of copper specifically or are you sort of Metal agnostic, and I'm just sort of thinking about keeping maintaining a diversified profile going forward with Eagle coming off over the next few years if there's Any sort of additional focus on bringing another nickel asset into the mix? Yes. I think We do have a focus on copper and that would be first priority, but we would look at other things as well and we have looked at other things as well, whether it be zinc or nickel, but we're just not seeing assets that would be an upgrade to our portfolio and be accretive for shareholders. Okay. Okay. I'll leave it at that. Thanks very much guys. Thanks. Thank you. The next one is from Dalton Baretto from Canaccord. Please go ahead. Thanks. Good morning, Maria and team. A couple of questions from me. I wanted to start by kind of picking up on that Chile event there. You discussed the proposed tax changes in some detail, but what about from a broader constitutional With one perspective, are you seeing anything there that gives you concern? And how insulated are you by your stability agreement? That's my first one. Thanks. Yes, so the elections for the constitutional assembly were put off. They're not happening until May. They were originally supposed to happen in April, but they were put back because of the increase in the COVID cases and they'll be held on May 15 Call. They'll be held on May 15 16. So we don't expect any further delay to that timeline nor for November. So On that, there's kind of a split. There's basically there's the right candidates, which are center right, there's a center left and then there's a more extreme left. And we'll really have a better idea after the May elections to understand where that constitutional assembly will be. But there's a lot of rhetoric from all sides at the moment. And So I think if it was a month from now, I would have a better feeling for the types of things that we might see coming out of the discussions. But the constitutional assembly timeline is still the same. So the elections have been pushed won't happen until mid next year. But we should have some kind of indication as to what might be in that based on the composition of that assembly and we won't know that until mid May. Okay. But from your stability agreement perspective, I guess until you know what's in there, it's hard to what you're insulated against? So our stability agreement should protect us against any new taxes until the end of 2023. So commencing in 2024, we could be subject new taxes there, but we do have protection until 2023. Okay, great. And then just maybe switching gears a little bit. I think your disclosure flagged localized COVID-nineteen outbreaks near Candelaria and Chapada. How much of a concern is that? I would say for us it is a concern. It's more of a concern at the moment in Chapada than it is in Candelaria, because Candelaria, Chile has made good progress nationwide on their vaccines. So They've got half of the population has had at least one dose and probably about a third has had a second dose. So We do see that vaccination program should start to stabilize the case levels and we should see them reduce there. At Chapada, it's different. The national campaign is moving quite slow. Not a lot of doses given. I think only Less than 15% of the population right now has a first dose. And locally, we're still trying to assist with getting vaccinations, but the availability of supply vaccine is not there. So that's the one where we are concerned. We have had our site doctor and our nurses vaccinated, but in large part the community and the workforce is not vaccinated there and is uncertain when we might get that. So that is We don't have any concerns about vaccine resistance. People want to receive it. But we're thinking that the general workforce right now, it's probably at least second half before we can have them vaccinated. Okay. And then I guess my last question, I just want to pick up on something you said on the Candelaria underground internal fees that you're looking at. I think you said you expect to sell a project, but you don't expect to move forward on it. What's the argument for not moving forward on it just given where your balance sheet Yes. Yes. So I think there's a few things. We have just gone through a heavy investment period in Chile. We would like to reestablish the base case and to do post investment review on the investments we have done. There are a number of And Jinhee could speak to this more eloquently than I, but some tax withholding tax credits and other tax credits that will disappear within the next year or 2 that we would like to take advantage of and taking advantage of those tax credits. And we feel that with the political uncertainty embarking on a very high CapEx project. It's not $1,000,000,000 but it's not under $100,000,000 either. So a big CapEx project in time of uncertainty on the tax regime is probably not A good decision and we're not pressed to we have good production and we have growth in other areas. So It's not like we're desperate to see that increase. So, prudency and just being careful and taking advantage of some tax credits that are disappearing. That's great color. Thank you, Mary. Good luck, guys. Okay, thanks. Thank you. There are no further questions at this time. I will now turn the call back over to Ms. Hoexter. Okay. Thank you very much, operator, and thanks everyone for joining the call today. In summary, our operations are performing according to plan and we're expected to deliver on all of our guidance this year. So we feel very well positioned and we look forward to our next update in July. Thanks everyone. This concludes today's conference call. Thank you for participating. You may now disconnect. Have a great day.