Earnings Call: Q4 2020

Feb 19, 2021

Ladies and gentlemen, thank you for standing by, and welcome to today's Lundin Mining 4th Quarter Results. All participants at this time are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Marie Inkster, President and CEO, please go ahead. Thank you, operator, and thank you, everyone, for joining Lundin Mining's 4th quarter and full year 2020 results call. I would like to draw your attention to the cautionary statements on Slide 2 as we will be making several forward looking statements throughout the course of this presentation. On the call to assist me with the presentation and answering questions are Jinhee McGee, our Senior Vice President and Chief Financial Officer and Peter Richardson, our Senior Vice President and Chief Operating Officer. On Slide 4, I want to take some time to touch on several of Lundin Mining's achievements In 2020, as they place us in an excellent position to perform well in 2021 and the years ahead. While responding to COVID-nineteen that we adjust some of our plans earlier in the year. We had our share of challenges in the Q4. We acted quickly and decisively to overcome these. The loss of our colleague at Neves Corvo in the 3rd quarter remains top of mind within our organization. A fatality is a rare event within Lundin Mining because of the This achievement is particularly notable in a year filled with the distraction, both personally and professionally, of a global pandemic. We achieved our most recent production guidance for all metals with cash costs in line or better than our guidance, including notably low 1st quartile cash costs at Chapada and Eagle. This led to the generation of nearly $860,000,000 of adjusted EBITDA quarter and make progress on growth initiatives. We were achieving excellent progress advancing the zinc expansion project at Neves Corvo prior to our proactive Decision to temporarily suspend the project to protect the operation and the local communities from the onset of COVID-nineteen. Mine and works continued throughout the year and the project officially restarted in January of this year. At Chapada, following a brief suspension of the program in March. We were able to ramp back up quickly and safely and completed nearly 42,000 meters of drilling that will help inform our expansion studies. And at Candelaria, we progressed our internal studies evaluating medium term opportunities to expand the underground mines. Lastly, we remain focused on value creation through disciplined allocation of our shareholders' capital. In late November, we announced an anticipated 50% increase to our regular dividend. This increase to an annualized $0.24 per share was approved by the Board yesterday. We continue to pursue actionable M and A while remaining disciplined to our strategy and our criteria. In short, we are very well positioned to deliver on our strategy and drive shareholder returns. With that, I will turn the call over to Jinhee to highlight the full year 2020 financial results. Jinhee? Thank you, Marie. Looking at a summary of our results On Slide 5, our operations in aggregate produced nearly 420,000 tonnes of base metals in 2020, including over 96,000 tonnes in the 4th quarter. In addition, we produced 163,000 ounces of gold in 2020, an increase of 15% year over year with the full year's contribution from Chapada. For the year, we sold over 380,000 tons of payable based metals and generated revenue of over $2,000,000,000 4th quarter revenue totaled $530,000,000 including positive price adjustment for prior period sales. Prior period price adjustments had a negative $50,000,000 impact on revenue or $0.08 per share for the year. However, with strengthening metal prices, the 4th quarter impact was a positive $48,000,000 or $0.65 per share. A detailed breakdown is available in our MD and A. Consistent with the prior year, 65% of our revenue was generated from copper sales in 2020. Gold contributed 12% to revenue, up from 9% in the prior year with the full year contribution from Chapada and the increase in the gold price. Zinc, nickel and lead contributed a combined 19% of total revenue in 2020, down from 23% the prior year, largely a dilution effect with the 1st full year of copper and gold sales from Chapada. We remain predominantly leveraged to copper and well diversified geographically. Slide 6 presents a summary of the full year financial results. I will also touch on our 4th quarter results. 2020 revenue was 8% greater than last year, mainly attributable to the 1st full year contribution of the Attributable net earnings from operations were $0.23 per share for the year, in line with the prior year and $0.16 per share for the 4th quarter. 4th quarter earnings were higher than the comparable period in 2019, primarily due to higher realized metal prices, partially offset by lower copper sales volumes. Adjusted earnings were $0.31 per share for the year and $0.15 per share for the 4th quarter. 4th quarter adjustments include $5,000,000 of Costs associated with the labor action at Candelaria and nearly $4,000,000 for project standby and suspension costs. Details of the adjustments are broken down in our MD and A issued last night. We generated adjusted EBITDA of $857,000,000 in 20 a 21% increase over 2019, including $235,000,000 generated in the 4th quarter. 2020 cash flow from operations was $566,000,000 in line with that of 2019. When adjusting for non cash working capital changes, operating cash flow was $645,000,000 or $0.88 per share, 17% greater than last year. 4th quarter capital expenditures on a cash basis were $100,000,000 bringing the total spend for 2020 to $431,000,000 marginally lower than the most recent guidance of $445,000,000 We ended the year with $141,000,000 in cash and equivalents and net debt of $63,000,000 As of February 18, these numbers had further improved to $165,000,000 in cash equivalents and $50,000,000 of net debt. Lastly, our Board of Directors declared regular quarterly dividends of CAD0.04 per share, totaling CAD0.06 per share in 2020. And yesterday, our Board approved an increase in the next quarterly dividend to CAD0.06 per share or CAD0.24 per share on an annualized basis, an increase of 50%. I will now turn the call back to Marie to discuss our operations and projects. Thank you, Jinhee. Moving to Candelaria on Slide In December, after reaching new collective agreements with all unions representing employees, the operation safely ramped back up to full production and our most recent guidance producing nearly 127,000 tonnes of copper and 76,000 ounces of gold at cash With the new collective agreement, though it excludes $5,000,000 of costs directly associated with the labor action. This is detailed in the MD and A. The Candelaria mill optimization project is now complete with the installation of the final Balmo motor completed in December. Full year capital expenditure of $216,000,000 is modestly below guidance of $225,000,000 2021 capital expenditures are forecast to total $345,000,000 including $160,000,000 on waste stripping. Candelaria is positioned to deliver 40% production growth this year on improving copperhead grades and achievement of planned processing rates. Our 2021 guidance reflects our expectation that copperhead grades will be similar to those in the second half of twenty twenty as we start the year to $1.35 per pound on this increased production. Moving to Chapada on Slide 8. The Chapada team responded quickly to the motor mill damage event late in the Q3 with effective action plans to minimize the production impact. 2 spare motors were installed on the SAG mill in early October and enabled resumption of milling at approximately 35% of the nameplate capacity. Throughput was further improved with the installation of a motor loaned from Samarco on the ball mill in mid November And a return to full processing capacity was achieved in late December with 2 repaired motors received at site and installed. The remaining 2 motors that were successfully repaired and are being maintained as spares. The operation exceeded our most recent guidance, producing over 50,000 tons of copper and 87,000 ounces of gold for the year. In fact, the 50,000 tonnes of copper produced was within 1,000 tonnes of the original guidance provided for the year in December of 2019 with our operations outlook at that time. Chapada was also able to achieve better results on cash costs on our guidance. In the 4th quarter, the mine achieved an impressive negative $0.18 per pound of copper Despite the constrained mill throughput and for the year achieved a 1st quartile $0.29 per pound. This positions the operation as one of the lowest Cost Open Pit Copper Mines in South America. Crushing and conveyor maintenance was undertaken during the 4th quarter And excess mining capacity was focused on waste removal activities. Full year capital expenditure of $39,000,000 is directly in line with guidance. The mine and mill continue to operate as expected and they are well positioned to achieve our 2021 guidance of 48000 tons to 53 With noting, we do not expect a significant year over year change in the underlying operating costs on a per ton basis. Our $1.10 per pound of copper cash cost guidance assumes a gold price of $1700 per ounce and a U. S. Dollar to Brazilian real exchange rate of 4.75 amongst other various assumptions. Chapada's exploration program has strong second half to the year, drilling at greater than planned 42,000 meters. The primary focus remained on near mine targets To better understand the mineral resource potential and inform our expansion studies. Study work progressed during the year and is being advanced in parallel with the exploration efforts. The 2021 campaign of 60,000 meters of drilling is underway. There are currently 4 exploration rigs on-site at the moment with plans for 6 for the majority of the year. Moving to Neves Corvo on Slide 9, the operation produced over 32,000 tons of copper and over 69,000 tonnes of zinc. Copper production achieved most recent guidance and zinc was within 1,000 tonnes. The full year cash cost of $2.09 per pound of copper was in line with guidance of $2.10 In the 4th quarter, while the zinc plant achieved greater than planned throughput, Zinc metal production was impacted primarily by below plant ore grades. The mine is continuing to focus on several expenditures of $128,000,000 including expenditures on the zinc expansion project were modestly greater than the guidance $120,000,000 as additional mobile mine equipment was purchased in the 4th quarter. 4th quarter That preparation work included progress on event raises, activities on the SAG mill, including commissioning with waste and work on surface conveying systems. The project was officially restarted in January of this year. Progress towards completion will continue to be dependent on the future effects of COVID-nineteen with government public health requirements and internal measures taken to protect our employees and contractors. We have mobilized a smaller number of contractors on an extended schedule given the current safety requirements for social distancing and other personnel limitations. Consistent with our previous guidance and timeline, construction is to be completed in stages over the course of 2021 with production ramp up planned to commence later in Q4 guidance of $70,000,000 on the project is unchanged. Approximately $30,000,000 will be spent in early 2022, primarily reflecting a timing of payments. 2021 total capital expenditure guidance for Neves Corvo is $135,000,000 including the ZEP expansionary expenditure. On Slide 10, Zincgruvan finished 2020 on a strong note. In its 164th year of continuous production, The operation set several records including ore hoisted, total material hoisted and mill throughput, all while achieving its lowest ever Zinc and copper production both achieved annual production guidance with zinc approaching the upper bound of Zinc production finished strong with a grade driven significant increase in production during the Q4. The guidance for 2021 is 71,000 to 76,000 tons at a cash cost of $0.65 per pound of zinc. The full year capital expenditures of $37,000,000 for 2020 were modestly less than guidance of $45,000,000 Exploration efforts continue on existing ore bodies as well as targeting Dalby and Boer Tabacum deposits, which remain high priorities. Nearly 18,000 meters of exploration drilling was completed in 2020 and we have an active program planned for 2021 with 27,000 meters of drilling planned as Lastly, on Slide 11, Eagle performed extremely well again in 2020. The Eagle team's record for consecutive days without a recordable injury continued into the 4th quarter, passing 1 year and achieving 412 days. As mining progressed into the higher grade regions of the Eagle East orebody, nickel production increased nearly 25% and copper over 30% compared to 2019. Full year production guidance was achieved with average grades and recoveries of both metals improving year on year. On the strong operational performance and increasing metal prices, Eagle's already first quartile cash costs improved further, achieving an average of $0.10 per pound of nickel for the year and an impressive $0.89 negative in the 4th quarter. With minimal capital expenditures of just over $11,000,000 Eagle generated nearly $140,000,000 of free cash flow for the year, including nearly $60,000,000 in the 4th quarter. Eagle remains well positioned to generate significant free cash flow in the coming years. 2021 nickel production guidance is 15,000 to 18,000 tons and copper production guidance of 17,000 to 20,000 tons. Underlying costs are very stable here and our $0.50 per pound of nickel cash cost guidance assumes a conservative byproduct copper price of $2.95 per pound amongst other assumptions. 2021 capital expenditures are estimated to total $15,000,000 Slide 12 provides a summary of current guidance as discussed in the operational section. This production guidance along with our Furnitures are expected to be $40,000,000 in 2021 with over 140,000 meters planned. As we are all well aware, the global effects of Disruption to operations due to COVID-nineteen. Turning to Slide 13, we have an excellent growing production profile from our current assets. We are guiding for copper production to increase roughly 25% this year and a total of 30% by next year compared to 2020, primarily on increasing grades at Candelaria and full year uninterrupted contributions from both Candelaria and Chapada. Zinc production is forecast to modestly increase in 2021 and as the zinc expansion project is completed Fully ramped up is set to increase 65% in 2023 compared to 2020 and be roughly 230,000 tons per annum. Gold production is forecast to be 175,000 ounces at the midpoint of guidance for this year, an increase of 7% over 2020. Of this, nearly 110,000 ounces are unencumbered and receive full market pricing. In conclusion, I would like to reiterate The investments we have made over the past several years have positioned Lundin Mining well to benefit from the current commodity price environment with multiple years of production growth, decreasing cash costs and free cash flow generation ahead. And with that, operator, I would like to open the lines for questions. Okay, thank you. Your first question comes from Arash Wolkata from Scotiabank. Your line is open. Hi, good morning. I was wondering if I could ask a couple of questions about Candelaria specifically. Marie, did I hear you correctly that You said the grade profile there in the first half of twenty twenty one will be similar to the back half of twenty twenty. Was that correct? Not exactly the first half ores, but we'll start the year in those levels. We expect it to improve as we go throughout the year. Okay. So you're going to start out around the kind of 0.55 level. What can you give us some insight in terms of What should we assume for the average grade for the year if it's going to start out that low? Well, I mean, you can probably back into it from the guidance. But When you look at last year, we were directly in line with our technical report issued in 2018 when you look at the grades. So there shouldn't be any great surprises. We know that it gets better as we get deeper in the pit and so we'll have an improving profile. Peter, I don't know if you want to comment on that. We don't typically guide on grade, but just some general guidance there. But as you said, we know that Phase 10 improves with depth and we're getting deeper and deeper Down in Phase 10. So that's all according to the technical report from 2018. Okay. Now that you've completed the mill optimization, can you give us a sense of what kind of throughput levels are you achieving and has the ore hardness issue gone away? Sure. Peter, did you want to take that one? Yes. So first of all, Seamap, the mill optimization project, the aim there was to increase throughput by 4,000 tonnes a day and also improve metal recovery of Copper by 1.7%. That was the goal of the target. We are seeing better throughput as we also get Lower down on Phase 10. As we've said previously, the lower we get down on Phase 10, the softer the ore is We know that. The ultimate throughput rate also depends on the ore blend at the time. And At the same time, we're feeding more and more ore from the underground, which is harder. So it's going to be a combination of the blend, But we're seeing better throughputs as we get deeper down the Phase 10. We also see we have more power now in the secondary mills. Are you getting close to that kind of 80,000 tonnes a day level? Is that kind of what we should be thinking about? We don't disclose the info on this quarter, but throughputs are improving. Okay. But is that ultimately where you're going or where Candelaria is going with the improvements 80,000 tons a day? Yes, I think we've been there, Orest, at those levels. And We just finished with the last installation of the ball mill motor. We're working on new liners. So we'll probably have a couple of months where we work The kinks and the new with everything in place. But yes, I'd say that we're looking at that At the typical level that we would aim to achieve on a consistent basis. Thank you very much. And your next question will come from Jackie Przybylski from BMO Capital Markets. Your line is open. Thanks very much. Just a couple of other project update questions maybe. First of all, on the ZEP, Can you maybe talk a little bit about remobilizing the contractors there? I know that you mentioned it in the early part of the call, it was difficult To keep the contractors on-site due to COVID, how's that situation in Portugal right now? And is remobilization Going well or is that at all a risk as you ramp that project back up? Yes. We don't see it as a risk. We had built into our timeline that we would be mobilizing with less people on-site, smaller numbers and an extended schedule. So that's built into our base case. Peter, do you want to talk about The project and what we've been doing and the remolding? Yes, yes. No, sure. So we have been removing people, Both underground and on the surface. At the moment, we're working with piping and mechanical work Underground also splicing of belts and then on the surface is the piping and mechanical work and some work in the grinding section. As Marie said, we have built that in, in our time schedule. We are also working on the strict COVID Rules and restrictions and procedures. So we test everyone that comes back, put people that are outside of the area into quarantines proactive before they could come on-site. So We're making sure that everyone that is on-site is set for duty and does not have any COVID symptoms or infections. That's great. Thanks. And then maybe shifting gears just to Chapada. It's hard to tell from the release that came out yesterday, but I mean, it sounds like you're still kind of reviewing the options in terms of the size and scope of a potential Chapada expansion. Are you able to give us maybe a bit of updated color in terms of where you're at on the drill program and on the studies? And when we may expect to The result or at least to see sort of the study results and maybe the options you're looking at, is there any color on the Time line at this point to getting that completed? Yes. So for the study and any release To the market as to where we're going with the studies, that's going to take a while, Jackie. We're looking at a Mid year internal review with our Board of the various scenarios and we do continue to study the scenarios at everything from the modest Expansion work up to a doubling. So there's 3 primary scenarios that we're looking at. But as you mentioned, the exploration program will really I'll now hand it over to Steve to speak to Steve. Thank you, Steve. Thank you, Steve. Thank you, Steve. Thank you, Steve. Thank you, Steve. Thank you, Steve. Thank you, Steve. Thank you, Steve. Thank you, Steve. Thank you, Steve. Thank you, Steve. Thank you, Steve. Good morning, Steve. Good morning, Steve. Good morning, Steve. Good morning, Steve. Good morning, Steve. Good morning, Steve. Good morning, Steve. Good morning, We're able to complete more than the 40,000 meters that we had originally targeted and then another 60,000 meters this What's in the plan, so and we don't think we'll have any issue meeting that target and that will be important to inform the studies as well. So I would Say that the next update that we would provide would be on an exploration update, probably mid year, if we can Have a reasonable update at that time, and we're working on some different land acquisitions and other things. We hope to have those wrapped up Within the first two quarters, so that we can provide an update in midyear. And then probably the studies will be a bit longer Before we come to ground on which avenue might be appropriate for the expansion scenario. Is this the schedule seems like it's a little different from what you had first thought when you acquired the property. Is it Because of COVID and the delays that you experienced in drilling related to COVID, is it an issue that the Opportunities are just maybe there's more opportunities than you expected and you're you just want to sort of investigate all of them? Or what exactly Is the cause of this exploration kind of taking longer than you initially thought? Yes, I think there's a lot of opportunity and it's really if you're talking about building a new plant or moving significant infrastructure, you want to Sure that you have the drilling done to support where you're going to put those things, where the future center of gravity is going to be, make sure you're not repeating What's happened already, which is infrastructure on an ore body. So there's a lot of information coming from the drilling programs and a lot Good work ongoing on the various scenarios. So we don't want to it to take forever, but we do want to make sure that we have The best information that we can before we go forward with a major investment. Sounds great. I may hop back in the queue, but I'll let somebody else And your next question comes from Ionis Matt Willis from Morgan Stanley, your line is open. Hello. Good morning and thanks for the And 3 questions from my side. The first one on Shabadd again, just a follow-up to Jack's question. Should we be thinking about full update on the expansion option in Early 2022 now instead of back end of this year. Then the second question around Neves Corvo. You seem to be putting a lot of effort on optimizing the ore mix and improving the development rates. But Is that going to benefit Q1 production? Or shall we expect a slow start to the year for Neves? And the third question for me, just on capital allocation. We're seeing the step up in production rates this year And strong metal prices suggesting a nice step up in free cash flow, but at the same time, dividend yield is below 2%. So I'm just trying to figure out in terms of timing or maybe additional cash returns, would you wait until Is that if it's fully derisked before making any decision around that? Or Would you have confidence if the current commodity price environment persists to increase The dividend without necessarily waiting for Q4 once the visibility is fully commissioned. Thank you. Okay, sure. So we got 3 there. I'll go back to the first question on the timing and follow-up to Jackie's question, Which was around the timing of Chapada. And we'll obviously want to bring that forward as fast as we Ken, we would like to have something in the back end of the year, but I don't want to make any promises that we can't Keith, if we're not ready then. So we'll bring the information as soon as it's It could be early next year, it could be end of this year. We're working on that and we'll try to expedite that as well as we can. On Nabors Corvo for the ore mix, the Q1 production, I would say rely on the guidance. We did have a backlog of development activities, but we are improving there. Peter, I don't know if you want to comment on the ore mix And the availability of starts is the key for the production there. No, not more than you said. I think it's Really good that you said rely on Q1 production forecast. We're continuously working on improving mine productivity and Primarily focused on, as you said previously, horizontal and vertical drift drilling development to be able to build inventory, So we can optimize both production and then the mix. Yes. Thanks, Peter. And then on the third question Capital allocation and the free cash flow, yes, we're quite happy and excited to see We're in a great metal price environment and have been investing over the last couple of years. So we're positioned well to take advantage of that. We did increase the dividend by 50% just recently. So $0.24 per share Per Anim is the current rate and we've committed to our Board to come back mid year with a review of where we are. So we'll have an update on that mid year. As I said, we're not going to wait until ZEP is finished Anything else, we'll have a look at that midyear. That's great. Thanks so much. And your next question will come from Jack O'Brien from Goldman Sachs. Your line is open. Hi. Good morning, Marie. Good morning, everyone. Thank you for the presentation. I just want to clarify firstly on The unit cost guidance you've given, I think you mentioned for Chapada that the that there's no significant sort of Change in operating costs year on year 2021 on 2020 is mainly a function of some of your assumptions. I noticed there's also increases at Neves Corvo and Zinkgruvan and Eagle, albeit lower. Can you just confirm for those 3 mining areas as well, it's really just a function of assumptions? Or are there any sort of underlying considerations We should also factor that. That's my first question. Yes. It's a combination of the output And the unit costs on a cost per ton milled in each of those places is very stable. So we don't expect any step change in costs. Our budget assumptions are in the table where we put our cash costs. They're very small, so You need a magnifying glass to see them, but we do use, say for example, R4.75 Real with our assumption for our 2021 budget, and we know that that is in our favor as well as the copper price, which we budgeted at $2.95 So that's just an example. The euro U. S. At $1.20 and the Swedish krone at $8.50 So depending on where that goes, it will affect The cost profile because the costs are in those local currencies. But underlying costs, there's nothing fundamental that's changing in the business That would affect those costs. Got it. Thank you. And just a couple of small follow ups. Are there any can you remind us just if there's any other sort of union negotiations due in 2021 across your portfolio? Typically with Brazil, it's an annual negotiation and they pass quite calmly and without an event. Our Chilean mines, which are the ones, of course, that people would be most concerned about and typically is a more Prolonged and difficult process of negotiation. We don't have any expiring contracts until 2023. We just Agreed a new contract in Portugal. Peter, I'm not sure of the duration of that. I know there's an annual salary adjustment, but I think the union agreement itself hasn't changed in many, many years. Yes. That's correct. Yes. And then in Sweden, it's annual. Yes. We just closed the ones in Sweden as well. Yes. Yes. And Eagle Mine is not unionized. Okay. That's incredibly helpful. Thank you very much. And then just the final one. Obviously, you've touched quite a lot on some of your exploration and sort of internal expansion opportunities. First, I was just wondering, Actually, I noticed your guided exploration spend is actually sort of down fairly meaningfully to 21 on 20. So just interesting thoughts there. And then I guess the follow-up, given that there is so much in sort of Your existing footprint or near it, should we assume that kind of internal opportunities are your first priority Over M and A? I would say that they're not mutually exclusive. And if we found a good project, we would We'll take advantage of that and invest in drill, and we continue to look for properties that we can develop and drill. And we have a team in Toronto and in South America looking at opportunities on the early stage exploration side. We don't have any we have a lot of opportunity around our sites, which is why you see big budget around our sites and it's very prospective, but I wouldn't take that as an indication that we don't have interest in other opportunities. I'd say the opposite that we would like to have additional opportunities, but we do have very good opportunities in and around our sites. I think one of the big differences is the zinc movement program is a lot less in terms of spending this year, but that's because we've Moved a lot of the drilling from surface to underground. So even though we still have a lot of meters planned, I think it's 27,000 meters. Peter, correct me if I'm wrong. We still have a lot of meters planned, but they're drilling from underground So it's a lot cheaper than the surface drilling. So that brings the budget down quite a bit. So But no, we have a lot of prospectivity, a lot ongoing, and we'll continue to be active on the exploration front. Great. Thank you, Marie. And your next question will come from Daniel Major from UBS. Your line is open. Hi, and thanks for the presentation. A couple of questions and slightly follow-up questions, but I'll ask them anyway. On the sort of cash returns and the balance sheet, if we look at the cash generation this year and certainly if the super Cyclists out there were right. There's going to be a large net cash position at the end of the year. Can you give a preference at this stage, Special dividends or buybacks, do you intend to be exercising anything on the NCIB at this point and at the share price level? That's Yes. So I would say that given where we are in the cycle and we're high above our long term pricing and We're not at our all time high for our stock price, but we have a very good healthy stock price. It's probably less likely that we would Undertake a buyback at this point in the cycle and more likely to give returns in other ways. Okay, very clear. Thanks. And then second question, I mean, from what it sounds like on your comments around the Chapada expansion, We're not likely to hear much till the end of the year or early next year. Is it fair to assume then that it's unlikely that you Be able to deploy meaningful amounts of capital into that project until 2023. If that is the case, should we be assuming CapEx somewhere around $450,000,000 $460,000,000 mark in 2022? I'm not sure what our you'd probably be able to get the number from our technical reports because they're pretty fresh. I would say you're probably in and around the right ballpark. I mean, we go between, call it, $500,000,000 $375,000,000 depending on where we are with pushbacks in the various pits. So there is a bit of a range there. I would say averaging Yes, 400 plus or minus 100 depending on what we're doing and where we are. But I wouldn't say your number is off base without having all of the information right in front of me For that year, I wouldn't say that you're materially off base. And just is it correct to assume it's unlikely There's a huge amount of upside risk from that, driven by Chapada. No. And I would say that if we are going to invest project, it would be one with a good return. So where you have cash flow reducing in the near term, you should have a NAV bump In the long term, I think I'm just trying to remember from the budget. Jinhee, 2022 CapEx, similar levels, but slightly lower than 21%, I think, and then a little bit of a drop off 23%, 24%. Do you recall? Yes, that is correct, Marie. Great. Thanks. And your next question will come from Abhi Agarwal from Deutsche Bank. Your line is open. Good morning all. Congrats on a strong set of results. Let me search a challenging year. Thanks for taking my questions. I have two questions please. So the first one is on the balance sheet. When you think about balance sheet, is there a net cash level you think about in case you have to execute on a transaction? And my second question is a generic question on inflationary pressures. A lot of your peers who have reported have highlighted inflationary pressures coming through. Are you also seeing that come through your operations? Thank you. Sure. I'm going to ask Jinhee To feel that because I know that she's been working with the sites on our minimum cash balances and also has been monitoring the inflation and other cost So, Jahee, do you want to take those 2? Jeanine, you may be on mute. I was on mute, sorry. Sorry, I didn't catch all the first question. Can you just repeat the first question? Yes, sure. Sorry, go ahead. Sorry. So my question was, when you think about the balance sheet, is there a net cash level you think about In case you have to execute on a transaction? Yes, sorry. No, we when we think about executing on a transaction, We look to we can always borrow to execute on transaction. So we don't manage our net cash for purpose of transacting. So we look at shareholder returns from our operations and then we can look at Borrowing is needed to act on transactions. And then I think your second question was on the inflation. And overall, we're not Any significant general cost inflation at our operations at this time. Where we are seeing some inflation is or expecting some Some specific consumables, like for example, in the grinding media, we are expecting some increase there because of the current steel prices. And again, another one like diesel, again, it's another area where The price will be impacted by broader markets, but generally, I would say our operations are not seeing significant And general inflation and I think when we look at some of our maintenance service contracts, some of those many of our operations have long term So again, not seeing a short term inflation impact. On a country by country basis, I think Brazil is one that's Experienced a little higher inflation in the recent year. And I think there though at Chapada, what we have going for us Is that the exchange rate there is quite favorable and so it's offsetting any of the inflation that we might see. So again, I guess overall really not expecting we're experiencing costs in line with our expectations and more of an impact I would say on our lead And your next question will come from Ionis Maspoulis from Morgan Stanley. Your line is open. Okay. I have a couple of follow ups, if that's okay. The first on Chapada. In terms of the expansion, my understanding was If you were to go down the path of a significant expansion, let's say, in the other 50% or 100% of the existing Through the trade, that would require expense permitting process that could take a bit of time. Could you just remind us how long First production, if you were to announce a plan, let's say, 1st January 2022, How long would it take to actually get the approval and hypothetical construction timeline? And then secondly, in terms of working capital, I was just wondering because you have had around Candelaria and Chapada in Q4. Is there any excess inventory that you may have to work through? Or do you feel that Overall inventory balances and working capital general is at normal level as of the end of Q4? Thank you. Okay. Yes, sure. On the expansion permitting timelines, the permitting process in Brazil has changed Recently, it used to be based on throughput levels and tonnages and things, but now they've moved to a footprint based type of scenario. Peter, I know you've been looking into this and have been talking about the permitting timelines and potential timelines. Can you give a little more color on that? Well, it's a little bit early to say on the timelines for the project. It all depends on what alternative is Chosen at the end of the day. Permitting time line, they have been increasing. So it's also difficult to say that it's going to also reflect Finally, on what alternative is chosen. So I don't know if we can say much more now on that, Yes. I think if you look at, say, ANUIA in Chile takes It used to be 24 months and now it's probably closer to 36 months. But it would probably be Something less than that and there's probably it'd probably be less than half of that, but there might be preparatory works that you could do in the meantime and other things that you could do to advance the project while you're waiting for certain permits. So again, Peter is correct. It's difficult to say exactly, but we would anticipate that we Could start early works and do different things within the existing footprint as we wait for any major permits that are required. On the working capital excess inventory, Jinhee, did you want to address That one, I don't I'm not aware of anything, but you maybe. Yes, sure. I'd say we have a little bit more in the inventory than we did at the end of 3rd quarter, that's because we did have a shipment delayed at Candelaria. But I would say it is in line with what So I wouldn't say it's excessively too much inventory at the end of the year, but it is a little bit higher than it was at Q3. Okay, great. Thank you. Thanks again. And your next Question will come from John Tumazos from your line is open. Thank you very much. Could you review what your size thresholds are for new projects There are a few big porphyries available, but there's a lot of little projects dancing around. Yes, typically we wouldn't look at something under say a 50,000 tonne copper equivalent unless We felt there was a prospect to get it above that. And the reason for that is that An operation takes an equal amount of management time and effort if it's 20,000 tons or if it's 200,000 tons if it's got challenges. So we don't want to be in a position where we have 15 minutees and 10 of them offer you 5% of your NAV. That Sounds like a big managerial and administrative nightmare for not a lot of return for your efforts. So we'd rather Focus on things that are going to be meaningful and if we're going to acquire something to make sure that we're spending our efforts on things that are going to make a difference for the company. And then in terms of mine life, I think Eagle was a very special one for us and it remains very special in terms of Being an exceptional ore body and you'll see from the free cash flows that it's an excellent operation, we wish that it had a longer mine life. And so typically with mine life, we're looking at things of a greater than 15 year mine life And recognizing that we're lucky with Eagle that we were able to find Eagle East and that we're benefiting right now Some very good pricing. But in this business, we've been below our long term copper price for almost the last 10 years. And so if you have a short mine life and you invest at a long term pricing, you may not make your money back if you don't If you can't ride at least 1 or 2 of the cycles, then you risk not making your money back in this business. So we do look at that from time to time, but we really have been sticking to our criteria in terms of what we're looking for. Does this mean only porphyries and that you can save time by just skipping VMS deposits? No. None of our last acquisitions were porphyries. Chapada is not depending on who you ask, Candelaria is an IOCG and Eagle with Sulfide. So it doesn't necessarily mean that we won't look at those types of ore bodies. I mean, we do have very good underground Expertise within the company, we have that's one of our core skills. And so large block caves And at Candelaria, for example, we're doing 14,000 tonnes per day, which is one of the larger non block caves underground mining So I think our mines are open and we'll look at various options for things. Thank you. We have no further questions in queue. We have a Jackie Chris Colossi, John Kumase, are you finished taking your question? I'm finished. Thank you. Okay. We can make that call. Sorry, is it my turn? Okay. Sorry about that. I just hopped on again at the last second. I just wanted to circle back on your dividend. I realized that the announcement just came out today for the $0.06 dividend per quarter. And I The day a dividend is announced is probably not the right time to ask about the next dividend announcement. But I'm just kind of curious if you could talk through some of The expectations you're using when you set the dividend and I realize you've already gone through the commodity prices, but I'm thinking more in terms of like How much spending do you think that you would sort of be comfortable With I know you kind of talked about this already on net cash, but like what kind of net cash or net debt level would you be comfortable with Going forward and incorporating that into that, so the ship had expansion or any kind of new future projects. Can you give us just a little bit more color in terms of like where you might see The dividend from here, you mentioned earlier that you might prefer not to do a buyback at this But maybe some other options. So is there a possibility that you'd incorporate like a special into the mix at some point? Can you just give us a little bit of color on what you're Yes. So that's what we'll be discussing with the Board mid year. And so we'd like We've just come off a fairly rough quarter and we'd like to see a good Chunk of time with some steady production and to see the continuation of the metal prices. We also know that the market's been heating up In terms of M and A, we want to look at the opportunity set and what options there are for investing in some accretive transactions. So we'll look at that in connection with our cash balances and the expectations going forward mid year. And I'd say our general view is, you don't borrow to pay a Dividend, you borrow to invest and you pay your dividends from cash flows. So that's the mentality that we would use when we look at the dividend. And I think Jinhee talked about the net cash and we have no intention of hoarding cash on the balance sheet for a rainy day or anything like That's not what we want to do. We want our assets, including cash, to give us returns. So we'll look at that midyear. Thanks very much, Marie. Okay. Thank you, everyone for participating in the conference call and Looking forward to reporting a good strong Q1 result to you in April. Thank you everyone. This will conclude today's conference call. You may now disconnect.