Thank you for standing by and welcome to Lundin Mining's third quarter 2026 earnings conference call. Currently, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. To remove yourself from the queue, you may press star one one again. I would now like to hand the call over to Jack Lundin, President and CEO. Please go ahead.
Welcome to Lundin Mining's third quarter 2026 earnings call. Our operating and financial results were released yesterday, and the news release, presentation, and webcast replay will be available on our website. All amounts are in US dollar unless stated otherwise. After the prepared remarks and presentation, as always, we will open up the floor for questions. Today's results will contain forward-looking statements that are subject to risks and uncertainties, and we encourage you to review the cautionary notes in our presentation and our filings on SEDAR+. Joining me today on the call is our Chief Operating Officer, Juan Andrés Morel, and our CFO, Teitur Poulsen. Before turning to our results, I want to address the challenges at Caserones, which have impacted the company's performance this year.
The Atacama region experienced an exceptionally severe winter, with two major storms in July and August damaging transmission line towers and leaving the operation without power for approximately 30 days. Throughout these events, the Caserones team maintained a strong focus on safety and worked diligently to restore operations in a controlled and responsible manner. The impact has extended into the fourth quarter, with snowmelt reducing haulage rates and limiting ore deliveries to the mill. As a result, full-year copper production guidance at Caserones has been revised to 105,000-115,000 tons from the previous range of 120,000-130,000 tons. Juan Andrés will provide further detail on these challenges in the operations section. Our revised full-year consolidated copper production guidance is now 285,000-310,000 tons, while cash cost guidance remains unchanged at $1.95-$2.15 per pound.
Despite these challenges, strong commodity prices and disciplined operational performance supported another quarter of revenue exceeding $1 billion and strong cash flow. Importantly, we also continue to make meaningful progress on our growth strategy. At Chapada, we sanctioned construction of an additional ball mill as part of the Saúva growth project. Earthworks and concrete placement are underway, ball mill fabrication has commenced, and commissioning is targeted for late 2027. The finer grind will improve recoveries and allow us to capture greater value from the higher-grade Saúva deposit, adding approximately 15,000 tons of annual copper production and 45,000 oz of gold. At Vicuña, we achieved two important milestones in this quarter. First, we secured a long-term provincial royalty agreement with the San Juan government, consolidating our infrastructure obligations into a single royalty structure and providing a five-year payment holiday on trust contributions.
Second, we received regulatory approval from Argentina's electricity regulator, ENRE, to construct the high-voltage power line connecting the project to the national grid. Together with the RIGI approval received earlier this year, these milestones represent important progress towards advancing Vicuña to a sanction as planned. While we continue to navigate the challenges at Caserones, our underlying business remains strong. We have a robust balance sheet, a compelling pipeline of organic growth opportunities, and a clear path forward at Vicuña. Our priorities remain unchanged: operating safely, delivering consistent operational performance, and advancing growth strategy as we work towards our ambition of becoming a top 10 global copper producer.
Performance at Candelaria and Chapada led the way this quarter and delivered our highest gold production of the year at 37,000 oz, which drove down consolidated C1 cash costs QoQ to $2.01 per pound, excluding storm-related impacts at Caserones of $66 million. Despite the operational challenges encountered in the quarter, Q3 was one of the strongest financial quarters in the company's history. Record realized copper prices drove revenue above $1 billion for the fourth consecutive quarter, while adjusted EBITDA reached $650 million and free cash flow from operations was $418 million, putting us in a net cash position of $237 million at the end of the quarter. Year- to- date, our adjusted EBITDA and free cash flow from operations have both already surpassed full-year 2025 totals, and we expect 2026 to be another record financial year for Lundin Mining.
On capital returns, we repurchased approximately 2.4 million shares for an aggregate consideration of $62 million under our normal course issuer bid and declared our 39th consecutive quarterly dividend. In August, the board approved an increase up to $100 million to our share repurchase program for the remainder of 2026. I will now hand it over to Juan Andrés to walk through the operational results in more detail.
Thank you, Jack, and good morning, everyone. Consolidated copper production was 63,000 tons. Candelaria and Chapada had strong quarters, while Caserones was the only site meaningfully affected by the weather-related disruption. Gold production was 37,000 oz, the highest quarterly gold production we have seen this year, driven primarily by Candelaria and Chapada. Year-to-date, consolidated copper production stands at 219,000 tons across our three mines. As mentioned, Candelaria is back half of the year weighted, and we expect grades to increase to the fourth quarter to deliver a strong finish of the year. Now, let's walk through each site, starting with Candelaria. The operation delivered an excellent third quarter, producing 35,000 tons of copper, up 13% from the second quarter.
The increase was driven by a greater contribution of ore from Phase 12, which delivered higher average head grades in line with the planned grade profile for the back half of the year. Production remains on track with full-year guidance of 135,000- 145,000 tons. An important milestone at Candelaria this quarter was the substantial completion of our underground mining insourcing initiative. Mining grades and unit costs have been better than planned levels, and we expect underground mining rates to stabilize at approximately 14,000 tons per day by the end of 2027. This expansion represents a meaningful path to grow production at Candelaria. Turning now to Chapada. The operation produced 12,600 tons of copper in the quarter, up 5% from the second quarter, the highest quarterly output in the last two years, along with 16,900 oz of gold. We expect to see similar levels in the fourth quarter as well.
Throughput benefited from high plant availability and improved blast fragmentation. Chapada remains on track to meet its full-year copper production guidance of 45,000- 50,000 tons. As discussed, it was a difficult quarter for Caserones. A series of severe winter storms caused two extended production stoppages in July and August, totaling approximately 30 days of suspended operations when accounting for the time required to safely restart, including thawing the flotation banks and turning over the mills. I want to recognize the Caserones team for their outstanding work navigating these conditions safely and efficiently. Production in the quarter was 15,000 tons of copper, reflecting the impact of the storm. As we move out of the winter in the Southern Hemisphere, operation continued to face weather events of lesser severity. In October, the site received 1.4 m of snow. Snow melt has created extremely muddy conditions in the pit.
This has reduced haulage rates and limited the volume of ore delivered to the mill. Haulage speeds have dropped by 20% along with truck availability. The last two months of difficult conditions have impacted maintenance schedules and reduced fleet availability. Given the mining rates we saw in September and October, we re-forecasted production for the remainder of the year, factoring in the lower haulage speeds and maintenance time to improve the fleet availability. As a result, we have further revised Caserones' full-year copper production guidance from 120,000 to 130,000 tons to 105,000 to 115,000 tons. This is very disappointing, but it's not a reflection of the underlying asset or the team. It is a direct result of the storm events that have driven Chile's lowest copper production in 20 years.
New full-year consolidated guidance is now 285,000 to 310,000 tons, with cash cost guidance unchanged at $1.95-$2.15 per pound. I will now turn the call over to Teitur to walk through the financial results.
Thank you, Juan Andrés, and good morning, everyone. Revenue for the quarter was $1.1 billion and marks the fourth consecutive quarter of revenue generation in excess of a billion. It continued strong metal prices, enabling the company to sustain a very solid revenue profile. Year-to-date, revenue is close to $3.5 billion, up over 25% compared to the first nine months of 2025. During the third quarter, copper contributed 87% of revenue, with gold at 11%. Candelaria was the largest contributor of 53% of quarterly revenue, followed by Chapada at 24%, and Caserones at 23%, with the Caserones revenue contribution negatively impacted by the severe winter storms previously discussed. For reference, Caserones was the biggest revenue contributor for the previous three quarters, typically representing over 40% of the quarterly revenue contribution for the company.
While Caserones' revenue of $255 million in the third quarter was below the prior year quarter due to the weather-related disruptions to production and sales volumes, Caserones' year-to-date revenue of $1.3 billion compares favorably to the $1 billion generated in the first nine months of 2025. Turning to sales volumes and pricing, total payable copper sold in the quarter was 64,000 tons, slightly above production as we lowered inventory levels during the period. The realized copper price, including adjustments from prior period provisional pricing, was $6.85 per pound and is the highest realized quarterly copper price recorded in the company's history. On gold, the realized price for the third quarter was $4,321 per ounce. Year- to- date, the realized copper price was $6.32 per pound, while the realized gold price was $4,590 per ounce.
As of the end of September, approximately 69,000 tons of copper were provisionally priced at $6.55 per pound and remain open for final pricing adjustments, with the majority of this volume being priced in the fourth quarter of this year. Production costs in the third quarter were $441 million compared to $530 million in the previous quarter. As mentioned earlier, Caserones incurred $66 million of mine standby cost in the quarter relating to the weather-related suspension of operations, of which $58 million relates to operating costs. These costs are reported separately in the income statement as mine standby costs and are therefore excluded from our adjusted EBITDA and adjusted earnings calculations. Without the reclassification of certain costs into standby costs, the consolidated production costs would have been more in line with previous quarters.
Consolidated cash cost for the quarter was $2.01 per pound, which is around 5% lower when compared to the previous quarter. The cash costs do not include the standby cost incurred during the quarter. However, the cash cost metric was nevertheless negatively impacted by the lower sold volume, but this was more than offset by higher gold byproduct credits when compared to the previous quarter. Year- to- date, consolidated cash cost was $1.92 per pound, slightly below our revised guidance range of $1.95-$2.15 per pound. Chapada's year-to-date cash cost of $0.57 per pound continues to significantly outperform, driven by the elevated gold prices generating strong byproduct credits.
Candelaria's year-to-date cash cost of $2.27 per pound reflects the impact of planned lower grades in the first half of the year, which are improving as higher grade Phase 12 ore becomes more available in the second half, leading to a lower cash cost per pound. Candelaria is on track to meet cash cost guidance for the year of between $2.05 and $2.25 per pound copper. We continue to actively monitor the broader input cost environment, and this slide shows that among the biggest drivers for our input costs are diesel prices, cost of power, and labor. Labor is the single biggest input cost factor, with most of our labor costs in Chile and Brazil incurred in local currencies. Therefore, any movement in foreign exchange rates has a material impact on our US dollar C1 cash costs.
With our labor force in Chile being significantly larger than in Brazil, in addition to other normal running costs incurred in local currency, you can see that a 10% move in the Chilean pesos has an order of magnitude larger impact on our US dollar C1 cash cost compared to any other input cost factor. Diesel also represents a material input cost for the company. Over the past year, we have seen diesel move from representing about 5% of the input cost structure to now representing between 7%-8% of our overall input costs relating to our operating activities. With annual consumption relating to operating activities of approximately 175 million liters of diesel, every $0.10 per liter increase in price translates to roughly $18 million in additional annual direct cost, impacting cash costs by approximately $0.03 per pound.
The cost of sulphuric acid has been very topical in the industry over recent months, but as you can see, this represents a very small portion of the company's input cost. We typically consume about 40,000 tons of sulphuric acid a year, or roughly $10 million-$15 million annually at current prices, which represents less than 1% of the company's total production costs. When blending all these factors and looking at the realized costs year- to- date and our assumed foreign exchange and diesel costs for the remainder of the year, we retain our full year cost guidance of $1.95-$2.15 per pound. Total capital expenditure in the quarter was $220 million on a cash basis, comprising of $123 million of sustaining capital and $97 million of expansionary capital.
Sustaining capital of $123 million in the quarter was directed primarily towards open pit waste stripping and underground mine development at Candelaria, as well as TSF construction at Caserones. Year- to- date, sustaining capital is $359 million and is tracking slightly behind plan. As a result, we have reduced sustaining capital at Caserones by $20 million, mainly due to the deferral relating to a purchase of a hydraulic shovel. Expansionary capital of $97 million in the quarter was mostly related to Vicuña, accounting for $81 million, reflecting the significant step-up in project readiness activities, including detailed design and engineering, execution planning, and site-level early earthworks as the project advances towards a sanctioning decision. The balance of expansionary capital includes early-stage construction activity at the Chapada ball mill as part of the Saúva project and other site-level initiatives.
We have reduced the expansionary CapEx on the Chapada ball mill by $30 million due to the timing of payments for the fabrication of the mill falling into next year. Year-to-date expansionary capital is $234 million. Our revised full-year capital guidance is now $980 million, comprising $530 million of sustaining capital, $55 million of expansionary capital at operating mines, and $395 million for the Vicuña spend, being 50% of our equity share. Moving to the key financial metrics for the quarter. Adjusted EBITDA was $648 million, representing an adjusted EBITDA margin of approximately 58% on revenue of $1.1 billion. Adjusted operating cash flow for the quarter was $430 million, which includes a release of working capital of $101 million. Turning to free cash flow and adjusted earnings.
Free cash flow from operations was $418 million for the quarter, up 16% from $360 million in the second quarter, despite the higher sustaining CapEx incurred in the third quarter. Year-to-date free cash flow from operation is close to $1.2 billion, 50% above the full year 2025 total of $774 million. Adjusted earnings attributable to shareholders were $277 million, or $0.32 per share, up 8% from $257 million last quarter. As mentioned earlier, adjusted earnings exclude the $66 million of mine standby costs at Caserones. Now turning to the balance sheet. Our financial position continued to strengthen throughout the quarter. Net cash improved to $237 million compared to $79 million at the end of the previous quarter, an increase of approximately $160 million year- to- date.
As of yesterday, net cash was approximately $200 million, reflecting capital investment at Vicuña and other normal cash outflows in the month of October. During the quarter, we received $23 million in contingent payments relating to the Neves-Corvo and Zinkgruvan transaction that was completed last year. As part of the transaction, a contingent consideration of up to $115 million was agreed based on copper and zinc prices. To date, we have received approximately $28 million in cash consideration relating to this contingent element. Overall, the company's balance sheet remains extremely robust, and we are in a good position to fund the Vicuña project once a sanction decision is made. Our revolving credit facility was undrawn at quarter end compared to $60 million drawn at the end of last year.
As a reminder, we upsized the revolving credit facility in February this year to a total commitment of $4.5 billion, leaving the company fully funded for the very exciting Vicuña project. In summary, yet another very strong quarter in terms of financial performance, despite the headwinds that Caserones has faced from the two severe winter storms during the quarter. I'll now turn the call back to Jack for final remarks.
Thank you, Teitur. Turning to Vicuña, we achieved two pivotal milestones this quarter. First, we secured a long-term provincial royalty agreement with the government of San Juan. This consolidates our infrastructure obligations into a single royalty structure and provides the project with a five-year payment holiday on infrastructure trust contributions in exchange for an upfront commitment of $250 million on a 100% basis, or $125 million for Lundin Mining's 50% share. Second, we received regulatory approval from Argentina's electricity regulator, ENRE, to construct the high-voltage power line connecting the project to the national grid. Together with the RIGI approval received earlier this year, these milestones represent significant progress in establishing the conditions required to advance Vicuña towards sanction. In the background of this slide, you can see an image of 150-ton haul trucks being transported to site. They will form part of the civil construction and earthworks fleet.
Year- to- date, 12 have been purchased and delivered to site. Excitingly, we are also making strong progress on the technical and commercial definition of stage one . Engineering is advancing, and the Vicuña team is finalizing the bottom-up stage one capital estimate alongside further refining the execution strategy and integrated project schedule. This work is currently undergoing extensive independent peer reviews, which will ultimately support a robust and executable capital cost and delivery plan. Our focus is on completing this work, ensuring the project is sufficiently mature and well-defined, and positioning ourselves to make a stage one sanction decision before year-end. While we have faced significant operational challenges due to the super El Niño winter at Caserones, our business has demonstrated resilience, delivering strong financial results, generating solid cash flow, and maintaining a robust balance sheet.
At the same time, we continue to advance our organic growth opportunities at Chapada and are making important progress at Vicuña. We are exceptionally well-positioned to capitalize on the long-term strength of the copper market. With accelerating demand, increasingly constrained supply, and a strong operating foundation at Lundin Mining, we have an exceptional pipeline of growth opportunities to pursue. Our focus remains on delivering sustainable value to our shareholders and progressing towards our ambition of becoming a top 10 global copper producer. With that, I will now open the floor for questions.
As a reminder, to ask a question, you will need to press star one one on your telephone. To remove yourself from the queue, you may press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Alain Gabriel of Morgan Stanley. Your line is open, Alain.
Yes, sir. Thanks for taking my question, and hi, everyone. Jack, one question from my side, first to start with, is on the Vicuña spending. You have maintained your full-year CapEx at $395 million, which implies a very substantial step-up in Q4. How realistic do you see the chances that this step-up will be spilling into 2027? That is my first question. I have a second follow-up. I will stop here now.
Hi, thanks for your question. We maintained our forecasted expenditure guidance on Vicuña. I mean, we believe that at Vicuña, with the weather that we have encountered and the work that is ongoing towards the end of this year, we are going to be continuing to ramp up expenditures as we get into what will hopefully be a 2027 year where we would be formally kicking off with construction. So, overall, I think expenditures are continuing to trend up month-over-month, and so that is why we maintained our projections on the Vicuña expenditures.
Thanks. That is very clear. The second question is on Caserones. You have cut the CapEx there, I presume mostly related to some stripping activity because of the weather conditions, and yet you have maintained your volume guidance for 2027. How much risks do you see to that guidance range now that some maintenance activity has been delayed or postponed into 2027? Thanks.
Hi, Alain. It is Teitur here. We have taken guidance down by $20 million for sustaining CapEx at Caserones, and it is relating to some equipment purchases being pushed out into 2027.
Thank you. Do you see any risk—
Yeah, that's $20 million—
—to your guidance range?
Well, I mean, we have to see how the weather pans out over the last few months here in the year. I mean, historically, Caserones has not quite kept up with the budgeted projects as we've gone through the last two or three years. Of course, this year, on top of that, we've had these severe weather impacts. Let's see where we end up, but we have decided to reduce guidance by $20 million so far for the full year sustaining CapEx number.
Okay. Thank you.
Thank you. Our next question comes from the line of Orest Wowkodaw of Scotiabank. Your line is open, Orest.
Thanks, and good morning. My question is also about Vicuña. Curious what is left in terms of remaining steps before an FID decision, just given the expected timing before year-end?
Hey, Orest. Thanks for the question. We are getting close to the end of this year, and as you have seen and as we have been updating the market, we have been very disciplined and able to hit all of our key milestones, whether it be various permits, various fiscal stability agreements, both at the federal level and at the provincial level. We continue to make progress towards that sanction decision before the end of this year. Really, the last remaining step is the bottom-up capital estimate, the execution plan, the schedule, and just getting all of the details that will support stage one for the execution of stage one. Once we complete that, once the Vicuña team completes that, then it will come to the shareholders for approval.
It is really just internal work that is being done now that will support the favorable sanction decision before the end of this year.
Okay. Appreciate that. With respect to the CapEx for phase one, I realize it is not quite complete, but you must be in the later stages here. Is it fair to say that the CapEx is likely experiencing some inflationary pressures, just given the environment we are in, over and above the previous $7.2 billion estimate?
That is fair to say, Orest. I think we are working through these independent peer reviews and stress testing all the areas of the project from a CapEx standpoint, execution, and schedule. We are going to be implementing all recent input pricing assumptions. Therefore, we are also bringing the CapEx forward by over a year. We came out with the PEA in Q1, but those were really kind of prices that were back from end of 2025. Now we are bringing this forward to a January 1, 2027 estimate. We will take into consideration inflation and escalation in Argentina. It will be all updated prices that go into this bottom-up estimate.
Oh, wow. Even including current diesel pricing in terms of impact for, let us say, stripping and everything, it is going to be completely costed as of the current environment?
Correct.
Wow. Okay. Thank you very much.
Thank you.
Thank you.
Our next question comes from the line of Richard Garchitorena of Barclays. Your line is open, Richard.
Great. Thanks, and congrats on the results. My first question, on Caserones, it looks like the copper grades declined in the third quarter. Maybe if you could just talk about how the issues around hauling impacted that, and then how should we think about that going into 2027?
Yeah. Hi, Richard. This is Juan Andrés. Thanks for the question. Yes, of course, since we experienced these muddy conditions at the end of the third quarter, we had to turn to stockpiles, so that has an impact on the grades. Of course, the delay on the pit development also did not allow us to reach some high grades that were at the bottom of the Phase 6 and 6B. But those high grades are going to be pushed into 2027, so we should expect better grades in the first half of next year.
Okay, great. Maybe if I could just follow up on Candelaria, better than expected, I guess, or better than second quarter grades there. Maybe if you could just talk through what impacted that, and then maybe just overall, any early reasons that the 2027 impacts of those going into the mine plans for that.
Yeah. In the case of Candelaria, as I mentioned before, we have known since the beginning of the year that it was second half weighted. We tried to move some of the high grade from Q4 into Q3, so that in part explains the better results in Q3. But we're confident that the Q4 will deliver the high grade that is coming from the Phase 12. That high grade comes from the vicinity of some old stopes, so we're very confident that that high grade is there. So, we'll have a strong 2026 in Candelaria, and we're looking also having a very strong 2027.
Great. Thank you.
Thank you. Our next question comes from the line of Daniel Major of UBS. Please go ahead, Daniel.
Hi, there. Thanks for the presentation and the questions. I guess two questions. Firstly, on CapEx, looking into next year, appreciate, obviously we'll get the Vicuña numbers when you get the FID. But if we think about kind of baseline CapEx, $530 million sustaining, diesel pricing, I guess, higher going into next year for stripping. Can you just give us a directional steer on CapEx ex-Vicuña across the rest of the portfolio, if there's any offsetting factors that would see it not be driven up by sort of inflation in some of the input costs we're seeing?
Yeah, I mean, we're working through the budget as we speak, and that'll come up for board approval in December. Following that, we will come out with guidance, whether it's later in December or early January, yet to be decided. But I think generally speaking, there shouldn't be any significant movements on sustaining CapEx as such. Obviously, diesel prices are higher now, so we'll see how that pans out. Then, we've seen a slightly weaker Chilean pesos over recent weeks and months, so that might also have some sort of impact at the margins. But I wouldn't expect any step changes in sustaining CapEx as such.
Okay. Thank you. Then a couple of questions on Vicuña. The first one, just on the royalties, you mentioned to signing the provincial royalty agreement, five-year holiday and capped at 3%. Can you remind us what the total revenue-based royalty would be, including any other kind of associated royalties, normalized basis in first five years when you're getting the holiday on the provincial royalties?
Yeah, we will have 1.5% on that provincial, and then there's a 3% provincial royalty in addition to that. So those are the royalties we have on Vicuña.
Okay, so 4.5% is the total life of, like, over the course of the operation, normalized?
Yes.
Okay, thank you. Then the final one, just thinking about what information we're going to get with the FID of Vicuña. Obviously, we'll get a CapEx number. Will you be providing updated kind of medium-term production profile, or is it just the Josemaria sort of development? Then the second one, you previously discussed the desire to accelerate phases two and three in order to bring forward the high grades, maximize NPV. Will there be any additional capital sort of sanction beyond phase one at this stage?
Yeah, thanks for the question. When we look to sanction stage one, we will be coming out with an update on the CapEx and schedule for the execution of stage one. All of that will be supporting an eventual update of the district. Recall in Q1, we came out with a district PEA, so we are now moving towards a district PFS, which we are aiming to have completed in the second half of 2027. This interim step of getting stage one sanctioned, we will come out with information specifically on stage one and any relevant information that we feel we can update on stages two and three, but all of that supports a district PFS study.
The second question that you asked, I mean, of course, everything that we are doing is looking at finding areas where we can maximize the value of the project, bringing in higher-grade material and bringing in production of the later stages as soon as reasonably possible. All that is being worked through right now with the Vicuña team. Overall, I think we are doing a very good job on continuing to de-risk Vicuña, but what you can expect to see is really just an interim update on stage one as we look to sanction that, followed by a district-level study towards the back half of next year.
Okay, great. Thank you. So it is just CapEx phase one number and some scheduling of the CapEx really is what we should be expecting at this stage.
Yeah, and if there were to be expenditures that are put towards stages two and three, we would, of course, highlight what those costs are associated to. So, we will provide as much clarity as possible, but really the update, the fulsome update will be through a district study that comes later.
Great. Thanks a lot.
Thank you. Our next question comes from the line of Matthew Murphy of BMO Capital Markets. Please go ahead, Matthew.
Hi. Can you elaborate a bit more on Vicuña preparation? Kind of interested, given the winter, what state the site is in now? Is it still snow-covered? Did the winter teach you anything or challenge any assumptions you had about what it is going to be like to build or operate there? I am just wondering what the hiring environment is like. How is the workforce preparation coming?
Hey, Matt. Thanks for the question. Obviously, we are still in this El Niño season. The winter has been extended in the southern hemisphere, so the challenges that we are encountering at Caserones and the weather that we are seeing at Caserones is very similar over at the Vicuña project, given that they are only 40 km away from each other. However, the conditions are a bit more favorable on the Argentinian side of the district, and we do still have a lot of snow covering some of the assets, but we have been able to move personnel and equipment. As I mentioned in the presentation, we have got 12 of our haul trucks now being assembled at site, and we are working on earthwork activities, so progress is continuing to be made.
But as it pertains to kind of the lessons learned from the experience that we are having at Caserones, I will hand it over to Juan Andrés, because there are a number that we are experiencing that we are looking to apply to the execution plan for Vicuña stage one.
Thanks, Jack. Hi, Matt. As Jack said, as you know, we experienced a very, very severe winter in Caserones, the one with the highest snow precipitation on record in Caserones. So we took the advantage to do an independent review, so we brought some specialists to help us collect all the lessons learned, and those are being captured in a report that we will hand it over to Vicuña to share the lessons learned so they can be incorporated either during the construction period and then, of course, during the operation.
Great. Thanks. And then just on the hiring?
Yeah, so we have been, I think, as I mentioned in an earlier question, kind of ramping up our expenditures month-over-month, and the same goes for hiring. I mean, we have been able to develop a pretty strong capacity-building program, getting ready for construction readiness activities. And so I think, given that the Vicuña project will be kind of the first major one out of the gates, we are not experiencing significant challenges in terms of attracting talent. But I think, more broadly in this industry, we are, of course, seeing pressures when it comes to getting the right experts in the field. But we are addressing that. We have got a good team. We have already been able to ramp up with a significant amount of staff, and so we will continue to work through that into the new year.
Great. Can I ask one more different topic on this corporate tax reduction in Chile? I guess that's most likely to affect Candelaria then? The Caserones tax stability agreement ends, I think, 2028, and maybe you have some tax loss pools there. Any thoughts you could share about how we'll see that come into the financials?
Yeah. Hi, Matt. That's correct. That was enacted in October, so after the third quarter end. You're right in that it'll impact at asset level, it'll obviously impact Candelaria, where we do pay corporation tax QoQ , whereas at Caserones, as you mentioned, we still have significant tax losses, so we're not projecting to pay any cash taxes there for the foreseeable future. Ultimately, this will obviously be cash flow accretive at the asset level. But the withholding tax on dividends when you take the money out of the country still remains at 35%. Our structure at the moment is we have intercompany loans going into Chile, so we are still repaying those loans, which obviously in the near term, we will avoid those dividend withholding taxes. Ultimately, when those loans have been repaid, we will move into a 35% withholding tax on dividends.
As such, the lower corporation tax rate at asset level, when that phase kicks in, will not benefit the company as such.
Got it. Okay. Thanks, Teitur.
Thank you. Our next question comes from the line of Matt Greene of Goldman Sachs. Please go ahead, Matt.
Hi, everyone. Just one question from me, tied to perhaps this one for you. Just the standby charges you incurred in the quarter, could you just walk us through how you get to that number? Is this downtime or costs incurred or lost revenue? Just keen to know how you get to that number. Has that been contained in Q3, or should we expect some sort of charge in Q4 as well?
Yeah. I mean, the way we derive that is we look at all the normal direct costs, then we prorate it on what uptime did we achieve in the third quarter. I mean, you can't charge that to inventory because you didn't have any production to carry the inventory against, so you have to expense it immediately. We were looking at mill uptime in some cases, and just normal production efficiency on some other cost items. It was a little bit of a blend of factors going into that. Out of the $58 million directly relating to OpEx, around about $21 million were actually costs incurred because of recovery exercises as the snow hit. It was over and above the normal production costs, if you like.
We had $21 million of direct snow recovery costs, then the delta around about $37 million was reclassified from normal production costs into standby costs. The other number that makes up the $66 million is then the depletion charge of $8 million, which we also prorated according to uptime performance during the quarter. In terms of impact on Q4, I would say it's early days, but I don't believe we will have any further charges into Q4.
Got it. That is clear. And obviously, you cannot control the weather. Is this something Would insurance cover this? Is this something you are looking to explore?
Yeah, no. The stoppages have not been long enough for business interruption insurance to kick in on this, so there will be no insurance.
Got it. Very clear. Thanks very much.
Thank you. Our next question comes from the line of Chris LaFemina of Jefferies. Your line is open, Chris.
Thanks, operator. Good morning, guys. My questions have been answered. Just one remaining question. Have you guys considered potentially hedging some of your copper sales to lock in cash flows? I know your policy historically, your philosophy historically has been to not hedge, but would you consider hedging to lock in cash flows ahead of a kind of large CapEx pipeline? Thanks.
Hey, Chris. Thanks for the question. I think we're always looking at those different opportunities. We haven't done that historically. I mean, we've got some gold hedges that exist now that are rolling off at the end of this year. But for copper, given it's our main commodity, historically we haven't done that. We always look if there's opportunities in the market, but right now, we've avoided it. I mean, we see a strong copper price environment. Fundamentally, we do believe that the prices are going to remain strong. There's some near-term volatility, and we've also seen some of our peers and some other Lundin Group companies looking at hedging their main commodity when they're going into heavy CapEx periods. So it's something that we look at, but we haven't locked in anything yet.
Great. Thank you for that.
Again, to ask a question, please press star one one on your telephone. Our next question comes from the line of Anita Soni of CIBC World Markets. Your question, please, Anita.
Hi. Thanks for taking my question. Most of them have been asked and answered, but I just wanted to follow up on Caserones. Are there any knock-on effects going into 2027 that we should consider in terms of sort of the ore haulage delays? Will that change where you would have originally thought you would have been in grade sequencing?
Hi, Anita. This is Juan Andrés. Thanks for the question. As I mentioned before, we were considering some high grades to be mined in the fourth quarter, but given this delay of approximately one month, those high grades are going to be pushed into 2027. We will see an improved grade profile in the first quarter of next year. But in general, we're still keeping the same mine sequencing as our long-term mine plan, so no big changes there.
Okay. All right. Thank you very much.
Thank you. As there appear to be no further questions in queue, that does conclude today's conference call. Thank you for participating. You may now disconnect.