Global Net Lease Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 4, 2023

There are 13 speakers on the call.

Operator

Good morning, ladies and gentlemen, and welcome to the London Mining First Quarter 2023 Results Call and Webcast. At this time, all lines are in a listen only mode. Following the presentation, we will conduct a question and answer session. This call is being recorded on Thursday, May 4, 2023. I would now like to turn the conference over to CEO, Peter Rockendale.

Operator

Please go ahead, sir.

Speaker 1

Thank you, operator, and thank you, everyone, for joining us today. I will draw your attention to the cautionary statements on Slide 2, We will be making several forward looking statements during the prepared remarks and likely during the Q and A. On the call to assist with the presentation and answer questions are Tyler Polson, our Senior Vice President and Chief Financial Officer and Juan Andres Morel, our Senior Vice President and Chief Operating Officer. Before we discuss our results, I would like to compliment our team on an exceptional start to the year with health and safety. Our efforts across the With visible felt leadership and the implementation of FRM fatal risk management has brought a discipline that is already impacting our team.

Speaker 1

Health and safety has always been a key value at Lundin Mining. And while we have made good progress, we will continue to strive for even greater results. Moving to our quarter. We delivered solid operating results across the portfolio producing nearly 103,000 tonnes of copper equivalent metal. Copper production increased by approximately 10% over the Q4 of last year, with particularly strong performance from Candelaria And with Chapada operating as per plan during the rainy season.

Speaker 1

Zinc production also increased 10% quarter over quarter With the zinc expansion project at NevescoRow continuing its ramp up and achieving record quarterly production in addition to zinc driven performing well. With a strong operating performance, we generated attributable net earnings for our shareholders of over $145,000,000 and adjusted EBITDA of over 3 $35,000,000 Operating cash flow, adjusting for the working capital draw, was $235,000,000 And free cash flow from our operations was over $70,000,000 Our balance sheet remains very strong with $1,700,000,000 of liquidity. As Tyler will speak to, we are realizing the benefits from the foreign exchange hedging program entered into late last year. And in April, we initiated a diesel hedging program to protect the operating cost structure at Candelaria. Our focus continues to be on growth.

Speaker 1

However, we will also continue to be very disciplined in how we allocate our capital. With yesterday's financial results, Our Board of Directors has maintained our peer leading regular dividend of CAD 0.09 per quarter or CAD 0.36 on an annualized basis. On the growth front, we're very excited about our recent acquisition of Castrone's. I was in Chile last month with a number of my colleagues And much of the integration work has begun. Both our Candelaria and Casaroni teams are looking forward to working together to create even further value.

Speaker 1

Also, it was evident after spending time with numerous government and regulatory officials as the transaction has been very well received in country. Casaroni's complements our existing operations and we believe will enable us to unlock synergies in the future as we integrate our teams and resources. In particular, Casa Roni's proximity to Candelaria will allow us to leverage our knowledge, experience, relationships, Supply chains and potentially existing infrastructure in the region. The transaction is immediately accretive on key cash flow and other financial metrics, We will continue to remain low financial leverage post the acquisition. We also continue to advance our large scale Jose Maria copper gold project.

Speaker 1

Detailed engineering currently stands at 40%. As I'm sure most on this call are aware, much has occurred in the Vicuna District Since our acquisition of Jose Maria, including our most recent purchase of Castoroni's, we will continue to progress our Jose Maria project in a prudent manner And take into consideration many of our learnings over the last year with respect to the region. We announced the 1st mineral resource estimate for the Siouba deposit in February. The maiden estimate is nearly 180,000,000 tonnes of indicated resource containing £1,300,000,000 of copper and 1,100,000 ounces of gold. We expect the estimate to increase with ongoing exploration efforts.

Speaker 1

At Candelaria, study work evaluating expansion of the underground mines We're looking forward to updating the study within any new information and making an investment decision upon receipt of our 2,040 EIA. In summary, Lending Mining delivered a strong Q1 and is well positioned to deliver on our strategy of operating, upgrading and growing A base metals portfolio that provides leading returns to our shareholders. I will now turn the call over to Juan Andreas to provide a summary of our production results.

Speaker 2

Thank you, Peter. Well, as Peter mentioned before, we produced approximately 103,000 tonnes of copper equivalent metal in the Q1. Copper production of 61,500 tonnes increased 9% over the Q4 of last year. Candelaria had a strong Q1 processing over 7,200,000 tonnes of ore. Chapada copper production declined Quarter over quarter as expected with lower head grades and recovery rates as the operation managed the Q1 rail season well as Peter mentioned before.

Speaker 2

Copper production at Nevers Gorgvo, Eagle and Zingruven all increased over the Q4 of the last year. Copper production is tracking well to annual guidance of 236,000 tonnes to 260,000 tonnes. Zinc copper production increased 10% quarter over quarter to over 48,500 tonnes. Rampart of the zinc expansion project at Neves Corvo progressed in line with plans, delivering its 5th quarter of sequential production improvement, With production increasing 13% over the Q4 of last year, zinc production throughput increased 10% over the last quarter, Processing 510,000 tonnes of ore and recovery improvements to 79%. Zincgruvan has had a good start of the year, producing nearly 20,800 tonnes of sand.

Speaker 2

Zinc production is tracking well to annual guidance of 180,000 to 195,000 tons As production is expected to increase over the course of the year with initiatives to enable ZEP to consistently achieve nameplate capacity and recovery improvement. Nickel production of 3,700 tonnes was lower Quarter over quarter as expected with plant grades profile at Eagle. Both copper and nickel production at Eagle were impacted in the first Quarter by end planned downtime of 1 of the ball mills, which has been rectified and rehabilitation work on the main ramp that limited ore production from Eagle East as well as winter weather conditions in the Upper Peninsula to a lesser extent. Even with the slower than planned start of the year at Eagle, nickel production is tracking to our annual guidance of 13,000 to 16,000 tons. Gold production was 36,000 ounces for the Q1, with Candelaria having a strong start of the year and Chapada having operated Through the rainy season as planned.

Speaker 2

Gold production continues to track well to our annual guidance of 140,000 to 150,000 ounces. All in all, an operational strong start of the year. I will now turn the call over to Tyler to provide a summary of our financial results.

Speaker 3

Okay. Thank you, Juan Andreas, and good morning, everybody. Moving to Slide 6. As Peter mentioned, we generated meaningful adjusted operating cash flow and free cash flow from operations in the Q1. Starting with the top line, we generated over $750,000,000 in Revenue.

Speaker 3

Our sales remain leveraged to copper with the metal generating 70% of the quarter's revenue. Zinc and gold contributed 13% and 8%, respectively, while nickel contributed 6%. Other revenues include sales of lead, cobalt, PGMs, iron and other byproduct metals. With the price of copper and several of the other metals we produced increasing during the quarter, revenue was positively impacted by $40,000,000 of prior period price adjustments. A summary of the realized copper, zinc and nickel prices for the quarter are presented in the charts on this slide.

Speaker 3

Ultimately, we realized prices of $4.49 per pound of copper, $1.39 per pound of zinc, dollars 7.36 per pound of nickel and 2,074 dollars per ounce of gold for the Q1, including the adjustments.

Speaker 4

At the

Speaker 3

end of The Q4 approximately 89,000 tons of copper were provisionally priced at $4.08 per pound and remain open for final pricing adjustments. As did over 41,000 tons of zinc at $1.33 per pound And over 2,000 tons of nickel at $10.75 per pound. On Slide 7, Production costs totaled nearly $420,000,000 in the Q1, an improvement of 7% compared to the Q4 of last year. The decrease is largely a result of improved prices of consumables, primarily at Candelaria and Nevis Corvo and particularly diesel and electricity compared to those of 2022. The chart on this slide presents the relative impact of The key drivers of the total operating and capital cost by operation for the quarter.

Speaker 3

Caldelaria's production cost improved 9% compared to the Q4 last year, benefiting from the lower rated electricity contract that commenced at the beginning of this year, which more than halved the per kilowatt hour cost quarter over quarter. The new PPA with our existing provider also ensures a minimum of 80% renewables in the energy mix, Prioritizing Wind and Solar. The new 3 year labor agreements with the 2 remaining unions were reached in the Q1 impacting Candelaria's production costs and cash flow. On a cash cost basis, the impact was $0.08 per pound of copper in the Q1. Candelaria's cash cost guidance of $1.80 to $1.95 per pound of copper in 2023 remains unchanged.

Speaker 3

Chapada production costs decreased roughly 20% compared to the Q4 of last year. While realized diesel prices did improve modestly, much of the quarter over quarter change, owes to how the operation is managed during the rainy season with a greater portion of the move feed being from previously stockpiled ores. Chapada's cash cost guidance of $2.55 to $2.75 per pound of copper in 2023 remains unchanged. Davis' cargo production cost increased 9% compared to the Q4 of last year, primarily due to the higher zinc production volumes. Production costs benefited from the easing of inflationary pressure on consumable prices, in particular electricity, where the realized rate in 1st quarter was less than half of that experienced for much of last year.

Speaker 3

Cash cost guidance is $2.10 to 2.30 Per pound of copper in 2023, with improvement expected as zinc and lead production volumes increase with the continued ramp up offset towards nameplate. Eagle's production costs improved 10% quarter over quarter, though cash costs were impacted by lower nickel sales volumes. Cash cost guidance is for $1.50 to $1.65 per pound of nickel in 23 and is currently trending higher with the expected year on year increase primarily our reflection of the plant lower production volume. Zinc Ruins production costs were consistent with those of the Q4 of last year. Cash cost guidance is for $0.60 to $0.65 Per pound of zinc in 2023, net of the lead and copper byproduct credits.

Speaker 3

Capital expenditures are tracking well to our guidance Sustaining CapEx of nearly $160,000,000 in the quarter compared to our full year guidance of $700,000,000 Expansionary capital expenditure on the Los Maria project during the quarter were approximately $90,000,000 in support of advancing the project, including the continuation of detailed engineering, procurement of long lead equipment and pre construction activities such as road upgrades and geotechnical work. Lastly, on this slide, we continue to realize the benefits of our foreign exchange hedging program intended to better visibility on our USD requirements of future operating costs and CapEx. In the Q1, we realized a gain of $14,000,000 Additional unrealized gains bring the fair value of the onset of contracts to $85,000,000 at the quarter end. As Peter mentioned, in early April, we initiated a diesel hedging program to protect the operating cost structure at Candelaria, where we operate our largest open pit mine. We have initiated diesel swaps representing approximately 75% 50% of the attributable purchases We forecast for the remainder of 'twenty three and all of 'twenty four, respectively.

Speaker 3

Our key financial metrics are presented here on Slide 8. 1st quarter revenue, as I said, was over $750,000,000 which was a slight decline quarter over quarter with $35,000,000 less of positive pricing adjustments in the current quarter. We generated adjusted EBITDA of over $335,000,000 and adjusted earnings were over $125,000,000 Adjusted operating cash flow was $235,000,000 and free cash flow from operation over 70,000,000 Details of the adjustments are broken down in our MD and A disclosure. We remain in a strong financial We finished the quarter in a very modest net debt position of $35,000,000 and today have a net debt position of approximately 93 We have significant liquidity of approximately $1,700,000,000

Speaker 1

And I think

Speaker 3

it's fair to say that the strength of our balance sheet and our funding capacity are 2 of the levers that enabled us to acquire Casa Ronis. Upon closing of the acquisition, our leverage will remain conservative given our overall net debt ratio and the additional contribution of EBITDA from Casa Romas. We will remain well on-site with our debt covenants after closing of the Casa Romas transaction And our liquidity headroom will also remain at a robust level. Based on our latest disclosed net debt position of $93,000,000 and coupled with the further drawing of 800,000,000 Open closing of the Casa Ronin transaction would leave a net debt position of approximately €890,000,000 before Accounting for the likely net cash position that will exist within the Casa Roni's locked box transaction mechanism. The transaction structure is centered on the lockbox principle with lockbox date being 31st December last year with a 0 debt and 0 cash balance as of that date.

Speaker 3

This means that by the time the transaction closes later this year, The company that we are acquiring a 51% stake in is likely to have accumulated a net cash position at the point of the transaction closing. Slide 9 presents greater detail as to sources and uses of cash in the Q1. Before changes in working capital, the direction and timing of which is heavily swayed by provisional pricing, our operations generated $185,000,000 a decrease of roughly $7,000,000 with cash flow from operation primarily used upon sustaining and expansionary investments in our assets. With that, I will now turn the call back to Peter.

Speaker 1

Thank you, Tyler. Slide 10 highlights the meaningful scale and material growth of our copper portfolio. As mentioned, we're very excited about the Casaronis acquisition. Casaronis complements our existing portfolio with large scale and long life copper molybdenum production In a jurisdiction which we already operate in and know well. Over the last 5 years, Casaroni has produced approximately 130,000 tonnes of copper concentrate and On a pro form a basis, Castrone's would have increased our consolidated copper production by over 50% last year.

Speaker 1

Closing the acquisition remains on track for the Q3 of this year, and our technical team is working hard to be in a position to publish An updated NI 40three-1 101 technical port on or prior to closing. As Tyler mentioned, we also have the option to Purchased another 19 percent of Castoronies for $350,000,000 and the effective date of the ownership is at the beginning of this year. We continue to make good progress advancing our world class Jose Maria copper gold project and continue discussions with potential partnership groups. We will continue to advance the project in a deliberate and disciplined manner. Candelaria's life of mine has been extended to 2,046 The base case plan of the corresponding technical court does not yet include the Candelaria underground expansion project, which has the potential to have roughly 20,000 tonnes of copper production per year, nor does it include the potential restart of the El Capirosa mine.

Speaker 1

And lastly, on this slide in February, we announced the maiden indicated resource estimate for the Saiwu discovery and view it as the first of many iterations of increasing mineral estimates to come. I also want to take this opportunity to highlight the significant exploration potential within the emerging Pecuna district on our existing land package. At the top of the figure on Slide 11, with Caserones, We will be acquiring a large package of over 58,000 hectares in Chile of highly prospective and underexplored land with several near mine charts ready for drilling. The castoronies claims about the land package of NGEX Minerals' large Los Alamos copper gold deposit in addition to some of NGEX's more recent Positive exploration results. The light green and pink shading on the map indicates our Jose Maria land packaging claims.

Speaker 1

Also illustrated is planned Jose Maria infrastructure, including the process plant, tailings facility and the Vadadero camp. We believe Jose Maria is well positioned to be the center of future development and expansion for this emerging world class district. Some of the top exploration targets on the Jose Maria property are outlined on the map, including Pochua Cliffs, Ortones, Los Pylos and Jose Maria at depth. We will begin drilling on many of these targets this year. In conclusion on Slide 12, We have a very desirable portfolio of long life quality mines and are advancing meaningful growth projects in a disciplined manner.

Speaker 1

We delivered solid performance in the Q1, leading to strong operating cash flows and a strong financial position from which to grow. We remain well positioned both operationally And financially to continue to deliver consistent results for the balance of the year and beyond. And with that, operator, I would like to open the lines for questions.

Operator

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Your first question comes from the line of Ioannis Masvoulas from Morgan Stanley. Please go ahead. Good

Speaker 4

morning, Peter and team. Thanks for the presentation. A few questions from my side and starting with Jose Maria. It seems to me that the messaging has changed a bit. You haven't reiterated explicitly the time line for a CapEx update in the second half of this year.

Speaker 4

You now refer to an updated EIA submission by Q2 2024 and you show the slide on the Cunha District Optionality. What's your latest thinking here on the best way forward for Josemarie and what are the associated time lines? And maybe if you can share our latest views around the optimal configuration and potential CapEx, that would be great. And I'll stop here. Thank you.

Speaker 1

Thank you. Thanks for the question. We continue to progress the technical work as mentioned in the presentation, but arguably, That's a good observation, probably at a bit of a slower rate. The reason it's a bit of a slower rate is really the findings that we've had over the course of the last year And then also taking into consideration the Castrone's acquisition. So we were trying to do a series of trade off studies, which Take time and whether or not we can benefit some with some of the infrastructure that we now have in place.

Speaker 1

We just thought that would be a prudent approach given the materiality of some of that infrastructure. Also, there has been a lot of exploration success in the region, And we just want to make sure that some of the decisions we've made with respect to positioning of the mill, etcetera, are Still 100% the best decisions given the development in the region. So nothing major that just making sure we're making all the right On that front, we're still pushing to make those decisions towards the end of this year. In parallel, we've been very, very busy On a lot of the partnership discussions, so that hasn't slowed down. I've been on the road for the better part of the last few weeks in a few different jurisdictions.

Speaker 1

And we are looking to maintain that kind of structure, if you will, of a partnership. The other area maybe I would add is, There has been information kind of coming out of Argentina with a few potential changes on how they deal with blue chip swaps, Currency controls, etcetera, many of these things would have a pretty material positive impact on the project. We're trying to get that information and take it into consideration, but it's also difficult because it's an election year. We're starting off with Provincial election then moving to federal. So getting that information kind of finalized is arguably a bit slow at this time line.

Speaker 4

Understood. Thanks very much, Peter. That's very clear. And I guess to your last point, would you expect Any major update on the fiscal front before the elections? Or is it more of a 2024 story as things stand?

Speaker 1

Yes. I would be surprised if it comes out prior to the election. So it could be a late 2023, arguably, And if not, early, early 2024.

Speaker 4

Perfect. Thank you. I'll join the queue again. Thank you.

Operator

Thank you. Your next question comes from the line of Ralph Raffiti from 8 Capital. Please go ahead.

Speaker 5

Good morning, team. Thanks for taking my questions. Peter, the MD and A at Josemaria talked about Procurement of some long lead equipment. Just wondering what specifically those items are? Where have you needed to get into the Even though this you're now going at a slower rate, is it SAGs, is it shovels, trucks?

Speaker 5

A little bit more specific on that would be helpful.

Speaker 1

Thanks, Ralphie. It's more we don't need to get in the queue. We were in the queue quite a long period of time ago. So it's mainly on the milling and crushing side. Most of those items, quite frankly, have been complete.

Speaker 1

And arguably, I would say at the end of next quarter, there probably wouldn't really be any outstanding items And the long lead items, if you will, in the queue. So it's just the ones that were over quite a period of time ago that are Being completed as we speak and those are the two areas in particular of focus.

Speaker 5

Okay, great. Yes. You also talked a little bit about the Jose Maria regional exploration on those three targets. I'm just wondering when we can get a little bit more of a strategy on regional exploration at Caseronis, right? Does that sort of fall behind Josemaria in terms of its Priority or are you waiting just more until you get sort of integration of the asset to look at exploration?

Speaker 1

Yes. I would say our exploration teams are already talking. I was just down in Chile for a pretty extended period of time and having meetings both with Caserones and Candelaria, the teams have really hit it off, which is great. So I think this is going to be A pretty quick integration, if you will, and then we focus kind of Phase 2 on the local synergies and then expanded synergies. We've got a fairly extensive process in place, and we have someone that actually is leading that process.

Speaker 1

From an exploration perspective, we've already come with a proposal for a budget at Caserone's, I'm keeping in mind that there's about 58,000 hectares at Castrone. So it's a huge footprint, arguably double the size of Candelaria. We have maybe 8 or 9 specific targets and one of the ones that's of particular interest, if you recall, Some of the most recent drills also came out from Los Olados. We're about 50 meters from the Castoroni border. So I think we have a pretty good understanding of the geology of that area and that was is going to be a focus.

Speaker 1

We are getting So we'll see what we can get done. But I mean there's no question that both Casterone's and Hossia Maria are going to be a huge, Huge focus for us this year and next year. And we spent a fair bit of time actually yesterday in our board meetings outlining the plan to our board.

Speaker 5

That's good to hear. Thanks for that update.

Operator

Thank you. Your next question comes from the line of Daniel Major from UBS. Please go ahead.

Speaker 6

Hi there. Yes, thanks for questions. First, just a question on the operational side. It was a good Performance in Q1. And if I look at the run rate of certain metrics, you look very well positioned versus The guidance for this year, particularly, if I look at the ramp up for the ZEP at Neves Corvo, I mean, you previously Indicated a sort of sequential improvement in zinc production through the year, but the current sort of Q1 run rate would certainly be achieving or above guidance.

Speaker 6

So I guess, is there some upside risk or conservatism built in, particularly the Neves Corvo guidance for this year? I could probably say something similar around the sort of run rates in terms of throughput at Candelaria. So yes, if you could just give us a bit more color there.

Speaker 2

Good morning, Diane. This is Juan Andres. Thanks for the question. I think we put together a very Strong and robust budget for the year, and Q1 is tracking according So at this time, we don't see a need to change any of the guidances in either Neves Corvo or Candelaria.

Speaker 6

Okay. Thanks. The second question, at the time presentation when you announced the Casaroenas acquisition, you made some commentary around, I think it was a 45 day time line before publishing Technical report or updated guidance on the asset, can we get an update there? And should we expect that before the deal closes?

Speaker 1

Thanks, Dan. It's Peter back to Peter here, sorry. No, I think when we made the announcement, if you made forward looking statements, it then triggers a time line for which You have to get the technical report out. So our thought is, I think it's best to put the technical report out if we can exactly at closing. So therefore, we're going to continue to maintain avoiding the forward looking statements.

Speaker 1

And right now, from a closing perspective, we are tracking extremely well To probably the very early part of Q3.

Speaker 4

Yes.

Speaker 6

Okay. Thanks. And one more if I could, just on the bigger picture around Jose Maria and etcetera. I mean, You mentioned in the past looking at multiple scenarios, one stream being Sort of offtake type silent partner and the other selling a larger stake to one of The big mining companies, can you give us any color in your recent discussions as to which Pathway is looking like the more likely option?

Speaker 1

Yes. I mean, I've been on the road a fair bit over the last few weeks and meeting with many of these different counterparties. I would say that The proposal that we said from the very beginning, which would be like many of the other South American big projects where Perhaps you have a major in there and then maybe even a smaller trading house. That would be the most likely structure we would try to accomplish And the discussions we've had to date seem to be supporting that.

Speaker 6

So just to be clear on that, That's more than one counterparty with a major as an operator. Is that what we should be thinking?

Speaker 1

Well, I would start off with probably one larger partner, as you said. It doesn't definitively mean who the operator would be. And then it just does give you the opportunity to bring in someone smaller, but that would be a second stage approach.

Speaker 6

Excellent. Thanks. Thanks.

Speaker 1

Okay. Hope that answers your questions. Sorry.

Operator

Thank you. Your next question comes from the line of Bryce Adams from CIBC. Please go ahead.

Speaker 7

Yes. Thanks, Peter. Good morning. On the back of the Casa Ronis announcement, I was going to ask on Around potential upcoming changes to taxes and royalties in Chile, can we get your updated thoughts on changes to the royalty bill? And when you think that we're likely to see a final outcome?

Speaker 7

Thank you very much.

Speaker 1

Sure. Well, as I said, I was just down And Chile, I found the tone, was quite positive in this area. We had a great meeting with the Minister of France, Maria Masel and Myself and Juan Andres spent a fair bit of time with him as well as the Minister of Mines. And I would argue that their tone is being Every time we meet with them, it's more and more moderated. And in fact, when we were there, there was a proposal put forward for a cap at 48 47%, sorry, And that was rejected.

Speaker 1

So the trend continues to go in the positive sorry, it is a positive trend, so we're quite happy with that. Andreas, I don't know if you want to add to that. Yes, because we are both in the same meeting. So I think from where they first started talking way back when on some pretty high numbers, Every time we have a meeting, it keeps getting better and better.

Speaker 7

When was the 47%, 48% cap rejected. I recall a 50% proposal, but that was going back to earlier in April.

Speaker 2

Yes. 3 weeks ago approximately, it was a modification presented by the government to the bill.

Speaker 7

All right. Perfect. Thanks for the updates. Appreciate it.

Speaker 1

No worries.

Operator

Thank you. Your next question comes from the line of Greg Barnes from TD Securities. Please go ahead.

Speaker 8

Yes. Thank you. Peter, I just want to go back to your answer to Ralph's question about the long lead items. Am I correct in understanding that all of the Milling and crushing equipment, all the major components have been ordered or in fabrication?

Speaker 2

Yes.

Speaker 8

Okay. I guess that's good news. Yes. And I would say

Speaker 1

more than fabrication, they're basically complete.

Speaker 8

They're complete. Okay. Yes, secondarily, on Jose Maria and the discussions with the government around the stability agreements, are you having sit down Face to face concentrated discussions with them at this point? And if not, when do you think you actually get to that point where you're sitting down with them and you're hammering out an agreement?

Speaker 1

We've had those discussions face to face both at the provincial and federal level. And in some cases, we've had actual agreement. I would say just last week that there was further discussion, but it was not face to face. And I have just my own personal view with the elections coming up, I suspect some of those face to face discussions in the near term may get a bit more challenging just to be able to hold.

Speaker 8

So is there a structured process around this? Is there a set schedule about meetings and discussions and a working document that you're putting together To pull together a final agreement, I just want to understand what the process is and how concentrated and how focused the discussions are?

Speaker 1

Well, there's a working document, but as far as having it on a time line, it's not quite that formalized. And I think again it's just because I mean the reality is you could have a new governor in short order, right? So That's why we're just taking a bit more of a cautionary approach on the timing and some of that is actually spilling into the broader Jose Maria timeline, if you will. Okay. Because you need to get those things out of the way.

Speaker 8

Which things out of the way? Sorry.

Speaker 3

Just bringing all the elections.

Speaker 8

Right, obviously. Okay, okay. Good enough. Thank you.

Speaker 1

No problem.

Operator

Thank you. Your next Question comes from the line of Stefan Ioannou from Cormark. Please go ahead.

Speaker 9

Thanks very much guys. Just maybe just a follow-up on Ralph's question as well just on the exploration. Outside of Casterone's on that slide you show on Slide 11, do you think we'll actually see some drilling then at the Patroquis and Portonis and Las Palas this year, just Given the success NGEX has had right there as well?

Speaker 1

I think that is very much a priority for us. We've already started discussions on whether we can a couple of rigs over there. You have to just keep in mind that it is shifting into winter season. So that gets a bit challenging. But I would say, from the Jose Maria side, it is a very, very much a priority.

Speaker 1

And we have a view on which ones we should start with 1st and we already have some locations in mind and there's a budget that would be allocated for it.

Speaker 9

Okay, great. And you guys have like permits or whatever required to go in and actually put a rig up on all those right now? Or is that still in the works as well?

Speaker 1

There are some areas where we have permits, some that are still awaiting.

Speaker 9

Okay, okay, great. Thanks very much guys.

Operator

Thank you. Your next question comes from the line of Gordon Lawson from Paradigm Capital. Please go ahead.

Speaker 8

Thanks for taking my question. I just have One easy one for you here. So with respect to synergies, at Kessaron and Plaid, would that include a possible expansion Of the SFPW plant could hose in marine oxide?

Speaker 1

No, we haven't taken that into consideration at this stage. I mean, perhaps it's Something down the road, but it hasn't been factored in. Most of the synergies that we're talking about right now will begin on the Chilean side And our focus is with Candelaria and also heading all the way down towards Caldeira with our pipeline, Port desalination plant, things of that nature. So the low hanging fruit will be G and A procurement And just sharing of knowledge and certain skill sets that are best achieved at Caserone's or at Candelaria.

Speaker 8

Okay. Thank you very much.

Speaker 1

My pleasure.

Operator

Okay. Your next question comes from the line of Jackie Zbielowski from BMO Capital Markets, please go ahead.

Speaker 10

Thanks very much. Actually, the question that Gord just asked Was basically what I was going to ask, but can you talk maybe about what we're going to see in the technical report that comes out? Are those synergies With Candelaria going to be included in that tech report or would that be some future upside?

Speaker 1

No. That wouldn't be included in the tech report. The tech report would be a stand alone document. Our team is well advanced In that document, I wouldn't anticipate there would be any large surprises in it from previous years of operation. But then we already do Separate to that, have a formal strategy that we can perhaps Jackie go through off the call on how we plan to approach the different phases of potential synergies.

Speaker 10

Okay. That sounds great. Thanks, Peter. And if I can maybe ask, and I know you've sort of answered this already, but if I can just ask again because I just want to be totally clear. On the elections that are coming up in Argentina, can you just talk a little bit about what news flow or what disclosures you might be Releasing prior to the elections?

Speaker 10

Or should we be expecting to wait on essentially any kind of News flow from Jose Maria until after those elections are finished. Can you just sort of spell that out for me?

Speaker 1

Well, I guess I would say if we have material news And it's pre any election results, we would put that news out. We won't hold anything back, but there are certain aspects of Bilateral agreements or negotiations of that nature, they're going to be extremely hard to proceed As we get into the finale here on elections, so I just anything of that nature is probably going to come out on the backside.

Speaker 10

Does that include the feasibility study, updated feasibility study?

Speaker 1

It's not they're not linked. So No, I don't think it will have an impact.

Speaker 10

Okay. Okay. Thanks very much.

Operator

Thank We have a follow-up question coming from the line of Ioannis Masvoulas from Morgan Stanley. Please go ahead.

Speaker 4

Great. Thank you. Yes, just a couple follow ups from my side. First, Peter, to your point on the Mining royalty bill in Chile, this 47% was rejected. Is that the all in tax rate?

Speaker 4

Or is the actual tax rate higher than 45% as per that proposal? Just trying to figure out whether we are Comparing apples to apples?

Speaker 1

Yes, it is the all encompassing rate.

Speaker 4

Okay. That's clear. And then the other question I had is around the Alcaparosa. How is the remediation work progressing there? And what's the Timing for a regulatory decision about the possible restart?

Speaker 1

Yes. So I think myself and Juan Andres will both answer that one. When we were down in Chile about 10 days ago, I just wanted to mention that our meetings with the Minister of Finance, as said earlier a couple of times with the Minister of Mines, Serna Giment and other government officials, it was really, really strong. I think the transaction with Canceroni It's put us in good standing with the government, especially given some of the headlines of other companies that have been a bit pushing back on the government. So We're getting extremely good support.

Speaker 1

That being said, it still does require permits to move the remediation process forward. We are out for bid right now with about 5 different companies that are going to be part of that remediation process. So once we get those permits, once we can determine The most appropriate bid that will begin and it should move in pretty quick order, but I'll pass it on to Juan Andres to add. Yes.

Speaker 2

I don't think I have much to add to what you said, Peter, but yes, we're working on different phases of the remediation and of course, the We are also seeing potential reopening of Alcaparossa in the second half of the year. And as Peter said, right now, All the studies or most of the studies have been completed. We're just awaiting for the final permits from the different government agencies to

Speaker 1

And I would just add, unfortunately, from a permitting perspective, those are extremely hard for us to determine how long that takes.

Speaker 4

That's fair. Thank you both for the answer. Thank you.

Speaker 1

Thanks for your question.

Operator

Thank you. Your next Question comes from the line of Patrick Jones from JPMorgan. Please go ahead.

Speaker 11

Hi, thanks for taking my question. It's just regarding A follow-up on Jose Maria. Obviously, given the timeline is looking like it's taking a little while longer and formal approval is looking like it would be some time post Q1, Q2 next year. I just want to kind of inquire as to what kind of CapEx spend you could have on an ongoing basis Prior to an FID decision, obviously, the guidance this year is about $400,000,000 Is sort of $100,000,000 per quarter a good rough estimate So what you'd spend pre FID into next year? And also is there sort of a limit that you would spend On a total aggregate basis prior to FID?

Speaker 1

Yes. I think first of all that the spend this quarter has come in A little bit below anticipated original number. I think that trend will probably be similar for the back half of this year. And I don't think until we actually have a definitive go ahead decision that moving out into 2024, I think the number will be fairly moderated down until we make that actual decision because a lot of the bigger items were these some of these long lead items

Operator

Thank you. Your next question comes from the line of Dalton Baretto from Canaccord. Please go ahead.

Speaker 12

Thank you. Good morning, Peter and team. Just one question for me. With the center of gravity kind of coalescing now around copper and Gold in the on the Chilean Argentinean border. How should we think about your European businesses now?

Speaker 12

Are they still core to you given that they're Geographically removed and big same component there?

Speaker 1

No, I think there's still assets that we're very happy that are within our portfolio, in particular For starters, if you look at Neves Corvo, they've just had a great Q1 on health and safety, which we're very proud of them on. We've also seen the production ramp up. Obviously, it's been a challenging project, but we're now starting to get into that gradual ramp up mode. So I think there's going to be huge demand for zinc in Europe. And as zinc grew, it has been an amazing asset within the portfolio for a long period of time.

Speaker 1

So Happy to have both assets in our portfolio. If something changes one day down in the future, we'll look at it differently. But right now, they're A core part of our team.

Speaker 12

Thanks, Peter. That's all for me.

Speaker 3

No problem.

Operator

Thank you. There are no further questions at this time. I'd now like to turn the call back over to Mr. Rockendale for any closing remarks.

Speaker 1

Thank you, operator, and thank you, everyone, for joining in today. I think Lundin Mining had a very, very good Q1, in particular, as mentioned at the start on health and safety, But also seeing the operational stability within the company. And we're going to be pretty vigilant going forward to ensure those two areas continue And look forward to updating everyone on our Q2 conference call. So thank you for joining.

Operator

Thank you, sir. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a lovely day.

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Earnings Conference Call
Global Net Lease Q1 2023
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