Lundin Mining (OTC:LUNMF) Corporation (LUN.TO), a prominent player in the metals and mining sector, has reported a transformative year in its Fourth Quarter and Year End 2023 Financial Results. The company achieved record production levels of copper and zinc, successfully meeting its annual guidance across all metals. Lundin Mining's strategic acquisition of the Caserones mine contributed to a significant expansion of its reserves by 26%. The financial results showcased strong revenue of $3.4B, an adjusted EBITDA of $1.4B, and operating cash flow surpassing $1B. The company also declared a quarterly dividend of CAD0.09 per share, returning over $206 million to shareholders in dividends for the year 2023.
Key Takeaways
- Lundin Mining met annual production guidance, with record outputs of copper and zinc.
- The acquisition of Caserones mine expanded total reserves by 26%.
- The company declared a quarterly dividend of CAD0.09 per share.
- 2023 revenue reached $3.4B, with adjusted EBITDA at $1.4B.
- Operating cash flow exceeded $1B, with free cash flow from operations at $345 million.
- Production costs rose to $648M in Q4, with full-year costs at $2.1B due to the Caserones acquisition.
- Cash costs for the year aligned with guidance at $2.07 per pound.
- Lundin Mining forecasts over 15% growth in copper production for the next year.
- Capital expenditure for 2024 is projected at $225M for the Josemaria project.
Company Outlook
- Lundin Mining projects significant copper production growth and remains focused on operational performance and shareholder returns.
- The company is in a robust financial position with a moderate net debt level of around $950M.
- Plans include spending approximately $840M in sustaining capital expenditures at operating mines and continuing exploration activities.
Bearish Highlights
- Production costs increased by 25% over the previous year, primarily due to the Caserones acquisition.
- The Chapada expansion study has been deferred.
Bullish Highlights
- Nickel and gold production exceeded guidance.
- Lundin Mining's asset base has grown substantially, with over 80% of copper production in top-tier jurisdictions.
- The company is optimistic about its future prospects and committed to creating shared value for stakeholders.
Misses
- No specific misses were highlighted in the provided context.
Q&A Highlights
- Lundin Mining discussed exploration and optimization efforts at Chilean assets, including drilling at Caserones and Candelaria.
- The company is considering logistics improvements, such as using the Candelaria port for concentrate shipments and long-term infrastructure plans involving water and power from Chile.
- Interest has been shown in Lundin Mining's European assets, particularly Neves-Corvo, amidst industry consolidation in the Iberian Pyrite Belt.
Lundin Mining's focus on optimizing mine plans and improving cost structures at all mines is expected to enhance profitability. The company's exploration efforts aim to extend mine life, with drilling at Portones and Caserones focusing on potential porphyry systems. The Josemaria development project presents a unique opportunity, and Lundin Mining is conducting optimization studies to reduce costs, with a focus on infrastructure and water management.
The company is engaged in partnership discussions for Josemaria, with potential partnerships anticipated before fiscal stability is achieved. Trade-off studies are considering the possibility of expanding the mill size at Josemaria, which could significantly increase production capacity.
Lundin Mining's strategic approach to its operations and the pursuit of growth opportunities in the copper sector position it well for continued success in the global markets. The company's confidence in managing capital expenditures and optimizing operations underlines its strong outlook for 2024.
InvestingPro Insights
Lundin Mining Corporation (LUN.TO) has been making headlines with its record production and strategic acquisitions, painting a promising picture for investors. As we delve deeper into the company's performance, certain metrics and insights from InvestingPro can provide a clearer view of its financial health and stock behavior.
InvestingPro Tips indicate that analysts are optimistic about Lundin Mining's profitability, with revisions to earnings forecasts trending upwards for the upcoming period. This aligns with the company's strong financial results and the expectation of continued profitability this year. Moreover, while the stock has experienced significant volatility and a notable drop over the past week, its profitability over the last twelve months suggests resilience in its financial standing.
From the real-time data available on InvestingPro, we observe that Lundin Mining has a market capitalization of $6.15 billion, reflecting its substantial presence in the mining sector. The company's P/E ratio stands at 18.25, with a slight adjustment to 17.81 when considering the last twelve months as of Q3 2023. This suggests a reasonable valuation relative to earnings. Furthermore, despite a slight revenue decline of 3.23% in the same period, the company's quarterly revenue growth was a robust 53.0%, indicating potential for short-term revenue acceleration.
Investors looking to delve further into Lundin Mining's performance can find more InvestingPro Tips by visiting https://www.investing.com/pro/LUNMF. With the use of coupon code PRONEWS24, users can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking a wealth of information to guide their investment decisions.
Overall, the data and insights from InvestingPro complement the narrative of Lundin Mining's transformative year and its strategic positioning for the future, providing investors with a comprehensive understanding of the company's potential.
Full transcript - Lundin Mng Corp (LUNMF) Q4 2023:
Operator: Good day, ladies and gentlemen, and welcome to the Lundin Mining Fourth Quarter and Year End 2023 Financial Results and Webcast. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. [Operator instructions] This call is being recorded on Thursday, February 22, 2024. I'll now like to turn the conference order to Jack Lundin, President and CEO. Please go ahead.
Jack Lundin: Good morning, and welcome to Lundin Mining's full year and fourth quarter 2023 earnings call. Last night, we reported operating and financial results. A copy of our press release and slides are available on our website where a replay of this call will also be made available. Before we begin our presentation, I would like to remind everyone that yesterday's results and certain comments on the call include forward-looking statements. I will draw your attention to the cautionary statements on Slide 2 for reference. On the call, I am joined by other senior members of our executive team, Teitur Poulsen, our Senior Vice President and Chief Financial Officer; and Juan Andres Morel, our Senior Vice President and Chief Operating Officer. I would also like to take this opportunity to welcome Pat Merrin to the team as Executive Vice President, Technical Services. Pat has extensive operational and technical experience as the previous SVP Canadian operation for Newcrest and also for Goldcorp. As well as I would like to announce another new addition to the team, Joel Adams, as the new Commercial Vice President. Joel brings with him extensive experience in the downstream segment of our business, having previously worked for Trafigura, and prior to that Glencore (OTC:GLNCY). Prior to commencing the presentation, I intend to address a recent unfortunate incident at our Neves-Corvo mine in Portugal, where a fatality occurred last week. We are deeply saddened by this incident, recognizing that the challenging circumstances it presents, our heartfelt thoughts and support are extended to the family and coworkers of our deceased colleagues during this difficult time. We will continue our efforts to send all of our workers home safe at the end of each day and are always committed to the health and wellbeing of our workforce. I will now focus the audience's attention to our 2023 corporate highlights. The company underwent a transformative year in 2023, marked by a comprehensive restructuring of the corporate head office, which was subsequently relocated to Vancouver in September. We increased our operational and technical strength of our team, which is now in place to bring the company through the next phase of growth. Production statistics will be further expanded upon during this presentation. However, I'm pleased to report that we met guidance for all metals, including a record for copper and zinc production for the company. During the year, we acquired the Caserones mine, which will be a building block for the future of the Vicuña District. Included within the acquisition of this operation is a large and highly prospective under explored land package of nearly 60,000 hectares. With great enthusiasm, we have launched the first segment significant exploration drill program at the mine since it began operating in 2013. At Candelaria, the environmental impact assessment approval has granted us an extension of mine life from 2030 to the year 2040. Current reserves surpassed this timeline and this milestone enables us to reassess the underground expansion, which will include updating the mine plan and CapEx this year. In December, Javier Milei assume the role of President in Argentina. We anticipate collaborating with the President and his administration to progress the Josemaria project. We had the privilege of meeting with the President and the Minister of Economy, along with Secretary of Mining in January to discuss matters related to Lundin Mining and Josemaria, and also the lending group's longstanding presence and success within the country. Lastly, we updated our mineral reserves and mineral resources and were able to grow our reserve base by 26% with the acquisition of Caserones to about 10.5 million tons of proven and probable copper reserves. While at Candelaria, additional drilling contributed to an increase in overall resources that we hope to convert to reserves in the future. Operationally, our assets performed well, delivering on guidance in all consolidated metal categories. Not shown on this slide, however, nickel and gold production achieved the upper end of the guidance ranges. As mentioned earlier, annual copper production was a record for the company at 315,000 tons. Across our base metals portfolio, the zinc expansion project at Neves-Corvo otherwise known as ZEP is coming to fruition leading to a record quarterly and yearly zinc production results. At Zinkgruvan in 2023 improved recoveries from the sequential flotation project were achieved. However, a longer-than-anticipated ramp up resulted in a slight miss on program guidance. We generated significant adjusted EBITDA of $1.4 billion, operating cash flow of over $1 billion and free cash flow from operations of $345 million. Yesterday, our Board of Directors declared a regular quarterly dividend of CAD0.09 per share. The annualized dividend of CAD0.36 offers a 3% yield and continues to be a leading return amongst our peers. We directly returned over $206 million in dividends in 2023 and more than $1.2 billion to shareholders since 2017 through dividends and share buybacks. Our ongoing focus remains on generating value through strong operational performance and disciplined capital allocation, which supports strategic growth initiatives to create long lasting and sustainable shareholder returns. I will now hand it over to Juan Andres to go through the operational results in more detail.
Juan Andres Morel: Thank you, Jack. We previously released our production results earlier this year, so I will speak briefly to some of the details provided in our year end release. As mentioned by Jack earlier, the company met metal production guidance on all consolidated basis for all metals in 2023, while nickel and gold productions achieved the upper end of the guidance. Copper production was a record for the company at 315,000 tons for the year and 103,000 tons for the quarter. Both Caserones and Eagle exceeded original guidance. Candelaria had a strong fourth quarter processing 7.8 million tons of ore and producing 42,000 tons of copper finishing off the year with the best quarter. This was the result of softer ore than planned, which drove throughput in the mill and higher grades, compared to previous quarters. Full year production at Candelaria was 152,000 tons of copper, which was the midpoint in the guidance. Caserones has performed extremely well and exceeded the upper end of the original guidance of 60,000 to 65,000 tons for the second half of the year and produced 65,200 tons of copper. During the fourth quarter, the mine produced 35,000 tons of copper and 928 tons of gold. Higher production volumes were driven by higher throughputs and recoveries. Throughput in the mill was 8.3 million tons for the quarter or 4,200 tons per hour, which is close to the nameplate capacity for the processing plant. We expect to see similar levels of throughput in 2024. Since the acquisition, Caserones has shown steady improvement in the throughput driven by higher mill utilizations and better haulage performance. As mentioned, production at Chapada was second half weighted last year. During the quarter, higher than anticipated grades offset lower mill throughput to produce 12,900 tons of copper, which is in line with the third quarter. In the first half of the year, Chapada produced 20,500 tons versus the second half at 25,100 tons of copper, and on a full year basis, 45,700 tons. Coal production for the quarter totaled 44,000 ounces for the fourth quarter and for the year, and 149,000 ounces, which was in the upper end of the original guidance. As mentioned earlier, higher throughput at Candelaria and improved grades and recoveries at Chapada, contributed to the overall gold production. Let's move to Slide number 7. Zinc production was higher quarter-over-quarter at 51,000 tons and is a new quarterly record as mentioned by Jack earlier. Production in Neves-Corvo increased quarter-over-quarter and produced 31,000 tons of zinc. We're seeing the benefits from the zinc expansion project as its ramps up in capacity. During the year, the zinc circuit was able to process 2.0 million tons. During the quarter, Zinkgruvan production was impacted by zinc or availability, which lowered throughput and grades during the quarter, 19,700 tons of zinc were produced in the fourth quarter and 76,000 tons for the full year, which represented a slight misguidance for Zinkgruvan. On a consolidated basis for the year, Lunding Mining produced 185,000 tons of zinc, which was in line with 2023 guidance. Nickel production was 3,700 tons for the quarter and 16,400 tons for the year, which beat the original guidance for Eagle. This was primarily driven by higher grades and recoveries over the course of the year. Operationally, all our assets perform well and we're seeing the results from our improved planning cycle and operational philosophy. I will now turn the call over to Teitur to provide summary on our financial results.
Teitur Poulsen: Thank you, Juan Andres. Moving to Slide 8. As Jack already mentioned, we generated a significant adjusted EBITDA, operating cash flow, and free cash flow from the operations in 2023. Starting here with the revenue, we generated $1.1 billion during the quarter with the fourth quarter benefiting from full revenue contribution from Caserona. Pricing adjustments on prior period sales of concentrate impacted revenues negatively by $24 million into fourth quarter. Revenue for the full year amounted to close to $3.4 billion and is the highest annual revenue recorded in the history of the company. Price realization has remained relatively stable for most metals during 2023, except for nickel, which has seen a steady decline in pricing during the year. The realized copper price was slightly above $3.80 per pound for both the fourth quarter and the full year was the realized price for zinc was around $1.15 per pound for both the fourth quarter and the full year. Our sales remains predominantly leveraged to copper with that metal generating 75% of the fourth quarter revenue with zinc and gold accounting for 7% each, and the balance of the revenue being relatively equally distributed across Nickel, Moly and PGMs. At the end of fourth quarter, approximately 118,000 tons of copper were provisionally priced at $3.85 per pound and remained open for final pricing adjustments, as did over 34,000 tons of zinc at $1.22 per pound, and 1,300 tons of nickel at $7.46 per pound. Moving to Slide 9, consolidated production cost for the fourth quarter amounted to $648 million, which is around 5% higher than the previous quarter, with the increase being driven by a higher volume of copper sold by approximately 13%. Cost on Caserones did also increase from the third to the fourth quarter due to higher maintenance and contracting costs. In addition to the third quarter, not having a full quarterly contribution given that the transaction closed on the 13th of July. For the full year production cost totaled $2.1 billion in 2023, which is a 25% increase on the previous year with most of the year-over-year increase relating to Caserones being included from the completion date of 13th of July, 2023. The sold volumes of copper and zinc over the same period increased by 25% and 18% respectively. At an asset level, production costs remained relatively flat year-over-year despite local currencies in Chile, Brazil, and Europe somewhat strengthening during the year. On a like-for-like basis, so that is to exclude the impact from the Caserones acquisition, the production costs for 2023 have remained flat compared to the previous year at $1.7 billion. Candelaria’s full year cash costs benefited from lower transportation costs that were offset by higher maintenance costs and unfavorable foreign exchange rates. Higher mill throughput during the year also contributed to higher costs. Cash costs for the year were $2.07 per pound, which was in line with guidance. Cash cost at Candelaria came in at $1.99 per pound for the year, which was slightly better than the guidance and was driven by stronger production and a higher byproduct credits during the year. Chapada full year cash cost of $2.27 per pound was better than guidance, benefiting from strong gold volumes and pricing compared to our forecast, which improved byproduct credits for both the full year and for the fourth quarter. Neves-Corvo was full year cash cost was slightly above guidance due to lower copper payables and impacts from unfavorable foreign exchange, which was partially offset by lower operating costs. Cash cost for the year was $2.37 per pound at Neves-Corvo. Turning to the next slide. Total capital expenditure tracked well to our guidance with sustaining CapEx coming in at the $797 million compared to guidance of $755 million. Total CapEx for the year amounted to $1 billion, including expansionary capital, which is around $100 million lower than our guidance of $1.1 billion for the full year. On a like-for-like basis, again, excluding the impact from the Caserones acquisition, the sustaining CapEx was essentially flat year-on-year at around $640 million for the full year. Cap spent at Caserones was $26 million below guidance, primarily due to deferral of material deliveries. While expansionary capital at Josemaria was $75 million lower than guidance, primarily as a result of foreign exchange gains. Moving to the next slide. Our full year and four quarter key financial metrics represented on the next couple of slides. As mentioned earlier, the full year revenue amounted to $3.4 billion, including four quarter revenue of $1 billion. We generated adjusted EBITDA of $1.4 billion for the year, including nearly $420 million in the fourth quarter, and adjusted operating cash flow for the year was in excess of a billion with $362 million generated in the fourth quarter. The adjusted operating cash flow reported this net of $106 million of cash taxes paid during the year. Moving to the next slide. Free cash flow from operation was $345 million for the year and $117 million for the quarter, which includes our own capital build of $8 million and $56 million for the full year and fourth quarter, respectively. Full year adjusted earnings was just over $336 million and $80 million for the fourth quarter. We remain in a strong financial position and finished the year in a moderate net debt position of roughly $950 million excluding capital leases. The year-end net debt level corresponds to a leverage ratio of around 0.7x net debt-to-EBITDA. Slide 13 presents in greater detail the sources and uses of cash in 2023. Our operations generated cash flow of just over $1 billion during the year. And after accounting for the sustaining capital spend of $727 million and excluding exploration and business development cost of $56 million, the company generated $345 million of free cash flow from operations. The company spent net cash of $649 million to acquire 51% of Caserones and paid $25 million as part of a deferred contingent payment relating to the Chapada acquisition. The company had cash outflow of close to $90 million in interest and lease costs and had a net cash inflow of close to $50 million relating to FX and diesel derivative hedge positions. Substantially all of the M&A growth and expansionary capital spend during the year was funded through debt, with the company drawing net debt proceeds of $1.039 billion during the year. Lastly, the company continues to pay an attractive dividend of CAD0.36 per share, which amounted to $206 million for the year. The company also distributed dividends to non-controlling interest in Candelaria and Caserones of $55 million in total. The company ended the year with just under $270 million in cash. The company continues to have a strong liquidity position with available liquidity headroom in our RCF of $1.5 billion as of year-end. With that, I'll hand the call back to Jack.
Jack Lundin: Thank you, Teitur. This slide highlights near term growth opportunities for the company. We're evaluating the Caserones additional 19% call option, which we are able to exercise on the one year anniversary, which is in July of this year. At current production levels, this has the potential to add approximately 25,000 tons of copper to our annual production profile. As mentioned earlier in the presentation, Candelaria received their new EIA, which allows the mine life to be extended to 2040 enabling us to advance the Candelaria underground expansion project otherwise known as CUGEP, which has the potential to add up to roughly 15,000 tons of copper production per year on an attributable basis. We are undertaking underground mine design optimizations for CUGEP, which incorporates the updated underground mining regulations from the mining authorities in Chile known as Sernageomin. Costing and scheduling will be included in this updated study. Demonstrated by these two opportunities, we have a clear pathway to augment over 40,000 tons of copper a year, which would represent an approximate 10% increase on an attributable basis of our production for the company based on the midpoint of guidance. Transitioning from operations to projects, Josemaria is being strategically advanced. Several areas of focus include pursuing optimization studies to enhance mining and milling production plans, concentrate transportation routing, mine site and offsite infrastructure requirements and water source and water management planning. Work continues on permitting with the technical review of the tailings dam design and the permit application for the access site road and power line. Minor permits and environmental impact assessments for road maintenance were completed and submitted for approval during the fourth quarter of last year. The newly elected San Juan Provincial Governor was elected in July and has taken office and negotiations are set to proceed on the infrastructure agreements for provincial royalties. In January this year, we had the pleasure of meeting the governors of the Atacama region in Chile, and San Juan province in Copiapo. Following a tour of the Candelaria mine made by the governor of San Juan and his delegation. We highlighted ways our infrastructure could add to the development of the Vicuña District and ultimately benefit both countries. They seemed very receptive and supportive of integration initiatives and to advance mining on both sides of the Chilean and Argentinian border. Regarding potential partnerships for the project, various options are being considered, discussions with several parties are ongoing and we will update the market as appropriate. Capital expenditure guidance is forecast at $225 million for 2024 for the Josemaria project. This primarily includes payments for the incoming procurement of long lead equipment and pre-construction activities such as road upgrades and geotechnical work along with permitting activities as described before. Next slide. Earlier this year, we announced updated three year guidance for production, operating cash costs, and capital expenditures for 2024. 2024 updated guidance outlook is in line with previously disclosed production ranges. Consolidated copper production in 2024 has stayed consistent with previous estimates, while consolidated zinc production ranges have been slightly adjusted. Consolidated gold production ranges have increased for 2024. In 2025, consolidated copper and gold ranges have increased, while zinc guidance has stayed in line with previous disclosure. Copper production is forecast to be 366,000 to 400,000 tons on a consolidated basis in 2024. Higher consolidated copper production in 2024 is mainly due to mine sequencing and the mine plan copper grade profile at Candelaria. Additionally, Caserones copper production guidance has been an increase to 120,000 to 130,000 tons on an annual basis to reflect higher plant throughput rates in the mill. Zinc production is forecast to increase to 195,000 to 215,000 tons on a consolidated basis in 2024, increasing further over the three year period to reach 220,000 to 240,000 tons in ‘25 and ‘26 as the benefits of ZEP are realized. Consolidated gold production is forecast to be 155,000 to 170,000 ounces in 2024 and then taper through the three year outlook period. Higher consolidated gold production in ‘24 is due mainly to the planned gold grade profile at Candelaria. Nickel production is forecast to be 10,000 to 13,000 tons in 2024. The production profile is driven by mine sequencing and nickel grade at Eagle East and the Eagle East extension ore bodies. Cash costs at several of the sites have decreased, including Candelaria, Chapada and Neves-Corvo, and part of this is driven by increased volumes and part of it is due to cost saving initiatives. Costs at Caserones have increased and reflect lower grades, higher mill throughputs, as well as lower byproduct credits. In the next slide. This year we plan to spend approximately $840 million in sustaining CapEx at our six operating mines, which is in line with last year where we spent $727 million, taking into account only half the year of Caserones. Approximately 50% of the sustaining CapEx is earmarked for capitalized stripping or underground mine development. $225 million as I mentioned before, of expansionary CapEx is scheduled for Josemaria. Now looking at our exploration potential. Drilling at Josemaria is underway with three active rigs at Cumbre Verde to target the same structures that intersected high grade mineralization on the neighboring property and run into Josemaria. Additional drill pads are being developed that will give us better access to the targeted areas. Drilling at Portones, target has been completed, which was targeting a new potential porphyry system to the west of Josemaria. These initial holes were scout holes and will be very helpful in planning the next drill program. At Caserones, exploration drilling has started with three rigs at the Angelica oxide sulfide target and at Caserones deep. Both are near mine targets that would add potential resources and mine life to the existing operation. We have finished up the borehole electromagnetic survey at Eagle and have closed off aspects of exploration immediately below Eagle East. In addition, geophysics programs will be completed to determine if a potential target remains at depth and to the south of the initial area of interest. We remain optimistic in this area. Eagle continues to deliver despite the backdrop of depressed nickel prices which have dropped by more than 37% last year. We have extended the mine life to Eagle to up to 2029 by optimizing the mine plan and implementing more bulk mining in the Eagle East extension area and reduction of other costs through insourcing of key contracts. We will continue to evaluate exploration targets to determine high potential opportunities to extend mine life further at this great asset. Lundin Mining currently stands in a favorable position, projecting more than 15% growth in our copper production compared to the previous year. Additionally, we are strategically positioned with two significant near term growth opportunities, which in include as mentioned before, the Caserones’ call option and Candelaria’s CUGEP. Combined, we have the potential to add in the near term as mentioned over 40,000 tons of copper annually. The team here continues to advance the pursuit of these opportunities and we anticipate to be providing updates later in this year. Our asset base has grown significantly in South America with the completion of Caserones and now over 80% of our copper production comes from top tier jurisdiction. Year-over-year we grew our reserve base to over 23 billion pounds of copper on a 100% basis and initiated significant new exploration drill programs at Caserones and also at Josemaria. Operationally, Lundin Mining produced a record in annual copper and zinc production in 2023. Our assets are performing better and we will continue to focus on optimizing mine plans and improving cost structures at all of our mines. In conclusion, with the team we now have in place and the improvements we have made, I'm excited about the future for Lundin Mining and look forward to creating shared value for our stakeholders. Our company possesses a truly unique opportunity underscored by our current portfolio of mining operations and the exceptional Josemaria development project. Anchored in the burgeoning Vicuña District, we are committed to maintaining discipline and focus as we progressively expand our operations in this region, while concurrently optimizing profitability across all our global operations. Thank you for your time. We would now like to open the line for any questions.
Operator: [Operator Instructions] Your first question comes from Ioannis Masvoulas from Morgan Stanley.
Ioannis Masvoulas: Hello, Jack and team. Thank you very much for the presentation. A couple of questions from my side. The first on Josemaria. We have continued to see inflation across the industry over the past year. How confident are you in keeping the Josemaria CapEx in check? And within that, can you talk about the optimization studies you're undergoing? How much of that is focused on OpEx versus CapEx?
Jack Lundin: Josemaria, we do have a pretty comprehensive work package this year to look at a number of things to bring down cost. I think what we're seeing in the industry and where inflation has really hit a lot of costs for our existing operations. We're trying to see where we can bring down costs in different areas for Josemaria. I think, things have stabilized a little bit and we're looking at updating our operating cost as well as our capital cost. And I think over the year, what we're doing with the trade-off studies when it comes to infrastructure layout, how we can tighten up spacing, how we can minimize our footprint, also how we need to bring in our road power line and access infrastructure as well. We'd mentioned that one of our big trade-offs is looking at, where we want to be shipping our concentrate out of. So our base case in the feasibility study had us going through Argentina out East, whereas now we're also looking at an opportunity which has significant cost savings and puts us in a much better position if we can move concentrate West out through the Pacific Coast. I think that's a big item that we're looking at. And then also, mentioned that we're doing hydrology and water studies as well. Water management is a big focus for us this year. We're looking at all aspects of the project on where we can bring down cost and where we can basically de-risk and improve executability of the project. And Teitur has a comment to add.
Teitur Poulsen: Maybe just to add, like, inflation is one side of the story, but obviously the devaluing local currency, the pesos is the other side of the same story. So after Millet got elected, there was a big devaluation in mid-December where the official rate went from around about $350 to the dollar to over $800 now to the dollar. In terms of our dollar cost funding that obviously balances out somewhat against inflation we have. What we also have yet to determine is actually how much of well, both CapEx and OpEx is going to be pesos denominated expenditure in the first place. So those details are still to be worked through in more detail.
Ioannis Masvoulas: And second question, given the significant CapEx needs again at Josemaria, one would argue that you could defer the Caserones stake purchase and/or the Candelaria and QGEP growth option to a later stage, so as to preserve cash into the Josemaría sanctioning. How would you respond to this argument?
Jack Lundin: I mean when it comes to our capital allocation, we have to keep our opportunities open and I think right now, near-term growth, it looks like Caserones and Candelaria make the most sense. But of course, as we study and advance our derisking of Josemaría, we have to look at all opportunities. What is exciting is they're all kind of centered in the same area. And I think when we look at synergies for these assets, anything that we do, we want to be able to minimize costs as much as possible and bring in near-term profitability. So I think that unless Teitur has anything to add, this is where we're focusing on these three areas in the near term.
Teitur Poulsen: And I don't think they're mutually exclusive. I mean we are talking about partnership alignment on Josemaría and see where we land with that. But that's obviously part of the accretion of capital allocation and we want to assess and go after all the opportunities we have in the portfolio in a responsible manner, of course.
Operator: Your next question comes from ours Orest Wowkodaw from Scotiabank.
Orest Wowkodaw: Just following up on the last set of questions. Is there a partnership process for Josemaría ongoing right now? Or do you need to complete, I guess, the stability agreement, the updated technical report before that really gets going? And I guess what I'm wondering is, could we see a partner before those items are finalized? Or is that -- is the partnership likely going to come after those milestones.
Jack Lundin: Orest, thank you for the question. I can start here, and then the team can chime in as needed. Discussions are ongoing, and so the process has kicked off. I mean we are looking at all opportunities. And I think derisking in parallel, none of these things happen overnight. And so we have to continue to progress with looking at formation of a framework for fiscal stability in Argentina, as I mentioned, and it's well known, we were able to meet with the President. And we have good engagement at the local level in the San Juan province and also in the Atacama region in Chile, where now Caserones and of course, Candelaria are. So we're very focused in this area, and we have a big presence there, and we understand how things are moving, and it is a bit of a moving target. But there could be a scenario where partnerships are formed before fiscal stability, ideally, they come together around the same time, and we're working towards that.
Orest Wowkodaw: Any potential time line at this point for the completion of the technical report?
Jack Lundin: Yes. So it depends on a number of these studies that we're working on that are really kind of in the thick of it in terms of data that we're collecting and the scenarios that we're running and obviously, engineering work that goes on with it and some consultants that are supporting. So it does seem like it will be a second half of the year item. And of course, it's hard to commit when there's a lot of moving parts to that. But as soon as we feel like we're ready to put a pin in it, then we will come to the market with an update.
Orest Wowkodaw: And then just as a follow-on, what's the expected time line for the Chapada expansion study? Or has that now been deferred?
Jack Lundin: The Chapada expansion study has been deferred. I mean what we're focusing on Chapada, of course, is right now near mine opportunities and improving the performance of the existing operation, and then we're drilling out -- and we'll be conducting a scoping study on that opportunity. So, it's really what we have today with our existing operation and then growing -- which is about 15 kilometers away, and it's tied to -- as well as the high grade Formiga or higher grade Formiga formation. So it's an exciting opportunity that we're going to be running a scoping study on, uh, this year.
Orest Wowkodaw: And then finally, if I could, any idea on the expected timeline for releasing drill results to the market for Cumbre Verde?
Jack Lundin: So drilling's ongoing, we've got three rigs turning right now at Cumbre Verde. Some exciting prospects that we're drilling into. And some of the visitors that were down in Argentina and Chile and in January would've seen that the drill pads were being formed. So, hopefully, as soon as we have more information, probably later in the quarter, early Q2, we could come out with some results.
Operator: Your next question comes from Edward Goldsmith from Deutsche Bank.
Edward Goldsmith: Two questions from my side. Firstly, on the timeline for the operational asset reviews and the next wave of synergies, Candelaria and Caserones. Just if you give some more color around that and the level of improvement being targeted there. And then secondly, on the drilling underway at Caserones, can you give us an idea on the exploration potential there?
Jack Lundin: I can touch on the exploration potential and then I'll hand it over to our Chief Operating Officer to talk about optimization work that's ongoing at our Chilean assets. But right now, as mentioned, we've got some rigs turning in the Argentinian side on Josemaria property targeting this what's called Cumbre Verde target, which we hope to be an extension of some of the neighboring properties that will look to test either veining or -- zones. And then at Candelaria’s, we've got two targets that we're drilling into right now. One is called this, Angelica oxide and sulfide Zone. So we're drilling through the oxides into the sulfide deep area, which have never been drilled before. But we know it's an attractive and highly prospective target. Couple, like about a kilometer away or two kilometers away from the existing open pit. And then we're drilling at Candelaria’s deep, so near the pit and looking to target, deeper sulfide zones that could be added eventually or quickly or to the resource at Candelaria’s. So about three rigs turning there and three rigs turning at Cumbre Verde. I think we'll add one more rig as well to get up to seven in this drill season. And then we'll come to the market with an update once we have some meaningful results. But I'll hand it over to Juan Andres to talk about the operations.
Juan Andres Morel: Yes, regarding the optimization in Chapada and Candelaria were well advanced on the full potential initiatives that we launched last year. In both the operations we're seeing, some low hanging fruit results and have been already incorporated in our 2024 budget. So part of the improvements in the C1 costs are attributed to those optimizations, but we're continue to looking at more opportunities as we move forward and we're very confident that we'll be able to increase our performance in both assets.
Operator: Your next question comes from Dalton Baretto from Canaccord.
Dalton Baretto: Thank you. Good morning, guys. I wanted to also ask about Josemaria. Jack, there's some language in the MD&A that talks about maybe looking at a bigger operation, a bigger mill size. I'm just wondering kind of what you're thinking is there and how much bigger we're talking about?
Jack Lundin: Dalton, good question. That's part of the trade-off studies as well that we're looking at when we go into our mine plan and mine optimization work. We are looking at utilizing the existing size of the mills that we already have in place. I think we did right size the purchase of those mills that are currently coming into country today. But we've looked at kind of expanding from anywhere from a 150,000 to 200000 tons per day and kind of in and around those bookends to see what the optimal milling rate would be. Pretty significant in size when you compare to Candelaria or Caserones, these sites do around 75,000 to 80,000 tons per day, 85,000 tons per day. Quite sizable operation, but we're not looking at getting significantly smaller or vastly larger for Josemaria. It's really just looking at how we can push tonnages. We're looking at ore hardness during the earlier parts of the mine plan and then just seeing what optimal rates we could run with, utilizing the infrastructure or utilizing the assets that we've already purchased.
Dalton Baretto: And then I think you said earlier that, you're looking at maybe moving concentrate now through Chile, which is obviously great considering the space at the Candelaria port. I'm just wondering, does that mean, you can also potentially bring in water and power in from the Chilean side and maybe use that desal plant?
Jack Lundin: Dalton, part of the work that we're doing, of course, is looking at logistics and transport of our produced product. Of course, we're also looking at longer-term, what it means for bringing infrastructure, given that we already have a port desalination facility on the Chilean side. This plays into the broader strategy and the long-term vision for the district. Strategically, Candelaria is located about 20 or 25 kilometers away from Josemaria and it's all part of the Vicuna district. At one point in time being able to bring in water and power into this area from either side means a lot to the district and can really unlock a lot of value. These, we have to look at in different phases. I think right now near-term looking at bringing concentrate, as opposed to going through Argentina, bringing it through Chile makes the most sense. We're really focused on that. And then at a later time, we would look at what does it make sense for desalinated or even perhaps power. But right now, the focus is concentrate shipments.
Dalton Baretto: If I can just squeeze one more in, a slightly different question for you, Jack. We're starting to see assets change hands in the Iberian pyrite belt with the Mazda deal last year and now First Quantum (NASDAQ:QMCO) putting less cruises on the block. Are you seeing much inbound interest on Neves-Corvo at all? And what are your thoughts around that operation? Thanks.
Jack Lundin: Thanks Dalton. I think we have been starting to get some inbounds about what our European assets mean to the company. Of course, we've focused our growing a lot in copper predominantly and then the strategic hold and the stronghold that we have here in the Atacama region and now as well in San Juan province, in the Vicuña District. Our focus on growth is really growing in this area. We do like the diversity play of the company. We have meaningful zinc production coming from our European assets. We also think that we could attract a lot of value from these assets. So we're playing kind of the optionality here and seeing what makes sense. But yes, to answer your question, we have received inbound interest on what it means for us with our European assets. And I think what you're seeing as well in the Iberian Pyrite Belt, both in Spain and in Portugal. I think there are some players coming in there that are looking to do a consolidation effort. So of course, we're monitoring that closely and seeing how we can crystallize value in that region.
Operator: Thank you. There are no further questions at this time. Please proceed.
Jack Lundin: Thank you very much for those that attended the call today. We're proud of the results of 2023 and looking forward to what will be a strong 2024. And again, we look forward to answering any questions as they come our way at a later date. Thank you very much for your time, everyone.
Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Thank you.
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