Capstone Copper Corp. (TSE:CS) delivered its Q1 2024 earnings call on May 2, 2024, with a production report of over 42,000 tons of and consolidated C1 cash costs of $2.88 per pound.
The company is staying the course with its 2024 guidance, expecting cash cost reductions as Sulphide production ramps up. The Mantoverde development project is progressing as expected, with the first saleable concentrate anticipated shortly.
Notably, Capstone Copper reduced its net debt significantly, from $927 million to $740 million, and improved its liquidity position to about $540 million. The company’s operations across various mines are performing well, and significant EBITDA growth is anticipated with the Mantoverde project’s ramp-up.
Furthermore, Capstone Copper is preparing to release a feasibility study for the Mantoverde optimized project by midyear and has outlined a $25 million exploration program to target higher copper grades.
Key Takeaways
- Over 42,000 tons of copper produced in Q1 2024.
- Consolidated C1 cash costs at $2.88 per pound, with reductions expected.
- Mantoverde project on track, with first concentrate sale coming soon.
- Net debt reduced to $740 million; liquidity increased to approximately $540 million.
- Significant EBITDA growth expected from Mantoverde project ramp-up.
- Operations at Pinto Valley, Cozamin Mine, and Mantos Blancos performing well.
- Feasibility study for Mantoverde optimized project due by midyear.
- $25 million exploration program announced to seek higher copper grades.
Company Outlook
- Reiteration of 2024 guidance with expected cash cost reductions.
- Mantoverde expected to produce around 120,000 tons of copper and over 30,000 ounces of gold annually.
- Mantoverde optimization to increase ore throughput by 40%.
- Commitment to renewable energy and reduction of greenhouse gas emissions.
Bearish Highlights
- Higher costs for oxides than anticipated in Q1, with corrections expected in the second half of the year.
- Delays in Mantos Blancos sulphides due to engineering and procurement issues.
- Operational issues affected grade and throughput in the first half of the year.
Bullish Highlights
- Plant operations responding well, with grinding and crushing circuits performing as planned.
- Mantoverde development project remains on track for commissioning milestones.
- Advancements in the feasibility study for the Mantoverde optimized project.
- Positive results from asset integrity program.
Misses
- Some minor operational issues at Pinto Valley.
- Delays in reaching nameplate capacity of 20,000 tons at Mantos Blancos sulphides.
Q&A Highlights
- Full nameplate throughput production at MVDP expected in about four months.
- Discussions ongoing with traders and smelters for concentrate off-take commitments.
- Costs for oxides higher than expected in Q1, with a catch-up plan in place.
- Mantos Blancos sulphides expected to reach nameplate capacity in Q3 after delays.
Capstone Copper has demonstrated a commitment to advancing its projects and improving its financial health. The company’s strategic exploration and development initiatives, along with its focus on sustainability, position it for potential growth in the coming periods. Investors and stakeholders can anticipate further updates in early August with the Q2 results, as Capstone Copper continues to navigate the dynamic copper market.
InvestingPro Insights
Capstone Copper Corp. (TSE:CS) has shown resilience and strategic prowess in its Q1 2024 performance, with a strong focus on cost management and project development. Here are some key insights from InvestingPro that could offer additional perspectives to investors:
InvestingPro Tips indicate that analysts are optimistic about the company’s earnings, with two analysts revising their earnings upwards for the upcoming period. This aligns with the company’s guidance and may signal confidence in Capstone Copper’s ability to manage costs and optimize production effectively. Additionally, the company is expected to grow its net income this year, which could be a result of the increased production and cost efficiencies mentioned in the earnings call.
From the InvestingPro Data, Capstone Copper is trading near its 52-week high, with a price of 96.62% of the high, reflecting strong market confidence in the company’s performance and future prospects. The stock has also experienced a large price uptick over the last six months, with a total return of 99.18%, showcasing the positive investor sentiment and the company’s robust market position.
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Full transcript – Capstone Copper (CSCCF) Q1 2024:
Operator: Good afternoon, ladies and gentlemen, and welcome to the Capstone Copper First Quarter 2024 Results Conference Call. [Operator Instructions] This call is being recorded on Thursday, May 2, 2024. I would now like to turn the conference over to Mr. Jerrold Annett. Please go ahead.
Jerrold Annett: Hello. I’d like to welcome everyone to Capstone Copper’s Q1 2024 conference call. Please note that the news release and regulatory filings announcing Capstone Copper’s 2024 first quarter financial and operational results are available on our website and on SEDAR. If you are logged into the webcast, we will advance the slides of today’s presentation, which are also available in the Investors section of our website. I am joined today by our CEO, John MacKenzie; our President and COO, Cashel Meagher; our Chief Financial Officer, Ramanpreet Randhawa; and our Senior Vice President, Risk, ESG and General Counsel, Wendy King. Following our brief remarks, there will be an opportunity for questions. Please note that comments made on the call today will contain forward-looking information within the meaning of applicable securities laws. This information, by its nature, is subject to risks and uncertainties, and actual results may differ materially from the views expressed today. For further information on the risks and uncertainties pertaining to our business, please see Capstone’s most recent filings, which are available on our website and on SEDAR. And finally, I’ll just note that all amounts we will discuss today are in U.S. dollars unless otherwise specified. Now I’ll turn the call over to John MacKenzie.
John MacKenzie: Thanks, Jerrold. Good afternoon, everyone in North America and Europe, and good morning to those dialing in from Australia. We’re pleased to present our first quarter 2024 results and achievements. Starting with Slide 5. We produced just over 42,000 tons of copper and consolidated C1 cash costs of $2.88 per pound in Q1, and we’re reiterating our 2024 guidance. We’ve started off the year strongly, with production close to the midpoint of our first half guidance range. Our Sulphide cash costs of $2.55 per pound were also at the midpoint of our guidance, while costs in our smaller cathode business were higher than planned. As a reminder, with our transformational month-old development project ramping up this year, Sulphide will make up a significantly larger proportion of our production base, contributing to a reduction in our consolidated cash costs. The MVDP remains on track and on budget. We’re on the cusp of producing first saleable concentrate and our team is focused on ramping up production to the design run rate levels. I was in Chile a couple of weeks ago, and I spent some time at site reviewing our progress and meeting with our team. I’m very pleased with the work done to date and believe the future of Mantoverde looks extremely positive. As part of my meetings in Chile, I attended a CESCO Dinner, the President Gabriel Boric reiterated the government’s desire to continue to develop an investor-friendly environment for copper miners with the objective of increasing foreign private investments in copper mining. This bodes well for Capstone Copper as we progress our feasibility studies for MVDP optimized and our Santo Domingo project in the Atacama region, which we plan to release by the middle of the year. On the corporate side, our net debt decreased substantially from $927 million at year-end 2023 to $740 million at the conclusion of the first quarter. Our balance sheet is in excellent shape as we ramp up Mantoverde head of our next leg of growth. Also note in the quarter, Orion Mine Finance, which was previously our largest shareholder, reduced their ownership position from 24% to 12%, following two secondary placements of shares. Orion’s second sold under the quarter was placed directly into Australia by our secondary listing, which trades on the Australian Securities Exchange under the ticker symbol CSC. We’re encouraged by the success of our CDIs to date, and we believe we’re on track to be considered for the ASX 300 index rebalance in September. The ASX is a premium market with a long track record as a platform for mining companies, and we’re excited to continue growing our investor base in the Asia-Pacific region. And with that, I’ll pass over to Raman for our financial results.
Ramanpreet Randhawa: Thank you, John. We are now on Slide 6. In Q1, we recorded copper production of 42,100 tons and copper sales just shy of 41,000 tons. LME copper prices during the quarter averaged $3.83 per pound, up close to 4% compared to $3.70 per pound in Q4 2023. Our realized copper price of $3.85 per pound was largely in line with the LME average price. Today, copper prices are closer to $4.50 per pound, every 10% increase in the copper price in 2024 impacts our EBITDA by around $125 million. And next year, with MVDP at full rates, a 10% move in copper prices would increase our EBITDA by just over $200 million. We recorded a consolidated C1 cash cost of $2.88 per pound per payable pound in Q1, which were $0.03 above our first half guidance range. We expect a large step change in our consolidated unit cost in the second half driven by our Mantoverde development project down to $2.10 to $2.30 per pound. Adjusted EBITDA in Q1 of $80.1 million increased by 21% year-over-year compared to first quarter of 2023, largely due to higher copper sales and lower costs. Moving on now to Slide 7. On the left hand side, we summarize our available liquidity, which as at March 31, 2024, was approximately $540 million, which includes $132 million of cash and short-term investments and $400 million of undrawn amounts on our $700 million corporate revolving credit facility. Our liquidity position increased substantially from year-end driven by net proceeds of $253 million from our primary equity raise in February. As a result, we finished Q1 with a net debt position of $740 million and an attributable net debt balance of $591 million. Our balance sheet is in a very strong shape during the ramp-up of MVDP ahead of our next phase of growth. The chart on the right-hand side of the page illustrates our EBITDA sensitivity at various copper prices. In the first 2 bars, you can see that we expect significant near-term EBITDA growth with Mantoverde Sulphide to full run rate production. This year in 2024, EBITDA will more than double from 2023 levels with MVDP ramping up. And with MVDP at full capacity in 2025, we expect to generate between $1.2 billion to $1.3 billion of EBITDA at copper prices of $4.50 per pound equivalent to today’s pricing levels. The EBITDA generation associated with Mantoverde will enable us to focus on generating free cash flow to delever our balance sheet and be quickly below 1x net leverage of spot copper prices, which provides additional financing capacity and advance our future growth pipeline in terms of Mantoverde optimize, exploration and Santo Domingo depending on market conditions. Now I’ll hand it over to Cashel for the operations review.
Cashel Meagher: Thanks, Raman. We’re now on Slide 8. Pinto Valley produced 15,672 tons of copper at a C1 cash cost of $2.53 per payable pound during Q1, which are competitive compared to similar grade copper mines in the U.S.A. The production performance was above the high end of our first half guidance range, while our cash costs were below the guidance range, driven by stronger-than-expected grades. We are starting to see the benefits of our newly implemented asset integrity program, and there is still room for us to increase the mean time between failures and improve our overall availability to be able to deliver more consistently higher throughput. Water inventory levels are positioned well ahead of the dry season. Moving to Slide 9. Cozamin Mine delivered a solid first quarter, producing 6,006 tons of copper at a C1 cash cost of $1.93 per pound. The mine demonstrated another quarter of nameplate mining rates after transitioning to the new cut and fill mining method earlier last year. Costs have increased 12% year-over-year due to a stronger Mexican Peso and additional contractor costs with more cut and fill as part of the mining sequence in 2024. Our Mantos Blancos asset is highlighted on Slide 10. Total Sulphide and cathode production yielded 10,967,000 tons of copper at a C1 cash cost of $3.05 per payable pound. Our Sulphide operations ran at a consistent level to what was seen in the back half of last year which is below the nameplate capacity of 20,000 tons of ore per day, largely driven by bottlenecks in the tailings dewatering area of the plant. During the first quarter, we continued to execute on our plan to address plant stability that includes improved maintenance and optimization of the concentrator and the retrofitting of the tailings systems. During the second quarter of 2024, we expect to install the final pieces of equipment, notably a surge tank and pumps that will allow us to ramp-up the plant to its nameplate capacity in the second half of this year, which will also drive a commensurate decrease in costs. We are confident that we have both the team in place and the asset that will support full run rates. Our efforts are focused on achieving this. And after that, we will recommence our studies related to the Mantos Blancos Phase 2 as we believe the ore body can support a further expansion. We will also looking to increase our exploration efforts at Mantos Blancos as we believe we have highly prospective near mine targets that could allow us to improve our grade profile and increase our tonnages over time. Now on to Mantoverde on Slide 11. We Q4 2023 oxide production was 9,476 tons of copper in cathode at C1 cash costs of $3.82 per payable pound. While costs were above our guidance range for the cathode business in Q1, we anticipate a step change in the cost profile for Mantoverde following the ramp-up of the MVDP Sulphides. During the quarter, important commissioning progress was achieved. Notably, we have now further to the grinding circuit, principally the SAG and Ball (NYSE:) Mills, and we remain on track for our remaining key commissioning milestones, first saleable concentrate during the second quarter and the achievement of nameplate operating rates in the third quarter. Once the operation is fully ramped up, Mantoverde will produce approximately 120,000 tons of combined cathode and copper and concentrate with over 30,000 ounces of gold per year. We advanced the feasibility study for our Mantoverde optimized project during the quarter, and we plan to release it by midyear. MVDP optimized is a brownfield expansion to increase ore throughput at Mantoverde development project by about 40%, and we expect this project to be very capital efficient. Slides 12 through 15 show our construction and commissioning progress at several key areas of the MVDP. Slide 12 shows the assembly of the fourth and final Shovel. The 3 previously assembled electric shovels commenced mining activities last year and led to the stockpiling of over 5 million tons of Sulphide ore. We also have a further 6 months of Sulphide ore exposed in the pit, further derisking the ramp-up. Slide 13 shows the close-up of the SAG and Ball Mills with the flotation circuit in the background on the left. As I mentioned, the mills have been spinning under power, and we have introduced material during the first quarter. Specifically, the SAG and Ball milling circuits have been tested at 100% charge load, and we are approaching a 30-day running test. Positioned behind the mills and to the left are various portions of the flotation circuit. We have commissioned the rougher flotation cells, which are ready for full throughput testing. The cleaner columns, tower mills, scavenger circuit and filter press are also in various commissioning stages, and we are on track for first saleable concentrate in Q2. On Slide 14, you will see the tailings storage facility and in the back, you can see our water reservoir, which has been filled with desalinated water for use on site. What you’ll also notice from this slide, Mentaverde is one of the driest places on Earth and sits at about 900 meters above sea level. In our view, it is amongst the best places on Earth to have built and be ramping up a copper concentrator. Lastly, on Slide 15, you’ll find our desalination plants on the coast to about 40 kilometers away from our mine. It has now been expanded and ramped up to support MVDP. We are excited to continue ramping up the Mantoverde development project over the next few months. Turning to Slide 16. We were targeting an initial 2-year $25 million exploration program focused on our highly prospective Mantoverde, Santo Domingo land package. We believe this program will further demonstrate the world-class nature of the district. With Mantoverde near completion, we can now focus on growth opportunities, including the plan to execute a $25 million exploration program that will include over 61,500 meters of drilling. This program has three initial objectives, which are two target higher copper grades, explore new areas adjacent or inside the current Mantoverde pits with potential to add new reserves and/or resources, and thirdly, to test priority targets in the northern area of Mantoverde land package with the potential to support the Mantoverde Santo Domingo district. The initial program is broken down between near-mine targets and Northern District targets. On the slide, you can see the Mantoverde Santo Domingo district on the right-hand side. In the northern area of our Mantoverde land package, there are several high priority targets identified with either outcropping copper mineralization or a set of geological and geophysical features resembling Mantoverde mineralization style. The current Mantoverde pits trend along the Mantoverde fault. And to the north is approximately 12 kilometers of underexplored area along the Atacama fault. This fall line contains several historic artisanal mine workings and in our view, the northern area of the Mantoverde District is highly prospective. In the Northern District of Mantoverde we are targeting a 200 million to 300 million ton ore deposit, grading between 0.4% to 0.6% copper. Beyond this initial program, we are also identifying our priority exploration targets at Santo Domingo. Two important areas of focus will be drilling out the oxide resource at Santo Domingo, which could be used to supplement our underutilized SXEW plant at Mantoverde that is only operating at two-thirds capacity. The second is to advance exploration for further copper-bearing sulphides closer to the current pits. Turning to Slide 17. We have profiled the near mine targets that we believe have potential to supplement our grade profile and support mining for longer at Mantoverde. We plan to explore continuity along the Santo Clara corridor and test areas north of the pit, while also drilling for Sulphides between the Manto Ruso & Kuroki reserve pits. Overall, the team has identified nine targets for near-mine exploration that we believe could impact our grade profile at Mantoverde in the future. The exploration program is the start of what we believe will define copper mining in the Mantoverde Santo Domingo district for many decades to come, targeting over 250,000 tons of copper production per year. Now over to Wendy King for the sustainability review.
Wendy King: Thank you, Cashel. We’re now on Slide 18 with a review of our sustainability highlights for Q1. At Mantos Blancos, 100% of electricity use in 2023 was covered by renewable energy certified sources as defined by the International Renewable Energy Certificate standard. As part of our sustainable development strategy, we are working towards transitioning to at least 50% renewable electricity in Chile by 2025 and greater than 90% renewable electricity across Capstone by 2030. Also in Chile, both Mantos Blancos and Mantoverde received ISO 50001 energy efficiency management system certification. ISO 50001 was developed for organizations committed to addressing their impact, conserving resources and improving their bottom line through efficient energy management. We believe this management system will make it easier for our organization to integrate energy management into our overall efforts to improve quality and environmental management. Our sustainable development strategy also includes an interim target to reduce greenhouse gas emissions from fuel and power by 30% by 2030 compared to a 2021 baseline year. To support this, GHG emissions and energy management teams were formed at all our sites to lead the development of our operating level greenhouse gas and energy reduction plans. During the quarter, we also completed a climate-related risk and opportunity assessment and scenario analysis. This will further align Capstone with the task force on climate-related financial disclosures. This quarter, we began including a section dedicated to ESG within our management’s discussion and analysis, and we expect enhanced disclosure in the second half of 2024. In 2023, both Mantoverde and Mantos Blancos were awarded the Copper Mark. And Pinto Valley and Cozamin are actively striving to replicate this. During Q1, PV and Cozamin updated their self-assessment and GAAP closure projects to align the latest copper mark version 3, and both sites are aiming to sign commitment letters in 2024. We Lastly, all our sites remain active in our local communities, supporting various initiatives and priorities. Some of the highlights from the first quarter include the Pinto Valley cleanup, the graduation of the third cohort of the Learning for Development Community training program at Mantoverde and the graduation of the first cohort of all female call truck operators at Mantoverde. Creating a positive impact in the lives of our people and our communities is core to our purpose at Capstone. We are always pleased to discuss our ESG performance and initiatives with analysts and investors and are available to take calls to discuss further. And with that, I’d like to pass it back to John.
John MacKenzie: Thanks, Wendy. Turning to Slide 19. We’ve outlined our sector-leading growth plans and some of the additional upside within our portfolio. As can be seen, we expect MVDP at its full run rate to bring us to a consolidated annual production level of around 260,000 tons of copper at costs around $2 per pound. As Cashel mentioned, we plan to release a feasibility study for our Mantoverde optimized project by midyear, which is a low-risk brownfield expansion that we think will unlock another 20,000 tons of copper with a highly attractive capital efficiency of around $7,500 per ton of annual production. From there, we have a pathway to over 400,000 tons of copper production with the addition of our Santo Domingo project, which is 35 kilometers from Mantoverde and which together will create a world-class mining district in that region of Chile. Beyond that, we have further upside across our portfolio with another low-risk brownfield expansion opportunity at Mantos Blancos, the ability to unlock cobalt in our MVSD districts; and lastly, the potential development of a world-class districts around our Pinto Valley mine in Arizona. Turning to Slide 20. We highlight the time lines for some of the studies that I’ve mentioned and for other milestones as we execute on our growth plans. Moving to copper production growth profile, what we have at Capstone doesn’t happen overnight. At Mantoverde, where we are about to produce first salable concentrate, the decision to grow production was taken nearly 9 years ago. Looking across the industry, the pipeline of copper projects is smaller than it’s been at any time in the past 20 years. Meanwhile, the world is going to need an enormous amount of more copper going forward. As an example, it takes 8x as much copper to produce 1 megawatt of offshore wind energy as it were to produce 1 megawatts of coal or gas-fired energy. Expansion of the energy grid and distribution networks will also require vast amounts more copper. And most recently, we’re learning about more about the data centers that will be required to support artificial intelligence. In our view, we’re in the early stages of a new era for the copper market, and it’s a great time for us to be ramping up production at our flagship Mantoverde asset. With that, we’re now ready to take questions.
Operator: Thank you. [Operator Instructions].Your first question comes from the line of Dalton Baretto from Canaccord Genuity. Please go ahead.
Dalton Baretto: Thank you. Good afternoon, John, and Cashel. I want to start by asking about MVDP. You’ve had or started to go through the mail as of March. And I’m just wondering what your opinion is on how the circuits responded so far, not from a metallurgical perspective as well as just a general operational perspective. Thank you.
John MacKenzie: Thanks, Dalton. I’m going to pass that across to Cashel to answer a bit more fully, but I would say that I was down there a week or so ago. And I would say the plant is responding sort of exactly as planned. I would say we’re very pleased with progress. And certainly, sort of what we’re seeing down there is very, very much in-line with our expectations. So maybe just for a slightly more fulsome answer Cashel?
Cashel Meagher: It’s a bit early in the process to be talking about metallurgical characteristics. However, the grinding circuit and the crushing circuit is working extremely well. We’re just getting into in the next few weeks looking at metallurgical responses. But everything is going according to plan. Knock on wood, when you start these ramp-ups and these late commissioning cycles on these things, what you’re hoping for is there’s no major failures. And everything is normal behavior under a ramp-up or commissioning process. So we’re really encouraged. We’re remaining on track, on schedule, and we’re really happy with the progress we’re making so far.
Dalton Baretto: Great. Thanks, Cashel. And then maybe switching gears to Santo Domingo. As you’re putting the final touches on the report, if I think back to the November 2022 release with all the synergies, can you remind me, John, which of those will be included in this report?
John MacKenzie: Yes. So what we’re incorporating is certainly a number of the synergies that we identified at that time, the synergies come in various buckets. And some of them are efficiencies by dint of having either infrastructure or operations in the same neighborhood. Obviously, some of them are scale synergies that we have between the assets. I would, however, say that the biggest synergies are really those that generate revenue ultimately. And those are, for example, the processing of the oxides ore that we have at Santo Domingo at the months of at SXEW plant and for example, the sort of joint processing of cobalt from both sites. Now at this stage, those studies are not yet at the same level of feasibility that the rest of the Santo Domingo project is at. So those will be in the opportunity section of that feasibility. And we expect sort of to a relatively short order thereafter, be able to incorporate those opportunities into the base case.
Dalton Baretto: Thanks, John. And then maybe if I can just squeeze one more in. As you are looking ahead sanctioning Santo Domingo and with your former employer, John [indiscernible], I’m wondering how you think about the buy versus build argument.
John MacKenzie: I think we’re in a very, very fortunate position that the opportunities we have are actually very high on the capital efficiency curve. And so we’ve just completed the construction of Mantoverde at around $11,000 in annualized ton. Our estimates for Mantoverde optimized is around $7,500 an annualized ton. And we also believe that Santo Domingo, it’s got a mixture, I’d say, of sort of greenfield and brownfield characteristics is going to be somewhat higher than Mantoverde, it’s still going to be extremely competitive. And so I think our perspective on this is what the world really needs over the coming decade or 2 decades is going to be a lot more copper. And that has to come from somewhere. And I think we’re in a fortunate position where we’re able to bring it online in an extremely capital-efficient way. And that’s really a reflection of three things. The one is we’ve got great grades at those deposits. We already have very, very significant infrastructure in the district. And then finally, it’s just a very good location to be building projects and it’s low altitude, it’s closer to the coast and it’s pretty near to some major mining centers. So I think from our point of view, our strategy to pursue our sort of internal organic growth remains very much intact.
Dalton Baretto: Thanks, I will leave it there.
John MacKenzie: Thanks, Dalton.
Operator: Thank you. And your next question comes from the line of Orest Wowkodaw from Scotiabank. Please go ahead.
Orest Wowkodaw: Hi, good afternoon. Just sort of picking up where Dalton left off. Just wondering what your thinking is in terms of how quickly would you move ahead with the Mantoverde optimization project as you ramp up here in terms of that Phase 1?
John MacKenzie: Yes. It’s a good question. I think the way we’re looking at it is we fairly recently submitted the permit application for that project. It’s a DIA and we would expect to get that sort of probably in the range of somewhere around 10 to 12 months. It’s not a complicated project. It’s not really sort of anything really we’re changing to the overall footprint of the business. And so that would really position us to sort of early next year in a position to actually sort of commence with the project. So, we are looking at progressing the detailed engineering prior to that. We are looking at placing some long lead time orders earlier than that. And what we have said on month over is we are going to be ramping up during the third quarter. We expect to get steady-state production in the fourth quarter. We would certainly be looking to then from that point onwards, as we bring on the sort of incremental equipment that’s involved in Monterey optimized, be moving up to that 45,000 tons a day as we progress towards the back end of 2025.
Orest Wowkodaw: Okay. And are you still envisioning CapEx for that project circa $150 million or so?
John MacKenzie: Yes.
Orest Wowkodaw: Okay. And then just finally, one more if I could. I am just wondering if you can give us an update for JV process – JV sale process for Santo Domingo.
John MacKenzie: So, until we have actually published the updated feasibility, we can’t really progress that process meaningfully. So, we expect to have that updated feasibility around the middle of the year. And then our intention is during the second part of this year to really engage with those parties that we already know have expressed a strong interest in participating in Santo Domingo. So, we would hope to really sort of have a lot more clarity on who that partner is going to be by the end of this year.
Orest Wowkodaw: Okay. Perfect. Thank you very much.
John MacKenzie: Thanks Orest.
Operator: Thank you. And your next question comes from the line of Ralph Profiti from Eight Capital. Please go ahead.
Ralph Profiti: Thanks operator. Good afternoon everyone. Cashel, it sounds like from a technical perspective, the separation between the grinding circuit and flotation were sort of equally technically challenging. And I am just wondering, as you move to particle separation stage, what are the kind of key deliverables of the design criteria that you will be keeping an eye on?
Cashel Meagher: Sure. Thanks. Actually, in my experience in ramping up copper concentrators, the key component that you focus on in the beginning of a ramp-up is throughput, and it’s the most important because, obviously, if you can’t crush or grind the rock, you have no chance of liberating any of the minerals. And all our reagents and our flotation circuits and all these types of things is just moving slurry. And actually, it floats quite easily, and we know that it floats very easily, the chalcopyrite almost immediately. So, what you are doing in the back half of a ramp-up is you are optimizing going from sort of low-80s to almost 90% recovery. And it’s only that 10% you are working with and you are tuning and you are doing that sort of thing. So, what we are seeing is on a 100% load charge, we are meeting the P80 specs that we require for the flotation cells to be able to liberate the chalcopyrite and do the flotation. So, we are just bringing on in the last sequence of our commissioning, some of our cleaner circuits, our scavenger circuit, our copper thickener and our filtration, which will allow us to start floating that material. But as any sort of ramp up of a copper concentrator, you always focused on the crushing and grinding first, then you focus on the flotation. Then you focus on the hardening of the crushing, grinding, tailings circuit. You do the flotation. And then when you get your throughput to a consistent and sustainable level, then you start tweaking the recovery of copper to move it up. But everything is going exactly as planned to-date. And again, I will knock on wood.
Ralph Profiti: Okay. Thanks. Quite encouraging to hear. As a follow-up, when you look at the exploration slide at MVDP, it sounds like between outcropping and what the IP has done, the opportunities are both for oxide and sulphide. I am just wondering if that’s the same strategy at Mantos Blancos, where you also talked about stepping up the exploration efforts where oxides and sulphides potentially are both something that we could see.
John MacKenzie: I will just make a couple of comments and then pass it across to Cashel. But look, just by way of example, when Anglo American (JO:) bought Mantos Blancos in 1980, it had 5 years of life. And every time we drill there, we continue to sort of extend the resource and the reserve. So, I think right now, we have around 16 years, 17 years of life at Mantos Blancos. I think it’s the longest, Mantos Blancos is actually ahead in terms of its life for the past sort of 30 years or 40 years or so. But what we do know is there remains huge prospectivity sort of both at depth in the pit. Historically, we haven’t been able to drill at depth in the pit because of the old underground workings. Now, that we have mined the pit through those, we actually do have the ability to sort of see what’s at depth. And actually, the couple of drill holes we have put into the bottom of the pit that continue to go through very attractive grade sort of copper beyond that. So, that said, around the lease area, there are certain other areas where we think are very highly prospective for either oxides or sulphides. And we are in a very fortunate position where we now have processing facilities for both. So, to an extent, our exploration programs are focused on both. We see sort of significant opportunity both on the sort of oxides and sulphides at Mantos Blancos.
Ralph Profiti: Encouraging. Thanks John. Thanks Cashel.
John MacKenzie: Yes. Thanks Ralph.
Operator: Thank you. And your next question comes from the line of Bryce Adams from CIBC Capital Markets. Please go ahead.
Bryce Adams: Thank you, Capstone for the update and presentation. I wanted to clarify the milestone for MVDP nameplate capacity. When you guide to achieving nameplate rates in Q3 of this year, does that mean reliably and consistently running at nameplate, or does it mean doing so for a period of x many days? I am just thinking about it, let’s say, that first concentrate is produced here in May, June, that implies a ramp up or could imply a ramp up to full capacity in about four months, which if done, I would be looking at that as a very strong performance. And I just wanted to clarify what the definition is around that milestone.
John MacKenzie: Sure, Bryce. We sort of move into what we call a commercial ramp-up phase after we have hardened the grinding and crushing circuits for a 10-day run. And so we are beginning that process now where we feel we are getting to the stage where we are able to accomplish that. So, that to us is the technical milestone of when we move into the official commercial ramp-up phase. You are quite right to say that four months to get to sustainable full nameplate throughput production is a great metric to achieve. We believe we are on target for timeframes like that. In the initial feasibility, if one was to look back at the 43-101, I believe it was around six months. So, we are right around that timeline now if you do it. But with the way things are going, we don’t see any reason why we can’t achieve what we have laid out. And so far, everything is going extremely well.
Bryce Adams: That’s great to hear. And does it also mean design recoveries in the same timeline?
John MacKenzie: Yes. So, the recovery curve is a little slower than the ramp-up curve. But yes, we do see us getting close to that. It’s a little longer the curve to achieve that. But we consider when we have got 80% to 90% of the design recoveries that, that meets the commercial ramp-up definition and then we continue tweaking from there.
Bryce Adams: Okay. Thank you. I appreciate that.
Operator: Thank you. And your next question comes from the line of Craig Hutchison from TD Bank. Please go ahead.
Craig Hutchison: Hi guys. Good afternoon. I was wondering if you could provide some color on your concentrate off-take commitments, just given how tight the market is right now. I mean one of your peers last night announced that they are receiving negative TCRCs actually being paid to take their concentrate. So, I wonder if you could just provide some color across your operations, whether you have commitments, where you have some exposure here to the spot market to get lower TCRCs. Thanks.
John MacKenzie: I am going to flip that question across to Jerrold, who sat from Investor Relations also he covers our marketing area, so Jerrold over to you.
Jerrold Annett: Yes. Thanks Craig. I kind of expected that question, so did a review of this. We do have considerable unencumbered tons to move. We are in the process of discussions with various traders and smelters. I would say the big impact would be 2025, where at CESCO in Santiago, we are happy with the discussions. And I would say that it is clear to us that the benchmark is likely to move considerably lower next year. But in addition to that, we can lock in tons today for 2025 and even in ‘26 and ‘27 at terms that are extremely attractive and not seen in decades. So, I would say that a $50.05 decrease in our effective treatment charges would lower Capstone’s consolidated C1 cost down by over $0.11 a pound for next year. So, when John said that MVDP at full rates were going to be around $2 a pound, then if this happens, like I mentioned, we will be in around the $1.90 range.
Craig Hutchison: So, it sounds like the exposure is more for 2025 rather than upside, I guess in terms of cost this second half of this year?
Jerrold Annett: Yes, we may – so we may have a few parcels this year, and to get negative treatment charges is on the table. But I would say the big impact for us is ‘25.
Craig Hutchison: Okay. Great. And maybe just one last question for me. Just on the oxides. The costs were higher, I guess than you guys expected in the first quarter here. Can you just talk to what drove that and whether that’s a one-quarter thing or whether we should see some higher costs on the oxides into Q2 as well? Thanks.
John MacKenzie: Hi Craig. Yes, we were a little bit behind probably in our ambitions on the amount of cathode we were going to produce. And so we are catching up now more or less in it and some of it had to do with placement and some of it had to do with some irrigation, but minor operational issues, but it’s nothing that we see ourselves not catching up on and correcting that in the second half of the year.
Craig Hutchison: Okay. Great. Thank you.
Operator: [Operator Instructions] And your next question comes from the line of David Radclyffe from Global Mining Research. Please go ahead.
David Radclyffe: Hi. Good morning, good afternoon John and the team. The first question is on Pinto Valley which is obviously tracking well to the guidance and backing up a strong Q4. Maybe could you talk to the grade profile and what it looks like over 2024? Are you still looking for better grades in the second half? And there was the high grades in Q1 to plan, or did you pull forward some grades? Thanks.
John MacKenzie: Cashel…?
Cashel Meagher: Sure. Yes. So, there was a little bit of re-sequencing in the first half due to some minor operational issues. So, there was some surprise in the grade, and there was some re-sequencing. But I think overall, I believe the guidance is still current and will balance out for the year on the grade profile. What I would say is we have been increasing steadily the throughputs from Q4 to Q1. And now we are seeing it again in Q2 at Pinto Valley. So, our work on our asset integrity program is paying dividends now, and we are really seeing it in the consistent throughput. So, I will be happy to see in the next quarters that the mine will finally be challenged against what the plants can – meeting more consistently nameplate throughput numbers. So yes, so I think it’s still on guidance. We did sort of do a little change in sequence, but we are back on plan now.
David Radclyffe: Okay. Thank you. And then maybe shifting to Mantos Blancos and the sulphides there, it looks like, obviously, some more stability issues during the quarter. You are sort of tracking under expectations. And I think you are now saying you want to reach the 20,000 ton per day mark in the second half of the year. So, it sounds like that’s been pushed back a little bit. So, you are maintaining guidance. So, how do you actually catch up at Mantos Blancos sulphides?
Cashel Meagher: Yes. So, basically, what it was is when we initiated the guidance, we had some engineering on the area of the plant that is causing us the sustainability and the maintenance issues, which was I think we have described several times before, on the tailings deposition and transportation portion. So, we have gone through a large engineering project. We have gone into procurement. We are into civil earthworks and pouring foundations for the various positive displacement pumps and pipes and tanks and infrastructure that are required to get more sustainable production. Some of the procurement and some of the work in engineering took a little longer, and some of the scope of the work increased. So, that’s why we sort of pushed out getting to the nameplate capacity of 20,000 tons into just sort of like, we believe the sort of Q3 area. We say H2, we are still waiting for delivery of some of the items, although all items are on the current new schedule to be ready for assembly in the middle of this year. As far as catch-up goes, we will see what the opportunities are in sequencing in the mine. So, that’s being worked out now to see if we can maintain the guidance production from that one plant. But we believe overall as a company that will meet the guidance with all of the mines together because we have opportunities elsewhere.
David Radclyffe: Thank you very much. I will pass it on.
Operator: Thank you. There are no further questions at this time. I would like to turn the conference back to Mr. John MacKenzie for closing remarks.
John MacKenzie: Alright. So, we look forward to updating you again in early August with our Q2 results. And until then, stay safe and feel free to reach out to Jerrold or Daniel if you have any further questions. Thank you for your continued support and have a good day.
Operator: Thank you. That concludes our conference today. Thank you for participating. You may all disconnect.
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