Vancouver Sep 2, 2015 (Thomson StreetEvents) -- Edited Transcript of Copper Mountain Mining Corp earnings conference call or presentation Monday, August 10, 2015 at 2:30:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Rodney Shier Copper Mountain Mining Corporation - Director, CFO and Corporate Secretary * Jim O'Rourke Copper Mountain Mining Corporation - Director and CEO ================================================================================ Conference Call Participants ================================================================================ * Mark Turner Scotiabank - Analyst * Stefan Ioannou Haywood Securities - Analyst * Don DeMarco National Bank Financial - Analyst * Marco Rodriguez Stonegate Securities - Analyst * Craig Hutchison TD Securities - Analyst * Peter Campbell Mackie Research Capital - Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Good morning, ladies and gentlemen, and welcome to the Copper Mountain Mining Corporation's second-quarter results conference call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer. (Operator Instructions) This call is being recorded on Monday, August 10, 2015. And I would now like to turn the conference over to Rodney Shier, CFO. Please go ahead. -------------------------------------------------------------------------------- Rodney Shier, Copper Mountain Mining Corporation - Director, CFO and Corporate Secretary [2] -------------------------------------------------------------------------------- Thank you, Joanna. After opening remarks by management in which we will review the business and operating results for the second quarter of 2015, we'll open the line to participants for questions, as noted by Joanna. Please note that comments made today that are not of a historical factual nature may contain forward-looking statements. This information, by its nature, is subject to risks and uncertainties that may cause the stated outcome to differ materially from actual outcomes. Please refer to the bottom of our latest news release for more information. I'll now turn the call over to Jim O'Rourke, Chief Executive Officer of Copper Mountain Mining. -------------------------------------------------------------------------------- Jim O'Rourke, Copper Mountain Mining Corporation - Director and CEO [3] -------------------------------------------------------------------------------- Thank you, Rod. Good morning to everyone and thank you for joining us. Today we'll discuss the 2015 second-quarter results of the operation at the Copper Mountain Mine, and our corporate financials. I will briefly summarize the financial results and provide an update on various operational activities, after which Rod will provide financial details for the 2015 second quarter. For those of you following on the webcast, we will -- we're referring you to the page number on the supporting slides as we go through the presentation. The 2015 second-quarter mine performance has continued to show improvement in both production and reduced operating costs, which continue to be our main focus. Referring to page 3, the quarterly cash costs. Site cash cost per pound of copper produced, net of precious metals credits, was $1.36 per pound for the period, a 16.6% decrease compared to the $1.63 per pound in the second quarter of 2014. The Corporation total cash cost per pound sold net of precious metals was $1.81 per pound copper. Refer you now to page 4, the mine site pie chart. Approximately 90% of the site operating costs are composed of 10 major categories. Site management have successfully tackled these major cost centers and have reduced operating costs from budget by about 11.5% year-to-date. This continuing drive for improvements at the mine are positioning the Company well to weather the current global market conditions. In addition, Copper Mountain's bottom line continues to benefit from a weaker Canadian dollar relative to the US dollar, as approximately 88% of the Company's operating costs have a Canadian dollar cost base. In keeping with this trend, no major capital expenditures are planned for the second half of 2015, and production improvements are expected to continue through to the end of the year. I will now refer you to page 5 of the secondary crusher. The new $40 million secondary crusher is working at its designed capacity, and is meeting our expectations for increased mill throughput, plus allowing us a smoother mill operation. With the secondary crusher having now completed two full quarters of operating at design capacity, it is consistently delivering the SAG mill feed that has decreased in size from a nominal 5.5 inch to 2 inch material. I will now refer you to page 6, the second-quarter operational results. For the three months ended June 30, 2015, the Company completed a total of three shipments of copper concentrate, generating $56.8 million in revenue after provisional pricing adjustments. Revenues were down about 16.5% for the quarter as compared to the same period last year, but the revenue during the first half of 2015 at $128.3 million was only slightly lower than the same period last year. Revenues were adversely affected as a result of the 15% lower average realized copper price during the first half compared to the same period last year. Production for the three months ended June 30, 2015 was 19.5 million pounds copper, 7,800 ounces of gold and 71,100 ounces of silver. This represents a 2% decrease in copper production as compared to the second quarter of 2014, but a 56% increase in gold production as compared to that quarter. I will now refer you to page 7, the updated 43-101. The majority of the ore will be mined from the pit to South area for the balance of 2015. At the same time, we'll continue with the Phase 3 pushback on the west side of pit 3. Subsequent to the end of the quarter, preparations for mining activities in the Virginia area were initiated, with a new access road to the mill completed. The Virginia deposit will provide small volumes of higher grade ore for blending into the mill feed during the second half. During the quarter, a total of 14.2 million tons of material was moved, including 5.7 million tons of ore and 8.5 million tons of waste. The mining rate at the end of the period was in the range of 167,000 tons per day moved. SAG mill throughput continued to improve during the quarter as a result of the finer feed from the secondary crusher. Copper production during the quarter was in line with guidance. I'll now refer you to page 8, the second-quarter operational results. Copper head grade for the year is forecast to average 0.33% copper. But because of the higher gold content in pit 2, the copper equivalent grade is approximately 0.41% copper equivalent. During the quarter, the copper head grade was 0.33% copper, which was in line with our forecast. For the 2015 second quarter, the concentrator milled a total of 3.2 million tons of ore as compared with 2.7 million tons of ore for the same period last year. On a ton per day basis, the 2015 second-quarter averaged 35,600 tons per day versus 30,477 tons per day for the same period last year. This represents a 17% improvement in throughput over the second quarter of 2014, which can directly be attributable to the addition of the permanent secondary crusher. This improvement continued into July, as throughput averaged 39,100 ton per day during that month. Recent throughput rates are encouraging, and provide the confidence that the budget rate of 37,500 ton per day is achievable on a consistent basis. SAG mill availability was 91% during the second quarter and the copper recovery averaged 82.4%. I'll now refer you to page 9, the 43-101 optimization plan. On June 17, 2015, the Company filed a National Instrument 43-101 technical report on the resources and reserves of the Copper Mountain mine. As suggested by shareholders and analysts, we included an updated 10-year optimization mine plan with annual tonnages and grades. The average copper equivalent grades of 0.43% is projected in this 10-year plan. But, as we have done in the past, the Company will continue to give guidance yearly, once the annual budgeting process is completed. I'll now refer you to page 5, the safety award. The mine has continued with its excellent safety record since being awarded the 2014 Edward Prior award from the BC government for operating the safest midsize mine in the Province. We are very proud of our team in continuing their excellent safety performance. As of today, I'm pleased to report that the mine has worked two years free of any loss time injuries. Now I'll refer you to page 11, the copper production versus mill tonnage. Operational highlights for the second quarter include the SAG mill milestone exceeding the 35,000 ton per day design capacity for the quarter, and continuing through July with the average milling rate of 39,100 ton per day. Further optimization of the mill throughput is a key focus for the -- to maximize our copper production. Looking to the second quarter of 2015, we are focused on capitalizing on our trend of continuous operational improvements, while at the same time continuing to focus on cost reductions with a strict capital discipline. The mine is on track for meeting its 2015 guidance level of 80 million pounds of copper and 35,000 ounces of gold. We recognize we have a challenge for the second half and have some plans in place to overcome any shortfalls. I will answer specific questions in the question-and-answer period for those wishing more detail. Now, I'll turn it over to Rod. -------------------------------------------------------------------------------- Rodney Shier, Copper Mountain Mining Corporation - Director, CFO and Corporate Secretary [4] -------------------------------------------------------------------------------- Thank you, Jim. I'll refer to page 12, Q2 financial results. For the three months ended June 30, 2015, the Company recognized net revenue after pricing adjustments and smelter charges of CAD56.7 million based on an average realized copper price of $2.74 per pound compared to net revenues after pricing adjustments and smelter charges of CAD68 million, based on an average provisional copper price of $3.08 per pound for the three months ended June 30, 2014. The decrease in revenue is a result of lower copper prices being realized during the quarter despite the slight increase in sales volumes for the quarter. The mine sold a total of 18.4 million pounds of copper, 6,300 ounces of gold, and 66,700 ounces of silver during the three months ended June 30, 2015. Compared to sales of 18 million pounds of copper, 6,300 ounces of gold, and 94,900 ounces of silver during the three months ended June 30, 2014. I'll now refer you to page 13 of the Q2 financial results. Cost of sales for the three months ended June 30, 2015 were CAD55.7 million, which resulted in a gross profit of CAD1.1 million, as compared to cost of sales of CAD57.6 million, which resulted in a gross profit of CAD10.4 million for the three months ended June 30, 2014. The decrease in gross profit is again a result of lower copper prices being realized during the quarter. General and administrative expenses for the three months ended June 30, 2015 were CAD2.2 million compared to CAD1.3 million for the three months ended June 30, 2014. For the three months ended June 30, 2015, the Company recorded finance expense of CAD2.5 million as compared to CAD2.6 million for the three months ended June 30, 2014. Finance expense primarily consists of interest on loans and the amortization of financing fees. For the three months ended June 30, 2015, the Company recognized a non-cash unrealized foreign exchange gain of CAD5.2 million compared with a non-cash unrealized foreign exchange gain of CAD10.9 million for the three months ended June 30, 2014, which primarily relates to the Company's debt that is denominated in US dollars. During the first quarter, the -- during the second quarter, the Company recognized a non-cash unrealized gain on the interest rate swap of CAD0.4 million as compared with a non-cash unrealized loss on interest rate swap of CAD1.6 million for the three months ended June 30, 2014, which is related to the revaluation of the interest rate swap liability required under the Company's loan agreement. It should be noted that these adjustments to income are required under IFRS and are non-cash in nature, as outlined in the company's MD&A and statement of cash flow. This all resulted in a net loss attributable to shareholders for the three months ended June 30, 2015 of CAD1.6 million or minus CAD0.01 per share as compared to net income of CAD9.5 million or CAD0.08 per share for the three months ended June 30, 2014. Management of the Company believe that as a result of the Company having US-denominated debt, selling copper, gold, and silver in US dollars and reporting the financial statements in Canadian dollars, the unrealized foreign exchange loss or gain each quarter is misleading to the readers of the financial statements if just looking at net income only. As a result, management believes that readers of the financial statements shall look to adjusted EBITDA, adjusted earnings, and adjusted earnings-per-share as a better way to evaluate the Company's financial performance during the period. Therefore, if we remove all the accounting non-cash items, the Company reported an adjusted EBITDA of CAD15.4 million and adjusted earnings of CAD3.4 million or about CAD0.03 for the three months ended June 30, 2015 as compared to an adjusted EBITDA of CAD10.2 million and adjusted loss of CAD1.8 million or CAD0.02 per share for the three months ended June 30, 2014. As of June 30, 2015, the Company had cash on-hand of CAD22.3 million as compared to CAD14.7 million at the end of the first quarter. To date, we have paid back about $83 million in principal and interest on our low-cost strategic debt. Our senior credit facility has now been reduced to $129 million. In addition, our JPEG debt is currently carrying an interest rate of just under 1%. In conclusion, the second quarter of 2015 delivered strong operational results that produced CAD15 million in cash flow from operations during the quarter, and was driven by total cash cost at the site of CAD1.81 per pound of copper, which resulted in adjusted earnings of CAD7.8 million for the six months. We are confident that our production targets will be met, and we will continue to accumulate cash on the balance sheet. I would now like to open the lines up for any questions that people may have. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Mark Turner, Scotiabank. -------------------------------------------------------------------------------- Mark Turner, Scotiabank - Analyst [2] -------------------------------------------------------------------------------- Just a few, I guess, operational questions first and then maybe a few financial questions. But the 39,100 tons per day achieved so far in July, I just wanted to, I guess, confirm that that's calendar day. And then if you can, what the availability of the mill has been during that time? Has the availability been better than what we can sort of expect going forward or better than design? -------------------------------------------------------------------------------- Jim O'Rourke, Copper Mountain Mining Corporation - Director and CEO [3] -------------------------------------------------------------------------------- Yes. Definitely it's per calendar day to start with, Mark. And secondly, the operating time was high. It was about 96%, and versus the budget of 92%. And we feel that the crew have been making big strides in terms of increasing their availability. -------------------------------------------------------------------------------- Mark Turner, Scotiabank - Analyst [4] -------------------------------------------------------------------------------- Perfect. Is there anything for the balance of the quarter where we could sort of expect like planned downtime to bring it back down to around the 92%? Or is --? -------------------------------------------------------------------------------- Jim O'Rourke, Copper Mountain Mining Corporation - Director and CEO [5] -------------------------------------------------------------------------------- We do have our planned shutdowns, but the -- I think the team have been doing a great job of getting these times down. Obviously, we've been improving substantially. We're still budgeting 92%, though. And we will have the odd month where we have bigger jobs than others. But overall, we are planning to average 92%. -------------------------------------------------------------------------------- Mark Turner, Scotiabank - Analyst [6] -------------------------------------------------------------------------------- Okay. Perfect. And then just operationally, I guess this is more of a conceptual question for next year -- because, obviously, the copper price doesn't come off since the end of Q2. And I mean, you are benefiting from weaker Canadian dollar during that time too. But just conceptually, how can I guess the mine plan -- what levers do you pull to sort of tweak the mine plan, if copper prices were to stay where they are, and given sort of the grade profile for next year? And I'm just thinking sort of more qualitatively or conceptually in terms of -- I mean, do you need to mine at the rates that you are right now? Because obviously you are mining at greater rates to put or to achieve a greater head grade. Is there conceptually some options where you can maybe park some of the trucks? But I guess just looking for some flexibility levers you can pull in the mine plan to sort of preserve the cash margin, should copper prices stay where they are. -------------------------------------------------------------------------------- Jim O'Rourke, Copper Mountain Mining Corporation - Director and CEO [7] -------------------------------------------------------------------------------- Right. Number one, we are not mining extra to increase head grade. I don't know if that clarifies that. What we are doing -- and I think we have a slide in here on our page -- I forget what one it was. It was on -- which shows -- yes, page 7 -- which shows where we are mining in pit 2, and where we are mining in pit 3. We plan to maintain our mining rate at these levels, provided the price doesn't fall completely out of the ballpark. But in order to maintain our long-term plan, we would continue to mine in the 165,000 ton a day range, and probably sweetens the head grade a little bit from some of the ore from Virginia and then later oil. That would be our main focus. -------------------------------------------------------------------------------- Mark Turner, Scotiabank - Analyst [8] -------------------------------------------------------------------------------- Okay, yes. What I was getting at was the low grade stockpiles -- if as much needed to be put into that low grade stockpiles to maintain the 0.31 next year, if there was some sort of flexibility around maybe putting less tons into that but pulling from other areas in the pit. But -- -------------------------------------------------------------------------------- Jim O'Rourke, Copper Mountain Mining Corporation - Director and CEO [9] -------------------------------------------------------------------------------- No. We pretty well mine according to our long-term mine plan, Mark. And I guess with regard to that, as I say, we do have some potential for increased grades. But we also have some other potential cost savings that we are working on. And we believe that we can continue the way we are and maintain our costs in the CAD1.80 per pound range. -------------------------------------------------------------------------------- Mark Turner, Scotiabank - Analyst [10] -------------------------------------------------------------------------------- Perfect. And then most of those cost more on the mine side? Or just -- well, on the mills in terms of increasing throughput? -------------------------------------------------------------------------------- Jim O'Rourke, Copper Mountain Mining Corporation - Director and CEO [11] -------------------------------------------------------------------------------- Our costs are pretty stable. We typically are CAD16 million, CAD17 million a month. And we believe we can maintain that. Obviously, we have some months that are higher than others, depending on the major jobs. We don't try and smooth things out. We take the costs as they occur, and report them accordingly. And I think we're pretty stable in that regard. I have to emphasize that the team at the site are doing an excellent job in tackling those [10-high] costs out of major cost centers. And we are working on them all. We are working on improvements of waste storage areas, things like that. So I think we've got a number of things to work on and maintain where we are. -------------------------------------------------------------------------------- Mark Turner, Scotiabank - Analyst [12] -------------------------------------------------------------------------------- Great. And then maybe just one more question, actually for Rod, before I jump to the back of the queue. Just in terms of the covenants on the debt, I know there is -- and I guess they are not sort of all disclosable, but there was from the debt service account that, at one point, had to have sort of CAD12 million [in that]. What's -- under the current copper price environment and FX, what is sort of the thinking there? Is any additional funds going to have to be placed into that reserve account again? Or we're not expecting anything to go into there? -------------------------------------------------------------------------------- Rodney Shier, Copper Mountain Mining Corporation - Director, CFO and Corporate Secretary [13] -------------------------------------------------------------------------------- No, we're not at this point in time. We've -- have continued to -- we have continued to adjust it where essentially it's corporate guarantees that fund that account. So there's no funding required to be in that account and there hasn't been since day one. And we've got an extension for another year to June of next year. And we just addressed that on a year-by-year basis. It's -- as you know, it's very friendly debt. And the only real covenant is our debt service coverage ratio, which we are well above, which was [1.25] and that's disclosable and filed on SEDAR. -------------------------------------------------------------------------------- Mark Turner, Scotiabank - Analyst [14] -------------------------------------------------------------------------------- Right. Perfect. Thanks, guys. Yes. Congrats on good operations in the quarter. I'll jump to the back of the queue. -------------------------------------------------------------------------------- Jim O'Rourke, Copper Mountain Mining Corporation - Director and CEO [15] -------------------------------------------------------------------------------- Thanks, Mark. -------------------------------------------------------------------------------- Operator [16] -------------------------------------------------------------------------------- Stefan Ioannou, Haywood Securities. -------------------------------------------------------------------------------- Stefan Ioannou, Haywood Securities - Analyst [17] -------------------------------------------------------------------------------- Just great to see the cash cost sort of down in that CAD1.80 level. I was just wondering, now you've had sort of two full quarters with the new SAG mill. Do you have a feel for sort of where the unit operating costs for that piece of equipment are coming in? And are they basically -- I guess, more importantly, are they sort of in line with what you had originally planned for or expected? -------------------------------------------------------------------------------- Jim O'Rourke, Copper Mountain Mining Corporation - Director and CEO [18] -------------------------------------------------------------------------------- Yes. I would say they are right in line. I think we still have some tweaking to do with regard to the secondary crusher. We've been changing the metal content in the wear parts a little bit, and improving our wear rates. We've also been changing a little bit of the profile to get a little bit performance out of it. But the costs are well within our budget. -------------------------------------------------------------------------------- Stefan Ioannou, Haywood Securities - Analyst [19] -------------------------------------------------------------------------------- Can you give an idea sort of what they are, like on a per ton crushed basis or whatever? -------------------------------------------------------------------------------- Jim O'Rourke, Copper Mountain Mining Corporation - Director and CEO [20] -------------------------------------------------------------------------------- Less than CAD0.50. -------------------------------------------------------------------------------- Stefan Ioannou, Haywood Securities - Analyst [21] -------------------------------------------------------------------------------- Less than CAD0.50. Okay, that's helpful. That's great. And just maybe on a slightly different note, just with the stripping going forward, is it fair to assume that, over the foreseeable future, we're going to see the strip ratio stay where it is or even decrease? And more importantly, sort of stay below that magic 2-to-1 number from an accounting point of view? -------------------------------------------------------------------------------- Rodney Shier, Copper Mountain Mining Corporation - Director, CFO and Corporate Secretary [22] -------------------------------------------------------------------------------- Yes. From an accounting point of view, you saw where our strip ratio was this quarter -- around 1.5. And we expect that to continue as we utilize the low grade stockpiles as well, if you were counting that in that calculation. -------------------------------------------------------------------------------- Stefan Ioannou, Haywood Securities - Analyst [23] -------------------------------------------------------------------------------- Okay, great. Thanks very much, guys. -------------------------------------------------------------------------------- Jim O'Rourke, Copper Mountain Mining Corporation - Director and CEO [24] -------------------------------------------------------------------------------- Okay. -------------------------------------------------------------------------------- Operator [25] -------------------------------------------------------------------------------- Don DeMarco, National Bank Financial. -------------------------------------------------------------------------------- Don DeMarco, National Bank Financial - Analyst [26] -------------------------------------------------------------------------------- Can you talk a little bit about any trends in G&A spending? And expected quarterly CapEx requirements going forward? Thanks. -------------------------------------------------------------------------------- Jim O'Rourke, Copper Mountain Mining Corporation - Director and CEO [27] -------------------------------------------------------------------------------- Sure. I'll let Rod to talk to that. -------------------------------------------------------------------------------- Rodney Shier, Copper Mountain Mining Corporation - Director, CFO and Corporate Secretary [28] -------------------------------------------------------------------------------- Okay. On the CapEx, Don, like other companies out there, we've tightened our belt. There's a difference between a want and a need. And our sustaining capital, it's very nominal. You've seen the first half of this year. We spent around CAD700,000 on capital. And we expect a similar amount in the second half of the year. So our original -- if I compared that to our original budget, it's -- you know, our original budget was around CAD5 million, but we determined some things are not required at this time. Okay? And from an administration point of view, we're fairly consistent quarter-to-quarter. It was up a little bit this year, as there were some management bonuses based on the performance from 2014. -------------------------------------------------------------------------------- Don DeMarco, National Bank Financial - Analyst [29] -------------------------------------------------------------------------------- Okay, super. That's all for me. -------------------------------------------------------------------------------- Operator [30] -------------------------------------------------------------------------------- Marco Rodriguez, Stonegate Capital. -------------------------------------------------------------------------------- Marco Rodriguez, Stonegate Securities - Analyst [31] -------------------------------------------------------------------------------- Thank you for taking my questions. Just have a really quick one in terms of your guys' thought processes as it relates to current copper prices, and then any sort of expectations you have for short-term pricing. I know it's kind of difficult and who knows? But just wanted to try to get a sense for how you guys are thinking about that and from a production standpoint as well. -------------------------------------------------------------------------------- Jim O'Rourke, Copper Mountain Mining Corporation - Director and CEO [32] -------------------------------------------------------------------------------- Well, I think what we did at the start of the year when copper prices did drop, we tackled our budget head-on, and management came up with a new plan and some cost reductions. And I think I mentioned in the talk, we are down about 11.5% on our operating costs as compared to our original budget. And we did identify the 10 key cost centers, and we continue to tackle those. But also, with regard to the operation itself, we continue to increase our tonnage, and also look at ways that we can maybe up the grades a little bit, and try and improve some of our profiles and whatnot in terms of haulage for the pit to get our costs down even further. -------------------------------------------------------------------------------- Marco Rodriguez, Stonegate Securities - Analyst [33] -------------------------------------------------------------------------------- Got it. And last quick questions and I'll jump back into the queue. You talked about additional cost reductions in the second half of the year, trying to focus on that if copper prices continue to decline. Can you kind of quantify how much more you can take out of the system, if you will? -------------------------------------------------------------------------------- Jim O'Rourke, Copper Mountain Mining Corporation - Director and CEO [34] -------------------------------------------------------------------------------- Yes. I think we have some other considerations. I mean, if copper price dropped below [CAD2.00], definitely, we'd have some other cost savings we could tackle. But I think it's premature at this stage. -------------------------------------------------------------------------------- Marco Rodriguez, Stonegate Securities - Analyst [35] -------------------------------------------------------------------------------- Got it. Thanks a lot, guys. -------------------------------------------------------------------------------- Operator [36] -------------------------------------------------------------------------------- Craig Hutchison, TD Securities. -------------------------------------------------------------------------------- Craig Hutchison, TD Securities - Analyst [37] -------------------------------------------------------------------------------- Thanks for taking my call. The question -- a follow-up question on the CapEx. If you are only spending about CAD1.5 million this year, will there be a catch-up year in 2016? And maybe can you give us a sense of what that number might be? I imagine there will be some capitalized stripping perhaps in 2016? -------------------------------------------------------------------------------- Jim O'Rourke, Copper Mountain Mining Corporation - Director and CEO [38] -------------------------------------------------------------------------------- No. -------------------------------------------------------------------------------- Rodney Shier, Copper Mountain Mining Corporation - Director, CFO and Corporate Secretary [39] -------------------------------------------------------------------------------- No, there's no capitalized stripping, Craig. We take that each quarter as it comes through. In terms of the CapEx items, our budgeting process -- because we have our project financing -- we put everything in our budget at the beginning of the year, because it does get approved by the banks. And then we do have another process that goes through to ensure that that's still a valid capital -- sustained capital addition that we do need. And so, we do have some leeway there. And with regard to future capital, we still believe we are in that CAD3 million to CAD5 million a year area, barring any change in the plans going forward at the mine site. -------------------------------------------------------------------------------- Craig Hutchison, TD Securities - Analyst [40] -------------------------------------------------------------------------------- Okay, is there any big tailings expansions at all required or --? -------------------------------------------------------------------------------- Jim O'Rourke, Copper Mountain Mining Corporation - Director and CEO [41] -------------------------------------------------------------------------------- Yes. We will have some of those coming up. We have some flexibility there. We are not really pushed in that area. Our tailing facility is in pretty good shape. I think you are probably aware that after the situation at Mont Polly, we had to move forward our updated report to last December, and then we had to get an extra independent consulting firm to review that. And then the government itself got another firm to review that. And what we've done there now is we've -- one of the recommendations that came out of that was that the companies have independent, if you will, Review Board. And we've set that up, and we've had the meetings at site. And we have a number of ideas that we are kicking around that would further improve it. But we've definitely got a clean bill of health for the near-term, and we could have some expenditures in the next few years that we are working on now. -------------------------------------------------------------------------------- Craig Hutchison, TD Securities - Analyst [42] -------------------------------------------------------------------------------- Okay, thanks. Maybe just one last question. Just I know in your mind plan for next year, you are targeting, I think, an average rate of about 40,000 tons per day. So what areas of improvement are you guys looking at in potential optimization areas to get to 40,000 tons per day on a sustainable basis? -------------------------------------------------------------------------------- Jim O'Rourke, Copper Mountain Mining Corporation - Director and CEO [43] -------------------------------------------------------------------------------- Okay. I think the main one is the secondary crusher. Just more improvements there. When we designed it, we were looking at a target of somewhere [near] P80 of 38 millimeter. And we are probably a little coarser than that right now. We do find that when we get the fine material, I mean, we hit tonnages well over 40,000 ton a day. So we are continuing to tweak the crusher, change the old mantle profiles a little bit. We added a little bit more magnesium -- or manganese. We've gone from 16% to 18% on oils and mantles; changed a little more meat on the bowls. They were wearing faster. All of these things that will improve the -- number one, the operating time of the secondary crusher. The -- also, the sizing. And I think, with that, we definitely can get it through the SAG mill. We've got some modifications we are doing in the mill, in terms of the ball mill; the screens at the discharge of the SAG mill. So there's a number of items we are working on. And I think we've been very encouraged so far, and particularly with the July results. And it's been going very, very nicely. The guys in the site have got a good handle on it, and it's going quite smoothly. So we believe the improvements are there and readily available. -------------------------------------------------------------------------------- Craig Hutchison, TD Securities - Analyst [44] -------------------------------------------------------------------------------- Thanks very much, guys. -------------------------------------------------------------------------------- Operator [45] -------------------------------------------------------------------------------- Mark Turner, Scotiabank. -------------------------------------------------------------------------------- Mark Turner, Scotiabank - Analyst [46] -------------------------------------------------------------------------------- Just one quick follow-up for Rod. In terms of the provisional pricing -- and I'm not sure if I missed it in the MD&A here -- but are you able to quantify how many pounds you have sort of outstanding that are provisionally priced at the end of the quarter? Just trying to get an impact or a sense of the impact if copper prices potentially stay down here for the next quarter. -------------------------------------------------------------------------------- Rodney Shier, Copper Mountain Mining Corporation - Director, CFO and Corporate Secretary [47] -------------------------------------------------------------------------------- Yes, I don't have that off the top, but if I was to estimate, it's going to be -- I'm thinking CAD1.5 million [provisional line]. Yes. Probably -- yes, probably in the order of 20 million pounds. -------------------------------------------------------------------------------- Mark Turner, Scotiabank - Analyst [48] -------------------------------------------------------------------------------- Okay. -------------------------------------------------------------------------------- Rodney Shier, Copper Mountain Mining Corporation - Director, CFO and Corporate Secretary [49] -------------------------------------------------------------------------------- Probably because you are -- yes, because you always have that rolling, and we're doing one (multiple speakers) -- yes. -------------------------------------------------------------------------------- Mark Turner, Scotiabank - Analyst [50] -------------------------------------------------------------------------------- Right, for the three. And that's -- yes, okay, the ballpark. I figured. I just wanted to make sure. -------------------------------------------------------------------------------- Rodney Shier, Copper Mountain Mining Corporation - Director, CFO and Corporate Secretary [51] -------------------------------------------------------------------------------- And then depending on where you happen to get it in that quarter, we've had quarters where you have a little bit of dip in the price, and you are down low as opposed to where it was at the end of the quarter, too. -------------------------------------------------------------------------------- Mark Turner, Scotiabank - Analyst [52] -------------------------------------------------------------------------------- Yes. And unfortunately or fortunately, timing is everything. So --. -------------------------------------------------------------------------------- Rodney Shier, Copper Mountain Mining Corporation - Director, CFO and Corporate Secretary [53] -------------------------------------------------------------------------------- Yes, that's right. -------------------------------------------------------------------------------- Mark Turner, Scotiabank - Analyst [54] -------------------------------------------------------------------------------- Okay, thank you. Thanks, guys. -------------------------------------------------------------------------------- Operator [55] -------------------------------------------------------------------------------- Peter Campbell, Mackie Research Capital. -------------------------------------------------------------------------------- Peter Campbell, Mackie Research Capital - Analyst [56] -------------------------------------------------------------------------------- Good quarter. Looks like everything is running pretty much as it should. That's good news. Quick question for you. It's just kind of a technical question on the SAG mill, Jim. The way things have been configured now with the secondary crusher, you are effectively running the SAG mill as a big ball mill. And I'm just kind of wondering, in terms of, like, wear and maintenance, if your expectation or observations is that the wear and maintenance on the SAG mill is any better or any worse than what it was before you installed the secondary crusher? -------------------------------------------------------------------------------- Jim O'Rourke, Copper Mountain Mining Corporation - Director and CEO [57] -------------------------------------------------------------------------------- I think it's been improving, Peter. In other words, less maintenance, getting better wear. But also the guys are doing a lot of work with regard to liner profiles and whatnot. And I guess moving the design more and more toward a less violent operation and more like a ball mill, where you've got attrition grinding versus impact grinding. -------------------------------------------------------------------------------- Peter Campbell, Mackie Research Capital - Analyst [58] -------------------------------------------------------------------------------- Right, right. And in that regard, just again, kind of a technical question. How is the steel consumption, like, for the balls? Is it about the same? Or higher or lower? -------------------------------------------------------------------------------- Jim O'Rourke, Copper Mountain Mining Corporation - Director and CEO [59] -------------------------------------------------------------------------------- Good question. I think it's gone down a little bit. -------------------------------------------------------------------------------- Peter Campbell, Mackie Research Capital - Analyst [60] -------------------------------------------------------------------------------- Oh, okay. So overall, like your observation -- at this point, anyways -- is that the finer feed to the SAG mill is that it's basically reduced wear and maintenance on the SAG, with the exception that perhaps your maintenance guys are doing a bit of a better job like adapting to the new feeds? And that's a pretty fair assessment then? -------------------------------------------------------------------------------- Jim O'Rourke, Copper Mountain Mining Corporation - Director and CEO [61] -------------------------------------------------------------------------------- Yes. I think that's a fair assessment. And as I've said, they are doing some modification on liners -- shell liners in particular, where we are decreasing the lift angle, as I say, to bring more in line with a ball mill versus impact grinding. -------------------------------------------------------------------------------- Peter Campbell, Mackie Research Capital - Analyst [62] -------------------------------------------------------------------------------- I see, I see. So that would potentially account for the decreased wear like on your liners and so on then, too? -------------------------------------------------------------------------------- Jim O'Rourke, Copper Mountain Mining Corporation - Director and CEO [63] -------------------------------------------------------------------------------- Right. -------------------------------------------------------------------------------- Peter Campbell, Mackie Research Capital - Analyst [64] -------------------------------------------------------------------------------- I got it. Okay. Well, okay, Jim. Thank you very much. -------------------------------------------------------------------------------- Jim O'Rourke, Copper Mountain Mining Corporation - Director and CEO [65] -------------------------------------------------------------------------------- Okay. Thanks, Peter. -------------------------------------------------------------------------------- Operator [66] -------------------------------------------------------------------------------- Thank you. Ladies and gentlemen, as a reminder, should you have any questions (Operator Instructions). There are no further questions at this time. You may proceed. -------------------------------------------------------------------------------- Jim O'Rourke, Copper Mountain Mining Corporation - Director and CEO [67] -------------------------------------------------------------------------------- Yes. Thank you very much, everyone, for joining us. And I think we are very confident that we can move forward with, hopefully, more improvements during our next call in the next quarter. And obviously with the increased tonnage, we also get increased copper production to try and gain a little bit there and ensure that we meet our guidance. -------------------------------------------------------------------------------- Rodney Shier, Copper Mountain Mining Corporation - Director, CFO and Corporate Secretary [68] -------------------------------------------------------------------------------- Okay. Thanks, again, everybody. And, as usual, if you have any questions, you can always contact us directly. Jim and I are always available for direct questions. Thank you very much. Good bye. -------------------------------------------------------------------------------- Jim O'Rourke, Copper Mountain Mining Corporation - Director and CEO [69] -------------------------------------------------------------------------------- Bye. -------------------------------------------------------------------------------- Operator [70] -------------------------------------------------------------------------------- Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.
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