Capstone Copper Corp

TSX:CS

Earnings Call Transcript 2022-Q1

[Operator]

Good morning. My name is Sylvie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Capstone Copper Q1 2022 Results Conference Call. [Operator Instructions]

Mr. Jerrold Annett, you may now begin the conference, sir.

[Jerrold Annett, executive]

Thank you. Good morning. I'd like to welcome everyone to Capstone Copper's results conference call. Please note that the news release and regulatory filings announcing Capstone Copper's 2022 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 is also available in the Investors section of our website. I'm joined today by our CEO, John MacKenzie; our President and COO, Cashel Meagher; our Chief Financial Officer, Raman 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, executive]

Thank you, Jerrold, and Good morning, everyone. I'm pleased to report our inaugural first quarter of Capstone Copper. And I'd like to take this opportunity to thank our entire organization and our stakeholders, as we progress our integration efforts to what has been an incredibly busy period since announcing the transaction in November the last year.

On Slide 5. Before we kick off the call with respect to our Q1 operational and financial results, I wanted to take a step back and briefly revisit the vision of Capstone Copper, as we continue to build a leading copper producer in the Americas. Our portfolio of 4 operating mines, the brownfield's, Mantoverde expansion and our fully permitted Santo Domingo project, create the foundation of a truly peer-leading growth profile in the coming years. With the ambitions of building a world-class district in Chile, while simultaneously improving the asset quality of our portfolio with higher grade, lower cost sulphides coming online.

Moving on to Slide 6. In Q1, we produced 22,500 tons of copper at a C1 cash cost of $2.31 per pound. Our quarterly results include a 9 day stub period for our Chilean operations, Mantos Blancos and Mantoverde. As a result of the Mantos Copper transaction closing towards the end of the quarter on March 23. Inflation has been a topical theme this quarter, not only amongst our peers, but for the world more generally. Our operating costs were impacted by inflationary pressures felt in the last 6 months and further exacerbated more recently as the war in Ukraine and the associated sanctions on Russia have led to higher energy and input costs, which we'll speak to further on the following slide.

On Slide 7, we've shown the year-on-year change in our C1 cash costs to illustrate where we are seeing the largest impact on our business from an operating cost standpoint. Prior to the impact of our Mantos Blancos and Mantoverde mines, our C1 cash costs were $2.17 per pound in the quarter, impacted by inflationary pressures, primarily for Pinto Valley, with respect to power, diesel, grinding media and other input costs, as well as higher TCRC's. With global benchmark terms for copper have increased by around 8.5% year-on-year.

On the top right hand side of the page, we show the impact of our Chilean operations for the 9 day stub period in the quarter, where costs were heavily impacted by record high sulphuric acid prices, and I'll cover this in more detail when discussing our guidance for the remaining 9 months of 2022. With the completion of the ramp-up of the Mantos Blancos sulphide plant debottlenecking in Q3 of this year and the commencement of production from MVDP late next year, we expect our costs to decrease substantially. As I mentioned earlier, our vision is to build a world-class district that encompasses Mantoverde and Santo Domingo.

Now I'll pass over to Raman for our financial results.

[Raman Randhawa, executive]

Thank you, John. We are now on Slide 8. Despite the inflationary pressures John referenced, we had a solid quarter, underpinned by higher sales and gross margins driven by a realized copper price of $4.78 per pound, resulting in adjusted EBITDA of $123 million in the quarter versus street consensus of approximately $95 million. Operating cash flow before working capital in the quarter was impacted by some one-time items, including transaction costs related to closing the Mantos transaction of $19.9 million, as well as the annual Mexican tax payment was higher by $23 million, which related to actually income from 2021.

Turning to Slide 9. And with the Mantos transaction closed in the quarter, we highlight our strengthened consolidated balance sheet with available liquidity of $638 million, which included our cash and short-term investments of over $400 million with an undrawn revolving credit facility of $225 million. Subsequent to the quarter, we had been working on this before the quarter, we further enhanced our financial flexibility. We actually increased our available liquidity by amending our revolving credit facility from $225 million to $500 million plus $100 million accordion, at very attractive terms. This financing was about rightsizing our borrowing capacity for a company of our size, i.e. Capstone Copper and the amended RCF is now expected to be in place before July this year.

With the enhanced RCF, our total available liquidity has increased from the $638 million I noted as of March 31 to now [ $913 ] million or over $1 billion with the according. Capstone Copper with 4 operating mines all generating meaningful operating cash flow underpins our ability to finance our growth plans. Our financial strength, coupled with our EBITDA generation shown on the left -- on the right hand side here, even a meaningful lower copper prices, which is shown on the right hand side of the page illustrates our ability to fund our next phase of growth.

Now as John mentioned, build a world-class district between Mantoverde and Santo Domingo. From a capital allocation perspective, we have actually phased in a disciplined approach with respect to our major capital projects in construction. And the major project that we do have in construction is Mantoverde, sulphides of which 40% is already spent on $825 million, plus 80% of the Mantoverde capital costs are fixed relating to the lump sum turnkey with Ausenco, and the fact that we order mining equipment from Komatsu pre-inflationary environment.

With that, now I'll hand it over to Cashel.

[Cashel Meagher, executive]

Thanks, Raman. We're on Slide 10. At Pinto Valley, we produced 14,400 tons copper at C1 cash costs of $2.60 per payable pound. Mill throughput was strong at an average of 58,400 tons per day, while grades and recoveries of 0.32% and 82% are expected to improve as we progress through the year. Copper production is weighted towards the second half of the year as we have taken some planned annual maintenance downtime in Q2.

The waterfall chart on the slide shows the areas where we saw $0.37 per pound higher operating costs in Q1 compared to our January guidance, about $0.12 per pound or one-third of the higher costs is due to inflationary input costs, as John mentioned earlier, like fuel, explosives, branding, media, reagents and some contractors. The balance is mostly due to Q1 being a lower production quarter plus the impact of capitalized stripping. We'll comment more on Pinto Valley costs a bit later in this presentation when we cover our 9 month guidance.

Bulk on the top right of the slide is a recent drone shot of our demo dump leach testing pad for our PV4 study. This is in addition to column leach testing, we are performing using the Jetti catalytic leach technology. The opportunity here is that excess SX-EW capacity at Pinto Valley is available to process increased dump leaching activity. Work continues on our pyrite agglomeration project. We'll conduct column test to determine the amount of asset credits that could be potentially generated by diverting a tailings stream containing up to 50% pyrite and mixing it with our dump leach feed.

The results of this will be included in the PV4 PFS, this study is expected to be released in H1 of 2023 and recall, we are aiming to extend the Pinto Valley mine life by 10 to 15 years into the 2050s. Before I leave this slide, and not mentioned is the work that we have done so far this year at Copper Cities just 10 kilometers from Pinto Valley. We believe Copper Cities is a geological mirror image of Pinto Valley. Recall, we announced in January that we have entered into an 18 months access agreement with BHP to conduct drill and metallurgical test work. To date, we have completed the required drilling and have sufficient samples to commence metallurgical test work in H2 2022. So I believe that the $7 million program is going quite well.

Moving to Slide 11. Cozamin had a good first quarter with production of 5,900 tons of copper to C1 cash cost of $1.12 per payable pound. On the cost side, Cozamin came in on the lower end of the guidance, we provided in January. Throughput of just over 3,700 tons per day was slightly impacted by planned downtime to install a mill and to increase grinding capacity to over 4,500 tons per day. This compares to our current mine plan of 3,780 tons per day, so the additional mill capacity will provide future mine expansion optionality and overall operational flexibility.

The top right of the slide shows a recent photo of the dry stack tailings and paste backfill facility, which continues on track for completion at the end of this year with commissioning in H1 of 2023. The total project investment is estimated at $45 million, of which $23.2 million have been invested to-date. Cozamin's exploration teams were very active during Q1, testing the Mala Noche Footwall Zone and Mala Noche Main Vein West Target. Drill testing has commenced from the underground West crosscut area. This is significant because our drilling accuracy and efficiency has improved as a result as we are targeting a zone that appears to extend the Mala Noche Vein. We expect to provide results of our Cozamin drilling within a broader corporate exploration update before PDAC next month.

Now on Slide 12. Commissioning of the Mantos Blancos debottlenecking project was completed in Q1 and subsequent to quarter end in April, we reached a throughput of 18,000 tons per day. So we are well on our way to achieving design throughput of 20,000 tons per day. And typical to all ramp ups, you need to see steady state throughput first, before process optimization can take place, where we expect to make gains and recoveries. They are currently in the low-70s, and we expect to see the target at 80% level. That was in the technical report in Q3.

Important to note, that Mantos Blancos' processing fee grades in the 0.8% to 0.9% range. And when we achieve design production this will drive down C1 cash costs at the mine. The higher cost oxides are now considered second grade production, which we can dial up or down depending on input costs, factors, namely sulphuric acid prices. We'll talk about this more in detail in a few minutes from now. Phase 2 PFS work to expand Mantos Blancos to over 27,000 tons per day, throughput will be completed in Q2, and this will be incorporated into a feasibility study. We will release in Q4 of 2022. Recall the expansion aimed to tie in unused old mill capacity with the new mill operation currently in ramp up, we expect this to result in an attractive IRR and overall low capital intensity.

Moving to Slide 13, Mantoverde will become our ground jewel world-class asset that is expected to double our company's EBITDA during its first year in production in 2024. As you can see by the photo below major construction as well underway. Bulk earthworks are complete for primary crushing and grinding area platforms and major TSF construction activities have commenced. We have received 13 new commence to 830 haulage trucks, and they are currently in operation. And finally the construction camp is complete and operational.

Over 40% of the projected CapEx has been spent at the end of Q1. In terms of inflationary pressures, we are seeing a small increase in CapEx owing to $25 million in higher pre-stripping costs related to higher diesel prices and we added in an extra $15 million contingency. The projected CapEx is now $825 million or $38 million higher. Recall we have a lump sum turnkey contract with Ausenco of which $525 million or 67% of the original capital costs have been fixed, plus $140 million in mining equipment is fixed, which equates to a total of $665 million on the $825 million or 80% of the project fixed.

Now on to Slide 14. One of our top deliverables for this year is for Mantoverde, Santo Domingo district integration plan to be announced just ahead of an analyst and investor tour scheduled for the week of November 14. The plan will outline how we believe the large copper, cobalt, gold and iron resources at Mantoverde and Santo Domingo should be developed. So as maximize the value of the district to the benefit of our shareholders and stakeholders. We expect to communicate and optimize flow sheet as part of this plan, as well as detailing the synergies that will be maximized by integrating these properties. We are targeting 200,000 tonnage per year of copper production with first quartile operating costs, driven by efficient operations, high copper grades and strong iron and gold byproduct credits.

Top of that, we have an enormous potential to be one of the largest battery grade cobalt producers in the world and lowest cost with strategic byproduct sulphuric acid used to treat district copper oxides and fill SX-EW capacity. We would produce 1.4 million tons of sulphuric acid per year, and currently we consume 900,000 tons between Mantoverde and Mantos Blancos, which would be significant cost savings for additional oxide production. The plan will map out how Mantoverde, Santo Domingo will link together with flow sheets, which we will then work on to deliver feasibility studies as follows. In H1 of '23, an updated Santo Domingo feasibility study that captures district infrastructure synergies. In H2 of 2023, a Mantoverde Phase 2 expansion feasibility study that captures district synergies. Also in H2 of 2023, a Mantoverde, Santo Domingo cobalt feasibility study, which captures production from both Santo Domingo and Mantoverde with byproduct sulphuric acid production.

In H2 of '23, a further updated Santo Domingo feasibility to capture the copper oxides opportunity where excess SX-EW capacity at Mantoverde can be utilized. This approach will enable us to provide informed timelines for each project that can be phased appropriately to reduce our execution risk. Timelines for studies outlined above will ultimately influence decisions around green lighting growth beyond our near-term MVDP project under construction.

We recognize we're in a fortunate position, given our low altitude location, near major mining centers, the scale of resources, the existing production base, and with key permits in hand, this is rare. Clearly, this growth pathway will keep us incredibly busy over the next 18 months. So I'm pleased that Capstone Copper continues to attract top industry-leading professionals join our team. In April Peter Amelunxen joined us as VP, Technical Services and he will oversee plant optimizations across the portfolio. Quarter back our technical reports or studies, including the Mantoverde, Santo Domingo integration plan. He is a professional engineer with 25 years of operational and senior management experience at numerous copper mines across the globe. I have had the honor in working closely with him for many years and look forward to this next chapter as our team executes in our exciting growth strategy.

Now on Slide 15. One of the largest synergies we have in creating the Mantoverde, Santo Domingo district is in cobalt. The iron oxide copper gold deposits in the Atacama region typically have high concentrations at cobalt associated with pyrite. And we have the opportunity, one of the world's largest and lowest cost vertically integrated battery grade cobalt businesses. As mentioned a strategic byproduct will be sulphuric acid, and we anticipate more than we currently require, allowing us to pursue copper oxide growth opportunities around our operations, where we have excess SX-EW capacity.

We are currently evaluating 2 different processes, roasting and acid pressure oxidation or POX. POX has potential to be a lower capital alternative, which is why we are pursuing this process in parallel with roasting. A flow sheet will be selected and a cobalt resource update will be completed for Mantoverde, Santo Domingo in H2 of 2022. Then in H2 of 2023, we will have the cobalt plant engineering and reserve estimate followed by cobalt Mantoverde, Santo Domingo feasibility study completed.

Now over to Wendy King for the sustainability review.

[Wendy King, executive]

Thank you, Cashel. We are now on Slide 16. We're pleased to announce our upcoming sustainability report that will be published in June. This is our sixth sustainability report prepared in accordance with the GRI standards and the SASB Mining & Metal Standards. We are also beginning to align our disclosures with the task force on climate related financial disclosures.

Tailings management was a key focus in 2021. Pinto Valley established and convened its independent tailings review board, a requirement of a global industry standard for tailings management. Construction is underway for the new paste backfill and dry stack tailing storage facility at Cozamin, which will result in a smaller land footprint and lower water demands.

Our global workforce grew by 30% in 2021, mainly driven by growth projects. Women's representation in our employee base held steady at 11%. We created a diversity and inclusion committee, which will work across sites to develop an action plan in 2022. Our Board diversity target is 30% women by 2023. We also made efficiency gains relative to production in water use, energy and greenhouse gas emissions. Overall water intensity, or the amount of water used per ton decreased by 11% over 2020, despite a global production increase. Trends and emissions closely followed energy use, which increased from added fuel demand for capital construction projects. However, the increase is still well below our production increase. We are committed to taking action on climate change by reducing our greenhouse gas emissions.

In 2022, we will establish a company-wide target and assess decarbonization pathways for all our sites. This process began in Q1 with a review of greenhouse gas inventories to establish a baseline in line with industry best practices. We are also developing our ESG strategy with focus on the areas that will be critical for Capstone in this new growth phase, which are tailings, water, climate change, land management, responsible value chain, workforce development, and community impacts. Our strategy will include actions and targets for these focus areas. Through our strategy, we aim to link our performance to the ambitions of the UN Sustainable Development Goals.

Now I will hand the call back to John.

[John MacKenzie, executive]

Thanks Wendy. We are now on Slide 17. I'm pleased to provide Capstone Copper's inaugural guidance. Keep in mind, this is for the 9 month period from April 1 to December 31. For the balance of 2022, we expect to produce between 91,000 and a 100,000 tons at C1 costs between $2 to $2.15 per pound for our sulphide business. Additionally, we expect to produce between 45,000 to 50,000 tons of copper from capitals at $3.55 to $3.75 per pound.

During the quarter, we critically looked at our business in the context of the current inflationary environment. The world has certainly changed since providing guidance in January this year, with the war in the Ukraine and sanctions on Russia, adding to inflationary pressures, which we are experiencing on input costs such as fuels, sulphuric acid, explosives, grinding media and freight charges. The capital costs are roughly $0.70 per pound, higher than what was published in our technical report, because we are assuming spot sulphuric acid prices of $280 per ton for the balance of this year, which represents all time highs. This compares to $180 per ton we assumed in the technical report for 2022. The perfect storm has led to where the sulphuric acid price and sulphur market is today.

Incredibly strong fertilizer demand is coincided with pandemic related logistical challenges in Asia, and higher ocean freight costs with the help of the supply side of the equation. We believe sulphur and sulphuric acid prices at these levels are unsustainable and will ease in the second half of 2022. Prudently, we've price fixed around 65% of our sulphuric acid purchases in Chile for the balance of the year. Also, when copper prices were higher in April, we made the decision to protect a $4 flow and lock in margins for over half of our cathode productions for the balance of the year. This works out to 27,000 tons of copper cathode with a $4 flow at a ceiling price of $4.86 per pound.

Now onto Slide 18. We added this chart to illustrate how we are proactively improving the asset quality of our portfolio by transforming our business to lower cost sulphide as we ramp up Mantos Blancos Concentrator Debottlenecking Project and complete the construction and ramp up for the Mantoverde sulphide project in 2024. Delivering Santo Domingo project will further increase our sulphide business, improving margins through reduced costs. Low cost sulphides are expected to contribute over 90% of our future total copper production. The developments of the world-class Mantoverde, Santo Domingo integrated district is expected to drive company-wide consolidated C1 costs to approximately $1.50 per pound.

Slide 19. This slide shows our capital and expiration guidance for the 9 months period from April 1 to December 31. At Pinto Valley, our sustaining capital includes one-time items totaling $24 million related to tailings and water management initiatives, especially important as we are actively looking for ways to maximize more throughput. At Mantos Blancos for financial reporting reasons, we were required to reclassify some operating costs to production phase of the third stripping, which is expected to be just over $50 million for the balance of 2022.

As previously mentioned, total initial CapEx for Mantoverde development project has increased $38 million to $825 million with expansionary capital this year focused on the primary crusher, pipelines, stockpiles, camps, and tailings. At Cozamin, capital spending is on track with respect to our paste backfill and dry stack tailings plants. And the Santo Domingo capital is primarily focused on re-routing highway C17 and spending on the cobalt feasibility study. Our exploration efforts for the balance of this year are primarily focused on brownfield opportunities at Cozamin and in Chile with a focus on delineating the oxide resource at Santo Domingo, as well as Greenfield expiration at Copper Cities. Looking forward, we expect increased brownfield exploration efforts in Chile, particularly at Mantoverde and Santo Domingo.

On Slide 20, we've set forth an exciting pathway to transform Capstone Copper into a premier mid-tier company on route to a 100% production growth and lower costs. We also have an opportunity to create a world-class cobalt business. If we put Chile on the map for yet another critical green metal as the world accelerates its decarbonization efforts. We are applying a disciplined and phased approach to growth, and we have the balance sheet, a strong cash flow base from current operations, and the leadership to execute on this plan.

Finally, on Slide 21. Capstone Copper is expected to produce 185,000 tons of copper production over 12 months in 2022, which has been illustrated on the slide in the first stage of growth. The second stage of growth as we commission the MVDP is expected to generate copper production of 260,000 tons by 2024, which represents 40% growth. Beyond this, we expect to deliver another 45% growth to 380,000 tons per annum with Santo Domingo with further expansion opportunities throughout our portfolio.

You can see that we have a tremendously exciting growth trajectory, and this doesn't factor in robust pipeline of other growth initiatives which we have referenced including PV4, the Phase 2 expansion projects at Mantos Blancos and Mantoverde and the cobalt production. Of even more importance is the fact that these projects all serve to lower our unit costs align for strong Casper generation throughout the cycle.

I'd like to take this moment to thank our team at Capstone Copper for their huge commitment to our integration process, which I'm very pleased to say is going extremely well. With that, we are now ready to take questions.

[Operator]

[Operator Instructions] And your first question will be from Orest Wowkodaw at Scotiabank.

[Orest Wowkodaw, analyst]

Congratulations again on the transaction. I've got a couple questions about your guidance, and I appreciate the pretty detailed guidance for 2022. When we start to think ahead to next year, am I correct in thinking that your copper production consolidated will be fairly similar in '23 versus 185,000 tons in 2022 with really the step up beginning in 2024?

[Raman Randhawa, executive]

Orest, I can answer that a little bit. I mean, as you know, Mantos Blancos was the main asset that's ramping up this year. So when you look ahead to 2023 that will be the pickup in production that you'll see, when you look through the 4 assets.

[Orest Wowkodaw, analyst]

But should we expect pretty minimal contribution from that in 2023 specifically?

[Raman Randhawa, executive]

Yes. I mean, we don't give 2023 guidance, but if you go to the tech report, you will see it. It is -- I wouldn't say it's minimal, you will see the numbers there in terms of how many tons there it is.

[John MacKenzie, executive]

I think, Orest the other thing that is important about it is, it represents quite a significant shift at Mantos Blancos from oxides to sulphides. So that does have quite an important impact on our unit costs at Mantos Blancos.

[Orest Wowkodaw, analyst]

All right, okay. And then sort of in similar vein in terms of CapEx, I was a little surprised how high the planned CapEx was for this year. Am I correct that, like when I deduct what's left for the project that, we could be looking corporately at CapEx sort of similar for next year, somewhere maybe in the $500 million to $600 range to finish the Mantoverde project, plus all the other sort of smaller sustaining and everything else going on? Is that kind of a good ballpark number?

[John MacKenzie, executive]

Orest, I will pass across to Raman to give you a more detailed answer, but the main portion of the CapEx spend on the Mantoverde project is this year. I think there -- Raman, if I'm not mistaken it is about $140 million for next year I think, the remaining portion for 2023. And I think the one item which obviously does influence the size of that CapEx spend is obviously the sort of pre-stripping and the third stripping at the various operations.

[Raman Randhawa, executive]

So when you look at it Orest the number is $825 million, we've spent $338 million, we've said to-date, there is $265 million in our guidance for this year. So that leaves up another $220 million for next year, roughly on Mantoverde.

[Orest Wowkodaw, analyst]

Right. Plus all the other assets.

[Raman Randhawa, executive]

Yes. I mean the sustaining capital under other assets. One thing when you look at our capital guidance of $620 million, it includes $125 million of those capitalized stripping. So the tech reports never had the accounting for capitalizing stripping that was probably just kind of in the OpEx line. So that's kind of new to standardize our accounting when you look at our guidance. So if you back out the $620 million, the $125 million on stripping, that's really a $500 million number when you look at it from a capital perspective without stripping.

[Orest Wowkodaw, analyst]

Yes, fair enough. But we are not really seeing the offset though in terms of reduction in your OpEx, right. So it does seem, I'd say incremental to the net numbers, and I get that, that's largely inflationary, but it's not like we can add the $120 million to CapEx and then take it out of OpEx.

[Raman Randhawa, executive]

Yes, I agree. I think the asset and inflation is heating into a bit of that.

[Operator]

Next question will be from Ralph Profiti at Eight Capital.

[Ralph Profiti, analyst]

If I may have 2 on Mantoverde, and just looking at the construction progress at 14%. And you talked about sort of monitoring COVID-19 risks and logistic risks, but it does seem that inflation risks are pretty much in-check just because of the Ausenco and the EPC lump sum contract. So just wondering, of those 3 things, which should we be most concerned about, in terms of stressing on either the CapEx number or scheduling? Is it COVID-19 or is it more of a logistics chain that sort of brings in the incremental risks?

[John MacKenzie, executive]

I'll take that. And then just ask Cashel if he has got any further comments. But -- we've obviously been through sort of 2 odd years of COVID already. And I think the procedures that have been put in place both at the operation, the project and the country as a whole have proven pretty resilient to sort of what COVID has thrown at us to-date. And I think we did have the advantage of negotiating the contract with Ausenco taking into account COVID. So we've actually assumed a sort of full blown pandemic for the full period of the construction.

So all of that is built into the procedures, there is things like a additional transport and additional accommodation, various sort of issues on productivity that we have assumed in the project. So I think COVID is well taken care of. I think we spoke quite a bit on inflation and how we've obviously been in somewhat impacted just by diesel price increase and the pre-stripping, and that would now built into our estimates.

We've been fortunate that basically we locked in the prices for all of the mining equipment and the plant equipment, I think before we saw this sort of inflationary period. And to an extent, we also locked in our orders before we hit the big sort of scheduling challenges. So before the -- there certainly we are seeing in the market today, timelines for lead times for orders growing significantly.

So I think we're reasonably comfortable there, I think as you know, they're sort of all logistical kind of challenges around the world with shipping and et cetera, and particularly I think around China. So these are things we need to keep a very close eye on. Just sort of as we sort of ensure the final equipment delivery to the project. I don't know Cashel if there is anything you want to...

[Cashel Meagher, executive]

No. I'd just echo, I have been to Chile several times since joining Capstone and it's incredible how that country is managing COVID. I mean, they have very robust protocols and procedures businesses as usual, and they've adapted to it. Where COVID interrupts us is exactly where John is saying, is what might be happening in the various areas where parts and components are being manufactured. So we're bird dogging that, we don't have any notice to-date that there is any major issues, but that is our biggest concern. If that was your question, what is your biggest concern? It's some of these areas, maybe what's going through the Shanghai Harbor versus a different Harbor and those types of things. So we are keenly aware of those things, monitoring them, but to-date, we don't have any confirmation of any major impacts to the project, but that's where it would lie. If we were to try and guess where something might happen.

[Ralph Profiti, analyst]

Cashel, let me stay with you, because there is been a more robust build out of the team there, are there any scope changes that have happened at Mantoverde that have been implemented or potentially being looked at? Just as sort of a fresh set of eyes has, sort of come in and looked at that project as you are sort of near that 50% completion rate, or at the risk of repricing, some of these contracts you've sort of held back on that?

[Cashel Meagher, executive]

Look, I'm completely familiar with the EPC delivered Ausenco that is there. And as it happens, that flow sheet is the exact same as the Constancia flow sheet. So I've had lots of opportunity to work with the -- that engineering group and I understand that flow sheets, it will serve extremely well, it's already been proven. So I don't think there is any modifications that myself or any of the new additions to the team would come in on that project, where we see the value. And that is what we really focused on and outline is what the future value for the integrated district is. And that's where we see maybe there is some other plans we can bring in, but that's in time and it's in steps. So it is not changing anything than what was previously planned or thought of at the integration of these 2 companies.

[Operator]

[Operator Instructions] And your next question will be from Craig Hutchison at TD Securities.

[Craig Hutchison, analyst]

Just a question on the ramp up of Mantoverde, previously the intent was, I think to have this thing in ramp up mode at the end of 2023. Now it looks like the ramp up is beginning in 2024. Is that a change or you guys just being more conservative in terms of what you are showing now?

[John MacKenzie, executive]

Craig, again, I will sort of see if Cashel has got anything to add, but I don't believe we've made any changes on that. I think we're still talking about sort of commissioning and commencements of ramp up in late 2023 and obviously sort of fitting full stride in '24.

[Cashel Meagher, executive]

Yes. That's it. And often on the back end of these large concentrators, there is a scope given to ramp up. We are just saying that we will be at complete and full production in '24. So there is that normal period in '23 that's sufficient to get to full production. It's just, we don't see sustainable production till '24. And that hasn't changed from the original timing at all. Maybe the wording is different, but it hasn't changed.

[Craig Hutchison, analyst]

Okay. So we could see some incremental production basically the end of 2023.

[Cashel Meagher, executive]

Absolutely, yes. And our full intention is to have ramp up production through there.

[Craig Hutchison, analyst]

And then maybe just a follow-up question to what Orest just touched on earlier, in terms of the capitalized stripping, the numbers you are quoting this year for Mantos Blancos and Mantoverde. Can we expect similar numbers as well next year on that kind of level of capitalized stripping?

[John MacKenzie, executive]

Yes. We will get you some more details on the kind of the strip ratio, but it's kind of by pit and by phase. But when you look at it, you can expect kind of in that range next year as well.

[Craig Hutchison, analyst]

Okay. I mean, just the last question for me. I know in the past you guys have looked at partnership options for Santo Domingo. I wonder if there is anything kind of actively engaged there or whether really the intent is to wait till you guys have some updated information, whether it's on the feasibility study or the district integration plan.

[Cashel Meagher, executive]

Yes. So Craig, definitely the latter. We have no engagements at all at the moment on partner studies on sort of partner discussions. I think, our entire focus is on the study work that we've described. And I think once we've got a much clearer idea of the integration plan, the value of the opportunities, I think at that stage we will consider whether a partner would be desirable or not.

[Operator]

And at this time, Mr. Mackenzie, we have no further questions. Please proceed.

[John MacKenzie, executive]

Thank you very much. Well, thank you everybody for joining us today. And we look forward to meeting investors at the Canaccord and the Bank of America Mining Conferences next week, and the PDAC in Toronto next month. And in the meantime, please reach out to Jerrold, if you have any further questions. Thank you very much and have a great day.

[Operator]

Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. At this time, we do ask that you please disconnect your lines. Have a good weekend.