Capstone Copper Corp

TSX:CS

Earnings Call Transcript 2023-Q1

[Operator]

Good morning. My name is Joelle and I will be your conference operator today. At this time, I would like to welcome everyone to the Capstone Copper, Q1 2023 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]. Thank you.

Mr. MacKenzie, you may begin your conference.

[John MacKenzie, Chief Executive Officer]

Thank you. I'm just going to pass it across to Jerrold Annett for some introductory comments.

[Jerrold Annett]

Good morning. I'd like to welcome everyone to Capstone Copper's Q1 2023 conference call. Please note that the news release and regulatory filings announcing Capstone Copper's 2023 first quarter financial and operational results are available on our website and on SEDAR. If you are logged in to 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. unless otherwise specified.

Now, I'll turn the call over to John MacKenzie.

[John MacKenzie, Chief Executive Officer]

Thank you, Jerrold and good morning everyone. We're pleased to present our first quarter 2023 results and achievements. Most importantly, and we're now on Slide 5, we're pleased to report that construction at our transformational Mantoverde Development Project or MVDP remains on time and on budget, with nearly 3 million tons of sulphide ore stockpiled to-date ahead of our ramp-up commencing late this year.

The photo on the left shows some of the overall construction progress on the processing plant, while on the right we can see sulphide ore being mined for the first time at Mantoverde. This year is pivotal for Capstone as we expect to complete MVDP construction in Q4, setting the stage for a doubling of consolidated cash flow and positioning us well for future growth.

I would also like to highlight that last week we reached a new collective agreement with the two labor unions at Mantos Blancos. This follows successful agreements with our labor unions at Mantoverde and Pinto Valley over the past 12 months. So for all of these operations we now have agreements in place that cover the next three years.

Turning to Slide 6, from an operational standpoint we experienced a challenging Q1 2023 marked by heavy rainfall at our Pinto Valley mine in Arizona. As a result, we produced a total of 40.7 thousand tonnes of copper at consolidated C1 cash costs of $2.96 per payable pound of copper produced.

In addition to the weather related challenges at Pinto Valley, at Mantos Blancos in Chile, an emphasis on preventative maintenance resulted in more downtime and lower throughput. However, we were encouraged by very strong recoveries and continued strong grades.

At Mantoverde we mined lower grade oxides during the quarter, which had higher acid consumption. Furthermore carry over inventory with sulfuric acid had elevated prices. Although for the balance of this year we are fixed for approximately 80% of sulfuric acid consumption at Mantoverde at $140 per ton.

Spot prices recently have decreased to below $100 per ton versus prices above $280 in 2022. Should prices hold at the current levels of $100 per ton, our C1 cost for oxides could decline by as much as $0.40 per pound next year. Lastly, at Cozamin we were focused on development and the ramp-up of the paste backfill plant.

Despite the slow start and turning to Slide 7 now, we are reiterating our 2023 consolidated production, cost and capital guidance. We anticipate production to increase sequentially quarter-over-quarter for the remainder of the year with a commensurate decrease in costs.

At Pinto Valley the operations improved sharply in March and the operation is now set up well with no planned major shutdowns over the rest of 2023. At the same time grades and throughputs are forecast to increase, which can also be said for Cozamin. Lastly, at Mantos Blancos we anticipate higher throughput over the rest of the year.

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

[Raman Randhawa, Chief Financial Officer]

Thank you, John. We are now on Slide 8. In Q1 we recorded copper sales of 37.5 thousand tons, which includes a sales lag of approximately 2.4 thousand tons due to the timing of shipments in Chile. We expect to catch up on those sales in Q2.

LME copper prices during Q1 averaged $4.05 per pound up 12% compared to $3.63 per pound in Q4 2022. Given our 2p [ph] hedging program hedges 0M+ 1[ph]tied to our commercial contracts, our realized copper price of $4.17 a pound was slightly above the LME quarterly average. As a result, we recognize revenues in the quarter of $336 million.

Adjusted EBITDA in Q1 of $65.2 million was impacted by the sales lag, lower production, and the higher costs due to heavy rainfall in Arizona, and a carryover of higher Q4, 2022 sulfuric acid inventory into Q1, 2023. The adjusted EBITDA figure also includes realized foreign exchange losses of approximately $9 million and derivative losses of $8 million. Without the FX and derivative losses plus the sales lag, the EBITDA would have been approximately $85 million.

Moving on to Slide 9. On the left-hand side we summarized our available liquidity, which as at March 31 was approximately $529 million, including $101 million of cash and short-term investments and $428 million of undrawn amounts on our $600 million corporate revolving credit facility. We are fully drawn on the $520 million project debt facility as well as the $60 million cost overrun facility with our Mantoverde partner Mitsubishi Materials Corp.

As John mentioned earlier, we remain on track and on budget for completion of the Mantoverde development project by the end of the year. We ended Q1 with a consolidated net debt balance of $651 million and attributable net debt balance of $492 million. The chart on the right-hand side of the page illustrates our EBITDA sensitivity at various copper prices. You can see that 2023 is overshadowed by the EBITDA generation with Mantoverde sulfides at full run rate production.

At $4 per pound copper, we expect to generate approximately $400 million of EBITDA in 2023 and over $1 billion of annual EBITDA when Mantoverde Development Project is online. Although the Santo Domingo project is currently unsanctioned, the project has potential to further increase our EBITDA generation to about $2 billion per annum with metal prices at current levels. The EBITDA generation associated with Mantoverde will enable accelerated opportunity to delever our balance sheet and be below one times net leverage at copper prices between $3.50 and $4 per pound, which provides additional liquidity to advance our future growth pipeline.

Now, I'll hand it over to Cashel for the operations review.

[Cashel Meagher, President, Chief Operating Officer]

Thanks Raman. We're on slide 10. Pinto Valley produced 12.8 thousand tonnes of copper at a C1 cash cost of $3.09 per payable pound during Q1 which is below our expectations, largely due to weather related challenges, specifically heavy rainfall in February led to stickier wet ore which is more challenging to process and impacted throughput. But most important, it also prevented us from accessing some of the lower benches in the pit with some higher grades.

Looking ahead we are encouraged by strong production through April and we are reiterating our guidance as we expect sequential improvements quarter-over-quarter. We also note as John mentioned, that we have no significant maintenance scheduled over the remainder of 2023. In terms of our growth at Pinto Valley, we are increasingly enthusiastic about district consolidation potential. As a result, our efforts are now focused on analyzing the impacts of potential district opportunities and we have deferred our PV4 study.

Moving to Slide 11. Cozamin mine had a transitionary production quarter producing 5,200 tonnes of copper at C1 cost of $1.72 per payable pound. Over the remainder of the year we expect throughput and grades at Cozamin to increase. Today we have also released an updated technical report at Cozamin to reflect changes in the mining method that we disclosed last quarter. The technical report features average copper production of 20,000 tonnes at a C1 cash cost of $1.51 per pound and a higher average of 24,000 tonnes at a C1 of $1.46 per pound in the first five years.

The new mine sequencing includes a combination of long-hole stoping in cut and fill. We've moved to this based on our experience with the ore body to date and we believe this will provide for greater mining recovery than if we had continued utilizing only long-hole mining methods.

We also believe there are several opportunities to improve the life-of-mine plan, including exploration, refinement to cut-and-fill in order to reduce dilution, and have the possibility of drift and fill methods to increase pillar and post recovery. On the exploration side, the Mala Noche Footwall Zone, deposit is still open to the Northwest, Southeast, and down dip.

Our Mantos Blancos asset is highlighted on Slide 12. Total sulfide and cathode production yielded 14.1 thousand tonnes of copper, at a blended C1 cash cost of $2.68 per payable pound. The sulfide operation produced their strongest quarter to-date, led by higher grades and recoveries. Work now is focused increasing overall reliability and improving production uptime. On that note, production and costs were impacted by unplanned maintenance and process improvement initiatives in the quarter. In terms of growth, design work is ongoing with respect to Mantos Blancos Phase 2.

Now, on to Mantoverde, Slide 13. Q1, 2023 oxide production was 8.5 thousand tonnes of copper in cathode at elevated C1 cash costs of $4.02 per payable pound. As John had mentioned, costs were impacted by lower production and carryover of high cost sulfuric acid in inventory. Most important, significant progress was achieved at MVDP during Q1. Project progress now stands at 83% with $654 million spent as of March 31.

With many of the classical major escalator risks behind us and or materially diminishing, the total expenditure for the project remains at $825 million and on schedule for year-end 2023 wet commissioning. The Mantoverde development project will deliver blended C1 costs of below $2 per pound and produce 120,000 tonnes of combined cathode and copper and concentrate with over 30,000 ounces of gold per year.

Slides 14 through 18 show construction progress at several key areas of the Mantoverde Development Project. Slide 14 shows the primary crusher with the retaining wall and conveyances advancing well. Structural steel erection is also advancing well as evidenced from the progress on the copper filtration building, column cells, and rougher cells, all major components are procured and on-site and are now in the final tie-in stages.

Slide 15 shows the copper concentrate thickener and a different perspective on the copper filtration and load-out facility. The picture on the right clearly displays the advancement of the assembly of SAG and Ball mills. The next slide, 16, shows the truck shop and the photo on the right shows the core seller stockpile and the reclaimed tunnels in preparation for the construction of the geodesic dome for dust control.

On Slide 17, we highlight the interior of the desalination plant on the left, where the expansion to 380 litres per second is on track for completion in Q2. The tailings facility can be seen on the right.

Now over to Wendy King for the sustainability review.

[Wendy King]

Thank you, Cashel. We're now on Slide 18. In March, we were very pleased to announce our new Sustainability Development Strategy, including specific greenhouse gas emission targets. The development of the strategy was a structured 12-month process with company-wide stakeholder participation and aligned with our purpose and values. We have a robust governance process for oversight and execution of the strategy.

The strategy is reflection of our firm commitment to sustainability and sets out our priorities, actions, and targets over the next seven years, focused on five initial priorities: Climate, water, tailings, biodiversity and communities.

In the climate priority, our target is to reduce greenhouse gas emissions from fuel and power by 30% by 2030 compared to the 2021 baseline levels. For tailings, we target 100% of our tailings storage facilities to be independently assured for conformance with the global industry standard for tailings management by year-end 2026.

Turning to Slide 19, and reviewing our quarterly sustainability highlights. At Mantos Blancos and Mantoverde, we have completed the self-assessment states for the Copper Mark assurance process, allowing us to move forward with the independent review in Q2. We have also completed the human rights assessment update and our annual review of the grievance mechanism. We completed the Copper Mark gap assessment and began planning projects to formally fill any identified gaps to proceed with the Copper Mark assurance process at Pinto Valley.

At Mantoverde, we've implemented rotainers for concentrate shipments, which are considered best practice in the industry. Rotainers are an ESG friendly transportation solution as they provide for a dust-free operation. The concentrate container is fitted with ISG's pathogen [ph] removable hard lid and sealed. The design also ensures no contaminants can build up and accumulate on the exterior of the containers.

At Pinto Valley, we have a donation program with a Navajo Reservation whereby some of our non-sellable copper is used for constructing jewelry and other craft. We received a photo on the bottom right recently showcasing some of the crafts created by students at the reserve. Our inaugural combined sustainability report, Growing Responsibly, is well under way and will be published in early Q3.

We are working to incorporate more climate discussions in our mainstream disclosure documents beyond the sustainability report to deepen our disclosure on the four TCFD areas, governance, strategy, risk management and metrics and targets.

And with that, I'd like to turn it back to John.

[John MacKenzie, Chief Executive Officer]

Thanks Wendy. On Slide 20 we highlight the significant catalysts we have over the next two years that support our sector-leading growth plans with further upside beyond this across our portfolio. We have a talented technical team in place and are working with strong engineering firms to execute on these studies and we look forward to releasing the results in the timelines shown on the slide.

Specifically, by year-end we plan to release our MVDP optimized study, which is targeting increasing throughput from 32,000 tons per day to up to 45,000 tons per day with no major capital equipment upgrades required. We're also contemplating a potential further expansion which could include the installation of a second processing line.

Meanwhile, we're busy at Mantos Blancos evaluating the potential to increase throughput from the installed 7.3 million tons per annum to 10 million tons by the existing underutilized Ball mills and processing equipment. And to round out the year, we plan to release an updated feasibility study for Santo Domingo in December.

And to conclude on Slide 21, we reiterate that we are in the midst of a transformational year for Capstone. We remain laser focused on the execution of our near-term growth profile, increasing copper production by 45% to approximately 260,000 tons, following the ramp-up at the Mantoverde Development Project. After this, we have the fully permitted Santo Domingo Project which unlocks district synergies and generates an additional 45% of copper production to 380,000 tons per year, with further upside and expansions across our portfolio.

With that, we're now ready to take questions.

[Operator]

Thank you. [Operator Instructions]. Your first question comes from Orest Wowkodaw with Scotiabank. Please go ahead.

[Orest Wowkodaw, Scotiabank]

Hi, good morning. Nice to see the progress at the Mantoverde Sulfide project. Given that you're, call it within nine months of completion, can you maybe just walk us through sort of what the critical path here is and where you see the biggest risk to that year-end startup timeline at this point?

[John MacKenzie, Chief Executive Officer]

Thanks for the question, Orest. I would sort of start off by just reiterating the fact that most of the kind of classical risks are behind us. The infrastructure is in place, the major equipment's on the site, the major equipment's actually installed already. We're now into the pipe installation, the electricals, all of those pieces. But certainly what we see at this stage is nothing that gives us concern in terms of the timeline. I think projects can kind of spring surprises on you, but I think we feel that we've got all of those elements under control and we've basically de-risked on all the possible contingencies that we could see arising. I'll just pass across to Cashel, to see if he’d like to add anything further to that.

[Cashel Meagher, President, Chief Operating Officer]

John, I think you've outlined it well. The major risks that we see in projects that are being executed in the last few years are usually – the major one is usually a geotechnical risk, and we've made quite great progress on the major material movement required there. And so while we can still watch that and evaluate that, we feel we're in a very good stead, that the tailings dam and the associated geotechnical works are progressing really well.

And then the other one classically we saw during the pandemic period was electrical and instrumentation, and I'm happy to say the electrical e-rooms have arrived, most of them, and they're in progress and being delivered. So what I would say is the major risks that we have seen in projects in the last few years are sort of behind us, so now they are the classical or the more rudimentary man-hours, pulling cable, placing pipe and bore in place, and those types of things, which are just the effective man-hours and efficiency of those man-hours on a project.

So I would say right now we're at the boring risks with a project, and it's just getting the work done.

[John MacKenzie, Chief Executive Officer]

Yeah, and I guess maybe one final comment is, obviously the other element that one always looks at is ramping up the mine itself, and our final pieces of additional mining equipment are out some months ago. We're sort of fully now ramped up, and we're now actually stockpiling sulphide ore ahead of the plant, and I think we said earlier, we've got around 3 million tons of sulphide ore stockpiled already. So I think that also gives us a lot of confidence in terms of the subsequent ramp-up.

[Orest Wowkodaw, Scotiabank]

Thank you. Just as a follow-up, and by the way, boring is good on projects like this. What do you plan to do with the construction team once you finish here at Mantoverde? Like I assume you're going to pause before starting Santo Domingo, but do you demobilize and then remobilize in the future? How do you think about that right now?

[John MacKenzie, Chief Executive Officer]

Yeah, I think that's a really good question Orest, and we've obviously got sort of two elements to that. The one is our owners’ team, and we certainly intend to keep our owners team intact. I think for us, this is next step as we move to Santo Domingo is obviously ensuring we have Mantoverde fully ramped up. We obviously want to complete the financing of Santo Domingo, and we want to sort of have a look at the macro environments at the time, and those three items will sort of guide our timing on decision-making to sort of take a full notice to proceed on Santo Domingo.

But I think we can certainly keep our full project team well occupied during that time. I think whilst we might not take a decision for full notice to proceed, that certainly doesn't stop us from progressing the engineering work, which in any event is the sort of first stage of a project. So really moving the engineering work and increasing the confidence in all the parameters within the project.

I think the other element is our key contractor, and I don't know if you're aware, but recently we've changed contractors at Santo Domingo. We've moved from Posco to Ausenco with the same contractor that we have at Mantoverde, and the intention there is also to ensure that continuity of experience and people from Mantoverde across to Santo Domingo. So I think certainly the core elements of both teams, the intent is to have retained for the Santo Domingo project.

[Orest Wowkodaw, Scotiabank]

Thanks, John.

[Operator]

Your next question comes from Dalton Baretto with Canaccord. Please go ahead.

Your next question comes from Bryce Adams with CIBC. Please go ahead.

[Bryce Adams, CIBC]

Yeah, hi! Thanks John and team for taking my question. Just one from me. I wanted to ask on Ausenco and the lump sum contract for Mantoverde. When we were on site last November, there was a discussion around inflation, such a capstone was less [audio gap] inflation because of the lump sum contract, and that Ausenco would be more exposed, but they were maintaining margin because of favourable FX rates. FX rates have changed since November, and I was wondering if that dynamic with Ausenco has also changed, and if there was any increased counterparty risk from the change in FX. Obviously the best contract is a win-win contract, so is that still the case with your partner?

[John MacKenzie, Chief Executive Officer]

Yes, it is Bryce and I think very fortunately Ausenco had also locked in a lot of its basically sort of underlying costs, so sort of all of its equipments, subcontracts, etc. A lot of the I guess main exposure to FX I think was earlier on in the project. So at this stage we certainly – I fully agree with your comment that despite being a lump sum turnkey contract, it's always important that everybody is making money, and certainly from what our discussions with Ausenco shows that the project is still working well for them.

[Bryce Adams, CIBC]

Got it. Thanks so much.

[Operator]

Your next question comes from Craig Hutchinson with TD Securities. Please go ahead.

[Craig Hutchinson, TD Securities]

Hi, good morning guys. Just one question for me as well. Just on Mantos Blancos, you guys have sort of bumped around the 15,000 to 16,000 tons per day for the last several quarters. I recognize in your MD&A disclosed that you had, I think 18 days at the time or 20,000 tons per day and there was some preventive maintenance done in the quarter. But can you just give some context as to what that preventative maintenance is and whether you feel confident that we can get to that 20,000 tons per day here in Q2 or the next quarter or so? Thanks.

[John MacKenzie, Chief Executive Officer]

Thanks, Craig. I'll refer that question across to Cashel.

[Cashel Meagher, President, Chief Operating Officer]

Sure, thanks Craig. Yeah, quite often, starting with a clean slate, I think we've said this before, is easier than starting off with a sort of a combined brownfield development where you're utilizing old equipment with new equipment and there were certain constraints in the beginning of this project when it was under the private equity world, and I think those are things we're working through and we have been working through.

The way I describe the project is the major components are there and they have been there since the beginning. They were designed well. They are capable of the throughput, but some of the interconnectivity might not have been engineered extremely well and we've been working our way through it on a basis of trial and error.

But I think we've changed our tactics on those and so I have much more confidence now that we've worked our way through many of the critical issues, where some of these minor bottlenecks have interrupted some of our consistent production due to maintenance interruptions, and we see that and we can track that by evaluating how much preventative maintenance we're doing versus breakdown maintenance we're doing and those metrics are all, we're seeing the right side of those and seeing them through, and it's working through, where maybe a pump was overlooked or maybe a pipe was overlooked and now we're starting to see the performance on a more consistent basis.

So the nameplate capacity target is still 20,000 tons and we see ourselves reaching that very shortly and on a much more consistent basis. So it's been a different type of ramp-up than would be a brand new construction, which has a different sort of level of engineering and evaluation applied to it. There's more of a learning curve on this one.

[Craig Hutchinson, TD Securities]

I guess no major capital would be required to kind of improve some of those efficiencies at this point, is that correct?

[Cashel Meagher, President, Chief Operating Officer]

No, and that's the key, is the initial project looked after the major capital and so now it's about the nuts and bolts and we're working our way through it and I think we've got a great plan moving ahead here.

[Craig Hutchinson, TD Securities]

Thanks guys.

[Operator]

Your next question comes from Dalton Baretto with Canaccord. Please go ahead.

[Dalton Baretto, Canaccord]

Sorry, I dropped off there somehow. I want to start by asking about Mantoverde again and I apologize if any of these questions have been asked already, I just dialed back in. But you're mining the sulphide ore now. You've got 3 million tons sitting on surface. How does that compare to your block model and what you were anticipating? Any surprises there?

[John MacKenzie, Chief Executive Officer]

I'll answer initially and then I'll pass across to Cashel. I think that one of the advantages we had was we really drilled up the sulphide ore body well beforehand. So if you look at the full life of mine plan for the current Mantoverde project, we have 70% of the reserves in the proven category and 30% in the probable for the entire life of mine. Now, that's a higher confidence level than most mining companies have just for the next couple of years. So it gives us a huge amount of geological confidence in the reserve and so far sort of what we have found is exactly in line with our model.

I would say that what we also are finding is in areas where we have not shown reserve or resource, but that's kind of interlinked between sort of existing pits. We're also finding some really encouraging holes that are going into those as well. So we do expect over time to sort of add to those reserves and resources and I think that'll certainly be accretive.

Cashel, is there anything you'd add to that?

[Cashel Meagher, President, Chief Operating Officer]

Yeah, I mean the only reconciliation, of course we could have on a stockpile is blast hole data against diamond drill hole data and it more or less agrees. So it's looking well and it's given us the confidence. We have different stockpiles. We have transition material, we have high-grade sulphide material, and then we have run of the mill materials and that's to sort of optimize our ramp up such that when we're at lower recoveries, we can put through material where we're not exposed to those lower recoveries to lose copper. But then again, we have the high grade material to put through when the plant has ramped up and we can get the revenues as soon as possible.

So they've planned it out really well and like John said, actually you might call the deposit over-drilled for a measured reserve. It's down to 25 or 35 meters in some places on the diamond drilling and has greatly reduced the risk of having surprises in grade or in quality of material.

[Dalton Baretto, Canaccord]

Okay, great. Thanks for the color there and then just kind of thinking about the studies on Mantoverde or study on Mantoverde that's coming out later this year. Just to clarify, will that study include both the optimization as well as the anticipated Phase 2 expansion with a second line or will it just be the optimization?

[John MacKenzie, Chief Executive Officer]

So Dalton, the MV optimization is obviously where we're putting our primary focus right now, because that's the most immediate opportunity that we have. We over-designed the crushers and the mills such that those major pieces of equipment, we believe can process sort of 40,000 to 45,000 tons a day versus the current project design of 32,000 tons a day. So our expectation is to have that feasibility study completed by the end of this year and that's something which we don't foresee this being a major CapEx project, but obviously one which generates very, very significant additional returns. So we would look to sort of permit and implement that kind of ASAP.

With the sort of Mantoverde Phase 2, that we'd be looking at a full second line and those studies continue, but I would say it's sort of obviously an earlier stage and we ultimately want to make sure that we optimize that project according to the ultimate capability of the ore body. So I think whilst our immediate focus will be on Mantoverde optimized, in parallel we'll also be sort of starting to drill up some of the further parts of the ore body or well of the concession area, just to make sure that sort of that second line is the optimal, ultimate capacity to go to.

[Dalton Baretto, Canaccord]

Got it, okay. And then sort of a similar question on Santo Domingo, Ausanco's doing the study now. Are they going to consider the broader district and all of the synergies or are they going to optimize Santo Domingo on its own?

[John MacKenzie, Chief Executive Officer]

Yeah, so the Santo Domingo feasibility study is really being – the original feasibility was done in 2018 and what we're doing is updating it for three elements. The first is sort of relation, the second is exactly the point you're asking about, is the synergies that we have between Mantoverde and Santo Domingo, and then the third is actually some design optimizations. The footprint for example at Mantoverde is sort of far smaller in terms of layout and more efficient than the previous design at Santo Domingo. So we believe we can take out about 35% of the footprint just by a more efficient layout and design.

Now, just going back to those synergies, so this study will include some of the synergies that we identified in November last year. There are others that are more on the revenue side and those are for example the processing of the Santo Domingo oxides and the processing of cobalt at Santo Domingo. Those are studies in their own light that are being run in parallel and I think from recollection we're actually due to present those sort of more like in sort of 2024.

[Dalton Baretto, Canaccord]

Okay, great. And then just maybe if I can squeeze one more in. This deferral on the PV4 study, are you able to talk at all in terms of what you're thinking in terms of broader scope and opportunities as well as kind of timing and when all that could come together?

[John MacKenzie, Chief Executive Officer]

Yeah, look I'll answer your second question first and I guess in terms of timing, our immediate focus is completing the Mantoverde development project. From there we'll be moving our focus across to Santo Domingo and probably doing the optimization at Mantoverde in parallel. So that does give us time to really look at the Pinto Valley area, work out what is the optimal development plan for that as a district.

We've got enormous resources there, sort of 1.5 billion tons sort of in total at Pinto Valley. We've been doing work sort of on BHP's Copper Cities site next door. We believe there's another sort of 1 billion tons or so of resource there. All of it sits at sort of a grade of I think we're talking about 0.33% copper.

Now ultimately our view is that by developing a large-scale processing plant, one can actually achieve highly, highly competitive costs. Obviously with these being porphyries, we believe you could sort of get decades and decades of sort of flat-lining production there, sort of without any grade decline at highly competitive costs, by sort of the most sensible – sort of working out what is the most sensible scale and how does one fit that all together in the best, in the most efficient possible way in that as a district.

So there's a lot of work to be done there, but I think we have kind of the time on our side to do so. And I think finally it's an area that's been mined for the past hundred years at least, and so we believe there's a lot of benefits in terms of the plans we have to develop this district that would also have very, very significant environmental benefits in terms of mitigating some of the environmental issues that have arisen from past operations in that district. And so we think it's a real sort of win-win solution for that district.

[Dalton Baretto, Canaccord]

Thank you for the color, John. That's all for me.

[Operator]

[Operator Instructions] Your next question comes from Stefan Ioannou with Cormark Securities. Please go ahead. Thanks very much, guys.

[Stefan Ioannou, Cormark Securities]

Thanks very much guys. Most of my questions have been answered or asked already. I'm just curious on Cozamin, I'm just looking at the updated mine plan; good to see. Just reading between the lines when I look at the sort of annualized mill throughput that's in it. Can I presume there's still a little bit of untapped capacity there? And is that just a function of maybe being a bit conservative on how much ore you can pull from the underground?

[John MacKenzie, Chief Executive Officer]

Yeah, thanks Stephan. And I'll pass that one across to Cashel.

[Cashel Meagher, President, Chief Operating Officer]

Yes, Stephan hi! You're absolutely right. The plant itself, the processing plant is capable of 4,500 tons a day and so too is the paste plant dry stack facility we have. So truly the production bottleneck is the underground and certainly we felt that sticking with the previous methodology of mining was limiting our opportunities to increase production there.

As you've noted, the technical report is maintaining the current production profile, but I think as we improve our competencies in the cut-and-fill methodology, it gives us a few other opportunities there in drift-and-fill, which will enhance our ability in the high grade areas to get greater mineral recovery than the sort of 80% to 90% that we would have in a normal cut-and-fill environment. And that gives us the ability maybe to extract some higher-grade pillars and that would give us the ability to increase our mineral recovery and slow down some of our capital development.

The other of course is the transverse mining method that we're including. We had solely a long-hole retreating method, sub-level retreat, and the transverse mining method will give us a higher – greater opportunity also to recover in a sequential fashion those pillars. So we could do pillar-less mining in some of the areas to be able to sequence with the paste-fill plant.

So we were a little bit conservative I would say, those are your words. But what we were is we were prudent in putting out a life-of-mine plan that is achievable, deliverable, and has been executed before. And it will now be the challenges to the mine to increase the opportunities given to them with the infrastructure of the paste plant and the underground new mining methods to increase production out of there, because certainly we have the capacity on surface to be able to mill more.

[Stefan Ioannou, Cormark Securities]

Okay, great. Got it. Thanks very much for that.

[Operator]

There are no further questions at this time. Please proceed.

[John MacKenzie, Chief Executive Officer]

Right. Well, thank you very much and we look forward to updating you again in August with our Q2 results. And until then, keep well 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! Bye-bye!

[Operator]

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.