Lundin Mining Corp
TSX:LUN
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
8.88
17.79
|
| Price Target |
|
We'll email you a reminder when the closing price reaches CAD.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Lundin Mining Corp
Earnings Call Analysis
Q2-2024 Analysis
Lundin Mining Corp
Lundin Mining delivered an impressive financial performance in the second quarter of 2024, driven by higher commodity prices. The company recorded a quarterly revenue of $1.1 billion, with copper contributing a significant 74% of this total. Adjusted EBITDA amounted to $461 million, and free cash flow from operations reached $338 million. Additionally, the company's operating cash flow was $492 million, benefiting from a release of working capital, and earnings per share were $0.16.
Copper remains the cornerstone of Lundin Mining's business, generating 74% of the quarterly revenue. The company's South American assets, particularly Candelaria and Caserones, contributed substantially to this revenue, accounting for 34% and 31% respectively. During the quarter, the company produced 80,000 tons of copper, with the production profile expected to improve in the second half of the year as grades and throughput increase at Candelaria.
Operationally, the company faced some challenges, including unscheduled maintenance and lower mining rates, which impacted copper, gold, and nickel production at several sites. Notably, nickel production at Eagle was limited due to additional ramp rehabilitation work, leading to revised guidance for the year. Despite these setbacks, consolidated copper production guidance remains unchanged due to increased guidance at Caserones and Neves-Corvo.
In a significant strategic move, Lundin Mining exercised its option to increase its ownership in Caserones by an additional 19%, adding approximately 25,000 tons of attributable copper to the company's production profile. This acquisition was funded by drawing down $350 million from the company's revolving credit facility. This aligns with the company's commitment to disciplined and scalable copper growth.
Total capital expenditure for the quarter was $255 million, with the full-year guidance revised downwards to $1.020 billion. This reduction is primarily attributed to decreased CapEx spending on Caserones, Neves, and Zinkgruvan. The company's production costs have remained stable, with unit cash costs trending in line with overall production costs. However, guidance for Eagle's unit cash cost was revised upward to $3.20 to $3.40 per pound of nickel.
Lundin Mining continues to demonstrate its commitment to sustainability, as highlighted in its 2023 Annual Sustainability Report. The company achieved The Copper Mark certification for its Candelaria and Caserones assets. Efforts to reduce greenhouse gas emissions are ongoing, with a goal of achieving a 35% reduction by 2030 compared to the 2019 baseline. Investments in host communities amounting to approximately $6.1 million were made, focusing on education, health, culture, and economic development.
The company’s balance sheet remains robust, with a net debt position of just below $900 million and a leverage ratio of 0.5x based on the last twelve months' adjusted EBITDA. Liquidity is strong, with the revolving credit facility having close to $1.5 billion available. Looking ahead, the company is poised for a strong second half of the year, supported by higher grades and throughput at key assets. The recent joint acquisition of Filo with BHP and formation of a joint venture to develop the Vicuna District in Argentina represents a transformational opportunity for the company.
Lundin Mining announced a regular quarterly dividend of CAD 0.09 per share, continuing its annualized dividend of CAD 0.36 per share. This commitment to returning value to shareholders is supported by the company’s strong financial performance and strategic investments in growth and sustainability.
You don't have any saved screeners yet
Good morning, ladies and gentlemen, and welcome to Lundin Mining Q2 2024 Financial Results and Webcast Conference Call. [Operator Instructions] This call is being recorded on Thursday, July 31, 2024.
I would now like to turn the conference over to Jack Lundin. Please go ahead.
Welcome, everyone, and thank you for joining Lundin Mining's second quarter conference call. For those that were on our corporate update call on Tuesday, where we announced the joint acquisition of Filo with BHP, thank you for joining today as well.
Yesterday, after market close, we reported our operating and financial results for Q2. The press release and presentation are available on our website under our Investors section. All figures presented today are in U.S. dollars unless otherwise noted.
Before we start the presentation, I would like to remind our listeners that the call may contain forward-looking information, and this information, by its nature, is subject to risks and uncertainties. As such, actual results may differ materially from the views expressed today. I would encourage you to read the cautionary note that accompanies our second quarter MD&A along with the relevant filings on SEDAR. These documents are also available on our website.
Today with me on the call are 3 other members of our senior executive team. Teitur Poulsen, our Executive Vice President and CFO; Juan Andres Morel, our Executive Vice President and COO; and Nathan Monash, our Vice President of Sustainability.
Briefly, before we get into the Q2 results, I wanted to highlight the transaction we announced yesterday. We look forward to working with BHP and embarking on this multi-decade partnership to develop the Vicuna District in Argentina. This transaction transforms our growth profile and solidifies our belief that the district has the potential to be world-class in both scale and quality. For anyone that missed yesterday's conference call, there is a replay available on our website, and I encourage you to listen to it and get the full overview of the highlights of the acquisition and partnership.
Now into Q2 2024. Quarterly copper production for the company was 80,000 tons. As we have previously discussed, our copper production profile is weighted to the second half of the year, and we expect to see higher grades and throughput in Q3 and Q4 at Candelaria that will drive the production. We're still on track to meet our annual copper guidance, which is between 366,000 tons to 400,000 tons. 47,000 tons of zinc and 32,000 ounces of gold were produced in the quarter. Operationally, the quarter was affected by unscheduled maintenance and lower mining rates that impacted production at several of our sites. Nickel production at Eagle was impacted by additional ramp rehabilitation work that limited ore production from Eagle East. We have had to revise guidance at Eagle for the remainder of the year.
After the quarter, we exercised our option to increase our ownership in Caserones to 70%, further enhancing our presence in the region and strengthening our overall copper-dominant portfolio of high-quality base metal mines. We had a very strong financial performance this quarter with the increase in commodity prices and generated $461 million in adjusted EBITDA and $338 million in free cash flow from operations. This quarter, we announced our regular quarterly dividend of CAD 0.09 per share, which makes up part of the annualized dividend of CAD 0.36 per share. In addition, we released our annual 2023 sustainability report that highlights the company's material, environmental, health and safety, governance and social performance during the year. We are committed to the responsible production of critical minerals and believe that mining can be a platform for sustainable development.
I will now hand the call over to Nathan Monash, our VP of Sustainability, to talk about the highlights from the report before going into the results of the quarter.
Thank you, Jack. Earlier this month, we published our 2023 Annual Sustainability Report, which reports on our efforts over the last year to address material sustainability topics and further integrate our sustainability strategy into Lundin Mining's plans for growth. Sustainability is key to who we are as a company, and this report highlights our commitment to creating shared value. As many of our long-term shareholders are aware, Lundin Mining has been reporting on our sustainability performance in a stand-alone document since 2010, demonstrating our commitment to transparency and responsible mining.
We are proud to highlight that we achieved The Copper Mark certification at Candelaria and Caserones, which is a leading global assurance framework for sustainability performance in the copper industry. I would also like to note that we have continued to reduce our greenhouse gas emissions through new power purchase agreements from renewable resources. We continue to make progress on our decarbonization plans and to achieve our goal of a 35% reduction by 2030 versus our 2019 baseline. We also continue to work with host communities 2023 to address common objectives in education, health, culture, and economic development. Our investments in 2023 totaled approximately $6.1 million. For a complete list of highlights, I would encourage everyone to go through the report that can be found on our website under the Sustainability section.
I will now pass the call over to Juan Andres, our Chief Operating Officer, to talk about our production results.
Thank you, Nathan, and good morning, everyone. The company is tracking to budget and production guidance on a consolidated basis for copper, gold and zinc. As mentioned earlier, copper production will be second half of the year weighted, primarily driven by grade profiles at Candelaria, Chapada and Neves-Corvo. Copper production for the company was 80,000 tons for the quarter and 168,000 tons for the first half of the year. Gold production for the quarter totaled approximately 32,000 ounces. As mentioned earlier, great profiles at Candelaria and Chapada will contribute to a stronger second half of the year for gold production.
At Candelaria, production was 31,000 tons of copper and 17,000 ounces of gold. Production during the quarter was impacted by mining rates, which limited access to higher grade ore from Phase 11 in the open pit. Mining rates were slower than anticipated due to interference with historic underground mining stopes in Phase 11. This delay pushed higher-grade ore into the third quarter. We expect production at Candelaria to be approximately 60% weighted to the back half of the year, where grades will improve to 0.7% to 0.9% copper. We have started to see some of these grades come to the mill in July already. Production at Candelaria is tracking to budget and still on target to meet guidance for the year.
Caserones produced 30,000 tons of copper this quarter. Higher-than-anticipated grades were partially offset by lower throughput and recoveries in the mill. Caserones has experienced a challenging winter this year. Prolonged snowstorms limited tailings deposition for several days with restricted mill throughput, while unscheduled maintenance events impacted mill availability. Caserones copper guidance has been increased to 124,000 tons to 135,000 tons of copper for the year, reflecting production results from the first half of the year. As mentioned earlier, guidance at Eagle has been reduced, which offsets the increase at Caserones and overall consolidated copper guidance remains unchanged.
During the quarter, Chapada produced 9,000 tons of copper and 15,000 ounces of gold. Lower recoveries from additional stockpile feed and unplanned downtime to repair a conveyor belt impacted production during the quarter. We planned grades and throughput to pick up in the second half of the year. Included in other copper production is Neves-Corvo, which produced 7,000 tons; Zinkgruvan, which produced 700 tons; and Eagle that generated 1,600 tons of copper for the quarter. Neves-Corvo copper production is expected to be on the lower end of the guidance range for the year.
Zinc production improved over the last quarter to 47,000 tons, and we expect it to improve further in Q3 and Q4. Neves-Corvo zinc production was 26,000 tonnes. At Neves-Corvo, lower grades were realized due to change in mining sequencing. Higher grades from Lombador South were replaced with lower grades from Neves South. Mining rates in Lombador South were impacted from additional backfill and development work. We expect this to improve in the next quarter.
During the quarter, Zinkgruvan produced 22,000 tons of zinc, which was in line with the budget, an improvement over the first quarter. We expect zinc grades to improve slightly over the remainder of the year. Nickel production was 1,700 tons during the quarter, a fall of ground in the lower ramp limited production from Eagle East. Additional ramp rehabilitation work was required, which impacted access to the Eagle East and reduced mining rates. It is expected that the mine will now produce 7,000 tons to 9,000 tons of nickel for the year and 5,000 tons to 7,000 tons of copper.
Operationally, our assets are tracking to guidance with the exception of Eagle. We anticipate higher grades in the second half of the year, along with reduced maintenance and weather interruptions, all of which will allow us to meet our annual guidance goals.
I will now turn the call over to Teitur to provide a summary on our financial results.
Thank you, Juan Andres, and good morning, everybody. Higher commodity prices in the second quarter led to improved margins, and we had a record revenue in the second quarter of $1.1 billion. Our revenue remains highly leveraged to copper with the metal generating 74% of the revenue mix. Zinc and gold contributed 9% and 5%, respectively, and nickel contributed 3%. Our South American assets contributed approximately 76% of revenue and represents a key area of growth for the company. Candelaria and Caserones contributed 34% and 31%, respectively, for a combined 65%.
Now looking at volumes sold and realized pricing. During the period, we sold 79,000 tons of copper at a realized price of $4.79 per pound of copper and 39,000 tons of zinc at a realized price of $1.49 per pound. As we discussed last quarter, we hedged a portion of the copper production in May to lock in the pricing floor. During the quarter, the company settled hedges on 21,500 tons of copper with a pricing floor of $4.10 per pound and a pricing ceiling of $4.52 per pound. And given the average copper price during May, the hedge resulted in a marginal loss of $3.5 million.
Revenue increased quarter-over-quarter, largely driven by commodity pricing and provisional pricing impacts, with provisional pricing adjustments from prior periods leading to a positive impact of $95 million during the quarter. Approximately, 78,800 tons of copper were provisionally priced at $4.34 per pound at the end of Q2 and remain open for final pricing adjustments, as did 17,900 tons of zinc at $1.31 and 255 tons of nickel at $7.75 per pound.
Production costs have been stable across our asset base this year. In Q2, total costs were $606 million, which is in line with previous quarters. Production cost increases from the previous quarter of around $40 million are mainly due to higher mining costs at Candelaria and maintenance costs at Caserones and Chapada. As shown on the chart to the right, our unit costs are trending in line with our absolute production costs. With our annual production profile being second half-weighted, we are on track to meeting our unit cash cost guidance at all sites, with the exception of Eagle, which has been revised upward to $3.20 to $3.40 per pound nickel.
Total capital expenditure, including sustaining and expansionary CapEx, was $255 million for the quarter and $524 million for the first half of the year, with our guidance for the full year Nordwinork to $1.020 billion, reflecting a $45 million reduction in guidance. The revised guidance mainly relates to reduced CapEx spending on Caserones, Neves, and Zinkgruvan. At Josemaria, we spent $87 million during the second quarter and have spent $143 million for the first half of the year versus our full-year guidance of $225 million. The capital expenditure in the second quarter primarily related to field activities for the water program, geotechnical studies, and road maintenance works and payment of long lead items.
Our key financial metrics for the second quarter are presented on Slide 17. We generated adjusted EBITDA of $461 million and adjusted operating cash flow was $370 million. Our earnings per share attributable to Lundin Mining shareholders amounted to $0.16. Our operating cash flow amounted to $492 million and benefited from a release of working capital of $122 million during the quarter, which was expected due to the change in payment terms from some of the sales contracts as we mentioned last quarter. Our adjusted operating cash flow, which excludes movement in working capital, amounted to $370 million, as previously mentioned. Free cash flow from operations was $338 million during the second quarter, demonstrating improved margins and lower sustaining capital investments. For the first 6 months of the year, our producing assets have generated in excess of $400 million of free cash flow.
Our adjusted earnings attributable to shareholders amounted to $122 million during the second quarter and represent a 170% increase on the same metric for the first quarter of the year. Our balance sheet remains strong with net debt position at the end of the quarter of just below $900 million, excluding capital leases, resulting in a leverage ratio of 0.5x based on the last 12 months' adjusted EBITDA. Subsequent to the quarter, we drew down an additional $350 million to pay for the Caserones 19% call option consideration. Our liquidity position remains strong with our revolving credit facility having availability of close to $1.5 billion as of the end of the second quarter.
So all in all, the company remains in good financial health with cost levels and sustaining capital investment levels both trending favorably, and coupled with robust commodity prices has resulted in a strong financial performance for the quarter.
I'll now turn the call back to Jack to talk about our near-term growth opportunities and exploration.
Thank you, Teitur. At the end of the quarter, we exercised our option to increase our ownership at Caserones by an additional 19%, which will add approximately 25,000 tons of attributable copper to the company's production profile, securing additional copper production at an attractive acquisition price of approximately $14,000 per ton. The call option exercise was paid for in cash and consisted of a payment of $350 million that was initially funded from Lundin Mining's revolving credit facility with the intention to refinance this amount by increasing the current $800 million term loan to $1.15 billion.
Exercising our option early provides significant benefits to both parties. We secure additional copper production at an attractive acquisition price while our partners receive an upfront payment and retain a meaningful 30% equity position in Caserones. This strategic move underscores our commitment to disciplined and scalable copper growth.
Now touching on exploration. At Candelaria, exploration efforts continue with over 8,300 meters of drilling now completed. And that's been -- that's 8,300 meters of an overall 18,000-meter program. Much of this work is focusing on growing the -- and upgrading the Candelaria underground resources where we have demonstrated success in the past. In addition, some efforts are directed at extending the La Espanola deposit.
Drilling activity at Caserones continues and is on track to complete 13,000-meter drill program, the most significant that, that asset has had in years. At the moment, drilling is paused for the winter season.
At Chapada, drilling is primarily focused on near-mine opportunities and at the Sauva discovery. Further drilling at Sauva kicked off in the second quarter. The plan includes drilling 16,000 meters this year. Initial results show Sauva mineralization continuing at depth with grades that would permit underground mining. The system is still open at depth, and we will continue to explore in this area.
Exploration efforts continue at Zinkgruvan with over 23,600 meters of drilling now completed as part of the overall 55,000-meter drilling program. Primary focus remains on increasing mineralized resource -- mineral resources at the [indiscernible] ore bodies to the West and the Birkeland and [indiscernible] ore bodies to the East.
Financially, we had a strong quarter, driven by higher commodity prices that led to record quarterly revenue for the company and operating free cash flow of $338 million. Our team continues to focus on business improvements and optimizing our assets to deliver results. As mentioned earlier, our production is back half of the year weighted.
On a consolidated basis, we are tracking to full-year guidance on copper, zinc and gold. There are a number of catalysts on the horizon that will help drive shareholder value, including the optimization work where we are conducting at Candelaria and Caserones. This includes looking at the underground expansion project at Candelaria, where we hope to give a market updates on these initiatives by the end of the year. It is a very exciting time for the company as announced on Monday, the joint acquisition of Filo with BHP and the subsequent formation of a joint venture that will hold the Filo del Sol project and the Josemaria project, which represents a compelling opportunity for Lundin Mining shareholders. This will be a transformational transaction for Lundin Mining. The creation of a long-term partnership between both Lundin Mining and BHP to jointly develop the Vicuna District in Argentina will unlock significant value and is consistent with our strategy of becoming a top-tier copper producer.
To close out our call, the team at Lundin Mining has worked hard in the first half of the year, putting us in a position to have a strong third and fourth quarter, and we will maintain our focus as we enter the second half of this year.
I would now like to open the call for questions. Thank you.
[Operator Instructions] Our first question comes from Ioannis Masvoulas from Morgan Stanley.
First question is on Candelaria and the Q2 expansion option. Can you give us an update on the timing of a decision and possible CapEx implications? And how does it actually fit into your growth aspirations in light of the JV with BHP? Thank you.
Hi, Ioannis, thanks for the question. The Candelaria underground expansion project is currently undergoing design and capital optimization efforts by the team there. And this is something that we are definitely keen to pursue as mentioned in previous quarters and on the presentation today. We're assessing kind of an optimized plan and anticipate we'll be in a position to update the market towards the end of this year. But I would say that it continues to be in terms of capital allocation, something that we would like to prioritize and showing -- promising early-stage results from where we're at in the study.
Our next question comes from Martin Pradier from Veritas Investment Research.
I just have a question on the Josemaria. You booked $50 million in earnings and reduced taxes out of the $122 million reported. Could you provide more color on Josemaria income?
Hi, Martin, good morning. It's Teitur here. Yes, this relates to a reversion of a tax expense that we incurred in the fourth quarter when the Argentinian currency was devalued significantly. Our tax balances in Argentina are booked in local currencies. So when the currency devalued, obviously, the recovery of that in dollar terms is reduced significantly. But there is inflation adjustments on the tax balances we have in Argentina. And this is essentially reversing the charge we had in Q4 with now inflation adjusting to tax, the local currency tax balance that you have in Argentina, which essentially, as I said, reversed at $50 million tax charge we had in Q4, and now we are reversing that back to 0 effectively into second quarter this year, so reflecting a tax receipt of -- a non-cash tax receipt of $50 million in the second quarter.
Our next question comes from Stefan Ioannou from Cormark Securities in the Philippines.
Just a quick maybe housekeeping question. Just looking to Caserones and the reiterated cash cost, can you just remind us because I remember there was talk of some labor negotiations through the summer with various parties. Can you just remind us where we're at with that and how that maybe is reflected in your cost guidance?
Yes, sure. And I'll hand it over to Juan Andres to give an update on that -- the status.
Yes. Good morning, Stefan. This is Juan Andres. We have 3 unions in Caserones. We have already closed the first negotiation in Q1. And as we speak, we are in the final stage of the second negotiation with the second union. We expect to close that in the next couple of weeks.
And I can maybe add like the -- in our guidance, we have made an allowance and an assumption on what these outcomes are going to yield. So it should already be embedded in the guidance we have given.
Our next question comes from Edward Goldsmith from Deutsche Bank.
Two questions from my side. Firstly, on the optimization plan and the synergies between your Chilean assets. Can you give us an idea of what has been achieved to date and the future synergy potential?
Yes. Sure. Juan Andres, maybe you can comment on the full potential work that we've got ongoing at Candelaria and Caserones?
Yes. As Jack mentioned during the presentation, we have started what we call the full potential initiative in actually 3 of our sites. We started with Chapada in 2023. And later in the year, we started the same exercise in Caserones and Candelaria. We have seen very good results and some of the reductions in the C1 that you're seeing are somehow attributed to that work that is being done. We plan to update the market on a more broader view by the end of the year. But so far, we're moving forward with the implementation of several initiatives.
And regarding your question on synergies between Candelaria and Caserones, we have already established what we call the regional support function units, basically a shared services unit. And that unit is already working on joint bidding processes, and we have seen very good results from those processes already.
Next question comes from Daniel Major from UBS.
Hi, there. Can you hear me okay?
Yes.
Great. A couple of questions, and apologies if anything has already been answered, I was a bit late joining. First question is on the CapEx outlook. Specifically with respect to Argentina, your guidance, $225 million for this year. Can you give us any steer on how you would expect that number on an attributable basis to trend for Lundin in 2025 post the formation of the JV on the basis 2025 is essentially going to be sort of formulating studies, et cetera? But yes, can you give us any steer on where that number would likely land next year?
At the moment, we're working on completing the program that we set out in 2024. So the Josemaria project team still has a number of initiatives that they need to work through as we look to close the deal and form the joint venture. And as mentioned on the call yesterday, we're going to be focusing on kind of releasing an updated budget for the year towards the end of this year. But the first half of 2025, we'll be able to provide a lot more clarity on work plan studies and kind of the path forward once both assets are held together in the joint venture. But there's still a lot of work to be done on Josemaria. We continue to work through various items, de-risking, looking at trade-off studies at the asset as a stand-alone and then also looking at hydrogeology models and water field programs as well.
So we'll continue on that, and we'll update the market closer towards the end of this year.
Our next question comes from Ioannis Masvoulas from Morgan Stanley.
Just a follow-up on the JV structure announced yesterday. In the past, you had indicated that the partnership at Josemaria level could involve a mining company and potentially another partner such as Melton Group. Is there a possibility for this to now materialize the new JV that you have set up with BHP, or is that not really something you're contemplating?
Hey, Ioannis, thanks for the question. At the moment right now, we're really focused on forming this JV and having a 50-50 JV structure. In the future at a later date, should the partners decide that we'd like to bring in a third partner, we can do so at that time. I think at the moment right now, we're contemplating working just BHP and Lundin Mining on driving these projects forward. But we do keep the optionality open for the future. But right now, a lot of work needs to be done to formulate the JV as described in the transaction announcement on Monday.
Next question comes from Orest Wowkodaw from Scotiabank.
Another question about the announcement from Monday evening with respect to the JV with BHP. I'm just wondering, obviously, we have not seen any kind of updated technical report on Josemaria. So I'm trying to understand what the value -- the $690 million that BHP is paying for the 50% stake effectively to Josemaria, does that reflect -- like can we read into that in terms of an implied NAV value for what Josemaria is actually worth from an NPV perspective? And I'm just wondering also like at what copper price does that assume?
Hi, Orest. The $690 million consideration for Josemaria is BHP's valuation on what they anticipate and what they think bringing both assets together will cost us bending in Josemaria to really form this joint venture that contains both the Josemaria project and Filo del Sol. That was the valuation that we were able to negotiate. So they have their internal models. We have our internal models on what we believe the value is of Josemaria, but now we get to look at both assets coming together and really scaling up this development plan. So that's all I can comment on their valuation for now.
Next question comes from Edward Goldsmith from Deutsche Bank.
Just going back to the Josemaria transaction. Can you talk us through the potential adjustments to the $690 million payment from BHP?
Well, we have agreed with BHP that we are funding the work program on Jose Maria for the remainder of this year. And depending on what actual expenditure is incurred to the end of the year, there might be an upward or downward adjustment on the $690 million payment. And from 2025 onward, we are paying 50-50 on capital expenditure. And again, if the deal hasn't closed by year-end, then there will be a further adjustment on 2025 expenditure as and when the deal closes in 2025 to reflect the 50-50 funding structure from January 1.
Next question comes from Ioannis Masvoulas from Morgan Stanley.
Just one last question from my side. Just on Eagle. So you flagged the challenges in the second quarter and you have already revised guidance lower for the rest of this year. Assuming the ramp rehabilitation completes by the end of '24, do you see the 2025, '26 production guidance at Eagle as achievable, or are there downside risks given where you are with this asset there today?
Yes, I'll let Juan Andres answer that, but I think we're trending towards being able to recoup those lost tonnages through the fall of ground. So we anticipate we'll be able to get back ramped up. But Juan Andres, you can comment better than I can as you were just at site.
Sure. Thank you, Jack. Ioannis, we plan to finish the rehab work by the end of Q3, beginning of Q4. So we expect to get back to full scale production by the end of the year. So at this point, we have only adjusted the guidance for 2024, and we don't see an impact on 2025 yet.
Next question comes from Orest Wowkodaw from Scotiabank.
Jack, just to clarify sort of your last comments about my first question. Does the $690 million paid by BHP, does that assume a value solely for Josemaria, or does that also include, call it, some value of putting Filo del Sol together with the asset? I'm just trying to understand sort of what the valuation of Josemaria could be.
Yes. Orest, that's their consideration for 50% of Josemaria. So their consideration for us -- for them taking over 50% of Josemaria as we bended into the joint venture.
Next question comes from Martin Pradier from Veritas Investment Research.
I just want to understand the Josemaria mill key parts have been ordered. So I'm assuming that the size of the mill is set. If that is correct, how fast could the mill be in production?
Thank you for your question. So yes, that is correct. We do have some long lead items and some large-scale fixed equipment like the ball and SAG mills and the mill motors for Josemaria that has already been purchased and is now in storage in San Juan. These are large-scale mills. And so therefore, we do anticipate that when the time is right to go into development, we'll be able to utilize this equipment. But again, we still have a lot of development avenues and opportunities to look through. And so once we've done our studies and done our integration of both assets, then we'll be able to better define the execution strategy for Phase 1 of this district development.
There are no further questions at this time.
I'd now like to turn the call back over to Jack for final closing comments.
Thank you, everyone, for joining the call. We appreciate that it's been a busy week for Lundin Mining, but a very exciting one nonetheless, and we remain on track to meet our guidance, and we'll be focusing on continuing our operational performance throughout the end of this year and in parallel, looking at closing this exciting transaction that we've announced.
So appreciate the support and thank you for all the questions.
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Thank you.