Hudbay Minerals Inc (HBM) 2017 Q2 法說會逐字稿

Good morning, ladies and gentlemen.

Thank you for standing by.

Welcome to the Hudbay Minerals' Quarter 2 2017 Conference Call.

(Operator Instructions) I would like to remind everyone that this conference call is being recorded today, Friday, August 4, 2017, 10 a.m.

I will now turn the conference over to Ms. Candace Brûlé.

Please go ahead, Ms. Brûlé.

Thank you, operator.

Good morning, and welcome to Hudbay's 2017 Second Quarter Results Conference Call.

Hudbay's financial results were issued yesterday and are available on our website at www.hudbay.com.

A corresponding PowerPoint presentation is also available and we encourage you to refer to it during this call.

Our presenter today is Alan Hair, Hudbay's President and Chief Executive Officer.

Accompanying Alan for the Q&A portion of the call will be David Bryson, our Senior Vice President and Chief Financial Officer; Cashel Meagher, our Senior Vice President and Chief Operating Officer; Javier del Rio, our Vice President of the South America Business Unit; Andre Lauzon, our Vice President of the Manitoba Business Unit; and Pat Merrin, our Vice President of the Arizona Business Unit.

Please note that comments made on today's call may contain forward-looking information, and this information by its nature, is subject to risks and uncertainties, and as such, actual results may differ materially from the views expressed today.

For further information on these risks and uncertainties, please consult the company's relevant filings on SEDAR and EDGAR.

These documents are also available on our website.

As a reminder, all amounts discussed on today's call are in U.S. dollars, unless otherwise noted.

And now I'll pass the call over to Alan Hair.

Alan?

Thanks, Candace.

Good morning, everyone.

We generated strong free cash flow during the second quarter of 2017 due to our improved production and cost performance compared to the first quarter.

We also continued to deliver on our operating targets.

Consolidated copper and zinc production both increased from the first quarter, and our consolidated cash cost per pound of copper decreased to $0.85 per pound, down $0.03 from the first quarter.

As a result, operating cash flow in the quarter increased by 54% from the first quarter of 2017, and we are allocating some of our positive free cash flow generation to expand our exploration budget and build our long-term growth pipeline.

We have been active in identifying and acquiring grassroots exploration properties in Peru, Chile and British Columbia during the downturn in metals' prices.

The increased exploration budget is due to anticipated drilling on these properties as well as testing targets in Manitoba and drilling down [plants] at Lalor.

We also continued to allocate cash flow to debt reduction with a total of $67 million of long-term debt repaid during the quarter.

We recently amended our revolving credit facilities to modify the financial covenants, extend the maturity dates to July 2021, and reduce the interest rate by 1.5% to LIBOR plus 3%.

Further, in early June, the U.S. Forest Service issued the final Record of Decision related to our Rosemont project in Arizona.

Since receiving that permit, we have begun the administrative process of completing the mine plan of operations and submitted our draft to the Forest Service in late June.

We remain on track to meet all of our production and cost guidance for the year.

Taking a closer look at the second quarter results, consolidated copper and zinc production increased by 18% and 14% respectively from the first quarter of 2017.

Consolidated cash costs, net of by-products, was $0.85 per pound of copper, a $0.03 decrease from the first quarter of 2017.

Consolidated all-in sustaining cash costs, net of by-products, was $1.49 per pound of copper, which was slightly higher than the first quarter, mainly due to planned higher sustaining capital expenditures in Peru during the dry season.

Net profits and earnings per share in the second quarter were $26 million and $0.11 respectively, compared to a net loss and loss per share of $2 million and $0.01 respectively in the first quarter of 2017.

Higher sales volumes allowed us to increase our gross profit compared to the first quarter of 2017.

As I mentioned earlier, operating cash flow before change in noncash working capital increased by 54% to approximately $124 million, up from $81 million in the first quarter.

The increase in operating cash flow was the result of growth in sales volumes of both copper and zinc.

Cash and cash equivalents increased by $20 million in the second quarter to $153 million.

This increase was partly a result of cash generated from operating activities of $132 million and a net release of restricted cash of $17 million.

These inflows were partly offset by $53 million of capital investments and debt repayments of $67 million.

As a result, our total available liquidity was $497 million, up from $433 million at the end of the first quarter.

The Constancia mine produced approximately 29,800 tonnes of copper during the second quarter, which was higher than the first quarter production primarily due to improved mill throughput.

Ore mined at Constancia during the second quarter increased compared to the first quarter, as we continue to increase stockpiles to improve our ability to blend ore at the processing plant.

Milled copper grades in the second quarter were slightly lower than the first quarter as Constancia entered lower grade phases of the mine plant, but remain higher than the expected grades as outlined in our recent technical report for Constancia.

Recoveries of copper, gold and silver in the second quarter slightly improved compared to the first quarter of 2017.

Improvements and process recoveries continue to be implemented and evaluated in conjunction with the continued positive grade reconciliations.

We expect to have a better understanding of the nature of the positive grade reconciliation by the end of 2017.

Combined mine, mill and G&A unit operating costs improved in the second quarter of 2017 when compared to the first quarter, but were affected by increased plant maintenance.

Costs of operating the moly plant at higher-than-planned rates, higher community spending, road maintenance costs and other administration costs.

However, during those maintenance periods, we took advantage of the downtime to complete additional maintenance originally scheduled for later in the year, shortening the expected downtime in the second half of 2017.

As a result, we expect combined unit operating costs to decline in the second half of 2017, with full year results expected to fall within the guidance range.

Constancia's cash costs net of by-product credits, was $1.24, down from $1.30 per pound in the first quarter, reflecting lower unit operating costs and higher copper production from Constancia.

Sustaining cash costs net of by-product credits was $1.82 per pound, an increase of 13% from the first quarter of 2017, as a result of higher -- of expected higher sustaining capital in heavy civil works during the dry season and mobile equipment overhauls.

The Manitoba operations produced approximately 34,900 tonnes of zinc, 11,000 tonnes of copper and 26,600 ounces of gold-equivalent precious metals during the quarter, all of which increased over the first quarter of 2017.

Ore mined in Manitoba increased by 9% quarter-over-quarter, primarily as a result of increased production at Lalor.

Overall grades of all metals increased over first quarter levels, including the higher zinc grades at the 777 mine as per the resequenced mine plan to prioritize higher grade zinc stopes in 2017.

Ore processed in Manitoba in the second quarter of 2017 increased by 14% over the first quarter, as mill performance significantly improved at both the Flin Flon and Stall concentrators.

Overall, Manitoba copper and precious metals recoveries improved quarter-over-quarters -- quarter-over-quarter, while zinc recoveries declined slightly.

Manitoba contained metal production increased as a result of higher grades in all metals at 777, as well as higher throughput in grades at both the Flin Flon and Stall concentrators.

Due to increased Lalor mine throughputs and higher zinc grades at 777, zinc concentrate production is exceeding the processing capacity of the Flin Flon zinc plant.

As a result, sales of excess zinc concentrate inventory began in the second quarter of 2017, and will continue as long as the concentrate production exceeds zinc plant processing capacity.

As a result of higher mill throughput, concentrated unit cost of the Flin Flon and Stall concentrators was 17% and 26% lower respectively in the second quarter of 2017 compared to the first quarter.

This decline in unit cost was despite additional costs of the Stall mill related to the high cost -- the use of a higher-cost temporary crushing facilities in April.

Stall resumed use of its permanent crushing circuit by the end of April.

The strong ramp-up of ore production from the Lalor mine in the first half of 2017 has resulted in the accumulation of an ore stockpiled as Lalor's production has exceeded the Stall concentrator's current milling capacity.

Given that there is spare capacity at the Flin Flon concentrator, we have started to truck some of the stockpiled ore to Flin Flon for processing in the second half of 2017.

Manitoba combined mine, mill and G&A unit operating costs in the second quarter improved by 9% compared to the first quarter.

Combined unit costs are expected to be within the guidance range for 2017.

Cash cost, net of by-product credits in the second quarter of 2017, was negative $0.18 per pound of copper as a result of significant zinc by-product credits.

Sustaining cash cost net of by-product credits in the second quarter of 2017, was $0.38 per pound of copper, remaining at low levels for the same reasons.

As we approach the latter half of the year, we'll continue to focus on generating positive free cash flow and debt reduction, which we've been able to do consistently so far this year.

From a growth perspective, we remain committed to advancing the existing opportunities in our pipeline, such as the inclusion of the Pampacancha deposit into the Constancia mine plant, the Lalor output expansion and the continued advancement of [priming] activities at Rosemont.

Our increased exploration budget speaks to our commitment to evaluate exploration and acquisition opportunities in the countries where we operate, providing long-term organic growth potential in our pipeline.

With that, we are pleased to take your questions.

(Operator Instructions) And we will take our first question from Orest Wowkodaw.

I wanted to get a bit more detail on Constancia.

I was being surprised by how strong the grades have been there.

They've been pretty flat in the first half of the year.

Are you expecting a significant decline to begin here in the second half?

Or is it possible we could see grades stay above the 0.5% rate?

And then secondary on the recovery side, they've been lower than planned.

And I'm just wondering if you've got some better idea in terms of what's driving the lower recoveries and whether you think this could be some kind of permanent issue that we're going to have to think about relative to kind of long-term expected recoveries.

Orest, Cashel here.

I'll attempt to answer the question.

We are seeing a consistent grade bias as has been mentioned in previous quarters.

We're putting forward some efforts towards understanding exactly what the -- what that bias is and what the magnitude of it is.

So we're undergoing a drill program twinning holes from the original resource this quarter now.

And actually that drilling starts next week, and it will take the balance of the quarter into the next quarter to be able to get there.

So to address the grade, if the bias continues, yes, we're probably going to see higher grades than the we forecasted as per the technical report for this year's production.

So what we believe is happening helps to answer towards the recovery issues you've identified.

Originally, the diamond drill coring -- this is our theory, anyway, and so we need this twinning of holes to be able to -- with 100% core recovery to test it, and you'll understand why in a second.

So what we think has happened is, with the pre-fracturing of the material at Constancia, in fact, we've shown in the past that we can free dig the material.

We blast to increase the efficiency and productivity there.

That -- when we were recovering the original core from the original diamond drilling, that -- there was a preferential sort of almost gravity circuit and it was washing the fines to the bottom of the whole.

So actually -- the core bell wasn't recovering the fine-grained chalcopyrite.

As such, that core was what was utilized originally in the metallurgical testing.

So the plant was set up to recover a coarser fraction of the chalcopyrite available.

And as you can imagine, the fines make its way through it.

So we're actually getting the recovery of the coarser fraction of the chalcopyrite as designed, and there's a number of initiatives in the mill underway to be able to test new reagents and new processes and new fragmentation from the mine to be able to recover those fines.

So we think, number one, we're going to recover more of those fines in the mill; and number two, that we're going to test this theory and prove it out with this 100% core recovery program that we have underway twinning the old holes to understand statistically what the magnitude of the bias is.

And is your expectation that this is only an issue for kind of the top level of the ore body for the next few years and then both of these things reverse as we get into the hypogene?

Originally, that was my theory, but no.

I -- we're thinking now that there is a great bias within the hypogene itself.

Because we've mined a considerable amount of hypogene to-date and we're seeing that persistence.

So what -- so we need to do the science to prove it out but that's the theory we're trying to prove out.

And until we sort of come up with it, as people have pointed out, the grade bias has been offsetting the recovery, but we think it's one of the same.

And so what we want to do is figure out exactly what it is so we can provide the proper guidance.

And we will take our next question from Matt Murphy.

Just on the cost guidance at Constancia relative to your costs in the first half.

Just wondering how much movement you expect in the numerator versus denominator.

This sounds like throughput could be a bit better, but I'm wondering how much of the cost in the first half is expected to go away?

Matt, Cashel here.

So we expect an improvement in the denominator and the numerator.

And there was the sum of sort of between $5 million and $10 million of extra costs we believe in the first half that won't persist through the second half.

So our unit costs are trending down for the past month and we're still aligned with what the January disclosed guidance was, so we see ourselves getting in line throughout the year.

And the element of community spend, just wondering if that's related to Pampacancha.

And what the status is on the land rights there.

Still -- are you still expecting to get it by the end of the year?

Or how is that coming along?

The accounting treatment of the community spend in the second quarter wasn't the community of Chilloroya or what -- concerning Pampacancha.

It was an ongoing for a couple of years' negotiation with some of the regional communities and that sort of hit the books and we finalized what those agreements were.

With respect to Pampacancha itself, we're -- basically, we're on track with our negotiating strategy with the local community.

They remain receptive.

I think the way we could couch it is, is we're sort of -- they expect one thing, we want to pay another, and we're working down to the details.

So it's a -- we are on track for meeting the guidance of production out of Pampacancha as laid out in the technical report.

And we will take our next question from Matthew Fields.

I know mining is a difficult business to sort of predict quarter-to-quarter here.

But in 1Q, you produced a lot more -- I think 10,000 tonnes or so than you sold.

You didn't really make up that gap in 2Q.

You, in fact, you're pretty flat, and you talk about working down stockpiles.

But -- is this sort of 10,000-tonne gap going to be worked out over the course of the year?

Is it going to persist?

Can you give us a sense of the cadence between production and sales over the back half and maybe just sort of overall cadence, front half versus back half?

Matt, it's David Bryson.

Look, the reality is that we're shipping 10,000 and often 20,000 tonnes parcels out of Matarani in Peru.

And so we did have some adverse weather across the whole sort of Pacific seaboard of South America.

I think we saw some other copper producers sort of talking about the impact of that on their sales as well in late June.

So it's difficult to sort of put opinion on exactly what our sales are going to be every quarter because the shipments are lumpy to the customers in order to keep the freight down and sort of take maximum advantage of the logistics.

So I would say that over the course of the year, we would expect sales to be in line with production.

Quarter-to-quarter, there is going to be variances, and I can't really give you specifics on exactly how that's going to play out every quarter.

Can I just ask, as of August 4, have you recovered that in balance?

As the swells have continued to Matarani into July, I think we did get a couple of [boats] out to last month.

So right now, we're at levels that are sort of, I think, at or a little bit below where we ended the quarter.

And we will take our next question from Greg Barnes.

Cashel, if I understand your response to Orest's question, you're expecting the best of both worlds.

So higher grade on the bias and higher recoveries once you figure out how to get it through your plant?

Yes.

So what I'm expecting is that, as per the -- I guess, disclosed quarter-over-quarter recovery would go up with recovery of more the fraction of what we call the ultrafines.

And so, yes, and we expect versus current levels -- so more in line with what the technical report says.

So what that's going to be?

Is it going to be for the hypogene as per the technical report, 89% copper recovery, don't know yet.

But we're going to trend in the upper half of the 80s versus now, we've been always trending in the lower half of the 80s.

So we expect to be able to do that.

There are technologies, there is reagents available to do that and so we're working through that process.

And so that's the target to get that up.

When is it going to happen?

We'll see.

And then the grade bias, yes, a little higher.

So in the end, we should benefit from the grade bias, although we may not get to the highest recoveries as reported or the mean recoveries as reported in the technical report for the overall copper total.

But in the end, provided we continue the improvements on throughput that we've been achieving and maintain that, we should end up day-over-day producing more copper.

Got you.

And these changes that you're making in the process plant, what are they specifically?

So you obviously, there are different reagents and other things that you're doing.

Yes.

It's a reagent-focus now.

We don't believe we're in a position where we need to change floatation capacity or -- and there is a focus on grinding utilization and optimization.

And so a combination thereof, we believe, will improve recovery.

So it's not a requirement for new infrastructure and capital.

Got you.

If I can just another question.

I thought Pat Merrin was on the phone.

I just wanted to ask about the Rosemont permitting.

Is the 404 water permit in anyway impacted by the mine plan of operations that you're working with the U.S. Forestry Service on?

Greg, it's actually Alan Hair.

I'll answer that question.

No, there is no connection.

The Forest Service Records' decision is the outputs of the whole full-blown environmental and social impact assessment process involved 18 different cooperating agencies and that's by far the most significant permit required.

But once you get that, that final Records of Decision, you need to operationalize it and that's what the mine plan of operations process is.

The 404 water permit is specifically a requirement under the Clean Water Act and is a completely separate thing.

So the Army Corps of Engineers is not waiting to see what the mine plan of operations looks like before they hopefully issue the water permit?

Correct.

And we will take our next question from Stefan Ioannou.

Most of my questions have been answered, but just wondering on the -- in Manitoba, just -- can you give us a bit of an update as where you're at with looking at New Britannia and factoring that into the overall expansion with Lalor and stuff?

Yes, Stefan, Cashel here.

Yes, we continue evaluating options.

We're sort of in a unique position having 3 processing plants and 3 (inaudible) stands and evaluating the best return on the capital that we'll employ to develop the gold zone and also to treat the gold zone.

So I think with these trade-off studies underway, we'll be in a position close to the end of the year to provide good guidance on what we'll be doing.

And we will take our next question from George Topping.

Could you give us an update on community relations at Constancia itself?

Is it all quiet at U.S. in the last quarter?

Yes, George, Cashel here.

Yes, the community relations are good.

No issues, yes.

No issues, perfect.

And just going to the Lalor.

Is there any revision coming for the second half of the year given the strong buildup?

Basically, we remain on as a release for Manitoba guidance.

We believe costs, production levels will meet the expectations as per the guidance.

So there is no revision.

They've done a lot of work to ramp up Lalor.

So Lalor is producing at 4,500 tonnes a day.

And that excess material, we will be milling much of it in the second half at the Flin Flon mill where we have excess capacity.

Right.

Sorry, just to be clear on there.

So your rate for [the back half] is probably closer to the 4,500 tonnes, did you say?

We're moving our way up to 4,500 tonnes.

We believe we'll be at 4,500 tonnes by the end of the year.

So we've ramped up from 3,000 tonnes, 3,200 tonnes, and we're moving through sort of a linear ramp-up through the process.

The resulting metal is on target for guidance as per January.

Right.

And then just lastly, Cashel, on the upgrade to the Stall mill.

Is there any way to advance that to reduce the trucking that you're doing?

Well, again, it's sort of a -- it's part of the whole discussion and review in trade-off with respect to the gold zone also.

But what we're finding is -- and what we're thinking is right now, is with the excess capacity while 777 is still producing, that the value proposition might actually be to utilize the available capacity in Flin Flon and the incremental cost thereof covers off the trucking cost and might be more of a value proposition than putting in a lot of capital to expand Stall.

And we will take our next question from Dalton Baretto.

Maybe sticking with Manitoba for a bit.

Just wondering, including the trucking cost at Flin Flon, where do you see the Lalor mining cost trending over H2?

So basically, as per the guidance for Manitoba, we believe we're going to be at the unit cost per tonne.

So we're still seeing ourselves as we've guided before.

We don't see a major change over the time.

We have in this past quarter and the previous quarter, increased some activities in Lalor to prepare ourselves moving to 4,500 tonnes a day by putting in some raises for ore transport and logistics and movement and also increasing our drill inventory such that we're more prepared for changes in stope sequencing if they do occur.

So it's just best practices.

So we did incur some higher costs.

So those costs, we believe, are going to level off now in the second half of the year.

But I guess, just in terms of the total impact as we look at Lalor's own mine unit costs.

The efficiencies we get at mining at those higher rates, the additional trucking cost, the blend of all of that will probably have Lalor running at a pretty similar total unit costs for the second half of the year compared to the first, maybe a little bit better.

But that will be offset in part by the fact that we're milling in Flin Flon, which is a lower cost concentrator than Stall, and obviously, actually generating the production that we can convert into revenue.

Okay.

And then maybe just in terms of the plant.

How much incremental zinc and concentrate you expect to produce above and beyond what the plant can process?

We'll certainly have some additional zinc concentrate sales that we'll be putting through in the second half.

I think it depends in part on sort of the timing of when the ore gets there.

And I think we're sort of -- given that there's also discussions underway in terms of placing that concentrate, we probably don't want to get too specific at this point in time in terms of our exact plans, Dalton, but we would expect to be selling zinc concentrate to third parties over the second half of this year as well as through 2018, just based on Lalor's strong ramp-up and the bias in 777's grades in favor of zinc and away from copper in the second half of this year.

(Operator Instructions) And we will take our next question from Brian Lalli.

David, if I could, you've made a pretty great progress on the revolver pay down.

I guess the first question is, is the intention to still fully pay that down over the next couple of quarters, particularly with where commodity prices are now?

Yes, certainly, Brian, copper prices are a bit of a tailwind.

We are going to have a higher sustaining CapEx as we -- I mean we're on target for full year but our 6-month sustaining CapEx was less than 50% of the full year guidance.

That's mainly just around the timing in Peru where we get most of the work done during Q2 and Q3 in the dry season.

We're also going to have additional CapEx on the paste plant in Manitoba.

And -- so I think the rate of free cash flow generation between all of that, maybe a little bit of extra exploration spending, the rate of free cash flow generation might not be quite as high in the second half, but it obviously depends on the trajectory of metal prices.

I still think that we've got a good shot at fully repaying the revolver by the end of the year and maybe having a little bit left over.

Great.

And it's actually a perfect segue to my second question I was going to ask on the CapEx.

But I guess on the interest expense side, it's -- the third quarter is going to have the semiannual coupon payments, right?

Again, I just want to make sure we're modeling cash flow correctly on our side.

Yes, it's January and July are the semiannual bond payments.

And we will take a follow-up from Greg Barnes.

Cashel, I want to understand what you're saying about the Stall Lake Concentrator potentially not doing the expansion there but using Flin Flon.

Is that possibly a permanent solution?

It's certainly a solution until the ore runs out at 777.

And so we will evaluate -- it's part of the overall optimization of the Manitoba operations as evaluating in the future what the production profile from Lalor will give to us and how we'll understand to go.

So certainly, I would say in the present future, that's the most likely solution.

And then we will evaluate what the mine could sustain as production after 777 goes down -- before 777 goes down and we'll come with a plan.

But as per the current technical report, and if we weren't to get -- be successful in expanding the base metal resource at Lalor, I think naturally after 4 or 5 years, the amount of available [bases] at Lalor reduces and there is a natural decline in the tonnes per day produced from the base metal.

So we're balancing that with the life of 777 and taking the opportunity of the incremental costs of the triple -- that the Flin Flon mill would incur to mill the Lalor ore.

Could you avoid the expansion of Stall completely?

There are some modifications we have to do to Stall.

We've had -- it's an old plant.

It was built in the '50s.

And there is things we need to do to upgrade it, and so we're evaluating those upgrades.

And so there are some modifications we need to do there.

So there is going to be, in the next year to 1.5 years, some capital into Stall to improve its maintenance reliability.

And we will take a follow-up from our Orest Wowkodaw.

Just on Greg's question there.

When do you think you'll be ready to make a decision on whether you're expanding Stall or not?

Is that going to come at the end of the year with this new updated optimization study?

Or is that kind of -- could that be later?

And then just secondly, at Constancia, when do you need access to the ore at Pampacancha to stick to the current mine plan that's in, I guess the 43-101?

And is there a chance if that gets pushed back if that's actually positive to production in 2018 because of the initial lower grade at Pampacancha?

Yes.

I think to answer to your first question, I think with Stall, we'll have a better idea by the end of the year when we're giving guidance on what we're going to do as far as the gold zone goes of what the future looks like.

So like I said, they're all integrated and working off those trade-off studies.

With respect to Pampacancha, the 43-101 and our guidance contemplates that we will be processing ores in the fourth quarter of 2018.

We're still on target for that.

That mine plan is the optimized mine plan where there's actually some ongoing stockpiling of some of the ore at Pampacancha.

I think you are correct that it could be offset by some -- we could, if we were to delay Pampacancha, we might end up with some early higher grades from Constancia continuing on and then pushing into 2019 where you're just robbing Peter to pay Paul.

So we're still focused on producing in the latter half of 2018 and that's what shows returns the best NPV to the resource we have available to us.

And when do you need to be actually in the deposit to make this timeline in terms of Pampacancha?

So there's a much -- actually, getting to the ore is not a big issue.

It's some of the ancillary work around it to manage the noncontact water, the haul road over there, et cetera, et cetera.

So if we, this time next year, are starting to pioneer at the pit itself, we'll be in time to be able to produce in the fourth quarter.

And we will take our next question from Anita Soni.

Can you give me an idea of your trucking costs in your Manitoba operations per tonne per kilometer?

Yes, Anita, they're between Stall or between Lalor and Flin Flon, they're in the order of $20 a tonne.

Canadian.

And we will take our next question from Alex Terentiew.

I just wanted one follow-up question here on the Stall expansion.

I just want to make sure I'm clear.

So the potential change to plan or -- that you're talking about, this expansion.

Is this from -- from the current 3,200 tonnes up to 4,500 tonnes?

Or are you talking about the 4,500 tonnes and upwards of 6,000 tonnes with the New Britannia mill?

I just want to make sure I'm understanding correctly there.

So what was contemplated originally, was as the base metal processing plant, Stall was going to be expanded from 3,200 tonnes to 4,500 tonnes.

What we're saying is, in the immediate future, we're seeing the benefit of utilizing the capacity in the Flin Flon mill instead of putting in the capital to increase the capacity of Stall to 4,500 tonnes.

The 6,000 tonne a day was the contemplation of reviving the New Britannia mill.

What we're doing is evaluating all the options available to us, and by the end of the year, we'll sort of give some guidance on what we're going to do with that excess production opportunity out of Lalor with respect to the gold zones.

Okay, that helps.

And then one more on Pampacancha.

The grade bias you're seeing at Constancia now, is this something you expect that you could see at that deposit as well?

We're not certain about that.

We need to get in there.

I think if there is a grade bias there, it wouldn't be for the same reason as Constancia.

From the diamond drill core that we used to outline the resource and reserve available to us, it doesn't appear there is the pre-fracturing that exists at Constancia and the core recovery itself was better.

So we don't see the same reason for a grade bias at Pampacancha.

There are no more questions at this time.

I'd like to turn the conference back over to Candace for any additional or closing remarks.

Thank you, operator, and thank you everyone for participating.

If you have any further questions, feel free to reach out to our Investor Relations team.

And this concludes today's conference.

Thank you for your participation and you may now disconnect.