Ero Copper Corp. (ERO) Q2 2021 Earnings Report, Transcript and Summary

Thank you for standing by. This is the conference operator. Welcome to the Ero Copper Second Quarter Results Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. [Operator Instructions] I would now like to turn the conference over to Noel Dun, Executive Chairman of Ero Copper for opening remarks. Please go ahead.

Thank you, and good morning, everyone. The news release announcing Ero's second quarter 2021 financial results is available on our website as are financial statements and MD&A for the three and six months ended June 30, 2021. As usual, we will be making forward-looking statements on this call that involve risks and uncertainties concerning the businesses, operations and financial performance of the Company. We would refer you to our most recent AIF available on our website, on SEDAR and EDGAR, for a discussion of the risk factors of our business and their potential impact on future performance. Unless otherwise stated, all amounts are in U.S. dollars. Joining me on the call today are David Strang, Ero's Cofounder and Chief Executive Officer; Wayne Drier, Chief Financial Officer; Makko DeFilippo, President; and Paul Nehlen, Vice President, Corporate Development and Investor Relations. Whilst uncertainty surrounding the path of the COVID-19 delta variant clearly still exists in Brazil, we are seeing encouraging signs relative to the case count peaks of mid-2020 and early 2021. We're also seeing increased rates of vaccination across our operations, and fewer people are away from work due to suspected exposure. All our preventative measures remain in place. And for reasons of prudence, we have no intention looking them in the unit term. We are pleased with our operational and financial results in the second quarter and the first half of the year as well as the progress we've made in advancing several strategic objectives. At the end of the quarter, we announced a $110 million gold stream transaction with Royal Gold on our NX Gold Mine. The transaction, which we expect to close in the very near term, unlocks some of the value we have long identified in the NX Gold Mine, whilst forming a strategic partnership, highly aligned with our plans to further develop and organically grow the NX Gold business. The proceeds from the transaction, combined with our record cash balance of $138 million, will be used to support our organic growth objectives there at MCSA and in the development of the Boa Esperanҫa project. Whilst NX Gold stream transaction closes, our pro forma cash balance will be approximately $240 million. We will be in a net cash position of approximately $80 million, giving us excellent balance sheet strength and liquidity to continue to execute on our strategy. In June, we completed the dual listing on the New York Stock Exchange, which, we believe over time, will broaden our shareholder base and enhance trading liquidity. We also published our 2020 sustainability report during the quarter, highlighting our ESG performance as well as our goals and initiatives related to responsible and sustainable mining. This year, we highlighted the formation of a climate change steering committee comprised of a multidisciplinary team at both executive and operational levels. Over the coming years, we expect this group to contribute greatly to further advancing our sustainability strategy, such as setting emission reduction targets and other performance goals. As we look ahead, we are bullish on the outlook for copper prices as the need to address climate change accelerates globally. Renewable energy initiatives, global electric infrastructure spending and the post-pandemic economic recovery are all copper-intensive activities. Furthermore, a realistic analysis of the supply side of copper shows it to be as challenged today as we anticipated it would be when we acquired MCSA in 2016. And increased environmental awareness amongst governments and stakeholders only compounds these challenges in our view. I am as excited as ever for what the future holds for our company. And I'm grateful to our colleagues for the fantastic work they do to support our production and organic growth, while continuing to manage the evolving challenges associated with the COVID-19 pandemic. I will now pass the call over to David to provide a brief review and update of our operations, after which Wayne will provide a summary of the Company's financial performance. As usual, our team will be available for questions immediately following the call.

Thank you, Noel. I would like to reiterate NOLs sentiment as our team, and especially our colleagues in Brazil, have worked incredibly hard to advance our strategic objectives, while continuing to deliver strong operating and financial results despite a dynamic operating environment. During the second quarter, we reported record cash flow from operations of $85.1 million, driven by strong performance across each of our operations, aided by copper and gold price tailwinds. At the MCSA Mining Complex, we processed over 550,000 tonnes of ore at an average grade of 2.13% copper and achieved a second consecutive quarter of record metallurgical recoveries averaging 92.5% during the quarter. As expected, mill throughput volumes decreased relative to the first quarter due to the first phase of scheduled mill maintenance, which was successfully completed shortly after quarter end. The impact of mill maintenance on copper production was offset by higher-than-forecasted grades due to a continuation of favorable grade reconciliations and planned [stopes] as well as supplementary mined tonnes from a value engineering project that seeks to identify and mine high-grade areas within the upper levels of the Pilar Mine previously believed to be sterilized. This program is yet another data point highlighting the ingenuity and commitment to creating value by our operations team in Brazil, supported by our newly created technical services team here in Canada. We also achieved quarter-on-quarter increases in both metallurgical recoveries and concentrate rates, demonstrating ongoing benefits from the HIG Mill we successfully installed last year. Enhanced milling capacity generated by the HIG Mill helped to mitigate the impact of mill maintenance on throughput volumes during the quarter and allowed us to fully evaluate the true performance potential of the HIG Mill that will go a long way in helping us in the detailed design of returning the overall mill to its original capacity. The strong operating performance across the MCSA Mining Complex contributed to quarterly copper production of 10,898 tonnes of copper and quarterly C1 cash costs of $0.72 per pound of copper produced, bringing copper production for the first half of the year to 23,536 tonnes at an average C1 cash cost of $0.60 a pound. We recently started Phase 2 of planning mill maintenance at MCSA and anticipate more throughput volumes in the third quarter to be similar to those achieved in the second quarter. While we expect our ongoing value engineering program to continue to provide some supplementary production from the upper levels of the Pilar Mine, on balance, we expect that grades will normalize to within our guidance range for the balance of the year. As a result of our strong first half production performance, we are well positioned to achieve our unchanged full year copper production guidance, albeit towards the higher end of our 42,000- to 45,000-tonne range. Similarly, we are also tracking towards the lower end of our full year C1 cash cost guidance range, which remains unchanged at $0.75 to $0.80 per pound of copper produced. The NX Gold Mine delivered a strong quarter as well, producing 10,377 ounces of gold and C1 cash costs of $499 per ounce and all-in sustaining costs of $660 per ounce. The 10% quarter-on-quarter increase in gold production was driven by higher tonnes milled and strong metallurgical performance, which more than offset lower grades mined and processed during the quarter. While we are tracking ahead of our full year production guidance range with approximately 19,800 ounces of gold produced in the first half of the year, at all-in sustaining costs of $650 per ounce, we anticipate modestly lower grades in the second half of the year due to planned mine sequencing and a normalization of recovery rates. As a result, we are well positioned to achieve the high end of our reaffirmed production guidance range of 34,500 to 37,500 ounces and the low end of our unchanged all-in sustaining cost range of $875 to $975 per ounce of gold produced. Our exploration programs generated exceptional results during the quarter and continue to validate our exploration-driven organic growth strategy. On the Curaçá Valley, we drove the best intercept on a grade meter basis in the history of our company within the deepening extension of the Pilar Mine. The 67-meter intercept grading over 9% copper was located beneath the current inferred mineral resource shell and highlights the sheer size of the super part style mineralization at depth. As drilling within deeply, particularly at depth, has continued to highlight better-than-expected results, we have initiated a design review of the project, including of shaft and development parameters to review value-enhancing opportunities and ensure we are maximizing the value of this incredible deposit. We are also continuing to make good progress in our regional exploration program and are evaluating a number of opportunities that we hope to share in our next quarterly exploration update. Our exploration results from NX Gold Mine was also exceptional, including the best hole drilled in the history of the mine, located beyond the limit of the current inferred mineral resource. The results highlight the intrinsic value of the mine that we have always recognized and will broadly speak to the potential of NX Gold land package, which remains largely unexplored. In the weeks ahead, we look forward to releasing the results of our optimization study for the Boa Esperanҫa project feasibility study as well as our third quarter exploration results. I will now turn the call over to Wayne to discuss our financial performance for the quarter.

Thank you, David, and good morning, everyone. As David mentioned, our strong operational performance, combined with elevated copper and gold prices, drove record quarterly cash flow from operations of $85.1 million during the quarter. While copper sales volumes were down quarter-on-quarter due to lower production volumes and a higher finished goods inventory at the end of the quarter, cash flow from operations did benefit from the higher metal prices and an $11.6 million reduction in our accounts receivable. Despite the lower copper production, as well as a stronger Brazilian real that drove higher unit costs compared to the first quarter, MCSA delivered C1 cash costs of $0.72 per pound of copper produced during the second quarter, resulting in average C1 cash costs of $0.60 per pound for the first half of the year, well ahead of our full year guidance range of $0.75 to $0.85 per pound of copper produced. Gold sales were flat quarter-on-quarter despite the higher gold production due to an increase in finished goods inventory at the end of the quarter. Gold C1 cash costs and all-in sustaining costs per ounce produced was up slightly compared to the first quarter due to the strengthening of the real, but we're still ahead of our full year cost guidance. Adjusted EBITDA for the quarter was $85.5 million, bringing adjusted EBITDA for the first half of the year to a record $172.2 million. The strengthening of the Brazilian real during the quarter allowed us to opportunistically settle a portion of our forward-dated foreign exchange derivative contracts, resulting in a realized loss of approximately $6 million. We continue to expect foreign exchange settlements to amount to somewhere between $4 million and $6 million per quarter, provided the Brazilian real stays relatively range bound at these levels. Our headline net income for the second quarter was $84 million or $0.90 per fully diluted share. After adjusting for noncash components, including unrealized foreign exchange gains, our adjusted net income was $53.7 million or $0.58 per fully diluted share. Our balance sheet is the strongest it has ever been, with cash and equivalents of $138 million, resulting in less than $20 million of net debt at the end of the quarter. As Noel mentioned, upon closing of the NX Gold stream, our pro forma cash balance will be approximately $240 million with a net cash position of approximately $80 million. While we intend to maintain strong available liquidity to support our growth projects, we do expect to pay down a meaningful portion of the revolver during the third quarter to reduce ongoing interest payments in the near term. I'll now hand the call back to Noel to share some final comments.

Thank you, Wayne, and everyone who joined the call today. Before we open it up to Q&A, I'd like again to congratulate the Ero team and our colleagues in Brazil for delivering another strong quarter. In running our business, we remain focused on return on invested capital. I am pleased to note that at the end of this 6-month period, our ROI fee, as calculated by Bloomberg, has averaged approximately 40%, which positions us well versus any other company in our industry worldwide. And why is this important? Simply because a company that consistently delivers high returns on shareholders' capital can afford to finance growth without diluting those very same shareholders with repeated capital calls and/or creating undue risk by taking on high levels of leverage in its capital structure. This is, to us, absolutely paramount in how we run our business. We are well positioned to deliver on our full year guidance and look forward to building further momentum with the release of our Boa Esperanҫa optimization study. Thank you for joining the call. We will turn it back to the operator to open the line for questions.

[Operator Instructions] The first question comes from Jackie Przybylowski, with BMO Capital Markets.

Congrats on the really strong quarter. Your cash balance is growing, and especially, I guess, after the Royal Gold stream transaction closes. Can you talk a little bit about what your plans are for that cash in terms of the growth projects? Should we see more investment, whether it's at MCSA? I don't know if that's going to be in the mill or in the exploration program? Or should we expect some of that to be going to Boa Esperanҫa in the sort of near to medium term?

Thanks, Jackie. With respect to the cash balance, as everybody knows, it's a very happy place for us to be. And I think, through the smart financial engineering we've done with the NX Gold stream, we're well placed now to fund not only our growth aspirations within the Curaçá Valley -- which primarily revolves around right now the deepening project and the sinking of the shaft -- but we're also well positioned now to take on Boa Esperanҫa in terms of building that mine in and of itself. As Noel reiterated, we are extremely highly focused on return on invested capital. And that means, with respect to that, how do we add the best and highest value to our shareholders while maintaining a capital structure that's in their best interests? And so with the cash that we have now -- and we believe we'll continue to grow in the quarters to come -- Anthea and her team will have the ability to move the deepening project forward aggressively, while at the same time starting to take on and looking to build power. Now on the lower head of the place, we have not had board approval for Boa, nor as the market seen the results of the Boa study. But we are anticipating that the project will come in on a robust nature and that we are now going to be in a strong position to be able to fund it.

And maybe just a quick follow-up on that. When do you expect that board approval would be decided? Is that shortly after the study? I think the study is kind of due late August, early September, if you remember correctly? So should we expect an announcement on that, sort of next month time frame?

Yes, Jackie, we will be releasing it to the marketplace over the course, I believe, of the next month, month and a half. The board will have reviewed that study at that particular time. We do know there is some optimization work that we want to do already in terms of the study in terms of looking to finalize that early in the new year. I don't have a crystal ball in front of me right now. So it's difficult for me to be able to, number one, also preempt what our board is going to say. But certainly, as a management team, we're looking -- if everything moves forward in the appropriate manner -- to start looking to break ground on Boa in the first half of next year. Probably [indiscernible] half of the first half.

That's helpful, just to understand what the time line is on that. Maybe if I can ask one more question, and then I'll let somebody else have a chance. You've recently put an exploration update. And it sounds like you've got a lot of really strong results around your existing mines. Can I ask, on the regional program -- so further out from your existing known deposits or known mines, can you give us a little bit of color in terms of maybe how aggressively you're looking regionally at this point, or what you're seeing there just broadly?

Well, as you know, I don't like orange jumpsuits, so I can't get too far down that road in terms of giving of [indiscernible].

Not asking you to.

With respect to -- this last quarterly update did not have a lot on the regional program. We are at full capacity in our lab with regards to running drill results through. Obviously, with regards to the discoveries we made in the deepening, they go a long way to enhancing near-term value to us. And so they took priority through the lab during the quarter, and hence, the release that we did there. We are encouraged and, I would say, excited about what we do on the regional program. The regional program still -- I think we have -- it moves around five to seven drill rigs, I think, maybe even more than that on it. And I think be on the lookout towards the end of September, beginning of October, for our exploration update. I think we'll have more fulsome information with regards to continuing progress with regards to the regional program.

That's helpful. I was just looking really broadly for some clarity on whether that was still something you guys were pursuing. So that's really helpful.

Let me just give -- the fact that we don't put out necessarily information on a quarterly basis on the regional program does not take away from how important the regional program is to this company. And Mike and the team continue to do fantastic work. As I've said in the past, with regards to the work that we're doing in the region, it's not like we're not hitting. We are. It's making sure that we continue to get the best return on the drill bit and our regional program. The regional program still remains a priority to this company, a significant priority to this company. And so we continue to spend a significant amount of time and effort on our regional exploration program in the Curaçá Valley. So there are no bones about it, and I can't emphasize it enough, that the regional program is important to us. And we're not moving away from that at all.

The next question comes from Orest Wowkodaw, with Scotiabank.

I'm interested in your comments about sort of looking at the shaft extension project at Pilar. And just wondering whether that could include a scope up of throughput; i.e., are you considering making that a bigger capacity shaft at this point?

You're really good at reading through the lines there, Orest. Yes. I mean, look, when you're now hitting the numbers that we're hitting in the deepening projects. When we released and talked to the market last year, we've talked about what the size of the project was. You have seen that [indiscernible] inferred mineralization. So we've gone a long way to converting a lot of that inferred mineralization already into measured and indicated. And I don't think any of us anticipated that we now see the ore body getting larger and higher grade to depth. And so fortunately, for us as a team, we are able to do this sooner rather than later, to give Anthea and her team in that time to evaluate the opportunity now to try to sink the shaft of how we can optimize that shaft. And certainly, there are significant, we see, value opportunities in looking at a potentially wider and deeper shaft than previously thought.

Can you remind us what the daily throughput capacity was in the existing plan, and perhaps an idea of how much that you're thinking that could go bigger?

So the existing plan was between about 800,000 and 1.2 million tonnes. Right now, Orest, I can't give you the exact capacity of where we think it could go to. But there are other intrinsic value-adds that the shaft can bring in, both with regards to the movement of people and the movement of waste that previously were thought to have to go through the ramp. And so while we do anticipate potentially some increase in production, there are other value-enhancing opportunities that we've seen now with the shaft that the previous share limited us on in terms of transportation of materials, people and waste that previously have been looked at being brought up the ramp. So I think you can look to somewhat of an increase in production. But I think where we see big opportunities is a decrease in operating costs as well.

And do you have an expected time line on when you expect to sort of complete that analysis to firm up the plans?

Yes. We'll have it done later this year. Look, we're looking to break ground on the shaft in -- well, starting work in September, in terms of some of the [sloes] and the groundwork that needs to be done with shelf sinking starting early next year. So as we're moving forward with that, as you can imagine, there's a lot of optimization we're paying on right now.

And then just a final question. I realize the study is not released yet on Boa. But could you at least potentially give us an idea of scale in terms of where -- sort of what you're thinking ballpark from, say, a tonnes-per-day type of number?

Well, as I will reiterate, again, I do not look good in orange. And so orange jumpsuits aren't my favorite. So it would be a significant forward-looking statement to be able to give you that. I think what we can say at the moment, is as the work is coming together, we are pleasantly surprised with changes in the resource, changes in the reserve and those types of things. So unfortunately, I cannot get into that just yet.

The next question comes from Stefan Ioannou with Cormark Securities.

Great quarter. And Orest kind of got my question on the shaft, but just maybe just take it one step further? Just given what you're seeing in the deepening extension zone -- I mean, you mentioned sort of reconsidering the size of it -- are you pretty comfortable with the anticipated location, or may that change, too just, again, in terms of how long it's going to take to nail down exactly what you want to do with it?

You must have been at the board meeting yesterday. We are very comfortable with the location of the shaft. The shaft in its current location is on the side of the ore body. And so yes, we're still very, very happy that the location of shaft helps us with regards to accessing the ore body in the most efficient way possible. So there's no -- we don't have any issues with regards to moving our shaft around or anything like that. In fact, we've just completed the drill test work with regards to the shaft layout. That hole went down to over 1,400, 1,500 meters. The feedback we received is excellent rock conditions. So everybody is geared that now to start the surface silverworks in order to start looking at erecting the headgear so that we can start moving forward with the shaft sinking.

And then I just [indiscernible]. Can you just maybe give us an update on some of the ore sorting efforts that you were working on pretty hard previously? Like is that just sort of chugging along in the background? Or where are you at with that work?

Good question. We are. We have been doing some test work with regards to the innate deposits through that system. And we are encouraged by the results that we've seen there. That was one of the last ore bodies that we hadn't tested with regards to it. So now, as we continue to move forward, we are looking at ways -- what is the best way to optimize the usage of ore sorting? And this is something that we have to continue to reiterate to the marketplace, a company like us, where we continue to see opportunities in a number of different areas. Utilization of, for instance, all sorting within that is all related to what is the highest return on invested capital for our shareholders. And that sounds a little bit cryptic. But as we continue to develop, particularly the Vermelhos District -- and as you know, between the Siriema, the N8/N9 deposits from Vermelhos itself, the self-extension that is now starting to morph into what we call UG 3, we are seeing significant opportunities in terms of how we stage or how we bring in each deposit into production and utilize that ore sorting technology. So we continue to work on it, we continue to optimize it. And as we continue to do that, our production plans with regards to how we optimize it changes the ramp. Because for us, as you know, the best thing to do going forward is to get the highest upgrade that we can at the lowest losses. And so the different deposits have solid differences between them, depending on the variability of ore and grade. And so we continue to work through that in terms of that. But on an overall basis, ore-sorting technology will be implemented into our company over the course of the next 12 to 18 months. And it will be installed up in the Vermelhos District initially, and we will grow that operation in order to optimize the maximum amount of material we can from the various deposits that we have available to us of that.

The next question comes from Bryce Adams with CIBC.

Thanks for the taking the questions. I have two. First on the Boa update in a few weeks or in the next month, will that include the results of the updated feasibility? Or it's an update with discussions around the trade-offs and the progress made so far? I just want to be crystal clear on that. I got a little confused by the press release.

Yes, no worries, Bryce. So what it is -- and just a bit of background -- when we look to update the feasibility study on Boa, we saw a number of areas that we could optimize the study. And so those are being run through. And they have had, in terms of optimization, some significant changes in terms of how that operation looks in terms of its production, et cetera. So with regards to what we've released initially in the press release, will be related to all of that new information. And then obviously, 45 days after that, we will be releasing the updated technical report reflecting those changes. So with respect to what you're seeking in terms of a comparison, we'll try and provide as much of that as we can compared to the previous study. But it will be a full release, as you would normally expect, in terms of news of providing as much detail as we can on the results of the study.

Second question is another clarifying one, and it's around the grades at MCSA. There's a comment in there saying we should expect lower grades in the second half and that those grades would revert to the guidance of 1.75%. Is that the full year? You're saying that the full year grade should average up to 1.75, or the second half would be 1.75?

I think the second half will be close to 1.75. As you know, we have had positive grade reconciliation during the year from some of the stopes we've been mining. The mining sequence was moved around due to some development issues that we had. And so we mine some stopes that were going to be mined in the latter part of the year first before that, and we've got positive reconciliation due to grade. As we continue to move forward, though, as we've highlighted, we have this engineering optimization study. We have availability and starting to identify areas in the upper levels of the mine that were previously thought to be sterilized but have significant rate. And we'll bring those in as and when the team feel comfortable to continue to mine them. I think the best thing we can tell you right now is the second half year grades will be closer to what we mined at the beginning of the year, what we guided at the beginning of the year.

[Operator Instructions] The next question comes from Dalton Baretto of Canaccord.

My first question, just very simply -- do you still expect to put out a 43-101 this year?

No.

Can you give anything more?

So let's talk about 43-101. So 43-101 and the requirements of 43-101 are twofold. Number one, when you are a new publicly listed company on the main [indiscernible] you are required, I believe -- and Makko can confirm this -- over the first three to four years, to put out a new technical report or 43-101 technical report, on an annualized basis. Thereafter, you are required to put out a technical report or an update if you have a material change to your operations. So if you look at our company right now, and as we have continued to progress here, we do not anticipate being required to put out a new 43-101 on the Curaçá Valley project at the end of this year. We will be putting out a new technical report, obviously, on Boa. And we do not anticipate having to put out a new technical report on NX Gold. So what we will be doing is, like our peers in the industry, we will be moving to guidance. And right now, we're evaluating what sort of guidance we will be providing, anticipating right now something in the order of a 3-year forward guidance process. Ideally, we would like to be able to provide the market with more detailed guidance and longer guidance, but we need to continue to work to make sure that any guidance we do beyond the 3-year period is achievable and is workable. As you know, we are a fairly dynamic company in terms of how we continue to move towards fully utilizing the plant at MCSA. And so obviously, we want to make sure that we are being realistic with regards to any guidance that we can provide to the marketplace.

And so would you put that out, then, early next year? Or are you still looking at the same time frame, kind of late November-ish?

I think right now, the best I can give you as early next year. But we reserve the right to adjust that to later this year.

Second one is just on your balance sheet and kind of where it stands right now. It's in a great position, as you said. When you look at the Company going forward, as you look at your internal ROIC calculations, is there an optimal debt level that's assumed that you'd like to see?

I'm going to give it over to Wayne to answer that. He's smarter than me.

Hey, Dalton. I think Noel and I and David would have made it pretty clear that we run the business -- we've been in this business a long time, and we're all quite alert to leverage. And so I think when we look at it, you're never going to see us take on a significant amount of debt. I think we would look to be more creative. And I think the NX stream is an example of that creativity in creating liquidity for growth projects in a very effective manner. But as regards to an ideal depth level -- I mean, there's so many factors that come into that, right? I mean, I think you have to look at the market and the outlook for the medium to long-term outlook for the commodities at that point in time and decide what we feel is a comfortable number. I think it's fair to say we are very underleveraged right now. But having said that, we're cognizant that we've got some significant growth projects here on the horizon. And as soon as we have a better understanding of what that profile is over the next two to three years, we'll look to put the appropriate capital structure to do that. But we'll always be very cautious as a team.

Yes, let me add to that a little bit. Yes, let me add to that. Obviously, as one of the lowest cost producers of copper in the world, we can carry a higher level of leverage than some of our peers that are high cost producers. And so when we think about the ROIC basis -- and we don't just use our internal rules, we're using Bloomberg -- our shareholders are pretty -- our key shareholders follow this very closely. We're not afraid of issuing equity, we're not afraid of borrowing money. But you have to use it the projects that can justify the ROIC, that can generate that high level of return. Our criticisms of the mining industry in the past is people pursue projects for growth, and nobody seems to do the math of how much equity you're pouring out or how much debt leverage you're putting onto your company. And then when metal prices turn down, they get themselves into deep trouble. So we know, given our cost structure, we can support a fair amount of debt. We know -- and we'll be fine. But the issue is, what are the range of opportunities in front of you? How can you exploit them and still maintain that ROIC discipline? Because over time, companies who have the ROIC discipline get rewarded by trading at higher multiples and having stronger shareholder support.

Just maybe one last one for me. This one's on the PGMs in the Curaçá Valley. It doesn't look like they're associated with kind of the higher-grade, top-rating [steps]. Where do we stand here in terms of our understanding?

So Dalton, it's not necessarily true. I think we're still at the learning stage with regards to that. There are certainly -- we do see mineralization. In the last news release, when we did put out some of those holes, there seemed to be some re-styled mineralization associated in and around the deepening project and some of the lenses there. But we have also found PGMs on the edges and that border these lenses. I think right now, we are still very much in a learning position with regards to the PGM potential of the district. We have -- due to COVID, that program is behind schedule in terms of helping us, albeit that our own lab is now continuing to increase their ability to be able to do sampling internally. What is of interest to us is there have been some groups who buy concentrate, who have shown an interest in [indiscernible] with respect to potentially PGM, and we will continue to evaluate that as we continue to move forward here. But I think right now, the way I would look at it, I would not be including PGMs in any valuation equation with respect to the Company, but rather that it's a very, very interesting opportunity that we continue to try and get better clarity and learn about.

The next question comes from Grant Moenting, with Scotiabank.

I those high copper margins. That being said, I think Dalton kind of stole my question on the PGMs. But I was just wondering, maybe going a step further, if there is -- as you said, you're still in the learning process there. But maybe, is there also an even evolving nickel story going on in the background in the Curaçá Valley?

Yes. Nickel still continues to be what I would term the illusive fairy. We do have some interesting things that we're seeing with respect to nickel. But again, we can't put a finger in the dike, so to speak, to say, hey, we've got the Eureka moment on nickel. I think Mike and the team -- it still forms part of the regional program. We've commented on this before that we have been evaluating a couple of nickel opportunities, and we continue to evaluate those opportunities in the Valley. But nothing yet to be able to say, hey, we can stop putting a nickel stream in the plant and start recovering nickel. As much as Anthea wants to. So that's a bit like I can leave it at that right now.

Congrats.

This concludes the question-and-answer session. I would like to turn the conference back over to management for any closing remarks.

Thanks, operator. And again, we can't thank you all enough to come on the call and listen to us: all the analysts who cover our story, all of our shareholders who are on the call and all potential investors. We really appreciate all of your time and your efforts with regards to following our company. And we continued to look forward to a great second half of the year and continue to move forward in a very, very exciting copper market. Thanks again, everybody. And have a good day. Bye-bye.

This concludes today's conference call. You may disconnect your lines. Thank you for participating.