Hudbay Minerals Inc. (HBM) Q2 2022 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Hudbay Minerals Inc. Second Quarter 2022 Results Conference Call. [Operator Instructions] I would like to remind everyone that this conference call is being recorded today, August 09, 2022, at 8:30 A.M. Eastern Time. I would now turn the conference over to Candace Brule, Vice President, Investor Relations. Please go ahead.

Thank you, operator. Good morning, and welcome to Hudbay's 2022 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 available, and we encourage you to refer to it during this call. Our presenter today is Peter Kukielski, Hudbay's President and Chief Executive Officer; Accompanying Peter for the Q&A portion of the call will be Steve Douglas, our Senior Vice President and Chief Financial Officer; André Lauzon, our Senior Vice President and Chief Operating Officer; and Eugene Lee, our Senior Vice President, Corporate Development and Strategy. 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 Peter Kukielski. Peter?

Thank you, Candace. Good morning, everyone, and thanks for joining us. Over the quarter, we’ve seen a volatile commodity markets and continued inflationary pressures that have affected industries across the globe. At Hudbay, we continue to focus on operating efficiencies and effective risk management systems in order to mitigate these forces. As you’ve seen in today’s presentation, we had a strong operating quarter with unit operating costs within guidance expectations and our consolidated cash costs benefit from our commodity diversification with higher gold byproduct credits. As a result, we have reaffirmed our 2022 production and cost guidance. Beginning on Slide 3, we achieved a solid operational quarter setting us up for a strong second half of the year. Our consolidated copper production in the quarter was 25.7k tonnes in line with our expected quarterly cadence and 4% higher than in the first quarter. Consolidated gold production increased 9%, another record for Hudbay due to higher gold grades improve and higher outputs at New Britannia. Consolidated zinc production in the second quarter was 23% lower than the first quarter, primarily due to lower tonnes and grades at 777 as the mine approach the end of its life and the continued transition toward mining the gold lenses at Lalor with a corresponding decrease of production from the base metal zones. Consolidated cash costs decreased to $0.65 per pound of copper from $1.11 in the first quarter. This improvement was a result of higher zinc and gold byproduct credits and higher copper production. Consolidated sustaining cash costs decreased to $1.87 per pound in the second quarter, compared to $2.29 in the prior quarter, due to the same reasons affecting cash costs. Both measures were within the 2022 guidance ranges. Consolidated all-in sustaining cash costs decreased to $1.93 in the second quarter from $2.54 in the first quarter, due to the same reasons I've already mentioned, along with lower corporate selling and administrative expenses. Operating cash flow before change in noncash working capital was $124 million during the second quarter, reflecting a marked increase from the first quarter, primarily as a result of an increase in noncash working capital, higher realized zinc metal prices and higher copper, gold and zinc sales volumes. Second quarter adjusted net earnings per share was $0.12 after adjusting for a noncash gain related to the revaluation of the environmental provision, and the specific asset impairment loss among other items. This compares to an adjusted net earnings per share of $0.02 in the first quarter. Second quarter adjusted EBITDA was $141 million, 28% higher than the previous quarter, primarily as a result of the same factors affecting operating cash flow. We exited the quarter with $259 million in cash as well as undrawn availability of nearly $365 million under our revolving credit facilities. We believe that our current liquidity combined with future cash flow from operations positions us well to weather the volatility in commodity prices experienced during the second quarter. I think it is important to note that as part of our risk management efforts, we enter into short-term rotational [ph] period hedges to manage provisional pricing adjustments on our concentrate sales. This resulted in our realized prices closely matching the spot prices in any given period and eliminates the risk of pricing adjustments post quarter. Turning to Slide 4. Our Peru operations benefited from higher mill throughput and slightly higher grades compared to the first quarter. We produced approximately 21,000 tonnes of copper, 14,000 ounces of gold, over 584,000 ounces of silver, and 390 tonnes of molybdenum. Production of all metals was higher than the first quarter. As previously disclosed, full year production in Peru is expected to benefit from higher grades in the fourth quarter of 2022. As such, full year production of all metals remains on track to achieve guidance ranges for 2022. Total ore mine declined slightly quarter-over-quarter due to higher amounts of waste being mined. Ore mine from Pampacancha increased in the second quarter as mining rates in the pit return to normal productivity levels following heavy rains and delays in the water management system earlier in the year. Ore mills during the second quarter was higher compared to the previous quarter, and copper gold and silver grades also increased. Second quarter combined unit operating costs in Peru were within the guidance range at $12.02 per tonne, lower than the first quarter due to lower milling costs and higher throughput. Peru's cash costs in the second quarter were $1.82 per pound of copper higher than the previous quarter, primarily due to higher mining and general and administrative costs and lower byproduct credits, partially offset by lower milling costs. Cash costs are expected to decline with higher expected copper production and contributions from precious metal byproduct credits in the fourth quarter. However, full year cash costs are expected to trend towards the upper end of the 2022 guidance range, reflecting the current inflationary cost environment. Peru's sustaining cash cost increased compared to the first quarter mainly due to the same factors affecting cash costs and slightly higher sustaining capital expenditures. Moving on to Manitoba on Slide 5. But before getting into the quarterly results, I'd like to acknowledge the team in Flin Flon and their efforts over the 18 years of steady operations at the 777 mine. Many of our workers come from multi generational families of Hudbay employees over our 90 years of continuous operations in Flin Flon. Since our discovery in 1915, Hudbay has developed and operated 29 mines in the Flin Flon Snow Lake Greenstone Belt, and we will continue to evaluate future exploration programs in the area while we ramp up production at our operations in Snow Lake. The last ore was hoisted at the 777 shafts in June the 17th and closure activities to safely decommission the mine and place the Flin Flon concentrator on care and maintenance are well underway. Hudbay employees and equipment have been transitioned from 777 to Lalor to support Lalor's ramp up to 5,300 tonnes per day by the end of the year. Our sincerest thanks goes to everyone in Flin Flon for their hard work over the life of the 777 mine and for contributing to the success of the entire Flin Flon operation. During the second quarter, the Manitoba operations produced nearly 45,000 ounces of gold, over 17,000 tonnes of zinc, 5,000 tonnes of copper and 281,000 ounces of silver. Gold and silver production increased by 4% and 1%, respectively, while copper and zinc production decreased by approximately 14% and 23%, respectively, compared to the first quarter. Precious metals production increased due to higher throughput recoveries at the New Britannia Mill, while copper and zinc production declined due to lower grades at Lalor and 777. Full year production of all metals in Manitoba are on track to achieve guidance ranges for 2022. Ore mines at Lalor increased by 7% in the second quarter, while production at 777 decreased as the mine approach closure in June, resulting in an overall 1% decline in total ore mined in Manitoba compared to the first quarter. Mined zinc and copper grades were lower compared to the first quarter, but in line with the mine plan, while precious metal grades remained relatively constant. The combined Snow Lake mills processed 2% more ore in second quarter compared to the previous quarter, tracking the increase in Lalor's production over the same period. The New Britannia mill achieved higher than targeted throughput in the second quarter, averaging approximately 1,590 tonnes per day, due to a number of improvement initiatives aimed at increasing throughput and further improving recoveries. With the inclusion of doré to gold and silver recoveries at the new Britannia Mill have also improved significantly in relation to previous quarters. Stall mill recoveries were consistent with the metallurgical model for the head grades delivered. Manitoba combined units operating costs decreased 5% compared to the previous quarter, mainly due to lower costs at 777 as the mine approach closure, partially offset by higher inflationary cost pressures for both commodities fuel and Lalor contractor costs. Looking ahead to the second half of 2022, we expect combined units operating costs to increase due to ongoing inflationary cost pressures and the removal of the lower cost Flin Flon operations. As such, we expect the full year combined unit costs to trend towards the upper end of the 2022 guidance range. Gold cash cost net of byproduct credits in the second quarter was negative $207 per ounce, which was lower than the first quarter and well below the 2022 guidance range as the operation has benefited from higher zinc byproduct credits, lower operating costs and higher gold production. On Slide 7, we begin our discussion of the progress we've made on our organic growth pipeline. The most advanced and exciting growth project is our Copper World Complex in Arizona. In June, we released the results of the preliminary economic assessment for the Copper World Complex, which incorporates the recently discovered Copper World deposits along with the Rosemont deposit that has been renamed to the East deposit. The PEA outlined a 2 Phase mine plan. Phase 1 reflects a standalone operation on private land and patented mining claims over a 16 year mine life with average annual copper production of approximately 86,000 tonnes from mined resources. Phase 1 cash costs and sustaining cash costs are $1.15 and $1.44 per pound of copper, respectively. Phase 1 generates robust economics with an after tax net present value of $741 million at a 10% discount rate and an internal rate of return of 17% using a copper price of $3.50. Phase 2 expands mining activities on the federal land and extends the mine life to 44 years, with average annual copper production of approximately 100,000 tonnes from mine resources. Cash costs and sustaining cash costs for Phase 2 are $1.11 and $1.42 per pound of copper, respectively. The second phase adds $555 million to the after tax NPV and generates an IRR of 49%. The projected after tax NPV at the time of sanction would be $2.8 billion, which demonstrates a significant upside opportunity the second phase brings to the project. From an ESG perspective, there are many benefits of Copper World,. It will support you as copper supply through onshore production of copper cathode expected to be sold entirely to domestic customers. The production of an onsite copper cathode reduces total energy consumption and eliminates greenhouse gas and sulfur emissions associated with overseas shipping and processing. We are also targeting further greenhouse gas reductions as part of our corporate reduction targets to align with the global 2030 climate change goals. We are advancing a pre-feasibility study for Phase 1 of Copper World during the second half of 2022, which will focus on converting the remaining inferred mineral resources to measured and indicated and evaluating many of the project optimization and upside opportunities. The project and capital optimization opportunities will examine the modular nature of the processing complex at Copper World, which can be flexed based on market conditions and funding strategy. Specifically, the prefeasibility study will contemplate multiple options for developing the concentrate leach facility and upfront capital. The permitting process for the couple of complex is expected to require state and local permits for Phase 1 and federal permits for Phase 2. We recently received approval from the Arizona State Mine Inspector for our amended mine land reclamation plan for the copper world complex. The MLRP was initially approved in October 2021 and was subsequently amended to reflect a larger private land project footprint. We expect to submit applications for the other key state level permits for Phase 1 of the Copper World complex in the second half of 2022. In June, we released our 19th annual sustainability report with highlights shown on Slide 8. We are truly proud of this report, which provides transparency and progress on key accomplishments and initiatives in 2021, along with goals for the upcoming year in the long-term. We believe global demand for the metals that we mine will continue to rise alongside the need for green technology that will play an essential role in meeting the challenge of arresting [ph] climate change. We're committed to a reduced greenhouse gas emissions future and we are currently working towards specific emissions reduction targets to align with the global 2030 and 2050 climate change goals. Last year, to better understand the nature of our greenhouse gas footprint and the best options for approaching and achieving sustainable emissions reductions, we began working on a 10-year greenhouse gas reduction roadmap. This roadmap will identify key sources of emissions, including Scope 3 emissions, and the nature of the changes, operational technical, that will be required to make full or significant impacts in each source area. We are also a proud member of the Mining Association of Canada and implemented towards sustainable mining or TSM protocols. These protocols are increasingly being recognized globally and adopted as best-in-class. Our goal is to maintain a score of A or higher for all protocols. And in 2021 we achieved a rating of AA across all TSM tailings management protocol indicators in both Manitoba and Peru. We also saw a 7% decrease in energy intensity per tonne of ore processed, and over 50% of our indirect energy consumption is from renewable sources. Slide 9 highlights the progress we've made on several of our exploration growth initiatives. In Peru, we control a large contiguous block of mineral rights with a potential to host mineral deposits within trucking distance of the Constancia processing facility. These mineral rights include the past producing Caballito property, and the highly prospective Maria Reyna property. Discussions with the community of Uchucarcco related to a surface rights exploration agreement on the Maria Reyna and Caballito properties are progressing well. We expect to finalize an agreement in the coming weeks before commencing field exploration activities. We are also continuing to compile results from our recent drilling at Llaguen copper porphyry target in northern Peru, and remain on track to complete an initial inferred mineral resource estimate in the third quarter of 2022. In Snow Lake, we have been actively conducting drilling activities in the Snow Lake area with success in identifying extensions of the copper gold rich feeder zone at the 1901 deposit and compiling results from ongoing infill drilling at Lalor. And in Nevada, an IP ground survey will be conducted in the second half of 2022 on the Mason Valley properties, which are located on private land claims near the Mason project. This work in combination with a reinterpretation of geological data from past operating mines and previous exploration data will be used to finalize the drill plan to test high grade scar and targets in the future. I'd like to conclude here on Slide 10. We have delivered many of the catalysts which we laid out at the beginning of the year. And we are on track to continue to accomplish our corporate objectives throughout the balance of 2022. In Manitoba, we are advancing our Snow Lake gold strategy with plans to achieve 5,300 tonnes per day at Lalor, as I touched on earlier. We are also implementing a recovery improvement program at the Stall mill this year to increase copper and gold recoveries. We'll continue regional drilling in Manitoba to explore for base metal and gold upside and continue to compile results from ongoing infill drilling programs at Lalor and 1901. In Peru, we already touched on our exploration initiatives, and we are also continuing to advance our recovery uplift in ore sorting programs at Constantia. In the United States, in addition to advancing the pre-feasibility study and state level permit applications at Copper World, we are continuing our infill drilling program with three drill rigs turning at site. In summary, we are proud of our operating performance to date, which positions us well to reaffirm our full year production and cost guidance for 2022. And we'll continue to focus on generating free cash flow while prudently advancing our high quality pipeline of organic growth opportunities to deliver value for all of our stakeholders. And with that, we are happy to take your questions.

[Operator Instructions] Our first question comes from Jackie Przybylowski of BMO Capital Markets. Please go ahead.

Thanks. [Indiscernible] first. This is exciting. I guess, congrats on the quarter. Maybe I'll ask Peter, if you can give us some additional color on why your costs on a unit basis were so good in the Manitoba division. Is that related to the closure of 777? Or can we expect to see strong cost performance going forward in the rest of the year as well? Thanks.

Hi, Jackie. Thanks very much for that. When we issued our Manitoba unit cost guidance for 2022, we assumed an approximately 5% increase in consumables which is why we're tracking in line with our projections albeit at the low end. So 777 was a lower cost mine. So the combined unit operating costs will increase in the second half as a result of removing 777 from the calculation. Also, we're seeing continued increases in the prices of materials and consumables such as fuel reagents, grinding media and contractor costs. So that's why we say that we will sort of -- we expect to be at the higher end of the -- of guidance at the -- in the second half.

And should we expect -- I know you're expecting to see the full closure or at least the full putting on hold of 777 in September, should we expect any costs associated with that on a one-time basis?

Yes. So Jackie, we disclosed an additional $25 million of costs expected this year starting in the second quarter relating to one-time costs for closure of the 777 mine and the zinc plant as well as to transition the Flin Flon mill and tailings facility to care and maintenance. We expect the majority of these costs will be incurred in the second half of the year.

Okay. And most of that, I guess, will be in the third quarter, or is it sort of evenly split?

Most of it will be in the third quarter.

Okay. And in terms of Arizona, if I could just maybe ask on permitting. I know, earlier this year, the appeals court made a decision, which didn't necessarily go in your favor on Rosemont. Is there a strategy to attempt to re-permit Rosemont at this point? Or how does that fit in with the plans for Copper World and the permitting there? Is Rosemont like sort of on hold until Copper World, is that?

I guess, I could give you a very long answer or a fairly short answer. I'm going to give you the fairly short answer, and then I'm going to ask André to provide a little bit of color. But in essence, what we've done is Rosemont, as it was previously configured has now been included into Copper World and we've renamed it East, the East pit. What we've done is the private land portion of Rosemont is included in Phase 1 of Copper World, and the federal land portion of Rosemont is included in Phase 2. So we will not be looking to read permit Rosemont as such, but we will be looking to sort of re-permit Phase 2 of the Copper World Complex. André' any further light that you might have to offer? André Lauzon: I think you covered it.

Okay.

Okay. Okay. So the original applications are not going to be resubmitted, you're just going ahead with Copper World plan as you've laid out. Okay. No, that's helpful. That's it for me. Thank you.

Thanks, Jackie.

Our next question comes from Ralph Profiti of Eight Capital. Please go ahead.

Good morning. Thanks for taking my questions. Peter, I want to get a little bit more color on the path forward at Maria Reyna and on Caballito. Once the community engagement agreements are in place, the drill permits happened commensurately. And just in the context of the $25 million that's being spent in 2022, do you have sort of early indications on how much you'll be spending on exploration in Peru in terms of, perhaps meters drilled or what the drill program may look like, once those permitting and engagement agreements are in place?

Yes, thanks. Thanks, Ralph. It's really hard to say exactly how things will turn out. So we expect to conclude an agreement with the community of Uchucarcco very, very shortly. And once we have concluded that agreement with Uchucarcco, of course, we will start surface investigations immediately. The question specifically with respect to drilling is one that needs we need to concentrate a little bit further and we'll have much more detail available from that once we've concluded the agreements. But at this point, it's very difficult for me to provide you with any specific guidance.

Okay, that's fair. Let me switch to 1901 and we're still quite a ways from the March 2023 reserve and resource update. But just wondering if the copper gold feeder zones are you going to be able to get that into say an inferred or measured in indicated category by the time the next reserve update comes?

André -- I would ask André to respond to that. But I don't think so, Ralph. I don't think that. It's -- 1901 still is in the mine plan for 2026. But more than that, I don't have much more information at this point.

Understood. Thank you.

Our next question comes from Orest Wowkodaw with Scotiabank. Please go ahead.

Hi, good morning. Nice to see the positive free cash flow generation here in Q2. I'm wondering given the lower commodity price environment if you're at all tempted to bring down your expected CapEx investments this year, next year, and whether there's some flexibility there to try to improve free cash flow generation.

Good morning, Orest and thanks for that. Look, we are extremely conscious of the current macro environment and the evolution of copper price. So we've looked really, really hard at all of our spending. And basically, we're truncating discretionary spending. So yes, we will, we will decrease fairly significantly our cash spent over the course of the remaining course of the year. We think it's a good thing to do in any case, in this uncertain environment. But we're not going to do so in a manner that compromises the future ahead of us, but we will be reducing discretionary costs for sure.

Okay. And I realize it's early in the year, but any idea kind of ballpark, what you're targeting for CapEx spend in 2023?

Early in the year we're going -- actually spent yesterday with contemplating [indiscernible], so it's early in the year for that already.

Okay. Shifting gears to Manitoba -- Steve, I don't know if you had a comment.

I was going to say we're not going to frighten you don't worry.

Okay. Just what -- also curious about Manitoba. So with 777 closing now and kind of off the books like when I look at Manitoba operating costs, they've been running in the order of about $115 million to $120 million a quarter. Where do you see that going with 777 and Flin Flon and smelter all closed? Like, I'm just wondering what kind of a rough ballpark run rate might be for operating costs now on a, call it millions of dollar basis in Manitoba. André Lauzon: So, Orest, this is André. So we'll update that with the -- in the coming year with the annual reserves. We're really fine tuning the costs right now. We're just finalizing the transition of our CFO and getting a firm handle on all of our operating and holding costs. But like Peter mentioned on the previous call, or question it was smaller is a little bit higher cost than 777. And we expect to see that higher. But we'll update that later on when we update our reserve statements.

Okay.

[Indiscernible] a little bit of an increase -- a little bit of a sort of a bump initially as we go to transfer activities in which it's stabilized next year as well.

Okay. Thanks for the color.

Our next question comes from Lawson Winder of Bank of America Securities. Please go ahead.

Hi, Peter. Good morning and thank you for the update. I wanted to ask about the Copper World CapEx and within the context of the sulfide leaching approach that you've selected, which is basically the lowest CapEx option, which would be no heat, no pressure. And then when I look around the industry, I mean, that seems to be more the exception than the rule. And I'd like to maybe get kind of your thoughts on the sensitivity around CapEx, if you do end up doing one of the more expensive options like -- perhaps like high pressure, low temperature, high temperature, low pressure, or, both high pressure and high temperature, and then with the trade-offs are there around recoveries. Thanks very much.

Sure. Morning, Lawson, and thanks for that. Look, I guess the first comment that I'd make is, you shouldn't get stuck on sulfide leaching, because it's simply a plug and play option module that's available to us. That was included in the PEA, because it's very, very significant ESG potential. It is something that we contemplated it, it certainly does help the IRR of the project. But it also -- it certainly it does not support CapEx. In fact, if you were to unplug it, you would reduce the CapEx by let's say $400 million to $500 million. So it's something that can be added initially concurrently with everything else or it could be deferred later on. Now to your point about whether it's atmospheric leaching or it's medium pressure leaching or something like that, we have we included atmospheric leaching in the PEA, which remember is a very early stage scoping study. But during the PFS, we will more closely examine the alternatives that are available to us. I would also offer that sulfa leaching is not new to us. We’ve been doing it in Flin Flon for a very, very long time. And many other mines have used sulfide leaching processes. Some, I would agree are medium pressure, others are atmospheric, but we have plenty time ahead of us in which to study the options and to alter and to optimize the flow sheet. So, I just -- I wouldn't get too stuck on the concept of sulfide leaching at this point, as I said, it is a plug and play module that we can include or not.

Okay. Thanks for that color. And just one sort of concept you introduced there that I hadn't really thought of was the potential sale of concentrate for the time being. Now how do you think about the timing of that like selling a concentrate versus doing the concentrate leaching approach, and especially vis-à-vis your ESG goals?

We could very easily do that. It's a question of just balancing trading off the various options. I think on the one hand, we can produce concentrate, no problem, because we will have a traditional sulfide concentrator. If we sell concentrate, we incur the costs associated with shipping that concentrate to smelters. We also incur or cause some of the emissions associated with the transportation. But it's certainly an option that's available to us. So as I said, we could initially start producing concentrate and defer sulfide leaching to a number of years later, if that's what we chose to do.

Okay. Thank you very much for your color on that, Peter. Have a great day.

You too.

Our next question comes from Greg Barnes of TD Securities. Please go ahead.

Thank you, Peter. I just want to touch on the political situation in Peru. It sounds pretty volatile. In your -- from what you're seeing, is it having any impact on the mining industry? Is there any suggestions from the current government about changing royalties or mining taxes? I've heard nothing, but I'm just obviously not that close to what's going on the ground and Peru, maybe you have some color?

Yes, we have. It's been all quiet on the political front for us and I -- I was actually in Peru, up at Constantia last -- just over a month ago. I would say as I spent time with the workforce up at Constancia, and the team in Lima, politics in Peru actually didn't come up once. So what I -- we read a lot about it from the outside. On the inside, I'm sure people worry about it, because there's a lot of uncertainty. But there has been no mention of changes to the fiscal regime. I think President Castillo did not accept the resignation of his first minister last week, this week -- last week. So he's busy dealing with his own constituents, his own cabinet and congress. I think that, we will continue to see this type of volatility and [indiscernible] behavior in the political spectrum for a while, but it's not effective. It's not impacting our operations at all.

And I assume that still has other issues to worry about the race and taxes and royalties and impact in the mining industry. He's got his own survival to concern themselves, I suppose.

I think you're probably right about that, Greg.

Okay, thank you.

You’re welcome.

[Operator Instructions] Our next question comes from Karl Blunden of Goldman Sachs. Please go ahead.

Hi, good morning. Congrats on your reaffirm cost guidance, given the inflation that we're seeing in the industry. I wanted to ask a little bit more about that when you look at current prices for consumables and energy, those have come down a little bit. Are they still running toward the high-end of your range of assumptions or now close to the midpoint and you're just more playing catch up with what's transpired through August this year.

Good morning, Karl, and thanks for that. Look, I think that we anticipated some increases earlier on in the year and we incorporated some of those increases into our guidance. But we have seen movement of fuel for example, the head of what we included in guidance and energy in Peru, [indiscernible] grinding media, which is very closely allied with the cost of both steel and molybdenum. So in Peru, of course, there is a stabilization mechanism for fuel prices. So what that tends to do is it tends to delay the effects of fuel price. So as fuel prices go up, they are not felt so markedly by the population. But as they come down, you still start seeing the sort of the delayed effect of those increases. So, I think that we still expect to see some increases of fuel costs in Peru. While those, obviously, less fuel dependence in Manitoba, but we have seen energy prices increase. So yes, in general, we have seen some of those costs increase above what we allowed for in our guidance.

Very helpful. Just looking further out, and the growth options you have, as you see the volatility that we've experienced recently in pricing, both on the copper side and then energy costs. Is this influencing how you think about potentially hedging costs or copper prices going forward as you get into a growth phase here?

Yes, We - as I mentioned in my -- in the discussion earlier on, we do quotation or period hedging, and that's all the hedging we do. We believe that our investors would like full exposure to commodity prices, and we offer that to them. We don't hedge. Thank you very much.

You’re welcome.

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

Thank you, operator and thank you, everyone for participating. If you have any further questions, please feel free to reach out to our Investor Relations team. Thank you. You may disconnect your lines.