First Quantum Minerals Ltd. (FM) Q2 2026 Earnings Call Transcript

Good morning and welcome everyone to the first Quantum Minerals second quarter 2026 results conference call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star key followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. At this time, I would like to turn the conference over to Benita Toe, Director, Investor Relations and Capital Markets. Please go ahead.

Thank you, Operator, and thank you everyone for joining us today to discuss our second quarter results. During the call, we will be making forward-looking statements, and as such, I encourage you to read the cautionary notes that accompany this presentation, our MD&A, and the related news release. As a reminder, the presentation is available on our website and that all dollar references are in U.S. dollars unless otherwise noted. On today's call are Tristan Paschal, our Chief Executive Officer, Ryan McWilliam, our Chief Financial Officer, and Rudy Battenhorst, our Chief Operating Officer. And with that, I will turn the call over to Tristan for opening remarks.

Thank you, Benita, and thank you, everybody, for joining us on the call today. It's been a very busy first half of the year for First Quantum and in the broader markets. So I'm pleased to have this opportunity to discuss these updates alongside our second quarter results. During the second quarter, we continue to deliver steady operations and it was pleasing that the S3 circuit at Constantin continue to operate above expectations, which Rudy will discuss later in the call. We remain well positioned for firmer production in the second half of the year. We've continued solid performance from S3. The bottom there can work at Sentinel and the processing of stockpiled ore at Cobra Palamore. With our hedging program concluded, as Ryan will discuss later, we are once again fully exposed to spot copper prices. Alongside stronger production, this will position the company for improved free cash flow generation at current copper prices. We remain well positioned in terms of our cash flow, liquidity and balance sheet to cope with ongoing market volatility, even as we continue our focus on cost management across the business. At Cobra Panama, we continue to work on the stockpile processing program during the quarter, with an acute focus on safety, equipment integrity, and operational stability. This measured approach allowed for the successful recommissioning of one of the site's three million trains, train three, in May, and the production of first concentrate in June, which is earlier than our third quarter target. I'm very pleased with this performance and I would like to thank the team at site, including the approximate 1,000 skilled Panamanians who have rejoined or newly joined Cobra Panama. This achievement reflects their hard work and the effectiveness of the preservation and safe management program maintained over the past several years that enabled a high level of regimen and reliability across the operation. Following the successful recommissioning, The focus was on operational stabilisation, and I'm pleased to report that Train 3 achieved stable operations and a total of 2.1 million tonnes of oil was processed through the second quarter to produce approximately 3,200 tonnes of oil. Stockpile processing through Train 3 has performed well with both mechanical and operational performance tracking within expectations. The Panama now has approximately 3,000 people on site and we have restarted procurement amongst local Panamanian suppliers. Our activities to date continue to provide confidence in the team and in the asset. Environmental stewardship remains a core priority and the stockpile processing will mitigate environmental and operational risks associated with a prolonged on-site storage of mineralised materials. During Quarter 2, the remaining human trains, Train 1 and 2, along with the regrind and column areas, were undergoing inspection, repairs and preventative maintenance to support the next phase of the stockpile. So far, indications are that the extent of the repairs are similar to train 3 and the other concentrate column are successfully swapped over from milling train 3 to milling train 2 as part of the maintenance cycling strategy. The power station and port continue to operate well and we expect our first concentrate shipment in August. Concentrate grades will be lower while we continue inspection, repairs and preventative maintenance of the rebranded columns area. Due to the global shortage, there is strong demand for the concentrate. In addition, at the current processing rates and spot cash flow from Cobra Panama to be neutral to... Moving forward, we will remain focused on maintaining this conservatively measured approach in order to ensure the highest quality of operations. With an estimated 38 million tonnes of mineralised ore containing approximately 70,000 tonnes of recoverable copper, we anticipate there will be sufficient stockpile to support around 12 months of processing at current rates. Also in a quarter, the comprehensive audit of COVID Panama was published and is now available to the public on the Miranda Monte website. The audit process spanned approximately eight months and with thousands of documents, participation in interviews and support for numerous site inspections and field visits. This was undoubtedly the most extensive and rigorous independent review ever undertaken in COVID Panama and one of the most thorough independent audits of any mine globally. The audit concluded that Cobra Panama is a professionally managed and technically sound operation with a high degree of regulatory compliance, achieving an overall score of 87 points. Importantly, the reports and management process. As with any comprehensive review of this nature, the audit also identified areas where further improvements can be made. 361 out of 370 commitments were fulfilled, with seven areas being in partial compliance, but with no areas fundamentally absent. Improvements required in these areas are related primarily to long-term reforestation, biodiversity and restoration programs that are correctable and not considered acute environmental incidents. We welcome these findings as continuous improvement has always been a fundamental and a valuable opportunity. The audit is now being reviewed by a high-level ministerial commission led by the Ministers of Commerce and Industries, Economy and Finance and communicated publicly by government for evaluation of the audit findings and will provide an informed recommendation on the future of the mine. In the meantime, we remain focused on the safe execution of the stockpile processing program and we remain ready to engage constructively with the Government of Panama to achieve a fair and durable resolution. Additionally, we continue the outreach efforts in the workforce and she was pleasing to share that our recruitment initiatives to support the hiring of staff for preservation activities achieved over 50% participation from communities in the mine's local area of influence and the participation rate from women was a problem. Our educational program added over 500 students during the quarter and now supports over 4,000 students in Panama, while our entrepreneurial program has 1,000 graduates to date. We have also launched a new environmental education initiative which is expected to reach more than 50,000 students. Moving over to Zambia, I want to thank the team at Consantium for co-hosting the 2026 International Mining Rescue Competition, not only for Consantium and First Quantum, but also for Zambia, as it marked the first time an African nation has hosted this from 10 countries across four continents and tested participants under the real world. And we are proud to have played a role in bringing the global mining community together in Zambia towards improving safety performance. Down there, I am proud to share that 2026 marks a significant milestone for First Quantum as we celebrate 30 years of partnership, investment and shared growth. Over the past three decades, we have invested not only in world-class mining operations, but also in the people, communities, local supply, helping to create lasting value. Our success is closely linked to the success of the communities in which we operate and that belief can be a recent example the handle of infrastructure and learning materials valued at more than 12.9 million kwacha to several schools in Sulawesi, helping create better learning environments and ultimately give us the talent, dedication and ambition of Zambian. As we celebrate our 30-year milestone, we remain committed to operating safely, responsibly and transparently and continue to be a long-term partner. And I will now pass the call to Rudy to discuss our operational results.

Thank you, Tristan. Higher production at Sentinel and the commencement of stockpile or processing at Copper Panama led to a 4% quarter-over-quarter increase for total copper production of just over 100,000 tons in the second quarter. Copper sales totaled 93,300 tons, approximately 7,000 tons below production due to timing differences between sales and production. At Consanchi, copper production in the quarter was 44,000 tons, down approximately 1,000 tons from the previous quarter due to lower throughput as the S3 and mixed circuits underwent planned maintenance during the period. The S3 concentrator, however, delivered the highest monthly throughput in May since commissioning and operated above design capacity throughout the second quarter. This performance was driven by increased operating time, strong utilization and milling rates, which supported the processing of long-term, lower-grade stockpiles. S3 continues to take a high proportion of feed from surface stockpiles, which are tarnished and lower-grade than freshly mined ore. Copper production guidance for 2026 remains unchanged at 175,000 to 205,000 tons, whilst gold production guidance is 110,000 to 120,000 ounces. This will be supported by continued strong performance at S3. Additionally, while ore will continue to be predominantly sourced from low-grade stockpiles, Fresh ore from the southeast dome that is harder and higher in grade will be gradually introduced in the S3 circuit during the second half of this year. Also at CanSanchi, we opportunistically sold surplus sulfuric acid during the quarter. Through proactive management of higher acid-consuming oxide ore and acid inventories, we generated surplus acid available for third-party sales, totaling approximately 36,000 tons, and expect sales to continue into the third quarter. At Sentinel, copper production was 50,000 tons, an increase of 5,000 tons from the previous quarter. This increase was attributed to higher grades and recoveries offset by lower throughput, a result of the planned five-day total plant shutdown at Trident that was completed in June. We continue to effectively manage through bolt fatigue with ball mill 2 and expect to resolve the issue permanently during the annual plant maintenance downtime in 2027 with a replacement of a section of the third can and discharge end. Production guidance for 2026 remains unchanged at 190,000 to 220,000 tons of copper. Production is weighted towards the second half of the year with improving mill throughput and an improvement in grades as mining progresses within stage two of the pit. Enterprise produced just over 11,000 tons of nickel, a 9% decrease from the previous quarter, mainly due to the aforementioned total plant shutdown. Production guidance for 2026 has maintained at 30,000 to 40,000 tons of contained nickel. We are continuing to focus on improving ore quality and grade control through ongoing RC drilling while also refining mining practices, including reducing the ore bench heights to minimize dilution and enhance recovery. Ore grades at Enterprise are expected to be lower in the third quarter, but in line with a mine plan. The development of permanent ramps is underway to improve mining productivity, and the pit dewatering stage tank pad is scheduled to be handed over to our projects team in early July, after which mining activities will focus on increasing the ore footprint through lowering current cutbacks, sump development, and south wall mining in preparation for the oncoming rainy season. Lastly, looking at Gweld, copper production was 2,000 tons and gold production was 6,300 ounces, which includes output from reprocessed tailings through the CIL plant. Production guidance for 2026 remains approximately 7,000 tons of copper and 30,000 to 40,000 ounces of gold. The operation will continue processing sulfide copper ore plus gold-containing tailings through the CIL plant with intermittent stockpiled oxide gold ore treatment to support the most favorable transition to full oxide ore gold production. In summary, as Tristan noted, we delivered consistent operations in the second quarter, and we are set up well to deliver stronger copper production in the second half of the year. Thank you, and with that, I will turn the call over to Ryan for the financial review.

Thank you, Rudy. The copper price remained strong in the second quarter, trading between $5.50 and $6.40 per pound. This was due to tariff-related stockpiling in the U.S., a tight copper concentrate market, and sulfuric acid supply concerns. Continued strong demand meant global warehouse inventories declined significantly towards the end of the quarter, with a 62% drop in shiffy deliverable inventories quarter over quarter. Turning to our financial performance, revenue increased by 8% to $1.5 billion, driven by higher copper prices and increased sales. As Rudy noted, we opportunistically sold our surplus sulfuric acid, contributing around $12 million in revenue. EBITDA increased by 23% to $400 million, as stronger revenue more than offset the impact of higher fuel and contractor costs. It is also worth noting that EBITDA was impacted by hedge losses and P&SM costs at Cobra Panama. Both headwinds fall away for the second half of the year, with the hedge program now complete, and Cobra Panama stockpile processing underway, with first shipments expected in August. Excluding Cobra Panama, our copper C1 costs were $0.03 lower quarter over quarter, benefiting from improved Zambin production, which was partially offset by higher fuel costs and reduced gold by-product credits. Including Cobra Panama, C1 cash costs were $0.03 higher, with a $0.06 impact relating to elevated production costs from stockpile processing. As expected, the increase in fuel prices was a headwind on costs, along with the weakening gold price. Diesel prices through the quarter averaged $1.59 per litre, in contrast to the $0.91 per liter paid in Q1. With a two- to three-month lag in fuel deliveries, elevated fuel prices are expected to continue flowing through our cost base in the third quarter. While Q2 saw pockets of improved diesel availability and some easing from peak prices, recent developments in Russia and the Middle East have reintroduced volatility in global fuel markets. As a result of this unpredictability, we have left our C1 cash cost guidance unchanged. However, as disclosed last quarter, should current fuel, quacha, and gold prices persist, there is a roughly 25 cents upside risk to our cost guidance. Our capital guidance, which already includes Cobra Panama stockpile processing, also remains unchanged. We've incurred around $60 million for the Cobra Panama processing program to date. This is within the $250 million of required spend previously guided to. In the rest of the business, capital spending broadly aligns with expectations at the start of the year. Our hedge program for both copper and gold is now complete. We incurred hedge losses of $159 million for copper and $5 million for gold during the quarter. This program was put in place to provide greater cash flow certainty through the S3 project delivery period. With the strategic hedge book now fully settled, we have no further hedges in place, giving us full exposure to spot copper and gold prices going forward. As Tristan noted, our stronger production, expected in the second half of the year, with that stronger production, we are well set up for free cash flow generation at current copper prices. On the balance sheet, we are pleased to close out the Cobre Las Cruces and Traley transactions during the quarter. These sales reflect our disciplined approach to portfolio management and focus on our core strategic priorities. They're delivered again on disposal of $271 million, with the net proceeds deployed towards short-term debt. Net debt increased by $123 million to $5.4 billion. This reflected planned CapEx tax and interest outflows, partly offset by EBITDA generation and favorable working capital movements. We closed the quarter with a strong liquidity of about $2 billion, including $771 million in cash and $1.25 billion of undrawn revolver capacity. Overall, it was a solid financial quarter, with strong execution driving resilient margins. We're maintaining a disciplined approach to capital management, keeping balance sheet strength, liquidity, and a continued focus on deleveraging at the center of how we make decisions. Combined with our full-spot copper price exposure, this positions us well to navigate market volatility while continuing to advance our strategic priorities. With that, I'll hand the call back to Tristan.

Thank you, Ryan. On to our development projects. During the quarter, we were very pleased to publish a technical report for our La Granja project in Peru. The report provided an updated mineral resource containing an estimated 23 million tonnes of copper, 600 million ounces of silver and 6.7 million ounces of gold, which positions the project as the second largest greenfield copper resource globally. The report also included geological and metallurgical work that indicates that a significant portion of the Arctic mineralisation is structurally controlled and associated with high-grade copper zones. Based on work completed to date, we believe arsenic can be effectively managed by segregation, blending and through commercial offtake arrangements. And that, as a result, the mine can be developed as a large-scale open-pit operation with a conventional flotation flow sheet. It is still early days for LeBranha. However, the technical report underscores the project's potential to become a Tier 1 multi-generational mining operation. Our focus is now on advancing the permitting process and our key priorities include the progression of baseline environmental and social studies, continued stakeholder engagement and preparation for the detailed environmental impact assessment. At Taka Taka, we continue to progress work to de-wish the project. This includes the mining ESIA, which is expected later this year, following completion of the public consultation process. In parallel, ongoing water supply assessments are evaluating incremental supply opportunities that could provide greater flexibility. We are also finalising our application under Argentina's Rigging Investment Incentive Regime and intend to submit it once the ESIA approval and required water use concessions have been secured. As I noted earlier, it has been a busy first half of the year with our operations and development projects. However, our priorities remain very clear. First and foremost, the priority is to progress towards a durable resolution at Cobra Panama. Secondly, maintaining safe, lean and productive performance across our operations. And thirdly, strengthening the balance sheet to ensure the company is well positioned to support future growth in a disciplined manner. With that, operator, I am happy to open the line for questions, please.

Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. We ask that you please limit yourself to one question and one follow-up to allow everyone an opportunity to ask a question. We'll take our first question from Orest Waukadaw at Scotia Bank.

Hi, good morning. I'm hoping you could provide us an update on Cobra Panama, and I'm wondering specifically if there's any expectation on when you would expect the government to move in terms of the next steps of their audit review in terms of conclusion moving forward. And then secondly, I'm also curious if you can comment on the media report recently that spoke about Panama setting up a state mining company that was looking for interest in the mine. Thank you.

Hi, Aarhus. Thanks for the question. Sure. In terms of timing of the audits process and the recommendations coming out of the Ministerial Commission, our engagement with the Government of Panama has been focused on the preservation and safe management plans and more recently on the stockpile processing programs. The Ministerial Commission that was announced on the 14th of July has established a regular schedule of meetings. They've made public statements on their goal to produce results as soon as possible and that the recommendations around that need to be holistic, need to look through the technical report and the substantial amount of effort involved in the thousands of pages there. It also associated economic, environmental and legal implications of the audit report and around the mine. Boris, we remain ready to engage as the process advances and the government, but it will be the government that determines the next steps and timeline. We don't have a clear timeline as yet regarding the decision-making process, but we know that they're very focused on this topic. And now with all the facts in hand from the audit, we think they are moving into a decision-making phase. But for us, and while we await next steps from government, our focus is on executing the stockpile processing program safely and responsibly, preserving the environments at the site, working with the communities around it and ensuring the integrity of the assets at Cobra Panama. In terms of your second question around, yeah, we saw the article from Reuters. As you know, Orris, we don't comment on media speculation. As I said, the government of Panama had completed that audit and they formed the Ministerial Commission to review those results and make recommendations on the future of the mine. President Molino has been clear that decisions regarding the mine will be communicated by the government once that review is complete and not before. And until then, I would suggest any updates from unconcerned sources, just speculation.

We'll take our next question from Richard Garcitorina at Barclays.

Just to follow up on Cobray Panama, I guess in terms of the final audit, was there anything specific that surprised you, anything that you weren't expecting that may cause you to sort of change the plan going forward in terms of the prep work that you're doing ahead of a decision from the government?

Hi, Richard. Yes, thanks. Look, the audit overall was a very thorough process. We were very satisfied with the level of engagement from SGS, the independent auditor, but also with government as we went through a lot of interviews, a lot of site visits. It was extremely comprehensive. I think overall the mark, the 87.7 out of 100 score, I think reflects a high level of compliance. There was 361 areas of full compliance and then seven areas of partial compliance. I think the two areas were of misallocation, but it's seven areas of partial compliance. And the areas that were drawn out, in particular, rehabilitation, biodiversity, we were aware of. So, for example, on rehabilitation, reforestation, I'm sorry, we were aware that, you know, during the period of closure, of suspension of the mine, that we hadn't been able to do that work. So it's no surprise that some of those reforestation areas had slid backwards. We were at some 54.7% completion of the target, which was over the life of the mine. but we had lost ground because during this closure we hadn't been spending money on those areas without the lack of clarity. Similarly on biodiversity, ecosystem conservation, species protection, we're very aware and we think this provides the opportunity to strengthen what is a very high level of compliance already. But what we did see in those non-compliances, there wasn't any broader breakdown in environmental management. There were no acute environmental issues that were of major concern. Instead, we need to identify areas of further work where we need to document further, and we're reviewing and identifying those areas, and certainly we're keen to address those and ensure that we continue to improve this.

And on the costs, $60 million incurred in the second quarter intact for the full-year But is the cash cost expectation of $4.50, that's still on track, or is there anything that you've seen?

Yeah, thanks, Richard. Ryan, do you want to take that question on costs so far at Panama?

Yeah, sure. So, Richard, in short, the circa $4.40 C1 costs we have expected at Kobe Panama, we still expect to be in line with that through the balance of the year. So I'd say we're on track for guidance. We're on track for costs in Panama following the successful ramp-up of the stockpile processing in Q2.

We'll move to our next question from Lawson Winder at Bank of America.

Sure. Thank you very much, Operator. And hello, Tristan, Ruby, and Ryan. Thank you for today's update. Just on Corporate Panama, again, just thinking around timing, what is your latest thinking on how long it would require to ramp up Corporate Panama to run rate once the fiscal framework is in place and all approval is secured. And then you noted the workforce at 3,000 people. That's really impressive. How do you expect that ramp-up to trend for the balance of the year? And I'm just trying to think of, like, what place you might be in at year end in terms of total employment and that ability to ramp up the mine.

Thanks, Lawson. Well, thanks for the question. The first thing to note is we're not in that mode yet of a full start and we're working through the government process. As I said, we'll wait for government around that timetable. If and when that comes through, in terms of our timeline to full production, the stockhole processing activity now covers most of the areas. Really, it's mining, the mining activity in particular, drill and blast or waste-stripping or full fleet mobilisation that were not involved at this stage. The fleet has been well-maintained during this period of closure, but ultimately the full restart will depend on our ability to restart mining, both in Batika and in the Kalina areas, to catch up with those processing rates. That's really the challenge. So that will come back to people, which you point out there, onboarding and training the workforce, getting operators and maintenance personnel back. We've been very pleased with how the Panamanians have responded and come back into the workforce, some 1,000 people already. Most of those, well, everybody on a truck right now that's involved in stockpile processing as a truck operator was previously hired at Cobra Panama, and we're very excited to have those people back and give them, again, meaningful employment in the context of a large unemployment number in Panama, some 10% of the country is searching for unemployment. So if the working age population of Panama is 2 million, that's 200,000 people that are out there looking for work. And I think that gives us opportunities to bring people back. We all need to get up to some 6,000 people in the event we do move to a full production ramp-up. But the constraint will be how quickly we can bring people on board and train them. I think it will be the highest level skills that will be the hardest. We'll certainly be able to get to 80% or 90% of our throughput within the six to nine months that we've spoken about. And we think that guidance remains relevant, as good as we have for the time being. but the last 10% to 20% of optimization will take time and rely on really those high level of skills. That's how we see it. It will still take six to nine months, we think.

We'll move to our next question from Matthew Murphy at BMO Capital Markets.

Hi. More questions on Gobra Panama. So, and congratulations on the restart. But this Ministerial Commission, okay, so first it's a regular schedule meeting. that's happening between the ministers? Do you have any insight into when those meetings happen, how frequently? And then is it your understanding you could be engaged at any time or presumably regardless of what they say, they'll have to engage with you? But do you know, is your expectation that that process has to finish, there has to be some recommendations made to the president, and then you'd be consulted? And then if you have any insight into what's on the government's agenda, you know, right now, do you think the mine is, like, first and foremost, or are there other events going on in Panama?

Yes, thanks, Matthew. So, look, in regards to the Ministerial Commission, certainly the Commission has established a scheduled regular meeting. And I don't think they're, not all of those are published, but the indication when they first announced around the 14th of July was sort of two to three times a week. There's a lot to go through. I think at that time when Minister Molto, the Minister of Commerce, spoke around what was involved, and he made it very clear, you know, how much effort would be involved going through in a diligent way through the entire comprehensive audit. And we respect that process. We don't necessarily think that there can't be engagement in parallel, that that would be an opportunity. However, we will take our guidance from governments around this timetable and certainly there's an indication from the Minister, Minister of Commerce, around their commitment to go through this in a serious manner and report back to the President their recommendations for what the future of the month is.

We'll take our next question from Anita Sani at CIBC World Markets.

Thank you. Good morning and thanks for taking my question, Tristan. So my question was just around restart cost. So I think we established, or you guys have indicated that it was around $250 million, including working capital, to get the processing plant restarted. The second leg, as you restart the mining operations, could you give us an idea of what the capital would look like for that portion of it?

Anita, thanks for the question. And again, we're not at that phase yet, and we will follow government process around engagement and the steps forward from here. But if and when that happened, we said previously before that we think the total involved would be some $350 million to $500 million, of which this $250 million for the initial stockpile processing would be included. And we have no reason to change those numbers at the moment. We think that's reasonable. Ryan, we gave some guidance around the cost of those operations. Maybe you could just fill in on the cost side of things, the operating cost side.

Yeah, sure. So as you said, Tristan, $250 million in terms of that ramp-up is appropriate. We've spent around $60 million of that as of June 30th. The rest of that will come through in the balance of the year. And then to go from there, if we get to the point that, as Tristan said, we're moving to full operations, that's an incremental $200 million split across additional operating costs, working capital, and CAPEX. But in that respect, we're obviously waiting for the government's guidance on next steps before we get into that. But broadly, in line with expectations in terms of Cobra Panama stockpile processing across both the ramp-up and startup costs and the operating costs we're seeing coming out of that.

Okay, thank you. I think that's it for my questions. Most of the other ones have been asked.

We'll go next to Ian Rosso at Barclays.

Thank you. Just coming back to Cabre Pana and the stockpile processing, just sort of curious, what determines the decision in terms of the throughput rate? Obviously, you say it's 38 million tons. I guess that's basically the one line for a year. But if you wanted to increase the throughput rates, would you be able to do that? And perhaps three, two lines. Just wanted to get your thoughts around that. And Ryan, just on that sort of spending within, you mentioned in Q2 the 60 million, I see you stripped out some of that, about 40 million out of EBITDA. Will you do that again in Q3 or was that just a one-off? Thanks, Ian.

So, yeah, in terms of what could be done with the stockpile ramp-up, we were pleased to have the first production in come through from train three. And I guess it's testament to the amount of efforts by the team there on the preservation activities over the last two and a half years and the investment made by the company to ensure asset integrity that we've been able to see those start up well. There's been a lot of acute focus on safety, really a focus on making sure we do things reliably rather than with velocity or with excess speed, really that we build a solid platform. And train three started up very well. We had liners there that we want to exhaust and we've now used those liners. So we've now taken train three down and we've already moved across onto train two. And your question is whether we could bring on, say, train one as we go and do the re-line on train three. And that's a possibility. It's really limited by people and bringing people back. At this stage, the 3,000 that we have on site feels appropriate. We're only able, for example, to give out six-month contracts at the moment because of the nature of the limited activities that we're allowed to do. And so, you know, at the higher skill level, you know, that will be a challenge until and if and when we get a green light that we will be able to provide people greater clarity around their employment. And so we could potentially add another train, but at this stage we're focused around moving now on train two. And at that level, we're also around 12 months. In terms of the cost, Ryan, could you take that question?

So, Ian, the $250 million in restart for the stockpile processing is broken up in three components. The first is $50 million of working capital outflows, so that doesn't report to EBITDA. The second is $100 million of CapEx, so that also doesn't go into EBITDA. And then to the crux of your question, the third is $100 million of operating costs associated with the commissioning. That's what we've adjusted EBITDA for. We've taken that out of adjusted EBITDA. You saw a $40 million adjustment in Q2, and we expect to take the balance of the $60 million adjustment as we spend that in the second half of the year out of EBITDA. So in short, none of that $250 million is flowing through to EBITDA.

We'll move to our next question from Myles Alsap at UBS.

Great. Thank you, Esther. A few quick questions, maybe first on Takataka. Yeah. Should we be concerned that the ESIA and the water permits are taking longer to come through? I mean, could it take another 12 months and we missed a rigged deadline and we're in trouble? What's happening now? That's the first question.

Yeah, sure, Miles. Thanks. So, Takataka, yes, there have been some slight delays. We apply for the ESIA and water permit with the provincial authorities in Salta. There have been some role changes there, and so as new people have come in, I think it's natural that they take a while to get behind the desk, but as we see things in terms of questions and backwards and forwards, we think we're sort of through that question round, and our understanding is the process will move forward in due order. we've had confirmation that the application is under review and we haven't received any further information requests for some time so that says to us that it's now in the serious stage of review obviously with those role changes it has taken a little longer but we're not concerned about that given the feedback.

Okay, that's reassuring. Maybe secondly a question for Ryan on the unit cost inflation And you say that you've got $0.25 kind of risk from currency and fuel and additional risk if current conditions persist. So if we say midpoint of guidance is, what, $2.28, at spot kind of diesel and currency, yeah, how much should we kind of think unit costs will be? Is it, you know, $0.30, $0.40 higher than the midpoint of the current guidance range?

Ryan, do you want to talk about that?

Yeah, thanks, Carlos. Yeah, so in short, that $0.25 is if you take our current guidance and you inflate the rest of the year costs for spot fuel, spot quacha, and spot gold. So we get a slight tailwind on the gold side, but headwinds on both fuel and the quacha. So I take the midpoint of our cost guidance and add the $0.25 in if we assume we see a higher cost environment that we're seeing today continue in a pretty static manner for the balance of the year.

We'll go next to Cody Hayden at Deutsche Bank.

Hello, and thank you for taking my question. Just on Takataka, I think you've previously spoken about the potential to bring in a strategic partner, and I was wondering if your thinking has evolved on this or if there are any updates you can share regarding partnership discussions or funding considerations at this stage. Thank you.

Thanks, Cody. Thanks for the question. Ryan, do you want to talk about potential partners and partnership at TAKA-TAKA?

Sure. Our real focus on TAKA at the moment is on de-risking the project. Those activities are the ones that Tristan's talked about around the ESIA work, around preparing the RIGI application. From a funding perspective, I think we're fortunate that we have a range of options. We've previously talked about the fact that we can look at putting a project finance in place. We've signed a working agreement with the IFC in preparation for that potential work stream. We've talked about the fact that we could bring a partner in. We've talked about the fact that there are significant gold byproduct credits associated with TakaTaka that would be amenable to streaming. And we will consider all of those options in due course. But it is early stage in terms of looking at funding options. I'd say our real focus at the moment is on de-risking the project in advance of those considerations.

Got it. And secondly, if I may, just back to Colbert, Panama, following the environmental audit, have you observed any meaningful shift in public sentiment towards the mind through your community engagement? Just kind of wondering how that maybe progressed with recent updates. Thank you.

Sure, Cody. So on the public perception side, yeah, we actually spotting a new poll just in the last 24 hours or so, so that was a group called DOXA, they're one of the authorised polling companies in Panama alongside Gallup, and so it's not quite the same methodology as Gallup, but what we've seen compared to the last Gallup survey in May, which was a 55% approval rating, that DOXA will report in the 63% favourable opinion of Cobra Panama. Alongside that, some of the questions that were asked, 55% of Panamanians supported President Molino negotiating a new agreement with Cobra Panama. 68% of people believe mining creates jobs. 63% believe it contributes to economic growth. And 67% believe it generates significant revenues for the country. That's in the context, Cody, where we have been continuing our outreach efforts and social media fairs, live events. I think to date, or since this year, we've had some, and last year, some 420,000 direct engagements with people since suspension. And really that's been about educating people around the benefits of the mine, the sovereignty of Panama over its national resources, and what that means in a local context on the ground with people, and our commitment.

Our next question comes from Craig Hutchison at TD Cowan.

Hi, guys. Thanks for taking my question. I just want to ask on the African assets, sales have lagged production here for a couple quarters in a row. Can you just maybe talk to some of the logistical issues there and whether you think we could see that reverse itself in the third quarter?

Thanks, Craig. Ryan, do you just want to talk about production versus sales?

Yeah, sure. So, Craig, where we saw the big difference was in Q1, and that was really just a function of ending the year-end last year with very low finished good inventories. And I'd say to some extent what you've seen is that normalized through mostly Q1 but also coming into Q2. So, the export channel is working well through the variety of transport corridors and ports that we're using. And as I say, that delta is principally driven by the low starting inventories at the end of last year. and we expect fairly stable sales versus production for the balance of this year.

And just on the sulfuric acid, you flagged potential surplus in Q3 here. Is that something that could be material and potentially lower costs or is it fairly small volumes?

Yeah, Craig. So what we saw is an $18 million benefit from selling that sulfuric acid in Q2. We're seeing that continue. So in Q2, that had around a $0.05 benefit to our C1 cost because the acid reports as a byproduct. We see potential for similar sorts of sales through the second half of this year, so potentially another $0.05 benefit. But obviously, that's very contingent on what happens in the Middle East and do we see sulfuric acid come back to the market. But I would say Q3, we both expect higher diesel prices to hit our costs, and that will be a tailwind. And then we do expect some sulfuric acid sales in Q3 to somewhat offset those diesel costs.

And we'll move next to Marcio Ferry at Goldman Sachs.

Thank you. Just a quick one on my side. I know we've talked about the cost to process the stockpile at Cobre Panama at $4.5 per pound in terms of C1. And we've talked about the capex and operating costs for the romp-up as well. Just wondering if it's maybe too early, but how should we think about once Power Panama is eventually at steady state and net net plate capacity, how should we think about the C1 and operating cost for that operation, you know, considering maybe three, three and a half years of cost inflation that we have observed globally? That would be great. Thank you.

Thanks, Marcio. Ryan, are you able to take that question on cost?

Yeah, sure, Marcio. Yeah, I think it is too early to put out specific guidance. As Tristan noted, we're laser-focused on the stockpile processing, doing that in a stable, environmentally responsible and safe manner. If the government takes next steps, at that stage, we'll consider both more detail around the ramp-up cost to fill operations and also the operating costs associated with those operations. We would expect the operating philosophy and approach would be similar to what it previously was in terms of cost performance. So if you take those operating costs that we saw three years ago and inflate that by what you've seen across large copper mines in the industry, I think that would be a sensible way of considering what would that look like on a full restart. So, you know, you're getting closer to the, probably before we were at 1 to 150 C1, and now we're probably going to be somewhere between 150 and 180 C1.

Okay, that's great. And a quick follow-up, obviously, the gold and copper hedges come to an end this quarter, fully exposed to spot now. Is that a plan to eventually review the hedging policy and add some hedges again, or the plan is just to stick with spot exposure for now? Thanks, Rory.

Yeah, sure, Marcio. So philosophically, we think about hedging as an insurance tool. So we've put in hedges when we've had periods of high capital spend combined with leverage on the balance sheet. And we did see that last year with Panama offline and S3 project underway. With S3 now being completed, the strong copper price has meant that we've let those hedges roll off. Now, I think our plan would be to stay unhedged, but we always have that as a tool in the toolbox. If we see capital spending coming or we think the balance sheet needs extra protection, we will revisit that. But as I said, as we said today, because of the strong outlook for the second half of this year, it's strong copper prices into next year, there's no near- or medium-term plan to go back into hedging.

And we'll take our final question today from Myles Alsap at UBS.

Great, thanks. Just a quick follow-up question on Cobra Panama. I mean, obviously, if the government gets too aggressive with the proposal as and when it comes, how quickly can you revert back to arbitration and how confident are you that you can kind of defend shareholder value here?

Thanks, Myles. Sure. Look, our arbitration remains in suspension, but all the company's rights are protected there, Myles, and we can reinitiate that. The panel was established. But what we see is that we've seen constructive progress in Panama. There's been good progress today, so we can point to really concrete progress milestones around the preservation and safe management plan approval last year and then moving into concentrate sales, restart of the power plant, and then more recently processing of the stockpiles both to ensure integrity of the assets and also environmental stewardship, but that is a step forward in terms of re-employment, hiring back 1,000 people. So we see that as good faith. Arbitration is not the preferred outcome and we would look to deal with the matter in a constructive mode and in terms of regression we think that it needs to be balanced between economic realities and reputation but also consciousness providing benefit to Panamanians and full transparency around that process. So that's our focus. As I said, arbitration is not a preferred outcome.

Great.

Thank you. Good luck.

And that concludes our Q&A session. I will now turn the conference back over to Tristan Paschal for closing remarks.

Thank you, Operator, And thank you, everybody, for your valuable time today.

And this concludes today's conference call. Thank you for your participation. You may now disconnect.