Coppernico Metals Inc

Good morning, everyone, and thank you for joining us. As you can see on Slide 3, I have with me Rod Shier, Copper Mountain's Chief Financial Officer; and Don Strickland, our Chief Operating Officer.

I'll begin by providing some brief highlights on the quarter. Rod will provide a more detailed discussion on our financial results, followed by Don, who will speak to our operations.

Then we’ll wrap up and open up the call to questions. Turning on Slide 4, we finished the year very strong.

As forecast the fourth quarter was our strongest quarter of the year. We saw quarterly and annual production increases and quarterly and annual unit cost reductions year over year.

Copper equivalent production for the quarter was. 24.5 million pounds comprised of nearly 21 million pounds of copper about 8,100 ounces of gold and 63,000 ounces of silver.

As for the full year production was 92.4 million pounds of copper equivalent which includes 78.8 pounds of copper, 28,250 ounces of gold and about 274,000 ounces of silver. The C1 cash costs improved 14% in the quarter to U.S.

160 per pound of copper produced and for the year cost per pound of copper produced decreased 4% to U.S. 177.

I should note that we have updated our unit cash cost definition to be in line with industry recognized definition of total operating costs or C1 cash cost. So the full definition and details behind our C1 cash cost calculation could be found in our MD&A.

Turning to Slide 5, 2018 highlights. As mentioned a strong year for Copper Mountain, we achieved guidance across all metrics, we also increased reserves at the mine to 210 million tonnes.

Earlier in 2018, we completed the acquisition of Altona which brought us Eva Copper Project and a huge very perspective land package in the Mount Isa region of Queensland, Australia. Subsequently, we completed a feasibility study on Eva in October that demonstrated an after-tax NPV of about 260 million and annual production of about 90 million pounds of copper over 100 million pounds of copper equivalent basis.

Also last year we completed a large drill program at New Ingerbelle which resulted in an updated resource and a new base case for a PEA for mining the New Ingerbelle Pit. The PEA showed very robust after-tax NPV of almost 400 million and more importantly demonstrated the significant value New Ingerbelle has to offer through low risk, low cost production with minimal capital investment.

We're now evaluating the full integration of Ingerbelle into the Copper Mountain mine production plan and currently evaluating a modest expansion to the existing Copper Mountain mill to improve grinding capacity. Expanded mill would allow for an increased throughput and recovery within our current operating and environmental permits.

Work is well advanced on the integrated plan and an updated reserve statement for the Copper Mountain operation. We expect to publish the study results along with our concurrent filing of 43-101 technical report this month.

I'll now turn the call over to Rod who will review our financial results in more detail.

Thank you, Gil. As noted on Slide 7, revenue for the fourth quarter of 2018 was $73 million on the sale of 19.4 million pounds of copper approximately 7500 ounces of gold and 70,000 ounces of silver.

Revenue was down as compared to Q4, 2017 despite higher sales in the fourth quarter of 2018 and this is a result of a 10% lower realized copper price during the quarter as well as a negative 2.4 million mark to market adjustment in the fourth quarter of 2018. This compares to a positive $10.7 million adjustment in the fourth quarter of 2017.

Mark to market adjustments are requirement under IFRS for shipments outstanding and not settled at the end of the quarter or year. Revenue for the full year of 2018 was $296 million on the sale of 79 million pounds of copper approximately 27,000 ounces of gold and 284,000 ounces of silver.

2018 revenue included a negative mark to mark adjustment of just under $1 million for unsettled shipments at year end as compared to a positive mark to mark adjustment of 10.7 million for the 2017 year. As noted on Slide 7, cost of sales for the fourth quarter of 2018 decreased by less than 1% to 65.2 million year over year.

Even though more concentrate was sold in the fourth quarter of 2018 as compared to the fourth quarter of 2017. This was because Q4, 2017 included a reduction of about 7.6 million in expenses to cost of sales associated with ore mined and sent to the ore stockpiles and not sold in Q4, 2017.

As compared to a charge of 2.8 million expense to cost of sales in Q4, 2018 for stockpiles or processed and sold during the last quarter of 2018. Cost of sales for the year increased by about 25 million compared to 2017 due in part to a 13.1 million charge that was included in the cost of sales figure in 2018.

As a result of processing a portion of ore stockpiles and a small part due to the increased cost experienced during the year for diesel fuel, maintenance and power. This compares to a $14 million deduction from the 2017 cost of sales figure for ore that was mined and stockpiles during 2017.

The drawdown of ore stockpiles in the year is a result of increased development stripping. As the mine focused on exposing higher-grade areas of the Pit for future years.

As required under IFRS some of these additional cost of stripping are capitalized when the period stripping ratio exceeds the life of mine stripping ratio. Turning to Slide 8, all this resulted in a gross profit of about 8 million and a net loss of 19 million in the fourth quarter of 2018 as compared to a gross profit of 20 million and net income of 23.5 million in Q4, 2017.

This change to a net loss position for the 2018 quarter from a net income position in the fourth quarter of 2017 was mainly a result of the expenses charged to cost of sales for some of the ore stockpile that was processed through the mill during the quarter as noted earlier. And due to a non-cash unrealized foreign exchange loss of nearly $15 million compared to a loss of about $2 million in Q4, 2017.

This is a change of approximately $13 million from quarter to quarter for a non-cash foreign exchange movement. These non-cash unrealized foreign exchange adjustments are mainly related to our debt that is denominated in U.S.

dollars. The net loss of 27 million for the year ended 2018 included a non-cash unrealized foreign exchange loss of 24 million as compared to 2017’s net income of 67 million which included a non-cash unrealized foreign exchange gain of 21 million.

This is a non-cash change of approximately 45 million between the two years. Again all mostly related to the treatment under IFRS of our U.S.

denominated debt. On an adjusted basis, the net loss for the quarter was 1 million or about $0.1 per share and for the 2018 year we reported an adjustment net income of 3 million or about $0.2 per share.

Adjusted EBITDA were 17 million for the fourth quarter of 2018 and 71 million for the full year of 2018. Cash flow from operations was about 29 million for the quarter and 51 million for the year which allowed us to end the year with about $46 million in cash on hand.

And now Don will provide an operational update.

Thank you, Rod. Starting on Slide 10 the mine team continued to deliver high performance exceeding our 2018 guidance.

Mining activities continue to the Pit West area with a focus on the next pushback. A total of 19.7 million tonnes were mined in Q4 which included 4.4 million tonnes of ore and 15.3 million tonnes of waste.

Mining in 2018 was predominantly in the Pit West area mining a record 74 million tonnes which included 21 million tonnes of ore and 54 million tonnes of waste. The strip ratio was higher both in Q4 and 2018 when compared to the respective periods in 2017 as a result of accelerated stripping.

We accelerated stripping with the objective of exposing high-grade ore for 2020 production the benefits of which you can see in our three year production guidance. Turning to Slide 11, the mill team also continued to deliver high performance achieving new annual production records for tonnage rate, operating time and total tonnes milled.

During the quarter the mill processed for total of 3.9 million tonnes averaging over 42,000 tonnes per day. For the year, the mill processed 14.5 million tonnes averaging nearly 40,000 tonnes per day.

New operating time averaged 96% for the quarter and 92.6% for the year. The mill feed grade averaged 0.3% copper improving from Q3 as expected for an average of 0.31% copper for the year.

Copper recovery averaged 81% for the quarter and 80% for the year. Flash flotation circuit was installed in the third quarter of 2018 as supported higher gold and copper recoveries.

Overall the whole mining team continued to deliver high performance based on strong culture of implementing improvements. And with that I will turn the call back to Gil to conclude.

Thanks Don, and Rod. Slide 12, we announced our three year guidance last month and we expect production in 2019 to be slightly lower than 2018 at 70 million to 80 million pounds of copper.

That’s due to some lower grade that we're seeing in the plan this year, but with the benefit of the new flash flotation circuit as Don just discussed and we installed last year our gold production expected to be a little higher at 29,500 and 32,500 ounces. Our copper equivalent basis production this year is expected to be 86 million to 95 million pounds.

As we move forward beyond 2019, production levels are expected to increase materially. As Don mentioned, we did a lot of development work this year to expose higher grade ore and we expect to see the benefits of that in 2020 with higher production levels.

But and it's important to highlight these production estimates do not include any benefits from further mill expansion or any contribution of production from New Ingerbelle both of which provide the potential for increased production levels. Slide 13, when we complete the integrated life of mine study which will include a new production plant.

We'll update our production guidance with the integration of New Ingerbelle. Work for the integrated plan is well advanced and we expect to announce the results for the reserve update and life of mine plan technical report shortly.

To conclude turning to Slide 14, this quarter Q1 there will be some very important value driving catalyst. The integrated plan I just mentioned and also we'll update the market on our development projects in Australia and our exploration plans on our highly perspective mineral holdings in Queensland.

So stay tuned a lot coming up this quarter and that wraps up our comments. Operator, if we could open up the call for questions.

Okay thanks so much guys, just a straight grass when we see the New Ingerbelle study or integration plan in the coming weeks or late into the quarter. You mentioned the mill expansion would be that be sort of just predicated on through the modest Mill expansion or will it be any discussion there of more meaningful mill expansion in time?

Well this will be the modest mill expansion it’s a study that’s going to look at adding additional bore mill into the Copper Mountain mill and the impact of that can be you know meaningful and significant but we’re still looking at a potentially larger expansion but the beautiful thing about this expansion is that not only do we improve the productive capacity of the plant but we also do that completely within our current operating licenses and environmental permits. So it's really a pretty straightforward expansion case for us to evaluate and it’s something that we can deploy and execute fairly quickly.

So that study which will again include an integrated Ingerbelle into the plan you can expect to see in the near term.

Okay great and just conceptually I mean I guess you’re free for down the road, roughly speaking how long would it take to receive first door from New Ingerbelle to make its way over to the plan?

Well I can tell you that, that will be pretty clear to see when we when we put our technical report so stay tuned I don't want to [indiscernible] to report.

Thanks now I understand. And just another question flipping gears over to Australia I mean obviously there's some financing initiatives going.

Can you comment any further on a sort of where you're at with that and from a timeline and sort of progress point of view?

I would suggest that we’re very far down the road here, but I'll let Rod to take that one.

Sure thanks.

Thanks Stefan you marked it specifically for Australia and I don't know if I characterize it that way. I would in light of the new study that Gil has mentioned I think we're looking at priorities of projects and allocation of capital.

And so we are looking at a refinancing of the existing debt and again that will be in the very near future we think and that will provide the capital for both advancing our projects down in Australia and our plans for Copper Mountain.

Okay great got it thanks.

Yeah the way to look at it is that just got restructuring of our existing project at Copper Mountain enables us to be able to free up a lot of cash flow that you know from the Copper Mountain mine which can then be used to advance the development of our project activities. But they'll be more discussions on that again in more detail in the near future.

So I would suggest again that will provide a good clarity and guidance to the market as news roles forward.

Okay great no that’s helpful thanks very much guys.

Hi guys, maybe just a follow up question on the financing, can you give us a sense of what your comfort level is in terms of maybe net to EBITDA for a large financing package I think right now you're sitting around 3.4 times. Is it realistic to be able to raise enough cash to New Ingerbelle and your Australian project at the same time?

First of all Craig I just want to mention we're not planning to do anything at the same time as we mentioned before. So we take a very, very phased and deliberate approach and we're not going to stress our balance sheet.

Ultimately when we look at our activities for the company – we target over the long term to – near to long-term of having a net debt to EBITDA ratio at two or lower. And that's really where we feel comfortable from a balance sheet perspective.

So given that we can free up some cash from our – and improve our operating performance. We're going to prudently advance these projects and we’re going to obviously do the best projects first.

I will say something else on our Australian projects we have so much exploration potential down there in Australia that we have to get after as well. We've got a good amount of dollar development activity in front of us in Australia that's highly perspective.

So we tend to move our project team from one project to the next in a deliberate manner and we're always thinking about cash flow generation and I'm not stressing our balance sheet.

Would you consider a joint venture with Australian assets?

We have no consideration for a joint venture on our Australian assets right as of this moment. We're doing a lot of evaluation on project financing and other mechanisms, but those are somewhat down the road.

So we'll talk about those when the time is appropriate and when we feel we have something concrete to talk about.

Okay and maybe just New Ingerbelle are there any permanent amendments you're required to have in place before you started feeding the mill with New Ingerbelle ore?

Well New Ingerbelle as you know kind of falls within our existing disturbance an operating license area. We will have to put a mine plan like we do all the time.

We have to develop this life of mine plan and we have to get the life of my plan through the approval process, but that's a sort of a normal course thing that we do at Copper Mountain and then we develop a new mine plan we have to get that plan approved by the problems.

Okay thanks guys.

Well I just want to thank everybody for listening to our conference call today. This is a very exciting time for Copper Mountain.

We have a lot of value driving catalysts as we just discussed in near-term and incredible amount of growth opportunities for the company. We intend to attack our growth in a very prudent manner.

And with that, so we'll conclude this conference call. Thanks for listening.