Capstone Copper Corp.

Thank you, operator. I'd like to welcome everyone to Capstone Copper's Q2 2025 Conference Call.

Thank you for joining us today. Please note that the news release and regulatory filings announcing Capstone Copper's 2025 Second Quarter financial and operational results are available on our website and on SEDAR+.

If you are logged into the webcast, we will advance the slides of today's presentation, which are also available in the Investors section of our website. I am joined today by: our President and CEO, Cashel Meagher; our SVP and Chief Operating Officer, Jim Whittaker; and our SVP and Chief Financial Officer, Raman Randhawa.

During the Q&A session at the end of the call, we will also be joined by our SVP Risk, ESG and General Counsel, Wendy King; and our Head of Technical Services, Peter Amelunxen, who are available for questions. Please note that the comments made on the call today will contain forward-looking information within the meaning of applicable securities laws.

This information, by its nature, is subject to risks and uncertainties, and actual results may differ materially from the views expressed today. For further information on the risks and uncertainties pertaining to our business, please see Capstone's most recent filings, which are available on our website at www.capstonecopper.com and on SEDAR+.

And finally, I'll just note that all amounts we will discuss today are in U.S. dollars, unless otherwise specified.

It is now my pleasure to turn the call over to Cashel Meagher, joining us for the first time in his new role as CEO.

Thank you, Daniel, and hello to all of you dialing in from the Americas, Europe, Australia and around the globe. Today, we are pleased to present our second quarter 2025 results and achievements.

As I conclude my first couple of months as CEO, I'm proud of how we have transitioned as a company for the last few years from a period of building and ramping up mines to a period of execution with a focus on safety and operational excellence. We are positioned extremely well.

Our ramp-ups are complete. Our production is increasing, and our costs are coming down.

Additionally, we have a very strong financial position. We remain committed to protecting the resiliency of our business through safety, operational execution and maintaining our strong balance sheet.

And of course, we are focused on copper, which makes up over 90% of our revenues. Copper is in the spotlight with government signaling its strategic importance and strong LME prices.

We continue to see robust demand and believe the medium- and long-term fundamentals remain attractive. Turning to Slide 5.

In Q2, our operations delivered consolidated copper production of 57,400 tonnes at a consolidated C1 cash cost of $2.45 per pound, which represents record copper production and the lowest cash costs we've achieved to-date. This was driven by record sulfide production at both Mantoverde and Mantos Blancos.

We are very proud to report that both sites achieved average throughputs above their design rates in Q2, a significant accomplishment by our teams in Chile. It has been a remarkable turnaround at Mantos Blancos, where our team has done a tremendous job implementing our asset management framework, and we are pleased to see another strong quarter at our new Mantoverde sulfide concentrator.

Earlier this month, we announced another significant milestone with receipt of the Mantoverde Optimized permit, which will allow us to increase throughput from 32,000 tonnes to 45,000 tonnes per day. We are eager to execute on this project imminently, subject to all joint venture Board approvals.

While we have been disappointed by lower throughputs at Pinto Valley over the past 12 months, it is important to consider this in the context of Pinto Valley's long history. The mine has produced over 4 billion pounds of copper in one of the oldest and most prolific mining districts in the United States.

With a long mine life and over 1 billion tonnes of resource, there is significant value that remains to be unlocked here. As the only operating mine in the district, we are extremely well positioned to take advantage of the current environment in the United States that is placing a greater emphasis on growing domestic copper production.

We are focused on the implementation of our asset management framework to achieve stable operations and design throughput at PD, modeled after the success we recently achieved at Mantos Blancos. At Cozamin, we saw another steady quarter with strong production and low unit costs.

On the Corporate side, we completed our debt refinancing plan by repaying our portion of the Mantoverde project finance facility, further improving our balance sheet strength and flexibility. Our balance sheet is in excellent shape, and we are committed to deleveraging further through internally generated cash flow.

In line with our sustainable development strategy, during the quarter, we launched a company-wide biodiversity standard. This establishes a common framework and minimum site requirements for applying the prevention and mitigation hierarchy for nature- related impacts and risks.

Turning to Slide 6. Our operations were off to a solid start in the first half, and we have reaffirmed our consolidated 2025 guidance.

We are particularly pleased about the performance at Mantos Blancos and Cozamin, which are both tracking towards the upper end of their site-level production guidance ranges, offsetting Pinto Valley tracking towards the lower end. Compared to the first half of last year, production has increased 34%, while costs have decreased 12%, primarily driven by the ramp-ups at our Chilean assets.

As we look to the balance of the year, we are expecting even stronger production in H2, and we are reaffirming all of our production costs and capital expenditure guidance provided earlier this year. Throughout the remainder of 2025, we look forward to demonstrating reliable copper production, lower costs and strong cash flow generation while continuing to advance our production growth opportunities.

And with that, I'll pass over to Raman for our financial results.

Thank you, Cashel. We are now on Slide 7.

In Q2, we achieved record copper production of 57,400 tonnes, reflecting higher sulfide production from the new Mantoverde sulfide concentrator. Strong copper production drove record quarterly revenue of $543 million.

We note that copper sales were around 1,800 tonnes below payable production levels, primarily due to timing of sales at Mantos Blancos. LME copper prices averaged $4.32 per pound in the quarter, up 2% compared to $4.24 per pound in Q1, and we realized a slightly higher copper price of $4.39 per pound.

LME copper prices remain strong today at around $4.35 per pound. C1 cash cost of $2.45 per pound decreased by 5% from last quarter and by 13% compared to Q2 last year.

Over those same period, sulfide cash costs have decreased from $2.58 per pound last year to $2.20 per pound in Q2 2025. Overall, in Q2, we realized strong gross margins of $1.94 per pound or 44%.

Record adjusted EBITDA in Q2 of $215 million increased 75% year-over-year, driven by higher copper production and lower cost. We reported adjusted net income attributable to shareholders of $27.5 million or $0.04 per share in Q2.

This also represents a 32% improvement year-over-year. Putting this all together, we generated significant free cash flow in the quarter of approximately $95 million, taking into account our operating cash flows, capital expenditures and lease payments.

Moving on to Slide 8. On the bottom left-hand side, we summarize our available liquidity, which as at June 30, 2025, was greater than $1 billion, including $312 million of cash and short-term investments and $795 million of undrawn amounts on our corporate revolving credit facility.

We finished the quarter with net debt of $692 million, which decreased from $788 million at Q1, driven by our strong cash generation in the quarter. In Q2, we have continued to see our net leverage decline with our net debt-to-EBITDA ratio of 1x at the end of Q2 compared to 1.3x at Q1 and 1.5x at year-end 2024.

During the quarter, we completed the refinancing of our balance sheet by repaying the Mantoverde project financing facility. Our partner, MMC, refinanced their portion of the facility with a new term loan at the asset level that is guaranteed and attributable to them.

Overall, this refinancing has lowered our cost of debt capital and termed out our debt maturities, while also creating a simplified structure. The chart on the right-hand side of the page illustrates our EBITDA sensitivity at various copper prices.

Based on the midpoint of our 2025 guidance as well as our upside related to MV-O and Santo Domingo at full run rates. For the balance of this year, a 10% change in copper price impacts our EBITDA by $100 million.

This level of EBITDA generation shown on the right will enable us to continue to generate cash to delever our balance sheet, which will further enhance our financial position and provide a strong platform to deliver on our growth. Now I'll hand it over to Jim Whittaker for the operations review, who is joining us in his new role as Chief Operating Officer.

Thanks, Raman. We are now on Slide 9, where we will first run through the Chile operations.

These mines are very familiar to me as I spent the last couple of years in my previous role as Head of Chile. Now as COO, I'm very happy to be expanding my scope to include our other top-tier mining jurisdictions in Arizona and Mexico.

Overall, in the second quarter, we were excited to see our recently ramped up projects continuing to exceed our expectations. Both Mantoverde and Mantos Blancos achieved above design throughput levels for Q2.

This is a significant accomplishment by our teams in Chile, and we look forward to seeing what these mines can accomplish in the second half of the fiscal year. Starting with Mantoverde, we achieved continued improvements in production and costs driven by our Mantoverde sulfide concentrator.

Total production yielded a record 24,986 tonnes of copper at C1 cash cost of $2.35 per payable pound, including a lower $1.51 per pound from the sulfides. In Q2, plant throughput averaged above 32,000 tonnes per day, exceeding the nameplate capacity after only 4 quarters in operation.

Copper grades averaged 0.72% in the quarter with the highest grades of 0.76% occurring in June. We are expecting higher grades in the second half of 2025.

During Q2, we saw recoveries pull back slightly to an average of 77.6% for the quarter. For the first 2 months of the quarter, we were mining through transition zones, which had higher levels of alteration and oxide content in the upper benches [ initially ] modeled.

This was partially offset in June and July, where mining progressed to the next bench with sulfide ore zones consistent with our long- term model and recoveries consistent with the ore blend and in line with our 2025 guidance. While we are disappointed that the upward trend for recoveries did not continue this quarter, we are reassured by metallurgical recoveries that align with our expectations once adjusted for the ore types processed.

As the mine continues to mature, we will have increased flexibility of available ore sources for optimizing mill feed for recovery and throughput. We expect the recovery rates achieved in June to be a better barometer for the go-forward rates in H2.

We expect copper production and cash costs to improve through the course of the year, primarily on those higher grades and recoveries, and Mantoverde is currently trending towards the midpoint of its production and cost guidance for 2025. Now moving to Slide 10.

We wanted to take a quick step back and highlight the significant accomplishment of our Mantoverde development project. We started the project in 2022 during the global COVID pandemic and finished construction around the end of 2023 within 5% of our original budget for a capital intensity of approximately $12,000 per annualized tonne of copper production.

We then commissioned the mine and produced first saleable copper concentrate in June of 2024, which was quickly followed by the achievement of commercial production in September 2024. And this quarter, in our fourth quarter running the plant, we exceeded our design capacity.

This benchmarks extremely well compared to the industry average, which usually takes around 13 years. The success achieved with the Mantoverde development project is a testament to the capabilities of our experienced team throughout the organization, both on the ground in Chile and at the senior leadership and Board levels.

We would like to thank our team for their commitment, dedication and hard work, and we look forward to continuing to leverage our operating talents to execute on Mantoverde Optimized and Santo Domingo projects. In terms of Mantoverde Optimized, earlier this month, we received the permit approval from the Chilean authorities.

This is another significant milestone, and we were very pleased with the level of engagement evidenced through the process by Chilean authorities and local communities. With this in hand, we are no longer permit constrained on the project development, and we expect to imminently sanction the project for development in Q3, subject to all joint venture board approvals.

Prior to receiving the permit in Q2, the Mantoverde Board has already approved $20 million in long lead items to begin placing orders and preserve the project schedule, showing the strong confidence in the project. We have been encouraged so far by the capabilities of the plant to achieve peak daily throughputs in excess of 45,000 tonnes per day.

We are looking forward to executing on the project in order to sustain these rates. So now on to Mantos Blancos.

The site continued to deliver in Q2, as highlighted on Slide 11. Total sulfide and cathode production reached 15,796 tonnes of copper at a C1 cash cost of $2.09 per payable pound.

Production and cash costs both improved significantly quarter-over-quarter, driven by the continued success of the concentrator post ramp-up. We have now sustained an average throughput above 20,000 tonnes per day for an entire quarter.

The ability to reach design throughput at the mine that has been in operation since the 1960s is a testament to the capabilities of our asset management framework currently being implemented company-wide. During Q2, the team was able to push plant throughput to achieve peak daily throughput of 26,000 tonnes.

We will continue to monitor second half plant performance to identify opportunities for further enhancement to the overall plant design that could be integrated with the proposed Mantos Blancos Phase 2 expansion. As a result of the strong throughputs and recoveries of the first half, we are expecting to continue in H2.

Mantos Blancos is trending to the higher end of its production guidance range and at the lower end of its cost guidance range. Turning to Pinto Valley now on Slide 12.

We produced 10,125 tonnes of copper at elevated C1 cash cost of $3.89 per payable pound during Q2. Pinto Valley experienced setbacks in Q2, which resulted in lower production and a higher cost.

Throughput averaged 38,000 tonnes per day in Q2, attributable to unplanned downtime driven by water constraints due to the extreme drought conditions in Central Arizona as well as some mechanical and electrical issues. As a result of the water constraints, throughput was restricted to approximately 2/3 availability with only 4 of the 6 mills operational since May.

The lower throughput was partially offset by stronger grades and recoveries compared to Q1. We continue to expect copper production to be weighted towards the second half of the year, driven by grades and throughput, contingent on the improved water availability and plant performance.

Grades in H1 averaged 0.29%, and we are expecting this to increase to average close to 0.34% in H2 due to the mine sequencing. In the second half, we are expecting recoveries of around 87%, similar to those achieved in Q2.

Throughput averaged around 44,000 tonnes per day in H1. Process availability is expected to improve sequentially through Q3 as we bring all 6 mills back online with an increase from 4 mills to 5 mills expected in August and that all mills will be expected to be [ churning ] in September.

As such, we are expecting throughput to average around 43,000 to -- 43,000 tonnes per day in Q3, consistent with H1 and increased to an average of around 52,000 tonnes per day in Q4. Putting all these pieces together, Pinto Valley is trending towards the lower end of its production guidance and at the higher end of its cost guidance range.

We have a tremendous resource at Pinto Valley in a prolifically endowed copper jurisdiction and U.S. administration that is focused on growing domestic copper production.

We will continue to evaluate the upside opportunities in our land package and within our broader district. Meanwhile, we are committed to the implementation of our asset management framework, looking to replicate the success we have seen at Mantos Blancos with the goal of improving the reliability of the plant to drive higher production and lower costs in the near term.

Moving to Slide 13. Cozamin delivered another solid quarter, producing 6,509 tonnes of copper at C1 cash costs of $1.49 per payable pound.

Based on the first half of the year, Cozamin is tracking very well relative to guidance. We continue to conduct exploration at Cozamin in order to maintain consistent levels of production through the end of the life of the mine.

And with that, I'd like to pass it back to Cashel.

Thanks, Jim. Turning to Slide 14.

We've outlined our sector-leading growth plans and some of the additional upside within our portfolio. Our strategy for the rest of 2025 remains consistent, continue to realize the benefits associated with the projects completed in 2024 while focusing on operational execution, strengthening our balance sheet and prudently advancing our next phases of organic growth.

With receipt of the Mantoverde Optimized permit earlier this month, we are looking forward to executing on this project upon formal sanctioning financed through internally generated cash flows. With high returns, a quick payback and low capital intensity, MV-O is a good representation of the executable growth we pursue at Capstone.

At Santo Domingo, we continue to make progress towards our next major phase of transformational growth, which has the potential to take our production up to approximately 400,000 tonnes of copper per annum. Our expectations are unchanged regarding timing with a potential sanctioning window expected to open around the middle of 2026.

We are at an advanced stage of our partnership process, and we expect to provide an update to the market on this during the third quarter. As expected, we have received a strong amount of interest from a broad group of potential partners that emphasizes the role Santo Domingo will play as an important pillar of long-term copper growth for Capstone.

Once the partnership is finalized, we would then move to securing optimal financing for the project. In parallel, we continue to advance the remaining work streams to optimize the scope of the project and the advancement of several upside opportunities, while continuing to monitor the macroeconomic environment.

Beyond these projects, we have a robust pipeline of low-risk, high-return projects in top-tier jurisdictions. This includes another brownfield expansion at Mantos Blancos, flexibility in the Mantoverde-Santo Domingo district to unlock production and create synergies and the potential development of another major copper district around our Pinto Valley mine in Arizona.

Our priority is to remain agile so that we can execute on growth responsibly while maintaining optionality and continuing to increase the value of our projects. This growth pipeline is what differentiates Capstone in an industry where growth often must be pursued inorganically and at a premium.

Considering the enormous amounts of copper that the world will demand going forward, we are extremely well positioned to benefit. With that, I'll turn to Slide 15, to conclude today's presentation.

This quarter, we have continued to realize the benefits from the first phase of transformation at Capstone Copper with tangible delivery on our peer-leading growth. We made a number of strides during Q2, including achieving record copper production, maintaining nameplate throughput at our recently ramped up assets in Chile and completing our balance sheet refinancing strategy.

We are well positioned to become a leading long-life, low-cost producer, playing an important role in supporting the world's decarbonization and electrification efforts. And with that, we are now ready to take questions.

Congrats guys on a pretty solid quarter. A couple of questions on Pinto Valley, if I may.

I guess, first, Jim, I think you mentioned that by Q4, you'd be at 52,000 tonnes per day, 87% recoveries. And I'm just wondering, is that sort of the ceiling for this mill, based on everything you've seen in your asset reliability program?

Dalton, thanks for the question. Thanks for calling in.

Yes, actually, there's probably an instantaneous level that's just over 60,000 tonnes per day at Pinto Valley. That's if you push all the metrics to their full extent on availabilities and utilizations.

So where we're pointing now, obviously, we've had a tough quarter with the water. And so we're trying to plan our way out of that.

We're obviously taking advantage of a little bit of maintenance where you have some time around the circuits, which is also good. But we're very, very confident by the end of the year, we'll be able to hit those run rates and still kind of hit the bottom end of the guidance with Pinto Valley.

But obviously, a pretty tough quarter in Arizona right now.

But then just looking at 2026 and beyond, is that sort of the steady-state rate we should be thinking about for Pinto Valley?

For Pinto Valley, I mean, obviously, we're in the middle -- as of every year, we're going through our life of asset planning circuit cycle, and we also get into our 5-year plan. Over the long term, we're probably closer to around 56,000 tonnes per day at the long-term run rate.

But like I said, these are things that we evaluate every year. AMF in general, plays a big part of that as we look at improving our maintenance practices, there may be possibilities to shift that.

But again, like I said, it's part of our 5-year plan that we review annually.

Great. And then maybe just staying with Pinto Valley.

I think you guys mentioned a couple of times the strategic value of the mill and the views of the current administration. And I'm just wondering if we can get an update on Copper Cities.

But just also, are you looking at other opportunities in the region?

Thanks, Dalton. Look, we're focused, as Jim sort of pointed out in his review of the assets, and their performance over the quarter is on operational excellence, asset management framework.

And we believe that those will deliver that capacity capable at sort of 90% utilization around 56,000 tonnes a day. With that being said, we do have an option agreement with Copper Cities that's progressing really well through the technical evaluation of the amalgamation of the 2 assets.

We anticipate sometime by the end of this year, sort of having worked through that at that sort of technical evaluation level. And then I think at that time, if there's more to be said, then we'll have more to say about it.

But really, our business in the region right now is focused on enhancing and improving Pinto Valley directly, and that's where we're concentrated on. And obviously, because Copper Cities is an adjacent property, that's sort of the scope and where we're looking at.

We're not really looking further afield than that.

Great. And then maybe just one last very quick one also on Pinto Valley.

In the executive order yesterday, there was some language around restricting concentrate exports going forward. I'm just wondering if that's going to impact Pinto Valley at all.

Okay. Thanks for the question.

And certainly, that's very topical. I think what you're referring to is a sort of vague reference to 25% restrictions starting in 2027 and then maybe escalating from then.

I think we always take these sort of proposals as such as more numbers roll in and more knowledge of the industry is acquired by the administration, they seem to modify what their expectations are. What I will say is there are 2 operating smelters.

They do not procure all their feed in advance. There's always opportunities to put our production in the U.S., and we would actually prefer to do that.

That's something where you're reducing your greenhouse gases, you're reducing your impact on the environment and it's staying within the local market. So we'll always -- and we do always sort of pursue those types of opportunities.

With that being said, it's -- there's a lot to go under the bridge between now and 2027, but we certainly will look at it to guide our strategy going forward. Look, it's a privilege to have an operating mine in the U.S.

now. They're coveting copper.

Pinto Valley has been around since 1975. It has an operating plant.

And we're happy to keep producing there and enhance our production there. And we think that's really what the administration is after.

Nice to see the improvement on the Chilean asset side. Just a question around Mantoverde.

Your recoveries were obviously impacted in April, May from this transition zone with high oxide content. And then we saw improvement in June.

Is that now fully behind you? Or are you expecting more of this high oxide content to show up either in H2 at some point or into next year?

Orest, Jim here. Yes, good question, and it's something we've been looking at quite a bit ourselves.

So just going through a bit of history, like on a quarterly basis, our recoveries have increased sequentially from 68% in Q3 of '24, up to 82% in Q1 of '25. And then we saw that drop in Q2 that we're still working on.

So -- as we mentioned, yes, we have 2 main oxide or -- sorry, 2 main operating phases, Manto Russo 1 -- Mount Russo and Mantoverde 1 in the pit. And we were both mining through transition zones in both of those pits at the same time.

So although at the same time, we were hitting record tonnages, which I think is good because the team is focused on copper output at the end of the day, and they will lever whatever they can to produce that. But when we're through these transition zones, that did complicate us on the recovery side in the plant.

On an ongoing basis, first of all, we don't expect to go through that again this year. We're already mined through that.

We're expecting to actually see that clearing up now in July and through August, which is good. It will be something that we'll have to look at in our detailed annual budget and planning to see when it comes back because these are going to be a repetitive process.

But overall, when you look at a long-term view on resource and reserve, this isn't very -- this doesn't amount to a whole lot. It's just something that we're going to have to take into account for in our cash flow planning from the production on an annualized basis.

Okay. And then -- so if you're not going to -- expected to experience that H2, should we anticipate the operation getting to that design recovery level then of 87% and 91% during the second half?

Yes, that's our target. I mean, really, what we're seeing in the mine now, we're into large areas of pure sulfide.

We expect that we'll be able to get back on track and hit those targets towards H1. So yes, we're definitely looking at a strong second half of the year.

For MV Optimized, can you just remind us if there's an update to the CapEx number that's expected relative to the $146 million? And also what the cadence of that CapEx may look like between the second half of this year and 2026?

Yes. Fahad, thanks for the question.

Yes. And so part of the process is, we did start with an early procurement process a couple of months ago.

So we're trying to retain some schedule. What I would say is what -- [ how ] we're looking at the detailed engineering that's been conducted to-date, there have been some modest scope changes that were required to sustain the production at the levels we wanted.

What we did is we conducted some surveys on site using our own technical team and validated by a third-party engineer to be sure that when we do this upgrade, we can indeed average the 45,000 tonnes per day. So we do see a modest increase from that $146 million.

What I will say is that detail of breakdown of what was inflationary pressure versus scope change, we will be coming with the announcement after we work through with our joint venture partner, and we introduced them to that sort of minor change. And then we look to sort of letting or publishing that sort of guidance in a news release and announcing the timing around MV-O, what the schedule is and the detail around that [ cap.

]

Jim, you gave a very detailed answer into the previous question on Mantoverde. And I was just wondering specifically, what is the long-term oxide contribution that comes from these transitional mix zones?

And concurrently, as you work through new benches, are improvements going to be need to be made on reconciliation model and grade control and the degree to which that was a contributing factor.

Ralph, I think the way we look at it is, obviously, transition zones exist in the sort of the periphery of the sulfide deposit in the near surface portion. I think, what we see is you mine through this transition zone once and you come to just more pure sulfide.

There are vertical structures. So I think you can anticipate the introduction of up to occasionally 5% sort of oxide material.

Jim, do you have anything to add there?

No, that's a good comment, Cashel. And it's something that we looked at.

There's obviously a lot of discussion of the assumptions that we put in our planning models and then what we see in the field. And so that's when I said when we go through a 5-year plan to a budget, these are things that we have to estimate.

But over a long term, that number obviously starts to decrease because the mine is getting deeper and we're into the purer sulfide ore body. So like I said, it's not something that we're really too worried about over the long-term view on the reserve and resource.

It's mainly just a short-term problem that we're mining through right now. And -- but like I said, we'll be updating on that as we provide guidance on an annual basis.

Cashel and team, just one on Santo Domingo. It seems you're reaching the point end of the partnering process here with the announcement expected during 3Q.

Just wondering if you'd be able to give us some color about how the partnership process has been going and just maybe an update since the last quarterly earnings call?

Yes. Adam, you know what, it's gone really well.

And so what we did is we went through that second phase where we had sort of brought it down to just over a handful of groups. And those groups, I think we would have characterized as asset participants, those that bring sort of financing strength and a few strategics to evaluate some of the opportunities within the district that might offer some offsetting synergy.

What I can say is we've arrived at a partner, and we also believe that some of those strategies remain available to us in the future with these negotiations underway. I think where we are in the detailed process of negotiation with that sort of final stage is, I wouldn't be surprised if we come out with an announcement within Q3 now, and we'll be very happy to announce that.

And it will be a major milestone on the way to bring forward a project that will really grow Capstone Copper in a district where we've been very successful building before, where we have a project team already doing detailed engineering with the aim to finish to 40%. And then with that partner, we'll be able to pursue a project financing strategy.

And our aim is to have the project sanction-ready by this time next year.

Okay. And just secondly, on Pinto Valley, just wondering if you could give an update more broadly on the drought conditions in Arizona.

Have we broken the drought yet? How are things looking from that perspective?

And what's really driving that increase in going from 4 to 5 mills in August this year? Is that just getting more water availability?

Or is it [ other ] optimizations?

Sure. Sure, sure, Adam.

What I'll do is I'll pass it over to Jim. I passed him the accountability of Pinto Valley, so he can get the answer here.

Yes. So yes, great question.

It's really -- obviously, it's hard to predict, but it is very seasonal. We're in the middle of summer.

It is very hot. And so we're in a bit of a hot dry stretch in Arizona.

These things do occur. I mean, obviously, it's not every year, but in speaking to some of our colleagues, even before the merger of Capstone Mining and Mantos Copper, there was discussions of time loss for drought, and you can find it in the records of Pinto Valley.

So it's something that's happened before. What we're doing about it, obviously, we have to maximize our pumping capacity that we have on site anyway, and that includes pump wells or tailing systems.

Our job is to make sure that all of that infrastructure is ready to go when we need it. The availability of water is obviously a different issue, but we need to make sure that our assets are in good and sound condition to be able to operate.

And the other thing that we've been doing, we've been talking to some other parties close by about ways that we can get into the water business. There is some mining around us.

We've got several neighbors, and we've been reaching out to them to see if there's any ways that we can look at purchase of water or some other combination of deals that we can set up there to try to protect things for the future. But those -- like I said, we're obviously focused on the internal things to the site, but also trying to explore some other options that we could offsite.

Just a quick one on the balance sheet. Obviously, you've done a good work.

Liquidity seems quite high, above $1 billion, 1x net debt to EBITDA, which is kind of below the target. So -- and you did mention that the plan is to further work on the balance sheet as well.

So just trying to understand what else do you see or do you need to do on the balance sheet side? Is it just to prepare for the next CapEx phase?

Or is it more liability management on the 2029 revolving credit?

Yes, Marcio, thanks for the question. I mean on the balance sheet, as you know, first 6 months have been busy kind of simplifying the structure and trimming out our debt.

I think we've now, as you can see with Mantoverde and Mantos Blancos producing at and above nameplate capacity started to turn that corner in inflection point on free cash flow generation. So really, the company is now positioned to generate cash, continue to delever, as you see in our net leverage ratio.

And then obviously, MV-O will be self-funded through MV-O when we sanction that in terms of the cash that comes out of Mantoverde and basically continue to delever ahead of a Santo Domingo sanctioning decision in mid-2026.

Not to put the cart ahead of the horse at Mantoverde, but just with regards to the Phase 2 thinking there, just kind of curious, what -- do you have a sort of a conceptual time line of like sort of how much exploration will be needed there to develop a kind of a mineable inventory to support that expansion?

Stefan, yes, great question. Certainly, that's our flagship operation.

It has a tremendous resource as you're sort of alluding to is 1.5 billion tonnes. And so it does have the mineral required for us to move ahead with a Mantoverde 2, which would be sort of the twinning the line and bringing the capacity of that particular mine to 90,000 tonnes a day of ore processed.

So we've been drilling and we're embarking on drilling now. So we are busy procuring drills at this very time.

And we'll be putting in place sort of over the next 1 year to 1.5 years in the order of about $15 million to $20 million extra over what we already committed to this year. So we could see that being approved in the following year and continuing with that drilling.

What I will say is, the drilling that has been conducted is meeting its expectations. And I think later this year, we'll be able to compile that and explain what that does for MV-O a bit and then also what that means in direction to MV 2.

Thank you, operator. We look forward to updating you in late October with our Q3 results.

Until then, stay safe and feel free to reach out to Danny, Michael or Claire, if you have further questions. Thank you for your continued support.

Have a good day.