Clive Newall - President and Director Hannes Meyer - CFO Philip Pascall - CEO and Chairman

Ian Rossouw - Barclays (London) Alex Terentiew - BMO Capital Markets Matthew Fields - Bank of America Karl Blunden - Goldman Sachs Matt Murphy - Macquarie Greg Barnes - TD Securities Orest Wowkodaw - Scotiabank Sean Wondrack - Deutsche Bank Alexander Hacking - Citi

Good morning. My name is Casey, and I will be your conference operator today. At this time, I would like to welcome everyone to the First Quantum's Third Quarter Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. Mr. Clive Newall, President and Director of First Quantum, you may begin your conference.

Thank you, operator, and thanks everyone for joining us today. On the First Quantum site, in London we have our finance department, Hannes Meyer, CFO; Juliet Wall, General Manager, Finance; and Simon MacLean, Group Reporting Controller; and joining from Perth are Philip Pascall, Chairman and CEO and Zenon Wozniak, Director of Projects. As usual, before we proceed I will draw your attention to the fact that over the course of the conference call, we will be making several forward-looking statements. And as such, I encourage you to read the cautionary note that accompanies our third quarter MD&A and the related results news release as well as the risk factors particular to our Company which are detailed in our most recent annual information form and available on our website and on SEDAR. Following my opening remarks, Hannes will take you through the financial results, which were published yesterday after the close of the TSX. And after that, we will open the lines to your questions. A reminder that the presentation which accompanies this conference call is available on our website and can be accessed either on the events section or on the Q3 2017 results conference call button under the News section of the homepage. So to get started, it was a very constructive quarter. We achieved some key objectives and significantly advanced offers. Sentinel's strong performance to date, which we alluded at our last conference call was indeed one of the highlights. Recall that for about five-week period during the quarter, power supply to the operation was reduced from the already restricted level. So this quarter's performance was particularly notable. Strong improvement is evident in all aspects of operations indicating that adjustments made earlier in the year, including the transition to the terrace mining are effective and now embedded. Already, the seasonal rain seems to have arrived in Zambia, and I'm pleased to say that the mine is responding well to conditions. As a reminder, the fourth quarter will include a scheduled four-day maintenance shutdown. Kansanshi was a cost on a reduced operating level due to the plant smelter maintenance shutdown. During this time, we did produce and sell concentrated third parties and continued to sell and ship anodes into our contracts thereby maintaining a continuous supply to our customers. So, the inventory that we had accumulated ahead of the smelter shut was essentially drawn down and going forward, we expect production will be roughly equal sales. Regarding our Zambian operations, I want to note two other items. First being power supply, which has been a focus for over two years now. The agreement reached on tariff and the importation from other suppliers resulted in the provision of unrestricted power to our operations. This was an important step forward, both for the country, for which the copper industry is a significant contributor to the economy and for First Quantum and hope we are now able to operate without those restrictions and overhang. Second, the current sliding scale royalty regime that came into effect mid-last year. The scale lease from 4% to 6% based on the market price for copper. This year's third quarter marked first time copper price average reached the top of the range triggering a 6% range with a price to continue to average about 272 a pound, the 6% will remain in effect. Turning to the balance sheet management, we are pleased with the refinancing announced last week, followed a number of initiatives successfully executed since the end of 2015 to ensure a continued financial flexibility. This program of initiatives aims to allow us to focus on our operational and development goals, while protecting against short-term volatility in the commodity markets. In addition, this replacement facility of better interest terms, financial covenants and amortization schedule so all around a positive development. We thank our banks for the support, they continue to extend as we execute our strategy. In the meantime, we're advancing the project financing process for Cobre Panama. We've been asked if this is still necessary and while it is not absolutely critical given the work done and the strength in our financial position, we do believe it will be a prudent safeguard against risks such as further copper price volatility. Our sales hedge program has been effective and ensuring stability of cash flows during the recent tight volatility price periods. With the improvement in prices, Hannes and his team have adjusted strategy and I'll let him go into those details. But overall, we believe the strategy employed to protect the strength of our balance sheet was appropriate and effective. During the quarter, we announced that we intent to put Ravensthorpe on carrier maintenance. This was a difficult decision since we have put a lot of effort in building a high-quality team, but in the end, it was hard to justify to reach a good result in a non-sustaining price environment. Carrier maintenance became effective at the beginning of this quarter where we are keeping a keen eye on the markets for potential restart and are progressing the permitting [ph] processing. I'm sure many of you would have seen comments by several market specialists expressing a positive outlook for nickel based on growing deficit, falling inventories in rising prices. The resin SOPs best days could well be ahead. Moving now on to Cobre Panama project, good progress continues as a traction in line with the unchanged schedule for phased commissioning in 2018, followed by a continued ramp up in 2019. At the close of the quarter, overall completion was about 63% with a workforce of over 9100 on site. We are approaching peak construction activity and that number is expected to grow to around 10,000 people by year-end. So, you can appreciate the progress that will be driven by this size workforce. As mentioned before, we however for some time maintained a high focus on power station work and its associated infrastructure. I'm pleased to say that we are now in commissioning phase for the first 150 megawatt generating set and progressing towards first firing of the boil about at the end of this year. And the very significant milestone of the successful hybrid test of the boiler was achieved during the quarter. Overall, at the end of Q3, the power station was just over 78% complete with sets one and two at about 95% and 60% respectively and in line with our planned phase start-up. With the first firing of the boiler plants later this year, power generation to the Panama grid is expected in the first quarter 2018 from the first generating set. The second equally sized set is planned to follow in the middle of 2018. The power generation is in advance of our power requirements commissioning of the process plant. Additionally, we expect to be connected to the Panamanian electricity grid shortly, which will provide pre-commissioning power and reduce our reliance on site gen sets for construction. In terms of completeness of the project in percentage terms, I mentioned project overall is 63% complete and at the end of the third quarter specific disciplines are well advanced with site like concrete progress 81% complete, structural direction 66%, mechanical installation 50%, tailing management ability 71% and pre-strip 69%. In the process plant, seventh and final mill is now being installed and all other areas of the processing plant are progressing across all disciplines. As we mentioned in previous calls, Cobre Panama is benefiting from the opportunity to incorporate a number of enhancements from our experience at both Sentinel and Kansanshi smelter. These together with some extra spare equipment and the additional diligent supply to the power station have added roughly $200 million to the capital estimate. We believe these are well worthy extra CapEx with benefits and startup, operations and future sustaining capital. I would remind you that this project is being built with a 20% higher capacity, but still less CapEx in the previous visits. Meanwhile, we continue to evaluate undertaking some additional mind pre-strip to help open up larger work phase areas for the ultra plus fleet that will be used on the mining. Also, a partial first raise in tailings management facility wall and embankments, which would otherwise normally occur within two years of startup and it could help with the operability of the facility in the early years, and the additional of an 8 million which could boost throughput by at least $0.15 per annum. This is a ball mill, we already are and therefore available to be deployed at Cobre Panama. Together with the improvements already incorporated, the addition of the 8 mill and ancillary work would substantially enhance the already attractive economics of this project. As we progress our thinking on these, we will update you of any decisions. Now at that point, I'll ask Hannes to take us through the financial review. Thank you.

Thanks Clive, and good day to everyone. Turning to the slide for quarterly production, copper production was in line with Q3 2016 as Sentinel's highest quarterly production to-date to offset by lower production that concerned due to the plant smelter shutdown. Sentinel's production totaled 54,000 tons of copper. Roughly 15,000 tons about the Q3 last year and 10,000 tons higher than the previous quarter. Both recoveries and throughput benefited from improved ore availability due to the change to terrace mining. Kansanshi's production of 59,000 tons was 12% below the corresponding quarter last year due to a 9% reduction in marine volumes on the oxide circuit combined with level of coverage on both the oxide and suphide circuits, resulting from the restrictions implemented during the plant smelter shutdown in the quarter. The smelter shutdown resulted in a reduction of the copper produced of 22% compared to the Q3 last year. Turning to the next slide, comparative EBITDA of $304 million was $84 million higher than Q3, 2016 with $113 million contribution of Sentinel. Gross profit was $3 million above Q3 as higher depreciation was offset some of the higher EBITDA. Net debt of $5.1 billion was $228 million above Q2, 2017 reflecting our planned capital expenditures program. Turning to the quarterly cash cost. We maintained a low unit cost production of C1 of $1.21 per pound, this was up from $0.09 from Q2, which included the credit following the review of capable cost and operation provisions in Kansanshi. For the third quarter, cost of Kansanshi and crudes [ph] were also higher on account of the planned maintenance shutdowns for both operations. Excluding Sentinel, copper C1 cost increased by $0.03 against Q3, 2016 all and sustaining cost for the quarter increased $0.25 against the previous quarter reflecting the movement in copper C1 as well as the increase in royalties in Zambia to 6% on the higher copper price. And phasing of sustaining capital expenditure including the smelter shutdown and to the deferred stripping at Kansanshi. With nine months now under our belt, we have note that unit cost guidance for this year to $1.20 to $1.30 per pound for C1. And all and sustaining cost to a range of $1.65 to $1.70 per pound. Turning to the long-term debt profile, at Q3, the company was in compliance of all its existing facility covenants and end the quarter in a strong position from $508 million of committed undrawn facilities and $476 million of unrestricted cash. We have additive liquidity with the replacement corporate facility announced last week. Also importantly, the new facility of $2.2 billion has revised financial covenants and extended to a repayment schedule that commences in December 2019, which gives us more protection against copper price volatility over the term of the agreement. Since the start of the year, with this refinancing and the replacement of the bonds deal for repayment in 2019 and 2020, we have significantly improved the debt maturity profile with $1.4 billion of debt that have been repayable over the next two years pushed out beyond 2019. The process to put in place project finance of Cobre Panama progressed well during this quarter. We are now in final term sheet stage and we'll launch this to the commercial banking market in November. Turning to the hedge program, with the increase in copper price and now improved financial position, we have allowed as our strategy to ensure that we capture more of the upside. Our plan is to continue to hedge up to one year in advance through mainly using zero cost colors. The hedges are currently in place, the hedge currently in place have an improving price profile. Turning to Cobre Panama capital expenditures, as Clive already mentioned, it has been an increase in our Cobre Panama CapEx. This includes rectification of certain components of the power station additional equipment purchases and multiple improvements derived from experience of both Sentinel and Kansanshi smelter which are expected to benefit startup operations and future sustaining capital. The slide also shows the impact on net capital of our acquisition of additional 10% in Cobre Panama. Tentative market guidance, our total copper production guidance is unchanged from previous with that said earlier, we now narrowed the cost guidance, and some proceed one and all-in sustaining cost. Thank you. And I'll now hand back over to Clive.

Okay, thanks Hannes. Operator, if you could now open the floor to questions, please.

[Operator Instructions] And your first question comes from the line of Ian Rossouw from Barclays London. Your line is open.

Thank you and hi guys. Just two questions from me, firstly on the increased CapEx guidance of Cobre Panama, I was hoping, if you could provide point just a bit more details on you send the release that it could benefit the ramp-up in also sustaining CapEx. So, I was wondering if you can actually quantify that on, does it actually help the OpEx C1 cost? And then just, whether you can confirm, you've previously mentioned that you expect to reach 80% of throughput capacity by renovating, is that's still the case? And then maybe just the second question on the VAT balances in Zambia, at least - it came down for the first time I think, and a long time. If you maybe you can just provide bit more details there, how do you expect that to go forward?

Clive, I can.

You want to take the first bit? Yeah.

Our cost has increased, and it, for a number of reasons, so it's probably we're commenting on. Some of just been increases, and for example a power station, where we had like rectification of unforeseeable fault, but it was form of very delivered exercise, to ensure that they work immediately, we start the map and that we don't have a situation with a power stations, has under arm of start. We've also increased a state holding in the like and that, again is aimed at an easy ramp up and earlier settlement of operation. I'd also comment, a project is intended and always has been intended to have a final capacity of 100 million tons per annum. And so, in the review we saw as much of the facilities for this, where they're common. For example, pipelines and conveyors on a whole host of things, and in fact, we would like by the end of 2019, to be in the position where we could consider, and if we need to be proceed to that final expansion. We don't think, that by then it would be major simply because long before then we will consider the 8 mills, which we expect, as Clive said to give us an increase of 15%, and possibly more. And we will indeed be considering that enhancement in the near future. So, in summary, all of the current capital expenditures aimed at ensuring that Cobre Panama, has a rapid ramp up. And in that in due course it can go to 100 million tons per annum with minimal disruption, and as early as possible. And it cost a big advantage of that, with together revenue enhancement, and what we're doing. All about 35% and the net increase in earnings would substantially more than that. We do not intend estimate a detail of this final situation, until we've got through all of our current projects, and before than this consider the 8 mills.

And the second point, 80% throughput about the end of the 2018 then on or, we got into statement file of ours.

Clive, we have always had the aim that by the December of 2018, we will be in a well-position be able to put that figure, it's of 80%, I've forgot about an actual amount - 5 million ton. We do acknowledge that's part of a ramp-up process, that will go on afterwards in terms of stable operation. And the meeting that 5 million tons a year is then to make it easy for us to rent that to pass 6 million tons a month in the early part of 2019. And then you have another question, I forgot the third one?

The other question that was on the VAT and the answer to that is the VAT is receivable in Zambia quarter and we've seen a weakening in the quarter, so it's rate from about $9.15 to $9.17, so that's largely foreign exchange driven into the improvement appearance of improvement.

Okay. Thanks.

Your next question comes from the line of Alex Terentiew from BMO Capital Markets. Your line is open.

Yeah. Thanks guys. Just a couple of questions, first on Sentinel, you had a strong quarter you're looking for more gains and recoveries and the suspect gives you higher throughout now that you have unrestricted power. So do you see upside potential to your 2018 production assessment in Sentinel 215,000 tons. Q3 annualized already at 214 and with the unrestricted power do you anticipate using the enterprise mills as well to further enhance the production there?

We will - no they haven't been the intention to use the enterprise for enhanced production. For a variety of reason you have to handle the material with its gray that's not good economics. But the answer to the other part of your question which is whether we would do better than our guidance of 215,000 tons. We are mindful that the first quarter and often the first five months, we have to cut with wet weather and that's probably why you're seeing that kind of mathematics.

Okay, that makes sense. So I guess just a follow-up question on enterprise and you have that facility there, Ravensthorpe as you know on carrier maintenance, nickel prices are improving a little bit. If nickel prices continue to improve further would you look to restart Ravensthorpe, or your preference be to go towards enterprise where you can probably, you maybe will have better margins?

Good question. They require slightly different things. We're taking the opportunity at Ravensthorpe to give the environmental approval and put a road in so that we can exploit the shoemaker [ph] deposit to the higher grade. And also because there was a strategy shot that we needed to do anyway. So, there are various works being done on the plant. And we'd expect that most of that would be in a position where it would shoot us to start for an 18 month. I think it can stand alone they produces slightly different product from enterprise, which is - will be a so-called flood. In that case we do have the pre-strip of the put still to do and it will depend on what time of the year it is, and you wouldn't want to be starting that in the wet weather. So, it will just depend on when we see those sorts of prices our own views that adding a lot of extra nickel to the market is only when it's going to come out relatively prudent fashion and we just look at another time.

Okay. Great. Thanks. I'll leave and jump back in the queue.

Your next question comes from the line of Brett Levy with CLO Company [ph]. Your line is open.

Hey guys, Clive, Hannes can you guys talk in a sort of as we get beyond Cobre Panama, do you guys plan to sort of stay in a single B range or you kind of looking to delever once you kind of getting into full cash flow mode?

Hi, Brett. We'll start delivering or you'll see the gradual deleveraging as Sentinel contributes more to the bottom line, but obviously the big deleveraging happened when Cobre Panama comes online and with that deleveraging we do expect them to that writing to improve to get to some way in that some way and that sort of double the midst BB sort of range.

And then, when you finish this new project financing at the end of November. Is there any plan or thought to either open market repurchases or stock or of debt again post project financing completion?

Look, we think we will start the project finance in November. So putting us in a closing it there is quite a task we fully through it yet. So we will start the project finance, we have launched that in November. And the other interesting question but probably not expecting an answer on that.

All right. Thanks very much, I'll get back in queue.

Your next question comes from the line of Matthew Fields with Bank of America. Your line is open.

Hey, everyone. Congrats on the progress on the Cobre Panama on the strong operations. Just want to ask little detail about the buy in of the extra 10% stake. It just a housekeeping for modeling questions, what's the scheduling of the installments? Are they evenly spaced over the period, or they sort of front end or backend loaded?

An initial payment due on closing which is expected to probably on the next month or so. And that is about, so that's the initial payment and that will be largely also the contribution from Bank of Nevada for the additional will largely pay for that or more than pay for that. And these sum payments in March and then October of each year. And that sort of evenly spread. So October or another four years from October - going on or basically on closings every anniversary.

Okay. And just as a side for this transaction. Now that you're sort of have the end of the project insight and you're so far long way. Why do you think Niko [ph] sold now when the project that so far advanced?

I'll try to just comment on that. The process started a lot earlier. In fact you may recall that actually started with Corus the other partner. And that was for reasons imposed by the Korean government that they needed to liquidate some of their holdings. And then the politics changed in South Korea. And they went off that, but in the meantime, I think their partners which is - had come to the conclusion that they would offer it. And it can be takes a long time. So this arrangement was actually concluded in large form probably 6-7 months honest, but it is being going along for a while before then. So it wasn't really closed with that in mind with where we are on it.

Okay, great. And then ...

And if you could read Korean, the news release that they put out in Korean, stated very clearly that there was a major strategy change within Niko [ph] where they are offloading all of their assets and focusing on their smelting and trading business.

It's too bad I took French in High School.

Likewise.

And then if you allow me one more, just to talk about the hedging strategy. I noticed you continue to hedge up to sort of the low-to-mid $3 which is great news it sounds like. Do you still intend to hedge about 50% of 2018 sales? Or is there going to be a change in that strategy?

Look we'll hit at a maximum of 50%. But as I said, we'll look at probably protecting more of the bottom end of the range and leave more of the upside open. And so probably reduced probably straight swaps seeing more colors. And maybe even some just to be a put option as that's becomes a lot cheaper.

All right, great. Thanks very much.

Your next question comes from the line of Ross Beaty with 8 Capital [ph]. Your line is open.

Good morning. Thanks for taking my question. Clive the improvement in power availability and reliability in Zambia, is that due to in country power capacity, becoming available, or has there been a material change in the imported power strategy?

Bit of both, it was a good rainy season last year, maybe Philip you were probably more up-to-date than I.

Yeah, as Clive said there was more rains - you could actually monitor the volumes in Kariba [ph] and it's certainly is improved. Then it was also desired by the government, to get the mines on to a more even footing, and this was part of a process to work that were done to do, the way they saw it was that. The hydroelectric power was being provided to the retail market, and the mines will be paying for whatever within imported power. And there is no question then import power, and that's one of the reasons, why in the process so far doing it. We saw to be able to import a portion of our sales. And that was to try and help reduce its cost. And we will do that. I don't know if you aware, but there is quite of lot of excess power, then - South Africa. And there are more power stations coming on stream, and they're interested in export of power, consider or not, I mean, way costing to us. And I think it's, that negotiation was called up with that situation. If they have enough power there, hydroelectric - for their retail markets.

As a follow-up quickly, within the revised CapEx number, the capital budget for a Cobre Panama, is there any additional capital that would assist with the 8 mills, and if you could also remind what would be the incremental capital to go with that incremental capacity expansion? Thank you.

We've not actually given out on estimate for the 8 mills, like something which. We intend to apply mines to and get back within and the near future probably next year. As for what might be included, I think as I said, there are, there's a quite a bit that is or had to be established upfront, if you want to get this higher the 100 million tons per annum, and you just have to make, you've to apply yourself to that, if - there. You could imagine if you under size that and try on fix it later, it's a huge impediment. And that has been covered, and would obviously cover 8 mills as well.

Okay, got it. Thank you, Philip.

Your next question comes from the line of Frank Zappa [ph] with Prudential. Your line is open.

I'll just have a quick note for verification on your 2018 and 2019, production guidance for copper, I think its 600,000 tons and 605,000 tons. Is there any Cobre production in those numbers or is it all expect to be kind of pre-production, as we think about those numbers?

Yeah, we haven't included any Cobre Panama that in our production in any of those guidance.

Okay, thank you.

Your next question comes from Karl Blunden with Goldman Sachs. Your line is open.

Hey, good morning guys. Thanks for the time. I just wanted to clarify just a couple of changes that you've made on the capital structure, you did push back, or you extended the term loans. What can you tell us about the interest rate on those loans and then also the conditions that need to be met to push those back, the maturity back to 2022?

In terms of the interest rates, you can roughly assume about 1% improvement, lower interest that we're paying for probably the better part of this year, or the next 6 to 9 months or so. And then the conditions are yes, that we refinance to the 21 and 22 bonds, as we refinance push them out and then we can think extend that facility.

Catch you, that's helpful. And then, with regard to the projects financing your - having discussions now with commercial banks, as well as the export credit agency. Have you shifted your focus status to accelerate that process with the large the commercial banks and do you anticipate any changes and what the use of proceed could be and I think you have maintained for several quarters that once you wrote down that facility you'd be able to use to retire or extend corporate debt, any changes on that front?

No. There is no change. I mean as we wrote down on that facility will reduce the term facility and eventually will be left with revolving credit facility at the corporate $1.5 billion and the - and will draw down on that facility to for the capital going forward to Cobre Panama.

Got you. Thanks very much guys appreciated.

Your next question comes from the line of Matt Murphy with Macquarie. Your line is open.

Hi, I just had one on the last disclosure on the look about mitigating primary sulfide contamination just wondering if this is something you're seeing increasingly and increasing need to do that stock probe blending or is it something you've been dealing with all along or do you expect it become an increasing problem going forward? Thanks.

That's been all along, there are any changes that we're seeing is that [indiscernible] quite demanding in terms of use of water and the quantum of water and I think we've got to do now and whenever we inject water back into the qualifiers [ph] and we put some more, and they got to make sure we train it up, but [indiscernible] demand of the phase hasn't changed.

Okay. Thanks.

Your next question comes from the line of Greg Barnes from TD Securities. Your line is open.

Yeah, thank you. Just looking at the construction completion at Cobre and your 63% at the end of Q3. I'm wondering how that evolves over the next 12 months?

I'll try to answer that. I think if you historically over the last quarter or two, its progressed about 5% a quarter, but one thing that is important to understand is the way we measure the procurement progress, which is a reasonable component of the project, we actually mentioned that on an incurred basis, so that's essentially when we're receiving voices for equipment of materials. What we do when the commodity prices dropped and the other pretty tough time that during 2015 and 2016 we renegotiated lot of payments on the equipment purchases and push the invoicing out to the back end. So we're are up [indiscernible] at the moment is over 90% of things purchased, progressed on procurement showing at about 60% and that's for about a billion dollars' worth will just over of the project. So the percentage gets a bit skewed low by what looks like a low procurement progress simply because we measure it on an incurred basis.

Okay. So when you start to commissioning where do you anticipate you'll be in terms of overall true construction completion?

When we thought the commissioning if we have actually - if we represent a 100% procurement progress with partly be it about 90%.

Okay. And when would that be?

We're starting commissioning at the end of quarter one next year, but it's a phased commissioning. So we wouldn't be at 90% of the end of quarter one so it's a phase commissioning for the end of quarter one onwards will start with water and [indiscernible] and then continue on and introduction of first all we expect to be towards the end of quarter three next year.

Okay. All right. Just one other question on other subject [indiscernible] in the MD&A that the power [indiscernible] Zambia will be subjected to review in early 2018. What does that mean?

The arrangements that we've had which we don't pay them before amount we agree until a certain amount has been spending to help to stay with our grid. And that is the current negotiation from a technical point of view and we expect that will be a very clear picture and what's being done in that it will resolve the timing of moving from what we currently are paying to that 9.3 and that's what we talked about.

Okay. So you're not going to go above 9.3 you'll stay there.

Yeah. I think there is a U.S. dollar inflation component that applies after certain time, but I'm not having any other detail, it would be selling minor.

That's very helpful. Thanks.

Your next question comes from Oscar [ph] with CIBC. Your line is open.

Thank you, operator and good morning everyone. Just getting back to Cobre Panama and increasing CapEx. I was interested if you could provide a little bit more color just to clarify for me. You talked about the improvements based on the learnings on both Sentinel and Kansanshi. But I understand correctly, you have only purchased equipment, but you haven't done anything with. Thinking of Sentinel, are there have been issues with transitional ore? Could you comment on that?

There are two different questions I think. At the time of the - with some significant modification, Sentinel cuts much better with what I call type B ore which is I'm not sure that it correct definition is transitional ton storing at. This is a very different type of ore body and it's porphyry ore body it's fairly young. But one of the steps that we have done for - control purposes there is something 260,000 meters are great control program that's underway. And we will do and it's in fact started meteorological test work just to determine at where any of that there might be some difficulty where that. We expect that it will be and what they've called well in the zone that just sit above the basic primary ore and it's only generally about a meter and meter and half. So if there is any difficulty and we'll curve there. And that is not included in the ore resource or reserve at all, in other words we expecting the mine as wait.

I'm just trying to if over the course of the next six months before you get, you construct for store if we're going to have additional CapEx increases. Can you comment on that please?

The next time that we will comment talking about will only be when we are talking here about the [indiscernible].

Okay. So presumably without the 8 mills or eight mill there won't be any more additional CapEx expected?

Look I think, all I can say about the project that's a year of its completion is obviously once revisiting those estimates overtime. And we'll address it when the time comes. But our expectation is that we've talked to you about the 8 mills, by then we'd have a pretty good handle on anything that might be at all.

Okay now. That's fair enough. Thank you very much. And then just I'm talking about debt expansion on the 8 Mill. Would you need additional permits and there be a change in sequence in terms of pits that you're mining at that point?

The answer is no to either of that.

Either of that, okay. Thank you very much.

[Operator Instructions]. Your next question is from Orest Wowkodaw from Scotiabank. Your line is open.

Hi, good morning. I have just a clarification question on the hedging program. When we look at slide 21 in the presentation, are the two green lines the effective caller range? Or how do we interpret the caller like your exposure on the caller price?

Yeah, you're right. There are two green lines, it gives you the average of and it's a combination of straight swaps that picked it in the blue part of the bar. So that's going to fixed price. And then the callers give you a bottom one with the green dotted lines sort of giving you the upside sort of range of that. And that's the same pitch of those edges - so, it's for those, that tonnage hedged.

So, could you just, kind of walk me through, then say for the first quarter then of '18, if I just want to look at the collars, what is the band of the collars, is it 258 to 274?

It's slightly blend at this, because this looks at 103,000 tons that's totally edged. So, the portion of that is straight swaps, for that 103,000 tons, that upper end of that would be 274, and the bottom of that would be 258.

Okay. When we pass on the strip out the forward, so, we could just see this by collars.

Just trying to think of we've got anything in that.

All right, look, we'll have a look at that.

Thank you.

Your next question comes from Sean Wondrack with Deutsche Bank. Your line is open.

Hi, just a quick clarification on that last question. What is the benefit from doing collars versus just try buying before we put straight ahead. Is it cheaper, what's with cheaper, what's market of that?

The puts are well fairly cheap. If you're looking just three months ahead. So, if you limit it to three months, then across the puts is very low, and I think at six months it goes up, and then all - start to rise quite rapidly. But it's obviously a function of time. And for benefit of the collars, it tends to get an equivalent offset. If really, which one of those solutions you look at, will be the term end, by how far you've to look. At the moment, we're not keen to do any kind of forward anticipating or hedging through the next quarter or so, because we're in reasonable - far out. And once we get to the first quarter of next, we'll look again at those put prices. But we're reviewing it all the time. It's what we want to use as the insurance base, a lower that it is, obviously, cheaper as those puts.

Great. And I think, and I would imagine, if you get closer to the project, kind of commencing, you might explore more puts, because you'll need a shorter amount of time, between, when you're buying them and when the projects, what you think about it?

When anything we know is certain, as - whatever you do it wrong and [indiscernible]. But, if I give you a background, we generally we had a policy that we want hedge, but with one exception. And that is where we depend for one reason and other, on operational income to cover the capital associated with our investments and projects. And then obviously, that the bank would, when we are looking some kind of security in that, then we start for look at that hedging. And as you get closer, it just depends on, I think one of the questions asked would be about, deleveraging, we need to be mindful of that for quite a time into the future. But, always with the aim, that we'll seek to reduce our debate, as we get into 2020, just because it would be prudent, and obviously with the cash flow that comes from all of those projects.

Thank you. That's helpful. And then quickly Clive, I just wanted to clarify your comment earlier about Sentinel, the terrace mining prepping, is that all passed test now? Or that continue into next quarter. I think you said, it's prepped, and it's basically prepared for the rainy season, is that correct?

If that was the statement, yeah, we think it's still, it's done.

When you modify a [indiscernible] is instantaneous, there is some back benches we still get down before the [indiscernible] on the Northern side of that put, and we've to look further ahead, and just be careful that we've got the drainage, working in the right direction. But, that struck what's core terrace mine, which is all out of the way we're doing it to Cobre Panama is really a whole exercise to ensure that we only have to pump from the very bottom of the line over the time when you don't have intermediate [indiscernible] because it's difficult and that [indiscernible] Sentinel.

Great. Okay. Great. And then my last question, I know you guys were kind of explaining the potential of expanding that mine underground. Is there any update that at this point in time if you guys made any decisions there or? I know that's very [indiscernible].

We have continued the evaluation.

Well I'm not sure if there [indiscernible] about that?

Yeah, we're putting down a decline to so that we can properly draw out the results because we have limited drilling in it. The work on the pilot plant is not complete and I think there is various sort of pre-permitting work going on at the moment. We've got a few years yet.

Okay. That's going to take a little longer. And then the last one just more of a [indiscernible], we've seen market activity in terms of the M&A kind of increasing particularly around the copper space, have you guys known - have you been approach by other miners or having conversations of other miners when you're looking at your assets as they get close to completion. Have you seen that level of activity pickup at all?

We couldn't comment on that market speculation.

Okay. All right. Thank you very much.

Your next question comes from the line of Matthew Fields from Bank of America. Your line is open.

Hey, thanks for it. I've just a couple of follow-ups. You worked on the anode inventory nicely turned to 36,000 tons. Can we expect this stock for work down little further as this is all over you'd like to keep?

Look that's probably about the label that you'd expect it to sort of be throughout normal operations.

Okay, great. And then lastly just I'm sort of curious about this. The detailed engineering percentage of completion for Cobre Panama actually went down to 86% from 87% last quarter. How does that kind of work?

Well about I'll answer that. We had civil engineering companies that have been involved in the design and I guess they initially progress in various ways. We give that to the engineering load by some of the enhancements that we incorporated. So it took additional engineering where we did some of the engineering with some of the enhancements that we brought in that we spoke it about with the CapEx and essentially the engineering sort of plateaued in the last quarter. So we have a 1% difference between the last quarter and this quarter is probably [indiscernible] probably fair to say it stayed up really flat even though we were doing engineering we were actually enhancing some of it what we have done and adding some scope into control system more concentrate.

Okay. Great. And that makes sense just. Then with copper price been what they are and then potentially staying here for a little while? Does this give you guys more clarity on S2.5 or S3 or at least at the very least, do you sort of have maybe an estimate on when we could expect some kind of decision on it?

Well, I'll comment on that. What we have said is at the moment - we weren't going to proceed with that because of the need to understand what amount of copper concentrate we can process anywhere else in the polygraph and that's a fairly very well decision because it depends on other smelters and in turn I mean I don't know if you know, they had reduced their production along so we don't quite show where those smelters are and what their capacity would be and while that persist it leads off in a position where really the only way to make expand the capacity of Sentinel all consent in this case is by having extra smelting capacity that we have to build our self and that capital expenditure is one that we really didn't want to consider right now and while we have the debt and expenditures its occurring on Cobre Panama.

Okay. Got it. So, it's just a multi-variable equation that remain on no for a while?

Well, and yes, we've not keen to incur further capital expenditure that kind, I mean for smaller amount that obviously, quite practical and sensible, it's far the ongoing, sort of capital spending in sustaining in the like. But for that is significant one, and we'll said, we want to do that not knowing what's the parameters are smelter.

Okay, thanks again.

Your next question is from Alex Hacking with Citi. Your line is open.

Hi, thanks for taking my question. Just the follow-up on the 8 mills at the Cobre Panama, you mentioned earlier that the infrastructure is mostly already in place to support that but, I assume that you would need to make some power - investments in the mine fleet or elsewhere. Could you discuss that, and then maybe just give us sense of what the overall CapEx would be when you move ahead with that 8 mills? Thank you.

We're not to come back to you on that, the answer is, yeah, of course it will be, it will need us to consider all of those things and that's what I said is we'll be doing that in the near future that, not right now.

Okay, thanks.

And there are no further questions at this time. I would turn the call back over to Clive Newall for closing remarks.

Okay, thanks to everybody for attending. I know it's a busy day for conference call, so, thanks for attending and we'll talk to you again in the next quarter. Thanks very much.

And ladies and gentlemen this concludes today's conference call. You may now disconnect.