Good morning. My name is Mariamma and I will be your conference operator today. At this time, I would like to welcome everyone to the First Quantum Minerals’ First 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] I would now like to turn the call over to Mr. Clive Newall, President and Director of First Quantum Minerals, you may begin your conference.

Thanks, Operator, and thanks everyone for joining us today. Joining me in London are, Hannes Meyer, CFO; Juliet Wall, General Manager, Finance, and Simon MacLean, Group Reporting Controller. 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 for the company’s first 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, first-quantum.com and on sedar.com. A reminder that the presentation which accompanies this conference call is available on our website and can be accessed either in the events section or through the Q1 2019 results conference call button under the News section of the home page. So, I'll get us started with some opening remarks before Hannes’ review of the financial results. Then we'll open the lines to take your question. 2019 is a transformational year for the company as we expect robust copper production growth while diversifying our geographies as a result of the ramp-up of Cobre Panama. The first quarter delivered as expected solid results both operationally and financially, despite Q1 being traditionally our weakest quarter due to the rainy season in Zambia. In the event we delivered comparative earnings per share of $0.14 for the quarter in-line with consensus estimates. Copper production in the quarter was slightly lower than Q1 last year, the results of lower production at Las Cruces and planned lower production at Kansanshi, which was slightly offset by another strong quarter at Sentinel. Continuing to benefit from the optimization programs of previous years, Sentinel had a great quarter achieving a first quarter production record, which is a 15% increase over Q1 last year. Kansanshi had lower planned production, which called for the processing of lower grade oxide ore and lower throughput on all circuits. The smelter, however, delivered a strong quarter. Las Cruces production declined significantly from Q1 last year, because of the land slippage earlier this year. We’re currently processing a blend of low and high grade stockpiles with an expected average grade of approximately 3.3% as we seek to access to the pit to resume normal mining. Our other smaller operations operated more or less in line with expectation. Copper sales are slightly lower than Q1 last year driven by lower production at Las Cruces, timing of Sentinel handout sales offset somewhat by concentrate sales and lack of sales at Çayeli in Q1 last year due to the timing of shipments. Our average all-in sustaining costs were a $1.77 per pound of copper net of byproduct credits in the quarter an increase from last quarter and the prior year despite more than 10% improvement in costs of Sentinel. However, they remain within our guidance range for the year. But do keep in mind that we're under a new tax and royalty regime in Zambia that became effective on January the first, which also impacts on our costs. We do expect some additional changes in Zambia. You may recall that the government of Zambia introduced a number of changes to royalties and taxes taking effect on January 1. In the same budget they also proposed to replace the current VAT with a sales tax to take effect in April 1. However, the government announced early in April that it was delaying the implementation of the sales tax until July 1, and replacing a single sales tax with a goods and service tax of 9% applied to domestic goods and 16% on imported goods. We estimate that this will increase our group C1 costs and all in sustaining costs by approximately $0.10 this year, and 15% to 18% per year thereafter excluding Cobre Panama. As we get more information, we may further refine these estimates. At Cobre Panama two milestones were achieved in Q1 first all through the mills early in the quarter with first concentrate right at the end. As you can see in the photos in the accompanying presentation, concentrate production has grown substantially, since then the production of first concentrate at the operation was a significant achievement and is a point of tremendous pride amongst our team there. We do expect that more than 80% of this year's production at Cobre Panama to come in the second half and the commercial production is expected sometime early in the fourth quarter. We also achieved some of those significant milestones at Cobre Panama during the quarter as we continue to ramp up to full production rates. These include all commissioning of the first train of the process plant, which consists of two primary crushers, multiple conveyors, one SAG mill, two ball mills rougher and cleaner flotation cells, thickness tailings pumps, some pipeline concentrate pumps and concentrate filtration systems. ball mill's: Since the end of Q1 we've been able to ore commission the second milling train and now how five mills in operation. The final ball in train two will be operational within the next few weeks. We've also been able to bring in to operation other process facilities that contribute to the production ramp-up including reground milling, pebble crushing, Jameson Cells and flotation columns. Some current photos of the progress are included in the presentation and can also be found on the website. The construction workforce, the mobilization continued in the quarter with a planned accelerated reduction in the second and third quarters of the year. There are now over 2,350 designated operations personnel currently engaged including all the key management staff. The mine, port, power station and milling trains one and two of the processing plants are running under operational employee control. While the commissioning team focuses on bringing online any remaining process facilities. To-date this was a few week ago, I guess now we'd produced over 20,000 tons of concentrate at a grade of approximately 20% and the seeing good initial process recoveries around 80%. The first concentrate shipment is expected sometime before the end of Q2. With the continued ramping up of the daily production, we're on track to deliver the 140,000 tons to 175,000 tons of copper over the year at the operation as we previously guided to. So with that I'll ask Hannes to take you through his review.

Thanks, Clive and good day to everyone. Turning to Slide, quarterly production, as I said we had record first quarter production at Sentinel. It was a 15% increase over the same period in 2018. Copper production in Q1 of 237,000 tons was 6% lower than Q1 2018 reflecting the impact of the land slippage at Las Cruces in January and to lower grade production at Kansanshi, which has impacted on planned processing of that lower grade in oxide ore. As Clive said, Cobre Panama achieved first copper production at the end of the quarter and its 25 tons of contained copper was produced. Mining volumes continued to increase. Turning to the next slide, financial overview. Comparative earnings were $0.14 per share for the quarter, double that of the same period in 2018. Comparative EBITDA of $368 million was $5 million higher than Q1 2018, despite around $62 million impact of the land slippage at Las Cruces. Excluding Las Cruces, gross profit was 37% higher with increased net realized metal prices, lower costs, and the positive impact of foreign exchange. Net earnings attributable to shareholders for the quarter were 13% higher than 2018, inclusive of a $25 million loss on partial redemption of senior notes that was excluded from comparative earnings, which in turn with 94% higher than those achieved in 2018. The increase in net debt reflects the planned Panama capital expenditure program. Turning to the next slide on quarterly unit cash costs. Copper C1 cost of $34 per pound was $0.07 higher and all-in sustaining cost of a $77 per pound was 5% higher than Q1 2018. These increases reflect the impact of the lower copper production at Las Cruces, following the land slippage. The increase in all-in sustaining costs was partially offset by lower deferred stripping costs. Copper C1 and all-in sustaining costs in Q1 2019 were within full year guidance. The Zambia sales tax is expected to be effective from 1st of July. We estimate this will have an impact of approximately $0.10 per annum in 2019 on the full year C1 and all-in sustaining cost. In calculating this, I assume around $100 million goods and services subject to sales tax per month across both sites with a split of about half is subject to the 16% import sales tax and the other half is subject to a 9% domestic sales tax, giving a blended rate of 12.5% or $12.5 million per month impact. On an annualized basis that would be around $150 million and with the expected increase in Sentinel production and associated costs next year, that would result in an increased total taxes to around $180 million per annum. This is a high level analysis and detail will differ slightly. The well is subject to final approval in June and that might be different from the current well. Turning to the next slide, the debt and liquidity profile at the quarter-end. The company ended the quarter with $850 million of net and restricted cash and cash equivalents, in addition to $520 million of committed undrawn facilities. And we are in compliance with all financial covenants. During the quarter, the company signed a new $2.7 billion term loan and revolving credit facility. The new facility replace the previous $1.5 billion revolving credit facility and comprises $1.5 billion term loan facility and $1.2 billion revolving credit facility maturing on December 31, 2022. This financing includes revised financial covenants, extends the debt maturity profile of the business and demonstrates the company’s access to a diverse range of capital markets. Also improves the financial flexibility of the company through the added liquidity. On 27 of March, $821 million of the senior notes due in February 21 were redeemed at a price of 101.75 plus the accrued interest. Turning to the hedge program outlook. The company continues with its hedge program to ensure stability of cash flow, as development of the Cobre Panama project continues in its commissioning phase ahead of the commercial production while maintaining compliance with financial covenants. As of today, the company has 92,500 tons of zero cost collars with maturities to February, 2020, at prices ranging from a low side of $2.83 per pound to a high side of $3.06 per pound. And 45,000 tons of unmargined copper forward sales contracts at an average price of $2.91 per pound with periods of maturity to December 2019. Approximately 30% of expected copper sales in 2019 are hedged to unmargined forward and zero cost collar sales contracts. And the average floor price of $2.86 per pound. We will continue to increase our hedge cover as price targets are met and we will use zero cost collars alongside forward contracts and purchase options as appropriate. Moving to the next slide on capital expenditure. Expenditure on Cobre Panama project in the quarter was $133 million or $98 million on a net basis. Guidance on Cobre Panama project capital remains unchanged at $6.3 billion. Guidance for the company's sustaining and other projects includes expenditure relating to Cobre Panama, which includes expenditure to enable commencement of the expansion to 100 million tons per annum capacity, which includes the initial development and engineering work, allowing mining’s proceed to inner pit. Other projects in 2019 include the full in-pit crusher and trolley assist expansion at Sentinel, the dewatering shaft at Kansanshi, remediation work at Las Cruces, following the January land slippage and cost to allow restart at Ravensthorpe. In the appendix, we have provided some additional guidance in regards to the treatment of depreciation and interest following declaration of commercial production at Cobre Panama. We have guided on the 2019 depreciation charge, excluding Cobre Panama, this is expected to be approximately $800 million to $825 million. However, this will increase once Panama moves into commercial production. We have also provided guidance on interest seizing to be capitalized following the declaration of commercial production at Cobre Panama. In the absence of any other major capital projects, this will be expensed. Thank you. And I'll now hand back over to Clive.

Thanks Hannes. So operator, could you please open the lines for taking questions?

[Operator Instructions] Your first question comes from Orest Wowkodaw with Scotia Bank. Your line is open.

Hi, good morning. I was wondering if we could have some more clarification on the Zambian sales tax impact. I'm a little confused by the guidance that you've given here on a per pound basis. When we look at your – your guidance states next year of $0.15 to $0.18 impact on group C1 cost ex-Cobre, looking at your guidance for next year of 570,000 tons or 1.26 billion pounds ex-Cobre and using just the midpoint there that would imply something around 200 million per annum impact. That seems high to me. Can you please clarify that? And also I was wondering if there's an impact on sustaining capital as well from the sales tax that is – whether that's captured here somehow? Thanks.

Yes. Orest, look, it is an estimate. And we also estimate the split between the domestic and the imported tariffs because I think that mix will change once we get final details on that. As I said in the earlier presentation, it's probably with a ramp up in Sentinel, we probably looking at a total impact of about $180 million. It could be close to the $200 million. So it's probably in that sort of range, the impactful next year.

Is that just C1?

That is the C1 and cash impact on the business. Yes.

Okay. So does that include…

So you should think about it as $100 million cash costs subject to these taxes per month. So at a – and just use the midpoint between the nine and the 16 giving you about a 12.5%. So that's an impact of $12.5 million per month or $150 million per annum. As we ramp up at Sentinel, increased further our expenditure, I mean that impact will obviously increase from the $150 million that’s we sort of currently estimate for this year.

And that was an annualized basis, although it's not in for this year, it’s for the full year.

Does that include the impact to sustaining capital?

No, that excludes sustaining capital, so sustaining capital and I mean, that's still unclear that as well. There are provisions within the draft bill that you can apply for certain exemptions through the minister, so that the impact of these sales taxes are not included in the sustaining CapEx.

Okay. I see. Thank you. And then just shifting directions on Cobre Panama. Can you give us an update maybe on how much copper Cobre Panama produced here in April?

Yes, we'll have to get the numbers in for today to get you the full April number.

All right. Sorry, I don't have the exact number yet.

Okay. Thank you.

Just under 4,000 tons.

Great. Thank you so much.

Your next question comes from Lawson Winder with Bank of America Merrill Lynch. Your line is open.

Hi, everybody. Thank you for taking the question. If I might just follow up on that last question on the Zambian assumptions and how you arrived at the $0.15 to $0.18 impact. I'm just curious, what are you assuming there in terms of, first of all, the cost split basically between labor and goods and services. And then what are you serving in terms of that goods and services portion, the percent that is a local versus import?

All right. So labor would not be subject to a sales tax because that's just the normal employment and you pay the payroll taxes.

Yes, exactly.

And then what we've done is used what we spent currently on material that's subject to VAT and that will transformed into a sales tax. So we've used that estimate at about half of that as import and half of that as domestic, I mean, the current split is different, but it's an estimate and it's there to give you some indication of the potential impact. It's not envisaged to be exact signs because we are working in a draft legislation still.

No, that's very helpful. I was just trying to understand your underlying assumptions. And then just sort of stepping back in sort of a larger question on Zambia, when you look at the two assets there, do you still consider Kansanshi to be a core asset?

Absolutely, Kansanshi is a very important asset with long life and as you know, we have a number of different scenarios as to what its future might look like depending on whether we do any of the expansions, which is not in the plan at the moment, but it will remain as a core asset for the foreseeable future.

Okay. That's very helpful. And then just one final one for me. In Panama, there's an election on May 5. I mean, I think if the polls are correct. It looks like Cortizo may win, do you guys have any sense of what you might expect from the new administration whether positive or potentially negative?

I think generally, from all I've read and know about him, it's more of the same. This is center-left, but center-left is fairly closer to the center than most political systems in Panama. I think generally in the - the local pundits feel is unlikely to be no significant changes from a business point of view.

Got you. That's great. Thank you so much.

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

Yes. Thank you, Clive. Can you give us a sense, I know you said 80% of production at Cobre will happen in the second half of the year, but get to that range of 140,000 to 175,000 tons of copper you're going to have to hit by my guess, 72 million tons a year throughput well before the end of the year.

Yes, I mean, that is the plan. And we're pretty confident we can achieve that. So it is very much the second half of the year thing, just about production. But the startup has been pretty good and recoveries are, the first concentrates are pretty good. And the grade of first concentrates also good. So we're pretty confident.

And you bring online two and three I think in Q2?

Yes. Well, certainly the line 2 is coming on very shortly and line 3 about a few weeks later. But yes, it should be in Q2 anyway.

So when do you think Q hit that 72 million ton three year throughput, I guess what’s the targeted exit rate for 2019?

The exit rate for 2019 is close to sort of 300,000 tons of production on an annualized basis. So I think we'll achieve what we've guided, it’s confident by now.

Okay. Thanks Clive.

Your next question comes from Ralph Profiti with Eight Capital. Your line is open.

Good morning Clive. I wanted to come back to the Zambia strategy and do critical decisions have to be made in the next few years or at some point particularly to maintain sort of the mine smelter balances or can some of the expansion projects that you've talked about being held off basically be held off indefinitely for strategic purposes. Now that you have sort of this new visibility on taxes and the very careful way that you're looking at redeployment of capital in Zambia?

Yes, I think – Kansanshi is under continuous scrutiny and there are a whole range of possibilities for that operation going forward. But the decision isn't just about Zambian politics and taxes. It's also availability of smelting capacity. And as you know, there are – there seems to be some pressure in the Congo to build smelters there. And we hear there’s one under construction, though all of those things would have an impact if Congolese concentrate doesn't come to Zambia. It leaves a lot more space in Zambian smelters. So there are a lots of factors weighing on our plans going forward. So right now we have a few more years left before we need to really get on with it, with something or the operation just slowly declines. It's not the end of the world that, by the way, it's not about, it's still a good operation and a good project. But there's a lot of things that may happen in between now and then, which would affect that decision. So you can't be very specific at this point really.

Yes. No, I understand. I understand. Maybe the follow-up, I want to come back to Cobre Panama and thinking about the plan to ramp up and the technical report, because previously you had talked about the plant potentially exceeding design specifications, right. And the challenges perhaps for the mining to keep up with the advent of increased demands from the mill. Now its early days, but can you see the plant versus the technical report going at 100% and 115% of capacity?

Well, its certainly by reading across from the performance at Sentinel where that clearly is as way more capacity than we anticipated. I mean, for example, we've never run the plant we’ve built to be used for enterprise. If the nickel price was right, that could become part of the circuit. But we've got so much fair capacity that we haven't needed to do that. So all indications are that Cobre Panama will have that same sort of level of excessive capacity and as you've heard and seen on the ground, there's a lot of built-in redundancy in that operation. It’s much more so than at Sentinel. So yes, it will have more capacity than we anticipate and I'm sure mining will be the limitation ultimately.

Excellent. Okay, thanks Clive.

Your next question comes from Matthew Murphy with Barclays. Your line is open.

Hi. I had another one on Kansanshi, just the commentary on the availability of acid in the quarter. Can you just talk about what you're seeing in Zambia? Is this something that we should assume going forward where you're going to be preferentially processing, reduced mix, lower grade oxide ore

No, I mean, we’re producing the normal levels of acid. We're moving through a part of the ore body where the higher grade oxide ore is just very high acid consumption. So it does limit our availability.

And so are there…

We’ve deliberately mining lower grade material to sort of optimize the usage of our sulfuric acid.

Okay. So it's not an issue of you're not being able to get acid from other smelters?

We do get acid from other smelters from time to time, but it's not 100% of the time, but there is availability – right now, there's probably [indiscernible] because of the import duty on concentrates into Zambia.

Okay. Okay, thanks. And then, I mean, just the comment on the power interruptions. And I'm wondering, is any of that related to some of the potential challenges around hydro capacity this year or do you think there's any chance of you being impacted by load shedding this year?

Well, firstly, the answer to your question with regard to the power interruption at Kansanshi, there were all related to problems with the interconnector from DRC. And we had a number of outages during the period, there’s a lot of lightning strikes of course, it's the rainy season, so that doesn't help. But that's a kind of perennial problem. We have issues regularly with relating to the interconnector and its unreliability. It's not that it's providing us with lots of power. It's actually we import voltage variability and all sorts of things through that line. That's the problem. And it kind of destabilizes the Zambian grid in the copper belt. So that was the first part of the question. The second part is that, yes, the river flows into Kariba are still relatively low. They're low picking up, but they are being matched by the flow of water out of the dam. So the dam levels are going to be pretty stable going forward. So it is being control this year. It's also part and parcel of the repair work that's going on in that plunge pool. So they're having to be very careful about how much water goes through the dam. So it doesn't interfere with that work as well. So ZESCO have showed everybody that there won't be any outages, any restrictions. And so let's hope. If they continued to manage it the way they'd been doing so far this rainy season, we should be okay, but it will be towards the right at the end of the year there is going to be a problem, that's when it might occur. So we don't know.

Okay. Thank you.

Your next question comes from Danielle Chigumira with Macquarie. Your line is open.

Hi there. Thanks for the call. And just another question on the Zambian sales tax, if I may. The 2020 impacts is not doubled to 2019 impact and so I just wanted to understand what drives this out or are you assuming a different mix between domestic and imported or what's the drivers behind that?

Yes, it does assume some optimization of the supply chain. It will take some time to drive through but it does assume that.

Okay, thanks for that. And just secondly on Cobre Panama, can you remind us what level of capitalized pre-commercial costs you expect to incur throughout the year?

Yes. I mean, for the first quarter, the pre-commercial production on a net basis was about $34 million. There is some revenue offsetting that, in terms of sort of pure costs in the second quarter around about $100 million, but again, there will be some revenue coming through to look to set us off as well.

Okay, thanks.

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

Hey everyone. I just want to maybe follow-up on that last one about capitalized Cobre expenses. The CapEx for the first quarter was pretty high. I think about 40% of your total full year guidance. So is that essentially just you seeing Cobre expenses being capitalized or is it really front end loaded? So you’re billion plus CapEx for the year?

I mean, for this quarter, Cobre Panama, the capital expenditure was just under $370 million, about $366 million. And so you'll see that about $133 million of that is on the pure project. In addition to that, there's about $157 million which is made up of other sustaining and project expenditure and as per the sort of technical report, a lot of that is to allow the expansion to 100 Mtpa capacity and also the initial development and engineering work for the Kaleena [ph] pit. And also within vast amount, there's an amount for stripping just stayed for 14 million. And also that those pre-commercial costs that we just mentioned on a net basis, $34 million. So yes, of that total amount, other expenditure that was talked about in technical report, there is a bit of a front loading expect in this quarter.

And I think you will see, maybe quite a lot of spin in the second quarter as well. But by the third quarter as we start getting – receiving revenues from the concentrate, I mean that offsets some of the negative outflow in terms of the operational cost as well. So there will be netting off on the revenue versus the operating expenses that will be capitalized. So it's probably less spin during Q3 and Q4 then or until we get to commercial production.

At Q3 you would have paid for pre-commercial would move into credit obviously, the revenue exceeding costs, Q2 you’ll probably still find that costs at site are still exceeding revenue about that.

So, I think you should think about it that most of it will probably be done by Q2 and thereafter, there's a credit or chip movement just about a breakeven position on that.

Okay, great. So if you're, do you anticipate being free cash flow positive for the second half of the year? And if so, do you still think you need to draw that 300 million on the accordion to reduce the remainder of the 21?

Look, we will have to see in the accordion. We exercise that and we have upsized that, I mean there's no real need to take up to the remainder of the $300 million bonds. But it just cleans it up, but it's, it's not a necessity for us. It's not an urgent need to do that.

And do you anticipate being free cash flow positive in the second half?

Yes, I mean it all depends on how quickly the ramp-up occurs at Panama. I mean we should be getting there at some stage in the second half.

Okay. Thank you very much.

Your next question comes from Oscar Cabrera with CIBC. Your line is open.

Thank you operator. And good morning, afternoon everyone. I'm just wondering if you can help us think through the impact of sustaining CapEx in Zambia. I can understand, this is not well defined now, but, with for example, your VAT credit, would you be able to apply that against it and what type of depreciation would be offset with the government allow you to take up? Have they talked about that?

Oscar it's a very good question. And one that I'd like to answer or to have the answer for. I could just cite some remarks made by the minister and quote it in the press that, she intends to repay and settle these VAT. So there's been sessions made that it is owing and we need to find some mechanism of offsetting or repaying that. So, I think that is something that we will discuss and continue to discuss in future. And you could, we could get to a position where we get to a certain or an offset of these VAT against various other taxes, but it's unclear at the moment.

Okay. Hannes. We'll keep waiting with it, once you have an answer on that. If I may this second question on your production in Kansanshi and Sentinel beyond 2021, if I remember correctly, we needed the S3 project to maintain Kansanshi’s production at about the level where it's at right now. Can you just remind me what that grade profile looks like, ore production profile beyond 2021?

Well, it depends where if we build S3 or S2.5, there's a – as I say there is a few variables there and of course still comes down to the smelter smelting capacity at the end of the day. But should we, if we go ahead with S3, we maintain the sort of current production levels for quite a few years. I haven't got the schedule in front of me, but it was quite a few years, probably seven or eight years I think.

Yes, one initially increased actually.

Yes, it does.

Above the current levels. And then, yeah, it will then remain at the current levels for quite a long time. I think if we don't do an expansion and 21 it will decrease. In 2021, it's still fairly level – the drop off is 2022.

So about 22, I think it drops to two 20 or something like that. Or 215. Yeah.

Sorry, can you just repeat that? I couldn't hear you. It was 215.

About 220,000 tons or so by 2022 if we don't do the expansion.

And then you expect that to continue to drop steadily, I assume?

Yes. It will sort of gradually decline. Yes.

Okay, great. Thank you. And then just lastly, on Ravensthorpe you continue to talk about, restarting the operation. I just wondering what sort of like, the level or sustainable level of nickel prices you would need to give the go ahead on that operation.

Yeah, it's a related, not just the nickel price but the cobalt price as well. I think the decision would be dependent on but primarily the nickel price going forward. But we are, have been looking also at separating the nickel and cobalt into two different concentrates, which would give us higher pay ability, which is the equivalent of a higher price. I mean right now, I mean at current prices we'd probably be breaking even true maybe in small profit of the current price. But it's the move to the next pit, that, is of course the deterrent if you're, if the thing is only marginal, marginally profitable. So because that's got a significant capital cost associated with it. And, why would you eat up reserves and resources for no real gain. So yeah, we do need a significantly higher nickel price, but also a higher cobalt price helps. And there's a lot of interest in Ravensthorpe from battery producers. There's a lot of possibilities for Ravensthorpe going forward.

That's great. Thanks for the color.

Your next question comes from Jan Rossouw with Barclays. Your line is open.

Hi guys, maybe just to follow up on Oscar's question on the credits. Does the government dispute the balance you quote in your balance sheet. I remember a few years ago there was some changes to that legislation where the government required, sort of proof of final destination. And I would imagine if you're selling to traders, you can't provide those documents. So maybe just a comment on that and then just on the concentrate balances within Zambia, I mean, is there any risk given you've seen obviously seen some lower smelter outputs from some of your competitors or peers within Zambia, if there's any risk to your Sentinel sort of ramp-up in production for next year.

I think on, as I said earlier, the Minister has been clear in parliament and in the media that those amounts, she owes that amount and it needs to be refunded and re settled offset. Of course you do face challenges on a continuous basis in terms of various claims of assessments and the like. So, by enlarge the amount is not disputed. But I mean you will have some challenges in terms of certain of the claims. And then in terms of the concentrate balances, I don't think the additional bits of Sentinel would be an issue because I think there's quite a bit of additional capacity in Zambia available at the moment. So between especially Zambia smelter and CCS, I think both can – and KCM…

Capacity a bit of our own smelter…

There has been some news flow around some of them obviously reducing outputs because of issues with import taxes, obviously getting some material from the DRC. Okay. So you don't anticipate that to be an issue?

No, it's only about a 120,000 tons of concentrate additional, so it's not massive.

Okay. All right. Thank you.

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

Just one for me. When you think about sort of your CapEx program for 2019 and you think about your liquidity and your cash and your revolver, would you suspect that your liquidity is going to be the tightest in 2Q in basically improving thereafter?

Yeah, I think it would be a fair assumption. And early in the call I did say in terms of Cobre Panama. I mean we do sell outflows in Q2 and soon as we start receiving the revenue from the concentrate sales, that we should have a shipment in Q2. And then in Q3 we should have more shipments from that time you'll get to a sort of breakeven position and a turn. So yes, it would be a fair assumption to say by mid-year that would be the low point of liquidity and the tightest.

Gotcha. And as you progress through the year, assuming Cobre comes online successfully, is there additional working capital or cash that's trapped sort of in preparing that asset for commercial production, that we could see kind of flow back onto the balance sheet?

I think as you ramp up. You will have the receivables sort of building up. So that there will be increase in the working capital. Inventories will build up but that's catered for within the current expenditure and operational expenditure as we build up. So, as we ramp up, I think you'll get to a steady state probably late or end of the year, probably by end of the year.

Okay. And you expect the biggest source of cash to come in 4Q?

Sorry. The biggest source of cash.

Source of cash in terms of the four quarters you see here to be in 4Q or

In terms of net positive cash flow from Panama.

Yes.

Yeah. It would be quarter four.

All right. Thank you very much.

[Operator Instructions] Your next question comes from Paul Gait with Bernstein. Your line is open.

Hi guys, thanks very much indeed. It's really just a follow-up to that last question. So steady state working capital by the end of the year, I mean, should we expect them to see sort of the $7 billion of net debt as the peak level of gearing or from what I'm hearing around the sort of commercialization and production? I mean, are we expecting to see that net debt figure increase again in the second quarter? I suppose what I'm trying to get at is, when is the point of inflection, on the balance sheet. And then sort of second question is in the cashflow statement, the $156 million on that working capital change again, do we expect that number to sort of be coming in over the subsequent quarters and just really what about 156 million corresponds to, would be very helpful. Thanks very much.

All right, Net debt is not at the peak level yet as we still explain, expect to spend money in Q2 whilst we building Panama. So, I would expect Q2 to be at a higher level, way after depending on the concentrate shipments and the production that you traverse and get to a break-even or positive cash flow point in the second half of the year. In terms of the working capital. We've had increases in inventories in this past quarter, notably consumables of about $50 million and that's largely attributable to Panama. So you wouldn't expect that to reverse because that will be part of the capital required to operate the mine. In terms of receivables, we've had certain receivables that increased by $123 million in the last quarter. $51 million of that relates to VAT in Zambia. So I mean, that's ongoing discussions and then trade receivables, you'll obviously expect that to receive that back, in the course of the next quarter or two. That should unwind as well. I think it's probably that unfinished goods probably increased a little bit now and that should decrease in Q2, but then that's an offset then with an Panama should increase in Q2 and Q3. And you would probably expect Panama, Panama finished goods to increase to a maximum by end of the year or early in Q1, Q1 next year as it ramps up and get to full capacity.

Perfect. Thank you very much indeed.

Your next question comes from Jatinder Goel with Exane BNP Paribas. Your line is open.

Hi. Just a quick one on a Zambia part that is there was some media article suggesting, just looking for significant power tariff increase, maybe later this year. Have you seen anything on ground developing or was it just rumors? Thank you.

For rate some articles that they were looking at significant increases, but on the domestic users, we've not seen any of that in the industrial and uses yet. I think there's been quite a bit of a pressure on over the last few years in terms of power and taxes that quite a few of the mines are probably at a close to break-even position at this stage. So, I haven't seen any of that yet and I'll think, I don't expect it anytime soon, but you can never tell.

Okay. Thank you.

Your next question comes from Daniel McConvey with Rossport Investments. Your line is open.

Good day. My, my questions on the VAT credits have been answered, so thank you.

Your next question comes from Alexandra Symeonidi with NN Investment Partners. Your line is open.

[Question Inaudible]

Sorry the line was very faint and you were very unclear. Can you just repeat, I heard something about C1 cash cost and Las Cruces. So I couldn’t hear you.

So basically that was my question. I see C1 costs increase across all of your mines. However you mentioned that this is because of the land slippage in Las Cruces. So yeah, if you can provide me, originally why we see C1 cost increase in the rest of your mines. Thank you.

In terms of – the comment about C1 cash cost in Las Cruces was that overall in the group level that has increased because Las Cruces is quite a low cost producer. So that on an average basis that magnify that even more the increase. In the likes of Zambia, we've had additional production, I mean production was a bit lower at Kansanshi. So that that contributed towards that as well. Other detail

Kansanshi it would be largely with the impact on production.

Okay. Thank you.

There are no further questions at this time. I will now turn the call back over to Clive for closing remarks.

Well, thank you very much operator. Before everybody goes, I just want to remind everyone that our Annual General Meeting will be taking place on May 9 at 10:00 A.M. TSX Gallery in Toronto. And everybody is invited to attend. We look forward to seeing some of you there. And finally, if there are any follow up questions, please contact myself or Lisa and we will do our best to get back to you. Thanks for your participation.

This concludes today's conference call. You may now disconnect.