MMG:Strong ramp up at Dugald River

Event

MMG’s copper production in 2QCY18was marginally lower than we forecasthowever full year production guidance has been maintained. Zinc productionwas better than forecast with Dugald River exceeding our expectations.

Impact

Las Bambas ramping back up. MMG produced 137.4kt of copper in the2QCY18, 9% below our forecast. Production at Las Bambas was 10% lowerthan expected but still demonstrated a strong recover for the 1QCY18whichwas impacted by geotechnical issues. Guidance for the mine has beenmaintained indicating further improvement in 2HCY18. Sepon’s production of16.8kt copper was also 11% below forecast with Kinsevere’s 20.5kt in line.

Dugald River achieves commercial production. Dugald River produced atotal of 38.6kt of zinc in the quarter with 27.6kt post commercial production,which was achieved on 1May. We forecast 30.6kt of zinc production. Millthroughput is already exceeding nameplate and the current focus is onramping up mining rates.

CY18guidance maintained. MMG has maintained its CY18productionguidance of 560kt to 590kt of copper and 190kt to 220kt of zinc. We currentlyforecast 506kt copper and 200kt of zinc.

Action and recommendation

Maintain Outperform. A softer copper production result than we forecast asLas Bambas continues to ramp back up from the issues of 1QCY18. DugaldRiver’s mill ramp up has been faster than we anticipated, the focus will now beon bringing the mine up to stable production rates.