Summary of Key Points from the Conference Call Industry Overview - The report focuses on the **copper market** within the broader **base metals industry**. The LME copper price has increased by **23% since November**, surpassing **$13,000** per ton, primarily driven by speculative inflows rather than fundamental market factors such as US dollar strength or China growth expectations [1][9][14]. Core Insights and Arguments - **Speculative Inflows**: The recent copper price rally is attributed to speculative inflows, with over **$30 billion** flowing into base metals markets in 2025, marking it as the largest on record. **58%** of this inflow was allocated to copper, leading to record levels of net speculative length in both COMEX and LME [9][14]. - **US Tariff Expectations**: The report anticipates that a refined copper tariff will be announced mid-year and implemented in January 2027. The focus is shifting from tariffs to negotiating agreements for critical mineral supplies [2][14]. - **Price Forecasts**: The forecast for LME copper prices is expected to decline to **$11,000** by December 2026, as global copper market fundamentals are easing, similar to the late stages of the Q2 2024 rally which saw a **20% price correction** [17][37]. - **Demand Growth Concerns**: China's refined copper demand growth was significantly below expectations at **-12% YoY** in Q4 2025. The report highlights potential downside risks to copper demand growth, particularly from electric vehicles (EVs), which are projected to account for **~30%** of global copper demand growth through 2030 [18][23][79]. Additional Important Insights - **Global Inventory Trends**: Global visible copper inventory is building ahead of the usual post-Lunar New Year restock, with a notable increase in copper scrap exports by **9% YoY** [18][23]. - **Copper Intensity in EVs**: The copper intensity of new EVs is decreasing, with some models showing as low as **22 kg/vehicle**, which could lead to a shift from copper to aluminum in wiring due to high copper prices [23][26]. - **Aluminum Market Outlook**: The aluminum prices are expected to fall as new Indonesian supply enters the market, despite current high prices. The effective capacity is projected to increase, potentially leading to a larger global aluminum surplus than expected [28][37]. - **Nickel Market Dynamics**: Nickel prices have rallied **30%** to **$18,670/t** since mid-December 2025, driven by Indonesia's mining quota policies. The report suggests that any constraints on nickel ore availability could significantly impact global balances and prices [29][31][145]. Conclusion - The copper market is currently experiencing a speculative-driven price rally, with significant concerns regarding future demand growth and inventory levels. The anticipated tariff changes and shifts in EV technology could further influence market dynamics. The aluminum and nickel markets are also facing their own unique challenges and opportunities, indicating a complex landscape for investors in the base metals sector.

Financial Data and Key Metrics Changes - Sales in Q2 totaled CAD 19 million at an average realized price of CAD 4.32 per pound, generating revenue of CAD 116 million, impacted by lower sales and a stronger Canadian dollar [21][22] - Net income for the quarter was CAD 22 million or CAD 0.07 per share, primarily driven by unrealized foreign exchange gains [21] - Adjusted earnings showed a net loss of CAD 13 million or CAD 0.04 loss per share [21] - Total cash costs (C1) reported at CAD 3.14 per pound in Q2, higher than the previous quarter due to lower capitalized stripping and lower molybdenum production [22][24] Business Line Data and Key Metrics Changes - Mining rates at Gibraltar increased significantly in Q2, with mine tonnages reaching 30 million tonnes, a 31% increase from Q1, marking the best mining quarter in four years [7] - Copper production remained stable at 20 million pounds, with copper grades at 0.2% and recoveries at 63% [8] - Construction costs for the Florence project totaled CAD 33 million in Q2, with total incurred costs reaching CAD 239 million, tracking towards a revised estimate of CAD 265 million [25] Market Data and Key Metrics Changes - The copper market has experienced volatility due to recent tariff announcements, but the LME copper price remains stable and strong [14] - The U.S. market is incentivizing domestic manufacturing of finished copper products, which is favorable for the Florence project [14] Company Strategy and Development Direction - The company is focused on advancing the Florence project, which is over 90% complete, with initial injection of solutions targeted for September [12] - The New Prosperity agreement allows for future mine development with the consent of the Silkotene Nation, providing a pathway for significant value realization from this asset [16][17] - The Yellowhead project has shown improved economics, with an NPV of CAD 2 billion at a copper price of CAD 4.25 per pound [18] Management's Comments on Operating Environment and Future Outlook - Management expects a strong rebound in production in Q3 and even better in Q4, with higher quality ore being accessed [7][30] - The company is actively looking to extend price protection into 2026 to cover the ramp-up of Florence [26] - Management is optimistic about the recovery of grades and recoveries at Gibraltar, projecting improvements in Q3 and Q4 [29][30] Other Important Information - The SXEW plant experienced a transformer issue, leading to an expected downtime of six to eight weeks, impacting less than 1 million pounds of production [9][10] - The company ended the quarter with a cash balance of CAD 122 million, maintaining liquidity of just under CAD 200 million [25] Q&A Session Summary Question: Commentary on grades and recoveries for Q3 at Gibraltar - Management expects both grade and recovery to improve significantly in Q3, returning to or exceeding reserve grade averages [29][30] Question: Risk of higher oxide material affecting recoveries - Management is confident in projections, noting a transition in oxidation and the expectation of higher grade ore in the coming months [31] Question: Production targets for Florence - The technical report indicates a target of around 40 million pounds for the first year of production [32] Question: Current pricing for sulfuric acid - Sulfuric acid prices are currently in the low CAD 200 range, with secured supply from two different suppliers [34] Question: Capitalized stripping expectations for Q3 - Remaining capital spend at Florence will be weighted to Q3, with minimal capital required in Q4 [38] Question: Production impact from SXEW plant downtime - The SXEW plant is expected to produce 3 to 4 million pounds annually, with a slight increase in production expected next year [40]