Ivanhoe Mines Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 6, 2023

There are 8 speakers on the call.

Operator

Good day and thank you for standing by. Welcome to the Ivanhoe Mines Third Quarter 2023 Financial Results Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. And I would now like to hand the conference over to your speaker today, Mr.

Operator

Matthew Kiebel, Director of Investor Relations and Corporate Communications. Sir, please go ahead.

Speaker 1

Thank you very much, operator. Hello, everyone, and good day. This is Matthew Kuebel live from Vancouver. It's my pleasure to welcome you to the Ivanhoe Mines Third Quarter 2023 financial results conference call. On the line today from Ivanhoe Mines, we have Founder and Executive Co Chairman, Robert Friedland President, Marni Clotier Chief Financial Officer, David Van Hoeften Chief Operating Officer, Mark Farrin and Senior Vice President, Corporate Development and Investor Relations, Alex Pickard.

Speaker 1

We will finish today's event with a question and answer session. You can again submit a question using the Q and A box on the webcast page as well as through the conference operator via your phone line. Please contact our IR team directly for follow-up questions that are not addressed during the call. Before we begin, I'd like to remind everyone that today's event will contain Details of the forward looking statements are contained in our news release today, November 6, as well as on SEDAR Plus and at www.ivenhomines. Com.

Speaker 1

It is now my pleasure to introduce Ivanhoe Mines' Founder and Executive Co Chairman, Robert Friedland, for some opening remarks. Robert, please go ahead.

Speaker 2

Thank you and welcome to everybody participating on this call. I have the good fortune to be in California on the U. S. West Coast. I would remind us that a stellar Q3, we couldn't be happier To present our prospects, we're starting with an opening image on the 5th October when His Excellency Felix Chisiquiti, the President of the Democratic Republic of the Congo, together with a senior government delegation Led by Prime Minister Sama visited our campus and the opening of our Kamoa Center of Excellence, Educational institution that we've established because this is going to be a 100 year mine, training generations of young Congolese.

Speaker 2

I'm very happy to tell you that over 97% of our employees are from the Democratic Republic of the Congo. And one of our major commitments is to invest in the labor force, both women and men who are doing such a fantastic job and developing a copper district the world desperately needs. In the recent weeks, we've had the Tragic situation in the Middle East compounding the conflict over the fate of Ukraine, Considerable tensions in the world economy against the background of the Federal Reserve Board raising rates. On Friday, there was some indication that the Fed's ability to raise rates may be on pause perhaps permanently In a period of time when copper inventories are extremely low, it is difficult to give this audience An idea of how many people have approached Ivanow Mines to participate in the unparalleled potential of the Western Forlans, which is unequivocally the best hunting ground for copper on this planet we all share. Those of you who listen to my public remarks know that we think there's no chance whatsoever of a meaningful energy transition without a lot more copper mining.

Speaker 2

And there's no point in mining copper if you're going to generate copious amounts of global warming gas to try to get the metal you need to reduce the generation of global warming gas. So the reinvention of mining by the women and the men that run our company led by our President, Marna, who will speak next, serves as a beacon for the industry to prove that we can do things differently. In this quarter, we announced that an independent audit has shown us to be the greenest major copper producer in the world. We're building the greenest major copper smelter in the world, which will very much reduce Our scope 3 emissions to essentially the best in the industry. And I'm very happy to Welcome to support from the G7 Nations, President Joe Biden and his emissary on All Things Energy Transition, Amos Hochstein, who announced European and American support for the Lobito corridor.

Speaker 2

That quarter will run from Colweissie to the Angolan border and then to the seaport of Lobito and will sharply reduce our Scope 3 carbon dioxide emissions, it will reduce the amount of capital we will need to develop new mines in the Western Four Lands. In That railroad will go right over our Western Portland holdings on the way to Angola. And that means that our cutoff grades didn't come down and the threshold for having spectacular economics in the Congo will do nothing but improve. So there's a number of trends underway that are leading to a better and better Democratic Republic of the Congo. I've said unequivocally that the DRC is the best place in the world to be mining copper metal.

Speaker 2

And I've repeatedly said that having operated in 64 countries, I find it perplexing The discount rates that people are applying in some banks for the world's best place to go mining. When people actually go there and see the 5 gs wireless, the young labor force, the availability of hydroelectric power, The extremely high grades, the lack of ice and snow and the engaged labor force, everybody working there with Such dedicated efforts, I can tell you at my age, nothing could make us happier than the progress we're making for all of our stakeholders. Hats off to Marna and her extraordinary team of managers who've created the best corporate culture in the mining industry. And hats off to this incredible quarter where we can report that we're comfortably and well ahead of schedule in the construction of our Stage 3 concentrator and we're also well ahead of schedule for the start up of the Capuchin Zinc Copper Silver Mine, which also has a very significant potential endowment of Gallium and Germanium, 2 metals that we have not even encountered in the economics of the project, but for which there is potential for recovery from the refining process. I just want to remind everybody that what Ibero Mines is doing is Unprecedented.

Speaker 2

We're building several major projects at once. The Kimoa number 1 minutee and the Kimono No. 2 minutee, which are now co joined underground, the Phase 3 concentrator, The world class smelter, which is a direct to blister smelter, state of the art and very, very clean and powered by Hydroelectric Power, the Capushi Mine and the Platte Reef Mine all going into production and now Platte Reef at an ever expanded rate, opening soon in the theater near you. And then on top of that, we have our exploration efforts in the Western Forlanes and initiating now at the Mokopane feeder, probably the world's largest potential mineral target in South Africa. So we have a very bright future ahead of us.

Speaker 2

We'll be talking about this in subsequent months. I'm off to Abu Dhabi to speak at a conference later this week. And with that introduction, I'll turn this over to Marna, who has done such an incredible job in the last quarter. Marna?

Speaker 3

Thank you, Robert. Those were very kind words. I think you've covered most of our highlights in your intro, but maybe just looking At that picture in front of everybody, that's a photo of our mining management team when they completed the holding between Kaumaoa-one and Kansoko, the 2 mines that will form part of our Phase 3 minutee. And you can see everybody is very proud of that achievement. We had a great quarter again and I always feel a bit guilty that I get to present sort of the highlights in the first opening solver.

Speaker 3

But we had another production record in the Q3. We produced close to 104,000 tonnes of copper. And I think what we are most proud of is our cash cost at £1.46 per $1.46 per pound of copper. Average for the year to date is 1.43 We think we've done a great job in containing our costs, and we will continue to do so and stay within guidance towards the Q4. As Robert mentioned earlier, Capucci is ahead of schedule, planning to start production in the Q2 of next year.

Speaker 3

Platouv is on schedule for production in the Q3. And as we mentioned, Kamawa Phase 3, the concentrator plant is ahead of schedule for the Q3, and that would allow us to get some early times out next year. Our guidance we will put out in January of next year, so check this space. On the next slide, Our total recordable injury frequency rate across all three of our sites is well below the industry average, but it is regrettable that we had a fatality at Kamau Kukula due to a fall of ground. We investigated the fall of ground and we implemented mitigating measures to prevent a reoccurrence.

Speaker 3

Safety in the mining industry requires continued focus from each and every individual employee and contractor, and we share our learnings across the industry and our operations to continuously strive towards a culture of 0 harm, which we aspire to at each of our sites. Robert briefly touched on our greenhouse gas emission intensity study. Our team recently announced the findings of an updated Greenhouse Gas Emissions Assessment that we commissioned from Skaar and Associates and WSP Group. And this report confirms that in 2022, Kumaoka Gula produced among the lowest carbon emissions per unit of copper in the world and the lowest of any major mine of any major copper mine. This is partially due to the incredibly high grade at Kaumao Kukula where we milled an average grade of 5.5% in 2022.

Speaker 3

It's roughly 10 times higher than the estimated average copperhead grade globally of 0.6%. It is also a function of the DRC grid being amongst the world's cleanest with 99.5% of grid power generated from hydroelectricity. And on a Scope 12 basis, Qumoa Kokulhas greenhouse gas emissions in 10/13/2022 was amongst the world's lowest. It ranks Chemoa at the bottom for Scope 1 and Scope 2. And with The commissioning of the smelter, we will also see a 46% reduction in emissions once we include Scope 3 emissions.

Speaker 3

And then last from me, but not least, we were privileged to have the President, His Excellency President Felix Teckede, the First Lady, the Prime Minister, the Governor of the province, as well as a host of other delegates at Kaumau Kukula during October. The President spent about 2 hours on-site. We addressed our first intake of students at the center of excellence, spending some quality personal time with each of them. We then took 2 of the mines, saw what we are busy constructing at the smelter and addressed our staff in our concentrator shed. It created such a high sense of morale for all our workers and the President was pleasantly surprised to see this world class facility in his backyard.

Speaker 3

He mentioned Kamaoka Kula when he went to announce his presidency, and I think that is really a feather in our path to show that we are really a game changer in the DRC in terms of how we run our business. We do mine with a greater purpose. So with that as an intro, I will now hand over to David Tanjaerzen, our CFO to take you through the quarterly financials.

Speaker 4

Hello, Alex. Can you hear me now?

Speaker 5

Hi, David. Yes, there you are. Please go ahead.

Speaker 4

Great. There I was talking away. Thanks, Madeline, and good day to everyone joining the call today. Kumaokukula sold just over 96,500 tonnes of payable copper in the Q3 of 2023. That was 5% down from the 101,500 tonnes sold in the 2nd quarter.

Speaker 4

Even though production was slightly higher, Copper and concentrate held in inventory increased to over 10,000 tonnes at quarter end with more than 7,000 tonnes thereof being copper in work in progress Thankful tolling at the local smelter in Q3. We expect excess inventory to unwind in the 4th quarter. With the slight decrease in time sold, revenue at Gamakakula was down only 1% from the previous quarter and up by more than 50 from Q3 last year with the realized copper price for Q3 of $3.84 per pound being slightly up from Q2. The Q3 2023 sales takes Kumar Kukula sales for the year to date to well over $2,000,000,000 up from $1,500,000,000 for the same period last year. Q3 costs were slightly higher with the 3rd quarter coming in at 1.3 6 per pound of payable copper produced, just 3% up from the average over the last year.

Speaker 4

The quarter on quarter cash cost increase reflects some impact of inflation on maintenance and operating costs at Kaumau Kapula as well as the increase in processing costs driven by higher diesel usage to run generators. Cash cost for the year to date is $1.43 per pound and below the midpoint of our guidance, which we reiterate. Kamau Kokoda's EBITDA was $423,000,000 in the Q3 of 2023 and was 7% down when compared to Q2 2023. EBITDA and EBITDA margin quarter on quarter was down due to the decrease in tons sold as well as realized foreign exchange, which is illustrated nicely in the next slide. The 5% decrease in tons sold mentioned earlier was responsible for a $34,000,000 decrease in EBITDA, And we expect Q4 to reap the benefits as inventory unwinds.

Speaker 4

The decrease in the copper price at which provisioning price Sales we recorded in Q3 had an $8,000,000 impact, while the quarter on quarter change in the remeasurement of revenue, which was a gain of $13,000,000 in Q3 and a loss of $28,000,000 in Q2 had a $41,000,000 impact. The $32,000,000 decrease to the right was as a result of the slightly higher cash cost in Q3, but also due to the realized foreign exchange causing a $14,000,000 swing quarter on

Speaker 3

quarter.

Speaker 4

As one would expect of the same in the previous slide, Avanos Group level adjusted EBITDA for Q3 decreased from Q2 with a decrease drop directly linked to the decrease in Kamaukakula's EBITDA explained on the previous slides and the decrease in Ivanhoe's share thereof as a result. Ivanhoe's adjusted EBITDA was $496,000,000 for the 9 months ending 30 September 2023, and that was up from $325,000,000 for the same period in 2022. We recognized income in aggregate of $121,000,000 from Kumakul Kulu in Q3, A combination of Ivanhoe's share of profit from the joint venture, which is illustrated in the chart at the bottom left of your screen, Together with the interest income of $51,000,000 in Q3 on loans to the joint venture, Avino recorded a quarterly profit of $108,000,000 in the 3rd quarter, driven by this income from Kamakukula. And on the right hand side, we have once again presented our reported net profit alongside the normalized net profit, which excludes fair value adjustments on the convertible notes for each period. We have recorded a steady increase in profit through the commissioning and ramp up of Kumaoka Kula's Phase 2 and debottlenecking.

Speaker 4

But this slide just illustrates a very small part of Ivanhoe's activities during the quarter with so much more being worked on that will generate short term growth at all of the Kokulak Flat Reef and Kapushi. The 3rd quarter saw us continue the expansion of Phase 3 at Kamaka Kula with over $320,000,000 invested Thereon in the quarter with the total investment in 2023 now just over $1,000,000,000 We also continue to progress both BlackBerry's and Khushi's development with investment in CapEx of $64,000,000 $74,000,000 respectively, in the quarter. And both projects are tracking very well as Alex and Mark will take you through in more detail in upcoming slides. 2023 CapEx guidance and spending plans remain unchanged at each of these projects. And Ibero Mines has a healthy cash balance of $303,000,000 at the end of the period with limited debt other than the $575,000,000 convertible notes maturing in 2026, providing plenty of balance sheet flexibility.

Speaker 4

Additional standalone facilities at each project is well advanced, most of which are expected to be closed in the very near term. I will now hand over to Alex Piccard, our Senior Vice President, Corporate Development and IR to commence the operations and projects out there.

Speaker 5

Thank you, David. I'm glad we found you there and good day to everybody on the line from London. Today, we also have Mark Farrin, our Chief Operating Officer joining us directly on the line from Komorokukula. So I will kick off on Koma Okula and then I will hand over to Mark to take you through the latest updates on our projects and our construction activities. As you also heard, we also have Executive Co Chairman, Robert Friedland, who will provide an update on the Western Forland and close the call out before our Q and A.

Speaker 5

So starting with Kamo Kukula, as Mana mentioned, we are very pleased to report another record quarter. So we just shaded the 2nd quarter by producing close to 104,000 tons of copper and concentrate. This brings our year to date copper production to 301,336 tonnes. So that places us well on track to meet Our initial guidance range for the year, which was 390,000 to 430,000 tonnes of copper and concentrates. From the perspective of the recoveries, they were very consistent, in fact exactly in line with the previous quarter at 87.2%.

Speaker 5

Again, this is higher than our design recovery rate of 86%. And on the next slide, I will talk a bit more about our our tailings recovery project that we announced a couple of months ago. It's also important just to note that both the quarter And the solid recoveries that we have been achieving have been done so in spite of the intermittent power issues that we've continued to face at Kamaoka Kula. So in effect, we are producing these volumes, but still leaving quite a bit of production on the table. So Mark Farrin will also have more details about the initiatives that we are undertaking to address those issues across the board.

Speaker 5

Looking now at the savings recovery project, so we spoke during the last quarter about the preliminary test work that we completed. And this showed a very, very positive result that it is possible to increase our recoveries from 87% today towards the mid-90s by installing quite conventional dedicated grinding and flotation for the tailings stream. So since that press release, we've now moved into basic engineering. So this will be completed in the Q1 of next year. And then after that, we will move into implementation to retrofit the necessary equipment to the Phase 1 and 2 modules.

Speaker 5

And maybe just as a reminder of the sort of size of the prize that we have here at Kaumao Kahului, you can see the chart on the right. Manu touched on these stats earlier, but one of the problems that we have and it's a good problem to have is that because we mine At the grade of 5.5 percent copper or so, we also have tailings that currently are at the grade of somewhere between 0.7% and 0.8 So our tailings grade is significantly higher than the average grade of global copper mines today. So that provides a huge opportunity to increase production and also margins. There's a stat there at the bottom of the page that just for the Phase 1 and 2 concentrators alone As a rule of thumb, for every additional percentage point we can achieve in recovery, this results in approximately 5,000 tons of additional copper We've also seen a huge amount of interest recently from the media in the Lobito corridor. And the reason for this is because the both the G7 and the European Union I've joined the United States in supporting this major project together with funding that will be coming from the Africa Development Bank as well as the Africa Finance Corporation in addition to the funding that has been identified by the U.

Speaker 5

S, the DFC. So the first step of this Lobito corridor project is to rehabilitate the line from Colweisi, which is just to the east of Komokukula that joins up with the Atlantic seaports of Lobito in Angola. As we previously announced, that has been managed by a Trafigura led consortium and we aim to be one of the cornerstone users of that line. As we previously disclosed, we will be starting trial shipments later on this year. It's a small volume to begin with is roughly 10,000 tons that we're looking to do, but that will provide us with a lot of additional data in terms of the costs.

Speaker 5

And then also touching on what Robert was saying earlier in terms of the emissions footprint, this Lovito line will be a significant additional step in producing 0 carbon copper is both much more efficient than trucking from a first principles point of view, but it's also roughly half of the distance to port than the alternatives, for example, trucking to Durban. The second step as well that has also been recently announced Is that there is an intention to connect the line from Lovito into the Zapier and Topper Belt, which will also make it a full service line connecting both the West on the East Coast of Africa. With that, I will pass over to Mark Farren, who will give us an update from Kamoakukula on our project and construction activities, starting with the Phase 3 concentrator.

Speaker 6

Thanks, Alex. Maybe just to start with where Robert kicked off the presentation. The Phase Concentrate itself is ahead of schedule. I think we've announced it this time by about a quarter. So what we're saying is it's scheduled for quarter 3.

Speaker 6

I'm saying hopefully the front end of quarter 3 next year. So it will run the that obviously also kicks into gear all the rest of it. So it's the ramp up, the crew ramp up for mining, The management of the holding, as it has happened, that's also been early. The scheduling and getting the ore reserves in place on all three mines, So Kansokko, Kymovo 1, Kymovo 2, getting them ready for mining and get them ramped up early next year. I guess in our back pocket, we've always had quite a big Stockpile is still around 4,000,000 tons, which will obviously start feeding into that brand new concentrator to get things moving.

Speaker 6

And then the next step and challenge, I guess, is logistics because we're going to be moving a lot more concentrates. I think Initially placing some of that new concentrates here locally, but that would obviously display some of the Kukula concentrate that's being fitted to the LCS local smelter at the moment. So my feeling would be that we would Have to put quite a bit of pressure on logistics and make sure that we get everything sorted out, which And we have an excellent team here, busy doing that. And as Alex mentioned down in that last slide, the LOVITO corridor becomes Strategically important in the long term, important in the short term just to get something going, but strategically important in the long term. So I think all in all, Kaumoa itself is going very well.

Speaker 6

If you if we can go to the next Slides, Alex. The smelter, I talk about the smelter itself. That thing is It's online to be commissioned quarter 4 next year, Tied in quite nicely with the Inge project that we're also doing. No major red flags there And a big focus now on getting the operational team in place. We've recruited the executives, and we are busy Recruiting the middle management and then obviously the labor force that goes with it.

Speaker 6

There's no major smelting Of this size or magnitude or type in the DLC itself, so we are going to be training some of the leadership all over the world, some here at LCS Zambia and in particular, China. So we're assembling a very strong team, I believe, of owners. And we also have, I think, a very strong project team and EPCM people that we'll use to Ramp up that smelter in quarter 4 next year. So the smelter itself is it's complex. It's the biggest in Africa, as everybody knows.

Speaker 6

It's one of the biggest in the world, And I think it's going to take some time to ramp up, but we have put a very, very good team to do this in place on that smelter. So I do believe we'll get it done in time. We can move to the next slide. Inge, we're going to talk a little bit about power. So I'm going to talk about 2 things here.

Speaker 6

One is the actual Inge refurbishment that we're doing. We are putting in 178 megawatts turbine in that Inge. That project as well is going well. We've set that project up 2 years ago to be commissioned in quarter 4, 2024. It's absolutely on track.

Speaker 6

That turbine is arriving now in the next month on-site. It's a huge turbine, And it will be the assembly of that turbine will start in January this year. But in addition to that work, We've done a detailed study on the network all the way from Ingo, which is about 1700 kilometers away from the mine and all the different Areas where there are interfaces between the DC line converting back to AC in this province, in the Powayzi province, all the way from Ingo. And there's about $73 odd 1,000,000 of additional work that's required to upgrade That line to make sure that we have a stable electrical system electrical reticulation system feeding through to the mine. That work Has been identified and has been put into the same loan as we had in Phase 1.

Speaker 6

So we've actually amended the scope slightly in Phase 2. We're doing the Inge project and the additional upgrade work to make sure that we have a stable electrical grid. Alex mentioned the fact that we've been battling with stability, that It's been sort of ongoing through the year. It's going okay. I think we've done a lot of work to get it in place.

Speaker 6

Inge is on track, And the board of Snell has now approved that additional scope of work. So we're going to move into execution, and we'll go as quickly as we can. In addition to that, on power, I just want to finish off on power. We are adding a lot of extra Generating capacity, so diesel generating capacity into our mine grid just to ensure that we have stable power under all conditions. So by the end of next year, we'll be able to run all 3 concentrators on diesel power if we don't if for some reason we have a Complete blackout.

Speaker 6

That's not the intention. It's not the intention at all, but we want to make sure because it's such a valuable mine and these concentrators, They create so much value per hour that we can't afford to be down because of any kind of disruption on power. So we'll have about north of 200 megawatts in place by the end of next year, and it's coming in stages, Basically fast enough to get my Phase III concentrator running before the Ingo turbine is running. So I think all in all, we've made some good decisions on power to fix up Ingo, to make sure that we stabilize the DRC grid and then secondly, to be able to I think that's about all on Kaumoa, Kukula and the Inge. Can we move to the next one?

Speaker 6

The next one is Platry Phase 1, which I call the baby mine. It's 800,000 tonne a year mine. That project is also on schedule. It's going to be running in quarter 3, 2024. There's underground development, as you guys know, from shaft number 1, which we've got moving quite nicely.

Speaker 6

We've done some underground modifications. We've just installed a crushing system to help us with all movement, and we've upgraded the hoist, the winder and the loading system underground for that shaft. We are busy with an optimization study there, which we call shaft number 3. It's a ventilation shaft. It was a ventilation shaft, but we are probably going to repurpose it to be able to do ventilation and wasting of ore to the tune of somewhere around 3,000,000 tonnes per annum.

Speaker 6

That gives us the ability to do 2 things. The first thing is to be able to derisk shaft 1, which was never really designed as a hoisting shaft. And then obviously, the concentrator that does 800,000 tons of ore, there'll be no risk to waste that. But in addition to that, It allows us if we want to accelerate Phase 2, we can start wasting out of shaft 3, While we're still sinking and equipping shaft number 2. And there's a detailed study underway and there will be a press release out, I think, in about a month or so.

Speaker 6

Marni, I think it's about a month. And I think it's going to be an exciting upside press release that's coming

Speaker 3

On plant 3? Yes. It will be before year end, Mark.

Speaker 6

Okay. Thank you, Mona. On plant 3, if nothing else really, The mine, as I've always said, I'm going to say it again, it's the best platinum ore body in the world, if you know platinum, PGM Metals. If you compare it to anything on the Eastern and the Western bush belt, where they're mining 1 meter or we're going to mine 24 meters at similar grades with high nickel and copper contents. So I think it is going to be a massive competitive advantage.

Speaker 6

I don't expect to see too much in the next year because it's a tiny mine. But watch this space over the next couple of years. It's going to be the best platinum asset in the world, and we're developing it very nicely. I think the next one is some commentary on Kapushi. Robert spoke about Kapushi.

Speaker 6

Kapushi is a very nice zinc ore body, 35% odd grade. It's just well on track to be Commissioned in quarter 2 next year. So I think it's 2 quarters ahead of where we promised, quarter 3, quarter 4, somewhere there. So it will be running in quarter 2 definitely. The stoping takes the first stoping is actually happening as we speak.

Speaker 6

We've done slots for a couple of the long haul stopes. We're basically drilling the fans at the moment. We've got about 7 levels open, 7.5 levels open, developed fully developed and ready to go. And the construction of everything on surface and underground has gone exceptionally well. The development is stable.

Speaker 6

I mean, the underground physical development is stable. It's actually on its operating steady state already. So it's really just about how much we want to open up in terms of footprint. The underground infrastructure is working beautifully. There's no problem with wasting.

Speaker 6

The plant will be early, as I said, and everything else is more or less on track to be in place and running by Quarter 2 next year. So no issues around Kapushi that I can think of. When you do come visit, those of you who visit, you'll see a beautiful Modern mine from March next year, a very nice looking for Puxi. It won't look anything like what you might have seen before if you've ever been to that site. It's a really nice modern mine, completely transformed.

Speaker 6

I think that's it on the projects. Is there anything else? Yes, that's it from me.

Speaker 5

I think we can hand over to Robert for the Western Poland.

Operator

Sir, if you're unmuted, please unmute your line.

Speaker 5

Perhaps I'll kick off in the absence of Robert and then he can take over when he rejoins. So a brief update on our drilling activities at the Westin Foreland. We've completed 37,500 meters of drilling As at the end of the quarter, the vast majority of that drilling was diamond core drilling. So that is very much advancing on the schedule that we had indicated at the start of the year. And we've also increased the number of contractor rigs that we have Drilling in the Westin Foreland today to 6 in addition to an Ivanhoe owned Land Cruiser rigs.

Speaker 5

We have been saying this for a couple of quarters that the maiden Mineral Resource estimate for Makoko and Kiala has all been completed from AQA QC point of view. And you can expect the release of that resource imminently. And then subject to the sorry, as a result, I should say of the drilling that we've completed To date on the Western Poland, I think we started out with a budget just short of $20,000,000 We've actually added Recently an additional $2,000,000 of budget for the remainder of 2023 and that is to further advance Certain new targets that we've been looking at more recently.

Speaker 2

Can you gentlemen hear me?

Speaker 5

I

Speaker 2

I don't know what's the problem with this conference system, but I'm back if you've lost me. We're developing several major projects at once. I don't know of a company that has been this ambitious with Kinsoko And the Kaumao mines underground being developed and the 3rd concentrator being developed and the smelter being developed and the Hydroelectric capacity in the country being developed and the backup power in the country being developed and the largest precious metals mine in the world being Accelerated and developed in South Africa and the richest zinc mine in the world being developed. And we don't really like to talk much about the Western Forelands, But since Christmas is coming and our shareholders have so much interest in our discussions, I'll start by saying that we have recently increased Our land holding in the Western Forlands, we completely dominate the important parts of the basin based on our proprietary geologic knowledge of how the creator put all this metal here in the first place. If you came from another planet in a flying saucer and your Martian boss has told you to come to find copper on this metal, There really is nothing to compare to this part of the DRC.

Speaker 2

The copper in this basin is analogous to the oil In the Gwar oilfield in Saudi Arabia, nothing has ever matched that on a geologic scale. These are not porphyry coppers. These are Sedimentary deposits are more akin to oilfields geology. When you find one of these things, they can go for miles And miles and miles and miles. And they're not disturbed by tectonic forces after they've been in place, West of a very important fault, we call the zipper fault.

Speaker 2

When we find copper, it just goes and goes and goes, which makes it amenable to bulk scale mechanization and very low cost. Now What has changed is this new railroad system coming through the Western Foreland and getting us closer to the coast means that mineralization is getting more and more attractive and we have a trained labor force now. We have 5 gs wireless. We have domestic food production, construction skills. And as all of these things develop, The attractiveness of the Western Forelands does nothing but grow.

Speaker 2

It would be difficult for me and inappropriate in this call to explain how many mining organizations all over the world, the largest ones And how many sovereign wealth funds and financial institutions have expressed interest in coming to the Western Forlands. But Let's just start with the Japanese. The current Emperor of Japan, when he was the crown prince in the Imperial Family, Opened a dam on behalf of the Japanese government in the 1970s and now he's the emperor. Now the Japanese have come to the Congo and want to finance copper production as part of their efforts to reduce Global Warming Gas, many of our shareholders may recall that we sold a 10% participation in the Platte Reef project We're close to $300,000,000 to a Japanese government led consortium of Chogmec, JGC and Itochun. So We have Japanese interest.

Speaker 2

We have interest from sovereign wealth funds in the Middle East. We have interest from major mining companies. And I'd like to tell this anecdote that one of the largest mining companies in the world came to visit What we're doing and concluded that Komokukul is the best mine in the world. They said they could never do it themselves because they didn't have the foresight to be in the Congo 25 years ago when we were suffering under the tyranny of the net present value model. This is the future for mining of copper on this planet.

Speaker 2

And so We will in the very near future start out by announcing the work we've been doing at the Makoko system and another related area of high grade at Kiala. These 2 in combination are now being studied to make a mine that I've been a mines that operate in an eightytwenty joint venture with the government in local Congolese. And so I would expect that we'll be able to give you those independently vetted numbers in the very near future. And thereafter, we're kicking around the idea of making a second disclosure of some work that's going on that is not part of the Makoko area. And for strategic reasons, we might not want to be too specific, But I think we'll have more to say in the second press release, let's say, before Christmas.

Speaker 2

So there'll be more news on this coming soon At a theater near you, we couldn't be happier with the geologic potential hiding under the western forelands. And I don't even think a fraction of 1% of the geologic potential that is there has been delineated as our knowledge and understanding of how the creator put the copper in this area has grown. Now that the President and the Prime Minister have come along with the First Lady and so many important people in the country And now that the country is engaging in another democratic election and now that the country has support from The European Union and the United States as well as China, all parties in the world are looking to the bright future of this country. And I would say the most important resource in the country are the people, the young women and the young men that make great geologists. They know what it looks like to look at the core and then there's the inherent gift from the creator in the Western Foreland.

Speaker 2

I'm very confident we'll be finding new mines in the Western Forelands 100 years from now. So coming soon at a theater near you, we'll tell you more specifics about the Western Foreland. Thank you, everybody.

Speaker 1

Thanks, Robert. And now we will begin the queue question and answer session. As per usual, I'll now hand it back to the operator

Operator

One moment please for our first question. Our first question will come from Lawson Winder of Bank of America Global Research. Your line is open.

Speaker 7

Thank you very much, operator. Good morning, Ivanhoe team and thank you very much for the update. I wanted to ask about 2 things. 1, Transport costs, so they seem to have stabled around that sort of $0.45 to $0.46 per pound level, which is fantastic to see given all the challenges you guys have faced. Looking forward into Q4 and 2024, is that the sort of level we'd expect until the blister is ready for shipping.

Speaker 3

I'm having issues. I didn't hear the question. We're having sound issues. The sound doesn't come. If you can repeat the question.

Speaker 3

Okay. Thanks, Mark.

Speaker 6

Yes. I think that's about it's a reasonable number, Lawson. What we're doing is we're actually looking at setting up some longer term contracts Right now, and a slightly different entity. So potentially, to lower the costs going forward. And then like Robert spoke, I mean, that Lobito corridor It's going to, I think, in the longer term, create a rail solution.

Speaker 6

The other thing to bear in mind is that when we start selling the blister, We basically halved the volume. We halved the amount of tonnes that we let go. So it has a massive logistics Cost per pound influence, about $0.20 per pound. So it does come down when we do the blister. Thank you.

Speaker 7

And then if I could just ask your views on the upcoming election, it's just around the corner here. I mean from an Ivanhoe point of view, things seem to be progressing normally. Are there any concerns Though internally from Ivanhoe that you might highlight or any thoughts on how the election is progressing? That would be very helpful. Thank you.

Speaker 3

Thanks, Lawson. Now my sound is miraculously back. I can maybe take that one. So it's actually been quite a quiet period leading up To the elections, I mean, we were around during the 2018 elections and it was much more volatile. We saw a lot more protests in the main city centers.

Speaker 3

I think it's been sort of quiet campaigning. There's 24 candidates running in total. There's probably 4 serious candidates out of the 24. The elections will definitely proceed as planned. That's the current word on the ground on the 20th December.

Speaker 3

And there's a lot of support globally to have free and fair elections. There's been voter enrollment. The presidential flight has been put together and all indications are that it will be A peaceful election season. So I've been traveling there the past couple of weeks. It's more there at the moment.

Speaker 3

And it's really been quite quiet apart from sort of banners everywhere and seeing people using platforms to do political speeches. But we are quite optimistic that it will be a peaceful election season.

Speaker 2

Yes. Lawson, I think the election you want to worry about is the one in the United

Operator

Thank you. And speakers, I'm seeing no further questions in the queue. I will turn the call back over to Matthew Kiebel, so he may continue with the webcast questions.

Speaker 1

Thanks very much, operator. Yes, just taking a few here. There's a couple of repeats, so we'll group them together and just cover a few topics here before 1st and foremost, I have a few questions here. David, Alex, Martin, maybe best suited for you. On the sort of expedited or advanced Expectation on the Phase 3 concentrator ramping up and sort of Mark touched on this a little bit, but the impact on the operations and the logistics supply chains on having that concentrator Phase 3 come in a bit ahead of schedule?

Speaker 3

Yes. So maybe I can give you the first go Matt. I The way we see things unfolding is that we will try and place a lot of that concentrate with the local smelter, LCS and Kuwaiti, just to lessen the logistic burden. We will also have to build up a stockpile that we will use for blending in the smelter once we start commissioning the smelter. It will give us access to some cash flow next year that we didn't necessarily bank on.

Speaker 3

We always timed the concentrator to coincide with the commissioning of the smelter. With the concentrator coming in a bit early, we think we're going to have increased Tonnage available from that concentrator coming through next year and that will be included in our guidance that we will put out in January of next year. Obviously, this comes with additional logistics. We're in the process of setting up long term contracts With logistics service providers to lock in dedicated supply, we're doing this sort of using bulk negotiation power with both Capuchin and Chemawa because we expect an increase in volume as these two projects will sort of ramp up Side by side, on the same corridor, but we've got a handle on the situation.

Speaker 1

That's great. Thanks, Marna. And the next one, there's a few questions on Platinib, so I'll group this together as well. Alex, maybe you have a little bit of a finger on the pulse This one, but a question on sort of a view on platinum and sort of the supply demand economics and sort of what's going on in South Africa and more broadly, as Pirate Reef comes online?

Speaker 5

That's the answer question, Matt. Thanks for giving me that one. Look, I mean, I don't know, to us, we're not building this mine for today's platinum price or tomorrow's platinum price. We're building this mine because it will be the lowest cost producer in the PGM industry because of the characteristics that Mark mentioned in terms of this being A completely unique ore body in the PGM sector. So even at today's basket price, which has obviously come up materially In the past kind of 12 months or so, we'd still be a very comfortable high margin producer.

Speaker 5

And so that's what we've kind of got to look forward to. But more broadly, what I would say is that there's clearly a lot of people That are feeling the pain right now. If you look across the BGM sector and there's clearly a large number of producers that are underwater on A cash cost basis or certainly on an all in sustaining cost basis and I think you're already starting to see That supply side response and contraction coming. So to me, I'm actually now feel relatively sanguine about it. It doesn't seem to be A bad time to be building a world class PGM mine that will one day be the future of the industry.

Speaker 5

And

Speaker 2

I'd like to add that you keep on calling it a PGM mine, but compared to the competition, We have a uniquely high end dominant nickel. In fact, the whole system constitutes 1 of the world's largest nickel resources. That's why we're drilling the Mokopane feeder. There's just an astronomic amount of sulfide nickel in that district that pales in comparison to any other nickel target. So the very high nickel endowment, the bulk mining, the flat nature of the ore body, The amazing thickness in grades, the favorable metallurgy, well, that's a problem for the rest of the industry, But it's a benefit for humanity because there's a lot of uses for these metals and there's also a lot of gold in the system.

Speaker 2

So there's gold and there's rhodium and there's platinum and there's palladium and there's nickel and there's copper. It's very important to understand that there's a naturally hedged Basket of Metals. South Africa has got a lot of challenges. The currency has been weakening, But this is a mine whose costs are in South African Rand and whose revenues are in dollars. So we just intend to be the best platinum, palladium, nickel, copper, cobalt producer with gold and rhodium in the world.

Speaker 2

And this is a 100 year mine. You just charge on and do it. That's the nature of the industry. And that's what we need to do. We need to produce these metals In a green and sustainable way that directly benefit local communities.

Speaker 2

And that's what we're doing. I think that this Tier 1 minutee is frequently overlooked. I don't know mines is frequently referred to as a copper company, but Very soon, we're going to be one of the world's major precious metals producers. And for added emphasis, utilizing CHF3 to hoist Means that this is going to become a really large mine much quicker than we've said in the past. And so as another present for our shareholders, We should come out with a detailed plan before Christmas to explain how quickly Platte Reef is coming on the scene.

Speaker 2

We've recently started the tailings. There's a sewage retreatment plant where we're recycling Mokopane City sewage water to produce clean water for the mine. That's a very green source of water and enables us to move forward. And we have uninterruptible Power from Eskom, Uninterruptible Industrial Power. So this giant project is opening soon at a theater near you, and I would urge all of our shareholders and stakeholders to get to know it a lot better.

Speaker 2

We'll be speaking again at Endava in February. And for those of you that want to go on tour, there's no excuse not to come and look at the stunning Thank you.

Speaker 1

Thanks very much, Robert and Alex. That was terrific. So we'll just wrap up with one more question That's a rather popular one. We can maybe throw this to Marno or Mark. It's somewhat of a question on execution.

Speaker 1

The question is the mining industry is trouble building small and large scale mines on time and on budget. So what do you attribute your ability to sanction sink shafts, build mines and smelters in both frontier and established jurisdictions. And now you have both the Phase 3 and Capushi mine ahead of schedule once again. What's sort of in Ivanhoe's secret sauce, if you would?

Speaker 3

I'm going to give it a first try because I know Mark's quite humble, but I think A lot of it has to do with the execution team. We have a team that really works well together. We've now done this before. We know how to be We know how to do make quick decisions. We don't have a lot of bureaucracy and red tape, but we've got good governance.

Speaker 3

And then I think it's about sort of using the same type of equipment and contractors that you've used before if it Successful provided it's competitive. But the secret really is in the people. And if a team works well together, You can achieve great things. And if everybody works towards the same goal and everybody knows where they need to go, Anything is possible. But Mark, you can also add to this.

Speaker 6

No, Mona, that's right. It's an excellent team that we have. And a lot of good capable contractors that over time we've managed to lock in basically the skills that we needed In this country and in South Africa, it's going well. Thanks. So you're right, it's team, it's people, it's about leadership.

Speaker 2

I'd like to throw in a word thanking our Chinese friends for raw material, fabricated steel and other critical elements that have been provided to the Chinese economy on time, on schedule. So When you get that steel delivered on time on schedule from the other side of the planet, that's very helpful. And a lot of engineering capability, a lot of skilled labor contributed by our Chinese partners. There's nobody that can make movies like Hollywood. Hollywood is a mixture of every conceivable ethnic type of person, every cultural background, And that's how James Cameron can make an Avatar and no one else can make movies like Hollywood.

Speaker 2

And there's a tremendous Our local Congolese speak the local language, understand the local conditions. They're very, very keen to build their own country. The esprit de corps amongst the management and the people is astonishing and the empowerment of women in the senior ranks of management creates a kind of corporate culture that is so much better than was traditional in the major mining companies. That's just a fact and we urge people to come and see it. This kind of thing is not captured in net present value models.

Speaker 2

It's not captured in spreadsheets. It's captured in flesh and blood in corporate culture. And so it's the management team that is of critical And incalculable value and may it continue, may it flourish and may it go on for a long time because This planet needs a lot of conscious mining if we're to have any prayer of changing the way we've done things in the past. Let's hope for peace and let's hope for peaceful use of the world's resources and leaving a better world for our kids and our grandkids. Thank you again.

Speaker 2

All of you.

Operator

Thank you.

Speaker 1

Thanks very much, Robert. That is a wonderful end to the call. And I'd just like to say this does conclude our call today. And thank you everyone for attending today's event. And as the Speakers outlined you can look forward to many exciting milestones coming for Ivanhoe Mines towards the end of 2023 and moving into 2024.

Speaker 1

Again, if you had not answered your question, please do reach out to IR team after the call concludes and we would be happy to answer it. With that, I'll pass it back to the operator to wrap Call up. Thank you very much, operator.

Operator

Thank you. This does conclude today's conference call. Thank you all for participating. You may now disconnect and have a pleasant day.

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Earnings Conference Call
Ivanhoe Mines Q3 2023
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