Ivanhoe Mines Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 3, 2023

There are 8 speakers on the call.

Operator

Good day and thank you for standing by. Welcome to the Ivanhoe Mines First 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. I would now like to hand the conference over to Matthew Kiebel, Director of Investor Relations and Corporate Communications.

Operator

Please go ahead.

Speaker 1

Thank you, operator. Good morning, everyone. It's my pleasure to welcome you to our Q1 2023 financial results conference call. My name is Matthew Kiebel. I'm the Director of Investor Relations and Corporate Communications dialing in from Sunny Vancouver this morning.

Speaker 1

On the line from Ivan O Mines, we have Founder and Executive Co Chair, Robert Friedland's President, Marni Clotay Chief Financial Officer, Damon Van Heelden and Senior Vice President, Corporate Development and Investor Relations, Alex Pickert. We will finish today's event with a question and answer session. You can 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 do contact our Investor Relations 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 forward looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward Details of the forward looking statements are contained in our May 3 news release as well as on SEDAR and at www.ivinhomes.com.

Speaker 1

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

Speaker 2

Thank you. I hope my voice is coming through from Beijing, China. I want to welcome everybody to this call after we've had another Amazing quarter of achievements by our people working so assiduously in the Democratic Republic of the Congo and South Africa. It's been an amazing quarter and there's more to come and there's a lot to talk about this morning. So with that, I welcome all of you To this opening slide, which you can see the enormous extent of growth in Kamo Kukula, and we'll turn this over to Marna to begin going through the highlights.

Speaker 2

Thank you very much. Marne?

Speaker 3

Thank you, Robert, And good afternoon and good morning, everyone. I'm speaking from Sunny South Africa, and we are very pleased to announce another quarter of operational excellence. A few key highlights this quarter and beyond include The completion of our debottlenecking program in February of 2023, again, ahead of schedule and budget, And this enables us to produce 450,000 tons of copper on an annualized basis using our Phase 1 and Phase 2 plants. Tomowa Kukura also achieved a record month of production of close to 35,000 tonnes copper in March, post the completion of this debottlenecking program. We have also seen a vast improvement on throughput and recoveries, which my colleague Alex will take you through later this call.

Speaker 3

Post the quarter, Capushi signed a term sheet for the €250,000,000 off-site and prepayment facility with Glencore and Jacobins. And we published our 6th annual sustainability report and I invite our audience to carefully study this report as we illustrate how we mine with a greater purpose. Our quarterly results speak for itself. To name a few key metrics, Kamaukukula produced on a 100% basis Over 93,000 tons of copper, of which it sold over 86,000 tons of copper, resulting in net revenue of $689,000,000 and EBITDA of $452,000,000 Our cash costs For the quarter, it was $1.42 per pound of corporate produced, and that was again at the lower end of our cash cost guidance. Our Phase 3 expansion at Kamaoka Gula is also on track for completion in 2024, and this will increase our copper production up to 150,000 tonnes on an annualized basis.

Speaker 3

1 of the key statistics highlighted in our 2022 sustainability report is our constant improvement on health and safety. We had a 40% reduction in our total recordable injury frequency rate across all sites during 2022. This was operating, expanding and building new projects. Safety is a team effort, and we are immensely proud of our staff and contracted commitment towards our 0 home policy. In the Q1, we have continued this trajectory with The marked reduction in our total recordable injury frequency rate across all our sites and our performance is well below the industry standard of 2.9 at our respective sites.

Speaker 3

This is a lovely picture of community members in front of a newly built church close to Kaumao Tekula. They are participating in our large food restoration program, receiving citrus saplings. Our group wide sustainability team have gone to great lengths to showcase the work we do in our 2022 annual sustainability report. But the statistics and pictures speak for themselves, and I will highlight only a few. We have increased our female employment across the group from 9% to 10% against an increasing workforce of 20%, and 76% of our group wide energy consumption is from Renewable Sources.

Speaker 3

This slide depicts a graphic representation of the world class at the Moa Center of Excellence that is scheduled for completion in September of this year. The center will be used as a training facility, ultimately providing access to DRC students to participate in internationally recognized programs. Some further interesting facts. Tamara Kakula contributed 4% to the GDP of the DRC in 2022, This is about to approximately double in 2023. Kamaukukula by $311,000,000 in government tax And royalties in 2022, the 1st full year of production, and we spent $95,000,000 on our group wide payroll with $70,000,000 in local payroll taxes.

Speaker 3

This is a picture of our top academic scholars in Mokubani, where we have over 6 44 scholarships on a group wide basis, and we have formed 332 formal and informal local enterprises. This is up from 66 in 2021. We have spent in excess of €20,000,000 on socioeconomic development, and it's important to note that most With that as an introduction, I will now hand over to David van Jjerden, our CFO, to take you through our quarterly financial results. Over to you, David.

Speaker 4

Thanks very much, Myrna, and Thank you for everybody joining the call today. I'm very pleased to present our Q1 results for 2023, which once again includes a number of records from Komofakula. Today's presentation is, of course, only a high level summary of our results and should be viewed in conjunction with our Condesa consolidated interim financial statements and MD and A for the 3 months ended March 31, 2023. Kamaka Kula recorded record revenue for the quarter with almost 87,000 tons of payable copper sold. Kamanakukula sold less than was produced during the quarter, resulting in higher finished wood inventory at the end of the quarter.

Speaker 4

There was approximately 18,000 tons of concentrate in inventory at the end of March, with approximately 14,000 tons of that to the Lualaba copper smelter for smelting prior to sale, with the remainder either in bulk in preparation for export. C1 cash cost was kept stable quarter on quarter, and I will discuss that a little bit more on a later slide. Record revenue and stable cost led to record quarterly EBITDA for Kamaka The increase in revenue for the quarter was driven by the higher copper prices during the period, with copper sales realizing at a copper price of $4.04 per pound of payable copper during the quarter. Temarcakula maintained its excellent margin, which was only marginally down from the Q4 of 2022 And due to Q4 revenue including a $52,000,000 measurement compared to only $30,000,000 in the Q1 of So 66% just an exceptional margin once again. I know everybody is pretty used to seeing the slide breakdown by now, but we want to continue to emphasize the underlying profit facility of Komokukuiwa.

Speaker 4

Revenue included a re measurement of $30,000,000 as I mentioned, with provisional sales at the end of the period re measured at $4.05 per payable bound of copper. It's important to point out that the finance cost Ofgemark Kula of $89,000,000 is mainly interest on shareholder loans used to fund initial CapEx, But that represents income for Ivanhoe and Amshejian, who provided us that funding. The tax expense for the Q1 of $116,000,000 was $76,000,000 of that was Income tax with the remainder being deferred tax. After the non controlling interest of the DRC government, Dimarcogula had profits attributable to its shareholders of $167,000,000 $83,000,000 of which On this slide, I would like to firstly focus on the chart at the bottom left of the slide. As we view the consistent cost level achieved by Temarca Kula as a real achievement, And we are proud to highlight that.

Speaker 4

We obviously track the results of our peers as well. And I think everyone there on this call who does the same would agree that Kamala's results should be applauded. If we turn to the C1 breakdown to the right, And you would note that processing costs increased quarter on quarter due to the power tariff increase that became effective in December And as we warned in our guidance as well as higher diesel usage during the quarter due to power interruptions experienced. Logistics costs eased slightly due to lower ocean freight. We continue to focus on to the cost saving initiatives.

Speaker 4

And one of the key initiatives Is of course the 500,000 ton per annum on-site smelter, which is being constructed as well as Phase III. We expect the on-site smelter to drive us to the lowest cost quarter and below 1.20 As was shown a few slides back, Avano's share of profits from Kamaukakula was $33,000,000 for Q1 And Avena recognized $47,000,000 of finance income from Kamaukukula, bringing the total income from Kamaukukula to record $130,000,000 for the quarter. Ivan has spent $3,000,000 in Western Ghouan's exploration, While the development of Pratt Reef and Kapushi continue to be capitalized as development. Iberno therefore recognized Profit of $113,000,000 before the impact of the revaluation of the convertible note, We recorded a $31,000,000 loss on the fair valuation of the derivative liability linked to the convertible note, And that's principally due to the increase in our share price from $10.70 to 12.21 at the end of March. This brought Ivanhoe's profit for the quarter to $82,000,000 after the impact of the non cash convertible bond revaluation.

Speaker 4

This slide shows our impressive Adjusted EBITDA and definitely impressive adjusted EBITDA growth and also includes how we suggest our adjusted EBITDA should be calculated. Our EBITDA of or our adjusted EBITDA of $168,000,000 includes our share of Kumar Acula's EBITDA, And we look forward to adding revenue from Tepushi and Black Reef to our adjusted EBITDA next year.

Speaker 5

Our CapEx guidance

Speaker 4

Remains unchanged and we would like to reiterate that. The 1st quarter spend was on the lower end, But largely, the curve we expect. And as Marnell, Alex and Robert will report later on the progress continues swimming. Kamaoka Kukula continues to fund its CapEx with operating cash flow And Quimoa had a healthy cash balance of $390,000,000 at the end of March. Ivano, in turn, had cash and cash equivalents of $497,000,000 at the end of March.

Speaker 4

We expect to spend Between $207,000,000 $257,000,000 on flat rate in the remainder of the year, where we are progressing well with $150,000,000 senior debt facility as previously disclosed. And as you would have seen from the recent release on Tukushi, construction activities there are Progressing ahead of schedule and the terms for the $250,000,000 financing facility has been agreed. Ivernow is also evaluating a bank facility of up to $80,000,000 in addition to $250,000,000 financing. And lastly, I would just we showed this slide when we presented our annual results. And a lot of shareholders picked up on this, and we thought it It was good to just update the numbers with the latest results and once again emphasize that Ivanhoe will receive distributions in excess of our ownership percentage.

Speaker 4

Once the development of Platrieff and Cushi has been completed and once we I would just like to hand over now to Alex Pickard, our Senior Vice President, Corporate Development, for an Operations update on Premocta.

Speaker 5

Thank you, David, and good day to everybody on the line. It's Alex Pickard here speaking from also a rare sunny day in London. As David mentioned, we will take you through the latest update from our operations, Exploration efforts and our projects. But first, maybe I'll just talk quickly about the slides that we have in the background here. What you can see in the foreground is the chemo Phase 1 and Phase 2 concentrator lines today and the long Gray building in the background or in the middle of the picture is the concentrate building where currently we are bagging and dispatching up to 90 trucks a day containing copper and concentrates.

Speaker 5

In the background of the image in the blue, you can see a rendering of the 500,000 ton per annum directed by the smelter that will be completed next year. And it just really gives a sense of the scale of that project. It will be the largest smelter in Africa and indeed the largest smelter of its kind anywhere in the world. So first looking at Kamovacula's operations in the Q1, I think Manna mentioned the strong copper production we had, which was close to 94,000 tonnes for the quarter. But what we are really pleased to see was the record of close to 35 tonnes achieved in the month of March.

Speaker 5

So really now we are viewing this level as a benchmark of what the plant is capable of following the completion of the debottlenecking program, but also taking into consideration that during this month, We achieved our production levels despite experiencing some grid instability and I will come back to that on the next few slides. In March and continuing through April, we've also achieved better and better copper recoveries, achieving over 88%, which compares very favorably to our design rate of 86%. But on some days, we are well over 90%, which is which is an outstanding achievement by the Concentrate team. We've also achieved several times now a daily milling rate in excess of 29,000 tonnes, which if you look at it on an annualized basis is significantly higher than our debottleneck nameplate plant capacity of 9,200,000 tonnes per annum. So for this quarter, we are reiterating our 2023 guidance of 390,000 to 430,000 tonnes of copper in concentrate.

Speaker 5

Obviously, Q1 was always going to be a bit of a slower quarter with the tie in of the debottlenecking and then also the electricity availability. But we've got more than enough time to make that up, especially with the full capability of the plant following the completion of the debottlenecking program. So moving on to the power situation in some more detail. I think the first thing to say is that actually we much better grid stability during the month of April. So what we saw is Snell, which is the DRC state owned power utility, introduced some infrastructure management and maintenance facilities and it was also helped by a 60 megawatt hydro facility coming into the network.

Speaker 5

That being said, we've made the decision to protect Kamo Kukula from any potential future grid instability by investing in backup generation capacity. So what you can see in this image is our currently installed generator farm at Kekula, which is providing 32 megawatts of backup power. We use that today for emergency facilities as well as powering one line of the plant. And then added to that, we have another 11 megawatts arriving by the end of this quarter, which will be installed and we're aiming to get to over 90 megawatts by year end. Coincidentally, 90 megawatts is around the maximum power draw on-site today.

Speaker 5

So we will have the capability to run the Phase 1 and Phase 2 mills using backup power if necessary. Longer term, we're looking to roll out up to 200 megawatts, which will basically account And we're also definitely considering renewable energy as part of the mix here. And finally, and something that will help the broader DRC grid in the shorter term, we're in discussions with the Zambian government to secure up 100 megawatts from the DRC Zambia interconnector. This will be gradually phased into the DRC grid starting with 30 megawatts in the short term. This slide is just moving back to the bigger picture.

Speaker 5

And what you can see here is the main trunk line, which connects The Ingerdam complex where we are working on Turbine 5 with the Kalwayze substation, so that's a 1700 kilometer line with a maximum capacity of up to 1,000 megawatts that run very close to the Kamoeka Kula mining license in the Western Poland. So over the years, we've been working with Snell since 2017 on hydro power refurbishment projects and we've developed an And so in response to the recent power instability, we completed with Snell a grid stability study And this identified key areas of the transmission network that will provide significantly improved stability for all the users on the network. And so in the coming months years, we will be working closely with Snell on those initiatives going forward. I'll take you through a few slides now, which just show you in images the excellent progress that we're making on Phase 3. But the main message here is that everything is well on track for commissioning by the end of 2024.

Speaker 5

So first, what you can see here is the concentrator. In the image, you can see that the concrete foundations and the civil works are rapidly advancing in preparation for the steel work, which is arriving imminently and the major pieces of equipment that will be arriving over the course of this year to be prepared for installation. This slide is just showing the underground mining process progress, sorry, that we're making in the Qumoa I and Qumoa II minuteing areas. So these mines will really be the backbone of the Phase III concentrator in terms of supplying feed. And so that will be 5,000,000 tonnes per annum to begin with from next year as the Phase 3 concentrator ramps up.

Speaker 5

In terms of the progress that we've made there, we've already completed well over 2 kilometers of development in the Kamoah-one and Kamoah-two declines. And then the plan is to open up the Kamoa-one minutee later on this year. I think the Kamoa-two minutee is not scheduled to begin until 2025. Very similar to what we've already done at Kukula. You can see we're using similar style machinery, similar scale and we will also be using drift and fill mining.

Speaker 5

And then this slide is Coming back to the smelter that I pointed out earlier and you can see that the reality is already very much taking shape on the ground. So this is showing the foundations of the Direct to Blister And we are preparing for the arrival of the equipment also later on this year. So I think across the Kamoa site, we're really moving into an exciting phase of the build where we will start to see the installation of the major equipment items that are currently on route to the mine or finishing off the fabrication process. And then perhaps just to come back to the hydropower at the end. What you can see here is the work underway at turbine number 5 at INGA.

Speaker 5

So that is also progressing on schedule with the intention to tie in with the start up of Phase 3 at the end of 2024. SIRVINE 5 will bring an additional 178 megawatts of green hydropower into the grid for priority use by Ivanhoe Mines and Tomoe Pekula. What you can actually see here in the image is the rotor and the stator. And just as an interesting fact, it itself contains about 40 tons of copper, which gives a great example of the huge copper intensity of Renewable Energy Infrastructure. So with that, I will pass to Robert for an update on our exploration activities.

Speaker 5

Robert, just in case you can't see the slides, we're on the Westin Foreland.

Speaker 2

Yes, thank you very much. I do see the slides. I got them on my And phone, everybody on this call, from day 1, expiration is in our DNA of the Lifeblood of our company, exploration requires both patience and determination, But it's my considered opinion that we will soon realize additional reward. The Avino Mines Group historically Finds a Tier 1 discovery around every 4 years or so. And so the time is coming up for us to come up with another one.

Speaker 2

In the Western Forelands, we've drilled 70,000 meters on our target for this year. We drilled about just under 5,000 meters of that in the Q1, which was the rainy season, but we're now entering The dry season where things really get a lot easier. We're budgeting $19,000,000 worth of drilling. We have 4 drill rigs On-site and I've got that feeling in my bones that we're going to come up with something that's going to make everybody in the Congo And all of our stakeholders are very happy. And Makoko and Keala, in the opinion of our senior management are going to be a mine.

Speaker 2

Really just a question of how big. We're working on the maiden resource estimate for this project that is wholly owned by Agronom Mines. The geology, the genetic setting is identical to the other mines in the Copper Belt. We have a lot of understanding of these systems, both a genetic understanding of what causes them to be birthed over eons of time in the first place and how to find more of them. So the preliminary economic assessment of this mine is underway.

Speaker 2

Since we owned it all, it's It's going to have quite a big impact. And if we find a big one out here, we can start dreaming about being the 2nd largest copper complex in the world or ultimately even the biggest. But I think what's not getting enough attention is the next Slide our Mokopane feeder exploration. I think apart from the fact that our Platte Reef project is the largest Precious metals project in the world under development with a hell of a lot of copper and nickel Required for the electrification of the world economy as byproduct, it remains a fundamental fact that the Bushveld complex In South Africa is one of the world's greatest mineral endowments, certainly in the top 3, if not the largest mineral endowment Of any geologic structure I can think of on a planetary basis. The question is where did the Bushveld come from?

Speaker 2

I mean, How does it come up from the middle of the earth? These things come up from great depth in the earth, like toothpaste, And they have to have a source. So we're doing a high resolution magnetic survey and we're doing gravity work and we're going to start drilling, which on the Mokopane feeder. And Mokopane feeder is an unbelievably powerful gravity anomaly. Something very, very heavy exists at the Mokabane feeder.

Speaker 2

It's only about 10 kilometers away from our shafts You see in this picture with the yellow airplane, the critical zone of the Bushveld, which hosts our Enormous endowment of precious metals is very heavy rock. If you pick it up, it's just astonishing how dense that rock is. And so the gravity anomaly is very significant. And academic geologists believe that the Mokohani feeder is named Because it fed the Mokopane area where all this metal really is. And so if there was ever a visionary exploration target on this planet, It's a mokopane feeder and I would urge all of the analytical community to come to understand it and pay it a lot more attention.

Speaker 2

And then on Platte Reef, we are rapidly barreling ahead to be a producing mine. The original idea was the same philosophy as Kamo Kahulah, start small and then expand. So the Phase 1 Concentrators under production, the underground development is advancing very rapidly. And recently, we've come up with some new ideas On the optimization of SHAP-three. Alex, why don't you pick it up and explain to people some of our thinking about SHAP-three and Why this could be such important good news?

Speaker 3

Thank you, Robert. I will take that over. And Robert indeed Yes, we are working on an optimization study at Plat Reef. We shelf 3 with the diameter of 5.1 meters is currently being reamed, and we've got approximately 150 meters of the 9 50 meters completed to date, and we're planning to We the study envisions Accelerated production from Phase 2 and this study will consider converting this 5.1 meter diameter ventilation shaft into a production shaft with the capability to hoist. So what we are saying is that we are planning to pull forward Production at Flat Reef.

Speaker 3

We always get a flag from Robert that we're taking way too long to bring this mine into production, and we are now trying to move everything forward and bring this mine into its fullest potential. Just maybe to follow on from what Robert was discussing, A lot of the listeners do not have the opportunity to visit our site, so we've changed our presentation slightly and We're taking you through a bit of a visual library, so you can see what our projects look like on surface and underground. So this is an underground picture at Platte Reef. Maybe let's go back to surface. And this is the 10 meter diameter Shoaf 2 that is currently under construction, and it will have a hoisting capacity of 8,000,000 tonnes per annum.

Speaker 3

The shaft 2 headgear concrete Structure has been completed to a height of approximately 79 meters and Schofst's overall height will be approximately 100 meters above ground, including the steel structure housing the main winders. Drilling of the pilot drill in Shaft 2 down to the shaft bottom commenced during the Q1, and a total of 6.80 meters have already been completed with drilling on schedule to finish finished during the Q2 of this year, where after reaming of a 3.1 meter diameter hole is planned. So that's just things are very exciting at Platte River. And when you drive into town, you can see the headgear miles away. Over to Cupushi.

Speaker 3

Last but not least, we've made significant progress at Cupushi. In late April, we issued a press release announcing that we signed a term sheet for the offtake of zinc concentrate and the $250,000,000 facility with Plinco and Jekamine. We are also negotiating a breach facility with local banks for up to $80,000,000 and this will be used to fund ongoing capital expenditure at Kapushi. Just back to our visual library, this is underground at Kapushi, where our development is 30% ahead of schedule with 682 meters completed in the Q3 And mining of the big zinc orebody with grades in excess of 35% will commence ahead of schedule in January of 2024, and it will be stockpiled pending plant commissioning. And then we go to surface.

Speaker 3

On the processing plant, our fabrication is on schedule With all Meiji equipment currently being fabricated, the bulk of the earthworks and civil works is nearing completion. And as you can see in the picture, Steel erection has started. Our first concentrate is on schedule for the Q3 of 2024. And then lastly on Capuchin, this is an initiative I'm personally very excited about. We have entered into negotiations with the provincial and the national government for a new commercial border crossing at Kapushi.

Speaker 3

And this new border will benefit both Kapushi and Kamoa and should assist in alleviating congestion at the existing border crossings. The Capushi border will also benefit the town of Capushi through creating an economic path for the town. And we are currently doing a study on the road conditions and upgrades required on the Zambian side of the border. So this concludes our operational update on all our exciting projects. I will now hand back to Matt Keith will handle the Q and A for today.

Speaker 1

Thanks very much, Marta. We'll now begin the question and answer session. I'm just going We'll take questions off the phone first, and then we will field anything through the webcast subsequently. So operator, please do proceed with questions on the line.

Operator

Thank you. Our first question is coming across. Can you as well please wait for your name to be announced before you start with your questions. The first question is coming from Gordon Lawson of Paradigm. Your line is open.

Speaker 6

Hello, good morning. Thank you very much for taking my question. So my first one is regarding your tax rates. It was a little high this quarter. Can you provide any guidance For the rest of the year and how much of that is related to shipping concentrate versus smelted product?

Speaker 4

No problem. Just to confirm, you are are you referring to Income tax and deferred tax or are you referring to our royalties and Indirect taxes that's disclosed in our C1 reconciliation?

Speaker 6

No, I'm referring to The current and deferred taxes.

Speaker 4

Okay. So the current and deferred tax would Not change irrespective of whether we toll or whether we sell concentrate. The provisional the tax for this quarter does include provisional tax adjustments on Provisional assessments received, so just a minor accrual for that. So it's slightly higher than we would expect that I think a Fair modeling percentage going forward would be sort of what was experienced for the average for last year and was just

Speaker 6

Okay. Thank you. And my second question, if I may, the Payable copper versus copper sold has been a little late the past few quarters. Should we expect some of these tons to come back in the next quarter?

Speaker 4

I think, yes. So I think we can definitely expect some of the copper to come back. We do Just like to mention that the inventory levels of finished goods at the end of December was pretty low. And we were able to clear almost everything on the floor just before the end of the year. So inventory levels have sort of normalized, but of course, we will try to clear those and Make up our inventory levels as small as possible.

Speaker 4

So they will definitely flow through the income statement in

Operator

Thank you. One moment while we prepare for the next question. The next question will be coming from Andrew Mitrokh of BMO. Your line is open.

Speaker 7

Hello. Just a quick question. Maybe we could get some commentary on The trajectory of the logistics costs, they seem to have peaked, I guess, Q3 of last year and you guys are recording Significant improvements since then. Is that a trajectory that can continue or the new levels that we see now in Q1, What we should expect going forward?

Speaker 3

Andrew, my dear Arcan Venture Regasia, we've managed to get a good handle on Our logistic costs and obviously what we've seen trending down was the shipping rates. We are however hopeful that in the longer term we can get our trucking We do foresee a bit of a backlog period as Tinky starts exporting over the next couple of months. But we have put in place mitigation measures by negotiating dedicated trucking So we do not expect a massive increase in cost on our side, but we in the long term, We would like to see our transport costs trending slightly lower than what it was.

Speaker 2

It's obviously going to be a lot lower. Obviously, it just depends how far you want to look forward or how much of a nitpicker you want to be For the next quarter or 2, this is a 100 year mine. We're going to have a railroad through Angola and we're going to be shipping Finished metal at 99.7 percent copper. So obviously, our shipping costs are going to plummet to much lower levels if you're willing To wait a year or 2 in the mining business, that's a nanosecond in the mining business. Young man?

Speaker 7

Thanks, Robert for putting that into context.

Speaker 2

Yes, thank you.

Speaker 7

I'll hand the microphone off to the next questioner.

Operator

At this time, there are no more questions in the audio queue. I would like to turn the call Back over to Matthew.

Speaker 1

Thank you very much, operator. We have a few webcast questions. I will kind of group them as there's a few that are a little bit similar 1st and foremost, just another follow-up, I guess, Marna on logistics. This one on the Capuchin Crossing. There's a lot of moving parts now with The railway and Capushi coming on, if you could just give a bit more color on how these are all going to work together and sort of the timing of how these might ease logistics?

Speaker 3

Thank you, Matt. So the Capuchin border in our mind is a short to medium term Solution, we are planning to implement it as soon as we get sign off, which we anticipate to be in the next couple of months. That will alleviate border congestion that's currently exacerbated by the fact that all the trucks IndioC goes through 1 main border and then there's a second border that recently opened up. The 3rd border will allow us to have a dedicated line for both Capuche and Primoa to use, reducing standing time significantly for our truckers. The Angola rail will service Chemowa more directly with a direct link into Angola, and that should then also alleviate traffic out of the country.

Speaker 3

We cannot Put in place enough measures, there's a lot of projects ramping up in Congo. There's a lot of growth in Congo. And we think all these initiatives that we are are complementary to each other. But we sort of boxed them into short, medium and long term solutions And the Board is sort of the immediate focus. Obviously, the Raul remains strategic and is also a greener solution.

Speaker 3

So we work closely with Jeff, I could draw in terms of being a key participant on that quarter.

Speaker 1

Great. Thanks, Morna. And next, I guess, one for Robert, maybe a little bit more of a Protheme 1, there's been a lot of news still recently on copper M and A and sort of the widespread interest visavis the Glencore Tech deal, etcetera. Robert, where do you see Ivanhoe Mines fitting into this world of heightened copper M and A? And where do you see the company going post the three assets we currently have under

Speaker 2

I don't know, back to the previous question. The Congo is the absolute epicenter of copper development on this planet. President Felix Sissacate has recently met with President Joe Biden. He's about to go to China to meet with President Xi Jinping. Everybody on the planet wants copper metal, Not only for the energy transition, could there be enough copper to even have 1 and national security demands given that It's going to take an ocean of copper to rebuild Ukraine, if we can ever generate a just and lasting piece there.

Speaker 2

People don't really understand that Catonga is a happening place. The economic growth there is exploding. Places like Canada and the United States are sleepy by comparison. When people get to decide, they're amazed that we have 5 gs wireless and they see such intelligent young Congolese writing code and to see how advanced Things really are there. When that railroad gets going through Angola, bringing everything into this part of the Congo will be cheaper, whether it's steel or cement or And the other material and the hydroelectric capacity expanding just makes us literally the best place in the world to be mining copper.

Speaker 2

According to independent observers, the Democratic Republic of the Congo has just nosed out Or is in a dead tie with Peru to be the 2nd largest producer of copper in the world. Where does this audience think more copper discoveries are going to be made in the next 5 or 10 years? The DRC or Peru or Chile for that matter. Today, Codelco announced miserable production numbers for the Chilean government with 2 point And $0.04 a pound cash cost and for 10 years Chile has not been able to grow production. Where is the production exploding is right here in Takeda, Glencore knows it and we agree this is the best place in the world to be mining copper and we're proving it quarter by quarter.

Speaker 2

So please stay with us and understand this is a long term business. The average age of a person in the Congo, the median age is only 18 years of age. It's a young, Hungry population eager for a better life. Having operated in over 60 countries around the world, I took a lot of heat when I stood up in London and said, I'd rather be mining copper in the Democratic Republic of the Congo than in Chile. But Given the government of Chile announcing partial nationalization of their lithium metal, It's obvious that they've fallen on the wrong path.

Speaker 2

And the leadership in the transformation of the world economy, depending on this copper metal, We're right here at the epicenter. I might add that, we get a lot of visitors from the industry. 1 of the largest major mining Companies in the world had a technical delegation underground at Komokukula and they said That the Komoca Kula is the best mine in the world. And they also noted that they never could have done it themselves. It took 30 years of dedicated effort by thousands of people to go to where the copper actually was and to participate in the rebirth of the country.

Speaker 2

So we'd like you all to join hands and enjoy the experience of watching Iverdo Mines become a major Diversified Mining Company, carrying the best of ESG and Canadian practices, idealistic practices and a sort of United Nations Our people work together to find this metal that we desperately need. We need to mine it in a green and clean way And that's exactly what we're doing. And so hats off to Marna and her team, hats off to our Board of Directors, which It's continuing to get stronger. And let's put our hands together and pray for the next big discovery because We're certainly working on it in the Western Portland and at the Mokopane theater. Thank you.

Speaker 1

And next one, a rather popular question as well, maybe one for David. A few questions on the shareholder loans, specifically in terms of Comeaux and scheduling on cash flow, as well as consideration of potentially an upcoming dividend.

Speaker 4

Yes. Thanks, Matt. I think it's been evident from previous quarters that Gamora Kakula is just a Cash flow machine, we are currently doing a brief deal with the most value accretive and Obviously, using the majority of that and cash towards development of Phase 3. At current copper levels, I think we definitely see Kamawa Being able to successfully fund its proportionate share of that capital expenditure and then Who knows? Shell, the loans might start to get repaid sometime next year.

Speaker 4

And with the Moa's cash generating ability and the fact that Ivanhoe, And as everyone on the call would know has very limited data, which is basically The convertible notes maturing in 2026. Any additional cash flow could be Yes, other use to distribute back to shareholders. But who knows, it's fully dependent On other successes, maybe we need the cash flow for Building another mine at the Western Foreland. So I think the future is sort of open to us. But yes, we will have we do have a very strong cash generating business, especially from 2025 onwards.

Speaker 4

And I think shareholders can expect to reap the rewards of that.

Speaker 1

Great. Thanks, David. And I think we have time for one more, so maybe a little airtime for Platte Reef as well. Alex, I think maybe this one might be for you. Just on the scoping for SHAF 3, just some questions on sort of what the market can expect in terms of news flow from that study and A little bit more detail on when that might actually impact Platte Reef's development?

Speaker 5

Yes. So It's a work in progress is the answer, Matt. Currently, we're working on the study on an internal level. And clearly, we will want to update our 40three-1 101 at the right time, but we also have to figure out how to do that within the slightly complex confines of 43,101, where we already have a feasibility study on Flat Reef and this will be a slight amendment to that feasibility study. But in terms of the critical path, the only real decision, which is not a major CapEx Decision is whether we equip that shaft or not.

Speaker 5

And I think we're basically willing to go ahead with that because Irrespective of the timing of Phase 2, equipping that 3rd shaft will give us a lot more flexibility in terms of the ramp up of Phase 1. It's not a big ticket capital item and it derisks the flat rate proposition overall. So that's really what we will be looking to do over the next Couple of years. And then hopefully, we can bring forward that start date of Phase 2 from where it was originally constrained was the completion of SHAPT 2 is thinking in 2027. Hopefully, we can do better than that as Malo mentioned.

Speaker 1

Great. Thanks, Alex. And we are coming up on the 60 minutes and have sort of run our way through questions. So operator, I'll turn it over to you to conclude the call. Thanks again everyone very much for joining us for Ivanhoe Mines Q1 2023 Financials.

Operator

Thank you. Thank you all for joining today's conference call. You all may disconnect now and you will enjoy the rest of your day.

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Earnings Conference Call
Ivanhoe Mines Q1 2023
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