Ivanhoe Mines Q3 2024 Earnings Call Transcript

Quartr
Provided by Quartr
October 30, 2024

There are 14 speakers on the call.

Operator

Good morning and good afternoon to everybody on the line. We're just experiencing a short technical delay. We will start the conference call at 10:45, so in 10 minutes' time. The presentation materials are available on the Ivanhoe Mines website, which is www.ivenhomines.com. Thank you.

Operator

Good day everybody on the call. Just a reminder that we are running 5 minutes behind because of some technical difficulties. The call will start at 10:45 Eastern Time. Please refer to the Ivanhoe Mines website for the presentation materials. That's www.ivonhomeines.com.

Operator

Thank you. Good day, everybody. Just a reminder that the conference call will start in approximately 3 minutes. Please refer to the website for the presentation materials on www.ivenhomines.com. Thank you.

Speaker 1

Good day and thank you for standing by. Welcome to the Ivanhoe Mines Third Quarter 20 24 Financial Results. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded.

Speaker 1

I would now like to hand the conference over to your speaker today, Matthew Kiebel, Director of Investor Relations. Please go ahead. Matthew, your line is on mute.

Speaker 2

Thanks, operator. Yes, everybody, thanks very

Speaker 3

much for joining us today. Our apologies, there was a slight technical glitch on the back end of the system. We will ask you today to refer to the slides that are posted to our website at www.ivenhomines.com. You can click on Investors and you'll see the deck there. If you could follow along with management on those slides, that would be great to just deal with this little bit of a technical glitch.

Speaker 3

We appreciate it very much and thanks for your patience. But welcome today. It's my pleasure to welcome you to the Ivanhoe Mines Third Quarter 2024 Financial Results Conference Call. As the operator mentioned, my name is Matthew Kiebel and I'm the Director of Investor Relations and Corporate Communications with Ivanhoe Mines. On the line today from the company, we have Founder and Executive Co Chairman, Robert Friedland President, Marna Clotay Chief Financial Officer, David Van Heelden Chief Operating Officer, Mark Faren Executive Vice President, Projects, Steve Amos and Executive Vice President, Corporate Development and Investor Relations, Alex Pickard.

Speaker 3

We will be finishing 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. If your question is not addressed, please do contact our Investor Relations team directly for follow-up, and we'll be happy to answer that question offline. Before you begin, I will point to Slide 2. We do have 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 looking statements.

Speaker 3

Details of the forward looking statements are contained in today's press release as well as on SEDAR Plus and at www.ivinhomines.com. It is now my pleasure to introduce Ivanhoe Mines' Founder and Executive Co Chairman, Robert Friedland, for opening remarks. Please go ahead, Robert.

Speaker 4

Well, greetings, everybody, and we certainly apologize for the technical delays trying to get a global system that is reliable. I'm addressing you from Riyadh, Saudi Arabia, where we are at the Future Investment Initiative here in the Kingdom of Saudi Arabia. Our opening photograph shows my standing next to Marna and a lot of our key people and a team of international investors inside the actual furnace in our new smelter under construction. That visit was fantastic. For those of you that haven't been at the Congo recently, the progress on-site is stunning and remarkable.

Speaker 4

So I welcome you all to this session. You can walk through the slides with us as I turn this over to Marna, our President. And let's go to the first slide with a picture of the smelter from a drone and off we go. Thank you, Marna.

Speaker 5

Thank you, Robert, and welcome everybody to our Q3 financial results. It's quite an impressive picture. You see that it's even more impressive when you drive around on-site. And it's quite exhausting to walk to the top of that building. When you look down, you can see quite a vista from that smelter.

Speaker 5

We're looking forward to completing the smelter in December and then start with commissioning early next year, but really a magnificent project. I'm moving over to Slide number 5 now, which is the highlight of our Q3. We were really busy with the ramp up of our Phase III concentrate during this quarter. That will help us increase our annual capacity production capacity to 600,000 tonnes of copper. And we see ourselves probably producing slightly less than 600,000 tonnes of copper next year and then ticking over the 600,000 tonnes of copper per annum in 2026 once we complete Project 95, which is our recovery project that Mark Farren will speak to a bit later in this call.

Speaker 5

We've had another record quarter. It feels like we say that every quarter, but it happens to be true in terms of production as well as revenue at Kaumau Ka Kula. And unfortunately, we had to reduce our guidance slightly, and that was mainly due to the intermittent power that we experienced earlier in the year. We've really broken the back of our power problems. Some of the projects are longer term projects, so it will take time to sort of get to steady state power the way we would like to see it.

Speaker 5

But we're currently importing about 65 megawatts of power. We've got 145 megawatts of backup power installed. That does have a cost impact. So we're trying to be as green as possible and stay on grid as far as possible. And Mark will also speak a bit later during this call about our power initiatives.

Speaker 5

Very exciting for us as a management team, and we've hosted a number of tours to the Western Forelands over the past quarter is what we're doing at the Western Forelands, really an exciting time. And we have indicated that we will put out a press release towards the end of the year with our plans for next year and give you a little bit of an update as to what we've seen at the Western Forland. We added some additional land packages to the Western Forland, another 336 square kilometers. And we've also deployed 2 new rigs to the Western Forlan, bringing the total number of rigs drilling to 11. We will probably be able to drill a bit through the wet season because we've prepared the next in our target areas.

Speaker 5

If we move on to the next slide, Slide 6, Health and Safety. It's a continued area of focus for us. Unfortunately, we did experience a fatality due to a fall of ground during the quarter. I think a picture speaks a 1,000 words. You can see our workforce increase from 2021 to today.

Speaker 5

Currently, we sit with basically over close to 30,000 people working across argon mines. And our safety statistics are quite impressive compared to the industry average, but it's never good enough when you do experience fatality incidents on the site. We've closed out the report. We've done retraining. We've implemented mitigating factors.

Speaker 5

But every time we experience these incidents, it sort of reset back to 0. And it's a collective effort to ensure that all our staff goes home safely every day. Moving over to the next slide, which is a picture of our 1st inaugural class at the Khmer Centre of Excellence graduating earlier this year. It was quite a joyous occasion as you can see. And I had the privilege of visiting the Center of Excellence a couple of weeks ago together with an investor group, where we were greeted by the new City Aid students that really applied from across the Congo.

Speaker 5

We give preference to our communities and people that's in our footprint area, but we really choose the best of the best in the country. And people as far as Kivu have applied to be accepted at the Kamara Centre of Excellence. These students were in class for a 2 month period and they came to the Centre of Excellence basically only speaking Swahili or French or Lingala and they presented in fluent English to us during this presentation. It was really a touching moment for me to see the impact that we are making at the Chemawa Centre of Excellence. So with that as an introduction, I will now hand over to David Van Giorden, our Chief Financial Officer, to take you through our financial results and that starts on Slide 8.

Speaker 5

Over to you, David.

Speaker 6

Thank you, Madna, and good morning and good day to everybody joining the call today. As I move over to Slide 9, the increased production in the Q2, which Maira already mentioned, translated to a record payable copper tonnes sold for the quarter and an 8% increase when compared to the Q2 of 2024. Because of the increase in tonnes sold, Kumaal Kakula achieved record quarterly revenue of $828,000,000 for Q3, even though the realized copper price decreased to $4.16 per pound for the quarter from $4.34 per pound the quarter before, and notwithstanding the fact that we had an increase in unsold copper stock in inventory at the end of Q3. On the next slide, with Kumaawakukula feeding lower grade material into the Phase III concentrate during ramp up in the quarter and considering the impact that had on total average grade, we are pretty happy that cash costs came out at $1.69 per pound of payable copper in the 3rd quarter. I would add that the $0.17 quarter on quarter increase of that $0.08 was due to the increase in power cost when compared to the previous quarter, where our power needs needed to be supplemented by the use of diesel generators to keep the plant operational.

Speaker 6

Turning to Kaumaukakula's quarterly EBITDA, as shown on the right hand side of the screen. EBITDA for Q3 2024 was $470,000,000 and that is Kamaoka Kula 2nd highest quarterly EBITDA on record. Due to the relatively low grade copper concentrate produced by the Phase 3 plant when compared to Phase 1 and Phase 2 plants. Kamaoka Kula toll treated all Phase 3 concentrate into blister copper at the nearby Lualava copper smelter to maximize profitability until the on-site smelter is completed. We normally sales generally takes place as soon as the trucks are loaded with the concentrate bags.

Speaker 6

Toll treating concentrate adds roughly 30 days to the time line as the sales are then only recognized when the blister produced by the Lula Lava copper smelter is loaded onto the offtakeers trucks. This increased our copper inventory on hand to 16,000 tonnes of copper at the end of September, impacting on our EBITDA for Q3. The EBITDA waterfall on the next slide nicely shows the drivers of the quarterly quarter on quarter EBITDA movements. Q3 EBITDA, of course, benefited from the increase in copper tons sold. This was, however, more than offset by the decrease in realized and provisional copper prices from the levels experienced in the previous quarter.

Speaker 6

Logistics charges for the quarter decreased from the levels early in the year, but as I mentioned when speaking about cash cost, power cost was notably higher for the quarter. Assuming equivalent tonnes, the impact of power on the above EBITDA water fall was $18,000,000 And as one would expect, mining and processing for Phase 3 was more expensive in the quarter due to it being in ramp up. Having said that, the EBITDA for Q3 would have been very close to the record EBITDA achieved in the Q2 had we sold all the copper we produced in the quarter, even with the lower copper price in Q3. The next slide shows a snapshot of Ivanhoe's consolidated results. I'm on Slide 12.

Speaker 6

Ivernow recognized a profit of $108,000,000 and a normalized profit of $112,000,000 in the Q3 of 2024, with normalized profit basically being flat quarter on quarter. With the last remaining portion of our convertible notes redeemed in Q3, there will be no difference between our profit and our normalized profit in future periods. As usual, our profit for now at least is driven mainly by the results from the Kumaokukula joint venture, where our share of profit decreased slightly from the Q2 to this quarter of $84,000,000 in Q3. Although Kapushi commenced production late in the Q2, sales of zinc concentrate only commenced in the Q4 and we will start to reflect on our results from the next time we have an earnings call. Looking at Ivanhoe's adjusted EBITDA on the next slide, Slide 13.

Speaker 6

Given the environment in the quarter, we are happy with our adjusted EBITDA of $160,000,000 in Q3. However, we continue to drive growth at each of our projects with the majority of the capital for the short term growth initiatives already spent. So we expect our EBITDA will continue to grow in the upcoming quarters as we reap the rewards of our past investments. In the near term, we expect that the increased production from Phase 3 at Kemah as well as at Kapushi will drive growth in our EBITDA and then there is, of course, the smelter at Kemahakukula followed by Project 95 and revenue from Black Reef. And we will, of course, not stop there.

Speaker 6

The next slide, Slide 14, shows our guidance for the year or capital guidance for the year. And we have been spending slightly ahead of schedule at Kaumau Kukula and we therefore expect to be close to the top of our 2024 spending range. And that will mean that our 2025 would then be at the lower end. Spending at Plat Reef will be towards the lower end this year. We had cash and cash equivalents on hand at the end of September of $180,000,000 and have added to our liquidity subsequent to quarter end.

Speaker 6

We recently closed a $75,000,000 working capital facility, of which we have already drawn $40,000,000 and are in the process of drawing the first $70,000,000 of the Black Reef Senior Debt Facility with the funds expected to hit our accounts in early November. We still have very little debt for a company of our size and strength and have a lot of flexibility and many options available to add gearing, and we will continue to do so as needed. I will now hand over to Mark Fearn and Alex Pickard for the latest updates on our operations.

Operator

Thank you, David, and good day to everybody on the line. It's Alex Pickard here, EVP, Corporate Development and Investor Relations. I will take you through our production results at Phase 12 and then also the progress with Phase 3 that we've been making.

Speaker 7

What you can see on Slide 15 here

Operator

is another fantastic image of the smelter construction site. I'll leave Mark Farrin, our COO to talk about progress at the smelter. So I'll skip now to Slide 16 looking at Komoe Takula's quarterly production. So given the ramp up of Phase 3, it follows that we had another record quarter as Manna mentioned in terms of both mill throughput and copper production with 116,000 tons of copper in concentrates. If we break that out now by the two phases, we milled about 2,200,000 tons at Secula at a grade of close to 5% and then just over 1,000,000 tonnes at Tomoa or Phase 3 at a grade of 2.6%.

Operator

At Tomoa in particular, we were feeding quite heavily from existing surface stockpiles at Phase 3. So about 40% of the total ore volume was coming from stockpiles and then the remainder is coming from run of mine. This will be a bit of a feature as we continue to ramp up the underground mining rates at the Kimoa-one and Kimoa-two ore bodies that support the Phase 3 plants. The good news is that we do have a huge amount of flexibility in this regard. We've got I think 4,500,000 tons of ore that's been mined and paid for effectively stockpiled on surface at the grade of approximately 3% copper across the complex is obviously slightly higher grade at the cooler side and slightly lower grade at the Kamoa Kansoko side.

Operator

In terms of the concentrator, we are pleased to say that we announced we achieved, sorry, nameplate capacity just after the quarter end in early October. I'll come back to that on the next slide. And Manu mentioned the revised guidance for the year, which we announced a few weeks ago is now 425,000 to 450,000 tons of copper in concentrate. Just to give some context on that in terms of the impact of intermittent power, particularly in the first half of the year, for the full year to date, we calculate that we lost approximately 36,000 tons of copper production to intermittent power And well over half of that was in the Q1 alone. But the good news is that going forward, I think the trajectory is very strong in terms of where we are today in order to catch up from the start of the year.

Operator

And I think we are looking forward to Q4 to be a really strong quarter and hopefully another significant record. As we move into 2025, as Marta mentioned, we're going to be pushing production volumes to get close towards the 600,000 tons and then 600,000 tons from 2026 and beyond.

Speaker 7

Moving to the next page 17, just looking at

Operator

a bit more detail at the Phase 3 concentrator ramp up. So we commissioned the concentrator in May. We had a pretty good quarter that we achieved the nameplate capacity in early October as I mentioned. Some real positives here in terms of what the concentrates shown in terms of its potential to mill significantly above the nameplate capacity. So the nameplate is 5,000,000 tons per annum.

Operator

We've achieved over 19,000 tons daily recently, which implies 30% over that design capacity. So one of the projects is to really try and lock in this optimized throughputs over the next 12 to 18 months with a debottlenecking program. For the month of October, the recoveries have been around 84%. The recoveries are hampered slightly just because we're feeding ore from the stockpiles as I mentioned before, but we have seen numbers day to day at 86% or 87%. So we are well on track for design there.

Operator

And then as David mentioned, and just to remind people, the concentrate that we produce at Phase 3 is slightly different from what we produce at Phase 1 and 2. Phase 3 is more chalcopyrite dominant. So the concentrate grade is in the sort of 30%. So what that means in terms of sales strategy is that we've been shipping all of that material to the Lula Harbor smelter for refining into blister copper to improve the economics. And we will continue to do that until we start stockpiling concentrate in anticipation of the smelter commissioning.

Operator

So that stockpiling will take place from early next year. Looking at the underground ramp up and actually what you can see in this picture is the the Kamala 1 and 2 box cuts and declines. So this is the exact same ore handling concept that we have at Kukula. It's really the back bone of the underground production and the tons coming out of the mine going forward. The good news and very recent good news is that yesterday we actually tipped the first ore coming from this system.

Operator

And so going forward, this will allow us to ramp up the mining rates and notably improve efficiency coming from underground. Currently all the material from Qumor 1 and Qumor 2 has been trucked out of the box cuts. And then also we will be looking to target improved grades toward 3% run of mine over time with this additional oil handling infrastructure. So that's an update on Phase 3. I'll pass over to Mark Farrin now to talk a bit more about power on Page 18.

Speaker 8

Thanks, Alex. I'm going to cover power in 5 different areas. And then and that should give a reasonable summary of where we are. So we took a decision about 2.5 years ago to make sure that our power is totally derisked by adding the generating capacity on the mine. It's expensive, but we by the end of this year, this financial year, we'll have about 2 20 megawatts of diesel generation on the footprint, which is enough to run Phase 1, Phase 2 and Phase 3 under any conditions.

Speaker 8

So basically, if you have a total blackout, you'll be able to switch in and then run all 3 concentrators in all 3 mines. That decision, I think, was a good decision, but obviously, it's not something we want to do going forward. Then inside the country, we've been working on a number of initiatives. The one is obviously the G25 unit at Inga to replace the unit and bring it to commission it and then take that power and get it through all the way from Kinshasa into the system and into our mine. That's 178 megawatts.

Speaker 8

That one will run-in about May, commissioning in quarter 1 and full steady state, I think, in about May. And then along with that, we've identified and are executing a number of grid stability projects. They're big projects. They're not small projects. Some are at Inga.

Speaker 8

So there's filter bank projects at Inga itself. And then at the local substation in Powezi, you've got a DC line that transmits all the power from Inger through this DC line into another switching station in Koeweze. We've got a major project, which is to supply a very modern static compensator and install it. That will run by December next year. And in the interim, we're using what you call synchronous compensators, which we have also in terms of our engineering and our project management, we are also maintaining and upgrading.

Speaker 8

So through the last year and through this year, we've been working on the network to derisk and to stabilize the network, to derisk the projects that we're going forward with and to stabilize that network. In addition to this, import power is very important for us, not so much for the Phase 1, Phase 2 and Phase 3, but for the further phases that are coming. So for us to grow into the next Phase 4, which we'll talk about at the end and potentially not potentially, definitely in the time coming to execute projects in the Western Forelands, we're going to need more and more power as we grow our footprint. So import power short term through the Zambian network, Zambian corridor, but some of the power generation comes all the way from Mozambique through that network and up to the mine. We have got 665 megawatts at the moment.

Speaker 8

And agreements that we're working on to increase that in the short term to 100 and potentially 200 into through next year, 2 100, 2 15 odd megawatts are being offered and will be taken as we grow the footprint. We are also executing a project with 1 of the suppliers to do a dedicated line through the Zambian corridor right up to the mining footprint. That's an independent line that will take about 2 years, 2.5 years to execute, and that will be an additional 3 50 megawatts. So if you look at the long term strategy in terms of derisking power, it's fixing the network here, the backup generation is in place, and we are working with wheeling companies and energy suppliers to be able to get dedicated power to Paloma as we grow the footprint. In addition to this, we've been studying solar for this year, right from the beginning of the year.

Speaker 8

We're at a final bidding stage at the moment. We're sitting with 11 bidders, each offering between 10 30 megawatts. We'll probably end up taking 2 or 3 of these bids and going forward with executing some solar projects with storage. That will take place, I think, in the next 12 to 18 months. We will expect to see some significant solar installations on the footprint, and that can be grown incrementally over the next couple of years.

Speaker 8

I do believe that solar is another answer that we must pursue in addition to the import power and the generation projects that we're doing in the country. So all in all, Alex, we have lost 36,000 tonnes of copper this year. It does influence a lot our forecast. I believe we put ourselves in a very good position going into next year. And like Mohaner says, we're aiming in the high 500s and we have put enough work in place to be able to derisk this and make sure that we can actually get it.

Speaker 8

Obviously, we're going to be running the smelter. I'll talk about that again just now, but that's also going to demand some power. But in what I've spoken about now, we've catered for that as well. Okay. The smelter I'm going to ask Stephen just to talk a little bit about the smelter here, Steve, where we are and the heat transfer.

Speaker 9

Sure, Mark. So things are going well. It says on the slide 94% complete. So we're almost there. Busy with the last bit of piping and the electrical installation and we are hoping by the end of this year to be mechanically complete.

Speaker 9

We're on track for that. It will take us a few months to heat up. So Q1, 2025 heat up and then first feeds by the end of Q1, twenty twenty five and then we're hoping for a fast ramp up there. So big projects, it's been hard work, but it's going very well.

Speaker 8

Thanks, Stephen. Okay. Then the future, I mean that's what we're here for as well. I think we've gone very fast in building this mine. Phase 1, Phase 2, Phase 3.

Speaker 8

They've been ahead of schedule. These concentrators are fantastic. They're all when you optimize them, it's not going to be a 14,000,000 ton mine, but you can you definitely able to get these 3 concentrators running at about 17,000,000 tons. And I think it will be happened in the next 2 years or so. So that's where I think we're going.

Speaker 8

Project 95 is in execution. It will be ready and running in quarter 1, 2026. So that's why Mona said from the year 2026, we'll be over the 600 mark. That implementation gives us about 30,000 to 40,000 tons of extra copper per year. And then Phase 4, if you think about the 3 projects taking us to 70 odd 1000000 tons, it means Phase 3 is much bigger than the 5.

Speaker 8

So Phase 3, we think is going to be about a 6,500,000 eventually when we've done some debottlenecking, again, in a year, in a year, in 2 years, max, it won't take 2 years. It will be less than 2 years to get that running. And then we're actually working on what does Phase 4 look like. And we'll come to the market, we'll come to you guys by quarter 1 next year with a proper study, with a proper plan. We're looking at how we're going to sequence it, what are the next priorities, how do we do it with the current power constraints, how do we develop enough power in the area to do it.

Speaker 8

Chairman Chen, you would have seen, has a plan to get to 1,000,000 tonnes of copper. The next steps along the way to me, and I'm going to say, I think there's another 2 steps here on Phase 3 Phase 4. I think there's another 2 concentrators asides of Phase 3 and potentially getting us to not to 20,000,000 tonnes here, but probably 30,000,000 eventually. 30,000,000 will leave you you can work it out yourself, but between 7,800,000 tonnes of copper for the next 40 years. So I think that's where we're going.

Speaker 8

And that excludes the Western Forlands, which is very interesting, and Robert will talk about the Western Forlands as well. So the focus for now is to make sure we get the smelter commissioned properly, that we tap into the value of Phase 1, Phase 2, Phase 3. We get the recoveries up to where they need to be. We get our operating costs down. The smelter will have a massive influence on that.

Speaker 8

And then obviously, the dependence on diesel, David did speak about $0.10 per pound is expensive to run diesel. So the work there is to actually derisk power over the next couple of months, over the next year and then make sure that we earn our own right to grow by creating enough power sources and getting stability into the networks, designing the projects as we always have, properly and responsibly and making sure we execute like that. So all in all, I think next year is going to be a great year. Going forward, we are doing a lot of work. We're doing a lot of work to line up the next steps.

Speaker 8

So somewhere between what I'm saying and what Chairman Chen wants, I think that's our future. There's another couple of steps that we'll be taking. We'll come to the market with those next steps by quarter 1 next year. Okay, I think carry on. We're on Western Forlins.

Speaker 8

I think Robert speaking to the Western Forlins slide.

Speaker 4

Yes, this is Saudi Arabia coming back on here. So we're in a world that desperately needs copper and in particular green copper, copper that is produced without the generation of global warming gas. We expect that copper to trade at a premium as we derisk the hydroelectricity in the country. And we've not mentioned that Angola intends to export 2,800 megawatts or 2.8 gigawatts of excess hydropower to the DRC. That would be the final killer.

Speaker 4

That would be enough copper in this part of the world to produce 5,000,000 or 10,000,000 tons a year of copper. So we are limited more by the availability of stable hydroelectricity than we are by our ability to find more copper. We told the world we're going to drill 70,000 meters in the Western Forlanes this year. We've drilled over 63,000 of those. So we'll definitely make that target.

Speaker 4

And we're now up to 11 rigs turning. So it's quite exciting to go out there by helicopter and land in that camp because Makoko is really the largest copper system found in the world in the last 10 years that is not Kamoa or Kukula. So there's no exaggeration in the claim that the Western Forlan system is the best place in the world to find high grade copper resources that could be mined in a green, safe and mechanized manner. And of course, the future of our company, in large measure is also in the Western Forlan, which is wholly held by Ivanow Mines and a few minority pieces. This new piece of land that we acquired, we don't sometimes think it's really in our interest to say too much about what we're doing in the Western Portland because some of this license acquisition is somewhat competitive.

Speaker 4

But this new piece of ground, which is almost as big as the joint venture area we have with the Jin Mining at Komokukula, is in a very attractive exploration area based on our 20 years of experience in the Western Forlands. So we're putting 2 rigs on that right now out of the 11 rigs and we're drilling 24 hours a day and we've made provision to drill through the wet season. South of us, the Zambezi River system has been experiencing drought. That's putting a lot of pressure on some of the Zambian operators. They also have to import power into Zambia from Mozambique.

Speaker 4

So we're hoping that it starts raining to build up the southern grid. The Congo watershed has had plenty of water. It's a different watershed. And so our hydro power is very well backed by the waters in the Congo River. We have a giant mining conference held here in Riyadh, Saudi Arabia yearly now.

Speaker 4

It's the Future Minerals Forum. It's been graced by top management from Rio Tinto, BHB, Tech Corporation is coming this year and others. And so we look forward to that in early January, a very good time for us to be talking about what we've been finding in the Western Forlands. We'll have the entire mining industry there, a lot of state owned actors. And we also will be in a position to update the market about our sister company, Ivanhoe Electric, which has been drilling here in Saudi Arabia.

Speaker 4

So January is the start to the New Year. It's not far away. By then, we should be seeing our 3rd Phase III concentrator running at full speed. And we really look forward to an either an earlier slightly late Christmas present for our shareholders when we tell you what we've been doing at the Western Forlands. But I'll repeat, there is no place on this planet as attractive to find copper metal.

Speaker 4

A, the acquisition cost is incredibly low. If we look at the monies we've spent to find copper, it's a penny or 2, a pound finding costs for high grade resources. And these high grade resources are blessed because they're in a region with hydroelectricity, no ice, no snow, no need to burn coal. It's ridiculous to burn

Speaker 8

Robert, we've lost Robert.

Speaker 4

It's a little better else because the hydroelectric power is coming to scale and the Lobito corridor sorry, am I back? Am I back?

Operator

Yes, you're back. Yes, you're back.

Speaker 4

So the last comment to make is the Lobito quarter is downhill. We're at about 4,500 feet elevation at Komokukula. So an electric train going west to the Atlantic Ocean will actually generate electricity going downhill to the ocean. So the Scope 3 emissions, once that railroad is up and running and we will use it next year, we'll even further place this copper complex as the greenest copper complex on planet Earth. And by the way, that also applies to Capuchin.

Speaker 4

So I'll now turn this over to Alex or Mark to talk about the ramp up of our Capuchin zinc germanium copper mine. Thank you.

Speaker 8

Thank you, Robert. Okay, Capuchin, I'm just going to touch on it. It was a mine that was obviously flooded for a long time. We dewatered it. We built it now.

Speaker 8

It's a fantastic, beautiful zinc mine. It's a very high grade zinc mine. And we got the concentrator running. I'm going to ask Steve to comment on how we battled a little bit with commissioning. But it's the underground mining is very, very good.

Speaker 8

We've got a lot of surface stockpiles. The mining conditions are fantastic. And I invite anybody to come and have a look at a very modern, beautiful underground mine. Stephen, just comment a little bit about how we battled on the in the beginning with the commissioning and then I'll talk some more.

Speaker 9

Yes, sure. It wasn't easy. Initially, we had some metallurgical stroke, mineralogical problems. We thought we were depressing pyrite. We were actually depressing zinc.

Speaker 9

So we weren't floating anything. Anyway, fortunately that's behind us. We also had some issues with excess fines in the run of mine. So we sort of had to get our heads around how to cope with that, which is also behind us and a number of other odds and sods that crept up. I think the good news is we're on the up now and things are going well.

Speaker 9

Our recoveries are well north of 90%. Our congreve is very, very salable, well north of 50% zinc. And our plan is Q1 next year to reach nameplate. So definitely all the issues behind us and going from strength to strength.

Speaker 8

Yes. Maybe just to close it off. So we did battle a bit with commissioning. It is running very nicely at the moment. There's a couple of pumps and there's a couple of areas within the plant that need to be upgraded.

Speaker 8

Our quarter 1 next year pretty much will be on what the feasibility number was. And then you can see there on the last bullet, we're aiming to go 20% above that and we will definitely go 20% above that. We know the infrastructure can do it. We've ordered the funds. We've ordered to switch gear.

Speaker 8

It's all up and it's going to be going by Q3 next year, 20% plus and well north of what we planned in the feasibility study. So it's a good project. It's an exciting project. It's going to have a very low cost because it's a very high grade mine. So by far, the highest grade zinc mine in the world.

Speaker 8

We run it about 33%, the feed grade next year is 33% plan. And I think the average across the world is about 7%. So it's a good it's a small mine, but it's a wonderful mine. And a lot of good work has gone in there. And I invite anybody to come and have a look and see what a world class mine looks like.

Speaker 8

Thank you. Alex, are you going to talk about Platry?

Operator

Yes. Thanks, Mark. I'll close out the presentation. I'm looking at Slide number 24, where you can see the impressive shaft number 2 headframe at Platte Reef. So in terms of Platte Reef, we've really discussed this before around the commissioning of the Phase 1 concentrator.

Operator

We took the decision to defer that sorry, I'm just hearing background noise. We took the decision before to defer that commissioning until later on in 2025. And the target of that was to focus instead our efforts on shaft development and the underground development ready for the Phase 2 expansion. In terms of that, we actually hit a significant milestone. I think it was this weekend on Saturday, where we hold the 5 meter diameter shaft number 3 from 9.50 meters underground.

Operator

So we will now move to equipping that shaft to be ready for hoisting from early 2026. And that will take our total hoisting capacity from around 1,000,000 ton today from shaft number 1 alone to about 5,000,000 tons per annum. You can actually see that in the picture. It doesn't look like much compared to the shaft 2 head frame in the foreground, but where you see the blue crane in the background, that's the top of the raised ball from 9 50 meters to shaft number 3. So once we have that shaft hoisting that basically provides the platform to build the Phase 2 concentrator and with the Phase 2 concentrator that's when we really get meaningful production scale and also cost benefits in terms of economies of scale at FlatReef.

Operator

We're targeting roughly 400,000 ounces of PGM production plus significant nickel and copper. Just reminding that about 25% to 30% of the revenue basket at FlatReef is coming from these base metals. At the same time, we are completing the initial raised bore within the larger shaft 2 headgear that you see on the page and that will be completed this year. Shaft number 2 is what drives the further expansion to 12,000,000 tons of hoisting capacity and that unlocks the Phase 3 expansion and the potential to produce roughly a 1000000 ounces of PGMs. All of this work is being updated in a feasibility study that we're working on now together with a PEA or scoping study, which includes the expansion case and Phase 3.

Operator

That study will be published early on next year. So with that, I will conclude the presentation and hand over to Matt Kiebel to chair the Q and A.

Speaker 3

Thanks very much, Alex and management. Yes, we'll move forward with the Q and A. As mentioned, you can insert a question to the text box on the webcast as well as use the phone line. First and foremost, we'll go to the phone line. Operator, could we please move over to those waiting on the phone and we'll move through the phone questions and then we will field any webcast questions.

Speaker 3

Thank you very much.

Speaker 1

Sure. Our first question will come from the line of Orest Wowkodaw from Scotiabank. Your line is open.

Speaker 10

Hi, good morning. I realize your updated mine plan for Kamo Kukula will be out in a few months, but I'm wondering if you can give us, I guess, a sense of when you would currently anticipate Phase 4 coming into the plan and whether we should anticipate that to be moved up from the previous plan, which I think had it around 2,030? I

Speaker 8

can answer. I think it's too early to give you an answer to be we're looking at different scenarios. As a timing so I did speak about it last time that we potentially will do the front end and start treating the old tailings to take out that additional 7% copper that's sitting there and then ramp up the workings, the underground resource. And also, we have some open pits, which we're studying. So we ourselves don't have a definitive answer of that exact timing, but there's definitely a Phase 4.

Speaker 8

And I don't speak to you about the size. So you can sort of work around sizing it and sequencing probably 2 more plants over time. But most probably, we still need to internally make sure that we're happy with the final profile. Alex, I don't know if you want to add to that.

Operator

I would maybe just add, Mark, in terms of what we published in the last integrated plan. Ares, you correctly said, I think we had Phase 4 in 2029, 2030. I mean, I would view that as, let's say, the long stop date. It certainly is not going to be any slower than that, much more likely to be accelerated. It will definitely be ahead of that, Joe.

Operator

Yes. Agree.

Speaker 8

Okay, perfect.

Speaker 10

And just a follow-up, if I could. I mean, obviously, very prospective in terms of the Western four Lands. I'm wondering from a strategy perspective, from when you think the right timeline is to bring in a JV partner or do you want to proceed on a 100% basis indefinitely?

Speaker 8

I think that's a Robert question.

Speaker 5

Yes. Is Robert still on, Robert? Not hearing, Robert. We get this question a lot. I think the landscape for Ivanowind has really changed, and we don't necessarily have to bring in a partner on the Western four Lands.

Speaker 5

If we do bring in a partner, it must be compelling. It must be a partner that would add something to Ivanow Mines. But we are definitely geared to go at it alone. And we will most certainly not do a deal at the wrong time in the value cycle. So I think it's sort of an open question if we will bring in a partner at the Western Forelands.

Speaker 10

Thanks, Meyer.

Speaker 1

Thank you. One moment for our next question. Our next question comes from the line of Lawson Winder from Bank of America Securities. Your line is open.

Speaker 10

Thanks very much operator and good morning, Ivanhoe team. Thank you for the update today. Could I ask about Western Foreland actually? And you mentioned that you've actually done some drilling and I think gotten some results at the Sakanama and Lubuti targets. Are there any similarities to either of the existing Western Foreland mineralization that you would observe or share with us, so either Makoko or Kitoko or Kiala?

Speaker 8

Gabe, I can take that one.

Speaker 4

Yes. Mark, I'm back on here in Saudi Arabia. I wanted to finish the previous remark about speculation about partners. I don't think we want to tell you that we need a partner and I don't want to tell you that we don't need a partner. We don't negotiate in the media and there's really no worry, nothing really turns on that question.

Speaker 4

We're in a very strong financial position. We have no debt and we're going to tell you about more about the Western Forlins in January. We have a Board of Directors to consider what the right thing to do is, but it is the world's preeminent exploration area. It could be divided into little pieces. It's an enormous area.

Speaker 4

It doesn't take a very big area to host an incredible amount of copper metal given the grades. And so let's just ask the questioner to exercise a little bit of patience And we'll file this under to be continued. Thank you.

Speaker 1

Thank you. One moment for our next question.

Speaker 2

Well, I think, operator, Mark, if

Speaker 3

you had Lawson had a quick question on geological similarities between the areas, if someone would like to field that one.

Speaker 8

Yes. So both those 2 are new. There is work going on, on both of them, very new work. They're all highly prospective, like Robert says. They're very prospective.

Speaker 8

And as we drill, it's just it's very exciting. And that's about all I can say. Just very new. There is focus there. We will develop this footprint over time.

Speaker 8

But there's much more than 1 or 2 mines in that place.

Speaker 1

Thank you. And our next question comes from the line of Andrew Mejakuch from BMO Capital Markets. Your line is open.

Speaker 11

Thank you. Maybe a question for David or someone else. Would be the trajectory or expectations for dividends coming back from, Qumoa to Ivanhoe in the balance of this year or into next year?

Speaker 6

Yes. Thanks, Andrew. I'm happy

Speaker 8

to take

Speaker 6

that. I think firstly, I'd note that we are past our spending peak at Kaumau Kaikula. And then also that we are negotiating or drafting new anode offtake agreements. And those as those are being finalized, we do expect that they would include a sizable advanced payment portion. That and then the increased cash generated by Como's operation will give us pretty nice flexibility to flow funds upwards.

Speaker 6

On your question, I think more specifically, I think on our agreement with the DRC government is that we distribute 20% of our distributable accounting profit upwards as dividends. So we do expect that to occur in 2025. Just a clarification note on the 2024 dividends. And so the dividends declared in 2024 has for now only been flowed up to Chemawa Holding and not all the way up to Ivanow Mines and Jazin. And that's just to maximize flexibility for Chemawa, noting that I mean that might still be sent upwards if Chemawa has excess cash.

Speaker 6

Yes, so looking at the current forecast, we do expect 2024 dividends in 2025 to flow up all the way. And then, I mean, if there's cash flow generated exceeding Kamaoka Kukula's operational requirements and what it needs for approved future growth projects, then that excess cash will be utilized to start the repayment of shareholder loans under the current agreements in place. So I know it's not a definitive answer with an exact date, but I think that does give you a bit of a framework to make your own assumptions, Andrew.

Speaker 11

Okay. And if there's time, could somebody just briefly comment on the scheduled drilling in South Africa on the license of neighboring Flat Reef

Operator

in

Speaker 11

terms of time lines and what to expect, please?

Speaker 8

The Moquipani feeder?

Speaker 6

Yes. Yes.

Speaker 8

So we're doing at the moment, we've defined the target areas. There's 3 of them. We've mobilized the drilling contractor and we're engaging with the community. So that process is almost finished. Patricia what's this in it?

Speaker 8

Patricia is one of our VPs. She's busy helping us with that. And we believe that those holes will start being drilled in quarter 1 next year, potentially this year, but I think quarter 1 next year.

Speaker 4

Perfect. Well, thank

Speaker 11

you very much. I'll pass the microphone to the next questions.

Speaker 1

One moment for our next question. Our next question will come from the line of Carlos de Alba from MS. Your line is open.

Speaker 12

Yes. Thank you very much. Just very quick question maybe for Marno or Alex. You mentioned that in 2025 copper production is expected to be maybe slightly below or close to 600,000 tons. That could be a wide range or a wider range.

Speaker 5

We've got a bit of an echo there. We will put out guidance towards the end of this year where we will give you another range. We just wanted to guide you to the fact that it might be slightly below 600,000 tonnes for next year and then we'll definitely be 600 and above in 2026 once we've completed Project 95. But we will provide a more definitive number in due course.

Speaker 12

Fair enough. Thank you, Marni.

Speaker 1

Thank you, Marni.

Operator

Yes. Sorry, just to add that guidance will be when we announce our Q4 production numbers. So it will be kind of 1st, 2nd week in January.

Speaker 1

Thank you. One moment for our next question. Your next question comes from the line of Daniel Major from UBS. Your line is open.

Speaker 13

Hi, there. Yes, thanks for the questions. Just a few from my side. Yes, the first one, your sales come a bit below production, the 16,000 ton build in inventory this quarter, would you expect to reverse in Q4 or carry into 2025? And then the second part of that question, what would be the expected concentrate inventory build during the smelter ramp up?

Speaker 13

So what should we expect as a gap between production and sales in 2025?

Speaker 8

So for the quarter 4, we will reverse it just to concentrate sales. And ahead of the concentrator ramp up, after smelter ramp up, we'll stock probably 30,000 tons of copper equivalent and that will half as we ramp up the smelter. So we think there will be a lockup of about 2 weeks or 15,000 tons continually ahead of that smelter at steady state. And we believe steady state will be quarter 4. So quarter 3, 75%.

Speaker 8

Quarter 4, we're hoping to get 100% capacity going and then lock up about 2 weeks of copper, 15,000 odd tons.

Speaker 13

Okay. So 15,000 over the full year?

Speaker 8

Next year. So this year, we'll wipe out the deficit and next year, we'll probably lock up about 15,000 roughly.

Speaker 13

Okay. And then just second one, Alex, you mentioned we'll get the guidance update for the group with the 4Q production update. Robbie, you mentioned around the resource update at Western Portlands. When should we be expecting that? Is that kind of with the production numbers or later in the quarter?

Speaker 4

We'd like to make you as nervous as possible. Christmas comes once a year. We might do it at Christmas. We might wait until we come to Saudi Arabia in January. We might wait for the BMO conference in February.

Speaker 4

We'll do it when we feel like doing it. We'd like to keep you on your toes. We don't want to keep you fully satisfied.

Operator

Okay. Fair enough. Thank you.

Speaker 4

I mean, we have 11 rigs turning, man. Like, think about that. There's nobody on planet Earth with 11 rigs turning in high grade sedimentary copper. So I think that's enough for now. We love you though.

Speaker 4

We love you though. Don't take it personally. It's just good things take a little bit of time. And your mother taught you to be patient when you were a kid. So let's just exercise a little bit of patience.

Speaker 4

And at the right time, we'll have more to say. We just acquired some really important ground in the Western Forlins. I want to emphasize that our understanding of the geology there is better than anybody on the planet. So we know what to acquire and getting ground in the Congo through the regulatory process and getting it properly licensed and embedded down is it's not easy. It has to be done right.

Speaker 4

And then you have to build roads out there and infrastructure and camps. But we'd love you to come out there and take a look. I think you'll really enjoy it. We just had an institutional tour and I can assure you it was extremely well received. So come on out, we'll show you what we're doing with your own eyes.

Speaker 4

We'd like that.

Speaker 13

Sounds good. Thanks.

Speaker 4

Thank you.

Speaker 1

Thank you. I'm not showing any further questions at this time. I would now like to turn it back over to Matthew Kuebel for any further questions.

Speaker 3

Thank you, operator, and thanks to all our analysts for the great questions. In light of time and our slightly delayed start, again, thank you so much for bearing with us and your patience. I think we'll wrap the call up here for today. If there were any questions under the dress, please do reach out to the IR team directly at www.ivenhomines.com and we'd be happy to answer them. But once again, thanks everyone for joining us and we look forward to providing some very exciting news as we move into the Q4 and 2025.

Speaker 3

Thanks, operator.

Speaker 1

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone have a great day.

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Earnings Conference Call
Ivanhoe Mines Q3 2024
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