Vital Energy Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
February 26, 2024

There are 10 speakers on the call.

Operator

Hello, and thank you for standing by. Welcome to Avonhold Mines Ltd 2023 Q4 and Full Year Financial Results Conference Call and Webcast. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer I would now like to hand the conference over to Matt Kiboo, Director of Investor Relations and Corporate Communications. You may begin.

Speaker 1

Thank you, operator, and hello, everybody. It's my pleasure to welcome you to the Ivanhoe Mines 4th quarter and annual 2023 financial results conference call. I am the Director of Investor Relations and Corporate Communications. On the line today from Ivanhoe Mines, we have Founder and Executive Co Chairman, Robert Friedland President, Marna Clotay Chief Financial Officer, David Van Heelden Chief Operating Officer, Mark Farrin Executive Vice President, Projects, Steve Amos and Senior Vice President, Corporate Development and Investor Relations, Alex Pickard. We will finish today's event with a question and answer session.

Speaker 1

You can submit your questions using the Q and A box on the webcast as well as through the conference operator via your phone line. Please do contact our IR team directly if you have follow-up questions or your questions was not were not addressed during the call. And just ahead of that, we would just 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 looking statements. Details of the forward looking statements are contained in our February 26 news release as well as on SEDAR Plus and at www.ivonhomemines.com. It is now my pleasure to introduce Ivanhoe Mines' Founder and Executive Co Chair, Robert Friedland for some opening remarks.

Speaker 1

Please go ahead, Robert.

Speaker 2

To all of our shareholders and stakeholders around the world, welcome to our conference call to discuss our annual results. After 7 28 years to 30 years of efforts, we're very happy to announce we have over 20,000 individuals working directly for Ivanow Mines, and we have a lot to go through in this conference call. Without further ado, I'll turn this over to Marna Clote, our President, who will just kick this right off. Thank you, Marna.

Speaker 3

Thank you, Robert. And maybe just a brief introduction. I've been with the company for the past 17 years going on 2018. And what you see in front of you is a picture of our 5th Street plant at Kaumaukukula that's ready for commissioning in June. So we are again ahead of schedule.

Speaker 3

I think we previously said to the market, we'll have Phase 3 ready in the Q4 of this year, and our team has really done it again. So we're definitely getting smarter as we move along. So I always have the privilege of starting with the highlights. And Matt, if you can just quickly put us on highlights. And I think from a Kumaoka Gula perspective, we really had a stellar year.

Speaker 3

We delivered again. We had some challenges. We did leave some copper on the table, mainly due to grid instability. And Mark Farren will talk to you about all the plans we have in place to ensure that we address these issues with the grid stability in the DRC. We've put out our guidance for this year.

Speaker 3

We're planning to produce between 440,000 to 490,000 tonnes of copper. And as I just mentioned, this is mainly due to the fact that we are again ahead of schedule with the commissioning of our 3rd plant at Phase 3. It's no easy task to build 5 major capital projects at the same time. I think we're probably the only team in the world to do that.

Speaker 4

That. And that we can

Speaker 3

only attribute to the wonderful people that we have in place across our organization. 2023 was probably for me on a personal level one of my toughest years. We spent a lot of time on planes addressing issues, making sure that we deliver to the market what we promised. We're very excited that now in 2024, we will bring Capushi into production as well in the Q2. The mine looks very neat.

Speaker 3

And again, Mark and Steve will take you through our development plans there a little later. Just sort of on the statistics side of things, we've produced over 390,000 tonnes of copper in 2023. We've sold close to 3706,000 tonnes, and the difference between the two is basically what was sitting in inventory and also at the Lualaba copper smelter. We created €2,700,000,000 worth of revenue, EBITDA of €1,680,000,000 and we were in the mid range of our cash cost guidance. We are also putting out our guidance for this year, and David van Jersen will take you through our C1 guidance a bit later during the presentation.

Speaker 3

And then, of course, it's always exciting to hear Robert talk about our exploration success, and we think we've got another one with Gidoka. So our team is very excited about what we are seeing in the Western Four Lands. We go to the next slide. Also, safety is at the core of what we do. Being in the mining industry, it's inherently a dangerous industry.

Speaker 3

But as you can see, at all 3 of our major projects, our safety statistics are tracking down, and we're well below the industry average, a statistic that we are very proud of. And we work hard at this every day to create a culture of 0 home across our organization. Next slide. And this is one I'm very excited about. The DRC is, in fact, the copper superpower on the rise.

Speaker 3

And I think the DRC is poised to have a take Peru as the 2nd largest producer of copper in the world. The DRC contributed to 11% of global mined copper in 2023. This is, in fact, truly the future of green metal. It's been able to be. It's prime real estate.

Speaker 3

It's where you want to buy your next house. We had an election in December. President Felix de Tukede was reelected for the 2nd 5 year term. We attended the inauguration, and we're very excited for what the future holds for the country. And we're seeing a lot of support from all the superpowers across the world to ensure that there's stability in the DRC.

Speaker 3

Sort of on a project level, from an ESG perspective, we take what we do very serious. We work with our communities on a daily basis. And we've also showcased the center of excellence that we launched last year that will be a tertiary educational institution in the DRC. And then last but not least, and Alex will touch on this a little bit later, is the Lobeysa railway corridor. That's really opened up a new gateway for us to get our product to market.

Speaker 3

We're currently running trial shipments. We've reserved significant capacity on this corridor and to be tracking this project, forming strategic partnerships with the developers to ensure that we can move our product. This will also ensure that we have an even lower carbon footprint than what we currently have. So with that as a bit of the lead in, I will now hand over to David van Jjerven, our CFO, to take you through our annual results for 2023.

Speaker 5

Thank you, Madna, and good day to everybody joining the call today. If we go to the mix slide, Matt, and Komalakukula achieved its highest ever annual revenue of $2,700,000,000 in 20.23 and that's at a weighted average realized copper price of $3.84 per pound. Revenue was up from the $2,400,000,000 achieved in 2022 and the strong EBITDA of $1,700,000,000 was delivered at a very healthy margin of 62%. If we look at Kamaalakukula's unraveled cash flow generation on the next slide. 2023 concluded the 3rd consecutive year of outperformance at Kamaka Kula.

Speaker 5

The 3 years EBITDA growth is shown on the left hand side with the graph showing the cash generated by operations on the right after excluding non cash working capital. This clearly illustrates that after an initial Phase 1 and Phase 2 investment of just over $2,000,000,000 Komal Kakula has returned $3,500,000,000 of cash in just 13 months. Just before we move over to the next slide, I just want to make a nice clarifying point that the 2022 and 2023 cash from operating activities is the same. It is a coincidence and not a mistake. Moving over to Kamaukukula's annual EBITDA waterfall.

Speaker 5

The waterfall illustrates that the 2022 move to a 1.7 EBITDA in 2023 equates to a 22 percent year on year EBITDA growth, driven principally by our increased production. The 2023 results also benefited from the higher realized copper price in 2023 when provisional pricing is combined with prices ultimately realized, with this partly offset by cost inflation. If we look at cost a bit further on the next slide, Kamaukukula again achieved guidance, with 2023 ending exactly at the midpoint of our initial 2023 guidance. Q4 2023 cash cost is slightly up due to generate the power used and the intermittent power on production as draws were made from the stockpile impacting on the grade molds during the quarter. Looking ahead at the next slide.

Speaker 5

Our cash cost guidance for 2024 is $1.50 to $1.70 per pound of payable copper. Even with the temporary elevated cash cost, Kamaoka Kula would still be well placed on the global cash cost curve. The 2024 guidance is impacted by the earlier commissioning of Phase 3, both due to the additional backup generation provided for in the guidance due to the Phase 3 concentrator coming online for INGAT2 as well as the slightly lower grade expected to be fed through the Phase 3 concentrator. Completion of the on-site smelter on schedule for commissioning in the Q4 of 2024 is expected to drive a decrease in average cash cost over the 1st 5 years post completion from 2025 onwards. We move to the next slide, please, Matt.

Speaker 5

As seen on the left, Ivernote's EBITDA is up by 23% year on year. When excluding the impact of the revaluation of the convertible notes and deferred tax income from Capuxi recognized in 2022, from a profit, the normalized net profit for 2023 was $388,000,000 and that's up 30% from the $298,000,000 in 2022. With construction of Phase 3 at Kamoa ahead of schedule and Kapushi commencing ramp up in just a few months, 2024 promises to be another year filled with record results. We move to the next slide, please. Our capital expenditure in 2023 was effective and that's clearly illustrated by our great projects being on or ahead of schedule and all tracking on budget.

Speaker 5

And in 2024, we will continue our industry leading investment growth. We have been active in arranging facilities for each of our projects with $400,000,000 of in country facilities drawn at Kamaukukula, the $150,000,000 senior debt facility signed for Platte Reef in December 2023 and financing for Kapushi expected to be finalized in Q2 this year. On a 100% basis across our projects, we invested almost CHF2 1,000,000,000 in growth in 2023 alone, and this is set to increase further in 2024. Our investments in 2023 and today are leading to real growth as early as this year. We move to the next.

Speaker 5

We ended the year with a very strong financial position with cash of 5 $74,000,000 in hand and very low current debt. And our $1,200,000,000 non current debt is mainly made up of the $800,000,000 relating to the convertible senior notes due in 2026 and possibly early redeemable in April 2024. Our net debt to EBITDA ratio is tiny and sets us up perfectly for the next phase of growth of our growth story. And I'll now hand over to Alex Picard, our Executive Vice President, Corporate Development and Investor Relations, to commence the operations and project update presentation.

Speaker 6

Thank you, David, and good day to everybody on the line. As Marni mentioned, we have a full complement here to take you through the fantastic progress we are making at our operations and our projects. So without further ado, I think we can move to the next slide. So, Kamoakukula had another outstanding operational year. As Marno mentioned, we produced 393,500 tonnes of copper, which was within our guidance range.

Speaker 6

I think we are especially pleased with this performance given that we're dealing with the constraints around power stability in the DRC. And Mark is going to take you through much more detail on what we're doing on power, which is a very key focus for this year. But really, we see the production as unfinished business in a way. We think that our copper output could have been perhaps even 40,000 tons or more higher with consistent power availability. So that bodes really well when we do solve that issue.

Speaker 6

Of course, we completed the debottlenecking project at Comeoa earlier in the Q1 and the Phase 1 and 2 concentrators have subsequently shown the ability to operate at the capacity in excess of 10,000,000 tonnes per annum with a clean run. And what is also good is that our recoveries have been in excess of design at 87% and that's also a reflection of power stability to some extent. So there's an opportunity to push that further. Steve Amos is going to take you through our very exciting Project 95 that we're launching to increase those recoveries much further. And then just to reiterate on our guidance range for the year, it's 440,000 to 490,000 tonnes of copper and concentrate.

Speaker 6

That factors in the early commissioning of the Phase 3 mill. And with the copper that we produce from Phase 3, we will be selling some of that concentrate that is coming in advance of the smelter and we will also be stockpiling a portion to feed that smelter when it becomes available in the Q4. So with that, I will pass to Mark Farren, our Chief Operating Officer, to talk you through the power initiatives in the BRC.

Speaker 7

Thanks, Alex. Yes, so power is I mean, it's been a little bit of a thorn in our side over the last year in particular. And I believe, like Alex, we've left about 40,000 to 50,000 tonnes of copper on the table because of power. Short term issues really, if you take it if we put the whole thing in context. And I'm going to start on this first line on what we've done on backup power.

Speaker 7

And then I'm going to talk you through the longer term initiatives that we've taken and that we are following through on. So in the short term, we've decided to create enough generating capacity on-site, which is obviously very expensive and it's diesel. So it's not exactly clean either. But it's to reduce the risk and make sure that we have full redundancy within this year to run Phase 1, Phase 2 and Phase 3 under any conditions. That decision we made last year.

Speaker 7

And if you have a look at these dates over here, you'll see that by July, we'll have 128 megawatts and by December, January, we'll have 210 Megawatts of diesel on-site. So under any conditions, we can run the 3 phases, the 3 concentrators in the 3 mines. It's very unlikely that you'll have load shedding to the extent of 100% blackout, but it has happened in the past and it's something that we need to manage. If I can move us to the next slide, which is probably more important. So under what we've been doing in the longer term, we've identified Inge as a project that we need to complete and we picked 1 of the turbines, so GE25 turbine.

Speaker 7

It's a big turbine. It's 178 megawatts. That project was picked 2 years ago and it's in execution. We will replace that turbine and have it commissioned by quarter 4 this year. So it's an additional 178 megawatts that will go into the grid.

Speaker 7

But with that work that we've done, we've had to do a full study all the way from Inge right to the gate where we put our power into the mine. And that's about 1700 kilometers of different areas to study. And we've identified stability issues in the grid, the same grid all the way from INGAR to us. And in that work that we've done, there's about $200,000,000 of upgrades that need to take place to make sure that the grid is stable and reliable. That work is in execution at the moment.

Speaker 7

We're working with the state utility to execute these projects. And that means that, that project should be complete within 12 to 18 months. We also have targeted additional power from Zambia. It's taken us some time to be able to organize that power. We're happy to say that we've signed an agreement today, a long term agreement and that will be followed by short term agreements, which will step up the power from Zambia, which will give us a clean source of hydropower into our mine in stages, starting from 15 megawatts and moving to about 100 megawatts this year.

Speaker 7

There's a longer term plan to get it to 150 megawatts. So in addition to the current work that we're doing on stabilizing the grid, increasing the power from Nga and Manangusha that we've already completed, we'll be able to add another 150 megawatts of power into the grid into the same grid and it will be stable. So that will be in addition to the work that we've done to create that capacity that I spoke to you about earlier by putting in the diesel generation as a backup. So I think all in all, if you look at where we're going with power in this year, in this year of 2024, we will be able to stabilize power and make sure that we have sufficient power for Phase 1, Phase 2, Phase 3 and for our smelter. And we're looking at how we're going to grow the business over the next couple of years.

Speaker 7

There will be more initiatives on power to make sure that we get stability and enough energy to power the projects going forward. Yes, so it's very important for us because we're growing this mine from the current 400,000 tonnes that we did last year into probably 500,000 tonnes going forward, 600,000 tonnes, actually 800,000 tonnes of copper we need to produce in the next 4, 5 years. That's absolutely within our control. The power has been a bit torn in our side, but we are addressing it. And we've placed, I think, the best project team on this working along with the Snell, which is at the local power utility.

Speaker 7

And I believe it will be executed properly within this year. So that's it on power. I'm going to talk going to just ask Steve to talk a little bit about where we are with Phase III, Steven. Steven is our technical prospects on projects. He's been with me.

Speaker 7

We've worked alongside for at least 10 years. All these projects that you see, they're on time and on budget. It's basically under Steven. Maybe if you can tell us about Phase 3 a little bit?

Speaker 8

Sure. Thanks, Marc, and hi, everyone. Yes, I think Marc Martin and Alex have both alluded to the fact that Phase 3 is going very well. In fact, we are up to 4 months ahead of schedule. So we're really getting good at sort of the stuff now.

Speaker 8

On the mining side, we're busy preparing the mine pad and the run of mine to feed the plant. We've got a mobile crusher on-site. We're busy tracking the ore from Kansoka, which is about a kilometer or 2 away. We're building a large stockpile ahead of the plants. Probably next month, we will commission the surface conveyors.

Speaker 8

The surface conveyors will take the run of mine from the mine effectively to the plants. We plan to build up 20,000 odd tonnes of stock ahead of commissioning for the plants and there's plenty of time to do that. We've got a number of months to do that. Then June, yes, we feed the plant first ore into the mill during June. And then I suppose once the ore is into the mill, it's all about ramp up.

Speaker 8

Phase 1, we did very well. We ramped the plant up in 3 months. And Phase 2, we did even better. We ramped the plant up in 2 weeks. So I'm expecting something good from Phase 3, and I think our track record sort of shows that we'll get to steady state reasonably quickly.

Speaker 8

I think you can see from the picture that the mechanical completion and all the equipment installation is complete. We're busy with the last bits of electrical installation, the cable pulling, etcetera, etcetera. And we've energized some of the substations and busy pumping a couple of motors to get things going pretty quickly. Next please, Matt. It hasn't changed on my side.

Speaker 8

There we go. Sorry, yes. Okay. So it's a bit of a leg. Okay.

Speaker 8

So this is something quite exciting. We call it Project 95. And the reason for the Project 95 is that the objective, and there's two fronts to it, is to increase copper recovery from the current 88 odd to 95%. We've been working on this for about 6 months now. So we've done a lot of work in the lab and the lab work is nearing completion.

Speaker 8

The two aspects to this are firstly, modifying the existing Phase 1 and Phase 2 plants, additional reground capacity, a flash float, a couple of other odds and sods to improve recovery from 88 to 95. As I say, Fichberg almost complete and looking very positive. The way we'll implement this because it's a in fact, it's a redfield site that it's operating is that these changes will do it similar to like we did in the debottlenecking. During the planned shutdowns, we'll come and do that we'll do all the construction during the planned shutdowns, we'll come and do the tie in, so there'll be minimal effects on existing production. Then the second aspect of this is the current arising, so that the current tailings we're producing and the tailings that are in the tailings dam.

Speaker 8

So what we've done there as well over the last 6 months or so is we've designed a process where we can take these tailings, regrind them and get about 60% to 70% recovery on that feed to the new plant. That's a greenfield standalone plant. And that's effectively taking recovery to the 95%. We believe there's about 30,000 tonnes per annum in those current arisings plus what's in the dam and then some additional recovery from the modifications to the existing plants. All on track, probably April ish, we'll have some basic engineering.

Speaker 8

We'll have a cost budget estimate. We'll get approval and we'll fast track this as soon as we can. Next please, Matt. Okay. Moving on to the smelter.

Speaker 8

So state of the art, 500,000 tonne per annum, OdoTec Direct to Blister Technology, biggest Direct to Blister smelter in the world. The emissions and the environmental legislation, all world class IFC World Bank principles. So absolutely zero pollution to the atmosphere with the smelter. It's been a massive job. It's a totally different league to a concentrator.

Speaker 8

Have we are importing 73,000 tonnes of equipment from abroad into the middle of Africa. We've got about 50% of that on-site at the moment and another approximately 25,000 tons on route. So it's looking good. It's nice when you can see the equipment on-site, especially in the middle of Africa. We are confident of our Q4 2024 startup commissioning Q4 2024.

Speaker 8

It also has a significant production in cash costs We estimate about 20%. And this I mean, you could just think for yourself, shipping 50% copper out of the country as opposed shipping 100 percent of the copper out of the country reduces your transport by half. There's also taxes and a TC to go with that and a significant amount of asset production, which is a sort of the commodity in the DRC because the bulk of the copper producers leach oxide with acid and produce copper by solvent extraction and electrowinning. Next slide, Matt. And I think it's over to Alex.

Speaker 6

Yes. Thank you, Steve. So we did make a landmark announcement at the end of the year that we commenced trial shipments of copper concentrate from Kamoakukula via the Lobito rail corridor. So the Lobito corridor is a project that has been very publicly supported by the U. S.

Speaker 6

Government together with the European Union and the G7. And the good news is that the shipments today have been a big success. We've taken only 8 days on a one way journey, which is less than 1 third of the time of the alternative exporting by truck via Durban or Doris Alarm. And obviously, that's a reflection of the shipment being on rail, but also of the overall length of the journey. Roughly it's almost half of the length of the journey to Durban.

Speaker 6

So ultimately, what this should mean is that the cost of shipment will certainly go down over time. But also it's important to note that the CO2 emissions associated with the transportation by rail are much lower. At Kamo Hakuna, we're very lucky in terms of the grades that we have and the hydropower, we already have the lowest CO2 emissions of any major copper mine. These are set to decrease by approximately half with the commissioning of the smelter and the reduction in the logistics burden as Steve mentioned. And then that will be further reduced by shipping on the Lobito corridor.

Speaker 6

Just in terms of the sort of next steps on Lobito, we've recently signed a reserve capacity agreement with the Lobito consortium led by Trafigura and that is to ship up to 240,000 tons of copper product. Copper product from next year will be largely 99.7% anode coming from the smelter. And then finally, it's also just important to note that the Lobuto corridor passes directly through the Western Foreland exploration licenses. So it will play a big role in terms of the construction of future mining operations as well as the exports of copper products. And that's perhaps a good segue onto the next slide.

Speaker 6

So just looking at our group wide exploration, we announced late last year that we quadrupled 20.24 to 90.1000000000 gallons of gallons, but also we are commencing drilling of the Mokopane feeder project adjacent to Plat Reef and also early stage exploration at our new licenses in Angola. I think as Ivanhoe Mines is a group, we firmly believe is the highest possible return on capital that we can drive for our shareholders. I think we've demonstrated that with all of our projects including Pemuco Kula were founded on exploration effectively by this team. And so we hope to add huge value with the drill bit this year. We did announce late last year the success that we've had already in terms of the initial copper resources at Makoko and Kiala, which are already globally significant and we're moving those into more of a study phase.

Speaker 6

And then of course we also discovery of Kitoko, which our Founder, Robert Friedland, will now explain much better than I'm sure I can.

Speaker 2

I'll tell everybody on this call, exploration is the lifeblood of the mining industry, and I thought I'd spend a few words explaining why the Congo has become so quickly equal to or larger than Peru as the 2nd largest producer of copper in the world. So these are sedimentary copper deposits. They actually share a lot of similarities with oilfield geology and they occur in basins. So I wouldn't call it a bathtub, but maybe the shape of a bird feeder. In this case, the basin is about 150 to 175 kilometers long and 25 to 40 kilometers wide.

Speaker 2

If you think that is a giant bathtub or bird feeder, very shallow. And if you filled that bathtub with layers of different colored sand, you filled your bathtub with 2 inches of red sand and then 2 inches of green sand and 2 inches of blue sand, gradually laying these sands inside the basin. The original discovery of copper at Kamoa was in a particular sand on the eastern side of the basin and we were astonished that we had a notion of 3% copper. The second discovery of copper was Kukula, much higher grade, 4.5% to 5.5% copper and an ocean of it. These flat line deposits, when you find them, they can be many, many kilometers long.

Speaker 2

They can go 10 or 15 kilometers long, 10 or 15 kilometers wide and they're very consistent. They lay there like a potash mine or an oilfield. So it's quite remarkable that when we went to the western side of the basin, in relatively shallow horizon, we found Makoko in sands that mimic the sands that host the original Kamoa discovery, say 30 kilometers to the east. And then with time and continued drilling, and Makoko became about 11 kilometers long. It's still open and we found a second Makoko stacked like different layers in a layer cake.

Speaker 2

And with additional drilling, we went deeper and deeper into the basin and we finally found 2 stacked new horizons called Quitoqo, which means beautiful or gift in the local languages. The deepest hole we've drilled right to the bottom of the basin is running over 11% copper right at the bottom of the basin. This has never happened before in this enormous target area. This is a whole new horizon. As of today, it's approximately 2 kilometers open and open in all directions.

Speaker 2

It's nearly flat line, but it's open up dip and along strike in virtually all directions and open down dip as well, very, very shallow dip as we've shown in many cross sections. So QuitoCo has metallurgical characteristics that you see in this picture, almost identical to Cucula. We see boronide and calcified, which are the very richest copper minerals. We see them in great abundance. And just to make sure that that initial discovery hole at over 11% was not a fluke, we recently put a wedge in the hole and drilled off of it and again intersected the same horizon at well over 11% copper.

Speaker 2

So it's consistent, it's real, it's open in all directions and it shows that the land position can throw off a number of additional Kukula type discoveries. So I think those are the geologic community that understands sedimentary copper, think that we could be finding more of these types of deposits for generations. The greatest amount of value that we can add for our shareholders is to add more drill rigs. We have 7 drill rigs turning now. We'll have 2 more going very shortly.

Speaker 2

That's despite the fact that this is the rainy season. In the old days, we would have stopped drilling in the rainy season, but this one has us really excited. We've the rainy season is going to end in 2 or 3 more months, but despite that, we're sure 9 drill rigs turning on this and that's going to create a lot of value because this ground is held by Ivanow Mines and a few joint venture partners that hold minority interests. So this vast area is really a very bright future for us. If there was ever a reason to be interested in our efforts to solve the world shortage that is looming for copper metal, both for electrification and national security, this is where you're going to find it.

Speaker 2

This Western Forlan region has brand new railroad coverage going straight to that port in Angola. And it's all downhill, by the way. We're at 1400 to 1600 meters elevation in the Western Forlands, and we're going to the Atlantic Ocean, obviously at sea level. So the railroad trains heading that way are actually going to be able to generate electricity going downhill as we go to the seacoast. And so we've learned so much in the last 20 years.

Speaker 2

We know how to build mines in this region. The hydroelectric power has been developed. The all the benefits of having the operating mine nearby enable us to do everything faster, quicker, cheaper and better than we did in the past. So the future of iron ore mined in copper lies in the Western Forlins, and I'm happy to say for our annual results, our team couldn't be more excited and that's why we've boosted our exploration budget fourfold this year to about $90,000,000 And with that, I think, I'll turn this over to Mark Ferron, so we can tell you about our new thoughts and our new plans to accelerate the production of the world's largest combined precious metals and base metals mine, which is Platte Ridge. So with that, Mark, turning over to

Speaker 7

you. So we moved from one fantastic mine to the other one. And I know that PGM space is a bit of the ugly sister at the ball moment that it's going through right now. But let's just talk a little bit about Platrieff. A tiny bit on what the actual ore body looks like first before I talk about the phases.

Speaker 7

So the ore body, what's different about this ore body is that it's 20 to 25 meters thick compared to the rest of the Bushveld complex, which is about 1 meter thick on average and with the same grades. The same grades. So you're still sitting with your 4 grams to 5 grams per tonne, 4E and huge nickel and copper credits. So you've got like a 0.3% nickel, which differentiates massively from anything else and the thickness of this ore body, which makes it completely unique and amenable to mechanization and automation across the ore body. I was in Anglo Platinum for about 23 years.

Speaker 7

And I can tell you now, as me, this is the best ore body in the world, definitely. Got the grade and it's got the thickness compared to anything else. So, what we did do is we started off with a Phase 1, which we call a baby mine. It's a test mine. It's just something we've put together with a concentrator that Steve will talk you through just now to get ourselves going and understand the ore body.

Speaker 7

With us getting moving on Phase 1, we've looked at how can we accelerate the development of this mine, How can we accelerate this development and bring in Phase 2 in a meaningful level of production and as early as possible. With the big shaft that you see in the background of the picture, that's basically a Phase 3 portion. It's a huge shaft. It's going to be able to waste 8,000,000 tons a year. But the Phase 12, we're trying to use to optimize what we have in the footprint before this huge shaft is in place.

Speaker 7

So Phase 1 and 2 together will give us the potential to waste 3,000,000 tons and therefore process 3,000,000 tonnes instead of the 1,000,000 tonnes odd that you're going to get out of Phase 1. So the work that we've done really now is to be able to accelerate Phase 2 and then also start looking at Phase 3. When you look at the end of the day, we'll have at least a 10,000,000 tonne operation running there, which is over 1,000,000 ounces of 4E and huge credits of nickel. So the timing of this, we'll have a PEA done and an FS done. The Phase II FS will be complete midyear, quarter 3 at the latest and the PEA for the 10,000,000 tonne case that we're busy with.

Speaker 7

And while we're talking about these things, we're actually in execution. So we're doing a lot of work at the moment to derisk Phase 2 and Phase 1 and accelerate the development

Speaker 8

of the

Speaker 7

mine. Another area, I think, to talk about is the fact that we had to place some the offtake. For Phase 1, it's been placed with Northern. And the Phase 2, we managed to place a big chunk of it with Sibanye. We do have terms for that, very favorable terms in the South African market.

Speaker 7

And further downstream, we're busy working with as a joint investment with other big players in South Africa to do some in house beneficiation. So I think all in all, if you look at what we have, the best platinum ore body in the world, accelerated development and a quartile Alex, if you can just show the Q1 cost position or where it's going to be on the next slide. So you'll see from the next slide that it's actually going to be the best place, lowest cost producer in the world. And that's simply because you have the ore body that's amenable to mechanization and automation. It's a very thick ore body.

Speaker 7

It's very high grade. There is nothing else like this ore body in the world. I know that for sure because I've been in that space for a very long time. Okay. We can move on.

Speaker 7

Stephen, are you going to carry on or just give an update on where we are the construction?

Speaker 8

Yes. If you can just move to the next slide, Matt. So in terms of concentrates, the concentrator construction, we're about 80% complete. We'll co commission this plant in August this year. And then we'll start the plant up on run of mine H1 next year.

Speaker 8

What you see there is the Phase 1 plant. The Phase 2 plant will be adjacent to this plant and it will be a similar size to Comeaua Phase 1, a total of 4,000,000 tonnes of run of mine treatment Phase 1 plus Phase 2. And that will give us about 500,000 ounces of 3E plus gold and about 10,000 tonnes of nickel production. There is space on the mine footprint for the Phase 3 concentrators as well. Maybe just to add, we recently secured water for the mine.

Speaker 8

We redid a water treatment plant called Musodi, a few ks away from the mine, and we're receiving clean water for the mine now. And our connection to the Eskom grid is imminent. We've just constructed a 28 kilometer line from a Burutu substation onto the mine. So everything going well at Plat Reef, focus on Phase 2 and Phase 3. Thanks, Matt.

Speaker 8

That's all for me. Next slide, please. I think it's over to Mark.

Speaker 3

It's over to me.

Speaker 8

Mona, sorry.

Speaker 3

Yes. No problem. So maybe just quickly on Capushi. We announced earlier last year that we've reached terms in terms of offtake, but we were surprised as to the favorable conditions that we could find in the local market for financing, to date, we've managed to conclude a $80,000,000 facility with 1 of the local banks. We're very close to closing another facility with a local bank.

Speaker 3

And then we've also entered into discussions with multiple offtake partners. Those discussions are nearing completion, and it will include a prepayment portion that will be associated with the offtake. And total facilities that we are planning to raise for Kapushi would be in the order of between €100,000,000 to €200,000,000 to facilitate with working capital. We're also planning to embark on logistics ourselves for Kapushi. So we've set up our own logistics company, and we will be handling the logistics in house with delivery at port terms with the off takers.

Speaker 3

If we go into the next slide, I think Mark will just quickly discuss the mining currently at Kapushi and then Steve will just talk you through the project update.

Speaker 7

Thanks, Manu. Yes, so the Kopushi mine underground is a very nice if you like mining, it's a beautiful mine. It's long haul stoping. It's in fantastic ground. It's derisked completely.

Speaker 7

We've done we've opened up 7 levels already for the open stope as long as open stoping. And we've put a stockpile on surface, which people would laugh about. I mean, low grade, we're calling it 22%, 220,000 tons of ore, which we call low grade at 22%. The mine's grade runs at 35% average, so it's a fantastic zinc ore body as zinc ore bodies go, and it's well set up. Again, Stephen will talk to you.

Speaker 7

We're ahead of schedule on the concentrator. The mining footprint is ready to go. And I don't believe there's any major risks to that there will be at Kapushi. Stephen, you want to talk a little bit about the concentrator? Yes.

Speaker 8

So, Waki, if you can just put the next slide up, please, Matt. Yes, so very excited about Kipushi. We've transformed the landscape at Kipushi. It's really looking fantastic. We're slightly ahead of schedule, sort of same time line as Kaumoa, commissioned in June, busy with the last electrical installation and energizing of substations.

Speaker 8

The process is exceptionally simple. I mean, if you can just have a look, there is 5 float cells in the whole plant, very easy metallurgy. And the design throughput, 800,000 ktpa, but I think what we'll probably do is a debottlenecking exercise and increase that fairly significantly. But all looking good for Kupushi, no issues whatsoever. Very excited about Kupushi.

Speaker 8

Thanks.

Operator

Our first question comes from the line of Andrew Mikachuk with BMO Capital Markets. Your line is open.

Speaker 4

Good morning. Congratulations on a lot of updates that went into this press release and a lot of hard work. Just kind of forward looking, when all this power arrives from Zambia and Inga and even the backup power on-site plus the rail, Is there any sense that this would cause kind of a rethinking or optimization of the mine plans around Kaumoa Phases 1, 2, 3 and I guess 4?

Speaker 7

Yes, definitely, Andrew. So you'll see what we're doing now and it will be announced in the next couple of months is the same thing you saw with Phase 1 and 2. Phase 3 will also do debottlenecking. And I think we can probably tweak up that production on all 3 concentrators to it's a 7 we call it 14, but it's probably going to end up in 16 or 17 plus all the recovery work that we're doing. And that's a few extra megawatts.

Speaker 7

And that gives us a little bit of time to get stability into the grid and then time Phase 4. Phase 4, when we want to I think it's in about 2 or 3 years' time. We need to start executing. So no risk, I don't think, short term. But power is the issue that we need to just get over the line with.

Speaker 4

Okay. And the just a second question on the exploration. Obviously, very encouraging that further progress is being made on Kitoko. What kind of timeline should investors be expecting for updates and pushing this ahead at the usual torrid Ivanhoe pace?

Speaker 2

Usual toward Ivanow pace. Well, we found 50,000,000 tons of copper, the highest grade, largest copper mine found in the world in recent memory for sure. We have no intention of slowing that down. We have every incentive in the world to find more copper on the Western Portland. So we're talking about 500, 600,000, 700, 800,000 tons of copper a year on our original joint venture ground that's on 400 Square Kilometers.

Speaker 2

And we're into designing and developing a new production at Moncoco and Sitokos. So here we go. We're going to keep drilling and if it gets bigger, we'll just add more drill rigs and keep going. As I said earlier, this is going to be quicker than in the past. When we started 25 years ago, that was a very different DRC Congo than we have today.

Speaker 2

Today, we have 4 gs wireless, we have a new international airport, we have fantastic access of a brand new railroad that goes downhill to the ocean and we're going to have too much electrical power other than not enough. So I guess a good way of saying that is, we don't really have a shortage of copper. We can find copper faster than we can build the concentrators to bring it to market. We can find we can build concentrators faster than we can build smelters to produce copper metal. But we are the fastest growing copper company in the world, mining the highest grade ores and with the lowest global warming gas period of production.

Speaker 2

So why quit? We have 20,000 people there. The median age of a person in the Congo is less than 19 years of age. The workforce is fantastic. And the support we've had from the government for our training programs, our environmental programs and our ESG programs are without parallel.

Speaker 4

So I

Speaker 2

think all we need to do is get you out there, Andrew, and you can stand at the drill rig and see this core come out of the Kotoko discovery. And even though I'm a grandfather, I got to tell you, finding something like that is exciting as anything you achieve in life, even for any geologists. Many geologists go through a lifetime and never get near discovery like Kukula or a Kotoko. So we're going to put the pedal to the metal and help the Congo get to its rightful position as the largest producer of copper in the world. There's no doubt that's achievable.

Speaker 2

The power line that we brought in from the Inga Dams can carry 900 Megawatts. We're doing close to 400,000 tons of copper on 78 Megawatts. If you get the highest grade copper ore bodies in the world and you couple them with hydroelectric power, then you got really green long life power, nothing can beat that. And so thanks for your enthusiasm and interest, Andrew, and your support over the years. And let's extend that to all of BMO who've been a big supporter of all of our efforts because we're speaking to you today from the BMO conference.

Speaker 2

In fact, I'm scheduled to go downstairs and give a speech in about 15 minutes. Thank you, Andrew.

Speaker 4

Okay. No, thank you, Robert. I'm going to sign off as well and hand the microphone to someone else. Thank you. Thank

Operator

you. Our next question comes from the line of Lawson Winder with Bank of America Securities. Your line is open.

Speaker 9

Thank you very much, operator. Good morning, Robert and team. Thank you for today's update. Fantastic as always. Just wanted to ask about the temporarily high cash costs and the outlook for 2025.

Speaker 9

So last quarter you guys had to a 20% reduction versus I think what was the midpoint of the 2023 guidance. So that would imply about $1.15 per pound. I just wanted to make sure I had my numbers roughly correct.

Speaker 2

Yes. Well, I'd like to take a stab at that because I think people get very confused. We have 78 megawatts of hydroelectric power we've developed so far. And good news is bad news here. We've developed this concentrator at least 6 months ahead of the schedule we told you about year.

Speaker 2

I can't think of anybody else building Tier 1 minutees ahead of schedule, can you? So, with the concentrator starting up in June, we have to burn diesel for 6 months until the Ingrid Dam comes on. So we're not going to burn diesel as soon as the Inghadan comes on. And we just announced an agreement we just signed an agreement today with Sombia to bring in hydroelectric power. So this power issue, this limiting factor is going away.

Speaker 2

So once the smelter is running and the Angolan Railroad is running, we're saving about $0.20 a pound on transportation costs because we're moving half the volume, shipping 99% copper instead of shipping 50% copper cuts to cost in half per pound. We're going to get the benefit of sulfuric acid and the price of sulfuric acid losses is very high in the Congo. And the higher the copper price goes, the higher the price of sulfuric acid goes in the Congo, you get a leverage effect because everybody screams for it, for their oxide copper mines. Right now, current production consumption of sulfuric acid in the Congo is 6000000 or 7000000 tons a year, but that's going up. And so maybe our smelter can provide 10% of what's required in the Congo.

Speaker 2

So I think the pricing that we assumed on sales of sulfuric acid are very conservative. So when we're running on 100 percent hydro power and we've got 3 mills going above their nameplate capacity, I think $1.15 is a perfectly realistic target. I'd say $1.10 to $1.30 in the midpoint of that range might be $1.20 or $1.15 Sounds about right to me. But don't everybody else on our team like to comment?

Speaker 7

Yes. Yes.

Speaker 2

Mark agrees. That's reasonable target. That's right at the bottom of the world cost curve in money, but at the bottom of the world cost curve in global warming gas produced pre owned copper for which we're going to get a premium. We're absolutely certain we're going to get a premium for clean copper. That's opening soon at a theater near all of us.

Speaker 9

Okay. Thanks very much for that detail. I also wanted to congratulate you guys on getting that 2 concentrate from Platte Reef? And is a base metal refinery on the table for something that Ivanhoe might build down the road? Or is the proposed mat the solution to avoiding having to

Speaker 4

do that? Thanks very much.

Speaker 2

Marna and Mark, could you talk a little bit without mentioning names about the nature of our discussions about going further downstream?

Speaker 7

I'm going to ask Alex to chip in. But definitely for Phase 2, I don't think we're at risk. Alex, you want to carry on there?

Speaker 6

No, I totally agree, Mark. I think for Phase 2, especially given that we've sort of modified the size around this 4,000,000 ton hoisting capacity, we definitely see that there will be capacity in the South African market for that concentrate. And then really what we're looking at is a joint venture partnership on downstream processing that's more geared towards Phase 3 when we have that huge shaft number 2 available. We can increase our processing capacity up to 10,000,000 tons per annum. And at that point, we're, if not the biggest, one of the absolute biggest PGM mines and also a huge producer of nickel and copper.

Speaker 6

So that becomes the limiting factor in terms of base metal refinery capacity in South Africa. But what we're looking at is potentially either building a greenfield site or even better to repurpose an existing brownfield site in South Africa of which there are many good candidates, which can save significantly on time and CapEx. And then the idea being that we would produce a nickel mat, so it's about 50% nickel by content, including the PGMs. And then that becomes a much more marketable product internationally to various different refineries.

Speaker 7

So we added the words to Phase 2 we think and then it's obviously Phase 3 is that decision point that we need to make.

Speaker 9

Okay. Thank you all very much.

Operator

Thank you. I'm showing no further phone questions. I would now like to turn the call back over to Matt.

Speaker 1

Thank you very much, operator. We are coming up on the top of the hour. So I think we will wrap the call up there. And as Robert mentioned, he's got give his keynote speech here. So we will wrap

Speaker 5

up today. I'd just like

Speaker 1

to thank everyone for joining us. If you did have any questions that were not answered on the call, please do reach out to the IR team, Tommy, Alex and myself, and we'd be happy to find the answers for you. But we're looking forward to a very exciting 2024. And thanks again for joining us. We can wrap up, operator.

Operator

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Powered by Quartr
Earnings Conference Call
Vital Energy Q4 2023
00:00 / 00:00