Ivanhoe Mines Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
April 30, 2024

There are 10 speakers on the call.

Operator

Good day, and thank you for standing by. Welcome to the Ivanhoe Mines First Quarter 2024 Financial Results Conference. 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.

Operator

I would now like to hand the conference over to your speaker, Matthew Keeble, Director of Investor Relations and Corporate Communications. Please go ahead.

Speaker 1

Thank you, operator, and hello, everyone, and good day from Saudi Vancouver.

Speaker 2

It's my pleasure to welcome you

Speaker 1

to Ivanhoe Mines' Q1 2024 Financial Results Conference Call. My name is Matthew Kiebel, and I'm the Director of IR and Corporate Communications at Ivanhoe Mines. On the line today from the company, we have Founder and Executive Co Chairman, Robert Friedland President, Marnak Twilte Chief Financial Officer, David Van Kiehlsen Chief Operating Officer, Mark Ferrant Executive Vice President, Corporate Development and Investor Relations, Alex Pickard and Executive Vice President, Project Steve Amos. We will finish today's event with a question and answer session. You can submit a question using the Q and A box on the webcast page as well as through the conference operator via your phone line.

Speaker 1

Please contact our Investor Relations team directly for follow-up questions that are not addressed during the call. Before we begin, I'd like to remind everyone that today's events 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 April 30 news release as well as on SEDAR Plus and at www.ivinhomes.com. It is now my pleasure to introduce Ivanhoe Mines' Founder and Executive Co Chairman, Robert Friedland, for some opening remarks. Robert, please go ahead.

Speaker 3

Yes. Thank you. Welcome to our quarterly conference call. A few general remarks. We're extremely happy with progress in the Congo.

Speaker 3

For those of you that are unfamiliar with our copper business, we have we can find more copper faster than we can build new production. We are only limited by electrical energy and we've solved that problem. Are going to explain why that problem is behind us. We've taken the opportunity to convert our convertible notes as our shares have traded near an all time high, which will leave us essentially debt free. We see nothing but clear sailing towards growing our production in the 3rd and 4th phase at our joint venture at Komokukula, and we see nothing but upside in the Western Forlanes on finding more metal.

Speaker 3

Somebody has to go out and find the metal that the world needs. It's going to be Ivanow Mines. I think we have a lot of new information to give to the market today, and you'll see why we've taken the position to do what we're doing. If you could show the next slide, please. We've been sending this Batman picture around about the absolute centrality of copper to the energy transition.

Speaker 3

There will be no energy transition without it. And we also see enormous amounts of offtake demand in the remilitarization of the world economy. Tensions and the balkanization of the world economy are causing copper to be a definitive national security issue for each nation state. So ivonomines is unique in its ESG characteristics. We'd like to refer all of our shareholders to the progress and the culture that the women and men that lead our company have created.

Speaker 3

And with that, I'm going to turn this over to the specifics and tell you why I think it's a fantastic opportunity now to get involved with Iberdome Mines. Marna, it's over to you. You're in Johannesburg. Please give them some specifics.

Speaker 4

Thank you, Robert. And it is indeed the season for copper. So say a picture speaks a 1,000 words and what you see here in my introduction slide is Phase 3, the £5,000,000 per annum concentrator that's basically being commissioned as we speak. And we will be starting our production there in May, which starts tomorrow. So it's really exciting times at Kaumao Kukula.

Speaker 4

If we go on to the next slide. The Q1 of 2024 was slightly below our expectations. And as Robert alluded to, that was mainly due to more than expected power interruptions and grid instability in the DRC. Our team has subsequently implemented several mitigating measures and we have already started to see the results of these efforts in April. Firstly, we secured an additional 15 megawatts of power through the Zambian grid.

Speaker 4

And secondly, we have embarked on an extensive grid upgrade and maintenance plan with our project team stations in Kinshasa working alongside the state owned power utility to prioritize and implement critical initiatives. These initiatives have already had a positive impact on production in April, with our production expected to be in excess of 32,000 tonnes for the month. In addition to this, we have also secured an additional 14 megawatts from Mozambique, also to be transmitted through the interregional grid, and this will commence tomorrow on the 1st May. So in total, an additional 55 megawatts of power. Pre commissioning of our Phase 3 concentrator, as I said earlier, is ahead of schedule with our 1st ore expected in May.

Speaker 4

And the Phase III smelter is also on schedule for the Q4 of this year. As we enter the dry season now in April, our drilling activities are ramping up on the Western Forelands and we have 17,000 meters of drilling planned for this year. May will be a busy month overall as we also start with pre commissioning of the concentrator at Kapushi, which is scheduled for 1st ore in June. Next slide. On a group wide basis, our total recordable injury frequency rate trends well below the industry standard.

Speaker 4

But regrettably, after quarter end, we had a fatality at the Kansoko mine. Pemaucoppa is undertaking a comprehensive internal investigation into this accident. Once the investigation is complete, our management will review and implement any additional safety measures recommended to prevent such an accident from recurring. Next slide. On the 17th April, we also launched our 7th annual sustainability report and we invite all of you to go and read the incredible stories of how we continue on our journey to mine with a greater purpose.

Speaker 4

A few highlights for 2023 include Kamaoka Kula contributed 6% to the DRC GDP. That is an outstanding achievement. $2,700,000,000 was spent on local suppliers group wide. We provided 8 49 scholarships and bursaries, group wide illustrating our commitment to education and local empowerment. 845 local suppliers were supported group wide, representing 150% increase year on year.

Speaker 4

And we spent $39,000,000 on socioeconomic activities across the group. Next slide. For 2024, we will focus on the following strategic initiatives that will be incorporated into our scorecard: our decarbonization strategy to net 0 our tailings management in conformance with the global industry standards on tailings management embedding human rights into our business practices, best practice in responsible sourcing as well as stringent diversity and inclusion targets. With that as an introduction, I will now hand over to David van Geerven to take you through the quarterly results.

Speaker 5

Thank you, Madna, and good morning and good day to everyone joining the call today. Madna already mentioned the instability with the DRC's Southern Powered Grid, which impacted on the financial results for the quarter. The quarterly revenue of $618,000,000 was stable compared to the previous quarter. The payable tonnes of copper sold for Q1 was $85,000 at a realized copper price of $3.82 per pound. With the average price of $4.50 per pound in April to date, we expect a nice uptick in revenue in the Q2.

Speaker 5

We expect a sizable re measurement adjustment in the Q2 as the 30,000 tonnes of payable copper provisionally priced is realized. And the higher price will, of course, also benefit the revenue for the tonnes sold in the Q2. If we move to the next slide. The cash cost per pound of payable copper produced for the quarter was $1.57 per pound. This was towards the bottom end of our 2024 guidance of $1.50 to $1.70 per pound, which we reiterate.

Speaker 5

The increase in Kamakakula C1 cash cost in the Q1 is principally due to the decrease in copper and concentrate produced during the quarter, but also as a result of the lower grade of copper processed in Q1. The grid instability during the quarter not only impacted on the ore tons milled, but also impacted on the copper ore grade processed due to the reduced underground access to high grade areas due to the water ingress during power interruptions. Marlon already highlighted how these challenges are being overcome and Mark will give more color later on in the presentation. The completion of the on-site smelter on schedule for commissioning later this year is still expected to drive a decrease in average C1 cash cost over the 1st 5 years post completion from 2025 by approximately 20%. Kamaka Kula's EBITDA was up quarter on quarter to $365,000,000 with EBITDA margin also up to 59% in Q1.

Speaker 5

On the next slide, Kamaoka Kula's EBITDA waterfall illustrated on this slide highlights that the EBITDA increase from the last quarter was driven by the higher copper price during the quarter, which had an accumulated impact of $35,000,000 This was partially offset by the impact of the reduction in tonnes sold, while we benefited from lower logistics charges, TCs and RCs in the quarter, while other costs increased only marginally. The next slide shows a snapshot of Ivanhoe's consolidated results. Avena recognized a normalized profit of $70,000,000 in Q1, slightly up from the previous quarter. This excludes the $139,000,000 non cash loss on the revaluation of the $575,000,000 convertible notes, which is as a result of the 26% increase in our share price. The increase in our share price is obviously a great problem to have, but the impact of the revaluation on our results is somewhat distorting.

Speaker 5

This is one of the reasons that we announced the redemption of the notes earlier today. So we will no longer have this problem from Q3 onwards. If we look at our strong balance sheet on the next graph, So with the redemption of the convertible notes, we will be in a net cash position with our cash on hand exceeding the consolidated debt on the balance sheet. Our continued investment in growth during the quarter remained materially on budget and we'll start providing additional returns imminently with the completion of the Phase 3 concentrate at Kamakakula and the commencement of production at Kapucia ahead of schedule. Not only are our projects significantly derisked, the capital intensity is much lower than the massive numbers that have recently gotten a lot of media attention.

Speaker 5

We have been able to arrange joint venture level facilities with great terms at Gamakakula with a working capital and overdraft facilities attracting interest of a mere 6.5%. The arrangement of additional facilities for Kapushi is also progressing well with finalization expected in

Speaker 6

the second

Speaker 5

quarter. We really have a bright future of growth ahead with almost no debt making us more nimble than any of our peers. Mark Farren, our COO, will take the presentation further to highlight our recent operations and project progress.

Speaker 1

And we're just going to turn the call over to our COO, Mark Farrin, in a moment as he connects the line. Mark?

Speaker 6

Thank you. Matthew, I'm going to talk through I'm looking at I'm using my phone to basically drive through my portion of the presentation because I can't see your screen. So there's the first picture of that nice smelter in the background. If I can move to the next one, which is basically your copper production quarterly copper production slide. And it's been mentioned by David and Mana that we produced 86,000 tonnes of copper in the quarter, the Q1, which is not exactly our normalized number.

Speaker 6

And if you have a look, you'll see that the December quarter and the previous quarter were impacted quite heavily by Power. So grid instability for some of the reasons mentioned. I'll actually want to talk about what we're doing about it, and that's the next slide. So we've got a team, as Manu mentioned, in Kinshasa working with the state utilities now on projects across the grid, not just the turbine that we're installing at Inge, but also to stabilize the grid. They've got 2 DC power lines that we're busy working with.

Speaker 6

There's a whole lot of reactive power projects and synchronous converter stations that are being upgraded as we speak. It's about a $200,000,000 odd investment, which is going into our loan agreement with Snell, which gets paid back. We've discussed this before by reduction in power tariffs in the longer term for us. So that's the one dimension is to make the Snell grid stable with the team. The second one is importing power.

Speaker 6

And in the month of April, we managed to get 15 megawatts from Zambia through that Zambian grid. It's stable, secure power, it's consistent and it's working. And then tomorrow is 1st May, we have signed an agreement to secure an additional 40 megawatts of power, which will take our imported power to 55 megawatts, which is a major breakthrough for us because it's stable power and this source is actually from Mozambique. So if you add the 2 together, you get 55 megawatts. And we've actually done projects which are stabilizing the grid in sorry, at Snell.

Speaker 6

So at the moment, it's a lot more stable. April is looking pretty good. We'll be north of 33,000 tonnes, which is more or less where the 2 concentrators should be, maybe a little bit more. And we've had almost no interruptions in the month of April. In addition to this, we have also spoken about this.

Speaker 6

We are installing backup diesel generator power for basically the whole mine to be able to run under any conditions. And a big chunk of that will be commissioned in July this year. So we'll have about 120 megawatts running by July this year. And by December, 2 20 megawatts of diesel power installed, which will give you 100% redundancy in terms of what's required to provide power. And then just to summarize where we are on power.

Speaker 6

The imported power will probably increase by the end of this year to 100 megawatts. We're busy signing off long term off dates. We've secured the power supply for that. And then the bulk of the work at Snow will be completed in quarter 2 next year. And quarter 3, quarter 4, it will be stable.

Speaker 6

In that case, we'll probably have 100% redundancy on what's required in our build up. So we have enough power for Phase 1, Phase 2, Phase 3 and Phase 4 and future expansions. So I think it has been a problem for the last two quarters. We've done a lot of work to derisk power. And I think it's going ahead of a lot better.

Speaker 6

And going forward, I believe there will be enough redundancy in the system to be able to expand as we need to. So I'm quite comfortable that we're getting there now. Thank you. If we can move on to the next slide. So I've discussed the backup power and imported power.

Speaker 6

Just some comments then on the Phase 3 concentrator. Again, we're about 2 quarters ahead of plan in terms of commissioning that concentrator. I'm quite excited about that. That thing is going to run-in May. The end of the back end of this month of May, it's going to run.

Speaker 6

And I know Steve has dialed in on this conference call, but we expect it to ramp up very quickly, the same as we did on Phase 1 and 2. I think Phase 2, we ramped up that concentrator in something like 6 weeks. So I think that this one will also kick in quite quickly. And hopefully, we the fact that we're commissioning it a bit earlier should help us to get the back end of our guidance and potentially the upside of our guidance for this year. The smelter itself is another the next slide is on the smelter construction.

Speaker 6

The smelter will run its first feed will be in December this year. It's on track. There's no major issues on that smelter. And we're very excited about that smelter running because it's going to drop our operating cost by something like 20% through the year of 2025. And it will reduce your logistics and the complexity of logistics significantly as we go forward.

Speaker 6

The next slide is on Inga, which is just as I spoke about earlier. Inge is a big turbine that we're installing. It's a 178 megawatt turbine. It's a massive turbine. It's something of 20 meters in diameter, 100 tons of kilo 100 tons of copper inside the alternator.

Speaker 6

So a big installation. It's going to be commissioned slightly late, so about January, February next year, where we had aimed for December this year. And that was mainly a logistics issue. But all of the major componentry is on-site. The team is mobilized.

Speaker 6

It's an excellent team and it's moving nicely. So that's on the smelter. And I think that's where we are. Is there anything else? I'm just looking from my side I've covered everything.

Speaker 4

Mark, you still have a slide on growth, Project 95. Okay.

Speaker 6

Sorry. On the growth, there's 3 areas, yes. And I guess forward looking slightly forward looking. So the one area is taking the infrastructure that we've already installed. So Phase 1, Phase 2 and Phase 3, we believe that we can move way beyond the 14,000,000 tonnes per annum that we've been talking about to about 17,000,000 tonnes with those 3 plants.

Speaker 6

There is some work that we've done on Phase 1 and Phase 2. Phase 1 and Phase 2, we believe can do 10,000,000 tonnes easily. And Phase 3, we believe we'll be able to get to between 6,000,000 and 7,000,000 tonnes. So instead of the tonnes that we've looked at 14,000,000 tonnes, it's probably more likely 17,000,000 tonnes. Then there's a project that we call Project 95, and that's also very exciting.

Speaker 6

It's a flow sheet that will take us from our current 88%, 89% recoveries to 95% recovery. That work is done and we'll have engineering done with a budget estimate for that work in May. So basically, in the next couple of weeks, we'll have that engineering budget ready. What's nice about that, there's 2 things here. The first one is all your new arisings, obviously, you get to increase 7% recovery.

Speaker 6

And the second thing is that all the tailings that we have accumulated over the last couple of years, it's about 50,000,000 odd tons. That can be reprocessed. And that will be reprocessed. And we'll get the benefit of that extra tonnage. If you add the 2 together, it's around about 80,000 tonnes per annum with a very effective capital cost and obviously a massive improvement in operating cost because you're getting much more you're getting another 7% recovery without any additional operating cost.

Speaker 6

So that's exciting. And then Phase 4 is going to be I believe it will be accelerated. We haven't got a time line yet, but it's not going to take too long to get Phase 4 moving. And there's some synergy between what we want to do on Phase 4 and Project 95. So basically, if I can talk about it is we would probably start some of Phase 4 early production by utilizing the tailings that are lying on that tailings dam at 50,000,000 tonnes that I spoke about.

Speaker 6

That would be something that we could do to initiate the first production at Phase 4. So all very, very exciting projects. I believe power, we've derisked significantly over this last quarter. We have a plan to be able to install enough power within the country and importing power as well as backup generation to derisk this operation completely and to be able to grow. The important thing for us was always to be able to grow at the rate that we need to grow.

Speaker 6

And I believe we have derisked it significantly. So I think that's it on power and on what we're doing in the future. Thank you.

Speaker 7

Thanks, Mark. It's Alex Pickard speaking. We're going to just take you through a couple of slides on the Western Fallen. So I think Mark gave a really good overview there of our plan at Kamoakukula to accelerate production, take our throughput rate to potentially 20,000,000 tons and beyond. And what we're really looking to do at Komoe Kukula is chase down the world's number 2 and world's number 1 copper producers over time.

Speaker 7

What we have next door at the Western Fallands is the opportunity to really start to produce over 1,000,000 tonnes per annum from this new great copper district on the whole. And we have some very exciting work that's going on there today. So during the Q1, we drilled 17,000 meters and bearing in mind January through to March is very much the middle of the rainy season. So 17,000 meters is an excellent achievement and it shows that now we are into the dry season towards the end of April, we are clearly on track to meet or even possibly exceed our target of 70,000 meters drilled this year, which was a 4 times increase in the drilling budget from last year. Most of the drilling we are doing at least currently is focusing on expanding the high grade Kitoko discovery that was made in the Q4 of 2023.

Speaker 7

We have a slide coming just to sort of preview some of the work we're doing at Kitoko. But also as well as Kitoko, I think it's worth reminding the audience that we've already discovered and delineated 5,000,000 tons of resources at Makoko and Kiala. This is a major achievement I think in the context of the copper industry, the 3rd largest discovery basically since Kukula. And put another way 5,000,000 tons of resources is roughly the same as a 200,000 tonne top of mine over a 20 5 year life. So you can see that we already have a critical mass to start a new mining operation in the Western Poland that what we're drilling now at Kitoko and elsewhere is really looking to improve and augment what we already have at Makoto.

Speaker 7

I think we can move to the next slide please, Matt. So this is showing the map and the Western Fallen license, which you can see is adjoining to the Western side of the Kekulele Mining license where it says Kukulah West. And really, the key thing to take away here is first of all, we're putting a lot of drill holes on a daily basis into Kitoko. You can see all of the red stars there that are indicating holes that are currently being drilled. We have I think 8 rigs on-site currently, which will soon be 10 rigs, including 2 rigs with specialization for deeper drilling.

Speaker 7

But the exciting thing for now, the Kitoko deposit is very much open in all of the day all directions. And so really what we're looking to do is understand the extent of the mineralization that we have and also the structure. And we're starting to explore the connectivity between you can see Kitoko and Makoko which are roughly 5 kilometers apart. They could potentially be developed as part of the same mining operation. And then ultimately there may be a connection also between Makoko and the western edge of Kukula, which you can see is indicated as roughly 10 kilometers in terms of distance.

Speaker 7

So for the Western full and it really is an exciting year ahead. We are getting into the dry season and the bulk of our drilling activities and I'm sure over the course of this dry season we will be providing the market with further updates in terms of our activities. I'm going to hand back to Mark Farren, who is actually sitting at Kipushi at the moment. So he's the best person to give you a quick update on what we're doing there.

Speaker 6

Thanks, Alex. I'll carry on. Okay. Just in broad strokes, Kopushi, the underground mine is fantastic. It's a fantastic ore body, it's running at 35% zinc, by far the highest grade in the world.

Speaker 6

The development footprint is open. We've opened up 7 levels already. We've started with the sublevel open stoping as the long oil stoping that's working perfectly. We've got about 300,000 tonnes of stocks, more than 3 months of ore on surface already ahead of that concentrator. And that concentrator will run-in May, also the end of May.

Speaker 6

We don't believe there's anything complex in that concentrator. It's a simple concentrator. It's quite a small one actually. But it's a fantastic mine. It's looking very, very good.

Speaker 6

I mean, if you people that have been there when it was flooded will not recognize what we've done. It's a modern mine. It's underground. Development is very, very good. The ground conditions are fantastic.

Speaker 6

And everything there is ahead of schedule. So I cannot think of any major risks there. And maybe just to mention what is quite encouraging is that the zinc price has been moving in the right direction and just at the right time too, I think. That would be my opinion. And I don't believe there's any major technical risk on that mine.

Speaker 6

We're very excited to get that first feed moving. And then to do exactly the same as we have at the other mines and that is to improve the productivities and then obviously the throughputs maybe over time to lift them a little bit more because it's such a good ore body that we just need to get it up a little bit more. So I'm confident that Kapushi is moving and will be is ahead of schedule like the other 2 and is looking really good. Thank you.

Speaker 7

Thanks, Mark. And I will just close out with an update. Last but certainly no means least on Platte Reef. So with Platte Reef, we announced during the previous annual results that we've made a change in strategy to accelerate the expansion of Platte Reef. So what this means in reality is that we will finish the Phase 1 concentrator project on time in the Q3.

Speaker 7

But we've deferred the ramp up of this concentrator until the middle of next year. The reason that we've done this deferral is so that we can focus on the underground development that we need to do for shaft 3 and for the Phase 2 expansion. So just to remind people on the line, what we decided is shaft 3, which was originally supposed to be a ventilation shaft, we changed approach and we decided to equip that shaft for hoisting, which will be ready by the end of 2025. And so this will boost the total hoisting capacity to around 5,000,000 tons, including Shack 1 and Shack 3. So with that 5,000,000 tons

Speaker 8

of hoisting capacity, the plan is to ramp

Speaker 7

up the Phase 1 and Phase 2 So capacity for development for our Phase 3 expansion. And just to give an idea around the numbers, at 4,000,000 tonnes of capacity will be producing somewhere between 4,500,000 ounces of the 4 E Metals. So that's platinum, palladium, rhodium and gold plus up to 10,000 tons of nickel and copper. And then longer term, the strategy is very much to keep shaft number 2 going. That's one of the largest hoisting shafts in the world.

Speaker 7

That will enable that Phase 3 expansion up to 10,000,000 tons hoisting capacity, at which point we will produce around a 1,000,000 ounces of the precious metals plus around 20,000 tons of nickel and copper. So a major, major producer of all of those metals. And all of this will be published in updated studies, a feasibility study and a scoping study that will be out in the Q4. With that, I think we're at the end of the presentation slides, but perhaps just before I hand back to Matt, I would point out that we are a little bit perplexed looking at the trading activity on the screen this morning. I think we very much see this as an overreaction caused by the convertible redemption.

Speaker 7

But then I would point out that this redemption is going to cause a lot of short positions in Ivanhoe Mines to be closed out over the coming weeks as these bonds are redeemed. So I think fundamentally, we believe this has been a very strong set of results and especially into the month of April in terms of the production we're showing at Kamoakukula, much more to come on the Western Fallands and we only perceive this to be an opportunity for our investors. But I'll hand over to Matt to chair the Q and A.

Speaker 1

Thanks, Alex. And operator, I think we'll move to the phone line 1st and foremost and clear all the phone questions. And then if we have time at the end, we'll hop over to the web and see if there's any web questions we'd like to field. Thank you very much.

Operator

Certainly. And our first question will be coming from Lawson Winder of Bank of America Securities. Your line is open.

Speaker 8

Hi, thank you operator very much. Good morning, good evening and afternoon everyone. Thank you for the presentation. I just I wanted to ask about this potential updated mine life plan for Kamoakukula. Is that intended to be published at some point this year?

Speaker 8

And then if so, what are you expecting in terms of the range of possible plans under consideration for that?

Speaker 3

Alex and Mark, do you want to talk about our plans to keep expanding and try to reach to the position of number 1, if not number 2 in the world, just at the joint venture?

Speaker 7

Yes. Absolutely, Robert. I'll take that. And thanks, Lawson. So look, I think Mark highlighted what the separate initiatives are that we're looking at.

Speaker 7

So just to go through those again, it's the optimization of the Phase 3 concentrators. So we think like Phase 1 and Phase 2, we can probably get at least 20% more capacity out of that concentrator. We have the Project 95, which is the plan to increase the recoveries and basically get, you know, 30,000, 40,000, 50,000 tons of effectively free copper from what we have already. That will also apply to Phase 3 as well as Phase 1 and 2. The opportunity to recover that 70,000 tons is already locked in our tailings at a greater 0.7%.

Speaker 7

And then also Mark was alluding to our plans to potentially accelerate Phase 4. We're looking at a lot of things around our mine planning in order to feed that Phase 4 operation. But fundamentally, we have 40,000,000 tonnes plus copper in the ground here. There are all sorts of opportunities to expand very efficient long haul mining. We can even look at open pit mining in different parts of the ore body.

Speaker 7

So there is no fundamental shortage of ore to feed a much expanded milling circuit. Specifically Lawson, the in terms of when we will publish what, Project 95, we're planning to we'll at least publish a press release giving you the details on that when the engineering is completed this month. I think what our intention is to publish a kind of more fundamental overarching updated study for Komorokukula that will incorporate all of these elements. Obviously, the last one we did was a couple of years old and that should be done by sometime around the end of the year. So we'd like to get it done and published, yes, before year end.

Speaker 6

That's where we are.

Speaker 3

Yes. Lawson, I'd like to add a few more comments. All of our ore sources that we've been mining are from underground. There are shallow open pitable resources that would be the highest grade open pit copper mine in the world. And the advantage of the open pitable resources is that the mineralized horizons have a lot of pyrite in the hanging wall and that pyrite that you get on the way down would be extremely beneficial for the smelter.

Speaker 3

So for the first time, we're looking as we have more and more milling capacity, we can potentially fill that milling capacity with very pitiful resources that exist on the AMOA license. So you can do the math yourself on getting to 16000000 or 17000000 tons of milling with the existing concentrators, then a 4th concentrator in the future would get us well over 20,000,000 tons. And it's really just a question of how large that concentrator might be. So this year, we should start showing the world what Komoca Kula could look like in a $4.5 per pound price environment or a $5 per price environment. We bring on additional capacity with less additional capital than any mining company in the world.

Speaker 3

If there's any place in the world that can expand production quickly in response to higher prices, it's Komokukula. And then of course, there's the Western Forlans, where we already have 5,000,000 tons of high grade. And as the spring and summer go on, we will update you on our drilling success in the Western Forlands. But clearly, the next mine, which would be Ivanow Mines operation will be accretive. But we do see the Komokukula joint venture definitely being in striking range to be the 2nd largest copper complex in the world.

Speaker 3

And given challenges we've seen in Chile and we're intimately familiar with those challenges, we're beginning to think we have a chance to be number 1 just in the joint venture even without the Western Forlins. So we'll be running more tours as we bring this all into focus, A $4 or $4.5 copper world for us is very, very different than a $3.5 per pound copper world. Thank you, Lawson.

Speaker 8

Yes, very well said. Thank you, Robert. If I could follow-up on one sort of finer point, I mean, with the huge amount of throughput that you're getting just from Phases 1, 23, is there any thought to foregoing a Phase 4 and focusing that expansion on Western Foreland?

Speaker 6

There must be a Phase 4.

Speaker 3

There has to be a Phase 4. Yes. Yes. Phase 4 is for the joint venture. Phase 4 is almost without a doubt, we're doing a Phase 4, let alone a Phase 5.

Speaker 3

We're looking at a Phase 5. The joint venture is sitting on an ocean of copper that is immediately developable. The Western Forelands is a completely separate thing. We're not in a joint venture there. That ground is held by Ivanow Mines.

Speaker 3

And they're perfectly accretive with each other because now that the railroad capacity is opening up to Angola, that railroad goes right through the Western to Fourlands. And as we're increasing the stability of the grid and putting our foot on more regional power, a lot of people are confused. The power is wheeled through Zambia, but it comes from Mozambique. And the vast majority of the Mozambique power is hydropower. Combined with our backup power, that's really our limiting factor.

Speaker 3

We're not limited by the amount of copper we have here, which is unique. We don't have a shortage of water. We're not fighting ice and snow like you would be up in the Andes or in Canada. Our real strategy is electrical energy and we're telling you today we really think we're putting that electrical energy constraint behind us now in the current quarter. And so, the joint venture has to see how far it can go.

Speaker 3

And I would wager having talked to Mark and our team, we just had our board meeting in London. We really are moving to a Phase 4. That Phase 4 won't touch, Kukula West. There's enormous resources in Kukula West, which could make a Phase 5 at the joint venture. And then the Western Forlins is a completely different story, which we will be telling the market about a lot more in the near future.

Speaker 8

Very exciting. Thank you.

Operator

And our next question will be coming from Andrew Mikitchook of BMO Capital Markets. Your line is open.

Speaker 7

Thank you.

Speaker 9

Mark, maybe you could just give us a little bit more context on this power that you're securing from the various grids to the south through the Zambian interconnector? Obviously, there is an active demand for power in the region in the Congo to the south of the Congo. Can you just give us a sense of your level of 1st mover or ability to secure this power? And I think you used the words in your previous comments, long term off take agreements that these aren't month to month that these are something are we correct to understand that this is kind of a multiyear agreement that something resembling 100 megawatts should be available for a very long time?

Speaker 6

Exactly right. Yes. That's exactly what we're doing. We've entered into short term agreements that was done a couple of months ago and that's where the 15 megawatts came from and the additional 40 megawatts that's coming from tomorrow. But we have been busy with setting up long term agreements because to get that stability in the long term and the volume the amount of megawatts that you need, we need to enter into longer term agreements, because these RPPs actually need to capitalize some of the investments.

Speaker 6

They need to invest in some of the long term infrastructure. We're far down the track with that. We've got 100 Megawatts agreements that we're busy finalizing now that and that's a long term agreement. It's basically a permanent agreement that will be in place. So we've as a minimum, we'll have that 100 megawatts in place by the end of this year.

Speaker 6

In addition to 2 50 odd megawatts that we've done by improvements in the DRC itself, the turbines that we've upgraded, the power lines that we're busy with, the infrastructure that we're doing. And then in addition to that, we've got 2 20 megawatts of diesel that we're putting in, which we never want to use. But if you add it all up, Phase 1, 2 and 3 will use about 2 20 megawatts and we'll have 5 40 megawatts of installed power via everything up. And we will not need to use the diesel in the long term. So I think in terms of derisking, we've done that.

Speaker 6

Taking the right steps, we're doing that. Looking for more power to build Western Forlins to get this into the copper district over 1,000,000 tonnes kind of number. We're busy with all of those long term strategies. And I can't on this call explain all of them, but there are other international suppliers that are waiting to supply additional power to us through different networks. So I do think like if you concentrate on a problem, for example, power that we had, we resolve these problems like we do with everything else.

Speaker 6

Very confident that we've gone a long way in the last couple of quarters in securing stable grid power from not only from Snell, but from the Zambian grid and from Mozambique in fact as well. That's happened quite recently. But in the longer term, I think we will be able to get a lot more megawatts from other sources.

Speaker 9

And Mark, any comments on the competitiveness of this? Clearly, there's other people looking for power. Is it just that you guys are ahead of the curve?

Speaker 6

We're ahead of the curve. It's not the cheapest power, but it's not like diesel. So for example, we're running between $0.13 per kilowatt hour and $0.18 to import this power, where Snell Power is going at about $0.11 So it's a little bit more expensive, but it's not prohibitive. And if you compare it to diesel, diesel is running at about 40 something, dollars 0.47 per kilowatt hour. So the more we get of this power, the better for us to grow.

Speaker 6

For where we are now, Phase 1, Phase 2, Phase 3, and I'm going to say, Phase 4, we've secured enough power. We're going to be fine with power. If we're going to build more phases, when we do the Western Fall and depending on the size, we can have to do more work at all. But I think we're okay for the next couple of years, next 5 year window, we're okay. And we are not stopping.

Speaker 6

We've got work streams running. We've got very competent people working on this. We also have we're moving quite quickly to look at solar solutions. We have some firm bids on solar already. And I think that will be added to our different sources as we go over time.

Speaker 6

So it's all good. It's actually good. We're getting there nicely.

Speaker 9

Thanks, Mark. Just one non power question. I'm not sure if there was any comments made about the Timokopane feeder exploration, there's a little bit of description of that in the release today. Can we get any additional comments on what kinds of targets, depths, timing of the proposed work on that property?

Speaker 3

Yes, I'll take a crack at that. The Muckabuddy Feeder has been named as such by leading PhD government platinum, palladium, nickel experts from the government of South Africa. There exists a giant gravity anomaly, 10 kilometers away from our shaft. It's one of the largest, if not the largest gravity anomalies on this particular planet that we inhabit. We have run a much more detailed gravity survey over that ground and there's something extremely heavy in our neighborhood.

Speaker 3

It could be iron or it could be the critical zone of the flat rate. The critical zone where we have the mineralization is very heavy rock. It grades almost 4 tons per cubic meter, a normal ton of rock will probably grade 2.7, 2.8 tons per cubic meter. So there's something very heavy. When you measure gravity, you don't know how deep it is.

Speaker 3

It could be something ultra heavy, very deep or it could be just something heavy closer to the surface. So we're running a lot of other geophysics and mapping and we see world class targets. I'm of the personal belief that the nickel endowment, sulfide nickel endowment in the northern limb of the Bushveld right where our farms are, is probably the largest sulfide nickel endowment on planet Earth. And everybody thinks that we're just going to be mining platinum and palladium, but actually we had historical intercepts 600, 700 meters thick of sulfide nickel with a gram or so of platinum, palladium and gold as a byproduct. Now where all this metal came from is a mystery.

Speaker 3

In fact, where the entire Bushveld came from is a mystery. The theoretical target in the mokopane feeder would be the stem of the mushroom that we call the bushveld. So it's a crazy interesting target. We're doing a lot of work on it. We'll be taking people on tour later this year and we'll get ready to drill it.

Speaker 3

But we have no idea whatsoever what it is, what is so heavy and we just don't know how deep it is. But there are deep mines in the world, it could be deep, it could be shallow and time will tell. South Africa is probably the most underexplored country in the world. If the numerator is its mineral potential and the denominator is what has been actually done. There has been really no significant exploration in South Africa since we found the Platte Reef mine, which is itself the largest precious metals mine being developed in the world.

Speaker 3

But given the well advertised problems in South Africa to secure mineral title, the 10 years that were rather challenging during the Zuma era. The world has just stayed away from South Africa for mineral exploration, but Ivanomide is there and we see a number of very compelling opportunities for Tier 1 discoveries. The first of which is the Mokopane feeder. Were that to be the case, that would be a negative cost base metals discovery because there's so much precious metals endowment. So this is a 3rd or 4th quarter project and we'll be telling you more about it in the near future.

Speaker 3

Thank you for the question.

Speaker 9

Thank you, Robert. I will turn the microphone to the next speaker. Thank you very much.

Operator

Okay. And I would now like to turn the call back to Matthew Kiebel for additional questions from the web.

Speaker 2

Thanks very much, operator. We have a few minutes left here. I have just 1 or two questions from the web that warrant some attention. So we'll just group them together. I think, Robert, this is probably geared towards you.

Speaker 2

I have a couple of questions on premiums for low emissions and responsibly produced metals, both nickel and copper. Some people asking if you could speak to the potential for seeing premiums on responsibly produced metal and what you're hearing in the market on that movement?

Speaker 3

100% certain that Ivanhoe Mines will be rewarded with premiums for our metal because we're the lowest generator of global warming gas per unit metal produced. In fact, it's becoming blatantly obvious to the mining industry in general that the giant porphyry coppers have only had to compete on one parameter, cash cost per pound of making copper. But when you look at the global warming gas per unit of copper produced, unless that those open pit mines are powered by a nuclear power plant or a hydropower, they create a horrendous amount of global warming gas per unit of copper produced. And it makes no sense for our kids or our grandkids to green the world economy if we're going to mine low grade copper and grind it down to nothing and get the same price as everybody else. Today copper is $4.58 a pound, whether you produce clean copper or dirty copper.

Speaker 3

No, that's coming to a screaming halt. AVX Technologies is about to begin trading metals in relation to their ESG characteristics on the Singapore Stock Exchange. And a lot of people don't realize how important the Singapore market is, but iron ore used to be traded between Rio Tinto and BHP and the Korean and Japanese steel mills once a year, they would agree a price in iron. Once Singapore started trading fungible iron contracts, all the iron in the world is traded there. So we're about to see all metals traded according to their ESG characteristics by a company that found a way to institutionalize trust using the blockchain.

Speaker 3

It's not easy to have differential pricing on metals. You've seen it in sweet and sour crude oil or different grades of crude oil. You will now see it in different grades of copper and nickel and other metals, as well as LNG and other forms of hydrocarbon. And that's because the world has failed to put a price on carbon. And that's so silly that we are the greenest producer of copper in the world that is significant.

Speaker 3

And yet we're getting the same price as everybody else. That will not persist. As soon as we have markets that can reward people who make clean copper, then some of the German automakers will pay a premium for that clean copper. And if you're a dirty copper producer, you will achieve a discount. And that is how it should be.

Speaker 3

And that's why the Democratic Republic of the Congo sits in the best position in the world for developing green metals. The only place we're going to find these green metals at scale is the African continent. That's where we have hydropower and high grades. And this is becoming increasingly obvious to everybody. We're seeing discussions that the copper industry needs at least, say, 15,000 dollars a ton to screw up their courage to build a large low tonnage copper mine.

Speaker 3

If you look at Quebrada Blanca, it came in at close to double the capital that was predicted. And so in an uncertain world in Latin America, you probably do need $15,000 a tonne to bring on stream significant 0.6 percent of 1 percent porphyry copper mines. And a lot of the existing mines have grades that are declining in grids that burn coal to make electrical energy. I mean, the sun only shines 3 or 4 hours a day in South America. And so the grid is a coal burning grid in countries like Peru and Chile.

Speaker 3

So we have a tremendous amount of interest in the production of green metal and that's where the Congo will clearly lead the world. And we look forward to the day where we'll be able to show our shareholders a premium price for our copper, but 100 percent for sure differential pricing in metals is opening soon at a theater near you brought to you by AVAX Technologies. And these are serious people. They ran the backroom at Goldman Sachs and they were involved in the COMEX and then IMAX, which are the leading commodities traders in the world as exchanges. So it took a long time to do this, but it's really going to happen.

Speaker 3

Thank you for the opportunity to pontificate on that important question.

Speaker 2

Thank you, Robert. And I believe we've pretty much covered all the questions today online and on the phone. So we'll wrap up the call. Just a quick reminder, if you do have an outstanding question that wasn't answered during the course of this call, please do follow-up with our IR team, Tommy, Alex and myself, and we'd be happy to answer that question offline. But this concludes the call.

Speaker 2

I'd like to thank everyone for attending today's event, and we look forward to speaking with you soon on the many exciting milestones coming up this year. Operator, please do feel free to wrap up. Certainly.

Speaker 3

Thank you. Thank you.

Operator

This concludes today's conference call. Thank you for participating. You may now disconnect.

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Earnings Conference Call
Ivanhoe Mines Q1 2024
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