Ivanhoe Mines Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
July 31, 2024

There are 10 speakers on the call.

Operator

Good day and thank you for standing by. Welcome to the Ivanhoe Mines Second Quarter 2024 Final Results Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would now like to turn the conference over to Matt Kavel, Director, Investor Relations, Corporate Communications.

Operator

Please go ahead.

Speaker 1

Thank you, operator. And it's my pleasure everyone to welcome you to the Ivanhoe Mines Q2 2024 Financial Results Conference Call. My name is Matthew Fiedler. I'm the Director of Investor Relations and Corporate Communications with Ivanhoe Mines. On the line today from the company, we have Founder and Executive Co Chairman, Robert Friedland President, Marna Clotay Chief Financial Officer, David Van Heelven Chief Operating Officer, Mark Farrin Executive Vice President, Corporate Development and Investor Relations, Alex Pickard and Executive Vice President, Projects, Steve Amos.

Speaker 1

We will finish today's event with a question and answer session. You can submit a question using the Q and A box on the webcast page as well as through the conference operator via your phone line. Please contact our Investor Relations team directly for follow-up questions that are not addressed during the call. Now before we begin, I'd like to remind everyone that today's event will contain forward looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward looking statements. Details of the forward looking statements are contained in our news release today as well as on SEDAR Plus and at www.ivenhomines.com.

Speaker 1

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

Speaker 2

Thank you. From London, England on a sunny day, it's a great pleasure to introduce our management team after such a strong quarter on behalf of all of the stakeholders at Ivanow Mines. As I speak to you today, import premiums on copper are up. The domestic inventories of copper in China are down. And so China is back in the copper market this morning.

Speaker 2

We've had quite a correction from recent highs. And on such a pleasant day with the world understanding how badly we need copper for the energy transition and also the tremendous demands for national security drawn on metal production. It's a great pleasure to introduce our team and to review the results of this very strong quarter, where our team will continue with over 20,000 people to be the fastest growing, highest grade and greenest of copper producers on the planet. So with that, let's turn this over and begin our session. Thank you.

Speaker 3

Thank you, Robert. I will start. Yes, I will start. And this is Marna Klute reporting out of Johannesburg, where it's starting to turn a little warmer. So the photo you see on your screen is a photo of our Phase 3 plant, a 5,000,000 tonne per annum plant that we've commissioned during the quarter and we're busy ramping up to full production.

Speaker 3

So if you go to the next slide. During the quarter, we completed both the Kapushi and the Kamoah Phase 3 concentrators ahead of schedule yet again. And as I mentioned, we're in the process of ramping them up to steady state. The Phase 3 concentrator at Kamala will boost our annualized production to approximately 600,000 tonnes of copper and we produced just over 100,000 tonnes of copper during this quarter at a cash cost of $1.52 per pound of copper produced, which we think is excellent results. A lot of work went into securing additional security supply to the mine with our current imports amounting to about 65 megawatts.

Speaker 3

And our COO, Mark Farren, will discuss our power initiatives in a little more detail later in the presentation. It was another record quarter for Kabawakakula as we ramp up production with our EBITDA of $547,000,000 where David Van Yaden, our CFO, will give you a bit more color later in the presentation on our financial results. Important to note that we reiterate our guidance for Chemawa on production as well as on our C1 cash cost. And then on the Western Four Lands, we have continued our expanded drilling program and we have seen some very encouraging results. We go to the next slide.

Speaker 3

On our health and safety, regrettably, we recorded a fatality at the start of the second quarter due to a breach in protocol, which resulted in an employee being struck by a drill rig. We've introduced additional training and safety measures, and we have put all of this in place to prevent the reoccurrence of this tragic event. A lot of effort have gone into improving protocols as the business matures, and we are pleased to record that during the construction of the Phase 3 concentrator, which consisted of approximately 10,000,000 man hours worked, not a single lost time injury was recorded. Further, since the commencement of the Phase 3 expansion, which includes the new Phase 3 concentrator, our smelter and all infrastructure surface and underground to the end of the second quarter, a total of 42,000,000 man hours have been worked by the engineering and contractor teams. In that time, only 4 lost time injuries and 8 recordable injuries have been recorded, setting an industry leading project life lost time injury frequency rate and total recordable injury frequency rate of 0.09 and 0.18 per 1000000 man hours worked respectively.

Speaker 3

But that's not all. Also during the 3,300,000 man hours worked on the construction of the Capuchin Concentrator, which was also completed during the quarter, not a single lost time injury was recorded. Therefore, the lost time injury frequency rate for the concentrator during construction was 0. We commend our engineering and contractors teams at both Kamoa and Kapushi for this outstanding achievement. Next slide.

Speaker 3

As we mentioned quarter on quarter, we are firm believers in a shared value model with our local communities and host countries. And to this end, Kemal is committed to distribute its first dividend to shareholders during the Q3. This dividend will amount to CAD98 1,000,000 of which 20% is payable to the DRC government. Kamala to date has created over 5,000 full time jobs for Congolese National. It's the largest exporter in the DRC, and it's expected to contribute 7% to the GDP of the country this year.

Speaker 3

We are also proud to report, and the picture you see on the slide is our Center of Excellence that our inaugural class at the Center of Excellence graduated during the quarter, and we are also expanding this facility to include an engineering training hub. With that as some introductory remarks, I will now hand over to David Vanier then to take you through our quarterly financial results. Over to you, David.

Speaker 4

Thank you, Marne, and good morning and good day to everyone joining the call

Speaker 5

today. We move over to the next slide.

Speaker 4

The increased production in the second quarter, which Marnal already mentioned, translated to a 13% increase in payable copper tons sold when compared to the Q1 of 2024. The increased production and higher realized copper price of $4.34 per pound in Q2 drove record revenue at Kamaoka Kula of $817,000,000 On the next slide, Marla mentioned the cash cost and we are really pleased with the cash cost of $1.52 per pound in the second quarter, which is close to the bottom of our guidance, which we reiterate. The quarter on CorSoT decrease in cash cost was mainly due to the higher production volumes, slightly lower logistics charges and a slight increase in the grade of copper ore processed in the quarter. Gamowakukula recorded record EBITDA of $547,000,000 for Q2 at an excellent margin of 67%. This was $90,000,000 more than the previous record achieved in Q2 last year.

Speaker 4

If we move to the next slide, Kamaakukula's EBITDA waterfall illustrated on this slide clearly highlights the contributors to the almost 50% increase in EBITDA. Obviously, we've had good results on the back of a higher copper price, but what I'm even more pleased with is the increased tons sold and the increase in EBITDA resulting from a reduction of costs. The next slide shows a snapshot of Avanor's consolidated results. Ivanhoe recognized a profit of $67,000,000 and a normalized profit of $115,000,000 in the Q2 of 2024, both substantively up from the previous quarter. The $48,000,000 difference between profit and normalized profit is a non cash loss on the revaluation of our convertible notes as well as the non cash finance charges recorded on the redemption of the notes, with 96% of the notes being redeemed in the quarter and the remainder being redeemed early in July, the divergence between profit and normalized profit for us is at an end.

Speaker 4

Our increase in profit was driven by the record share of profit from Kamaoka Kula, which doubled from the Q1 this year to $90,000,000 in Q2 2024. Looking at Ivanhoe's adjusted EBITDA on the next slide. I would note that although the adjusted EBITDA of $203,000,000 in Q2 2024 was a record for Ivanhoe, we are by no means done in growing the business. Production from Phase 3 at Kamaukukula as well as at Kapushi will drive growth in our EBITDA in the coming months. And then there's, of course, Project 95 at Gamoa, a debottlenecking program at Kapushi and production commencing from Platrieff next year.

Speaker 4

And on the next slide, here we highlight that with the redemption of our convertible notes, we had a net cash position of $88,000,000 at the end of June, leaving us ideally placed to drive our growth projects with significant funding capacity at both the corporate and the project level. We have kept our production and cash cost guidance unchanged. And as noted on the next slide, We have increased our capital guidance at Kamalakukula only with $300,000,000 allocated for the exciting Project 95. This will add up to 30,000 tonnes of copper production at Kamaokukula a year and Mark and Alex will elaborate on that a little bit further. We have also added and drawn a further $450,000,000 term and working capital facilities during the quarter.

Speaker 4

In country facilities amounted to $800,000,000 at the end of June. They're unsecured and attract an interest of less than 9% on average. There's no major changes to our previously noted spending plan, but we have deferred some Phase 2 spend at Platte Reef and added budget for Kabushi's debottlenecking and remaining cost to complete. During the quarter, we concluded and drew down a $50,000,000 working capital facility for Kabushi and $120,000,000 of loan facilities linked to offtake was closed and drawn in July 2024 on Kapushi. I will now hand over to Mark Farren, our COO for updates on production and details of how our growth projects are being executed.

Speaker 4

Thanks, Mark.

Speaker 5

Thank you, David. Matthew, if you can just go to the slide that puts the quarterly production on. Thank you. Okay. So you can see that the quarter was a lot better than the first quarter.

Speaker 5

We did speak about it at the end of the Q1, where we had quite a big impact on production because of power issues in the DLC, mainly the Snell network stability issues. Things have improved a lot this quarter. And we've also managed to secure some power from Zambia. We're running it was 55 megawatts for the quarter, basically the 2nd quarter, but it's now 65 megawatts, which we've got secured firm supply from Zambia. And that will be moving up over this next quarter to 75, and then we're targeting to get to 100 megawatts of power coming from that footprint area, that region between Mozambique and Zambia.

Speaker 5

So our initiatives that we've put in place to stabilize the grid at Snell, those are starting to pay dividends. And so are the things that we're doing in terms of export getting imported power from Zambia. And we're still holding guidance, which means we have to have a very strong second half, let's call it, with the influence of Phase 3 coming on and also the stability initiatives that we put into place and importing of power. Let's go to the next slide, Matthew. And just talking about what they are, we've gone into detail a few times on these issues.

Speaker 5

It's really about getting our INGA turbine commission that will be by the end of this year. And then we've done a lot of other projects, sub projects on the network stability of the Snell network all the way from Ingo right to our switching stations in Koeweze. Those projects are moving nicely. We have a very good relationship with the state utility. And most of them will be executed by mid-twenty 25 with a couple of longer term initiatives that were ended probably the end of 2025.

Speaker 5

The imported power is working, it's stable, it's making a huge difference for us. And we also expect by the end of this year to get that to 100 megawatts. And our diesel generation capacity has been increased over this time period. I think it's in another week or so. We will have about 135 megawatts working on the mine itself, which means that you can run Phase 1 and Phase 2 under all conditions.

Speaker 5

So if you have a complete blackout, for example, across the grid, you'll be able to tie into that 135 megawatts of power and run Phase 1 and Phase 2 and the mining operations. So that's a major improvement that we have set ourselves up for. And that 135 will be increased gradually, so that by the end of the year, we'll have 220 megawatts of power of diesel power, which basically is enough to run the total operation under any conditions. It's obviously not something we want to do because it's very expensive to run diesel gensets. And it's not exactly green energy, but it's the backup system that we put in place while we strengthen all the initiatives in the DRC to get firm reliable green power going at levels that we require.

Speaker 5

The next slide. Okay. And Phase III is a good story. Stephen, would you like to talk a little bit about Phase III?

Speaker 6

Yes. I can give a brief update. So we've been running now for about 1.5 months. And I think the ramp up is pretty much in line with our Phase 1 and Phase 2 concentrators at Kaumoa. We've become pretty good at ramping up concentrators at Kaumoa.

Speaker 6

We've got a very strong team there. Over the last sort of what 6 weeks or so, we've got a design throughput of 15,000 tonnes per day, which we've exceeded on numerous occasions. I think we've even got the record on that slide, your 16,700 tons per day. So already after sort of 6 weeks of operation, we're looking at in excess of 5,000,000 tons per annum. And I think on the weekend, we had a record copper production considering Phase 1, Phase 2 and Phase 3.

Speaker 6

So we definitely see good growth in this next quarter. That's pretty much it, Mark.

Speaker 5

Yes. Thanks, Stephen. Okay. So there's a few things still to do in Phase 3, which is basically to get the fine ground in place, which will be the end of August as far as I know. That will improve the project recoveries.

Speaker 5

But volumes are going through very nicely. And I think the back end loading of this year should see record after record being set, hopefully. And we put ourselves in a better position because of the power. So I think we should have a very strong performance quarter 3 quarter 4. This month that we're in now, July, it's going to end tomorrow.

Speaker 5

And that month also should be very it should be a new record, 36,000 or 37,000 tons of copper, and that will increase over the next couple of months. So I think all in all, Phase 1, Phase 2, Phase 3 running very nicely. There's some other projects I'll talk about just now, which will increase the copper production. Marni mentioned 1 or 2 of them just now to go into a little bit more detail. You can take the next slide.

Speaker 5

Stephen, you want to talk about the smelter?

Speaker 6

I can talk about the smelter, Mark. Yes. So big project, obviously, in excess of $1,000,000,000 biggest copper smelter in Africa and biggest direct to blister copper smelter in the world. We're going well. We're about 85% complete on the project into the I don't want to say final stages of construction, but sort of piping and electrical installation.

Speaker 6

Plan for project completion, I. E. Construction completion by the end of the year. And then we plan to start the heat up, I think, January, February next year. So no red flags at the moment.

Speaker 6

The bulk of the equipment is on-site, which is good. Traveled long way to get to site. And now this sort of destiny is in our own hands. But I think going well, very happy with this.

Speaker 5

Yes. If I could add, I mean, it's on track. There's no major red flags. The labor is being trained. It will be just over 1,000 people running that smelter, being trained in different countries with different operations in the world.

Speaker 5

And a very strong owners team has been put in place to do number 1, commissioning and number 2, to actually operate that smelter, which is quite complex as everybody would know. Next slide. So this is sort of introducing you guys to the new thinking. So Phase 3 is not the last stage, obviously, of growth at Kaumao and Kukula. We are going to be doing the very next one, we're busy with now, it will be announced very soon, Project 95, which basically means taking Phase 1 and Phase 2 from the 87%, 88% recovery to 95% recovery.

Speaker 5

The basic engineering is complete. We have a budget for it. It's going to be voted by the Board as we speak. Long lead items are being placed. So it's committed and it's a fantastic project.

Speaker 5

It also produces 25,000 to 30,000 tons of copper additional per year. So you'll have your project running, your Phase 1 and 2 running. And for the same throughput, you're going to get 7% more recovery. So it's a fantastic project. We're also looking at a Phase 4.

Speaker 5

A Phase 4 doing 2 things. So number 1, taking all the old tailings, which will be about 50,000,000 tons to 60,000,000 tons of copper running at 0.7% and retreating those tailings at a rate of somewhere around and this is not firm yet, but probably 10,000,000 tons a year. So another 25,000,000, 30,000 tons of copper per year while you're ramping that up. And then there's a Phase 4, what we can call probably a Phase 4B, which will be an increased volume through different areas. So ramp up basically at Tsukumoa 1, 2, Kansokko mines and introducing some new mines.

Speaker 5

The final number there is probably 2 more steps along the way, if you can work that out. I mean, we've just commissioned the plant now. So maybe another 2 steps or another 2 plants of that size. Just one more point while I'm talking about that. The plant that we've just commissioned, the 5,000,000 ton plant, the nameplate is 5, but we think we can push it by another 10%, 20% or 30%, 20% to 30% probably more likely.

Speaker 5

So, Comoa is still growing. The big thing for us is to secure the stable power, enough stable power to run these operations and to grow them. And included in that will be what we're going to be doing on the Western Vauldrons as well. Everything there needs power, a lot of power. It's a big operation.

Speaker 5

But we have solutions. And I believe the solutions are good, solid solutions that we will implement over time. Next slide. Yes, I think Alex, you want to talk about capital intensity on this?

Speaker 7

Yes. Thanks, Mark. I'm seeing the Western Forum, but if we

Speaker 5

could just get back to

Speaker 7

Project 95. Obviously, I think capital intensity is a big topic of discussion within the copper industry more broadly. And we've sort of taken the trouble here to calculate the capital intensity looking back of the Phase 1, 2 and 3 concentrators together, which is coming out at around $7,000 per ton for this sort of 600 1,000 tons of copper production capacity that we have today, which is by far and away the best that you will see in the industry is roughly a third of average greenfield projects. But I think if you look at recent projects that have been sanctioned and commissioned up to $30,000 per ton of installed capacity, we're running at roughly a 5th. And Project 95, we're also very pleased to say is by almost coincidence is at the same number at $7,000 per ton.

Speaker 7

So Project 95 is a really accretive low cost project, very low additional milling costs to unlock that additional 30,000 tons of and we can move to the Western Forlins now. So I think as Marno mentioned, we are very much on track with our expansive drill campaign. 70,000 meters is really the most we've ever drilled in a single year. We're over 55% complete with about 40,000 meters drilled. We're still in the dry season.

Speaker 7

So this is where we get the bulk of our activity done. We currently have 9 rigs drilling in the field. The focus is on the Kotoko area as well as the Mogocco West area. Worth noting that Makoto West is separate from the Makoto resource that we announced last year. And we're also testing the basement architecture between the Makoko and Kitoko discoveries and elsewhere on the license package as well.

Speaker 7

I think if we skip to the next slide, we've got a bit of a map just to sort of unveil and show where some of the recent drilling has taken place. So you can see there is a real center of gravity going on at Makoko West and Kitoko, which are roughly 5 kilometers along strike from the Makoko resource where we've announced that we have about 5,000,000 tons in contained copper. What I would say is we'll have much more to say about our drilling at the Western Foreland. We have a couple of months of drilling. And then I would say by the end of the summer, we will likely be making an announcement to give much more information on what we've been up to.

Speaker 7

I think Mark will take us through the next slide on Kipushi and the commissioning. Mark, you might be on mute.

Speaker 5

Thanks. Sorry, Alex. I just got stuck on the mute. Yes, so Capuchin is going well. It's a small mine, but a lot of zinc is going to come out of it.

Speaker 5

So if I can just start with underground, the development is way ahead of plan. It's a beautiful underground mine that's got very good ground conditions and high grade. It's a high grade mine, very high grade. I think our average is 33% zinc for the life of mine. We've been developing the mine quietly.

Speaker 5

We're sitting with more than 300,000 tons of feed on surface. And we've just started basically getting that little plant to start running. So Stephen, I don't know if you want to talk a little bit about the plant and the progress we're making as well.

Speaker 6

I can talk a bit on the plant. So it's not going as well as I would have liked to be totally honest, but the plant is running. So that's good. And I think we finally over the last sort of 2 to 3 weeks have got the plant running at something which is stable and now we can start sort of tweaking the flotation parameters and the milling parameters. At the moment, we're battling to get a 50% corn grade.

Speaker 6

We're sort of in the high 40s, which is fine, but not really good enough in my opinion. So I think over the next couple of weeks, our focus is going to be on quality as opposed to quantity. And we'll get that going. Yes, I mean, there's no fundamental flaws we'll get going in the next couple of weeks, but not as good as Ka Moa.

Speaker 5

Yes. But it's a good it's a lovely footprint. It's a high grade zinc mine. I think it's going to go very well, but it's obviously not going to be a come over because you're never going to have quite that kind of revenue stream coming from it. On offtake, we've done well with offtake.

Speaker 5

That's the next slide there, Matthew. We're still sticking to guidance of about 100,000 to 140,000 tons. We might have to revise it down slightly depending on how quickly we get on the plant, but we will get them done. I'm very sure of that. We've done offtake with Citic and Trafigura, and we have €170,000,000 in financing available, and we're busy talking to other off takers as well as we go.

Speaker 5

So I think all in all, this has been a good year for Kupishi. We've got that mine running after a long time. We've dewatered that mine. We've set up the development. We've opened up the stoping.

Speaker 5

It's long haul open stoping, so it's a low cost operation. It looks beautiful underground. It looks very much completely different on surface. If you've ever been there before, you'll have a look at it. The whole of Kapushi looks different.

Speaker 5

The town is clean. It's neat. There's a very positive vibe inside that town. So workforce is motivated. And I do believe we're going to do well on this project.

Speaker 5

So I think that's where we are in Capuchin. We can carry on.

Speaker 7

Thanks, Mark. I think I'm just going to conclude the presentation with an update on Flat Reef. So you can see here a very nice image of the Flat Reef Phase 1 concentrator. It's about 800,000 tonnes in capacity. So it's actually very similar to the concentrator in terms of size of Kipushi.

Speaker 7

This is another project that we've completed successfully on time. As we previously disclosed, we are cold commissioning the plant that we did take the decision to defer the hot commissioning feeding all through the plants until next year. This is in order to prioritize the development of shaft number 3 and in turn prioritize the Phase 2 expansion instead of focusing today on production areas for Phase 1. I think we can move to the next slide where I'll just cover that in a little bit more detail. So yes, as I mentioned before, our focus has been to accelerate the Phase 2 expansion, which is all based on shaft number 3.

Speaker 7

So that shaft originally was a ventilation shaft. We repurposed the shaft to focus on permanent hoisting. The reaming of the shaft is ongoing and it's expected to be completed around the end of this quarter. And then the equipping of that shaft will commence through the remainder of the year and into 2025. So from 2026 onwards, we are targeting to have a hoisting capacity of 4,000,000 tonnes per annum from this shaft, which is 4 times the capacity we have today from shaft number 1.

Speaker 7

So that's 5,000,000 tonnes overall. And then at that point in time, the plan would be to increase the concentrator capacity, which will give us a production capacity of roughly 400,000 ounces of the 4 precious metals as well as the significant nickel and copper endowment that Platte Reef has. All of this work is going to be documented in an updated Phase 2 feasibility study and also a Phase 3 scoping study or PEA, which is targeting around 1,000,000 ounces of production. Those two studies will be completed around year end and published thereafter. I think if we can just skip to the final slide and before we hand over to Matt to chair the Q and A, this is a nice advertisement for our last site visit at Kaumao Kahuku.

Speaker 7

We had a very nice site visit during the month of July. And I would just like to say if you are interested in attending future tours, we'll be running at least 1 or maybe 2 tours over the course of this year. Please get in touch with myself, or Tommy Houghton in London. Thank you.

Speaker 1

Thanks, Alex. And we'll now begin the question and answer session for today. I'll now just briefly hand it back to the operator to proceed with any questions waiting on the phone line. Following wrapping up the phone line questions, we'll move over to the website and answer any web based questions we have in the platform. Please proceed with the phone questions, operator.

Operator

Thank you, Matthew. For the first question for today, it is coming from the line of Daniel Major of UBS. Your line is open.

Speaker 8

Hi there. Can you hear me okay?

Speaker 1

Yes, sir.

Speaker 8

Great. Thanks. Yes, thanks for the questions. The first question, I see you paying a dividend for the first time. How should we look about the future dividend policy or expectation for run rate of cash returns going forward?

Speaker 8

That's the first question.

Speaker 4

I'm happy to take that Daniel. Yes, I mean we've got Kamaoka Kula Jet generating significant cash flows. And but as we've seen with this Project 95, we continue to find ways to reinvest for a better return on capital and for ways which we think are better for our shareholders than paying a dividend. We are still in growth phase. So depending on the plans for future expansions of maybe Phase 4 at Chemawa, and we would have to look at dividend policy subsequent to that decision being made.

Speaker 8

Right. So in the interim, should we just look at it as an ad hoc basis for dividends?

Speaker 4

Yes. I think that would be right. However, I think once the dividend flow commences, we should be able to continue with a steady stream thereof.

Speaker 8

Okay. All right. Thanks. And then the next question on the smelter. You're scheduled to be complete by the end of the year and then ramping up into next year.

Speaker 8

Can you give us any sense of the well, 2 things, the working capital implications for the JV during the ramp up of the smelter? How much working capital will you build and then release? And what's the sort of time line expected before you hit steady state capacity at the smelter?

Speaker 5

I can do a bit of that one. And Steve, maybe you want to Yes, I can chip in as well, Yes. So working capital is probably, if you want a number, it's going to be around €100,000,000 €100,000,000 €70,000,000 to €100,000,000 €1,000,000 A lot of that's basically strategic spares, 1st fills and a lot of it's to make sure that you don't you battle when you do commissioning. You've got enough of everything to get going. So that's more or less basically been happening in the background.

Speaker 5

That's the one. And then to ramp up a big smelter like that, Stephen, 6 months a year?

Speaker 6

No, Mark, you know what I'd say. I mean, yes, to ramp up to maybe 80% 6 months, but I would say a year to get to sort of steady state production. We're going to stockpile about 70,000 tonnes of corn ahead of the commissioning of the smelter, sort of nice sweet stuff so that we can make our lives easy and then sort of work our way through that as we go. Yes.

Speaker 5

And that's it. Thanks.

Speaker 8

So just to follow-up on that, I mean, you build up 60,000, 70,000 tons of concentrate. That would have been incremental working capital build on top of the 100,000,000 that you €1,000,000 you highlighted for other elements. Is that

Speaker 5

I think over time, you'll keep strategic spares and fill commodities on there. I don't think you'll go up above that number. We've done a big study on this work. It's between $70,000,000 $100,000,000 it will stay

Speaker 4

there. Yes. And maybe Daniel, I'll just add that as part of the anode offtake facilities, we'll probably look at prepayment facilities there. We are confident that we can definitely arrange in excess of $500,000,000 of facilities as part of the offtake. So I don't think we've got many concerns in terms of reaching that working capital requirement.

Speaker 8

Okay, great. And just one more, if I may, slightly more strategic question with respect to the Platte Reef. We're seeing Anglo American intention to separate Amplatz. Have you looked at a combination of the Platte Reef and Mogalakwena or some other ownership combination at some point in the future?

Speaker 3

Difficult one to answer on a public platform, but I think we are keeping all our offices open. And obviously, we do get approached with a lot of ideas and synergies between ourselves and Anglo. I would never say never. I think there could be a lot of synergies between the two companies and it's something that we're not necessarily close to, but not necessarily actively pursuing as well.

Speaker 8

Excellent. Thanks. I'll go back in the queue.

Operator

Thank you. One moment for the next question. And our next question will be coming from the line of Andrew Mitrakh of BMO Capital Markets. Your line is open.

Speaker 9

Hi. I just wanted to maybe a follow-up question to Mark. Maybe number 1, congratulations to you and your team on the Phase 3 ramp up or ramp up as well as it's gone so far. But I just wanted to come back to this whole power thing. It seems like you're now moving from having issues with power to moving it to strength where you have the optionality to address all this.

Speaker 9

Just in terms of how you guys project Phase 3 ramping up and the smelter coming on and your trajectory, call it over the next 18 months, does the imported power plus backup power ever get kind of tight? Or is this really the end of discussions about power constraints and operations?

Speaker 5

Yes. Thanks, Andrew. So what I mean, 2 years ago, we made the decision to add the diesel generation capacity, which basically the 2 20 megawatts, so that if anything does happen on the Snell network or any conditions, we can run the 3 concentrators and the mine. So that's the pullback position. I've explained that before.

Speaker 5

In the meantime, we've done proper deep accurate studies on the Snell network. We've identified issues or constraints that need to be resolved. We've extended our loan. So basically, the funding mechanism to improve make the improvements on the network and then also to get it repaid over time. That loan has been extended to about $450,000,000 now.

Speaker 5

So I think we've identified all the big stuff on their network. And once that's resolved, you'll have a stable Snell network. In addition to that, and in order to grow, we've started to look at importing power from different countries. So today, for example, I'm actually in Angola. Angola sits with 2,000 megawatts of spare capacity, generating capacity that they don't use.

Speaker 5

And there are proper definitive projects underway to be able to get distribute that power into the let's call it the SEDEC, the Southern African network and feed Zambia and DOC. So short term, we've made those decisions. We've got that 188 Megawatt turbine coming on stream at the end of let's say, the end of 2020, just the end of this year. And then the rest of the work taking place to stabilize the network. And longer term, I think, for us to grow to what we need to do, we're going to need more megawatts in what's available short term in the DRC.

Speaker 5

So we're looking at the other countries. So we definitely are working in Zambia. And like I said to you, Armen and Golar at the moment, Angola is in a very, very powerful position with power. They've got huge generating capacity that they're not using. So it's really just putting transmission lines in heavily between their first port of call is to get lines into Zambia and then Zambia and DRC.

Speaker 5

With proper project plans, they've got budgets. There's a relationship between Trafi and a local company called Promox, which we've been talking to over the last couple of days. We're meeting the ministries, the Minister of Energy. So I think all in all, long term, we have solid solutions, which will be a combination of Snell and probably Angola and ZESCO in Zambia to make sure we get enough talent to grow. Remember, we don't just want to solve for X at a Phase III level.

Speaker 5

I'm looking at Phase IVA, IVB and probably another phase there, plus what we do in the Western Forelands. So what we're discovering on the Western Forelands is also very exciting. And there were a couple of mines coming up there too. So we're going to be a huge power consumer over time. And but the solutions are yes.

Speaker 5

The solutions are definitely there, to give you a long answer to a short question, sorry.

Speaker 1

Great. And I think Andrew has dropped off the line. So that sort of exhausts our phone questions for today, operator. So I will take over and we'll field some web questions that have come in, in the interim. I think 1st and foremost, this is probably best suited for David, if you're there, David.

Speaker 1

Just a quick question on C1 cash costs and the success in keeping them near the lower end of the guidance. If you could just talk a little bit about what's allowed us to keep cash costs so well controlled and also how you see those costs moving in the next, let's say, 12 months or so?

Speaker 4

Happy to, Matt. I think key during this quarter has been the increased production. I think I would also note that grade is key. And yes, our cash cost has increased quite a bit from where it was in the Q2 of 2023. But in terms of cash costs on a grade equivalent basis, it's actually very close, especially if you discount the differential caused by power outages.

Speaker 4

So key has been power for us. We do expect probably a slight increase in the latter parts of the year because of the fact that Phase 3 and the Phase 3 concentrator would run at a slightly higher cash cost because of the grade factor and because that grade coming from Kaumao one and Kaumao two will be slightly lower than coming from Kukula. But we are definitely proud of what the team has achieved so far.

Speaker 1

Great. Thanks, David. And then the next question is Mark mentioned Western Forlan. So Alex, Marna or Robert can chime in here. But Mark mentioned the next set of mines.

Speaker 1

And the question involves what are next steps following the completion of the 70,000 meters this year? And how do you see sort of milestones for the Makoko West region over the next year or so?

Speaker 5

If I can just answer the short term things, we're drilling. So we've got this drilling program going. We've got desktop studies running, but I think we need a bit more time because we're defining a fantastic ore body there. We're trying to link shallow and deep and then it will be a footprint that we create, but we need to do the drilling to define the ore body a bit better. I'm not sure if Robert will want to comment, I'm sure.

Speaker 5

But I think what we're finding is very exciting.

Speaker 4

It needs to be linked and

Speaker 5

then we will design. And like we've been doing with all the other phases, we'll do something similar.

Speaker 2

Thank you, Mark. This is Robert. I think the less said the better, it's summertime. We've said more than enough. The fundamental restriction on the development of copper in this new part of the copper belt in the Western Forlanes, primarily we've been limited by skilled people we've put together.

Speaker 2

We've been limited by stable electrical energy, which we put together. And we've had to train very young and very talented young labor force to where we now have the best safety statistics in the mining industry. So given that we don't fight ice and snow, given that we can we're on pad cave flat land, given that it's downhill to world markets to the new Lobito Corridor. The Congo is going to inherit its position as the lowest cost, greenest copper producer in the world. It's already the 2nd largest producer after Chile, having passed Peru as the 2nd largest producer.

Speaker 2

You can rest assured that more copper will be found in the Western Forlands. And in time, the copper will no longer be a limiting factor. It will be drilled off. It will be a question again applying people and electricity and water. And we'll talk more about our plans during the season and the fall when we go speak at public forums.

Speaker 2

But for today, we're seeing very strong interest globally in our efforts. We're getting interest from sovereign wealth funds and major financial institutions. And although copper has gone from $5 to $4 a pound in the recent correction and now back up again, it's going back up again today. You've seen our share price being very stable and huge amounts of new institutional interest. So in mining, you have to take a 5 or 10 year view and we think we're going to grow this to a $50,000,000,000 or $100,000,000,000 value enterprise over the next 5 years.

Speaker 2

As we continue our leading industry growth based on Marna's team and what they're doing to try to bring in the Congolese people as true stakeholders in this enterprise, which is a pattern that we intend to continue in South Africa as well. So with that, let's call it a great midsummer update. We look forward to the Q3. We hope you enjoy the photographs of our progress. We have more than 20,000 people hard at work, essentially 24 hours a day.

Speaker 2

And let's call it end to this conference. Wish you all the best in the summer.

Speaker 1

Thank you, Robert. And so that concludes today's call. I'd like to thank everyone again for attending and we look forward to speaking with everyone soon on the many more exciting milestones coming up for the rest of the year. With that, operator, would you please wrap up the call on the line? Thank you.

Operator

Thank you. This does conclude today's conference call. Thank you all for joining. You may all disconnect.

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Earnings Conference Call
Ivanhoe Mines Q2 2024
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