Ivanhoe Mines (OTC:IVPAF) (IVN) has announced a positive outlook in its first quarter 2024 earnings call, citing advancements in the Democratic Republic of Congo (DRC) and plans for significant production growth at the Kamoa-Kakula joint venture. Despite power instability in the DRC affecting first-quarter results, the company has taken steps to mitigate these issues and expects to start production at new facilities later this year. With a stable revenue of $618 million and a strategy to become debt-free, Ivanhoe Mines is positioning itself to meet the rising global demand for copper.
Key Takeaways
- Ivanhoe Mines reported $618 million in revenue and a cash cost of $1.57 per pound of payable copper.
- The company is addressing power interruptions in the DRC by securing power from Zambia and Mozambique and installing backup diesel generators.
- Phase 3 concentrator production is set to begin in May, with the smelter following in Q4 2024.
- Ivanhoe Mines aims to redeem convertible notes to achieve a net cash position and become debt-free.
- Exploration efforts are ramping up, with the company on track to quadruple its drilling target to 70,000 meters this year.
- The Kamoa-Kakula mine expansion could make it the second-largest copper complex globally, with plans to reach over 20 million tonnes of milling.
Company Outlook
- Ivanhoe Mines is optimistic about becoming one of the largest copper producers in the world.
- The company plans to convert convertible notes and focus on strategic growth initiatives.
- There is potential for significant expansion at the Kamoa-Kakula mine and the Western Foreland area.
- The Platreef project expansion is being accelerated, with an updated study expected by year-end.
Bearish Highlights
- First-quarter results were impacted by power interruptions and grid instability in the DRC.
- The company is working to stabilize the power grid and has seen improvements in April.
Bullish Highlights
- Ivanhoe Mines is confident in the increasing demand for copper and its role in the energy transition.
- The company expects higher copper prices to contribute to an uptick in second-quarter revenue.
- Sustainable and responsible production practices may lead to premium pricing for Ivanhoe Mines' metals.
Misses
- Despite stable revenue, power instability in the DRC initially hindered production targets.
Q&A Highlights
- CEO Robert Friedland discussed the company's efforts to secure stable power and the exploration potential in the DRC and South Africa.
- Ivanhoe Mines is exploring long-term power supply agreements and the use of blockchain for differential pricing based on ESG characteristics.
Ivanhoe Mines has expressed confidence in its ability to navigate the challenges and capitalize on the opportunities in the copper market. With strategic initiatives aimed at increasing production capacity and mitigating power supply issues, the company is well-positioned to leverage the rising demand for copper and contribute to the global energy transition.
InvestingPro Insights
Ivanhoe Mines (IVN) has shown resilience and strategic foresight in its approach to navigating the complex mining landscape. The company's positive outlook and ambitious production goals are reflected in the recent performance metrics and analyst observations available through InvestingPro. Here are some curated insights that align with the company's current trajectory:
InvestingPro Data:
- The company's market capitalization stands at a robust $16.99 billion, suggesting a strong investor confidence in its growth potential.
- Ivanhoe Mines is currently trading at a Price/Earnings (P/E) ratio of 52.7, indicating a premium valuation that aligns with its high earnings expectations.
- Over the last six months, the company has experienced an impressive price total return of 86.74%, highlighting the positive market sentiment and strong performance.
InvestingPro Tips:
- Analysts have noted that Ivanhoe Mines is trading at a high Price/Book multiple of 5.12, which may suggest the stock is valued favorably in terms of its net asset value.
- The company's stock price movements have been quite volatile, which could present opportunities for investors with a higher risk tolerance.
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Full transcript - Ivanhoe Mines (IVPAF) Q1 2024:
Operator: Good day and thank you for standing by. Welcome to Ivanhoe Mines First Quarter 2024 Financial Results Conference. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker, Matthew Keevil, Director of Investor Relations and Corporate Communications. Please go ahead.
Matthew Keevil: Thank you, operator and hello, everyone and good day from, Vancouver. It's my pleasure to welcome you to the Ivanhoe Mines first quarter 2024 financial results conference call. My name is Matthew Keevil and I am the Director of IR and Corporate Communications at Ivanhoe Mines. On the line today from company, we have Founder and Executive Co-Chairman, Robert Friedland; President, Marna Cloete; Chief Financial Officer, David Van Heerden; Chief Operating Officer, Mark Farren; 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 your questions using the Q&A box on the webcast as well as through the conference operator via your phone line, please do contact our Investor Relations team directly for follow-up questions that are not addressed during the call. Before we begin, I would 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 April 30 news release as well as on SEDAR Plus and at www.ivanhoemines.com. It is now my pleasure to introduce Ivanhoe Mines' Founder and Executive Co-Chair, Robert Friedland, for some opening remarks. Robert, please go ahead.
Robert Friedland: Yes, thank you. Welcome to our quarterly conference call. A few general remarks. We are extremely happy with progress in the Congo. For those of you that are unfamiliar with our copper business, 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. We're 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 a third and fourth phase at our joint venture at Kamoa-Kakula and we see nothing but upside in the Western Foreland on finding more metal. Somebody has to go out and find the metal that the world needs. It's going to be Ivanhoe 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. 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 in the balkanization of the world economy are causing copper to be a definitive national security issue for each nation state. So Ivanhoe Mines 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, 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 Ivanhoe Mines. Marna, it's over to you. You're in Johannesburg. Please give them some specifics.
Marna Cloete: Thank you Robert and it is indeed the season for copper. The picture speaks a thousand words and what you see here in my introduction slide is Phase 3, the 5 million tonnes 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 Kamoa-Kakula. If we go on to the next slide. The first quarter of 2024 was slightly below our expectations and as Robert alluded to, that was mainly due to more than expected power interruption 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. And secondly, we have involved on an extensive grid upgrade and maintenance plan with our project team's stationed in Kinshasa working alongside the state and 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 inter -regional grid and this will commence tomorrow on the 1st of 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 first ore expected in May. And the Phase 3 smelter is also on schedule for the fourth quarter of this year. As we enter the dry season, now in April, our drilling activities are ramping up on the Western Foreland and we have 17,000 meters of drilling plan for this year. May will be a busy month overall as we also start with pre-commissioning of the concentrator at Kipushi which is scheduled for first ore in June. Next slide. On a groupwide basis, our total recordable injury frequency rate trend well below the industry standard but regrettably after quarter end we had a fatality at the Kansoko mine. The Kamoa place 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 of 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. A few highlights for 2023 include Kamoa-Kakula 6% to the DRC GDP. That is an outstanding achievement. $2.7 billion was spent on local suppliers groupwide. We provided 849 scholarships and bursaries. Groupwide illustrating our commitment to education and local empowerment. And 845 local suppliers were supported groupwide representing 150% increase year-on-year. And we spent $39 million on socio-economic 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 next VRL. Our tailings management in conformance with the global industry standards for 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 from here then to take you through the quarterly results.
David Heerden: Thank you, Marna. And good morning and good day to everyone joining the call today. Marna 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 million 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 $4.30 per pound in April to date, we expect a nice uptick in revenue in the second quarter. We expect a sizable re-measurement adjustment in the second quarter as the 30,000 tonnes of payable copper provisionally price is realized. And the higher price will of course also benefit the revenue for the tonnes sold in the second quarter. 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. The increase in Kamoa-Kakula C1 cash cost in the first quarter 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 all tonnes ns mold, but also impacted on the copper all grade processed due to the reduced underground access to high-grade areas due to the water ingress during power interruptions. Marna 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 first five years post-completion from 2025 by approximately 20.%. Kamoa-Kakula’s EBITDA was up quarter-on-quarter to $365 million with EBITDA margin also up to 59% in Q1. On the next slide Kamoa-Kakula 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 million. 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. Ivanhoe recognized a normalized profit of $70 million in Q1, slightly up from the previous quarter. This excludes the $139 million non-cash loss on the revaluation of the $575 million 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. 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 will start providing additional returns imminently, with the completion of the Phase 3 concentrated at Kamoa-Kakula and the commencement of production at Kipushi ahead of schedule. Not only are our project significantly de-risked, the capital intensity is much lower than the massive numbers that have recently gotten a lot of media attention. We have been able to arrange joint venture level facilities with great terms at Kamoa-Kakula with a working capital and overdraft facilities attracting interest of a mere 6.5%. The arrangement of additional facilities for Kipushi is also progressing well with finalization expected in the second 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.
Matthew Keevil: And we're just going to turn the call over to our CEO, Mark Farren, in a moment as he connects to the line. Mark?
Mark Farren: 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 Marna that we produced 86,000 tonnes of copper in the quarter, the first quarter, which is not exactly our normalized number. And if you have a look, you'll see that the December quarter end compared to this quarter were impacted in quite heavily by power. It's a great 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 Marna mentioned, in Kinshasa working with the state utilities now on projects across the grid, not just the turbine that we're installing at Inga, but also to stabilize the grid. They've got two DC power lines that we're busy working with. There's a [inaudible] of reactive power projects and synchronous converter stations that are being upgraded as we speak. It's about a 200 million odd dollar investment, which is going into our loan agreement with SNEL, which gets paid back. We've discussed this before, bar reduction in power tariffs in the longer term for us. So that's the one dimension, is to make the SNEL grid stable with the team. The second one is importing power. 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 the 1st of 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 two together, you get 55 megawatts. And we've actually done projects which are stabilizing the grid at SNEL. 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 two 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. 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, 220 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, 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 SNEL will be completed in quarter two next year. And quarter three, quarter four, it'll be stable. In that case, we'll probably have 100% redundancy on what's required in our holder. So we'll 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 de-risk power, and I think it's going out of a lot better. And going forward, I believe there'll 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, the imported power. Just some comments on the Phase 3 concentrator. Again, we're about two 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 back end of this month of May, it's going to run. 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 of six weeks. So I think that this one will also kick in quite quickly. And hopefully, 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. The smelter will run. Its first feed will be in December this year. It's on track. There’re 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 20% through the year of 2025. And it will reduce your logistics and the complexity of logistics significantly as we go forward. The next slide is on Inga, which is just, as I spoke about earlier, Inga 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 tonnes of copper inside the alternator. So a big installation. It's going to be commissioned slightly late so about January, February next year where we had aim for December this year and that was mainly a logistics issue but all of the major componentry is on site, the team is mobilized, it's an excellent team and t's moving nicely. So that's on there on the smelter and I think that's where we are is anything else about, I'm just looking from my side if I've covered everything.
Marna Cloete: Mark, you spend, left slide on growth, Project 95.
Mark Farren: Okay, sorry. On the growth, is three 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 million tonnes per annum that we've been talking about to about 17 million tonnes with those three plants. There is some work that we've done on Phase 1 and Phase 2. Phase 1 and Phase 2, we believe can do 10 million tonnes easily. And Phase 3, we believe we're about to get to between 6 and 7 million tonnes. So instead of the tonnes that we've looked at 14 million tonnes, it's probably more likely 17 million tonnes. Then there's a project that we call Project 95. And that's also very exciting. 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 two things here. The first one is all your new risings, obviously you get the increased 7% recovery. And the second thing is that all the tailings that we have accumulated over the last couple of years, it's about 50 million odd tonnes. That can be reprocessed and that will be reprocessed and we'll get the benefit of that extra tonnage. If you add the two together, it's around about 80,000 tonnes per annum with a very effective capital cost and obviously a massive improvement in operating costs because you're getting another 7% recovery without any additional operating costs. So that's exciting. And then Phase 4 is going to be, I believe it will be accelerated. We haven't got a timeline 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 Non - TRIFR. So basically, if I can talk about it, it is we would probably start summer Phase 4 early production by utilizing the tailings that are lying on that tailings dam, that 50 million tonnes that I spoke about. 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 de-risked 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 de-risk 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, and I believe we have de-risked significantly. So I think that's it on power and on what we're doing in the future. Thank you.
Alex Pickard: Thanks, Mark. It's Alex Pickard speaking. We're going to just take you through a couple of slides on the Western Foreland. So I think Mark gave a really good overview there of our plan at Kamoa-Kakula to accelerate production, take our throughput rate to potentially 20 million tonnes and beyond. And what we're really looking to do at Kamoa-Kakula is chase down the world's number two and world's number one copper producers over time. What we have next door at the Western Foreland is the opportunity to really start to produce over a million 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 first quarter, we drilled 17,000 meters. 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 four 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 fourth quarter of 2023. 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 five million tonnes of resources at Makoko and Kiala. This is a major achievement, I think, in the context of the copper industry, the third largest discovery basically since Kakula. And put another way, 5 million tonnes of resources are roughly the same as a 200, 000 tonnes copper mine over a 25 year life. So you can see that we already have a critical mass to start a new mining operation in the Western Foreland that what we're drilling now at Kitoko and elsewhere is really looking to improve and augment what we already have at Makoko. I think we can move to the next slide please Matt. So this is showing the map and the Western Foreland license which you can see is adjoining to the western side of the Kamoa-Kakula mining license where it says Kakula 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 eight rigs on site currently which will soon be 10 rigs including two rigs with specialization for deeper drilling. 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 five 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 on the western edge of Kakula, which you can see is indicated as roughly 10 kilometers in terms of distance. So for the Western Foreland, 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.
Mark Farren: Thanks, Alex. I'll carry on. Okay, just in broad strokes, Kipushi, the underground mine is fantastic. It's a fantastic ore body running at 35% zinc, by far the highest grade in the world. The development footprint is open. We've opened up seven levels already. We've started with the sub-level open stoping, the long-haul stoping. That's working perfectly. We've got about 300,000 tonnes of stock, so more than three months of ore on surface already ahead of that concentrator. And that concentrator will run in May, also the end of May. 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. I mean, people that have been there, when it was flooded, will not recognize what we've done. It's a modern mine. Its underground development is very, very good. The ground conditions are fantastic, and everything there is ahead of schedule. So I cannot think of any major risk there. And maybe just to mention, what is quite encouraging is that the zinc process has been moving in the right direction, and just at the right time, too, I think. That would be my opinion. I don't believe there's any major technical risk on that mine. 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 overtime 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 Kipushi is moving and will be ahead of schedule like the other two. And it's looking really good. Thank you.
Alex Pickard: Thanks, Mark. And I will just close out with an update. Last but certainly no means least. on Platreef. And so with Platreef we announced during the previous annual results that we've made a change in strategy to accelerate the expansion of Platreef. So what this means in reality is that we will finish the Phase 1 concentrator project on time in the third quarter 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 million tonnes including Shaft 1 and Shaft 3. So, with those 5 million tonnes of hoisting capacity, the plan is to ramp up the Phase 1 and Phase 2 concentrators at a capacity of around 4 million tonnes, that's just leaving a little bit of extra capacity for development for our Phase 3 expansion. And just to give an idea around the numbers, 4 million tonnes of capacity will be producing somewhere between 400,000 and 500,000 ounces of the 4E metals, so that's platinum, palladium, rhodium and gold, plus up to 10,000 tonnes of nickel and copper. And then longer term, the strategy is very much to keep Shaft 2 two going, that's one of the largest hoisting shafts in the world. That will enable that Phase 3 expansion up to 10 million tonnes hoisting capacity, at which point we will produce around a million ounces of the precious metals, plus around 20,000 tonnes of nickel and copper, so a 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 fourth quarter. 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, 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 Kamoa-Kakula, much more to come on the Western Foreland, and we only perceive this to be an opportunity for our investors. But I'll hand over to Matt to share the Q&A.
Matthew Keevil: Thanks, Alex, and operator, I think we'll move to the floor. online first 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: [Operator Instructions] And our first question will be coming from Lawson Winder of Bank of America.
Lawson Winder: 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 my life plan for Kamoa-Kakula. Is that intended to be published at some point this year and then if so, what are you expecting in terms of the range of possible plans that are consideration for that?
Robert Friedland: Alex and Mark, do you want to talk about our plans to keep expanding and try to reach to the position of number one, if not number two in the world, just a different culture?
Alex Pickard: 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. 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 30 -40, 50,000 tonnes 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 those 70,000 tonnes that's already locked in our tailings at a rate of 0.7%, 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 million 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, so there is no fundamental shortage of ore to feed a much expanded milling circuit. Specifically Lawson, in terms of when we will publish what, Project 95, we're planning to, well, 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 Kamoa-Kakula 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 before year end.
Robert Friedland: 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. 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 significant open pitable resources that exist on the Kamoa-Kakula license. So you can do the math yourself on getting to 16 or 17 million tonnes of milling with the existing concentrators, then a fourth concentrator in the future, that would get us well over 20 million tonnes. And that's really just a question of how large that concentrator might be. So this year, we should start showing the world what Kamoa-Kakula 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. If there's any place in the world that can expand production quickly in response to higher prices, it's Kamoa-Kakula. And then, of course, there's the Western Foreland, where we already have 5 million tonnes of high grade. And as the spring and summer go on, we will update you on our drilling success in the Western Foreland. But clearly, the next mine, which will be Ivanhoe Mines operation, will be accretive. But we do see the Kamoa-Kakula joint venture definitely being in striking range to be the second largest copper complex in the world 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 one just in the joint venture even without the Western Foreland. 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.
Lawson Winder: Yes, very well said. Thank you, Robert. If I could follow up in one sort of finer point. I mean with the huge amount of throughput that you're getting just from Phases 1, 2 and 3, is there any thought the foregoing of Phase 4 and focusing that expansion on Western Foreland?
Robert Friedland: [Multiple Speakers] opportunity, 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, we're looking at a Phase 5, the joint venture is sitting on an ocean of copper that is immediately developable. The Western Foreland is a completely separate thing and we're not in a joint venture there. That ground is held by Ivanhoe Mines 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 Foreland and as we've been 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. 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 nice and snow like you would be up in the Andes or in Canada. Our real shortage 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, 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 Kakula West. There’re enormous resources in Kakula West, which could make a Phase 5 at the joint venture. And then the Western Foreland is a completely different story, which we will be telling the market about a lot more in the near future.
Operator: And our next question will be coming from Andrew Mikitchook of BMO Capital Markets.
Andrew Mikitchook: Thank you. 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 first 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, but 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?
Mark Farren: 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 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 longer-term agreements because these RPPs actually need to capitalize some of the investments. They need to invest in some of the long-term infrastructure. We fall down and track with that. We've got 100 megawatts agreements that we busy finalizing now, and that's a long-term agreement. It's basically a permanent agreement that will be in place. So as a minimum, we'll have those 100 megawatts in place by the end of this year in addition to 250 -odd megawatts that we've done by improvements in the DLC 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 220 megawatts of diesel that we're building in, which we never want to use. But if you add it all up, Phase 1, 2, and 3, we'll use about 220 megawatts and we'll have 540 megawatts of installed power, if you add everything up. And we will not need to use the diesel in the long term. So I think in terms of de-risking, we've done that. Taking the right steps, we're doing that. Looking for more power to build Western Foreland, to get this into the copper district over a million tonnes kind of number. We'd be 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. And 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. Very confident that we've gone a long way in the last couple of quarters in securing stable grid power from not only from SNEL, but from the Zambian grid and from as a beacon 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.
Andrew Mikitchook: And Mark, any comments on the competitiveness of this? Clearly, there's other people looking for power. Are you guys ahead of the curve?
Mark Farren: 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 SNEL power is going at about $0.11. So it's a little bit more expensive, but it's not prohibitive. And if we compare it to diesel, diesel's running at about $0.40 something, $0.47 odd cents per kilowatt hour. So the more we get of this power, the better for us to grow. 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 Foreland, depending on the size, we're going to have to do more work, that's all. But I think we're okay for the next couple of years, the next five year window, we're okay. And we are not stopping. 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 and we have some firm bids on solar already, and I think that will be added to our different sources as we go over time. So it's all good. It's actually good. We're getting there nicely.
Andrew Mikitchook: Thanks Mark. Just one non-power question. I'm not sure if there were any comments made about the Mokopane 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, depth, timing of the proposed work on that property?
Robert Friedland: Yes, I'll take a crack at that. The Mokopane Feeder has been named as such by leading Ph.D. 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. It could be iron, or it could be the critical zone of the Platreef. The critical zone where we have the mineralization is very heavy rock. It grades almost four tonnes per cubic meter, and normal tonnes of rock will probably grade 2.7, 2.8 tonnes per cubic meter. So there's something very heavy. When you measure gravity, you don't know how deep it is. It could be something ultra -heavy, very deep, or it could be just something heavy, but closer to the surface. So we're running a lot of other geophysics and mapping, and we see a world-class target. 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 by -product. Now where all this metal came from is a mystery. 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. 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 under-explored country in the world, if the numerator is its mineral potential and the denominator is what has been actually done. There's been really no significant exploration in South Africa since we found the Platreef mine, which is itself the largest precious metals mine being developed in the world. 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 Ivanhoe Mines is there and we see a number of very compelling opportunities for Tier 1 discoveries, the first of which is the Mokopane Feeder where that to be the case, that would be a negative cost base metals discovery because there's so much precious metals in diamond. So this is a third or fourth quarter project and we'll be telling you more about it in the near future. Thank you for the question.
Operator: And I would now like to turn the call back to Matthew Keevil for additional questions from the web.
Matthew Keevil: Thanks very much operator we have a few minutes left here I have just one 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. I have a couple 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.
Robert Friedland: A 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 of 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, no, that's coming to a screaming halt. ABAC’s 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 (NYSE:RIO) and BHB and the Korean and Japanese steel mills once a year they would agree 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. 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 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. 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 a tonne to screw up their courage to build a large, low-tonnage copper mine. 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% of 1% 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 three or four hours a day in South America. And so the grid is a coal-burning grid in countries like Peru and Chile. 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% for sure, differential pricing in metals is opening soon at a theater near you brought to you by ABAC’s Technologies. And these are serious people. They ran the backroom at Goldman Sachs and they were involved in the comics and then IMAX (NYSE: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. Thank you for the opportunity to pontificate on that important question.
Matthew Keevil: 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 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. 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.
Robert Friedland: Thank you.
Operator: Thank you. This concludes today’s conference call. Thank you for participating. You may now disconnect.
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