Q3 2021 Ivanhoe Mines Ltd Earnings Call

November 15, 2021

[music].

Thank you for standing by. This is the conference operator. Welcome to the Ivanhoe Mines Q3 at 2021 financial results conference call. As a reminder, all participants are in listen-only mode and the conference is being recorded.

As a reminder, all participants are in listen only mode and the conference is being recorded.

After the presentation, management will be addressing questions sent in advance. Webcast participants also had the opportunity to type in their questions via the webcast. I would now like to turn the conference over to Bill Trenaman, Vice President Investor Relations. Please go ahead.

I would now like to turn the conference over to Bill <unk>, Vice President Investor Relations. Please go ahead.

Thank you, operator. It is my great pleasure to welcome you to Ivanhoe Mines first-ever quarterly earnings call. Today's call will feature a short presentation and a brief overview from members of our senior management team. The presentation is available for viewing via the webcast. It is also available on our website at www.ivanhoemines.com. Today's call will end with a question and answer session. You can submit a question at any time using the Q&A box on the webcast page.

My great pleasure to welcome you to Ivanhoe mines first ever quarterly earnings call.

Today's call will feature a short presentation and brief overview from members of our senior management team.

The presentation is available for viewing via the webcast is also available on our website at www Dot I've been home mines dotcom.

Today's call will end with a question and answer session.

You can submit a question at any time using the Q&A box on the webcast page.

Before we begin, I would like to remind everyone that today's event will contain forward-looking statements. Details of the forward-looking statements are contained in our third quarter MD&A and news release, both of which were issued earlier today and available on our website or on SEDAR. I will now turn the call over to our founder and co-Chairman, Robert Friedland for a few introductory comments. Please go ahead, Robert.

Details of the forward looking statements are contained in our third quarter MD&A and news release, both of which were issued earlier today and available on our website or on SEDAR.

I will now turn the call over to our founder and co Chairman Rob.

Robert Friedland for a few introductory comments. Please go ahead, Robert.

Thank you, Bill, for those of you joining this call from all over the World I'm sitting in Singapore. It's late at night here and I welcome all of you to this call on this important occasion for the thousands of people that have contributed to the development of either their minds. The profits that we're announcing today, an initiation of commercial production. It's not an individual mine, but it is a mining district, there's stress about patient skill copper system. It's the largest untested dropper system in the world. So it's a very momentous occasion to announce it. First phase concentrator is ahead of schedule, under budget and in production.

Joining this call from all over the World I'm sitting in Singapore, It's late at night here and I welcome all of you to this call.

This important occasion for the thousands of people that have contributed to the development of either their minds.

The profits that we're announcing today, an initiation of commercial production.

There's not an individual mine, but it is a mining district, there's stress about patient skill copper system.

The largest untested dropper system in the world.

It's a very momentous occasion to announce it.

First phase concentrate or is.

ahead of schedule, under budget and in production.

Budget and then production.

We have some members of our senior management team here who will be happy to take questions and we'd remind you that we've been working for over 25 years not only on this project, but on two other tier one projects [Kipushi], which we will also be touching on in this presentation. With that introduction, I'll turn this over to Marna, our President who's going to take you through the quarter third results and and beyond, thank you. Thank you so much, Robert. Matthew, if we can just move to the slide deck that shows the highlights.

With that.

Introduction I'll turn this over tomorrow, our president who's going to take you through the quarter.

Third results and and beyond thank you.

Thank you so I'm not sure I'll bet.

Matthew if we can just move to the slide deck that shows the highlights.

And what a journey this has been. And so we transitioned from renowned explorers to operators of what I believe is the most exciting copper discovery in the world. In only five years, we transformed the cooler into the impressive mine it is today. In no small part due to the 7000 people on site, each [playing day part[ and making it possible to build this mine on budget, ahead of schedule and let's not forget, during a pandemic.

And so we transitioned from renowned explorers operators of what I believe is the most exciting copper discovery in the world.

In only five years, we transformed cooler into the embrace of mind at ease to die.

In no small part due to the 7000 people on site, each playing day part and making it possible to build this mine on budget.

Shh L.

let's not forget, during a pandemic.

Rest assured, the same group of people and team to deliver similar results on all future expansions [inaudible] and smelter projects. The quarterly highlights you see on your screen today is only the start of continuous growth and improvement we aim to achieve for decades to come.

The quarterly highlights you see on your screen today is only the start of continuous growth and improvement we aim to achieve for decades to come.

With phase one commissioning now complete and due to the impressive ramp up performance, we feel confident to increase our guidance to between 92500 and 100000 tonnes of copper in concentrate for the 2021 financial year.

And just a short few months it is clear that phase one will easily exceed design capacity and the same will ring true for phase two. We have produced over 77500 tons for the year and expect I'll see one cash costs currently at $1.57 per pound to decrease over time as we bring so they expansions online and hone our efficiencies.

We have produced over 77500 tons for the year and expect I'll see one cash costs current you have $2 57 per pound decrease over time as we bring so they expansions online and tow now efficiencies.

But more now in Okinawa, earning slide 10, when David van Heerden, our CFO and by the way, David. Congratulations on your appointment. We will take you through our results. If you can take it to the next slide, Matt. I would like to take a few minutes to focus on our ESG scorecard.

If you can take to the next slide Matt.

I would like to take a few minutes to focus on our ESG scorecard.

Ivanhoe is now only in its fourth year of publishing our sustainability matrix and we have already seen a marked increase in our MACI index, writing, achieving an A rating with a target of becoming a leader in the near future. There's a myriad of inputs driving ESG performance with health and safety being a key focus for Ivanhoe.

He's a myriad of inputs driving ESG performance with health and safety being a key focus five and Oh.

Our operational teams have put in a tremendous effort to embed a culture of zero home and we believe that every employee should return home safely every day and our improved loss time injury-free hours is a testament to that.

When it comes to CO2 emissions, it seems like divine intervention that we protest copper mine into production when we did. We will also have to asign some visionary created to our leader real bit treatment. It is clear that the world will need copper for everything from battery electric vehicles, EV chargers, solar panels, wind turbines, grid overhauls, to name a few.

We will also have to sign some visionary created to our leader real bit treatment. It is clear that the world will need copper for everything from battery electric vehicles, EV Chargers solar panels wind turbines grid either holes to name a few.

A lot of promise reminding [inaudible] and Ivanhoe will be happy to oblige in assisting world leaders in keeping their promises. I would like to remind everyone that copper from Kamoa-Kakula is using clean renewable hydropower. Earlier this year, I have now completed the refurbishment of six turbines at the Mwadingusha power plant in partnership with Snow the state power utility in the DOC.

I would like to remind everyone that copper from conoco, two last months using clean renewable hydropower.

Earlier this year, I have now completed the refurbishment of six turbines at the Mwadingusha power plant in partnership with Snow the state power utility in the DOC.

This power plant is now generating 78 megawatts enough power for phase 1 and phase 2. But we have now also extended this partnership to include Inga II, turbine 5, which will generate an additional 162 megawatts of power.

But we have now also extend that this partnership to include in got two turbine Foss, which will generate an additional 162 megawatts of power.

This problem will be sufficient for our [inaudible] expansions as well as how smelter project. Today, the main source of emissions on the mine is the diesel fleet and that is why we announced that we are exploring the use of battery electric or even fuel cell underground equipment.

Today, the main source of emissions on the mine East the diesel fleet and that is why we announced that we are exploring the use of battery electric or even fuel cell underground equipment.

It is fantastic to see how much progress the equipment manufacturers are making in terms of electrifying mining fleet and we plan to adopt the technology ahead of the curve.

Thermal efficiency also have any wise into this decision, at 70% of the initial energy off the conventional diesel is wasted as heat, resulting in additional ventilation management and exhaust gases.

We therefore already placed orders with [epilogue] for battery electric underground fleet at Platreef, which will be delivered early next year and transition and people transition from our fleet over time.

This will allow us to use the lessons learnt from Platreef,with the ramp up will be a little bit slower and then transition over to Kamoa-Kakula. Lastly, a comment on diversity. I intend to publish targets for females employment across all levels in the organization.

Lastly, a comment on diversity of and I intend to publish targets for female employment across all levels in the organization.

In addition, we will continue to focus on minority groups and previously disadvantaged communities in line with the jurisdictions in which we operate. I will now hand over to David to take you through our inaugural earnings.

I will now hand over to dive it to take you through all inaugural earnings.

Thank you, Marna. We have been filling our quarterly result for a few years now, but with our first project now in production. We believed it was the right time to start with quarterly earnings calls. A practice we expect to continue with each quarters results going forward. Since Q3 2021 is the first quarter since commercial production, I will focus on the results achieved in the quarter, as opposed to comparing them to that of previous quarters. The comparisons of the three and nine months ending September 2021 to the same periods in 2020 is of course, elaborated on in our [NDNA].

We have been finding a quarterly result for a few years now, but with our first project now in production. We believed it was the right time to start with quarterly earnings calls.

This we expect to continue with.

Each quarters results going forward. Since Q3 2021 is the first quarter since commercial production I will focus on the results achieved in the quarter as opposed to comparing them to that of previous quarters. The comparisons of the three and nine months ending September 2021 to the same periods in 2020.

of course, elaborated on in our [NDNA].

Next slide, please, Matt. Over the last few months, we have received a number of questions about how come up Kmoa-Kakula's revenue and ultimate profit will flow into R&R statement of comprehensive income. We, therefore, decided that this is probably a good place to start the financial overview.

Over the last few months, we have received a number of questions about how come up come out cocoon.

Revenue and ultimate profit will flow into R&R statement of comprehensive income. We therefore decided that this is probably a good place to start the financial overview.

The Kamoa-Kakula project is a joint venture between Ivanhoe Mines and [Yogen mining] to do the 49.5% share interest income or holding that holds and 80% interest in the project with the DRC government holding a direct 20% interest. Therefore, [Kamoa coppers] results are consolidated into Kamoa-Kakula holding and argonaut recognizes its 49.5% share as a single line item on the <unk> statement of comprehensive income.

80% interest in the project with the DRC government holding I direct a 20% interest therefore come out of Corpus results are consolidated into come our holding and argonaut recognizes its 49.5% Qi a single line item on the <unk> statement of comprehensive income.

Next slide, please. During its first quarter of commercial production, the Kamoa-Kakula joint venture sold 41,490 tons of payable copper and recognized revenue of $343 million. The revenue is made up of a $12 million reduction due to the re-measurement of contract receivables as at September 30th. This represents the effects of mark to market fter August and September sales at a copper price of $4.10 per pound. So additional upside is expected in Q4, if the copper price remains at current levels. The Kamoa-Kakula cost of sales for Q3 2021 was $99 million in total and $1.08 per pound of payable copper sold while cash cost per pound of payable copper totaled $1.37 per pound, but more on that later.

Okay.

Yeah.

During its first quarter of commercial production Docomo cooler joint venture sold 41490.

90 tons of payable copper and recognized revenue of $343 million. The revenue is made up of a $12 million reduction due to the re measurement of contract receivables as at September 30th. This represents the effects of Mark to market After August and September sales.

a copper price of $4.10 per pound. So additional upside is expected in Q4, if the copper price remains at current levels. The Kamoa-Kakula cost of sales for Q3 2021 was $99 million in total and $1.08 per pound of payable copper sold while cash cost per pound of payable copper totaled $1.37 per pound, but more on that later.

<unk> cost of sales for Q3 between between year, one was 19 $9 million in total and the dollar and I change per pound of payable copper sold while cash cost per pound of payable copper totaled $1 37 per pound, but more on that later.

General and administrative expenditure was $33 million for the quarter, which of course includes the cost of an excellent management team that worked tirelessly to bring Kamoa-Kakula's first phase into production on time and on budget. And is now not only focused on operations but also on the Phase 2 and Phase 3 extensions

<unk>.

Operating profit for the first quarter of commercial production was $210 million, and EBITDA was $233 million. [Kamoa] holding recorded finance cost of $52 million in Q3 which is principally the interest on shield [inaudible] as well as interest on Kamoa-Kakula's equipment financing facility and the short term facilities available under the off-take agreements.

Gamal holding recorded finance cost of $52 million in Q3.

<unk> is principally the interest on shield the lungs from IV infusion as well as interest on chemo kudos equipment financing facility and the short term facilities available under the off take agreements.

Development and exploration expenditure incurred from inception is available for the offset against taxable income and Kamoa can amortise these for tax purposes over the first two years following commercial production. For this reason, Kamoa has an income tax expense equal to only 1% of our revenue. And the remaining $47 million of the tax expense is deferred tax and does not represent a cash outflow.

And the remaining 47 million.

of the tax expense is deferred tax and does not represent a cash outflow.

The noncontrolling interest of $24 million represents the profit attributable to the DLC government's 20% interest in Docomo Kakuta project, leaving profit of $84 million attributable to the joint venture partners I've enough share of which equaled $41 million for the third quarter. 2021.

2021.

Next slide please ma'am.

If we turn to all avenues consolidated interim results for Q3 the chart in the slide deck starts with the last slide ended with a share of profit from the comerica cooler joint venture of $41 million for the quarter. Additionally, avenova and interest income.

<unk> of $24 million from Kumalo holding in the third quarter for the shareholder loans that advanced to the joint venture.

During the quarter the company spent $9 million on the Campos. It project 7 million on western fruit for it before Lance exploration and $7 million on general and administrative expenditure.

Cost and good at Blackberry project are deemed necessary to bring the project into commercial production and are therefore capitalized development costs and property plant and equipment.

The 55 million dollar gain on the fair valuation of financial liability in Q3 represents the change in the deemed fair value of the conversion feature attached to the $575 million, 2.5% convertible senior notes, which Avenue closed in March of this year.

The conversion feature is an embedded derivative financial liability and the fair value changes principally due to the fluctuations in our share price.

Oven, a recognized finance costs of $10 million in Q3 relating to the interest on the convertible notes at.

The effective interest rate.

Which ultimately bolt up to INR <unk> profit for the three months ending September 2021 of $85 million.

Next slide please meant.

Yeah.

The cash cost per pound of payable copper produced food delivery to China, what's the dollar city seven foot pound for Comerica coolest first quarter of commercial production.

For the quarter reflect the measured ramp up of production at the marker cooler to steady state and are expected to trend downward as the face to concentrate the plant is commissioned and demands fixed operating costs are spread over increased copper production longer term, we are looking at projects like the smelter, which.

Improved cash cost by up to 15%.

Cash cost is a non-GAAP measure.

The reconciliation from cost of sales to cash cost all provided on page 39 of our aim DNI.

We intend to provide all in sustaining cost when phase two convinces.

As the mine is newly commissioned sustaining capital is limited, but mostly relating to the underground infrastructure and development. However, as we are in the process of ramping up the cooler mine in anticipation of ice two it's somewhat arbitrary to make the distinction between expansion and sustaining capital activities. In fact today, we all mine.

In excess of all phase one mining right and we hope and we also have the $3 7 million ton mining stockpile to draw down on.

Next slide please.

We have a strong balance sheet and are well positioned for further development of our project.

With $519 million in cash and cash equivalents on hand, and consolidated working capital of $624 million.

All date of 671 million relates mainly to the 2.5% convertible notes I mentioned earlier. However, these are only due in 'twenty 'twenty six.

Possible earlier redemption, our forecasted spend for the reminder of the year is $61 million on blackberries depreciate.

Exploration of the wisdom for lands end overrides.

I now hand over to Alex be caught all vice President corporate development and whatnot to provide a brief update on further developments at our projects.

Thank you David and good day to everyone on the line.

I will now take you through an operations update at Comerica cooler on the western Poland and I will pass back to Manav to take you through our activities at plot reef and Kikuchi.

Next slide please.

I pick Ola we've achieved an exceptionally smooth ramp up to steady state production. Since we first commissioned to concentrate that in may of this year.

To date, we have produced over 77500 tonnes of copper in concentrate which has either been sold treated to produce blister copper at the lower level of copper smelter nearby and call lazy or shipped by our off takers for export to international markets.

Given the exceptional ramp up performance, we have steadily increased our guidance for the year from the data from the initial range of 80 to 95000 tons to the current range of 92, five to 100000 tonnes of copper in concentrate.

We intend to provide full guidance for 2022, which will include our initial production forecast for phase two in January.

While the concentrates of has reached nameplate capacity. The <unk> team is busy exploring several optimizations to maximize the capability of the pilots both in terms of all throughput, but also copper recovery.

As an example of this during the quarter, we identified that the main the main bottleneck in the process was the concentrate filter capacity at the backend of the plant, particularly when floating are exceptionally high copper grades.

To alleviate this we installed while ahead of time, the phase II filter press, which provide significant additional redundancy.

Since eliminating this bottleneck we are frequently achieved copper production in excess of 700 tonnes per day, which gives an idea of what is possible.

Next slide please.

On the phase two as with the phase one belt, we are well ahead of our schedule and on budget.

Construction is more than 60% complete overall with procurement effectively completes and almost all deliveries onsite, which significantly reduces the risk of project delay.

During the quarter, we tightened our guidance for first production from phase II from Q3 to Q2 of next year.

Phase two will double the plants capacity to an annualized rate of 400000 tonnes of copper in concentrate or potentially more depending on optimization.

This means that comerica cooler within a year will be one of the 10 largest copper mines in the world.

Now our attention has shifted to phase III.

We are busy working on the design and engineering phase III, but the early indications are that we will build a larger concentrated in phase one and phase II located close to cancer.

Second mine located roughly 10 kilometers north of the existing cooler mining concentrate there.

We are planning to new access into the mining areas to phase III, starting with an expansion of cancer as well as the opening up of the commercial deposit to the north.

Phase III will be brought online in parallel with the ingot to power project mentioned by Luna and will also include investment in a 500000 tonne per annum directed blister copper smelter to produce copper metal onsite that come out of the cooler and significantly reduce our unit costs.

We will be providing further details on the planet to phase III by the second quarter of next year.

Next slide please.

Moving now to the western Poland.

We firmly believe that the DRP will play a pivotal role in supply in Qatar to meet the global transition to a low carbon economy.

In addition to our World class lineup tomorrow to cooler future discoveries in the western fold on top of basin will have two truly global significance.

Within the management team involved in our minds the western Poland is perhaps the project that we are most excited about and we are confident that this ground is the most prospective in the worlds copper exploration as evidenced by the first discoveries we have made it at Makoko and Colo.

During the quarter, we've been focusing our efforts on completing critical exploration infrastructure.

To access the enlarged two and a half thousand square kilometer land package that Ivanhoe now controls between 90 and 100%.

This includes a 70 kilometer access road, which is nearing completion to allow for drilling access to the licenses during the wet and dry seasons.

The same time.

<unk> high definition, geochemical and geophysical surveys across the licenses, which will significantly inform our drill targeting in 2022.

With that I will hand back tomorrow to discuss plot reef Lucy.

So in that time I would not argue with you I think I'm more excited about flattery I do understand the sizzle that waste in fall and so I'm very excited about that too.

But that flattery. If there is a lot happening we've added a lot of depth to our management team and we are now in full execution planning to start production in 'twenty, 'twenty, four which seems like tomorrow with the wait times flying.

A stream financing announced earlier this year so in its final stages and should be completed soon.

And this together with our project financing facility and that we will conclude after the stream will source the funding phosphates twice mine.

Definitive feasibility study will be published early in 2022.

But we have a number of very exciting developments at a flattish project to announce and we plan to update the market in the next couple of weeks or so watch this space.

If he can move over to Kopischke.

I personally I've been spending a lot of time in Congo with it over the past couple of months now that we can travel again and.

And our discussions with Jacobina has advanced significantly and I'm confident that we should be in a position to reach agreement on a development both in short order.

The feasibility study for Capri, She's also essentially complete and it will be published once we reach consensus.

We are also currently capacity lighting Alco bouchey team with additional manpower and planning critical both procurement. So we can hit the ground running and bring this mine into production within the within 24 months once we reach agreement with our partners.

We've also initiated discussions with finance, yes for third party financing.

I must say with zinc prices that draco tie the time has come to restore this mine to its former glory.

Next slide.

This brings us to the final section of today's presentation, we've been receiving a lot of questions from investors and analysts about all future cash flows and capital allocation philosophy. So we thought we would give you a bit of a taste of what our current thinking is.

It is clear from our recent modeling.

Supported by current copper prices that the Milwaukee too long, we'll generate more than sufficient cash flows to fund all future expansions that we are currently planning.

This includes the completion of ice tea size three the power project as well as the smelter.

They will be future cash flows to the shareholders of the myeloma, which is ourselves celgene and the D C government through shareholder laundry payments and ultimately paying dividends.

If current market conditions prevailed at Essex baked it that they will be sufficient cash flows to two means with shareholder laundry payments from comerica cooler as soon as after phase two is fully commissioned in two we need to we need to.

This will flow directly into the treasury of either or neither.

So if we can move over to the next Tonight.

David already mentioned, our strong cash position of $580 million earlier in the presentation.

This will be augmented with the cash flows received from Karnataka cooler that I, just mentioned and will help to maintain our strong balance sheet and fund all highly accretive growth projects.

At best flat sheet and completion, we plan to fund the projects with third party funding so that beats dreams project finance facilities or prepayments and that will be in combination with our current cash resources.

But it is our intention to reward our shareholders with a dividend from cash surpluses.

After funding a tier one gas project that's already in the pipeline.

So I will now ask Bill Ciena men to motor drive to dice SKU and ice station.

Now over to you Bill.

Yeah.

Thank you Marta.

No and I would like to thank all the.

Shareholders and investors.

Who have submitted questions via the webcast I'm, we've tried to assemble them and group them together as best as we can we may not have time to get to everyone's question and we encourage you to reach out to anyone ever team for follow up here in case, we don't have time to answer your question today.

So without further Ado, we'll move to the first question and they come from Andrew Mecca Truth of BMO capital markets and the first one.

I'll ask David to answer and the question is can you provide some additional commentary on the dollars 37 per pound C. One cash cost during the ramp up quarter.

And how these will compare to those budgeted in the mine plan.

<unk> has the addition to that question that says which cost components would you expect to have the most savings potential as you build a steady operating track record over the next quarters.

David Please.

Thank you Bo and Andrew.

Given it's our first operating quarter, we are very encouraged by the cash cost of $1 37 per pound.

So doing that the mine was ramping up below our targeted throughput inefficiency. The dollar 37 cash cost per pound was lower than the cash cost budget to buy them on site team.

General and administrative expenditure is an obvious component we would we would expect to see savings fairly quickly that's fixed operating costs are spread over increased copper production as mentioned during the presentation.

Smelter project is expected to result in a significant cost saving in both logistics and other realization cost in the longer term, but we also see some room for savings on logistics in the interim.

Thanks, David Andrew has a second question that well we have you on the line I'll ask is the phase two start up expected to have a pre commercial period in Q2, 2022 similar to the phase one startup in <unk> and 2021 or will.

This immediately start contributing to the joint venture earnings.

Andrew We expect phase two to immediately start to contribute to Cook America Culottes joint venture earnings once the second concentrate plant starts to produce copper and concentrate.

But this question is also a good opportunity to hire lots of really quick ramp up we've experienced with phase. One we first ore was introduced into the concentrated plant on may the 20th and initial commercial production was declared on July 1st which is you know I think is exceptional.

Thanks, David No I'm going to turn the floor over to Robert to answer a question from Aurist Walker, though of Scotiabank and the question is.

Somewhat of a three part.

Sirius is does Ivanhoe mines planned to develop all three projects in the portfolio now come over expansions Platt reef handicapped Wuxi concurrently.

Assuming come or expansions or the top priority is plat reef ore capuche, he likely they'd be the second project under development.

And does the company have the bandwidth and financing ability to be constricting, all three projects at once over to you Robert Please.

Yeah.

Well thank you.

Look tomorrow, and cooler or a tier one mine, that's where it came from a tier one mine in Nevada.

P. H P came from a tier one mine.

Broken Hill.

So we definitely intend to build a major mining company off of these tier one assets and we definitely have the bandwidth to develop all three projects in fact, theyre very well, they're well advanced.

Pushy mind, we've completely redeveloped.

The ground in the last five years.

Everything you see there is new underground so we're limited to a dedicated team studying stoping at some of the richest base metals or in the world.

I had a 45% zinc equivalent with silver credits.

For many of them credits copper credits one of the highest grade ore bodies on the planet.

So building a concentrated or with the underground already developed.

Straightforward task for a dedicated management team.

I'd remind you in the Congo, we have hydro electric power.

And we don't have any snow and we don't have any we don't have any ice.

So we have natural advantages.

Population close to 90 million people to choose from and the management team. So.

Bouchey is it kind of a dream of mine and we can definitely developed it was a dedicated management team.

Yeah.

Alright, Chief Technical officer, he used to run that mine he knows it like the back of his hand, and Thats ready to go.

But there's also been under development for some 25 years. The number one shaft is really been sunk it's a very short drift into extremely high grade.

Hmm.

Rhodium copper nickel and gold ores.

So the small mine as long as it's financed through building a concentrate or definitely are separate teams.

That's resident at the mine site.

Africa is quite ready to do that so we have an independent Congolese unit.

There was a lot of cross polarization between come out good cooler and Campos there both in the Katanga Province, but South Africa is a separate deep.

Experienced management team with a lot of the underground development already underway with a separate financing.

So yes, we won't develop all three of these mice, we slow down to them at the beginning of the COVID-19 pandemic I went to the PDC almost two years ago.

When the first cases of COVID-19 broke out in Canada and you all remember it was quite a scary period.

So we decided to tighten our belt and sprint to production.

Come OCA cooler as quickly as possible.

The World knows we bought this mine in production ahead of schedule and under budget and you can't really.

You can't really find that anywhere else in the global mining industry.

I'll give you a long list of the copper mines, either won't get built already.

Many years later, but we have enough analysts on this call to make that list himself.

It's sort of a tank unicorn.

To bring a mine on schedule a little ahead of schedule and on budget for a loan under budget and that's a testament to the fact that the greatest projects.

[noise] attract the best people.

So we've got people from all over the mining industry at all levels of applying to come join our organization because they see that we're going to build a world class major mining company.

Moca cooler has reserved for last for more than 50 years and the same is true flat rate. So these are absolutely the very top of tier one resources I would remind you.

That's the <unk> project is the worlds largest precious metals development.

And also has an enormous nickel and copper sulfide resource, which is very important to the electric metals requirements of the planet.

Yes, we're going to bring all of these in production. They are all opening soon.

The theater near you.

Excellent Thanks, Robert Oh, I'm going to turn the floor over to Alex Picker to answer a question from Sam Crittenden of RBC capital markets and the question is.

Alex can you give some more color to the planned tomorrow onsite smelter in terms of your approach to sizing capex and timing.

Okay. Thanks, Bill and thanks, Tom for the question.

Look I think the first thing to say on the smelter is that we will be awarding the basic engineering for the smelter imminently and it is a project that we're excited about.

A couple of reasons first of all I think it was a great impact on the economics for Comerica cooler overall and David touched on that but also in terms of off our our green credentials.

No. We think it's fantastic to operate the smelter on hydro power and the DRC instead of say a smelter in Asia are running on coal power.

But also in terms of what we're shipping them all we put on the roads, we can effectively half the number of trucks that we are that we are sending them. So we think from a C. O. Two point of view, there's also a huge benefit.

And in terms of the sizing of the smelter I think people will have picked up and are in our press releases that we've increased the sizing.

The sort of 400000 tonnes, a blister copper capacity, we were looking at before up to around 500000 tons a blister copper.

And I think that's partly a reflection of how how much we've accelerated phase one phase two and we will look to accelerate phase III. So that 500000 tons will accommodate the bulk of the phase one two and three concentrates but also leaving some concentrate leftover to send to the lava copper smelter, where we have a successful partnership.

In terms of the Capex I think our previous guidance with somewhere in the region of $600 million, but that was a slightly smaller smelter. So I would say that it will be it will be a little bit higher but not materially higher but we will come in and come out with more information on that.

And in terms of the overall timing, obviously with the basic engineering and we're looking to move this project ahead as fast as possible.

In terms of the actual execution timeline too.

To engineer and build the smelter at somewhere in the region of three years, but crucially, we will tie it in with the the startup of the new power generation I didn't get to them.

And so we will come back to the market with similar timing on when that will be possible.

Thank you.

Yeah.

Great. Thanks, Alex Oh, well, you're on the phone I'm glad we have some questions from Dalton Barreto of Canaccord, Genuity and they're probably best answered by US. So the first one is given the mining productivity to date, the smooth ramp up of the mill and the opt in isolation and work to date do you.

Eight phase one being able to operate above design capacity, if so by how much.

Oh I see.

I think we touched on it.

Oh, sorry, I had Montgomery Alex Yeah. So sorry, you asked me, we do anticipate it to definitely anticipated to open right above design capacity and our teams are currently working on a number of optimization initiatives and I'm in the short term up to 15% additional throughput to east plant.

And even more in the long term.

Thanks, Martin L. A the second part of Dawkins question is is there a possibility you can could commission phase two in the early part of Q2 and what is the critical path item to achieve this.

Definitely and that is our current objectives and the critical path is running through the electrical installation.

In particularly particular day, the last delivery of the electrical components decides if anything's guarantee on the African continent. So we don't really foresee an issue with Ely. So planning for early part of Q2.

Thank you and the third part is.

The question is given what you've learned from phase one do you anticipate phase two being able to operate above design levels as well.

Nice to Houston at least there's no reason to believe that it will be any different from one in.

In fact, we have implemented to holidays incident on phase one the entire design and implementation of phase two and we envision an even smoother ramp up than phase one.

Great last but not least from Dalton is [laughter] with the onsite operations going so well how is the logistics chain to and from the port working.

It's it's starting well I wouldn't say, it's without hiccup, we've had a few issues at the Durbin pool, especially with a lot of demand on our site on sea and going to the U S and shortly so shortly dish coming to Africa.

But luckily we had all our procurement items spare kit well ahead of time. So that's been delivered to site and we don't foresee any impact on our schedule and as a result of it.

Thank you Martin a oh, we have a question for Robert and is from Lawson Winder of Bank of America.

Robert The question is given the exploration plan for the western for Atlanta in 2022 when do you anticipate you'll have an initial resource and will it include existing deposits like makoko and kill so either to Robert or to Alex.

Okay.

I don't I don't have a Robert so I'll take that one.

So look I mean, I think I'm kind of I'm, sorry, I'll take.

Since I love loss and I'll try to answer that question.

This is a 400 square kilometers joint venture.

Copper bearing basin, that's at least 3000 square kilometers.

All of it is the same geology. So this is oilfield geology.

These are strat abound systems that we're constrained by one super giant geological event throughout the entire basin.

Just like the with water and basin for gold.

Ultimately you know host hundreds of gold mines.

It was water ambition.

Theres just enormous potential.

Additional.

The animals in this channel I mean, if you look at these pictures.

Due to the curvature of the Earth.

You can only see 26 kilometers.

Ship disappears at sea at a distance of 26 kilometers.

Due to the curvature of the Earth, but it's just going to the south.

There's a there's a license of the western Portland is.

Something like six times longer than the distance.

Consider the horizon or 150 175 kilometers.

In addition, we.

We may be acquiring additional ground in the basin.

So.

In this jungle, there's all kinds of animals.

You know you never come on which might be a zebra.

Cooler, which would be a lion.

And when you go out in the Jungle you can find you know.

Harry Aardvarks and you get it you can find at eaters, and you can find elephants and what we're looking for of course, their blue world or a brown of salaries.

So I wouldn't worry too much about my coke or kill like Hill is very close to our northern concentrate or it's very high grade.

The Bonanza zones is ridiculously high grade, you've got 1 billion or $2 and a couple of million tons of rock. So there are there are potential for extremely high grade structurally controlled copper deposits like the Bonanza zones.

And theres deposit there's potential to find more coolers or maybe even something better.

So I wouldn't really worry too much about quantifying the cocoa or kill the other then they represent proof that the basin is pregnant with copper.

Stephane just as from a cooler makoko is it this is a 25 or 30 kilometers.

I can't think of any incidents in my 40 years in mining.

We're a mining company that's done at 25 or 30 kilometer step out.

And then encountered exactly the same type of mineralization.

They encountered when they started.

So the scale of the mineral exploration potential will be realized over decades.

You can find minds here faster than you can build them.

And we're responding instead.

The legendary buildup of copper.

Because first of all we don't have ice and snow.

You know, we're not in the Cordillera and British Columbia at high elevation.

Well basically flat land, we can operate year round 365 days a year.

You have to start by building a road system through all of this land is we've just built a 65 kilometer initial spine road going into this completely untested terrain and so there's a big sort of military logistical campaign underway just to open the place up.

You don't really want to drive 65, or 70 kilometers from an exploration camp battery cooler for example, so we're.

Gonna be establishing remote camps.

And so it's a very serious military grade effort.

And we're really there to hunt very big game.

The list of financial entities and major mining companies that have approached us to get involved in this asset.

With comparable.

Everybody you could think of is.

As expressed interest because there really is no place on planet Earth.

We can go out and find these kinds of copper assets let's.

That's simply a fact.

The copper belt east of Covid as he was the largest producing copper zone on planet Earth until Chile got embedded in the 19 seventies, but these giant porphyry copper is.

True up enormous volumes of rock and enormous volumes of electricity per year.

Unit of copper produced and so when you look at their global warming.

Yes.

For unit of copper produced their horrendous.

The grid in Chile for example is burning coal.

So their COVID-19 any mines.

And so as cop 26 has happened and people are worried about scope, one and two emissions let alone scope three in our scope three should be negative because copper is powering.

The energy transformation, what we're doing here is absolutely critical to the world attempts to directly address the global warming problem there.

That puts a lot of responsibility on those of us on this call.

Because this is a legendary scaled effort and I really wouldn't want to comment on a on an ant eater.

Or a small anaconda snake or zebra.

We were really out there to find really large deposits into understand.

The base that we have some <unk>.

20 years, and there's geological environment.

And I would say by way of a clue that there are about four factors that have to come together to create a cooler we know what those four factors are if you get three of them.

You'll get somebody like him Makoko.

Makoko would have been the biggest copper mine in the British Empire. If we went back 100 years, you know it would be it would be a tier one deposit, but it's just not as big as it was a.

Cooler because they cook Hulu, we have all four elements of our secret sauce.

So in surveying the basin in identifying the sub basins, where the right four factors exist.

We think we have a head start on looking for some really really large deposits and so you have it.

You have three or four mining companies in one here.

You have a cash generation machine that is going to grow faster than anybody else in the mining industry. There is no gold mine in the world that can scale as fast as it is kind of our main cat.

Theres no copper mine in the world that can scale as fast as this copper mine can because of the very low capital intensity.

After all we have about $1.75 billion of copper sitting in surface that we've really mind that hasnt been gone through the concentrator, yet and the capital cost to build that mine that you see there was only $1 3 billion.

So this is a.

Mine that can bend over and pick itself up off the floor by pulling on its bootstraps.

And our responsibility is to set the highest ESG standards humanly obtainable.

Why we're putting so much effort into hiring women.

And hiring local people and training young people based on their attitude for work. So that we set a very very very high ESG bar.

Because we think a compromise that can produce copper oh.

With less global warming gases and anyone else will have.

A commodity that will trade at a big premium to a normal copper mine that is generating a lot of global warming gases, we think companies instead of very very high is cheaper well.

The attract capital at lower cost and more pritchett larger quantities than you would in a traditional mining companies. So.

I realize there's a redesign of the mining industry from a clean slate everything was consciously thought through that.

The team the technical team is very broad and very deep in.

And the cultural change for those that come and visit us you'll see that it's quite an improvement on the traditional mining industry.

Very efficient very.

A very passionate people similar to a silicon valley culture people that know, they're making history and are proud of doing it. So we invite you all to continue on this journey with us because the best is yet ahead of us.

Just a first earning call there'll be many more in the future and there'll be a lot more news to disclose so.

Well listen I look forward to the time that you can come to indaba, maybe little jumping to helicopter and fly over the Western four let me give you an idea of the incredible scale.

Of the geologic and dominant we have ahead of us to explore on behalf of the Congo. These people in all of our stakeholders.

Yeah.

Okay.

Thank you Robert.

We are coming up to one hour and we're running out of time very quickly. So we'll take one last question. It comes in from Farooq Ahmed of Raymond James and it's it's a it's a question that I will turn it over to Alex and Marta to address it.

And it's a it really relates well to what Robert said about come or could coolers outstanding ESG credentials are the question is how will carbon emissions from plant reef and kept bouchey compare to come over a cooler.

And the second part of that question is how will you plan to manage carbon emissions across your asset portfolio.

Yeah.

Thanks, Bill, but perhaps Oh I'll start with keep Wuxi <unk> and then you know maybe mom is best placed to talk about some of the renewable initiatives that we're looking at with that with flat roof.

So I mean, what could push you look I think from a from a kind of units of zinc pet Oh, sorry, sorry.

Emissions per unit to zinc point of view it can be even better than chemo with the cooler because it also runs 100% on hydro power and if you think of what actually consumes. The power you know come out with a cool that we're mining, let's say, 6% rock and we're turning it into a concentrated 55%. So you know that's a factor in let's call it in energy.

Factor of nine or 10.

Keep wuxi, we're mining, 35% zinc and we're turning it into a concentrate at 55%.

The same energy factor is probably less than two in terms of what you actually have to do to turn that into a marketable product.

From <unk> point of view I think I think the C. O. Two emissions are all fantastic in terms of the.

Units I think that we will produce them, perhaps I'll I'll pass over to Martin to talk about flat right.

Okay. Thanks, Thanks, Alex I think flat is probably the more complicated.

In terms of carbon emissions, just because of its location in South Africa, that's the east Goldman coal dependent and we all know is definitely exploring solar solutions and that's part of the studies that our team is currently conducting and then you've got this year pace. It is centered around the pool was a announced that companies can now gena.

Right up to 800 megawatts of power for use in its own projects and we plan on fully utilizing that allocation and in the future once we get up and running but the E sourcing Ivan I was such that we are doing everything to ensure that we start chipping away at our carbon emissions.

That's why I sort of discussed earlier, we still are we starting with electric fleet at blackberries and I'm planning to do to use electric fleet throughout the mine. So I'm every bit helps and I think it's just showing that we take it seriously incorporating it into our design parameters.

And that's what is incorporated across the group into all all our designs for smelters, we ensure that we use baseball practice in terms of emission standards and that will be continued continually I'll focus to ensure that whatever we do across the giant scope one's got to scope three we trying to reduce all emissions.

Thank you Marta and Alex Robert I'd like now turn it over to you for some closing remarks before we hand, it back to the operator to.

To conclude today's conference call. Thank you.

For those for those interested in our Green World I thought we should add that one of our associated companies has built the largest vanadium redox.

Batteries their grid scale batteries, a customer was the China state electrical grid.

And we are now coming out with a third generation battery that's V R B energy Dot com.

And adding a grid scale battery here in the Congo will eliminate any issues with momentary interruption of power in the grid.

Taken instantaneously and if you're building into the second.

And you can also add an infinite amount of solar to the hydro we have because once you have a battery.

Can charge that battery with our hydroelectric power.

You can also charge the battery.

And that will apply in South Africa, South Africa is a huge vanadium endowment.

Identifying the lowest cost sources of vanadium pentoxide in the world.

The future in South Africa lies in putting up solar and then building a big grid scale battery and then you just you just get off the grid, because that's come as a bit of a disaster burning coal.

If you want a green mine he's got to build a grid scale battery and you put that in the capital cost about.

How about 60% of the capital cost of that battery is the vanadium vanadium never wears out and they never catches on fire. Unlike a lithium ion battery. So the future is solar gretzky.

Grid scale batteries, producing these metals at the bottom of the cost curve you've got to have a.

I know everybody was very broad shoulders, but quad reef is incredible.

The rhodium credit alone has got more precious metal than most gold mines.

So it'll be a deeply negative cause nickel mine or a deeply negative cost palladium platinum mine. When do you use the magic of byproducts County, copper gold mines are better than having just one mine.

But every five or six payable metals or priorities makes it.

On top of a tier one.

Very top tier one.

We need we need sulfide copper, we need sulphide nickel, we need platinum and palladium, we need them for hydrogen fuel cells.

And so it's going to be in the end a very green line and we're very focused on doing exactly that all you really need to do is throw up the solar which cheap and put a battery solution and you're there.

Okay.

So with that I welcome you all to this call.

We are distributing Madonna and Pfizer vaccines through our Labor force now.

Oh, we've really got a world class medical effort. There we think it's safer to go to our mindset is to run around downtown Toronto.

So we're looking forward to welcoming visitors and I think people that have been here to just say two or three years ago are gonna be astonished at what they see when they land in that new co is the airport and drive on a new highway capacity is 220 kv lines.

Up to this tier one mine development and we look forward to welcoming over there and we thank all of our shareholders.

We're having such a good experience sticky with us.

We caution that the best is yet to come thank you very much.

Yeah.

Thank you operator, I'd like to turn it over to you now please sure. Thank you.

Today's conference call you may disconnect your lines.

For participating and have a pleasant day.

Bye bye.

[noise].

Yeah.

Yes.

Yeah.

Okay.

Yeah.

Okay.

Q3 2021 Ivanhoe Mines Ltd Earnings Call

Request a DemoDemo

IVN

Ivanhoe Mines

Earnings