Q4 2022 Ivanhoe Mines Ltd Earnings Call
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Speaker 3: The conference...
Speaker 4: Good day and thank you for standing by. Welcome to the Ivanhoe Mines fourth quarter and annual 2022 financial results and review of mine construction and exploration activities conference call.
Speaker 4: At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star-1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star-1-1 again.
Speaker 4: Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Matthew Keevel, Director of Investor Relations and Corporate Communications. Please go ahead. Thank you, operator. Hello, everyone. It's my pleasure to welcome you to the Ivanhoe Mines 2022 Fourth Quarter and Annual Financial Results Conference Call. My name is Matthew Keevel and I'm the Director of Investor Relations and Corporate Communications with Ivanhoe.
Speaker 4: as to the conference operator via your phone line. Please contact our investor relations team directly for any follow-up questions.
Speaker 4: Before we begin, I'd like to remind everyone that today's events will contain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Details of these forward-looking statements are contained in our March 13th news release, as well as on CEDAR and at www.ivandhomemines.com.
Speaker 4: It is now my pleasure to present Ivan Homain's founder and executive co-chair, Robert Friedland. Go ahead, Robert.
Speaker 5: Well, to everybody on our 2022 conference results here, I welcome all of you.
Speaker 5: And I'll start by saying it's great to be in a company producing real things.
Speaker 5: that everybody on this planet needs.
Speaker 5: Ivanov has a very strong balance sheet, huge cash flows, the lowest cost and greenest ore bodies on this little planet in copper, in platinum and palladium, in rhodium, gold, nickel, zinc and germanium.
Speaker 5: Now while clearly today confidence has not been restored by an incompetent Federal Reserve Board,
Speaker 5: which seemingly just yesterday said inflation was transitory.
Speaker 5: We now see systemic instability in the banking system with banks everywhere being long.
Speaker 5: long-term bonds at very low interest rates.
Speaker 5: Investors everywhere will be looking for strong cash flows.
Speaker 5: precious metals exposure, yet with minimal leverage and strong ESG performance.
Speaker 5: I believe that Iverdell Mines has priceless assets. We have the best exploration and management team in the mining business.
Speaker 5: We're operating the best new copper mine in the world.
Speaker 5: And that's the world, if there's one metal that the world cannot live without, it's copper.
Speaker 5: There will be no energy transition without copper metal and every nation state is going from a just-in-time to a just-in-case economy.
Speaker 5: Military budgets are rising globally and metals like copper, nickel, zinc and germanium are at the top of the shopping list for national security purposes.
Plant Reef is the largest precious metals development on our planet, and I believe that the Mokopane feeder is the most important precious metals exploration project in our industry.
So it's getting harder and harder to finance than another tier one copper or precious metals mine.
And as a consequence, Ivanova is attracting the deepest pocketed investors in the world.
And our group's disruptive exploration technology and our new disruptive comminution technology and our related companies have attracted the largest mining companies and some of the leading technology investors in the world. In a flight for safety, I've been Oman, with the support of our host governments.
our loyal young labor force.
and our major institutional investors will lead our industry in mining with a higher purpose.
Therefore, I will turn this over to our great management team and please enjoy the rest of our presentation.
Thank you.
Thank you, Robert. Good afternoon and good morning everyone. This is Marna Krücher, President Broadcasting from a cloudy jersey.
Our management team is very excited to present a set of outstanding results for the 2022 financial year. Both our production and cash costs were within our regional guidance parameters. An achievement we are very proud of in a year marked by production disruptions across the globe and extraordinary inflationary pressures.
David van Jeuven, our CFO , will talk you through our annual results in the next section. Next slide, please. Next slide, please.
Deny Mouse landing in 10 Slack WOMEN
Kamalak Kukula produced on a 100% basis.
Over 330,000 tons of copper.
It sold over 320,000 tons of copper, resulting in net revenue of $2.15 billion, an EBITDA of 1.39 billion, and cash cost for the year was £1.39 per pound of copper produced.
Our team on site also successfully completed the de-bottle making project, again ahead of schedule, and this increased production capacity to 450,000 tonnes on an annualised basis.
Our 5.3 expansion is also on track for completion in 2024.
This will increase copper production up to 650,000 tons.
My colleague Alex will give you a more fulsome update on our Phase 3 pro plays later in the schools.
Earlier this year we published an updated PFS and PEA, which includes phase 3 and phase 4. This resulted in an after-tax NPV at a discount rate of 8% of US$20 billion. But, as we all know
NPV models simply cannot capture the value of a multi-generational mining complex such as Kamaraka Kula.
But probably our most impressive statistic to date is our zero lost time injuries recorded on the construction of the phase three expansion. The smelt and refurbishment at Turbine 5 at Ingo 2, which is the hydroelectric dam. Next slide. We frequently get all.
mining complex, sharing an equal if not a slightly larger slice of the pie in the benefits to be derived from the mines cash flows. To date the DRC government received in excess of 500 million in taxes and royalties.
We have invested in excess of $40 million in our host communities.
building schools, clinics, churches, and implementing livelihood and enterprise development initiatives.
Please bear in mind that we have only been producing for a year and a half.
Our payroll to local employees amounted to 250 million and our permanent staff is over 97% Congolese.
If you go underground at Kamau Kekula, it is Congolese personnel operating all our machinery. And here is an astonishing fact, in our first full year of production, we have a full year of production.
We contributed 4% to the GDP of the country. Next slide.
What sets the DRC apart is the people.
The median age of the population is just below 17 years of age. It's a very young generation eager to learn and be part of something great.
To this end we have embarked on building the Tamawa Centre of Excellence that will be completed later this year. This centre will serve as a tertiary education centre providing access to a world class education to young students from our host communities.
We currently also have a state of the art technical training facility on site, where all our Congolese operators are trained to the highest operating standards.
The DRC is blessed with an abundance of minerals and a great climate. And Robert will provide some colour in our exploration efforts later in the school.
But most importantly, the DRC is blessed with hydropower, which means all our copper at Kamaoka Kula are green copper with a low carbon footprint. And of course, the growth at Kamaoka Kula also significantly contributes towards the mines low carbon intensity. With a shared value with our communities and governments.
all parties involved work towards a common goal. We are immensely proud that in 2022 the DRC died with Peru as the second largest producer of copper.
With that as an introduction, I will now hand over to David from our CFO to take you through our 2022 Annual Results.
Thank you, Madna, and good day to everyone joining the call today. I'm very pleased to present our record annual and quarterly results, which is of course only a high-level summary of our results and today's presentation should be viewed in conjunction with what it did.
annual financial results in the NDMA for the three and 12 months ended December 2022. We'll move over to the next slide please.
So, marker cooler phase one and phase two concentrators continue to operate above design capacity.
in the fourth quarter, with copper sales remaining stable quarter on quarter. The record revenue in the fourth quarter was up from Q3 due to the higher average copper price and included a mark to market of provisionally priced sales at $3.79.
cash costs remained stable and the higher revenue with consistent cost resulted in a record yield of $451 million.
On the next slide, we zoom into the mauka poolers revenue and EBITDA margin.
And from this slide, it's abundantly clear that significant upside can be expected with high copper prices in Q1 2023 and beyond.
When considering 2022 as a whole, this is just all the more impressive when remembering that the market only combines commercial production in July 2021.
And phase two only commenced in April 2022. The annual revenue of $2.1 billion with an EBITDA of $1.4 billion for 2022.
and an EBITDA margin of 65% is really just the start for this impressive asset and equally impressive deal. Copper cells realised in the fourth quarter was done so at the weighted average price.
of $3.56 per pound, while 58,000 tons of playable copper remained provisionally priced at the end of December and was re-measured at $3.79 per pound at the end of the period.
With the price of copper being elevated well above the $3.79 per pound in early 2023 to date, we do expect to see the remissurement of the $58,000 represented price tons having an additional positive impact in our Q1 2023 results.
Next clock is when
Operating cash flow generated by Kamal Kukula during the year was allocated to growing this exceptional asset. On completion of phase 2, we move straight into phase 3.
with a joint venture well placed with a very healthy cash balance.
of $366 million in hand at the end of the C22.
And we'll go into how that and additional.
cash flow from operations will be spent in our capital guidance on the latest slide.
Next slide please Matt. This slide does present our normal Zoom into Kamoika Kula joint ventures accounts to illustrate how Ivan has opened up Chi of profit. Close.
Next slide, please, Matt. This slide does present our normal zoom into Kamauka Kula joint ventures accounts to illustrate how Ivan has often shared profit flows from the Kamauka Kula result.
into Ivanov's profit using the joint venture accounting.
Having already discussed Kamal Kukula's revenue and EBITDA,
I will further just add that the finance costs recognized by Kamala are up $295 million in 2022.
is principally the interest on Shell the lunch from Aibno and Zhejiang that was advanced in 2021 and before.
to fund operations and initial capex. I will show the $151 million interest income I've now recognised.
on this loan on the latest life we're not talking about other as well.
Additionally, I'll just mention that the tax expense is 90 different tracks.
and therefore non-tax at present.
The non-controlling interest of $141 million represents the profit attributable to the GLC government's 20% interest in the commandment we love.
copper complex, leaving a profit of $513 million attributed to the twin venture partners, with the Ivanov share of that being $254 million.
uh...
Next slide please.
With the past headwinds of 2022 and behind us, I'm very happy to say that there's
No surprises on C1 cash costs with C1 cash costs for Q4 being stable and our cash price benefiting from the
global marine freight rates coming down from its elevated levels in the second and third quarters of 2022. Importantly, Ivanow was one of the...
Very little, if not the only, copper company that came within its original guidance that was set out in early 2022. We are something we are very proud of.
Our 2023 guidance is slightly up from 2022, but we'll go into that a little bit later in the next slide.
which you can move to now.
We are extremely excited to realize the benefits from the plant smelter as part of phase 3, as you would have seen in the AMPRIE feasibility study released in the last two years.
at the end of January . Once the smelter has been commissioned, we expect a C1 cash cost of less than $1.20 per pound, placing us comfortably in the lowest hotel.
This slide also illustrates our 2021 or 2022 cash costs of $1.39 for the year and also shows
just what was considered when placing our 2023 guidance.
Our guidance does take into account increases in power costs and that becomes effective like last year, increased benchmarking on T-C's and R-C's as well as the impact of possible congestion in the regional tracking capacity and market dynamics.
Next slide please.
So if we move to Ivanhoe's record profit for the year –
We start from the left, as previously mentioned, recognize $234 million of its share of profit from a natural intervention.
We also recognised $151 million of interest on the loan to the joint venture and the other expenditure was really a line for Toronto.
We also recognised $151 million of interest on the loan to the joint venture. And the other expenditure was really a line for drug water.
The Kapushi project and expenditure there was expensed up until the end of June .
when the IBANO and JICA means approved the...
for commercial production and in line with the feasibility study and therefore expenditure expenditure to who she was capitalized after and deemed as development costs.
The deferred tax recovery of $113 million, which was centered on the growth, also relates to Capucci and the decision to develop and because of the...
the development decision and the approval of that decision, it was deemed probable that they would be sufficient.
taxable income in which we could utilize the tax asset and therefore we recognize the
the first dash recovery earlier than the other thing.
Q2 2022. That's built up to the ultimate record profit for either of $434 million.
We can move to the next slide, Matt. Will you put off plans for 2023 and 2024?
Our development teams and project teams at all three projects will be extremely busy as we continue to develop our...
and project teams at all three projects will be extremely busy as we continue to develop our and see outstanding assets.
And the capital expenditure provided on this slide is as presented on the 31st of January In
in our CapEx guidance release and the capital cost aligns well with studies we released, particularly considering the inflationary market and precious wealth.
I've experienced over the last few years. And I think it's also just important to note that and these costs are...
based largely on committed orders we've got in place. Planned phase two capital expenditure at that remains under review as we have commenced an optimization study potentially accelerated production.
from the face to expansion which will consider the implications of converting the 5.1 meter diameter ventilation shaft which we call shaft 3.
which will consider the implications of converting the 5.1 meter diameter ventilation shaft, which we call shaft 3, which is an induction shaft.
with the capability to waste. So we'll be on the lookout for possible changes once the study is completed.
We can move to the next one, isn't it? So, Ivanow in this slide deck and in the NDMA we have presented our adjusted EBITDA at an Ivanow group level.
And this is fake.
important for analysts and investors, basically illustrating our view of how adjusted EBITDA should be calculated.
and looking at the detailed reconciliation we've got in the NDNA
and you will note that we have not been creative at all.
and I think basically just taking obvious adjustments to get to our ultimate adjusted to what we feel is a good proxy for cash flow generated by and the market plan I'll share thereof as well as the effects of...
How are the expenditures on that?
We've got a breakdown and as one would expect at this stage, the majority of Ivanos-adjusted Iberdocks is made up of the share, our share of the Kamaua-Kukumba and Iberdocks, which we obviously need to cover in any case.
So if we move to the next slide.
I'll point to the on the previous slide where we...
of the Ibadar from Kamar Kapula. And we had i...
39.6% interest of the mauku kula effectively included in our adjusted EBITDA.
And similarly, we've got equity ownership percentages at Flatreef and Kapushi, which does not necessarily, does not at least initially align with the proportion of cash that Iverno will be receiving from.
cash flow generated from our projects. And this slide is once again just illustrates the loans and funding already advanced to those projects through holding companies held by Hibernate and because of accounting.
these shareholder loans would generally cancel out, so it's not seen on a consolidated label.
But it's very important to consider the higher proportionate loans advanced by Ivanhoe because it does impact on future cash flows.
And what this slide effectively means is that Ivanow will receive a much higher portion of distributions once they commence and then only our equity.
Stike would suggest.
start.
DashFlow waterfalls for all our projects.
And as one would expect, would result in cash flow or with shareholder loans and other financing to be repaid first, or at least a large proportion of that to be repaid first with the governance so therefore, ARGONA will receive higher cash flow first.
As we all know, time is money. So effectively, I know on evaluation, from a valuation point of view, should receive a higher attributed portion of the value of our projects than just our mere equity interest in them. We'll move to the next.
like this map. So just to summarise, where Ivano is placed for 2020 and beyond, Ivano has a very strong cash position with cash-in-cash equivalents of almost $600 million in the bank and a very limited CAN I mean while the next 18 months is prospectively legislod, AbweBen Faruhi
Very small net-date position.
And if one considers that the net debt of 132...
million at the end of 2022 includes the convertible notes.
I would consider that the ITOS is actually in a net cash position. We've got total assets of four billion dollars at the end of the year and total liabilities of 1.1 billion which includes again the convertible notes as well as the $ Favorite
deferred revenue which relates to the Blackberry stream which will be amortized once Blackberry is introduced into production. And that concludes the financial highlights for me and I will now hand over to Alex to...
Thank you for your attention. Okay, thank you David. It's Alex Pickard here speaking from London. I'll just say in advance, apologies if I sound a little bit hoarse, I'm recovering from two weeks of marketing and conferences in North America.
So in this section we will take you through a review of all of our operations Kamoa, Kipushi and Flat Reef and also Robert will be giving a bit of a flavor of the exploration that we're doing in the Western Forelands and at the Moktopane feeder in South Africa. But first I will take you through some of the highlights at Kamoa Kukula of which there are many on the next slide.
So, it's quite incredible to believe really that this was Kamua Kukula's first full year of production given that we only started phase one operations in July of 2021.
So for the full year 2022 we're very pleased to report that we delivered the upper end of our initial production guidance which was 290,000 tonnes to 340,000 tonnes of copper for the year and we came in at just around 333,500 tonnes, so just below the top end.
This was really a reflection of the outstanding ramp of the phase 2 mill which began in April but we were already at full capacity within a matter of weeks.
And where you can really see that is on the right hand side we managed to mill 7.1 million tons which is a fantastic achievement given that we only had three quarters of production from the full phase 1 and phase 2 at a rate of 7.6 million tons per annum.
We recently announced that we completed our $50 million de-bottlenecking program ahead of schedule and on budget, which is a recurring theme for Kamoa to Cooler. This de-bottlenecking allows us to increase our nominal throughput by 20% to 9.2 million ZN and we finished the very final piece.
which was the commissioning of the fourth and final filter press. That was completed last week.
And then since then we are very pleased to report that we've hit daily records for both throughput and copper production. Copper production being in the region of 1,500 tons daily which shows the true capability of what this plant can hopefully do given a good run.
So now as we reach steady state, one of our major targets is to improve our metallurgical recoveries across the board. So the original design parameter was 86%. We have been achieving from one day to the next recoveries of 88% and above, and we are looking to lock these recoveries in for the long run and ultimately be sending a lot less copper to our tailings.
Finally, we reiterate our 2023 production guidance of 390,000 to 430,000 tons of copper in concentrates.
Finally, we reiterate our 2023 production guidance of 390,000 to 430,000 tons of copper in concentrate. Next slide, please. Next slide, please.
So moving on to this Phase 3 expansion, the Phase 3 expansion project is continuing to advance on schedule in all facets. So that includes the three major initiatives that we've spoken about before, the first being a 5 million tonne per annum expansion of our mine and a new concentrator located.
at Kamehameha, which you can see towards the center of that map on the right hand side. The second part is building the largest copper smelter in Africa, which will produce 500,000 tons of 99.7% copper anode and bring with it significant cost improvements that David already mentioned. And then the third part, and a very, very important part, is the
hydropower turbine refurbishment to provide 178 megawatts of clean energy for all of these expansion projects.
There is no change in terms of our target. We're still aiming to tie all of these initiatives in by the end of 2024.
And one major area in our favor, in fact a couple of major areas, one is that we are using the same team, the same contractors that delivered so successfully through Phase 1 and Phase 2. And the second is that all of the major equipment, I think David already mentioned, has been ordered is undergoing fabrication, so we're expecting deliveries to start arriving.
in the later part of this year and then that will be the really exciting part of the build as all of that starts to come together. But because all of these orders have been placed and committed it also gives us a very high degree of confidence in our capital budget of 2.5 billion dollars for the next two years.
and then that will be the really exciting part of the build as all of that starts to come together. But because all of these orders have been placed and committed it also gives us a very high degree of confidence in our capital budget of 2.5 billion dollars for the next two years. Next slide please.
And finally on Kamau Kukula, we would just like to reiterate that we published our Life of Mine Multigenerational Plan.
for the mine in late January . That's what we refer to as the 2023 Integrated Development Plan or IDP.
We like this slide as it's a good summary of why we believe that Kamoah Kukula today is the world's best copper mine with a unique combination of incredibly high grade of between 5 and 6% copper going into the mill. But uniquely for a very high grade mine we also have a world class production scale.
aiming to be the fourth largest producer in this chart, but with our sites set to become much bigger. And finally with a very very long life, which is reflected by the large bubble size that you see in this in this diagram. One of the other striking conclusions, I think, of the IDP study is Kamoa's ability to sustain a huge production rate.
in excess of 600,000 tons of copper per annum for a period of almost 30 years, which is quite unparalleled I think in the industry today, and provides us with huge leverage to copper prices on an ongoing basis.
We recommend that listeners review the study in full and that will be published this week in 43.101 form on March 16th and that will be available on the Ivanhoe Minds website and also available on CDAR.
So with that, I will hand back to our Executive Co-Chairman and founder Robert Friedland to talk a bit more about our exploration initiatives.
Thank you, Alex. Having listened to this presentation, I think we will make a few more remarks. First about the smelter.
it's really important to understand that a great percentage of the world's smelting capacity is in China and there's going to be a shortage of smelting capacity. It doesn't really matter how much copper concentrate is produced.
if you have a bottleneck in smelting. So the fact that we're building the most modern, up-to-date smelter.
with technology from Adokunpu as well as the best Chinese technology from Niren.
is going to make this a super green copper mine. What energy is required is coming from hydroelectricity and the analog holds like in the aluminum industry with green hydropower and the highest grades.
It has been noted by a number of major mining companies who have visited Kamo Kukula that this is the world's best copper mine, certainly the greenest.
certainly with the best ESG characteristics and that puts a lot of attention on the western forelands.
The basin that we hold in the western forelands holds identical geology to Kamoa, Kukula, Kinsoko, the Bonanza Zone, Kamoka Kula itself.
All of these deposits are hosted in sedimentary geology that is important to our industry on a global scale.
It's difficult for me to think of a major mining company that has not approached us with interest in the western forelands.
Now in the western forelands there are four magic ingredients.
The information is proprietary to our geologists, but if we have three of them coming together, we shouldn't get an ocean of 3% copper.
And our cutoff grade up until now is 3%, our head grade is 5 or 6%, but even a 3% copper deposit is highly anomalous in the crust of the earth. We're using less capital intensity, less energy, less water, less carbon dioxide per unit of copper produced.
than any competing copper mine in the world. Now, if you get a fourth magic ingredient, you get a Cucula.
It's our team that knows these ingredients and there is a huge amount of work to be done in the western four lands. We've noted that we're working at Lupemba, Mochiji, and Cocoa. We're also starting to look at the possibility of developing our own.
a wholly owned mine in the western forelands at Makoko, utilizing some of the high grades at Chialla. At this stage, I would only like to say that if it walks like a duck,
owned mine in the western forelands at Makoko, utilizing some of the high grades at Chialla. At this stage I would only like to say if it walks like a duck and it quacks like a duck.
It's probably a duck. And it's only a matter of time before one of our wholly owed minds manifests in the western forelands.
I don't know of an exploration project at this scale in the copper industry. We've recently had some very competent new geologists join our team. We're throwing a $19 million budget at drilling through sand cover.
This sand in the western four lands blew in from the Kalahari Desert. There is a blanket of anywhere between 10 and 30 meters of sand obscuring the geology. So there are very large areas in this basin where we are drilling through the sand to test what is underneath it.
we couldn't be more excited about our multi-year program at the Western Corlands. So for copper, this is the best copper hunting area in the world.
I'd like to draw attention a little bit to precious metals because the platinum price is up today more than gold. The palladium price is up as much or more than gold.
Gold is not bad. Rhodium is going crazy. In a world that seems to be afraid of risk.
I'd like to remind everybody, we are building the world's largest precious metals mine with astronomically large precious metals endowment. If you look at the Mokopane feeder slide, you see our shafts up there on the turf sprint farm. Where did this northern limb come from?
So if you look at those magenta colors on the Blink Water Lisbon and Makalah Kaskow Farms
We are looking at what is one of the largest gravity anomalies in the world.
on the critical limb of the bushveld are extremely heavy. So there's something enormous and something very heavy under those three farms.
Seven years of patient effort was required to get those farms awarded to Ivanow Mines.
Blinkwater, Lisbon, and Moor Drift. And this is the most significant exploration project in the precious metals business anywhere.
in our estimation.
We don't know what's causing all that gravity, but if you go to the next slide and look at the Mokopane feeder in relation to the Buschfeld complex, the Buschfeld complex has produced more precious metals than any single structure in the world.
We don't know what's causing all that gravity, but if you go to the next slide and look at the Mokopane feeder in relation to the Bushveld complex, the Bushveld complex has produced more precious metals than any single structure in the world. The Mokopane feeder...
occurs at the structure of the northern limb of the Buschfeld and the ring structure that represents the Buschfeld. There's something extremely heavy there, and in our quarterlies we disclose that we're going to be starting a lot of sophisticated geophysics, more detailed gravity and ARIMAG, and we'll be testing this unusual feature.
And of course if we're right, this would be a Norril scale target of nickel, of copper, of gold, of platinum, of palladium, of rhodium. This is where the mantle has been tapped and that's why...
PhD geologist working for the South African government called us the mokopane feeder. If you ever want to lay awake at night dreaming about the possibility of a supergiant discovery that follows in the history and the footsteps of all the other supergiant discoveries we've made.
I would also nominate the Mokopane feeder as sort of a mind-blowing opportunity in the South African industry. And I want to thank our team and the support we've had in the South African government to put this project forward. So with that, we look to even better days.
And with the continued growth of our company, I'll hand this back to our compatriots to continue the discussion about Platte Reef. Alex? Thank you, Robert. It's back to me. And, Marna. There you are. So, talking about super giant discoveries, so a bit of an update as to what we've been up to at Platte Reef. Our underground development work has been focused on vertical development of white...
plan to complete this in the fourth quarter of this year, of 2023.
We have initiated optimisation work to identify value accretive options for installing hoisting capacity in the shaft. So a shaft 3 was originally planned as a ventilation shaft only. It has a diameter of 5.1 litres.
And we are now planning to equip the shaft for wasting, which provides an alternative option to remove ore and waste from the underground mine. This has the benefit of de-risking the development and ramp up of phase 1, but it might also be used to accelerate the ramp up.
of the underground mining activities for phase two. And just to remind you, phase two is planned for completion at the end of 2027.
Earthworks construction for the Phase 1 concentrators is also underway with the Mill Foundation and civil activities also advancing well. And then we have also commenced with the construction of our first solar plant at the end of last year in the first quarter of 2022.
and we expect to commission this in 2023. And this power will be used for mine development and construction activities. If we go to the next slide, this is a beautiful picture. Let me show it. This is our Sharf 2. The 10-meter diameter Sharf 2, which is required for the first two expansion, will be among the largest hoisting shafts of an 8-meter socket major tower... which features various amounts of growth and hims velocityspeople. The measurement and lab was measured positive for the quarter hour and arguing millions of rib DOD computers.
out of 104 meters in total.
There's also a very nice photo of me, if I may say so myself, initiating the pilot role for the rice ball ring offshore in the press release that was issued earlier today. And then last but not least, we go back to the DRC to give you a bit of an update on Zen Patboy Umsupra Tiger Shadd I learned this joke last week before when the
Our long lead orders are expected to commence delivery to site in early July . And this includes the bore mill, currently being fabricated by CITIC in China. And maybe I just want to stand still on Kapushi a little bit. I think a lot of our shareholders will be surprised as to the progress that we are making at Kapushi.
Kapushi is really an easy project compared to what our team has managed to do at Kamawa. Our construction work on site is advancing very well on schedule with our earthworks effectively complete and our civil works is all complete.
online. We completed a scoping study investigating various border options at the Kapushi border post and this was issued to the government for consideration. We are also doing further studies on the Zambian road network to identify preferred routes to link a pushy to international ports.
A new commercial border crossing will be a significant advantage in terms of direct imports, clearing customs, but it will also provide socio-economic benefit to the town, which is currently independent.
The border crossing will of course also benefit logistics for K?maua, K?kula's operation. And then if we go to the next slide.
Here you can see our underground mine development around Kapushi's zinc ore body and that's advancing ahead of schedule. Our stout perimeter drives are being developed and we are expecting to start extracting ore towards the latter part of this year.
Shaft 5 is planned to be the main production shaft with a maximum hoisting capacity of up to 1.8 million tonnes per annum. Our off-take discussions, including a 250 million prepayment facility, have advanced to final draft term sheets. This has been received from shortlisted parties and it's under review by the Capucci shareholder.
of the DAI school. Over to you Matt. Thank you Marna. We'll now begin the question and answer session. The way this will go, we'll clear the phone lines first and then we'll go to web questions thereafter as we have time. We probably won't be able to get to all questions today so if we don't get your question please do follow up with our team directly and we can get an answer for you. With that I will turn it back to the operator to populate the phone line and we will grab questions on the line first and then we will turn to webcast operator.
open.
Yes, thank you. I guess a question for Alex. Can you talk about the grid stability issues in the DRC and how that's impacting operations at Kamo Kukula currently?
Sure, thanks for the question, Greg. So as we've written in our annual announcement, we have been experiencing intermittent power issues in the DRC grid. That's been going on roughly since December .
But the first thing to say is that that is reflected in terms of our production guidance for the year. So when we say 390 to 430,000 tons that was on the basis of the grid stability that we were seeing at the time.
I think we've mentioned it's a regional issue, it's not an issue with any of the hydro dams that we have been a part of upgrading. But it is generally caused by failures in generator capacity across the grid and some of that is avoidable through better maintenance and putting other systems in place.
So what we're trying to do is mitigate this in a number of ways. The first thing is to install backup capacity. So we mentioned in the release that we will have an additional 13 megawatts in generator capacity arriving in a little over a month at Kamoa which will start to help. And the plan is to ramp up that generator capacity to 132 megawatts by next year which will cover
quite a bit of our operations from phase one and phase two will be able to basically run at least one mill uninterrupted even during incidences of blackouts. The second thing I think we're doing is in terms of assisting SNELL, we're doing a detailed analysis of what the weak points are in the regional grid system. And then we are going to see how we can assist in terms of the project management to perform those improvements across the grid. And a lot of them are not big capital cost items. It's small incremental improvements.
And these could potentially be incorporated into our loan agreement with Snell. And then the third thing maybe to mention is that we are discussing additional dedicated grid power capacity coming in from Zambia. And we're quite confident and optimistic in terms of that potential. But maybe just to end on a more positive note, I think without these power numbers – When I want to summarize I'll discuss the
also in the power intermittent capacity, I think we would be seeing some unbelievably good operational numbers from Kumo to Kula, like the 1500 ton daily record that I mentioned in my segment, but it's obviously the power that has a knock-on impact for how often you can run and also consequences for your recoveries.
Thanks, Alex. This is going to be a question for Robert.
Do you have any sense from a Makapane feeder zone, maybe too early, at how deep that large zone actually could be or is it just too early at this point to have a sense of that? Thank you. Only God knows and she might change her mind. You know, we see an enormous gravity feature. It's been known for a long time.
feature must mean something. Now, it could be a supergiant gravity anomaly at 2 km of depth or it could be a slightly less giant gravity anomaly at 500 meters or a kilometer of depth and we won't know until we detail it and drill it.
It's the probable source of the magma that formed the northern limb. And the reason I'm so excited about it is that when you look at the northern limb, the further south you are in the limb, the higher the base metal's content. They are the nickel and the copper. The footwall at Platte Reef is limestone.
it acted as a reductant and that's why there's such an enormous difference in copy of the sound movement. Looking at the scale of this gravity anomaly, one could imagine that it could be the largest space metal discovery in the world.
And it doesn't really matter how deep it is if it's that big. You can see that it normally is miles across.
So we're just going to have to go step by step. It took us seven years to acquire 100% of those farms.
Believe me, that wasn't easy and hats off to our people that worked right up to the President's office because we've established our credibility to look at this asset and only drilling is going to tell us how deep it is and what its ultimate scale is.
But if you're looking for an ultra-giant precious metals target
Given that Platte Reef is the world's largest precious metals mine in development,
The geopysics of the mokopane feeder just dwarf anything else on the continent. So let's drill it and see. Thank you for your interest in it.
the mokopane feeder just dwarf anything else on the continent. So let's drill it and see. Thank you for your interest in it.
Thank you. As a reminder, to ask a question at this time, please press star 11 on your touch-tone telephone. Our next question comes from the line of Andrew McKitchen with DMO Capital Markets. Your line is now open. Your line is now open.
Hello, can you hear me? Yes. Okay. Just two quick questions, maybe one for David first. Can you give us some guidance on the pace of spending for Phase III?
I realize you can't give us the exact numbers, but maybe you give us a sense potentially where the peak capex.
Intensity is or the peak spending just so we have a sense of what to expect this year going into next year, please.
No problem Andrew. I think we do two things pretty well and one thing is...
coming online on schedule and budget. And then the other is we, the project teams generally underspend what they plan or spend it later. We've included ranges on our 2020 guidance specific.
for that reason. And we do – I probably expect us to come in closer to the smaller end of the range as shown in our pre-and pre-free guidance.
Because we've incurred, replaced a large amount of the commitment, as Alex has mentioned, we expect the peak funding point to be close to September . That's basically the year.
the forecasted big funding point for us internally. But that might be slightly later as there is a bit of a drag when comparing committed amounts to actual full cost of cash.
Thank you. That's very helpful for us to get a sense of what to expect. Maybe my second question I assume would be for Alex. There have been discussions in previous calls and press releases about continuing to accelerate development at Kakula so that the mining activity there can be used to accelerate the development
maybe better matches the mining process or the processing rates from phase one and two combined so that there's less reliance on the...
on the stockpile and less reliance on Consocho. How is that progressing and when should we be kind of seeing the benefits of that or start to hear more details from your team?
Yeah, thanks Andrew. I mean it's still an ongoing initiative that basically the plan is that Kakula underground will be able to supply the entirety of the 9.2 million ton and large capacity for the phase one and phase two mil. And if you look at the mine today, you know, we're probably somewhere in the high eight in terms of what's coming run of mine versus an IP and exams aren't.
versus coming from the stockpile. But I would just add, this is not necessarily a game of chasing the highest grade possible from one week to the next. Part of this development is basically to open up a lot more panels and open up much more of the mining footprint and have much more of our reserve.
at Kakula available to be mined at any one time. So that will take us months rather than weeks to be able to be in that position where we can routinely mine 9.2 million tons from Kakula. But I think the study that we put out is a pretty good reflection of where we're intending to get to in that regard. Thank you very much for your comments.
feed the microphone to the next speaker. Thank you. Thank you. I'm sure no further phone questions I'll hand the call back over to you Matthew.
Thank you operator. We have a time for a couple web questions so I will pull a few here. There's quite a few repeats so we'll sort of group some together. First of all, I think the first one is probably for Robert. It's more of a macro strategy question. Robert, with the pending cash flows coming in 2025, could you speak a little bit to your longer term vision for Ivanhoe Mine strategically?
with Kapushi and Kamo reaching peak cash flow heading towards the end of the decade. We're going to build Iverno Mines into the world's greatest new major mining company.
come over reaching peak cash flow heading towards the end of the decade. We're gonna build Iverno Mines into the world's greatest new major mining company. There's just no doubt about it.
We've had interest from all quarters. I'm spending my life flying around talking to sovereign wealth funds and major mining companies and investors from all over the world looking to get involved in something real for a change because these metals are required for the energy transition. Without these metals it just won't happen.
And these metals are required for national security and everybody's interested in beefing up their defense capability in a very uncertain world. And then of course paper assets are just trash. Nobody really trusts central banks anymore or what they have to say. You can see that in today's precious metals prices. So there's a lot of liquidity in the world.
looking for real things and paradoxically, if our mind is ten times the grade of your mind, we're using a tenth of the energy and a tenth of the steel, a tenth of the concrete, and we're generating a tenth of the global warming gas for unit of metal produced. So looking at how far we've come in the last 26 years and looking where we're going to go to the next decade, we really see no limit on our mind's ability to...
and local communities are part of the effort.
We've reinvented the software around mining on the ESG characteristics. We think over 26 years of effort we have the right formula to grow.
I'm firmly of the belief that in coming quarters we'll show the world the best in class strategic long-term partners to grow Ivanhoe mines into a century long pursuit. You know the great mining companies in the world like BHP came from Broken Hill or...
Rio Tinto really grew when it bought Bingham Canyon from British Petroleum in Utah. It really took Rio Tinto to the moon. So we have a great ore body like this with huge cash flows.
Just imagine the cash flows of Cooacoola to all the government's concern as well as ourselves. We're going to grow Iverdome mines into Canada's next major mining company. Period. Full stop. Thank you. Thanks Robert. And I think we have time for maybe one or two more. The next one is probably best suited for me.
this has been asked a couple times. Thanks. Thanks Matt. I personally spend a lot of time in the EOC engaging with government and our experience has just been positive. There's been a real willingness from government.
to work with the investment community to see foreign investment into the country and even with the pending elections if I compare it to the previous election period it was a lot more volatile. Now we see campaigns being run but we don't see riots on a daily basis.
So it's your normal campaign season, you know things are getting a bit active, but the government should remain stable. People want to see democratic elections being held towards the end of this year. There's a firm commitment from government to do so.
And, you know, government has been very supportive in our efforts. We've hosted a number of tours to our partners through the Minister of Portfolio, the Minister of Mines, the Prime Minister to Kupushi, and they were all very complimentary in terms of how we conduct our business and how they want to use Kamau Kukula as an example of how mining can be done in the country.
and how we can grow the industry even further in a sustainable way as partners. Great, thank you, Marna. And we've just run short up here on our hour, so I think that's all we're going to have time for today. So this concludes the call. I'd just like to thank you again for attending today's event, and we look forward to speaking with everyone soon on the many exciting milestones coming in 2023. So thanks again and back to you, operator. Thank you all for participating. This concludes the conference call. You may now disconnect.
The conference will begin shortly. To raise and lower your hand during Q&A, you can dial star 11.
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