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Earnings call: Ivanhoe Mines reports strong 2023 results, eyes growth

Published 29/02/2024, 02:06 am
© Reuters.
IVPAF
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Ivanhoe Mines (OTC:IVPAF) Ltd (IVN.TO), a Canadian mining company, reported robust financial results for the fourth quarter and full year of 2023, with significant revenue and copper production achievements. The company's revenue reached $2.7 billion, supported by a weighted average realized copper price of $3.84 per pound. Ivanhoe's Kamoa-Kakula project delivered 393,500 tonnes of copper, meeting its production guidance. Looking ahead, the company anticipates a production increase in 2024, with estimates ranging from 440,000 to 490,000 tonnes of copper, largely due to the early commissioning of the Phase 3 mill.

The upcoming on-site smelter, slated for commissioning in Q4 2024, is expected to enhance efficiency and reduce costs.

Key Takeaways

  • Ivanhoe Mines reported a 2023 revenue of $2.7 billion, with a strong copper price of $3.84 per pound.
  • Kamoa-Kakula achieved its highest annual revenue and produced 393,500 tonnes of copper.
  • 2024 copper production is projected to increase to 440,000-490,000 tonnes.
  • The company maintains a solid financial position with $574 million in cash and low debt levels.
  • Capital expenditure was on target, with $2 billion invested in growth and projects progressing on schedule.
  • Power initiatives are underway to stabilize supply, with the potential to further increase copper output.
  • Project 95 aims to boost copper recovery rates, with basic engineering expected to be completed by April.
  • A state-of-the-art smelter is anticipated to cut cash costs by 20% and decrease CO2 emissions.
  • Exploration efforts continue, with new copper deposits discovered and an increased exploration budget of $90 million.
  • Infrastructure improvements in the DRC, including access to hydroelectric power, support production goals.
  • The company forecasts a cash cost range of $1.10 to $1.30 per pound for 2025, with a realistic target of $1.15.

Company Outlook

  • Ivanhoe Mines plans to further increase copper production in 2024.
  • The Phase 3 mill commissioning and smelter operations are expected to reduce costs and enhance efficiency.
  • The company aims to become the world's largest copper producer, with a long-term production goal of 500,000 to 800,000 tonnes per year.
  • A potential joint venture partnership could lead to the construction of a base metal refinery in South Africa.

Bearish Highlights

  • The actual production figures could be affected by the stability of the power supply.
  • Financing for the Kipushi project is still pending, expected to be finalized in Q2 2024.

Bullish Highlights

  • Kamoa-Kakula's high production and revenue set a positive precedent for the company's growth trajectory.
  • The company's strong financial position and low debt levels provide a solid foundation for future investments.
  • Project 95 and the new smelter promise to significantly increase recovery rates and reduce costs.

Misses

  • There were no specific misses reported during the earnings call.

Q&A Highlights

  • The company addressed queries regarding production targets, infrastructure improvements, and financial strategies.
  • Discussions on downstream processing and potential joint ventures were also highlighted.
  • Ivanhoe Mines encouraged further engagement with their Investor Relations team for additional questions.

Ivanhoe Mines Ltd closed the call on a confident note, looking forward to capitalizing on its strategic projects and investments to meet the growing global demand for copper. With a focus on sustainability and community engagement, the company is poised to strengthen its market position in the coming years.

InvestingPro Insights

Ivanhoe Mines Ltd (IVPAF) has recently been a focal point for investors interested in the mining sector, especially given its performance and strategic initiatives. To provide further context on the company's financial health and market performance, here are some insights based on real-time data and InvestingPro Tips:

InvestingPro Data:

  • Market Cap (Adjusted): 13.47B USD
  • P/E Ratio (Adjusted) for the last twelve months as of Q3 2023: 40.66
  • Price % of 52 Week High: 95.82%

InvestingPro Tips:

  • IVPAF is currently trading near its 52-week high, which could indicate strong market confidence or a potential reevaluation of the stock's value.
  • Analysts predict that the company will be profitable this year, aligning with Ivanhoe Mines Ltd's optimistic production and revenue outlook.

These metrics and tips suggest that Ivanhoe Mines Ltd is valued highly by the market, especially in terms of earnings, and is anticipated to maintain profitability. The company's stock volatility and near 52-week high price point may be of interest to investors seeking growth opportunities. For those considering an investment in Ivanhoe Mines Ltd, there are additional InvestingPro Tips available that could further inform your decision. In fact, there are 12 more InvestingPro Tips listed on InvestingPro, which can be found at https://www.investing.com/pro/IVPAF. To enrich your investment strategy with these insights, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.

Full transcript - Ivanhoe Mines (IVPAF) Q4 2023:

Operator: Hello and thank you for standing by. Welcome to Ivanhoe Mines Ltd 2023 Q4 and Full Year Financial Results Conference Call and Webcast. [Operator Instructions] I would now like to hand the conference over to Matthew Keevil, Director of Investor Relations and Corporate Communications. You may begin.

Matthew Keevil: Thank you, operator and hello, everybody. It's my pleasure to welcome you to the Ivanhoe Mines fourth quarter and annual 2023 financial results conference call. I am the Director of Investor Relations and Corporate Communications. On the line today from Ivanhoe Mines, we have Founder and Executive Co-Chairman, Robert Friedland; President, Marna Cloete; Chief Financial Officer, David Van Heerden; Chief Operating Officer, Mark Farren; Executive Vice President, Projects, Steve Amos; and Senior Vice President, Corporate Development and Investor Relations, Alex Pickard. We will finish today's event with a question-and-answer session. You can submit your questions using the Q&A box on the webcast as well as through the conference operator via your phone line, please do contact our IR team directly. If you have follow-up questions or your question was not addressed [ph] during the call. And just ahead of that, we would just like to remind everyone that today's event will contain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Details of the forward-looking statements are contained in our February 26 news release as well as on SEDAR and at www.ivanhoemines.com. It is now my pleasure to introduce Ivanhoe Mines' Founder and Executive Co-Chair, Robert Friedland, for some opening remarks. Please go ahead, Robert.

Robert Friedland: I'll call all of our shareholders and stakeholders around the world, welcome to our conference call to discuss our annual results after some 28 to 30 years of efforts. We're very happy to announce we have over 20,000 individuals working directly for Ivanhoe Mines and we have a lot to go through in this conference call. So without further ado, I'll turn this over to Marna Cloete, our President, who'll just take this right off. Thank you, Marna.

Marna Cloete: Thank you, Robert and maybe just a brief introduction. I've been with the company for the past 17 years going on 18. And what you see in front of you is a picture of our Phase 3 plant at Kamoa-Kakula that's ready for commissioning in June. So we are again ahead of schedule. I think we previously set to the market, we'll have Phase 3 ready in the fourth quarter of this year and our team has really done it again. So we're definitely getting smarter as we move along. So I always have the privilege of starting with the highlights. And Matt, if you can just quickly put us on the highlights. And I think from a Kamoa-Kakula perspective, we really had a stellar year. We delivered again. We had some challenges. We did leave some copper on the table, mainly due to grid instability. And Mark Farren will talk about all the plans we have in place to ensure that we address these issues with the grid stability in the DRC. We've put out our guidance for this year. We're planning to produce between 440,000 to 490,000 tonnes of copper. And as I just mentioned, this is mainly due to the fact that we are, again, ahead of schedule with the commissioning of our third plant at Phase 3. It's no easy task to build major capital projects at the same time. I think we're probably the only team in the world to do that. And that we can only attribute to the wonderful people that we have implies across our organization. 2023 was probably for me on a personal level, one of my toughest years. We've spent a lot of time on plans addressing issues, making sure that we deliver to the market, what we promise. We're very excited that now in 2024, we will bring Kipushi into production as well. In the second quarter, the mine looks very neat. And again, Mark and Steve will take you through our development plans they are a little lighter. I'm just sort of on the statistics side of things, we've produced over 390,000 tonnes of copper in 2023. We've sold close to 376,000 tonnes and the difference between the 2 is basically what was sitting in inventory and also at the Lualaba [ph] copper smelter, created $2.7 billion worth of revenue. EBITDA of $1.6 billion and we were in the mid-range of our cash cost guidance. We are also putting out our guidance for this year and David we'll take you through our C1 guidance a bit later during the presentation. And then, of course, it's always exciting to hear Robert talk about our exploration success. And we think we've got another one with Kitoko [ph]. So our team is very excited about what we are seeing in the Western for land. If we go to the next slide. Our safety is at the core of what we do, being in the mining industry in doing the dangerous industry. But as you can see, at all 3 of our major projects, our safety statistics are tracking down and we're well below the industry average, statistics that we are very proud of; and we work hard at this every day to create a culture of zero harm across our organization. Next slide. And this is one I'm very excited about. The DRC is, in fact, the copper super power on the right. And I think that DRC [indiscernible] Peru as the second largest producer of copper in the world. The DRC contributed to 11% of global mined copper in 2023. This is, in fact, truly the future of green metal. It's the neighbor to be it's prime real estate, it's where you want to buy your next half. We had an election in December. President [indiscernible] was re-elected for the second 5-year term. We attended the inauguration and we're very excited for what the future holds for the country. And we're seeing a lot of support from all the superpowers across the world to ensure that the stability in the DRC. Sort of on a project level, yes, from an ESG perspective, we take what we do very serious. We work with our communities on a daily basis. And we've also showcased the center of excellence that we launched last year that will be a treasury educational institution in the DRC. And then I'm last but not least and Alex will touch on this a little bit later, is the Albizia Rover [ph] corridor. That's really opened up a new guide way for us to get our product to market. We're currently running trial shipments. We've reserved significant capacity on this corridor and to be tracking this project, forming strategic partnerships with [indiscernible] to ensure that we can move our product. This will also ensure that we have an even lower golden footprint than what we currently have. So with that as a bit of the lead-in, I will now hand over to David Van Heerden, our CFO, to take you through our annual results for 2023.

David Van Heerden: Thank you, Marna and good day to everybody joining the call today. If we go to the next slide, Matt. Kamoa-Kakula achieved its highest ever annual revenue of $2.7 billion in 2023 and that's at a weighted average realized copper price of $3.84 per pound. Revenue was up from the $2.4 billion achieved in 2022 and the strong EBITDA of $1.7 billion was delivered at a very healthy margin of 62%. If we look at Kamoa-Kakula's unraveled cash flow generation on the next slide. 2023 concluded the third consecutive year of outperformance at Kamoa-Kakula, The 3 years EBITDA growth is shown on the left-hand side with the graph showing the cash generated by operations on the right after excluding non-cash working capital. This clearly illustrates that after an initial Phase 1 and Phase 2 investment of just over $2 billion, Kamoa-Kakula has returned $3.5 billion of cash in just 15 months. Just before we move over to the next slide, I just want to make a nice clarifying point that the 2022 and 2023 fleet cash from operating activities and it's the same, it is a [indiscernible] incident and not a mistake. Moving over to Kamoa-Kakula's annual EBITDA waterfall. The waterfall illustrates that the 2022 to move to 1.7 [ph] EBITDA in 2023 equates to a 22% year-on-year EBITDA growth ton principally by our increased production. The 2023 result also benefited from the higher realized copper price in 2023 when provisional pricing is combined with prices ultimately realized with this partly offset by cost inflation. We look at costs a bit further on the next slide. Kamoa-Kakula again achieved guidance with 2023 ending exactly at the midpoint of our -- initial 2023 guidance. Q4 2023 cash cost is slightly up due to generator power used and the implemented power on production as draws were made from the stockpile impacting on the grade mill during the quarter. Looking ahead at the next slide; our cash cost guidance for 2024 is $1.50 to $1.70 per pound of payable copper. Even with the temporary elevated cash cost, Kamoa-Kakula would still be well placed on the global cash cost curve. The 2024 guidance is impacted by the earlier commissioning of Phase 3, both due to the additional backup generation provided for in the guidance. Due to the Phase 3 concentrator coming online before [indiscernible] as well as the slightly lower grade expected to be fed through the Phase 3 concentrator. Completion of the on-site smelter on schedule for commissioning in the fourth quarter of 2024 is expected to drive a decrease in average cash cost over the first 5 years post completion from 2025 onwards. If we move to the next slide, please, Matt. As seen on the left, Ivanhoe's EBITDA is up by 23% year-on-year when excluding the impact of the revaluation of the convertible notes and deferred tax income from Kipushi recognized in 2022. From our profit, the normalized net profit for 2023 was $388 million and that's up 30% from the $298 million in 2022. With construction of Phase 1 at Kamoa ahead of schedule and Kipushi commencing ramp up in just a few months, 2024 promises to be another year filled with record results. If we move to the next slide, please. Our capital expenditure in 2023 was effective and that's clearly illustrated by our projects being on or ahead of schedule and all tracking on budget. And in 2024, we will continue our industry-leading investment growth. We have been active in arranging facilities for each of our projects were $400 million of in-country facilities drawn at Kamoa-Kakula. The $150 million senior debt facility signed for Platreef in December 2023 and financing for Kipushi expected to be finalized in Q2 this year. On a 100% basis across our projects, we invested almost $2 billion in growth in 2023 alone and this is set to increase further in 2024. Our investments in 2023 and today are leading to real growth as early as this year. We move to the next. We ended the year with a very strong financial position with cash of $574 million in hand and very low current debt and our $1.2 billion noncurrent debt is mainly made up of the $800 million relating to the convertible senior notes due in 2026 and possibly early redeemable in April 2024. Our net debt-to-EBITDA ratio is tiny and sets us up perfectly for the next phase of growth of our growth story. And I'll now hand over to Alex Pickard, our Executive Vice President, Corporate Development and Investor Relations, to commence the operations and project update presentation.

Alex Pickard: Thank you, David and good day to everybody on the line. As Marna mentioned, we have a full complement here to take you through the fantastic progress we are making at our operations and our projects. So without further ado, I think we can move to the next slide. So Kamoa-Kakula had another outstanding operational year. As Marna mentioned, we produced 393,500 tonnes of copper which was within our guidance range. I think we are especially pleased with this performance given that we're dealing with the constraints around power stability in the DRC. And Mark is going to take you through much more detail on what we're doing on power which is a very key focus for this year. But really, we see the production as unfinished business in a way. We think that our copper output could have been perhaps even 40,000 tonnes or more higher with consistent power availability; so that bodes really well when we do solve that issue. Of course, we completed the debottlenecking project at Kamoa earlier in the first quarter. And the Phase 1 and 2 concentrators have subsequently shown the ability to operate at a capacity in excess of 10 million [ph] tonnes per annum with a clean run. And what is also good is that our recoveries have been in excess of design at 87% and that's also a reflection of power stability to some extent. So there's an opportunity to push that further. Steve Amos is going to take you through our very exciting Project 95 that we're launching to increase those recoveries much further. And then just to reiterate that our guidance range for the year, it's 440,000 tonnes to 490,000 tonnes of copper and concentrate. That factors in the early commissioning of the Phase 3 mill. And with the copper that we produced from Phase 3, we will be selling some of that concentrate that is coming in advance of the smelter and we will also be stockpiling a portion to feed that smelter when it becomes available in the fourth quarter. So with that, I will pass to Mark Farren, our Chief Operating Officer, to talk you through the power initiatives in the DRC.

Mark Farren: Thanks, Alex. Yes. [Indiscernible] power is -- I mean, it's been a little bit of a thorn in our side over the last year, in particular. And I believe, like Alex, we've left about 40,000 to 50,000 tonnes of copper on the table because of our short-term issues, really, if you take it -- if you put the whole thing in context. And I'm going to start on this first line what we've done on backup power. And then I'm going to talk you through the longer-term initiatives that we've taken and that we are following through on. So on -- in the short term, we've decided to create enough generating capacity on site which is obviously very expensive and it's diesel. So it's not exactly clear either but it's to reduce the risk and make sure that we have full redundancy within this year to run Phase 1, Phase 2 and Phase 3 under any conditions. That decision we made last year. And if you have a look at these data over here, you'll see that by July, we'll have 128 megawatts in by December, January, we'll have 210 megawatts of diesel on site. So under any conditions, we can run the 3 phases of the 3 concentrators in the 3 mines. It's very unlikely that you will have load shedding to the extent of 100% blackout. But it has happened in the past and it's something that we need to manage. If I can move us to the next slide which is probably more important. So under what we've been doing in the longer term, we've identified Ingo as a project that we need to complete. And we picked one of the turbines. So G-25 [ph] turbine is a big turbine at 178 megawatts. That project was picked 2 years ago and it's in execution, we will have replaced that turbine and have it commissioned by quarter 4 this year. So that's an additional 178 megawatts that will go into the grid. But with that work that we've done, we've had to do a full study all the way from ingot right up to the gate where we put our power into the mine and that's about 1,700 kilometers of different areas to study. And we've identified stability issues in the grid, the same grid all the way from ingot to us. And in that work that we've done is about $200 million of upgrades that need to take place to make sure that, that gird is stable and reliable. That work is in execution at the moment. We're working with the state utility to execute these projects. And that means that, that project should be complete within 12 to 18 months. We also have targeted additional power from Zambia. It's taken us some time to be able to organize that power. We're happy to say that we've signed an agreement today a long-term agreement and that will be followed by a short-term agreements which will step up the power from Zambia which will give us a clean source of hydropower into our mine in stages, starting from 15 megawatts and moving to about 100 megawatts this year; there's a longer-term plan to get it to 150 megawatts. So in addition to the current work that we're doing on stabilizing the grid, increasing the power from [indiscernible] that we've already completed, we'll be able to add another 150 megawatts of power into the same grid and it will be stable. So that will be in addition to the work that we've done to create that capacity that I spoke to you about earlier by putting in a diesel generation as a backup. So I think all in all, if you look at where we're going now in this year of 2024, we will be able to stabilize power and make sure that we have sufficient power for Phase 1, Phase 2, Phase 3 for our smelter and we're looking at how we're going to grow the business over the next couple of years. There will be more initiatives on power to make sure that we create stability and enough energy to power the projects going forward. Yes. So it's very important for us because we're growing this mine from the current 400,000 tonnes that we did last year into probably a 500,000 and north going forward 600,000, 800,000 tonnes of copper we need to produce in the next 4 or 5 years. That's absolutely within our control because the power has been on in our side but we are addressing it. And we've placed, I think, the best project team on this working on now which is the local power utility. And I believe it will be executed properly within this year. So that's it on power. I'm going to talk to just ask Steve to talk a little bit about where we are with Phase 3, Stephen. Stephen is our [indiscernible]. He's been with me. We've worked alongside for at least 10 years. All these projects that you see there on time, on budget, it's basically [indiscernible]. If you can tell us about Phase 3 a little bit?

Steve Amos: Sure. Thanks, Mark and hi, everyone. I think Mark -- Alex have both alluded to the fact that Phase 3 is going very well. In fact, we -- we're up to 4 months ahead of schedule. So we're really getting good at sort of the stuff now. On the mining side, we're busy preparing the mine pad and the run of mine to feed the plant. We've got a mobile crusher on sites. We're busy trucking the ore from Conoco [ph] which is about a kilometer or two away. We're building a large stockpile ahead of the plants. Probably next month, we will commission the surface conveyors, the surface conveyors will take the run of mine from the mine effectively to the plants. We plan to build up 20 000-odd tonnes of stock ahead of commissioning for the plant. And there's plenty of time to do that. We've got a number of months to do that. Then June, yes, we feed the plant first ore into the mill during June. And then I suppose once the ores into the mill, it's all about ramp-up, Phase 1, we did very well. We ramped the plant up in 3 months. And Phase 2, we did even better. We ramped the plant up in 2 weeks. So I'm expecting something good from Phase 3 and I think our track record sort of shows that we'll get to steady state reasonably quickly. I think you can see from the picture that the mechanical completion and all the equipment installation is complete. We're busy with the last bit of electrical installation, cable pooling, etcetera. And we've energized some of the substations and busy pumping a couple of motors to get things going pretty quickly. Next please, Matt. Okay. So this is something quite exciting. We call it Project 95. And the reason for the Project 95 is that the objective and there's two fronts to it is to increase copper recovery from the current odd-88% [ph] to 95%. You've been working on this for about 6 months now. So we've done a lot of work in the lab and the lab book is nearing completion. The 2 aspects to this are: firstly, modifying the existing Phase I and Phase II plants, additional regrind capacity flash float, a couple of other odds and sides to improve recovery from 88% to 95%. As I say, Bismark [ph] almost complete and looking very positive. The way we'll implement this because it's -- in fact, it's a red field site, it's operating, is that these changes will do it similar to like we did in the debottlenecking during the planned shutdowns were coming -- we do all the construction during the planned shutdowns will come and do the tie in, so there will be minimal effect on existing production. Then the second aspect to this is the current arising sort of the current tailings we're producing and the tailings that are in the tailings dam. So what we've done there as well over the last 6 months or so is we've designed a process where we can take these tailings, regrind them and get about 60% to 70% recovery on that feed to the new plant; that's a greenfield stand-alone plant. And that's effectively taking recovery to the 95%. We believe there's about 30,000 tonnes per annum in those current arisings plus what's in the dam and then some additional recovery from the modifications to the existing plant. All on track, probably April is we'll have some basic engineering we'll have a cost budget estimate, we'll get approval and we'll fast track this as soon as we can. Next, please, Matt. Okay, moving on to the smelter. So, state-of-the-art 500,000 tonne per annum [indiscernible] direct-to-blister technology, biggest direct-to-blist smelter in the world. The emissions and the environmental legislation, all world-class IFC with World Bank principles, so absolutely zero pollution with the atmosphere with the smelter. It's been a massive job. It's a totally different league to a concentrator. We have -- we are importing 73,000 tonnes of equipment from abroad into the middle of Africa. We've got about 50% of that on site at the moment and another approximately 25,000 tonnes on route. So it's looking good. It's nice when you can see the equipment on site, especially in the middle of Africa. We are confident of our Q4 2024 start-up, commissioning Q4 2024. It also has a significant reduction in cash costs and we estimate about 20%. And this -- I mean, you could just think for yourself, shipping 50% copper out of the country, as opposed shipping 100% of the copper out of the country reduces your transport by half. There's also taxes and a TC to go with that and a significant amount of asset production which is a sort of the commodity in the DRC because the bulk of the copper producers leach oxide with acid and produce copper by solvent extraction and electro-winning [ph]. Next slide, Matt. And I think it's over to Alex.

Alex Pickard: Yes. Thank you, Steve. So we did make a landmark announcement at the end of the year that we commenced trial shipments of copper concentrate from Kamoa-Kakula via the Lobito rail corridor. So the Lobito corridor is a project that has been very publicly supported by the U.S. government together with the European Union and the G7. And the good news is that the shipments to date have been a big success. We've taken only 8 days on a one-way journey which is less than 1/3 of the time of the alternative exporting by truck, by Durbin or Doris alarm [ph]. And obviously, that's a reflection of the shipment being on rail but also of the overall length of the -- it's roughly -- it's almost half of the left of the journey to Durbin. So ultimately, what this should mean is that the cost of shipment will certainly go down over time. But also, it's important to note that the CO2 emissions associated with the transportation by rail are much lower. At Kamoa-Kakula, we're very lucky in terms of the grades that we have and the hydropower. We already have the lowest CO2 emissions of any major copper mine. These are set to decrease by approximately half with the commissioning of the smelter and the reduction in the logistics burden, as Steve mentioned. And then that will be further reduced by shipping on the Lobito corridor. Just in terms of the sort of next steps on Lobito, we've recently signed a reserve capacity agreement with the Lobito consortium led by Trafigura and that is to ship up to 240,000 tonnes of copper product copper products from next year will be largely 99.7% anode coming from the smelter. And then finally, it's also just important to note that the Lobito corridor passes directly through the Western fallen exploration licenses. So it will play a big role in terms of the construction of future mining operations and as well as the export of copper products. And that's a good segue on to the next slide. So just looking at our group-wide exploration. We announced late last year that we've quadrupled [indiscernible] but also we are commencing drilling of the Makopane feeder project adjacent to Platreef. And also early-stage exploration at our new licenses in Angola. I think as Ivanhoe mines as a group, we're firmly believe in is the highest possible [indiscernible] we can drive for our shareholders. I think we've demonstrated that with all of our projects, including from Kamoa-Kakula, were founded on exploration effectively by this team. And so we hope to add huge value with the drill bit this year. We did announce late last year, the success that we've had already in terms of the initial copper resources at Makoko and Kiala which are already globally significant and we're moving those into more of a study phase. And then, of course, we also [indiscernible] discovery of Kitoco [ph] which our founder, Robert Friedland, will now explain much better than I'm sure I can.

Robert Friedland: Everybody on this call, exploration is the lifeblood of the mining industry and I thought I'd spend a few words explaining why the Congo [ph] has become so quickly equal to or larger than Peru is the second largest producer of copper in the world. So these are sedimentary copper deposits. They're -- they actually share a lot of similarities with oilfield geology and then the current basins. So I wouldn't call it the best hub but maybe the shape of a bird feeder. In this case, the basin is about 150 to 175 kilometers long and 25 to 40 kilometers wide. But you get things that as a giant bathtub or bird feeder very shallow. And if you feel that bathtub with layers of different colored sand. You feel your bathtub would have 2 inches of red sand and then 2 inches of green sand and 2 inches of blue sand -- these sands inside the basin. The original discovery of copper at Kamoa was in a particular sand on the eastern side of the basin and we were astonished that we had a notion of 3% copper. The second discovery of Copper was Kakula much higher grade, 4.5% to 5.5% copper and the ocean of it. These flatline deposits when you find them, they can be many, many kilometers long. They can go or 10 or 15 kilometers long and 10 or 15 kilometers wide and they're very consistent. They lay they're like a potash mine or an oil field. So it's quite remarkable that when we went to the western side of the basin, in relatively shallow horizon we found Makoko in sands that mimic sends that post the original Kamoa discovery, say, 30 kilometers to the east. And then with time and continued drilling Makoko became about 11 kilometers long. It's still open. And we found a second stack like different layers in a layer cake. And with additional drilling, we went deeper and deeper into the basin and we finally found 2 stacked new horizons called Kitoko which mean beautiful or gift in the local languages. The deepest hole we've drilled right to the bottom of the basin is running over 11% copper right at the bottom of the [indiscernible] this has never happened before in this enormous target area. This is a whole new horizon. As of today, it's approximately 2 kilometers open and open in all directions. It's nearly flat lined but it's open up dip and along the strike in virtually all directions and open down dip as well, very, very shallow dip as we've shown in many cross sections. So, Kitoko has metallurgical characteristics that you see in this picture, almost identical to Kitrulo [ph], we see bornite and calcacite [ph] which are the very richest copper minerals. You see there will be great abundance. And just to make sure that, that initial discovery hole at over 11% was not a fluke. We recently put a wedge in the hole and drilled off of it and again, intersected the same horizon at well over 11% copper. So it's consistent, it's real, it's open in all directions. And it shows that the land condition can throw off a number of additional Kakula-type discoveries. So I think in terms of the geologic community that understand sedimentary copper, think that we could be finding more of these types of depositary generations. The greatest amount of value that we can add for our shareholders is to add more drill rigs. We have 7 drill rigs turning now. We'll have 2 more going very shortly. That's despite the fact that this is the rainy season. In the old days, we would have stopped drilling in the rainy season but this one has us really excited. We've -- the rainy season is going to end in 2 or 3 more months. But despite that, we're sure have 9 drill rigs turning on this and that's going to create a lot of value because this ground is held by Ivanhoe Mines and a few joint venture partners that hold minority interests. So this fast area is really a very bright future for us. If there was ever a reason to be interested in our efforts to solve the world shortage that is moving for copper metal both for electrification and national security. This is where you're going to find it. This Western 4-month region as brand-new railroad coverage going straight to that port in Angola and it's all down Hill, by the way. We're a 1,400 to 1,600 meters elevation in the Western Foreland [ph], we're going to the Atlantic Ocean, obviously, at C-level. So the rail road trains heading that way are actually going to be able to generate electricity going down well as we go to the Seacoast. And so we've learned so much in the last 20 years. We know how to build mines in this region the hydroelectric power has been developed, all the benefits of having the operating mine nearby and able us to do anything faster, quicker, cheaper and better than we did in the past. So the future of Ivanhoe Mines in copper [indiscernible] to Western Foreland [ph] and I'm happy to say for our annual results our team couldn't be more excited and that's why we've boosted our exploration budget for a fold; this year at about $90 million. And with that, I think I'll turn this over to Mark Farren, so we can tell you about our new thoughts and our new plans to accelerate the production of the world's largest combined precious metals and base metals mine which is flat [ph]. So with that, Mark, turning over to you.

Mark Farren: So we move from one fantastic mine to the other one. And I know that PGM space is a bit of the [indiscernible] moment that it's going through it right now. But let's just talk a little bit about Platreef a tiny bit on what the actual ore body looks like first before I talk about the phases. So the ore body, what's different about this ore body is that it's 20 to 25 meters thick compared to the rest of the Bushveld Complex which is about 1 meter thick on average and with the same grades -- the same grade. So you're still sitting with your 4 to 5 grams per tonne [indiscernible] nickel and copper credits. So you've got like a 0.3% nickel which differentiates it massively from anything else and the thickness of this ore body which makes it completely unique and amenable to mechanization and automation across the ore body. I was in Anglo Platinum for about 23 years. And I can tell you now, as me, this is the best ore body in the world, definitely. It's got the grade, it's got the thickness compared to anything else. So what we did do is we started off with a Phase I which we call a baby mine. It's a test mine. It's just something we've put together with a concentrator that Steve will talk you through to get ourselves going and understand the ore body. With us getting moving on Phase 1, we've looked at how can we accelerate the development of this mine. How can we accelerate this development and bring in Phase 2 at a meaningful level of production as early as possible with a big shaft that you see in the background of the picture, that's basically a Phase 3 portion. It's a huge shaft. It's going to be able to rest 8 million tonnes a year. But the Phase 1 and 2, we -- trying to use to optimize what we have in the footprint before this huge shaft is in place. So Phase 1 and 2 together will give us the potential to host 3 million tonnes and therefore, process 3 million tonnes instead of the 1 million tonnes odd that you're going to get out of Phase 1. So the work that we've done really now is to be able to accelerate Phase 2 and then also start looking at Phase 3. When you look at the end of the day, we'll have at least a 10 million tonne operation running there which is over 1 million ounces of 4E and huge credits of nickel. So the timing of this we'll have a PEA done and FS done, the Phase 2 FS will be complete midyear -- quarter 3 at the latest and a PEA for the 10 million tonne case that we're busy with. And while we're talking about these things, we're actually in execution. So we're doing a lot of work at the moment to derisk Phase II and Phase I and accelerate the development of the mine. Another area, I think to talk about is the fact that we had to place some the offtake for Phase 1, it's been placed with Northam. And the Phase II, we've managed to place a big chunk of it with Sibanye [ph]. We do have terms for that, very favorable terms in the South African market. And further downstream, we're busy working with as a joint investment with other big players in South Africa to do some in-house beneficiation. So I think all in all, if you look at what we have, the best platinum ore body in the world, accelerated development and quartile -- Alex, if you can just show the Q1 cost position of where it's going to be on the next slide. But you'll see from the next slide that is actually going to be the best place lowest cost producer in the world. And that's simply because you have the ore body that's amenable to mechanization and automation. It's a very big ore body. It's very high grade. There is nothing else like this ore body in the world. I know that for sure because I've been in that space for a very long time. Okay. We can move on Stephen, or you going to carry on it, just give an update on where we are the construction.

Steve Amos: Yes. If you can just move to the next slide, Matt. So in terms of concentrate -- the concentrate construction, we're about 80% complete. We'll commission this plant in August this year and then we'll start the plant up on run of mine H1 next year. What you see there is the Phase 1 plant. The Phase 2 plant will be adjacent to the plant and it will be a similar size to Kamoa Phase 1. A total of 4 million tonnes of run-of-mine treatment, Phase 1 plus Phase 2. And that will give us about 0.5 million ounces of 3E plus gold and about 10,000 tonnes of nickel production. There is space on the mine footprint for the Phase 3 concentrators as well. Maybe just to add, we recently secured water for the mine. We redid a water treatment plant called Mercari [ph], a few K’s [ph] away from the mine and receiving clean water for the mine now and our connection to the Eskom grid [ph] is imminent. We've just constructed a 28-kilometer line from a brute substation onto the mine. So, everything going well at Platreef, focus on Phase I and Phase II. That's all from me. Next slide, please. I think it's over to Mark. Marna, sorry.

Marna Cloete: It's over to me. Yes. No problem. So maybe just quickly on Kipushi. We announced earlier last year that we've reached terms in terms of offtake but we were surprised as to the favorable conditions that we could find in the local market for financing. To date, we've managed to conclude a $80 million facility with one of the local banks. We're very close to closing another facility with a local bank. And then we've also entered into discussions with multiple offtake partners that those discussions are nearing completion and it will include a prepayment portion that will be associated with the offtake. And total facilities that we are planning to raise for Kipushi would be in the order of between $100 million to $200 million to facilitate with working capital. We're also planning to embark on logistics ourselves for Kipushi. So we've set up our own logistics company and we will be handling the logistics in-house with delivery at port terms with the off-takers. If we go into the next slide, I think Mark will just quickly discuss the mining currently at Kipushi and then Steve will just talk you through the project update.

Mark Farren: Thanks, Marna. So the Kipushi mine underground is a very nice, if you like, mining. It's a beautiful mine. It's long hole stoping. It's a fantastic ground, must derisk completely. We've done -- we've opened up 7 levels already for the open stope -- as long we're open stoping. And we've put a stockpile on surface which people would laugh about I mean low grade, we're calling it 22%, 220 tonnes -- 220,000 tonnes of ore which we call low grade at 22%. The mine's grade runs at 35% average. So it's a fantastic zinc ore but as zinc ore bodies go and it's well set up. Again, Stephen will talk to you, we're ahead of schedule on the concentrator. The mining footprint is ready to go and I don't believe there's any major risk to -- that there will be at Kipushi. Stephen, do you want to talk a little bit about the concentrator? Next slide.

Steve Amos: I'll walk through. Next slide up, please, Matt. Yes. So very excited about Kipushi. We've transformed the landscape at Kipushi. It's really looking fantastic. We're slightly ahead of schedule sort of same time line as Kamoa commissioned in June. Busy with the last electrical installation and energizing of substations; the process is exceptionally simple. I mean if you can have a look the float cells in the whole plant, very easy partly -- and the design throughput, 800,000 KTPA but I think what we'll probably do is a debottlenecking exercise and increase that fairly significantly. But all looking good for Kipushi now you see whatsoever, very excited about Kipushi. Thanks.

Operator: [Operator Instructions] Our first question comes from the line of Andrew Mikitchook with BMO Capital Markets.

Andrew Mikitchook: Congratulations on a lot of updates that went into this press release and a lot of hard work. Just kind of forward-looking, when all this power arrives from Zambia and Inga and even the backup power on site plus the rail. Is there any sense that this would cause kind of a rethinking or optimization of the mine plans around Kamoa Phase 1, 2, 3 and I guess, 4?

Unidentified Company Representative: Yes. Definitely, Andrew. So you'll see what we're doing now and it will be announced in the next couple of months is the same thing you saw with Phase 1 and Phase 2; Phase 3 will also do debottlenecking. And I think we can probably tweak up that production on all 3 concentrators to -- it's -- we call it 14 but it's probably going to end up being 16 or 17-plus [ph] all the recovery work that we're doing and that's a few extra megawatts. And that gives us a little bit of time to get stability to the grid than time Phase I when we want to. And I think it's in about 2 or 3 years' time, in to start executing. So no risk, I don't think short term but power is the issue that we need to just get over the line with.

Andrew Mikitchook: And the -- just a second question on the exploration. Obviously, very encouraging that -- what kind of time line [indiscernible] dates and pushing us ahead of the usual phase [ph]?

Unidentified Company Representative: The usual [indiscernible] 50 million tons of copper, the highest grade, the largest copper mine in the world in recent memory for sure. We have no intention of slowing that down; we have every incentive in the world to find more copper in the Western Foreland. So we're talking about 500,000, 600,000, 700,000, 800,000 tonnes of copper a year on our original joint venture ground. That's on 400 square kilometers. And we're into designing and developing a new production in Makoko and Kitoko [ph]; so here we go. We're going to keep drilling, and if it gets bigger, we'll just add more drill rate and keep going. As I said earlier, this is going to be quicker than in the past. When we started 25 years ago, that was a very different DRC Congo than we have today. Today, we have 4G wireless. We have a new International Airport. We have fantastic access of a brand-new railroad that goes down [indiscernible] to the ocean. And we're going to have too much electrical power other than not enough. So I guess a good way of saying that is there's not really have a shortage of copper. We can find copper faster than we can build the concentrators to bring it to market. We can find -- we can build concentrators faster than we can build smelters to produce copper metal. But we are the fastest-growing copper company in the world, mining the highest grade ores and with the lowest global warming gas due to production. So why quit, we have 20,000 people there. The median age of a person in the Congo’s [ph] less than 19 years of age. The workforce is fantastic. And the support we've had from the government for our training programs, our environmental programs and our ESG programs are without parallel. What I think what we need to do is get you out there, Andrew; and you can stand at the drill rig and see this core come out of the Kitoco discovery. And even though I'm a grandfather, I got to tell you finding something like that as exciting as anything you achieve in large even for any geologists, many genesis go through a lifetime and never get near a discovery like Kakula or Kitoco. So we're going to put the pedal to the metal and help the Congo get to its rightful position as the largest producer of copper in the world. There's no doubt that's achievable. The power line that we brought in from [indiscernible] dams can carry 900 megawatts. We're doing close to 400,000 tonnes of copper on 78 megawatts. If you get the highest grade copper ore bodies in the world and you couple them with hydroelectric power where you've got a really green long-live power, nothing to beat that. And so thanks for your enthusiasm and interest, Andrew, in your support over the years. And let's extend that to all of BMO been a big supporter of all of our efforts because we're speaking to you today from the BMO conference and try scheduled to go downstairs and give a speech in about 15 minutes. Thank you, Andrew.

Operator: [Operator Instructions] Our next question comes from the line of Lawson Winder with Bank of America (NYSE:BAC) Securities.

Lawson Winder: Thank you for today's update. Fantastic as always, I just wanted to ask about the temporarily high cash cost and then -- and the outlook for 2025. So last quarter, you guys [indiscernible], a 20% reduction versus, I think, what was the midpoint of the 2023 guidance. So that would imply about $1.15 per pound. I just wanted to make sure I had my numbers roughly correct?

Unidentified Company Representative: Yes. Well, I'd like to take a stab at that because I think people get very confused. We have 78 megawatts of hydroelectric power we've developed so far. And -- good news is bad news here. We've developed this concentrator at least 6 months ahead of the schedule we talked you about last year. I can't think of anybody else building Tier 1 mines out of schedule. Can you? So with the concentrator starting up in June, we have to burn diesel for 6 months until the Engadam [ph] comes on. So we're not going to burn diesel as soon as the dam comes out and we just announced an agreement. We just signed an agreement today with Zambia to bring in hydroelectric power. So this power issue -- this limiting factor is going away. So once the smelter is running and the Angolan railroad is running, we're saving about $0.20 a pound on transportation costs because we're moving half of the volume, shipping 99% copper; so we're shipping 50% copper custom cost in half per pound. We're going to get the benefit of self-cured acid in the price of sulphuric acid lost is very high in the Congo. And the higher the copper price goes, the higher the price of sulphuric acid goes in the Congo. We get a leverage effect as everybody screams for it for their oxide copper mines. Right now, current production consumption of sulphuric acid in Congo; 6 million or 7 million tonnes a year but that's going up. And so maybe our smelter can provide 10% of what's required in the Congo. But I think the pricing that we assumed on sales of sulphuric acid are very conservative. So when we're running at 100% hydropower and we've got 3 mills going above their nameplate capacity, I think $1.15 is a perfectly realistic target. I would say $1.10 to $1.30 in the midpoint of that range might be $1.20 or $1.15. It sounds about right to me to -- like to comment?

Mark Farren: Agree.

Unidentified Company Representative: Yes. Mark agrees, that's a reasonable target. That's right at the bottom of the world cost curve in money but at the bottom of the world cost curve and global warming gas produced the copper for which we're going to get a premium. We're absolutely certain we're going to get a premium for clean copper. That's opening soon at a theater near all of us.

Andrew Mikitchook: Okay. I also wanted to congratulate you guys on getting that agreement with Sabaan Yang [ph] is potentially expandable. What are you guys thinking about in terms of options for processing the remaining part of Phase 2 concentrate from Platreef. And is a base metal refinery on the table for something that Ivanhoe might build down the road? Or is the proposed at the solution to avoiding having to do that?

Unidentified Company Representative: Marna and Mark, you talk a little bit without mentioning names about the nature of our discussions about going further downstream.

Mark Farren: I'm going to ask Alex to chip in. But definitely, for Phase 2, I don't think we at risk, Alex, do you want to carry on that?

Alex Pickard: No, I totally agree, Mark. I think for Phase 2, especially given that we've sort of modified the size around this 4 million tonne hosting capacity. We definitely see that there will be capacity in the South African market for that concentrate. And then really, what we're looking at is a joint venture partnership on downstream processing that's more geared towards Phase 3 when we have that huge shaft number 2 available, we can increase our processing capacity up to 10 million tonnes per annum. And at that point, we're, if not the biggest, one of the absolute biggest PGM mines and also a huge producer of nickel and copper. So that becomes a missing factor in terms of base metal refinery capacity in South Africa. But what we're looking at is potentially well either building a greenfield site or even better to repurpose an existing brownfield site in South Africa [ph]; many good candidates which can save significantly on time and CapEx. And then the idea being that we would produce a nickel map. So it's about 50% nickel by content, including the PGMs and then that becomes a much more marketable product internationally to various different refineries.

Unidentified Company Representative: So and of which is Phase 2, we think and then it's obviously Phase 3 is that decision point that we need to make.

Operator: Thank you. I'm showing no further phone questions. I would now like to turn the call back over to Matt.

Matthew Keevil: Thank you very much, operator. We are coming up on the top of the hour. So, I think we will wrap the call up there. And as Robert mentioned, he's got [indiscernible] his keynote speech here, so we will wrap up today. I'd just like to thank everyone for joining us. If you do have any questions that were not answered on the call, please do reach out to the IR team, Tom, Alex and myself and we'd be happy to find the answers for you. But we're looking forward to a very exciting 2024 and thanks again for joining us. We can wrap up, operator.

Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

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