Ivanhoe Mines Ltd

TSX:IVN

Earnings Call Transcript 2023-Q1

[Operator]

Good day, and thank you for standing by. Welcome to the Ivanhoe Mines First Quarter 2023 Financial Results Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded.

I would now like to hand the conference over to Matthew Keevil, Director of Investor Relations and Corporate Communications. Please go ahead.

[Matthew Keevil, Director, IR & Corporate Communications]

Thank you, operator. Good morning, everyone. It's my pleasure to welcome you to our first quarter 2023 financial results conference call. My name is Matthew Keevil. I'm the Director of Investor Relations and Corporate Communications dialing in from sunny Vancouver this morning. On the line from Ivanhoe Mines, we have Founder and Executive Co-Chair, Robert Friedland, President, Marna Cloete; Chief Financial Officer, David Van Heerden; 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 a question using the Q&A box on the webcast page as well as through the conference operator via our phone line. Please do contact our Investor Relations team directly for follow-up questions that are not addressed during the call.

Before we begin, I'd like to remind everyone that today's event will contain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Details of the forward-looking statements are contained in our May 3rd 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. Robert, please go ahead.

[Robert Friedland, Founder & Executive Co-Chairman]

Thank you. I hope my voice is coming through from Beijing, China. I want to welcome everybody to this call after we've had another amazing quarter of achievements by our people working so assiduously in the Democratic Republic of the Congo and South Africa. It's been an amazing quarter and there's more to come, and there's a lot to talk about this morning.

So with that, I welcome all of you to this opening slide, which you can see, the enormous extent of growth at Kamoa-Kakula, and we'll turn this over to Marna to begin going through the highlights. Thank you very much. Marna?

[Martie Cloete, President]

Thank you, Robert, and good afternoon and good morning, everyone. I'm speaking from sunny South Africa, and we are very pleased to announce another quarter of operational excellence. A few key highlights this quarter and beyond include: the completion of our debottlenecking program in February of 2023, again, ahead of schedule and budget. And this enables us to produce 450,000 tonnes of copper on an annualized basis using our Phase 1 and Phase 2 plants.

Kamoa-Kakula also achieved a record month of production of close to 35,000 tonnes of copper in March post the completion of this debottlenecking program. We have also seen a vast improvement on throughput and recoveries, which my colleague Alex will take you through later this call. Post the quarter, Kipushi signed a term sheet for a $250 million offtake and prepayment facility with Glencore and Gécamines. And we published our sixth annual sustainability report and I invite our audience to carefully study this report as we illustrate how we mine with a greater purpose.

Our quarterly results speak for itself. To name a few key metrics, Kamoa-Kakula produced, on a 100% basis, over 93,000 tonnes of copper, of which it sold over 86,000 tonnes of copper, resulting in net revenue of $689 million and EBITDA of $452 million. Our cash cost for the quarter was $1.42 per pound of copper produced, and that was again at the lower end of our cash cost guidance.

Our Phase 3 expansion at Kamoa-Kakula is also on track for completion in 2024, and this will increase our copper production up to 650,000 tonnes on an annualized basis.

One of the key statistics highlighted in our 2022 sustainability report is our constant improvement on health and safety. We had a 40% reduction in our total recordable injury frequency rate across all sites during 2022.

This whilst operating, expanding and building new projects. Safety is a team effort, and we are immensely proud of our staff and contracted commitment towards our zero harm policy. In the first quarter, we have continued this trajectory with a mild reduction in our total recordable injury frequency rate across all our sites, and our performance is well below the industry standard of 2.9 at our respective sites.

This is a lovely picture of community members in front of a newly built church close to Kamoa-Kakula. They are participating in our large-leaved restoration program, receiving citrus saplings.

Our group-wide sustainability team have gone to great lengths to showcase the work we do in our 2022 annual sustainability report. But the statistics and pictures speak for themselves, and I will highlight only a few. We have increased our female employment across the group from 9% to 10% against an increase in workforce of 20%. And 76% of our group-wide energy consumption is from renewable sources.

This slide depicts a graphic representation of the world-class Kamoa Center of Excellence that is scheduled for completion in September of this year. The center will be used as a training facility, ultimately providing access to DRC students to participate in internationally recognized programs.

Some further interesting facts. Kamoa-Kakula contributed 4% to the GDP of the DRC in 2022, and this is anticipated to approximately double in 2023 Kamoa-Kakula paid $311 million in government taxes and royalties in 2022, the first full year of production, and we spent $95 million on our group-wide payroll with $70 million in local payroll taxes.

This is a picture of our top academic scholars in Mokopane, where we have over 644 scholarships on a group-wide basis, and we have formed 332 formal and informal local enterprises. This is up from 66 in 2021. We have spent in excess of $20 million on socioeconomic development, and it's important to note that most of the businesses we incubate or assist the local services or groups outside of our mines, too.

But that as an introduction, I will now hand over to David Van Heerden, our CFO, to take you through our quarterly financial results. Over to you, David.

[David Van Heerden, CFO]

Thanks very much, Marna, and thank you for everybody joining the call today. I'm very pleased to present our first quarter results for 2023, which once again includes a number of records from Kamoa-Kakula. Today's presentation is, of course, only a high-level summary of our results and should be viewed in conjunction with our condensed consolidated interim financial statements and MD&A for the 3 months ended March 31, 2023.

Kamoa-Kakula recorded record revenue for the quarter with almost 87,000 tonnes of payable copper sold. Kamoa-Kakula sold less than what was produced during the quarter, resulting in higher finished good inventory at the end of the quarter. It was approximately 18,000 tonnes of concentrate in inventory at the end of March with approximately 14,000 tonnes of that sold to the Lualaba Copper Smelter for smelting product to sale with the remainder either in bulk or bagged in preparation for export.

C1 cash cost was kept stable quarter-on-quarter, and I will discuss that a little bit more in a later slide. Record revenue and stable cost led to record quarterly EBITDA for Kamoa-Kakula at the continued high margin, which leads nicely into the next slide.

The increase in revenue for the quarter was driven by the higher copper prices during the period with copper sales realizing at a copper price of $4.04 per pound of payable copper during the quarter.

Kamoa-Kakula maintained its excellent margin, which was only marginally down from the fourth quarter of 2022. And due to Q4 revenue including a $52 million remeasurement compared to only $30 million in the first quarter of '23. So 66% is an exceptional margin once again.

I know everybody is pretty used to seeing the slide of breakdown by now. And -- but we want to continue to emphasize the underlying profitability of Kamoa-Kakula. Revenue included a remeasurement of $30 million, as I mentioned, with provisional sales at the end of the period remeasured at $4.05 per payable pound of copper. It's important to point out that the finance cost of Kamoa-Kakula of $89 million is mainly interest on shareholder loans used to fund initial CapEx, but that represents income for Ivanhoe and Zijin, who provided that funding.

The tax expense for the first quarter of $116 million. $76 million of that was income tax with the remainder being deferred tax. After the noncontrolling interest of the DRC government, Kamoa-Kakula had profit attributable to its shareholders of $167 million, $83 million of which was Ivanhoe's share.

On this slide, I would like to firstly focus on the chart at the bottom left of the slide as we view the consistent cost level achieved by Kamoa-Kakula as a real achievement. And we are proud to highlight that. We obviously track the results of our peers as well, and I think everybody on this call who does the same would agree that Kamoa's results should be applauded.

If we turn to the C1 breakdown to the right, you would note that processing costs increased quarter-on-quarter due to the power tariff increase that became effective in December and as we warned in our guidance as well as higher diesel usage and material [indiscernible] due to power interruptions experienced.

Logistics cost eased slightly due to lower ocean freights. We continue to focus on further cost-saving initiatives. And one of the key initiatives is, of course, the 500,000-tonne per annum on-site smelter, which is being constructed as Phase 3. We expect the on-site smelter to drive us to the lowest cost quartile and below $1.20 per pound of payable copper.

As was shown a few slides back, Ivanhoe's share of profits from Kamoa-Kakula was $83 million for Q1. And Ivanhoe recognized $47 million of finance income from Kamoa-Kakula brining the total income from Kamoa-Kakula to a record $130 million for the quarter. Ivanhoe spent $3 million in Western Foreland exploration while the development of Platreef in Kipushi continued to be capitalized as scheduled. Ivanhoe, therefore, recognized a profit of $113 million before the impact of the revaluation of the convertible note.

We recorded a $31 million loss on the fair valuation of the derivative liability linked to the convertible note, and that's principally due to the increase in our share price from $10.70 to $12.21 at the end of March. This brought Ivanhoe's profit for the quarter to $82 million after the impact of the noncash convertible bond revaluation.

This slide shows our aggressive adjusted EBITDA and decent increase of adjusted EBITDA growth and also includes how we suggest our adjusted EBITDA should be calculated. Our EBITDA of -- or our adjusted EBITDA of $168 million includes our share of Kamoa-Kakula's EBITDA, and we look forward to adding revenue from Kipushi and Platreef to our adjusted EBITDA next year.

Our CapEx guidance remains unchanged, and we would like to reiterate that. And the first quarter spend was on the lower end, but largely the curve we expect. And as Marna, Alex and Robert will report later on, the progress continues and Kamoa-Kakula continues to fund its CapEx with operating cash flow and Kamoa had a healthy cash balance of $390 million at the end of March. Ivanhoe in turn had cash and cash equivalents of $497 million at the end of March.

We expect to spend between $207 million and $257 million on Platreef in the remainder of the year where the -- where we are progressing well with $150 million senior debt facility as previously disclosed. And as you would have seen from the recent release of Kipushi construction activities, they are progressing ahead of schedule and the terms for the $250 million financing facility has been agreed. Ivanhoe is also evaluating a bank facility of up to $80 million in addition to $250 million financing facility.

And lastly, I would just -- we showed this slide when we presented our annual results and a lot of shareholders picked up on this, and we thought it was good to just update the numbers with the latest results and once again emphasize that Ivanhoe will receive distributions in excess of our ownership percentage. Once the development of Platreef and Kipushi has been completed and once we start to receive shareholder loan requirements from Kamoa-Kakula.

I would just like to hand over now to Alex Pickard, our Senior Vice President Corporate Development for an operations update on Kamoa-Kakula.

[Alex Pickard, VP, Corporate Development]

Thank you, David, and good day to everybody on the line. It's Alex Pickard here speaking from also a rare sunny day in London. As David mentioned, we will take you through the latest update from our operations, exploration efforts and our projects. But first, maybe I'll just talk quickly about the slides that we have in the background here. What you can see in the foreground is the Kamoa Phase 1 and Phase 2 concentrator lines today and the long gray building in the background or in the middle of the picture is the concentrate building where currently, we are bagging and dispatching up to 90 trucks a day containing copper and concentrate. In the background of the image in the blue, you can see a rendering of the 500,000-tonne per annum direct-to-blister smelter that will be completed next year. And it just really gives a sense of the scale of that project. It will be the largest smelter in Africa and indeed the largest smelter of its kind anywhere in the world.

So first, looking at Kamoa-Kakula's operations in the first quarter. I think Marna mentioned the strong copper production we had, which was close to 94,000 tonnes for the quarter. But what we are really pleased to see was the record of close to 35 tonnes achieved in the month of March. So really now, we are viewing this level as a benchmark of what the plant is capable of following the completion of the debottlenecking program, but also taking into consideration that during this month, we achieved our production level despite experiencing some grid instability.

And I will come back to that on the next few slides. In March and continuing through April, we've also achieved better and better copper recoveries, achieving over 88%, which compares very favorably to our design rate of 86%. But on some days, we are well over 90%, which is an outstanding achievement by the concentrate team. We've also achieved several times now a daily milling rate in excess of 29,000 tonnes, which if you look at it on an annualized basis, is significantly higher than our debottlenecked nameplate plant capacity of 9.2 million tonnes per annum. So for this quarter, we are reiterating our 2023 guidance of 390,000 tonnes to 430,000 tonnes of copper in concentrate.

Obviously, Q1 was always going to be a bit of a slower quarter with the tie-in of the debottlenecking and then also the electricity availability. But we've got more than enough time to make that up, especially with the full capability of the plant following the completion of the debottlenecking program.

So moving on to the power situation in some more detail. I think the first thing to say is that actually we experienced much better grid stability during the month of April. So what we saw in SNEL, which is the DRC state-owned power utility, introduced some infrastructure management and maintenance facilities, and it was also helped by a 60-megawatt hydro facility coming into the network.

That being said, we've made the decision to protect Kamoa-Kakula from any potential future grid instability by investing in backup generation capacity. So what you can see in this image is our currently installed generator farm at Kakula, which is providing 32 megawatts of backup power. We use that today for emergency facilities as well as power in one line of the plant.

And then added to that, we have another 11 megawatts arriving by the end of this quarter, which will be installed and we're aiming to get to over 90 megawatts by year-end, Coincidentally, 90 megawatts is around the maximum power draw on site today. So we will have the capability to run the Phase 1 and Phase 2 mills using backup power, if necessary.

Longer term, we're looking to roll out up to 200 megawatts, which will basically account for the Phase 3 expansion and the smelter, and we're also definitely considering renewable energy as part of the mix here. And finally and something that will help the broader DRC grid in the shorter term, we're in discussions with the Zambian government to secure up to 100 megawatts from the DRC-Zambia Interconnector. This will be gradually phased into the DRC grid starting with 30 megawatts in the short term.

This slide is just moving back to the bigger picture. And what you can see here is the main trunk line, which connects the Inga Dam complex where we are working on turbine 5 with the Kolwezi substation. So that's a 1,700-kilometer line with a maximum capacity of up to 1,000 megawatts that run very close to the Kamoa-Kakula mining license in the Western Foreland.

So over the years, we've been working with SNEL since 2017 on hydro power refurbishment projects, and we've developed an excellent relationship. And so in response to the recent power instability, we completed with SNEL a grid stability study and this identified key areas of the transmission network that will provide significantly improved stability for all the users on the network. And so in the coming months and years, we will be working closely with SNEL on those initiatives going forward.

I'll take you through a few slides now, which just show you in images the excellent progress that we're making on Phase 3. But the main message here is that everything is well on track for commissioning by the end of 2024. So first, what you can see here is the concentrator in the image. You can see that the concrete foundations and the civil works are rapidly advancing in preparation for the steel work, which is arriving imminently and the major pieces of equipment that will be arriving over the course of this year to be prepared for installation.

This slide is just showing the underground mining process -- progress, sorry, that we're making in the Kamoa 1 and Kamoa 2 mining areas. So these mines will really be the backbone of the Phase 3 concentrator in terms of supplying feed. So that will be 5 million tonnes per annum to begin with from next year as the Phase 3 concentrator ramps up. In terms of the progress that we've made there, we've already completed well over 2 kilometers of development in the Kamoa 1 and Kamoa 2 deep mines.

And then the plan is to open up the Kamoa 1 mine later on this year. I think the Kamoa 2 mine is not scheduled to begin until 2025. We can rely on Kamoa 1 in the meantime and the existing stockpiles that we've already built up at the Kansoko mine. From a mining perspective, it's important to add that it's very similar to what we've already done at Kakula. You can see we're using similar-style machinery, similar scale, and we will also be using drift and fill mining.

And then this slide is coming back to the smelter that I pointed out earlier, and you can see that the reality is already very much taking shape on the ground. So this is showing the foundations of the direct-to-blister furnace building, and we are preparing for the arrival of the equipment also later on this year. So I think across the Kamoa site, we're really moving into an exciting phase of the build where we will start to see the installation of the major equipment items that are currently on route to the mine or finishing up the fabrication process.

And then perhaps just to come back to the hydropower at the end, what you can see here is the work underway a turbine #5 at Inga. So that is also progressing on schedule with the intention to tie in with the start of the Phase 3 at the end of 2024. Turbine 5 will bring an additional 178 megawatts of green hydro power into the grid for priority use by Ivanhoe Mines and Kamoa-Kakula.

What you can actually see here in the image is the rotor and the stator and just as an interesting fact, it itself contains about 40 tonnes of copper, which gives a great example of the huge copper intensity of renewable energy infrastructure.

So with that, I will pass to Robert for an update on our exploration activities. Robert, just in case you can't see the slides, we're on the Western Foreland.

[Robert Friedland, Founder & Executive Co-Chairman]

Yes. Thank you very much. I do see the slides. I got them on my hand phone. To everybody on this call, from day 1, exploration is in our DNA. It's the lifeblood of our company. Exploration requires both patience and determination. But it's my considered opinion that we will soon realize additional reward. The Ivanhoe Mines group historically finds a Tier 1 discovery around every 4 years or so. And so the time is coming up for us to come up with another one.

In the Western Foreland, we've drilled 70,000 meters on our target for this year. We've drilled about just under 5,000 meters of that in the first quarter, which was the rainy season, but we're now entering the dry season where things really get a lot easier. We're budgeting $19 million worth of drilling. We have 4 drill rigs on site, and I've got that feeling in my bones that we're going to come up with something that's going to make everybody in the Congo and all of our stakeholders very happy.

Makoko and Kiala in the opinion of our senior management are going to be a mine really just a question of how big. We're working on the maiden resource estimate for this project that is wholly owned by Ivanhoe Mine.

The geology, the genetic setting is identical to the other mines in the copper belt. We have a lot of understanding of these systems, both a genetic understanding of what causes them to be [indiscernible] of time in the first place and how to find more of them.

So the preliminary economic assessment of this mine is underway. And since we own it all, it's going to have quite a big impact. And if we find a big one out here, we can start dreaming about being the second largest copper complex in the world or ultimately even the biggest.

But I think what's not getting enough attention is the next slide, our Mokopane Feeder exploration. I think apart from the fact that our Platreef project is the largest precious metals project in the world under development with a hell of a lot of copper and nickel required for the electrification of the world economy as byproduct, it remains a fundamental fact that the Bushveld complex in South Africa is one of the world's greatest mineral endowments, certainly in the top 3, if not the largest mineral endowment of any geologic structure I can think of on a planetary basis.

The question is where did the Bushveld come from? I mean, how did it come up from the middle of earth. These things come up from great depth in the earth, light toothpaste. And they have to have a source. So we're doing a high-resolution magnetic survey, and we're doing gravity work, and we're going to start drilling which -- on the Mokopane Feeder.

And Mokopane Feeder is an unbelievably powerful gravity anomaly, something very, very heavy exists at the Mokopane Feeder. It's only about 10 kilometers away from our shafts that you see in this picture with the yellow airplane. The critical zone of the Bushveld, which hosts our enormous endowment of precious metals is very heavy rock. If you pick it up, it's just astonishing how dense that rock is. And so the gravity anomaly is very significant. And academic geologists believe that the Mokopane Feeder is named because it fed the Mokopane area where all this metal really is.

And so if there was ever a visionary exploration target on this planet, it's a Mokopane Feeder and I would urge all of the analytical communities to come to understand it and pay a lot more attention.

And then on Platreef, we rapidly barely had to be a producing mine. The original idea was the same philosophy as Kamoa-Kakula; start small and then expand. So the Phase 1 concentrator is under production. The underground development is advancing very rapidly.

And recently, we've come up with some new ideas on the optimization of Shaft 3.

Alex, why don't you pick it up and explain to people some of our thinking about Shaft 3 and why this could be such important, good news?

[Martie Cloete, President]

Thank you, Robert. I will take that over, and Robert [indiscernible], we are working on an optimization study at Platreef. We -- Shaft 3 with a diameter of 5.1 meters is currently being rigged. And we've got approximately 150 meters of the 950 meters completed to date. And to be planning to complete that work in the fourth quarter of this year. We -- the study envisions accelerated production from Phase 2. And this study will consider converting this 5.1-meter diameter ventilation shaft into a production shaft with the capability to hoist.

So what we are saying is that we are planning to pull forward production at Platreef. We always get flagged from Robert that we're taking way too long to bring this mine into production, and we are now trying to ream everything forward and bring this mine to its fullest potential.

Just maybe to follow on from what Robert was discussing. A lot of the listeners do not have the opportunity to visit our sites. So we've changed our presentation slightly and we're taking you through a bit of a visual library. So you can see what our projects look like on surface and underground.

So this is an underground picture at Platreef. Maybe let's go back to surface, and this is the 10-meter diameter Shaft 2 that is currently under construction, and it will have a hoisting capacity of 8 million tonnes per annum. The Shaft 2 headgear concrete structure has been completed to a height of approximately 79 meters and Shaft 2's overall height will be approximately 100 meters above ground, including the steel structure housing the main winders.

Drilling of the pilot drill in of Shaft 2 down to the shaft bottom commenced during the first quarter and a total of 680 meters have already been completed, with drilling on schedule to finish during the second quarter of this year, where after reaming of the 3.1-meter diameter hole is planned. So things are very exciting at Platreef. And when you drive into town, you can see the headgear miles away.

Over to Kipushi. Last but not least, we've made significant progress at Kipushi. In late April, we issued a press release announcing that we signed a term sheet for the offtake of zinc concentrate and $250 million facility with Glencore and Gécamines. We are also negotiating a breach facility with local banks for up to $80 million and this will be used to fund ongoing capital expenditure at Kipushi.

Just back to our visual library. This is underground Kipushi where our development is 30% ahead of schedule with 682 meters completed in the first quarter, and mining of the Big Zinc orebody with grace in excess of 35% will commence ahead of schedule in January of 2024, and it will be stockpiled pending plant commissioning.

And then we go to surface. On the processing plant, our fabrication is on schedule with all major equipment currently being fabricated.

The bulk of the earthworks and civil works is nearly completion. And as you can see in the picture, steel erection has started. Our first concentrate is on schedule for the third quarter of 2024.

And then lastly, on Kipushi and this is an initiative I'm personally very excited about. We have entered into negotiations with the provincial and the national government for a new commercial border crossing Kipushi. And this new border will benefit both Kipushi and Kamoa and should assist in alleviating congestion at the existing border crossings. The Kipushi border will also benefit the town of Kipushi, through creating an economic hub for the town, and we are currently doing a study on the road conditions and the upgrades required on the Zambian side of the border.

And so this concludes our operational update on all our exciting projects. I will now hand back to Matt Keevil to handle the Q&A for today.

[Matthew Keevil, Director, IR & Corporate Communications]

We'll now begin the question-and-answer session. I'm just going to quickly hand it back to the operator to populate the line. We'll take questions off the phone first, and then we will field anything through the webcast. subsequently. So operator, please do proceed with questions on the line.

[Operator]

[Operator Instructions]. Our first question is coming across. The first question is coming from Gordon Lawson of Paradigm.

[Gordon Lawson, Paradigm Capital]

So my first one is regarding your tax rate. It was a little high this quarter. Can you provide any guidance for the rest of the year? And how much of that is related to shipping concentrate versus smelted product?

[David Van Heerden, CFO]

No problem. Just to confirm, you are -- are you referring to income tax and deferred tax? Or are you referring to our royalties and indirect taxes that's disclosed in our C1 reconciliation?

[Gordon Lawson, Paradigm Capital]

No, I'm referring to the current and deferred taxes.

[David Van Heerden, CFO]

Okay. So the current and deferred tax would not change irrespective of whether we toll or whether we sell concentrate. And the provisional -- the tax for this quarter does include provisional tax adjustments on provisional assessments received, so just a minor accrual for that. So it's slightly higher than we would expect that to be going forward but not materially so. I think a fair modeling percentage going forward would be sort of what was experienced will be the average for last year, and we've just write-off slightly above 30%, which would be normal.

[Gordon Lawson, Paradigm Capital]

Okay. And my second question, if I may. The payable copper versus copper sold has been a little light the past few quarters. Should we expect some of these tonnes to come back in the next quarter or 2?

[David Van Heerden, CFO]

I think, yes. I think we can definitely expect some of the copper to come back. We do just like to mention that the inventory levels of finished goods at the end of December was pretty low. And we were able to clear almost everything on the floor just before the end of the year. So inventory levels have sort of normalized, but of course, we will try to clear those and make -- have our inventory levels as smooth as possible. So that will definitely flow through the income statement and income.

[Operator]

[Operator Instructions]. The next question will be coming from Andrew Mikitchook of BMO.

[Andrew Mikitchook, BMO Capital Markets]

Just a quick question. Maybe you can give some commentary on the trajectory of the logistics costs. They seem to have peaked, I guess, Q3 of last year, and you guys have -- recording significant improvements since then. Is that a trajectory that can continue? Or the new levels that we see now in Q1 what we should expect going forward?

[Martie Cloete, President]

Andrew, maybe I can venture a guess here. We've managed to get a good handle on our logistic costs. And obviously, what we've seen trending down was the shipping rates. We are, however, hopeful that in the longer term, we can get our trucking rates lower, too. We do foresee a bit of a backlog period as [indiscernible] starts exporting over the next couple of months. But we have put in place mitigation measures by negotiating dedicated trucking supply for Kamoa-Kakula. So we do not expect a massive increase in cost on our side. But we -- in the long term, we would like to see our transport costs trending slightly lower than what it was.

[Robert Friedland, Founder & Executive Co-Chairman]

Well, it's obviously going to be a lot lower. Obviously, it just depends how far you want to look forward or how much of a nitpicker you want to be for the next quarter or two. This is a 100-year mine. We're going to have a railroad through Angola, and we're going to be shipping finished metal of 99.7% copper. So obviously, our shipping costs are going to plummet to much lower levels if you're willing to wait a year or 2 in the mining business. That's a nanosecond in the mining business, young man.

[Operator]

[Operator Instructions]. At this time, there are no more questions in the audio queue. I'd like to turn the call back over to Matthew.

[Matthew Keevil, Director, IR & Corporate Communications]

Thank you very much, operator. We have a few webcast questions. I will kind of group them as there's a few that are a little bit similar in theme. First and foremost, just another follow-up, I guess, Marna, on logistics. This one on the Kipushi crossing. There's a lot of moving parts now with the railway and Kipushi coming on. If you could just give a bit more color on how these are all going to work together and sort of the timing of how these might ease logistics.

[Martie Cloete, President]

Thank you, Matt. So the Kipushi border in our mind is a short- to medium-term solution. We are planning to implement it as soon as we get signed off, which we anticipate to be in the next couple of months. That will alleviate border congestion that's currently exacerbated by the fact that all the trucks in DRC go through one main border and then there's a second border that recently opened up.

At the third border will allow us to have a dedicated line for both Kipushi and Kamoa to use, reducing standing time significantly for our truckers. The Angola rail will service Kamoa more directly with a direct link into Angola and that should then also alleviate traffic out of the country. We cannot put in place enough measures. There's a lot of projects ramping up in Congo. There's a lot of growth in Congo. And we think all these initiatives that we are embarking on are complementary to each other.

But we sort of box them into short, medium and long-term solutions and the border is sort of the immediate focus. Obviously, the rail will remain strategic and is also a greener solution. So we work closely with Trafigura in terms of being a key participant on that corridor.

[Matthew Keevil, Director, IR & Corporate Communications]

Great. Thanks, Marna. And next, I guess, one for Robert, maybe a little bit more of a macro theme one. There's been a lot of news flow recently on copper M&A and sort of the widespread interest vis-a-vis the Glencore Teck deal, et cetera. Robert, where do you see Ivanhoe Mines fitting into this world of heightened copper M&A? And where do you see the company going post the 3 assets we currently have under construction?

[Robert Friedland, Founder & Executive Co-Chairman]

I don't know, back to the previous question. The Congo is the absolute epicenter of copper development on this planet. President Félix Tshisekedi has recently met with President Joe Biden. He's about to go to China to meet with President Xi Jinping. Everybody on the planet wants copper metal, not only for the energy transition should there be enough copper to even have one and national security demands given that it's going to take an ocean of copper to rebuild Ukraine if we can ever generate a just and lasting peace there.

People don't really understand that Katanga is a happening place. The economic growth there is exploding. Places like Canada and the United States are sleepy by comparison. When people get to decide [indiscernible] that we have 5G wireless and they see such intelligent Yongkang writing code and to see how advanced things really are there. When that railroad gets going through Angola, bringing everything into this part of the Congo will be cheaper, whether it's steel or cement or any other material. And the hydroelectric capacity expanding just makes this literally the best place in the world to be mining copper.

According to independent observers, the Democratic Republic of the Congo has just nosed out or is in a close tie with Peru to be the second largest producer of copper in the world. Where does this audience think more copper discoveries are going to be made in the next 5 or 10 years? The DRC or Peru, or Chile for that matter.

Today, Codelco announced miserable production numbers for the Chilean government with $2.04 a pound cash cost and for 10 years, Chile has not been able to grow production. Where is the production exploding is right here in Katanga. Glencore knows it, and we agree this is the best place in the world to be mining copper, and we're proving it quarter-by-quarter. So please stay with us and understand this is a long-term business.

The average age of a person in the Congo, the median age is only 18 or 19 years of age. It's a young, hungry population, eager for a better life. Having operated in over 60 countries around the world, I took a lot of heat when I stood up at London and said, "I'd rather be mining copper in the Democratic Republic of the Congo than in Chile, but given the government of Chile announcing partial nationalization of their lithium metal, it's obvious that they've fallen on the wrong path.

And the leadership in the transformation of the world economy, depending on this copper metal, we're right here at the epicenter. I might add that we get a lot of visitors from the industry. One of the largest major mining companies in the world had a technical delegation underground at Kamoa-Kakula and they said that Kamoa-Kakula is the best mine in the world. And they also noted that they never could have done it themselves.

It took 30 years of dedicated effort by thousands of people to go to where the copper actually was and to participate in the rebirth of the country. So we'd like you all to join hands and enjoy the experience of watching Ivanhoe Mines become a major diversified mining company, turning the best of ESG and Canadian practices, idealistic practices as a sort of United Nations of people work together to find this metal that we desperately need.

We need to mine it in a green and clean way and that's exactly what we're doing. So hats off to Marna and her team, hats off to our Board of Directors, which is continuing to get stronger. And let's put our hands together and pray for the next big discovery because we're certainly working on it in Western Foreland and at the Mokopane Feeder. Thank you.

[Matthew Keevil, Director, IR & Corporate Communications]

Thanks very much, Robert. And next one, a rather popular question as well. Maybe one for David. I have a few questions on the shareholder loan, specifically in terms of Kamoa and scheduling on cash flow as well as consideration of potentially an upcoming dividend.

[David Van Heerden, CFO]

Yes. Thanks, Matt. I think it's been evident from previous quarters that Kamoa-Kakula is just a cash flow machine. And we are currently doing what we feel is the most value accretive and obviously using the majority of that and cash towards development of Phase 3. And at current copper levels, I think we definitely see Kamoa being able to successfully fund its proportionate share of that planned capital expenditure. And then who knows shareholder loans might start to get repaid sometime next year. And with Kamoa's cash-generating ability and the fact that Ivanhoe as everyone on the call now has a very limited debt, which is basically the convertible notes maturing in 2026.

And any additional cash flow could be either used to distribute back to shareholders. But who knows. It's fully dependent on other successes. Maybe we need the cash flow for building another mine at the Western Foreland. So I think the future is sort of open to us. But yes, we will have -- we do have a very strong cash generating business especially from 2025 onwards. And I think shareholders can expect to reap the rewards of that.

[Matthew Keevil, Director, IR & Corporate Communications]

Great. Thanks, David. And I think we have time for one more, so maybe a little airtime for Platreef as well, Alex. So I think maybe this one might be for you. Just on the scoping for Shaft 3, just some questions on sort of what the market can expect in terms of news flow from that study and a little bit more detail on when that might actually impact Platreef's development.

[Alex Pickard, VP, Corporate Development]

Yes. So it's a work in progress is the answer, Matt. Currently, we're working on the study on an internal level. And clearly, we will want to update our 43-101 at the right time, but we also have to figure out how to do that within the slightly complex confines of 43-101 where we already have a feasibility study on Platreef and this will be a slight amendment to that feasibility study. But in terms of the critical path, the only real decision, which is not a major CapEx decision, is whether we equip that shaft or not.

And I think we're basically willing to go ahead with that because irrespective of the timing of Phase 2, equipping that third shaft will give us a lot more flexibility in terms of the ramp-up of Phase 1. It's not a big-ticket capital item, and it derisks the Platreef proposition overall. So that's really what we will be looking to do over the next couple of years.

And then hopefully, we can bring forward that start date to Phase 2 from where it was originally constrained was the completion of Shaft 2 sinking in 2027. Hopefully, we can do better than that, as Marna mentioned.

[Matthew Keevil, Director, IR & Corporate Communications]

Great. And we are coming up on the 60 minutes and have sort of run our way through questions. So operator, I'll turn it over to you to conclude the call. Thanks again, everyone, very much for joining us for Ivanhoe Mines Q1 2023 financials.

[Operator]

Thank you. Thank you all for joining today's conference call. You all may disconnect now, and everyone, enjoy the rest of your day.