Ivanhoe Mines Ltd

TSX:IVN

Earnings Call Transcript 2022-Q3

[Operator]

Good morning, ladies and gentlemen, and welcome to the Ivanhoe Mines Q3 2022 Financial Results Conference Call. [Operator Instructions]. This call is being recorded today, November 14th 2022. I would now like to turn the conference over to Matthew Keevil, Director of Investor Relations and Corporate Communications. Please go ahead.

[Matthew Keevil, executive]

Thank you, operator. Hi, everyone. My name is Matthew Keevil, and I am the Director of Investor Relations and Corporate Communications with Ivanhoe Mines. It is my pleasure to welcome you to our Q3 2022 conference call. 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 review of your phone line. Given our time constraints, we will likely be unable to answer every question, but please follow up with the IR team after the call.

Before we begin, I'd like to remind everyone that today's event will contain forward-looking statements, which involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Details of these forward-looking statements are contained in our November 14th news release as well as on SEDAR and at our website at www.ivanhoemines.com. It is now my pleasure to introduce Ivanhoe Mines' President, Marna Cloete.

[Martie Cloete, executive]

Thank you, Matt, and welcome, everyone, to our third-quarter earnings of 2022. We've had an extremely busy quarter with our expansion projects at Kamoa and activities ramping up at Platreef [ and Bushveld ]. This quarter Kamoa-Kakula kept building on its reputation as a world-class mine with record sales of 94,000 tonnes of payable copper and copper production of 98,000 tonnes of copper for the quarter. This gives us the confidence to up the lower end of our production guidance to 325,000 tonnes of copper and concentrate with the aim to achieve the upper end of guidance of 340,000 tonnes of copper and concentrate. The debottlenecking project is now 70% complete, and it is expected to reach annualized corporate reduction of 450,000 tonnes of copper in the second quarter of 2023.

Our Phase 3 expansion activities are progressing well and is expected to increase production from Kamoa-Kakula to 600,000 tonnes by the fourth quarter of 2024. Our C1 cash costs continued to be impacted by higher-than-expected logistics charges. But with current mitigation measures in place, we reiterate our guidance and expect to be at the upper end of cash cost guidance for the year. To this end, we have tightened the range to between $1.35 and $1.40 per pound. Before our CFO, David Van Heerden discuss our financial results in more detail, I would like to provide a quick update on the efforts of our sustainability team. During the quarter, Kamoa-Kakula [indiscernible] at the Kamoa Center of Excellence, a rendering of this facility is in the background of the slide.

This center, once in operation aims to create a sustainable and community-centered learning environment in the heart of the DOC. It will be a world-class facility offering degrees, diplomas and short courses in collaboration with internationally accredited institutions. At our livelihood programs at Kamoa, our teams are expanding our community-forming footprint, which contributes to local entrepreneurs as well as food security. Our team at [ Plattery ] focus on enterprise and supply development to enable small and medium enterprises to be included in our supply chain. And at Kipushi, we focused on access to water with a borehole program underway to assist our communities.

With that, as a short introduction, I would like to now hand over to David Van Heerden for the financial results.

[David Van Heerden, executive]

Thank you, Marna, and good day to everybody for joining on the call today. The third quarter of 2022 was another quarter of exceptional performance at Kamoa-Kukula. However, the results was impacted by a further decline in the copper price at the end of the period and inflationary pressures, both of which I will discuss in more detail.

This call is, of course, just a high-level summary of our quarterly results and the presentation should be viewed in conjunction with our quarterly financial statements and MD&A for the 3 and 9 months ended September 30, 2022. During the quarter, Kamoa-Kukula sold almost 94,000 tonnes of payable copper and concentrate, leading to quarterly revenue from contract receivables of $570 million before negative remeasurement of $110 million at period end, bringing us to a total revenue of $460 million up for Q3. C1 cash costs for the quarter was a fraction higher due to the ongoing elevated logistics charges, but we will go into that in more detail in the coming slide.

Notwithstanding the lower copper prices in the quarter, the Kamoa Kakula generated a very healthy EBITDA of $254 million. Revenue from contract receivables booked at an average copper price during the month of sale was $570 million in Q3 compared to $699 million in the second quarter of 2022, with the sales provision priced at $3.48 per pound in Q3 compared to $4.32 per pound in the second quarter. Q2 sales was remeasured at the end of June at a copper price of $3.79 per pound, while the realized copper price for Q3 was $3.50 per pound. And at the end of September, the outstanding balance of provisioning price sales were remeasured using a copper price of $3.36 per pound, with these collectively resulting in the negative mark-to-marketing at the end of Q3 of $10 million.

The Kamoa-Kakula's cost of sales for the third quarter was $216 million in total and $1.05 per pound of realized copper sold, down from $1.15 in the second quarter. After deducting general and administrative expenditure, the operating profit for the third quarter of the year was $223 million. And Kamoa-Kakula EBITDA was $254 million. Kamoa Holding recorded finance cost of $81 million in Q3, which is principally the interest on the shareholder loans from IR ingestion as well as the interest on Kamoa-Kakula's equipment financing facility. The deferred tax and tax expense for the quarter was $57 million compared to $62 million in Q2 -- Q3. Noncontrolling interest of $20 million for the quarter represents the profit attributable to the DRC government's 20% interest in Kamoa-Kakula Mining Complex, leaving a profit of $69 million attributable to the joint venture partners, Ivanhoe share of which equals $34 million in Q3.

We move to the next slide, indicated at the top left of the chart, is the quarter-on-quarter comparison of Kamoa's revenue while also including the realized copper price in the period. The buildup of the year-to-date revenue to $1.5 billion has been exceptional considering the decline in copper price. The top right chart indicates the cash from Kamoa-Kakula generated from its operating activities. At the bottom left chart, underlining the strong quarter-on-quarter EBITDA performance and margin, which has been more than sufficient to cover the current expansion expenditure with a capital expenditure per quarter summarized at the bottom right-hand side. We move to the next slide, the Ivanhoe consolidated results for Q3. And the chart starts with average share of profit from the Kamoa joint venture of $34 million, which was mentioned 2 slides back.

Additionally, Ivanhoe earned interest income of $41 million from Kamoa Holding in the third quarter from shareholder loans advanced to the joint venture. During the quarter, the company spent $4 million on Western Foreland exploration and $9 million on general and administrative expenditure. Costs incurred at the Platreef and Kipushi project are deemed necessary to bring the projects to commercial production and will, therefore, capitalize as development cost in property, plant equipment. The $27 million loss on the fair valuation of the financial liability in the third quarter represents the change in the deemed fair value of the conversion feature attached to the $575 million, 2.5% convertible senior notes, which have now closed in March 2021.

The conversion feature is an embedded derivative financial liability the fair value change is principally due to the fluctuations in our share price. And the losses, therefore, result from the increase of Ivanhoe share price from the end of June 2020 to the end of September this year. Further, I want to recognize finance costs of $10 million in Q3 related mainly to the interest on the convertible notes at the effective interest rate. The aforementioned ultimately built up to 5s profit for Q3 of $24 million.

We go to the next slide. The cash cost per pound of payable copper produced for delivery to China was $1.43 per pound of payable copper for Q3 2022 and largely in line with the $1.42 per pound in the second quarter. The volume benefit from additional tonnes produced in the quarter resulted in decreases in G&A and processing costs but was offset by the increase in logistics costs. Concentrate production at Kamoa-Kakula doubled over the last year, which has not been met with a sufficient supply of trucking capacity and has led to an increase in the trucking contractor market pricing. In addition, the Lualaba Copper Smelter was closed in June for maintenance, thereby temporarily increasing logistics volumes and costs for the last 2 quarters.

The Lualaba Copper Smelter completed the scheduled maintenance in early September, which will assist in reducing overall shipping volumes -- the export blister copper incurs lower logistics cost per unit compared to copper concentrate. These factors, together with border congestion further increased trucking demand resulting in higher logistics costs. Importantly, though, Kamoa-Kakula was able to sell almost all tonnes in table copper produced in the quarter with a difference in payable copper sold and able copper produced be less than 1,000 tonnes. And as Marna mentioned, we still expect to come in on the upper end of our guidance range. So although our costs are higher than we like.

And the previous slide has indicated that Kamoa-Kakula still generate excellent EBITDA and cash from its operating activities. Thank you. I will now hand over to Alex Pickard, our Vice President -- no sorry, one more slide. Just looking at our strong balance sheet position, which supports our growth, we are well positioned for further development of our projects with $663 million in cash and cash equivalents on hand and consolidated working capital of $686 million. Other liabilities of $999 million, $610 million related to the convertible notes.

With these only due in 2026 with possible earlier redemption, while $284 million related to deferred revenue, which represents the prepayment for future sale of refined gold and palladium platinum to be delivered by the Platreef project in terms of our streams and the future - which in the future will be amortized as the ounces are delivered to the stream purchases. Our forecasted spend for the remainder of 2022 is $149 million on [indiscernible] as well as continued exploration on Western Foreland and overhead. All operating and capital expansion costs at Kamoa-Kakula are expected to be funded from copper sales and facilities in place at Kamoa. So we are forecasting a very healthy cash position at the end of the year.

I will now hand over to Alex Pickard, Vice President and Corporate Development; and Marna to provide a brief update on the development of our projects.

[Alex Pickard, executive]

Thank you, David, and good day to everybody on the line. It's Alex Pickard here, VP, Corporate Development. And I'll say I'm very glad you took us through the balance sheet there because I wasn't prepared to take over then. So now I'll take you through a brief update on Kamoa-Kakula operations and projects and also talk a little bit about our exploration efforts out in the field. First of all, looking at Kamoa-Kakula's operational performance, we are very pleased to report another record-breaking production quarter of 97,800 tonnes of copper-containing concentrate. This included 33,500 tonnes produced in September alone. So that comfortably exceeds an annualized production rate of 400,000 tonnes, and we were pleased to also repeat this level of production during the month of October.

The chart on the right-hand side gives a bit of an indication of how this was achieved. So as Phase 2 has reached steady state, we've gradually improved our billing rate. And so for the quarter, we milled close to 2.1 million tonnes, which was up from 1.85 million tonnes in the previous quarter. And at this milling rate, we're looking at an annualized overall milling rate of roughly 8.3 million tonnes. So that's exceeding our original design throughput of 7.6 million tonnes. We're also very pleased that the grades increased slightly during the quarter to 5.6%, and this is a reflection of the continuing optimization efforts that we're going through with our mining activities at Kakula in particular.

Given that Phase 2 is also now ramped up to full capacity, we are pleased to see that the recoveries are hitting our design target of very close to 86% overall. So where that leaves us today is that as of the end of October, we've produced just over 274,000 tonnes of copper. And as Marna mentioned at the beginning of the call, that's given us the confidence to increase the lower bound of our production guidance to 325,000 tonnes up to 340,000 tonnes of copper for 2022. Finally, just looking at the debottlenecking program, that's also tracking ahead of schedule. We are roughly 70% complete to date. And so we are targeting to be fully up and running by the second quarter of next year. This will increase the overall milling capacity to 9.2 million tonnes. So that's roughly 10% higher than what we milled in the previous quarter or in terms of copper production, that's around 450,000 tonnes of copper output. But we will be giving more detailed guidance for 2023 early in January.

Next slide, please. So moving on to our larger Phase 2 expansion project at Kamalakula. The construction activities are going ahead very much as planned, and we have no change to our target for commissioning in the fourth quarter of 2024. So this Phase 3 project includes the construction of a new mine and concentrator in the Kamoa area of the mining license. So that's roughly 10 kilometers to the north of the existing concentrator at Kakula. And as well as the mine and concentrator expansion, we will also be building the largest direct-to-blister smelter in Africa, which has a capacity of 500,000 tonnes of copper anode and we anticipate that the smelter will be very much a game changer for the overall logistics of Kamoa and will further reduce our cost structure, which we already feel is very competitive.

Where we are today, we've completed basic engineering for the entire project, and this will all be incorporated into a new technical report for Phase 3 and beyond that will be published early next year. And on-site, we are well underway with the earthworks in the early civil works. We are in the process of advancing new declines in order to open up the new underground mines at Kamoa 1 and Kamoa 2 that will ultimately support the Phase 3 concentrator throughput. On the power side, we are also busy with the refurbishment of turbine 5 at Inga II dam, which will provide an additional 178 megawatts of renewable power for Phase 3. And at that site at Inga, we recently completed mobilization with the contractors, and we're pleased to say that the manufacturing of the key long lead equipment is also well underway in China. Now moving on to our exploration activities and starting with the Western Foreland project adjacent to Kamoa-Kakula.

So currently, we are in the process of wrapping up the bulk of our regional large-scale drilling for this year as we now head into the wet season in the DRC. We've been busy drilling extensions at a zone known as Kakula West. So this is adjoining a copper discovery that we initially made in 2016, I believe it was known as Makoko. And then in addition to the drilling at Makoko, we are conducting stratigraphic drilling at Lupemba, which is located in the far southwest of the Western Foreland as well as testing for the edge of the Roan sandstone, which is to the north of the existing Kamoa far north mining area on the mine - on the Kamoa right main road.

Finally, a few weeks ago, we made an announcement that we've been awarded new exploration rights in South Africa. These are directly adjacent to Platreef's mining rights and are actually slightly larger in size than the 2 farms that make up the Platreef Mining right at roughly 80 square kilometers. So looking at the Diagram on the right-hand side as an illustration, what we are looking to understand is a very significant gravity anomaly, which is known as the Mokopane Feeder and the intersection of this anomaly with a regional fault system, which occurs on these new licenses. So following that award a few weeks ago, we are now kicking off with high-resolution geophysical work, and we look forward to providing more information on this new project in due course.

With that, I will hand back to Martie to finish off with Platreef and Bushveld.

[Martie Cloete, executive]

Thank you, Alex. Just a quick reminder that we are currently executing Phase 1, a 700,000 tonne per annum mine at our Platreef Project in South Africa, which is anticipated to start first production in the third quarter of 2024. Our

[Audio Gap]

[Matthew Keevil, executive]

Her line has dropped and somebody please take over.

[Alex Pickard, executive]

Sure. I'm happy to do so. So where we are with Platreef today is based on the completed Shaft 1, we are well underway with the underground mining. So we've completed over 300 meters of lateral development work. What we're doing right now is working towards the bottom of the first ventilation shaft, which will allow us to significantly increase the number of crews in the mining activity underground. On surface, we have a lot of activity going on. We started the construction of the processing plant for Phase 1. So the civil works are underway there. The long lead time orders have been placed.

We are also in construction with the first 5-megawatt solar power plant for Platreef and that's largely to support our construction activities and also to charge the battery electric underground fleet that we are trial using at Platreef today. In terms of the remainder of this year, we are forecast to spend $72 million. As David mentioned, all of our expenditures at Platreef are currently being funded by the streaming agreements and we made the final drawdown on the $300 million facilities. So we are very much targeting first production in Q3 of 2024.

There's no change there. But really, with Platreef, we're much more excited about the ultimate expansion and scale of this project which will be dictated by Shaft 2. So we are continuing with the sinking works of Shaft 2, you will start to see the head frame going up very quickly there. And ultimately, the goal with Platreef is to become one of the largest and lowest cost producers of the PGM metals, platinum, palladium, rhodium gold as well as a significant quantity of nickel and copper, which contribute roughly up to 30% of the total value of the resource at Platreef.

Next slide, please. And at Kipushi, we've also had a very busy quarter in terms of we kicked off with a breaking of ground ceremony in August. So that was attended by Ivanhoe Mines members of the DRC government as well, of course, as our partners, Gécamines. So the first concrete port took place last month, and we are in the process of ordering the long lead items for the processing plant. That is all underway. We have mining crews operating underground now at Kipushi for the first time since the early 1990s. So that's a very exciting milestone for the team on site.

And also, we announced that we have a study underway, which is to investigate options to upgrade the DRC and the aboard a crossing at Kipushi, which will allow Kipushi to have a direct access for commercial imports and exports and will also hopefully have knock-on positive effects for Kamoa. We hope to come to the market soon with an update on our financing and offtake discussions, but it's safe to say they are well-advanced with several interested parties. And looking at the overall schedule for Kipushi, we are keeping the project on track for an 18- to 24-month construction timeline overall. So looking to have Kipushi together with Platreef, together with the third phase of copper all in production by the end of 2024.

Perhaps with that, I will pass back to Matt Keevil to fund the Q&A.

[Matthew Keevil, executive]

[Operator Instructions]. First and foremost, I think we'll hand it back to the operator just to get to everyone who's waiting on the line. Operator, could we jump over to some questions on the line, please?

[Operator]

Ladies and gentlemen, we will now begin the Question-and-Answer Session. [Operator Instructions]. We'll take our first question from Lawson Winder with Bank of America Securities.

[Lawson Winder, analyst]

Can you hear me fine?

[Martie Cloete, executive]

Yes.

[Lawson Winder, analyst]

Okay. I just wanted to ask about the logistics costs. So just to begin with, the $56 per pound reported in Q3 2022. Are you able to break down for us how that split between Lualaba being closed versus trucker availability and border issues?

[David Van Heerden, executive]

Yes. I think, Lawson, it's -- I mean, it's a bit of an interesting mix. Although with the - we would say order issues probably around and these are all not magnitude estimates, but border issues around $0.03 per pound. And if we look at the -- just the increase in cost from our logistics service providers, that's gone up around 20%. I think if we look at ocean freight that we have seen an increase, I think, globally over past quarters, but we've seen that come down in Q3. So it's a combination of everything. If we look at the -- if we compare the smelter with concentrate logistics charges on a like-for-like comparison, and there's about a 20% difference book bound between the 2.

[Lawson Winder, analyst]

Okay. Maybe I'll ask it a - I'll ask this question again, but maybe from a different point of view, which is like looking into 2023, do you expect $0.56 per pound to be the transportation cost going forward?

[David Van Heerden, executive]

Listen, I think we would like to see where logistics cost goes with our current initiatives that we've announced and see what impact that's got on the cost in the near term. And as that becomes apparent, we will look to include that in our guidance provided for 2023, which we will issue early next year.

[Lawson Winder, analyst]

Okay. And then also a similar question. What was the exit rate cost from the quarter. So as of like September 30, 2022, to what -- where would you have been running? Would have been above 56% or below that $0.56?

[David Van Heerden, executive]

So exit costs at the end of the quarter and below 56% because of the fact that we utilized Lualaba in September.

[Lawson Winder, analyst]

Do you have a specific number of a chance?

[David Van Heerden, executive]

I think I don't want to be too specific and give too much information other than that we still expect to be within our guidance range for the fourth quarter.

[Lawson Winder, analyst]

Okay. And then just maybe one final question for me on the head grade. So I think -- the expectation for a couple of quarters had been that head grades would start to approach 6%. Why do you think it's still running a little bit below 6% and then into Q4 or into 2023, is 6% head grade to the mill, a reasonable expectation?

[Alex Pickard, executive]

Maybe I'll give color on that one for you, Lawson. So look, I guess, in terms of where we are today, it's really a function of how much can Kakula on a stand-alone basis because, of course, Kakula has significantly higher grades than Kansoko. So how much can Kakula supports the current milling rate, which, as I mentioned in my section, as of the last quarter was about 8.3 million, 8.4 million tonnes per annum.

And today, Kakula was not necessarily planned to be able to support that in full, but that is a work in progress. And what that means in practice is doing effectively more development along the sites of Kakula to open up more panels so that we can have a greater availability of these high-grade panels for the mining crews at Kakula. So that sounds very simple in theory, but in practice, it does take some time to get it right. There is a bit of a lag. It will require putting in more or handling infrastructure.

So for example, we're looking at an additional conveyor to complement the Kakula South decline. And all of this will take some months to get up to speed. We're very confident that we will get there. But in the meantime, we will continue to feed or from the run of mine -- or sorry, I should say, really the development stockpiles, which comes in at a slightly lower grade, but the advantages that's already been paid for effectively from a cash flow point of view, and we can keep our mill as full as possible in the meantime.

So looking forward to 2023, we've got this double effect because while we should be catching up from a mining point of view and having more availability, the mill also isn't standing still. We'll probably have an additional 1 million tons of capacity following the debottlenecking. So the mine will continue to catch up through 2023. In terms of where we get to, I'd say, we'd hopefully be somewhere between 5.6% and 6%, but we will probably give a more firm view on that at a later date.

[Operator]

Next, we'll go to Farooq Hamed with Raymond James.

[Farooq Hamed, analyst]

My question is maybe a little bit bigger picture. Just looking at your CapEx expenditures, they seem to be ramping up as we get into the fourth quarter here. And as we talk about your project timelines with all 3 projects, either the expansion or would Platreef and [ Bushveld ] being delivered in the second half of 2024? It looks like there's going to be quite an increase in intensity here at all 3 sites. So I'm just wondering, we've looked at other companies when they start expanding and start trying to do work on multiple assets at the same time.

There tends to be an increased risk of timeline slippage of projects starting to have creep in different ways, cost creep, whatever it may be because you have just so many fronts that you're moving forward at the same time. So can you talk a little bit about what sale safes or what processes do you have in place to ensure that you can move all 3 projects forward on the timelines that you have guided for without having the risk that we've seen multiple companies in the mining industry have in the past?

[Martie Cloete, executive]

Maybe I'll take this one. We've made a great effort in ensuring that we learn from what we've done at Kamoa. We've recently announced that Mark Farren joining us as our Chief Operations Officer, and he started on the 1st of November, so is fully back in the saddle. You'll probably join us on the next quarterly call. We've also pulled Steve Amos who did the project execution at the [ Makokula ] into the group to ensure that we take the learnings forward from Kamoa-Kakula. What we've also done over the past year is capacitating both Kipushi and Platreef with the right kit levels to ensure that we can deliver these projects because we do know what it takes.

And we are ensuring that we remain on track with long lead order items. We schedule things well in advance. And I must say we do have a competitive edge with our Chinese shareholders assisting with procurement out of China and ensuring that everything remains on track. So I think we actually have an edge of our peers in terms of our structures with our shareholders to deliver these projects. In terms of capital allocation in the earlier part of your question, we've carefully crafted each and every project to sustain to be able to sustain itself with local facilities and also be augmented by Ivanhoe Mines or Kipushi and Platreef in terms of our treasury. We flushed all those numbers through. And we are comfortable that we will be able to execute these projects with confidence over the next 2 years.

[Farooq Hamed, analyst]

Okay. No, that's helpful to understand what you've done internally and the benchmarking you've done on the capital. Just a follow-up to that then. Given that these projects are really getting started and obviously, they have been started before, but in earnest here, do you intend to provide milestone updates on a quarterly basis to the market so that we can see how these projects are tracking individually so that we know when to anticipate production and if there are issues that arise along the way?

[Martie Cloete, executive]

Most definitely, we joke because everything is happening in 2024 for us, we'll be delivering the smelter and Phase 3 at Kamoa-Kakula in 2024. Platreef going to production in Q3 of 2024, Bushveld will go into production in 2024. So you will see a lot of news flow from us over the next couple of quarters to show you the progress as we do the bolts at both Platreef and Kipushi and as we ramp up our construction activities at Kamoa-Kakula.

[Farooq Hamed, analyst]

Okay. And then maybe just one last one for me. Just as it relates to the CapEx estimates. So for Platreef, I believe it was $488 million and $382 million at Kipushi. Those numbers were provided earlier in the year. Across the industry, we've seen inflation impact CapEx estimates for projects and brownfield projects and greenfield projects. So can you tell us how are you tracking to that -- to those estimates that you provided at the beginning of the year? Are you seeing inflation pressure on those costs? Do you anticipate having to remeasure those costs in the coming quarters? Or at this point, are you still comfortable with those CapEx estimates?

[Martie Cloete, executive]

So we are comfortable to a large degree because we did place a large number of the long-lead order items based on our cost estimates. But we are seeing some element of inflation and where we are seeing inflation that will be communicated once those numbers are firmed up. But it's not inflating the numbers to a degree where the project will be impacted severely negatively, but it is normal inflation that we are all seeing coming through. I don't know, David, if you maybe want to add a bit more granular information on the capital inflation we are seeing.

[David Van Heerden, executive]

No. Thanks, Marna. I think you've summarized it well. And together with our production guidance, which we will issue early next year. We will also update the market on our guidance around our capital expenditure for 2023. And that would include a more detailed indication of where we see there has been inflationary pressures and increases. It's just a bit maybe a bit more granular detail, I think, on Platreef, specifically because of the weakening of the South African rand and the impact of inflation has been less felt when compared to Kipushi, for instance. And then on Kamoa, we've got the benefit of being bit with the pre-feasibility study at this stage. And so we can build in any -- the latest estimates on inflation as well, and that will be reflected in the study.

[Farooq Hamed, analyst]

Okay. And sorry, did you just say the timing of that study?

[David Van Heerden, executive]

So the timing of that study is late this year, early next.

[Operator]

Next, we'll go to Andrew Mikitchook with BMO Capital Markets.

[Andrew Mikitchook, analyst]

I just want to go back to the Western Foreland exploration that Slide 16, if I'm reading this correctly. I just go back to the significant the prioritizing of Lupemba and new CG versus the regional work and extending the [ motivation ]at Makoko West. Just so to end to that, please.

[Alex Pickard, executive]

Andrew, perhaps I'll take this one. Look, it's difficult to give a definitive view on priority ranking, but they are looking to achieve different things. So perhaps starting with Makoko, that is more I would view it as low-hanging fruit in terms of expanding our knowledge of an existing deposits and seeing what additional resources we can add to that area. So we're drilling there with a reasonable degree of certainty, whereas what is going on elsewhere in the license, whether that is Lupemba which is in the far southwest or Mushiji in the North is what we're trying to do really is cut the net as wide as possible to begin with on the Western Foreland as a whole to test our knowledge based on the geophysics and the geochem information that we've acquired over the last couple of years.

And really what we're doing is testing our knowledge of the underlying basinal structure and what leads to the Kakula style mineralization that ultimately we're searching for. And then if we don't find exactly what we're looking for because we've gone beyond the bounds of the Roan sandstone, which is the horizon that we're looking for, in particular, we bring the netback narrower and closer towards our existing operations. But obviously, there's a very rational reason for testing the edges and the perimeter of the portfolio first because we're not done in terms of looking at what else might be out there in the Western Foreland. So hopefully, that just gives a bit of context as to the -- yes, it's not so much the ranking, but how we see things.

[Operator]

Thank you So we have no further questions on the phone. I'll turn it back over to Matthew Keevil for further questions.

[Matthew Keevil, executive]

Thanks very much, operator. We have time for a few from the web. So we'll dive in -- there's a few repeats here, so we may consolidate some questions as we move forward just to get through as many as possible. But first and foremost, we'll start at the top. Marna, David, this is probably a good question for you. This is a popular one on the web client. Given the volatile copper environment recently, how have your expectations changed in terms of shareholder returns, dividends and the repayment of those loans over the next 5 years?

[David Van Heerden, executive]

I think dividends and shareholder returns is of, obviously, copper price dependent. I think at the moment, the focus is on expansion because we do feel that firstly, expansion of Phase 3 [indiscernible] of the most value-accretive thing we can do. And then also the continued development at Platreef and Kipushi. As we've highlighted on the call already, everything comes to an end at -- in 2024. And I think after that, this would definitely be a lot of options open to us.

[Matthew Keevil, executive]

Great. Thanks, David. The next one, Marna, I think this is probably well-placed for you. To just elaborate a little bit on the logistics situation within Congo as well as what's going on regionally in terms of those transport items.

[Martie Cloete, executive]

We've experienced a few issues this first quarter around border congestion. And I think we had a couple of breakthroughs. During the previous quarter, there was only one border, which is Kamoa-Kakula that was open for imports and exports. Subsequently, [ Makoko ] also opened for imports and exports, and we've got a third border that's available for imports in Congo. We ourselves are currently working on a solution at Kipushi that will also cater potentially for volumes from Kamoa, which would further alleviate pressures but ultimately, we are also looking at rail solutions, which we see as the medium- to long-term solution for Kamoa-Kakula.

Not only is it a greener solution, but it will be a cheaper solution, a much shorter route, if we follow the Western corridor. So that's a development that we have a keen interest in. We have been working with our local logistics service providers to ensure that we get guaranteed trucking availability to Kamoa-Kakula. We haven't really experienced truck shortages over the past quarter. We've had enough availability of trucks. -- but it's really been around turnaround times on borders. One of the big items that we did also managed to negotiate with longer operating hours at some of the borders and that also made a huge difference. It does take, however, a bit of time for these costs to flush through your balance sheet and the income statement. So we're hoping to see some of the fruits of our efforts in the fourth quarter.

[Matthew Keevil, executive]

Thanks, Marna. And just one another popular question on the web. Alex, this is probably best position for you. Talking a little bit about the company's broader not necessarily M&A strategy but growth strategy following the Mokopane Feeder acquisition? And what do you see moving forward in terms of exploration and development?

[Alex Pickard, executive]

Thanks, Matt. It's a good question. Look, I think our announcement with the Mokopane Feeder, hopefully, it illustrates to the market that we're certainly not done with the 3 projects that we are advancing into production or sorry, in the case of [ Mokopane ] production but expanding. And as we've alluded to on this call, we see a really pivotal year for Ivanhoe Mines in 2024, where we will be a material producer with 3 effectively diversified assets online. And that naturally leads to a bit of a question about what's next in the hopper.

I think where Ivanhoe Mines has had its greatest successes in the past have been with the drill bit, but also with our differentiated approach to project development and the project development expertise that we've certainly built up with Kamoa-Kakula. And we feel that there are value accretive opportunities out there to find things in a similar vein where we can apply our model and hopefully generate the fourth and fifth and sixth projects, major projects for the Ivanhoe Mines portfolio. So yes, we're certainly interested. We're certainly looking around.

[Matthew Keevil, executive]

Great, Alex. And with that, we've run slightly a bit over our time. So we'll conclude the call. So yes, this concludes Ivanhoe Mine's Third Quarter 2020 Financial Results Call. Thanks again for everyone attending, and we look forward to speaking to you about the exciting milestones coming in 2023. Again, if you add outstand any questions, please do not hesitate to reach out to our IR team, and we can answer those on a one-on-one basis. And with that, I will pass over to the operator to close the call.

[Operator]

Thank you. Ladies and gentlemen, that concludes the conference call for today. We thank you for your participation. You may now disconnect your lines.