Ivanhoe Mines Ltd

TSX:IVN

Earnings Call Analysis

Ivanhoe Mines Q3 Financial Performance

In Q3 2023, Kamoa-Kakula witnessed a 5% drop in copper sales, selling just over 96,500 tonnes, but with revenue up by more than 50% from the previous year at over $2 billion year-to-date. Production costs rose slightly to $1.46 per pound, a 3% increase due to inflation on operating costs. EBITDA for Kamoa-Kakula softened by 7% to $423 million, while Ivanhoe's group-level adjusted EBITDA for the 9 months to September 2023 grew to $496 million, up from $325 million year-on-year. The company confirmed that Phase 3 expansion is progressing well, with no change to 2023 CapEx guidance. Copper production is on track to meet annual guidance of 390,000 to 430,000 tonnes, suggesting a robust end of year and exciting milestones anticipated for 2023 and 2024.

Strong Environmental Responsibility and Presidential Recognition

In 2022, Kamoa-Kakula, a significant project under Ivanhoe Mines, not only boasted among the world's lowest carbon emissions per unit of copper produced but also operated with an impressive average copper grade of 5.5%, which is strikingly higher than the global average. Such high-grade mining, powered by 99.5% hydroelectricity from the DRC grid, positions the company well within the sustainability frontier. Moreover, the project received distinguished attention from DRC authorities, with a Presidential visit driving high worker morale and underscoring Ivanhoe Mines as a transformative force in the region's mining landscape.

Q3 Financial Performance and Inventory Build-up

For Q3 2023, Kamoa-Kakula witnessed a small setback with a 5% decrease in payable copper sales compared to Q2, slightly bumped by inventory build-up which is expected to unwind in Q4. This translated to only a minor 1% revenue dip from the previous quarter, showcasing resilience with a more than 50% revenue boost from the same quarter last year. The Q3 realized copper price marginally increased from Q2, helping Kamoa-Kakula's YTD sales surpass $2 billion. An uptick in costs, affected by inflation and increased diesel usage, nudged cash costs upward to $1.46 per pound of copper, remaining within the guidance. Earnings before interest, taxes, depreciation, and amortization (EBITDA) for Kamoa-Kakula saw a 7% quarter-on-quarter decline, largely due to these factors.

Strategic Investments and Solid Cash Position

Despite a slight revenue and EBITDA downtick in Q3, Ivanhoe Mines has continued its significant investments across its projects, maintaining a solid growth trajectory and is committed to its 2023 CapEx guidance. With substantial investments in expanding the Kamoa-Kakula Phase 3 and advancing other projects like Platreef and Kipushi, the company has demonstrated a calculated commitment to its operational and strategic goals. Additionally, managing a healthy cash balance of $303 million provides the firm with ample liquidity to support its ambitious agenda.

Year-to-Date Production and Financial Outlook

Ivanhoe Mines has reported a robust year-to-date copper production reaching over 300,000 tonnes, setting a solid foundation for its Q4 expectations. The financial strength is further cemented by an adjusted EBITDA of $496 million for the nine months ending September 30, 2023, reflecting the progress Ivanhoe Mines has made despite the global economic headwinds. With its unique position in copper mining and dedication to sustainability and growth, Ivanhoe Mines is poised to continue its trajectory as a premier player in the industry.

Earnings Call Transcript 2023-Q3

[Operator]

Good day, and thank you for standing by. Welcome to the Ivanhoe Mines Third Quarter 2023 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.And I would now like to hand the conference over to your speaker today, Mr. Matthew Keevil, Director of Investor Relations and Corporate Communications. Sir, please go ahead.

[Matthew Keevil, executive]

Thank you very much, operator. Hello everyone and good day. This is Matthew Keevil, live from Vancouver. It's my pleasure to welcome you to the Ivanhoe Mines third quarter 2023 financial results conference call. On the line today from Ivanhoe Mines, we have Founder and Executive Co-Chairman, Robert Friedland; President, Martie Cloete; Chief Financial Officer; David Van Heerden; Chief Operating Officer, Mark Farren; 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 again submit a question using the Q&A box on the webcast page as well as through the conference operator via your phone line. Please contact our IR 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 news release today, November 6, as well as on SEDAR plus and at www.ivanhoemines.com.It is now my pleasure to introduce Ivanhoe Mines' Founder and Executive Co-Chairman, Robert Friedland, for some opening remarks. Robert, please go ahead.

[Robert Martin Friedland, executive]

Thank you, and welcome to everybody participating on this call. I have the good fortune to be in California on the U.S. West Coast. Ivanhoe Mines has had a stellar third quarter. We couldn't be happier to present our prospects.We're starting with an opening image on the 5th of October when His Excellency Felix Tshisekedi, the President of the Democratic Republic of the Congo, together with a senior government delegation led by Prime Minister, Sama, visited our campus in the opening of our Kamoa Centre of Excellence, an educational institution that we've established, because this is going to be a hundred-year mine training generations of young Congolese.We were very happy to tell you that over 97% of our employees are from the Democratic Republic of the Congo, and one of our major commitments is to invest in the labor force, both women and men, who are doing such a fantastic job at developing, a copper district the world desperately needs.In -- recent weeks, we've had the -- tragic situation in the Middle East compounding the conflict over the fate of Ukraine, considerable tensions in the world economy against the background of the Federal Reserve Board raising rates. On Friday, there was some indication that the Fed's ability to raise rates may be on pause perhaps permanently.In a period of time when copper inventories are extremely low, it is difficult to give this audience an idea of how many people have approached Ivanhoe Mines, to participate in the unparalleled potential of the Western Forelands, which is unequivocally the best hunting ground for copper on this planet, we all share.Those of you who listen to my public remarks know that we think there's no chance, whatsoever, of a meaningful energy transition, without a lot more copper mining. And there's no point in mining copper if you're going to generate copious amounts of global warming gas to try to get the metal you need to reduce the generation of global warming gas.So the reinvention of mining by the women and the men that run our company, led by our President, Marna, who'll speak next, serves as a beacon for the industry, to prove that we can do things differently.In this quarter, we announced that an independent audit has shown us to be the greenest major copper producer in the world. We're building the greenest major copper smelter in the world, which will very much reduce our Scope 3 emissions to essentially the best in the industry. And I'm very happy to welcome the support from the G7 nations' President, Joe Biden, and his emissary on all things energy transition, Amos Hochstein, who announced European and American support for the Lobito Corridor.That corridor will run from Kolwezi to the Angolan border and then to the Seaport of Lobito, and will sharply reduce our Scope 3 carbon dioxide emissions. It will reduce the amount of capital we will need to develop new mines in the Western Forelands, in fact, that railroad will go right over our Western Forelands holdings on the way to Angola.And that means that our cutoff grade, can come down and the threshold for having spectacular economics in the Congo will do nothing, but improve. So there's a number of trends underway that are leading to a better and better Democratic Republic of the Congo.I've said unequivocally that the DRC is the best place in the world to be mining copper metal. And I've repeatedly said that, having operated in 64 countries, I find it perplexing the discount rates that, people are applying in some banks for the world's best place to go mining.When people actually go there and see the 5G wireless, the young labor force, the availability of hydroelectric power, the extremely high grades, the lack of ice and snow, and the engaged labor force, everybody working there with such dedicated efforts. I can tell you, at my age nothing could make us happier than the progress we're making for all of our stakeholders.Hats off to Marna and her extraordinary team of managers, who've created the best corporate culture in the mining industry. And hats off to this incredible quarter, where we can report that, we're comfortably and well ahead of schedule in the construction of our Stage 3 concentrator, and we're also well ahead of schedule, for the startup of the Kipushi Zinc, Copper, Silver mine, which also has a very significant potential endowment of gallium and germanium. Two metals that we have not even counted in the economics of the project, but for which there is potential for recoveries from the refining process.I just want to remind everybody that what Ivanhoe Mines, is doing is unprecedented. We're building up several major projects at once. The Kamoa #1 mine and the Kamoa #2 mine, which are now co-joined underground. The Phase 3 concentrator with the world-class smelter, which is a direct-to-blister smelter state-of-the-art and very, very clean and powered by hydroelectric power.The Kipushi Mine and the Platreef Mine all going into production. And now Platreef at an ever expanded rate opening soon at a theater near you. And then on top of that, we have our exploration efforts in the Western Forelands and initiating now at the Mokopane Feeder probably the world's largest potential mineral target in South Africa. So, we have a very bright future ahead of us. We'll be talking about this in subsequent months. I'm off to Abu Dhabi to speak at a conference later this week.And with that introduction, I'll turn this over to Marna who has done such an incredible job in the last quarter. Marna?

[Martie Cloete, executive]

Thank you, Robert. Thanks for the kind words. And I think you've covered most of our highlights in your intro, but maybe just looking at that picture in front of everybody, that's a photo of our mining management team, when they completed the holding between Kamoa 1 and Kansoko, the 2 mines that will form part of our Phase 3 mine. And you can see everybody's very proud of that achievement.We had a great quarter again, and I always feel a bit guilty that I get to present sort of the highlights in the first opening salvo, but we had another production recorded in the third quarter. We produced close to 104,000 tonnes of copper. And I think what we are most proud of is our cash cost at 1.46 pound per -- $1.46 per pound of copper average for the year-to-date is $1.43. We think we've done a great job in containing our cost, and we will continue to do, so and stay within guidance towards the fourth quarter.As Robert mentioned earlier, Kipushi is ahead of schedule, planning to start production in the second quarter of next year. Platreef is on schedule for production in the third quarter. And as we mentioned, Kamoa Phase 3, the concentrator plant, is ahead of schedule for the third quarter, and that would allow us to get some early tonnes out next year, our guidance we will put out in January of next year. So check this space.On the next slide. Our total recordable injury frequency rate across all three of our sites is well below the industry average. But it is regrettable that we had a fatality at Kamoa-Kakula due to a fall of ground, we investigated the fall of ground and we implemented mitigating measures to prevent a reoccurrence.Safety in the mining industry requires continued focus, from each and every individual employee and contractor, and we share our learnings across the industry and our operations, to continuously strive towards a culture of zero harm, which we aspire to at each of our sites.Robert briefly touched on our greenhouse gas emission intensity study. Our team recently announced, the findings of an updated greenhouse gas emissions assessment that, we commissioned from Skarn Associates and WSP Group. And this report confirms that in 2022, Kamoa-Kakula produced among the lowest carbon emissions per unit of copper in the world and the lowest of any major mine -- of the any major copper mine.This is partially due to the incredibly high grade at Kamoa-Kakula, where we molt an average grade of 5.5% in 2022, it's roughly 10 times higher than the estimated average copper head grade globally of 0.6%. It is also a function of the DRC grid, being amongst the world's cleanest with 99.5% of grid power generated from hydroelectricity.And on a Scope 1 and 2 basis, Kamoa-Kakula's greenhouse gas emissions intensity in 2022 was amongst the world's lowest. It ranks Kamoa at the bottom for Scope 1 and Scope 2. And with the commissioning of the smelter, we will also see a 46% reduction in emissions once we include Scope 3 emissions.And then last from me, but not least, we were privileged to host the President, His Excellency President Felix Tshisekedi, the first lady, the Prime Minister, the Governor of the Province as well as a host of other delegates at Kamoa-Kakula during October. The President spent about two hours on site. He addressed our first index of students at the Centre of Excellence, spending some quality personal time with each of them.He then took a tour of the mine, saw what we are busy constructing at the smelter and addressed our staff in our concentrator shed. It created such a high sense of morale for all our workers and the President was pleasantly surprised, to see this world-class facility in his backyard.He mentioned Kamoa-Kakula when he went to announce his Presidency, and I think that is really a feather in our cap to show that we are really a game changer in the DRC in terms of how we run our business. We do mine with a greater purpose.So with that as an intro, I will now hand over to David Van Heerden, our CFO, to take you through the quarterly financials.

[Alex Pickard, executive]

We are just checking, because we can't hear David's audio. Please just bear with us. [Technical Difficulty]

[Operator]

One moment, please. The speaker will be on momentarily.

[David Van Heerden, executive]

Hello Alex. Can you hear me now?

[Alex Pickard, executive]

Hi, David. Yes, there you are. Please go ahead.

[David Van Heerden, executive]

Great. There I was talking away. Thanks, Marna, and good day to everybody joining the call today. Kamoa-Kakula sold just over 96,500 tonnes of payable copper in the third quarter of 2023. That was 5% down from the 101,500 tonnes sold in the second quarter. Even though production was slightly higher, copper and concentrate held in inventory increased to over 10,000 tonnes at quarter end, with more than 7,000 tonnes thereof being copper in work in progress, sent for tolling at the local smelter in Q3.We expect excess inventory to unwind in the fourth quarter. With a slight decrease in tonnes sold, revenue at Kamoa-Kakula was down only 1% from the previous quarter and up by more than 50% from Q3 last year. With the realized copper price for Q3 of $3.84 per pound being slightly up from Q2. The Q3, 2023 sales takes Kamoa-Kakula's sales for the year-to-date to well over $2 billion, up from $1.5 billion for the same period last year.Q3 cost was slightly higher with the third quarter coming in at a $1.46 per pound of payable copper produced, just 3% up from the average over the last year. The quarter-on-quarter cash cost increase reflects some impact of inflation on maintenance and operating costs at Kamoa-Kakula, as well as the increase in processing costs driven by higher diesel usage to run generators.Cash cost for the year-to-date is -- $1.43 per pound and below the midpoint of our guidance, which we reiterate. Kamoa-Kakula's EBITDA was $423 million in the third quarter of 2023 and was 7% down, when compared to Q2, 2023.EBITDA and EBITDA margin quarter-on-quarter was down due to the decrease in tonnes sold as well as realized foreign exchange, which is illustrated nicely in the next slide. The 5% decrease in tonnes sold mentioned earlier was responsible for a $34 million decrease in EBITDA, and we expect Q4 to reap the benefits, as inventory unwinds.The decrease in the copper price at, which provisionally priced sales recorded in Q3, had an $8 million impact, while the quarter-on-quarter change in the re-measurement of revenue, which was a gain of $13 million in Q3 and a loss of $28 million in Q2 had a $41 million impact.The $32 million decrease to the right was as a result of the slightly higher cash cost in Q3, but also due to the realized foreign exchange causing a $14 million swing quarter-on-quarter.As one would expect after seeing the previous slide. Ivanhoe's Group level adjusted EBITDA for Q3 decreased from Q2, with a decrease directly linked, to the decrease in Kamoa-Kakula's EBITDA explained on the previous slides and the decrease in Ivanhoe's share thereof, as a result.Ivanhoe's adjusted EBITDA was $496 million for the 9 months ending 30 September 2023, and that was up from $325 million for the same period in 2022. We recognized income in aggregate of $121 million from Kamoa-Kakula in Q3, a combination of Ivanhoe's share of profit from the joint venture, which is illustrated in the chart at the bottom left of your screen.Together with the interest income of $51 million in Q3 on loans to the joint venture. Ivanhoe recorded a quarterly profit of $108 million in the third quarter, driven by this income from Kamoa-Kakula. And on the right hand side, we have once again presented our reported net profit alongside the normalized net profit, which excludes fair value adjustments on the convertible notes for each period.We have recorded a steady increase in profit through the commissioning and ramp-up of Kamoa-Kakula's. Phase 2 and debottlenecking, but this slide just illustrates a very small part of Ivanhoe's activities during the quarter. With so much more being worked on that will generate short-term growth at all of Kamoa-Kakula, Platreef and Kipushi.The third quarter saw us continue the expansion of Phase 3 at Kamoa-Kakula with over $320 million invested thereon in the quarter, with a total investment in 2023, now just over $1 billion. We also continue to progress both Platreef and Kipushi's development with investment in CapEx of $64 million and $74 million respectively in the quarter and both projects are tracking very well, as Alex and Mark will take you through in more detail in upcoming slides.2023 CapEx and CapEx guidance and spending plans remain unchanged at each of these projects. And Ivanhoe Mines has a healthy cash balance of $303 million at the end of the period, with limited debt other than the $575 million convertible notes maturing in 2026, providing plenty of balance sheet flexibility. Additional standalone facilities at each project is well advanced, most of which are expected to be closed in the very near term.I will now hand over to Alex Pickard, our Senior Vice President, Corporate Development and IR, to commence the operations and projects update.

[Alex Pickard, executive]

Thank you, David. I'm glad we found you there. And good day to everybody on the line from London. Today, we also have Mark Farren, our Chief Operating Officer, joining us directly on the line from Kamoa-Kakula.So, I will kick-off on Kamoa-Kakula, and then I will hand over to Mark to take you through the latest updates on our project and our construction activities. And as you also heard, we also have the Executive Co-Chairman, Robert Friedland, who will provide an update on the Western Foreland and close the call out before our Q&As.So starting with Kamoa-Kakula, as Marna mentioned, we are very pleased to report another record quarter. And so, we just shaded the second quarter by producing close to 104,000 tonnes of copper in concentrate. This brings our year-to-date copper production to 301,336 tonnes, so that places us well on track to meet our initial guidance range for the year, which was 390,000 to 430,000 tonnes of copper and concentrate.From the perspective of the recoveries, they were very consistent, in fact, exactly in line with the previous quarter at 87.2%. Again, this is higher than our design recovery rate of 86%.And on the next slide, I will talk a bit more about our tailings recovery project that we announced a couple of months ago. It's also important just to note that both the quarter [technical difficulty] 00:23:30 and the solid recoveries that we have been achieving have been done so and in spite of the intermittent power issues that, we've continued to face at Kamoa-Kakula.So in effect, we are producing these volumes, but still leaving quite a bit of production on the table. So Mark Farren will also have more details about the initiatives that we are undertaking to address those issues across the board.Looking now at the tailings recovery project, so we spoke during the last quarter about the preliminary test work that we completed and this showed a very, very positive result that -- it is possible to increase our recoveries from 87% today towards the mid-90s by installing quite conventional dedicated grinding and flotation for the tailing stream.So since that press release, we've now moved into basic engineering. So this will be completed in the first quarter of next year, and then after that, we will move into implementation to retrofit the necessary equipment to the Phase 1 and 2 modules. Maybe just as a reminder of the sort of size and the prize that we have here at Kamoa-Kakula, you can see the charts on the right.Marna touched on these stats earlier, but -- one of the problems that we have, and it's a good problem to have, is that, because we mine at a grade of 5.5% copper or so, we also have tailings that currently are at a grade of somewhere between 0.7% and 0.8% copper. So our tailings grade is significantly higher than the average grade of global copper mines today, so that provides a huge opportunity to increase production and also margins.There's a stat there at the bottom of the page that just for the Phase 1 and 2 concentrator is alone as a rule of thumb, for every additional percentage point, we can achieve in recovery, this results in approximately 5,000 tonnes of additional copper production annually.We've also seen a huge amount of interest recently from the media in the Lobito corridor. And the reason for this is because the -- both the G7 and the European Union have joined the United States in supporting this major project together with funding that will be coming from the Africa Development Bank, as well as the Africa Finance Corporation in addition to the funding that has been identified by the U.S., the DFC.So the first step of this Lobito corridor project is to rehabilitate the line from Kolwezi, which is just to the East of Kamoa-Kakula that, joins up with the Atlantic Seaports of Lobito and Angola. As we previously announced, that has been managed by a Trafigura-led consortium, and we aim to be one of the cornerstone users of that line.As we previously disclosed, we will be starting trial shipments later on this year. It's a small volume to begin with, it's roughly 10,000 tonnes that we're looking to do, but that will provide us with a lot of additional data in terms of the costs. And then also touching on what Robert was saying earlier in terms of the emissions footprint, this Lobito line will be a significant additional step in producing zero-carbon copper.It's both much more efficient than trucking from a first principles point of view, but it's also roughly half of the distance to Port than the alternatives, for example, trucking to Durban. The second step as well that has also been recently announced is that there is an intention to connect the line from Lobito into the Zambian Copper Belt, which will also make it a full-service line connecting both the West and the East Coasts of Africa.With that, I will pass over to Mark Farren, who will give us an update from Kamoa-Kakula, on our project and construction activities starting with the Phase 3 concentrator.

[Mark Farren, executive]

Thanks, Alex. Maybe just to start with where Robert kicked off the presentation. The Phase 3 concentrator itself is ahead of schedule. I think we've announced it this time by about a quarter. So what we're saying is it's on scheduled for quarter 3. I'm saying hopefully the front end of quarter 3 next year, so it will run, but that obviously also kicks into gear all the rest of it.So it's the ramp-up -- the crew ramp-ups for mining, the management of the holding. As it has happened, that's also been early, the scheduling and getting the -- all reserves in place on all three mines, So Kansoko, Kamoa 1 and Kamoa 2, getting them ready for mining and get them ramped up early next year.I guess in our back pocket, we've always had quite a big stockpile that's still around 4 million tonnes, which will obviously start feeding into that brand-new concentrator to get things moving. And then the next step and challenge, I guess, is logistics, because we're going to be moving a lot more concentrate. I think initially placing some of that new concentrate here locally.But that would obviously display some of the Kakula concentrate that's been fed into the LCS local smelter at the moment. So my feeling would be that we would have to put quite a bit of pressure on logistics and make sure that we get everything sorted out, which -- and we have an excellent team here busy doing that.And as Alex mentioned on -- in that last slide, the Lobito corridor, becomes strategically important in the long term, important in the short-term, just to get something going, but strategically important in the long-term. So I think, all in all, Kamoa itself is going very well.If -- we can go to the next slides, Alex? The smelter. If I talk about the smelter itself, that thing is in -- its online to be commissioned quarter 4 next year, tied in quite nicely with the Inga project that we're also doing. No major red flags there and a big focus now on getting the operational team in place.We've recruited the executives and we are busy recruiting the middle management and then obviously the labor force that goes with it. There's no major smelting of this size or magnitude or type in the DRC itself. So, we are going to be training some of the leadership all over the world, some here at LCS, Zambia, and in particular China.So we're assembling a very strong team, I believe, of owners, and we also have, I think, a very strong project team and EPCM people that, we'll use to ramp up that smelter in quarter 4 next year. So the smelter itself is complex. It's the biggest in Africa, as everybody knows. It's one of the biggest in the world and I think it's going to take some time to ramp up. But we have put a very good team to do this in place on that smelter. So, I do believe we'll get it done in time.And we can move to the next slide. Inga, we're going to talk a little bit about power, so I'm going to talk about two things here. One is the actual Inga refurbishment that we're doing. We are putting in 178 megawatt turbine in at Inga. That project as well -- it is going well. We've set that project up 2 years ago to be commissioned in quarter 4, '24. It's absolutely on track.That turbine is arriving now in the next month on site. It's a huge turbine and -- the assembly of that turbine will start in January this year. But in addition to that work, we've done a detailed study on the network all the way from Inga, which is about 1,700 kilometers away from the mine, and all the different areas where there are interfaces between the DC line, converting back to AC in this province, in the Kolwezi province, all the way from Inga.And there's about $73 odd million of additional work that's required to upgrade that line to make sure that we have a stable electrical system, electrical reticulation system feeding through to the mine. That work has been identified and has been put into the same loan as we had in Phase 1. So, we've actually amended the scope slightly in Phase 2.We're doing the Inga project and the additional upgrade work to make sure that we have a stable electrical grid. Alex mentioned the fact that we've been battling with stability that, we're battling with power. It's been sort of ongoing through the year. It's going okay. I think we've done a lot of work to get it in place. Inga is on track and the Board of SNEL has now approved that additional scope of work. So, we're going to move into execution and we'll go as quickly as we can.In addition to that, on power, I just want to finish off on power. We are adding a lot of extra generating capacity, so diesel generating capacity into our mine grid, just to ensure that we have stable power under all conditions. So by the end of next year, we'll be able to run all three concentrators on diesel power if we don't -- if for some reason we have a complete blackout. That's not the intention -- it's not the intention at all, but we want to make sure, because it's such a valuable mine and these concentrators that create so much value per hour that we can't afford to be down, because of any kind of disruption on power.So we'll have about north of 200 megawatts in place by the end of next year and it's coming in stages, basically fast enough to get my Phase 3 concentrator running, before the Inga turbine is running. So, I think all in all, we've made some good decisions on power to fix up Inga to make sure that we stabilize the DRC grid. And then secondly, to be able to have enough generating capacity on our mine if there's any issues. I think that's about all on Kamoa-Kakula and the Inga.Can we move to the next one? The next one is Platreef Phase 1, which I call the baby mine, it's a 800,000 tonne a year mine. That project is also on schedule. It's going to be running in quarter 3, 2024. There's underground development, as you guys know from shaft #1, which we've got moving quite nicely. We've done some underground modifications. We've just installed a crashing system to help us with all movement and we've upgraded the hoist, the winder and the loading system underground for that shaft.We are busy with this optimization study there, which we call Shaft #3. It's a ventilation shaft, it was a ventilation shaft, but we are probably going to repurpose it to be able to do ventilation and hoisting of all, to the tune of somewhere around 3 million tonnes per annum. That gives us the ability to do two things.The first thing is to be able to derisk Shaft 1, which was never really designed as a hoisting shaft. And then obviously, the concentrator that does 800,000 tonnes of ore, there'll be no risk to hoist that. But in addition to that, it allows us if we want to accelerate Phase #2, Phase 2, we can start hoisting out Shaft 3 while we're still sinking and equipping Shaft #2. And there's a detailed study underway and -- there will be a press release out. And I think in about a month or so, Marna, I think it's about a month and I think it's going to be an exciting upside press release that's coming on plan.

[Martie Cloete, executive]

Yes. It will be before year-end, Mark.

[Mark Farren, executive]

Okay. Thank you, Marna. On Platreef nothing else really, the mine, as I've always said, I'm going to say it again. It's the best platinum ore body in the world. If you know platinum PGM metals, if you compare it, to anything on the East and the Western Bushveld, where they're mining 1-meter ore, we're going to mine 24 meters at similar grades with higher nickel and copper contents.So, I think it is going to be a massive competitive advantage. I don't expect to see too much in the next year, because it's a tiny mine, but watch the space over the next couple of years. It's going, to be the best platinum asset in the world and we're developing it very nicely.I think the next one is some commentary on Kipushi. Robert spoke about Kipushi. Kipushi is a very nice zinc ore body 35% odd grade. It is well on track to be commissioned in quarter two next year. So I think its 2 quarters ahead of where we promised, it was quarter 3, quarter 4 somewhere there. So, it will be running in quarter 2 definitely.The stoping takes -- the first stoping is actually happening as we speak. We've done slots for a couple of the long-hole stopes. We're basically drilling the sands at the moment. We've got about seven levels open, seven half levels open, developed -- fully developed and ready to go. And the construction of everything on surface and underground has gone exceptionally well.The development is stable, I mean, the underground physical development is stable. It's actually on its operating steady state already. So it's really just about how much we want to open up in terms of footprint. The underground infrastructure is working beautifully. There's no problem with wasting that the plant will be early, as I said, and everything else is more or less on track to be in place and running by quarter 2 next year.So no issues around Kipushi that I can think of. When you do come visit, those of you who visit, you'll see a beautiful modern mine from March next year, a very nice-looking Kipushi. Won't look anything like what you might have seen before, if you've ever been to that site. It's a really nice modern mine, completely transformed.I think that's it on the projects. Is there anything else? Yes, that's it from me.

[Alex Pickard, executive]

I think we can hand over to Robert for the Western Foreland. Do we have Robert?

[Operator]

Sir, if your line is muted, please unmute your line.

[Alex Pickard, executive]

Perhaps I'll kick off in the absence of Robert and then he can take over when he rejoins. So a brief update on our drilling activities at the Western Foreland. We've completed 37,500 meters of drilling as at the end of the quarter. The vast majority of that drilling was diamond core drilling. And so, that is very much advancing on the schedule that we had indicated at the start of the year.And we've also increased the number of contractor rigs that we have drilling in the Western Foreland today to 6, in addition to an Ivanhoe-owned Landcruiser rig. We have been saying this for a couple of quarters, but the maiden Mineral Resource estimate for Makoko and Kiala has all been completed from a QA/QC point of view. And you can expect the release of that resource imminently.And then subject to the -- well, sorry, as a result, I should say, of the drilling that we've completed to-date on the Western Foreland, I think we started out with a budget just short of $20 million. We've actually added recently an additional $2 million of budget for the remainder of 2023, and that is to further advance certain new targets that we've been looking at more recently.

[Robert Martin Friedland, executive]

Can you gentlemen hear me?

[Matthew Keevil, executive]

I have you, Robert yes.

[Robert Martin Friedland, executive]

Can everybody hear me. Yes. I don't know what's the problem with this conference system, but I'm back if you've lost me. We're developing several major projects at once. I don't know of a company that has been this ambitious with Kansoko and Kamoa mines underground being developed. And the third concentrate are being developed and the smelter being developed in the hydroelectric capacity in the country being developed, and the backup power in the country being developed.And the largest precious metals mine in the world, being accelerated and developed in South Africa and the richest zinc mine in the world being developed. And we don't really like to talk much about the Western Forelands, but since Christmas is coming and our shareholders have so much interest in our discussions, I'll start by saying that we have recently increased our landholding in the Western Forelands.We completely dominate the important parts of the basin based on our proprietary geologic knowledge of how the creator put all this metal here in the first place. If you came from another planet in a flying saucer and your Martian boss has told you to -- find copper on this metal, there really is nothing to compare to this part of the DRC. The copper in this basin is analogous to the oil in the Ghawar oilfield in Saudi Arabia. Nothing has ever matched that on the geologic scale.These are not porphyry copper. These are sedimentary deposits that are more akin to oilfields geology when you find one of these things, like you can go from miles and miles and miles and miles -- and they're not disturbed by tectonic forces after they've been in place West of a very important fault, we call the zipper fault. When we find copper, it just goes and goes and goes, which makes it amenable, to bulk scale mechanization in very low cost.Now what has changed is this new railroad system coming through the Western Forelands getting us closer to the coast means that mineralization is getting more and more attractive. And we have a trained labor force now. We have 5G wireless. We have domestic food production, construction skills. And as all of these things develop, the attractiveness of the Western Forelands does nothing, but grow.It would be difficult for me and inappropriate in this call, to explain how many mining organizations all over the world, the largest ones and how many sovereign wealth funds and financial institutions have expressed interest in coming to the Western Forelands, but let's just start with the Japanese. The current Emperor of Japan when he was the Crown Prince in the Imperial family, opened a dam on behalf of the Japanese government in the 1970s and now he is the Emperor.Now the Japanese have come to the Congo and want to finance copper production as part of their efforts to reduce global warming gas. Many of our shareholders may recall that we sold a 10% participation in the Platreef project for close to $300 million to a Japanese government-led consortium of JOGMEC, JGC and ITOCHU. So, we have Japanese interest. We have interest from sovereign wealth funds in the Middle East. We have interest from major mining companies.And I'd like to tell this anecdote that, one of the largest mining companies in the world came to visit what we're doing and concluded that Kamoa-Kakula is the best mine in the world. They said they could never do it themselves, because they didn't have the foresight to be in the Congo 25 years ago, when we were suffering under the tyranny of the net present value model. This is the future for mining of copper on this planet.And so we will, in the very near future, start out by announcing the work we've been doing at the Makoko system and another related area of high-grade at Kiala. These two in combination are now being studied to make a mine -- that Ivanhoe Mines had operate in an 80-20 joint venture with the government and local Congolese. And so, I would expect that we'll be able to give you those independently vetted numbers in the very near future.And thereafter, we're kicking around the idea of making a second disclosure of some work that's going on that is not part of the Makoko area. And for strategic reasons, we might not want to be too specific, but I think we'll have more to say in the second press release, let's say, before Christmas. So there'll be more news on this coming soon at a theater near you.We couldn't be happier with the geologic potential hiding under the Western Forelands. And I don't even take a fraction -- of 1% of the geologic potential that is there has been delineated as our knowledge and understanding of how the creator put the copper in this area has grown. Now that the President and the Prime Minister have come along with the first lady and so many important people in the country.And now that the country is engaging in another democratic election and now that the country has support from the European Union and the United States as well as China. All parties in the world are looking to the bright future of this country. And I would say the most important resource in the country are the people, the young women and the young men that make great geologists.They know what it looks like to look at the core, and then there's the inherent gift from the creator in the Western Foreland. I'm very confident we'll be finding new mines in the Western Foreland's 100 years from now. So coming soon at a theatre near you will tell you more specifics about the Western Foreland. Thank you, everybody.

[Matthew Keevil, executive]

Thanks, Robert. And now we will begin the question-and-answer session. As per usual, I'll now hand it back to the operator to populate the phone lines with any analyst questions. And following those will turn to the web and see if we have any web-based questions to proceed with. So please, operator, go ahead with the phone line.

[Operator]

[Operator Instructions] Our first question will come from Lawson Winder of Bank of America Global Research.

[Lawson Winder, analyst]

I wanted to ask about two things. One, transport costs. So they seem to have stabled around that sort of $0.45 to $0.46 per pound level, which is fantastic to see given all the challenges you guys have faced -- looking forward into Q4 and 2024, is that the sort of level we'd expect until the blister is ready for shipping?

[Robert Martin Friedland, executive]

You want to take that one?

[Martie Cloete, executive]

I didn't hear the question. We're having sound issues. The sound doesn't come through -- if you can repeat the question.

[Mark Farren, executive]

I'll take it.

[Martie Cloete, executive]

Okay. Thanks Mark.

[Mark Farren, executive]

I'll take it. Yes, I think it's about -- it's a reasonable number, Lawson. What we're doing is we're actually looking at setting up some longer-term contracts right now and a slightly different entity. So potentially to lower the costs going forward. And then like Robert spoke, I mean that Lobito corridor is going to, I think, in the longer term, create a rail solution.The other thing to bear in mind is, that when we start selling the blister, we basically halve the volume. We halve the amount of tonnes that we let go. So it has a massive logistics cost per pound influence, about $0.20 per pound. So it does come down when we do the blister.

[Lawson Winder, analyst]

And then if I could just ask your views on the upcoming election. It's just around the corner here. I mean, from an either point of view, things seem to be progressing normally. Are there any concern though internally from Ivanhoe that you might highlight? Or any thoughts on how the election is progressing? That would be very helpful?

[Martie Cloete, executive]

Thanks, Lawson. Now my sound is miraculously back. I can maybe take that one. So it's actually been quite a quiet period leading up to the election. I mean we were around during the 2018 elections and it was much more volatile. We saw a lot more protest in the main city centers. I think it's been sort of quiet campaigning. There's 24 candidates running in total. There's probably four serious candidates out of the 24.The elections will definitely proceed as planned. That's the current word on the ground on the 20th of December. And there's a lot of support globally to have free and fair elections. There's been voter enrollment. The Presidential flight has been put together and all indications are that it will be a peaceful election season. And so, I've been traveling there the past couple of weeks.It's marked there at the moment. And it's really been quite quiet apart from sort of banners everywhere and seeing people using platforms to do political speeches. But we are quite optimistic that, it will be a peaceful election season.

[Robert Martin Friedland, executive]

Yes, Lawson, I think the election you want to worry about is the one in the United States.

[Operator]

[Operator Instructions] And speakers, I'm seeing no further questions in the queue. I will turn the call back over to Matthew Keevil, so he may continue with the webcast questions.

[Matthew Keevil, executive]

Yes, just taking a few here, there's a couple of repeats, so we'll group them together and just cover a few [technical difficulty] 00:52:47 before closing the call. First and foremost, I have a few questions here. David, Alex, Marna, maybe best suited for you. On the sort of expedited or advanced expectation on the Phase 3 concentrator ramping up. And sort of Mark touched on this a little bit, but the impact on the operations and the logistics supply chains on having that concentrator Phase 3 come in a bit ahead of schedule?

[Martie Cloete, executive]

Yes. So maybe I can give you the first go, Matt. I think the way we see things unfolding is that we will try and place a lot of that concentrate with the local smelter LCS in Kolwezi just to lessen the logistic burden. We will also have to build up a stockpile that we will use for blending in the smelter, once we start commissioning the smelter.It will give us access to some cash flow next year that, we didn't necessarily bank on. We always timed the concentrator, to coincide with the commissioning of the smelter. With the concentrator coming in a bit early, we think we're going to have increased tonnage available, from that concentrator coming through next year, and that will be included in our guidance that, we will put out in January of next year.Obviously, this comes with additional logistics. We're in the process of setting up long-term contracts with logistics service providers to lock-in dedicated supply. We're doing this sort of using bulk negotiation power with both Kipushi and Kamoa, because we expect an increase in volume as these 2 projects will sort of ramp up side-by-side on the same corridor, but we've got a handle on the situation.

[Matthew Keevil, executive]

That's great. And the next one, there's a few questions on Platreef, so I'll group this together as well. Alex, maybe you have a little bit of a finger on the pulse on this one, but a question on sort of a view on platinum and sort of the supply-demand economics and sort of what's going on in South Africa and more broadly as Platreef comes online?

[Alex Pickard, executive]

Glad you ask the ask question, [00:55.01] Matt. Thanks for giving me that one. Look, I mean, I don't know -- to us, we're not building this mine for today's platinum price or tomorrow's platinum price. We're building this mine, because it will be the lowest cost producer in the PGM industry, because of the characteristics that Mark mentioned in terms of this being a completely unique ore body in the PGM sector.So even at today's basket price, which has obviously come up materially in the past kind of 12 months or so, we'd still be a very comfortable high-margin producer. And so that's what we've kind of got to look forward to. But more broadly, what I would say is that there's clearly a lot of people that are feeling the pain right now if you look across the PGM sector.And there's clearly a large number of producers that are underwater on a cash cost basis or certainly on an all-in sustaining cost basis. And I think you're already starting to see that supply side response and contraction coming. So to me, I not feel relatively sanguine about it. It doesn't seem to be a bad time to be building a world-class PGM mine that will one day be the future of the industry.

[Robert Martin Friedland, executive]

Yes, I'd like to add that you keep on calling the PGM mine. But compared to the competition, we have a uniquely high and dominant nickel. In fact, the whole system constitutes one of the world's largest nickel resources. That's why we're drilling the Mokopane Feeder. There's just an astronomic amount of sulfide nickel in that district that tails in comparison to any other nickel target.So, the very high nickel endowment, the bulk mining, the flat nature of the ore body, the amazing thickness and grades, the favorable metallurgy. Well, that's a problem for the rest of the industry, but it's a benefit for humanity, because there's a lot of uses for these metals, and there's also a lot of gold in the system. So there's gold and there's rhodium, and there's platinum, and there's is palladium, and there's nickel, and there's copper.It's very important to understand that there's a naturally hedged basket of metals. Now South Africa has got a lot of challenges. The currency has been weakening, but this is a mine whose costs are in South African rand and its revenues are in dollars. So, we just intend to be the best platinum, palladium, nickel, copper cobalt producer with gold and rhodium in the world. And this is a 100-year mine.So you just charge on and do it. That's the nature of the industry, and that's what we need to do. We need to produce these metals in a green and sustainable way that directly benefit local communities, and that's what we're doing. I think that this Tier 1 mine is frequently overlooked. I don't know mine is frequently referred to as a copper company. But very soon, we're going to be one of the world's major precious metals producers.And for added emphasis utilizing Shaft 3 to hoist means that this is going to become a really large mine much quicker than we've said in the past. And so as another present for our shareholders, we should come out with a detailed plan before Christmas to explain how quickly Platreef is coming on the scene. We've recently started the tailings -- there's a sewage retreatment plant, where we're recycling Mokopane's city sewage water to produce clean water for the mine.That's a very green first source of water and enables us to move forward. And we have uninterruptible power from Eskom, uninterruptable industrial power. So this giant project is opening soon at a theatre near you, and I would urge all of our shareholders and stakeholders to get to know it a lot better. We'll be speaking again at Endava in February.And for those of you that want to go on tour, there's no excuse not to come and look at the stunning improvement in what we've done there in February. So let us know, I'm [e-mail], if you'd like to come take a look. Thank you.

[Matthew Keevil, executive]

Thanks very much Robert. And Alex that was terrific. So I'll just wrap up with one more question. That's a rather popular one. We can maybe throw this to Marna or Mark, it's somewhat of a question on execution. The question is the mining industry is trouble building small and large-scale mines on time and on budget. So what do you attribute your ability to sanction zinc shaft, build mines and smelters in both frontier and established jurisdictions. And now you have both the Phase III and Kipushi mine ahead of schedule once again. What's sort of in Ivanhoe secret sauce, if you would?

[Martie Cloete, executive]

I'm going to give it a first try, because I know Mark's quite humble, but I think a lot of it has to do with the execution team. We have a team that really works well together. We've now done this before. We know how to be nimble. We now have to do by quick decisions. We don't have a lot of bureaucracy and red tape, but we've got good governance.And then I think it's about sort of using the same type of equipment and contractors that you've used before if it was successful, provided it's competitive. But the secret really is in the people. And if a team works well together, you can achieve great things. And if everybody works towards the same goal and everybody knows where they need to go, anything is possible. But Mark, you can also add to this.

[Mark Farren, executive]

No. Marna, that's right. It's an excellent team that we have and a lot of good, capable contractors, over time, we've managed to lock in, basically the skills that we needed in this country and in South Africa, it's going well. Thanks. So you're right. It's team, it’s people, it's about leadership.

[Robert Martin Friedland, executive]

I'd like to throw in a word thanking our Chinese friends for raw material fabricated steel and other critical elements that have been provided through the Chinese economy on time, on schedule. So when you get that steel delivered on time, on schedule from the other side of the planet, that's very helpful. And a lot of engineering capability, a lot of skilled labor contributed by our Chinese partners.There's nobody that can make movies like Hollywood. Hollywood is a mixture of every conceivable ethnic type of person, every cultural background, and that's how James Cameron can make an Avatar and no one else can make movies like Hollywood. And there's a tremendous strength in cultural diversity, you get people from different cultures and different backgrounds working towards a common goal.Our local Congolese speak the local language, understand the local conditions. They're very, very keen to build their own country. The esprit de corps amongst the management and the people is astonishing and the empowerment of women in the senior ranks of management, creates a kind of corporate culture that is so much better than was traditional in the major mining companies.That's just a fact, and we urge people to come and see it. This kind of thing is not captured in net present value models. It's not captured in spreadsheets. It's captured in flesh and blood, in corporate culture. And so, it's the management team that is a critical and incalculable value.And may have it continue, may it flourish and may it go on for a long time, because this planet needs a lot of conscious mining, it would have any prayer of changing the way we've done things in the past. Let's hope for peace and let's hope for peaceful use of the world's resources and leaving a better world for our kids and our grandkids. Thank you again all of you.

[Matthew Keevil, executive]

Thanks very much, Robert. That is a wonderful end of the call. And I'd just like to say, this does conclude our call today, and thank you, everyone, for attending today's event. And as the speakers outlined, you can look forward to many exciting milestones coming for Ivanhoe Mines towards the end of 2023 and moving into 2024.Again, if you had unanswered question, please do reach out to IR team after the call concludes and we would be happy to answer it. With that, I'll pass it back to the operator to wrap the call up. Thank you very much, operator.

[Operator]

Thank you. This does conclude today's conference call. Thank you all for participating. You may now disconnect, and have a pleasant day.