Ivanhoe Mines Ltd. (IVN) Earnings Call Transcript & Summary

Well, there are no questions on this item.

Thank you, Mary. If you're a shareholder or a proxy holder using Lumi to vote on this matter, you may do so now. If you've previously voted on this matter and do not wish to change your vote, no further action is required. I will pause briefly to allow for voting. [Voting]

The next item of business is to consider and if deemed advisable approve with or without variation, an ordinary resolution, the full text of which is set forth on Page 11 of the company's management proxy circular, approving the company's deferred share unit award plan, which includes proposed amendments to the plan. We will dispose of the reading of the resolution unless specifically requested by any shareholder or proxy holder. I now move that the ordinary resolution approving the share unit plan as described in the management proxy circular be approved. May I have a seconder?

Peter, I second the motion.

Okay. Let's pause for a moment and allow Mary to check whether there's any online questions.

There are no questions on this item.

Thank you, Mary. If you're a shareholder or a proxy holder using Lumi to vote, you may do so now. If you have previously voted on the matter and do not wish to change your vote, no further action is required. The next item of business is to consider and if deemed advisable, approve with or without variation, an ordinary resolution, the full text of which is set forth on Page 12 of the company's management proxy circular, approving amendments to the terms of the previously granted stock options to 2 insiders. We will dispense with the reading of the resolution unless specifically requested by any shareholder. I now move that the ordinary resolution approving the company to amend the stock option to grant insiders as described in the management proxy circular be approved. May I have a seconder?

Peter, I second the motion.

Okay. Mary, are there any online questions?

There are no questions on this item.

Thank you, Mary. If you're a shareholder or a proxy holder who is using Lumi to vote on this matter, you may be so now. If you have previously voted on the matter and do not wish to change your vote, no further action is required. I will now pause for 1 minute and ask that all shareholders and proxy holders finish voting on all items presented as we will be closing voting in 1 minute. [Voting]

Okay. Thank you. I confirm that the voting is now closed. We will pause 1 minute to allow the scrutineer to advise us if sufficient votes have been cast in favor of all the items of business that were presented today, preliminary results of this.

I have received confirmation that the scrutineer -- that the company has received sufficient votes in favor of each item to carry each motion.

Accordingly, I hereby confirm that all motions presented at this meeting were carried. Voting results for the election of directors will be provided in a news release, which will be issued later today and will be available under the company's SEDAR profile along with the comprehensive report of voting results. Is there any other business that anyone present wishes to properly bring to the attention of the meeting? I will now pause and allow Mary to check online if there's any business to be brought before the meeting.

Peter, there is no other business to be brought forward.

As there is no further business to be brought before the meeting, I will ask for a motion that this meeting be terminated.

Peter, this is Matthew. I move that this meeting be terminated.

Thank you, Matthew. I declare the motion carried. This concludes the formal portion of the meeting. I would like to thank you [Audio Gap] meeting today. I will now begin with -- we will now begin with Marna's brief presentation on the company's development over the past year. The question-and-answer session will immediately follow. Now over to Marna to begin the presentation.

Thank you, Peter and good morning and good afternoon to all our shareholders joining us today. The presentation will contain some forward-looking statements. The forward-looking statements disclaimer is currently on the screen and can be viewed in its entirety on the company's website at www.ivanhoemines.com. So 2022 was indeed a banner year for Ivanhoe Mines. At Kamoa-Kakula, had marked our first true financial year of production. We also successfully brought our furnace steel plant online ahead of schedule and on budget. During the year, we produced close to 324,000 tonnes of payable copper. And subsequent to the '22 year, we also completed the debottlenecking program ahead of schedule. This will enable annualized production of 450,000 tonnes of copper ahead of the commissioning of Phase 3, at the end of 2024, where after our annualized production will increase to 650,000 tonnes of copper. Our Phase 3 expansion at Kamoa-Kakula is tracking well against guidance and is earmarked for completion at the end of 2024. Phase 3 includes an additional plant with a capacity of 5 million tonnes per annum at the Kansoko mining area, a direct-to-blister smelter with a capacity of 500,000 tonnes of blister anode and the expansion of the Kamoa mining footprint area. In the beginning of 2022, we also announced our exceptional results for the Platreef independent feasibility study. We have completed the first production shaft and started with underground development. We also completed the 79-meter base of Shaft 2, where a pilot hole is currently being drilled. The Platreef project remains on track for first production in the third quarter of 2024. At Kipushi, we managed to reach agreement with our joint venture partners, Gecamines, on the development path for the project. We also commenced with construction activities in 2022 and in 2023, we entered into a term sheet for a $250 million offtake financing facility with Gecamines and Glencore. This project also remains on track for first production in the third quarter of 2024. But we're particularly excited about our exploration efforts and allocated significant budgets towards extensive programs at both the Western Foreland adjacent to Kamoa-Kakula in the DRC, as well as the Mokopane feeder adjacent to our Platreef project. Driven by Kamoa's strong financial results, Ivanhoe Mines recorded adjusted EBITDA of $489 million in 2022, which was up from $148 million in 2021. Ivanhoe's share of Kamoa-Kakula's EBITDA amounted to just over $550 million in 2022. And while development costs that Platreef and Kipushi were capitalized, Ivanhoe continued the exploration efforts on the Western Foreland and elsewhere, spending approximately $34 million. We expect that EBITDA to continue to grow organically in 2023 and beyond, with the debottlenecking at Kamoa-Kakula completed in the first quarter of 2023 and operational results from Platreef and Kipushi reflecting in our results when their production commences next year. And of course, there will be another step-up in EBITDA once Kamoa's Phase 3 expansion is complete. If we look at Kamoa-Kakula on a stand-alone basis, the statistics are, we produced approximately 324,000 tonnes of payable copper. We earned $2.1 billion in revenue. And a fun fact, Kamoa-Kakula contributed close to 4% of the GDP of the DRC in 2022. It was its first full financial year of production. That's remarkable. Kamoa-Kakula's EBITDA was $1.4 billion, of which just over $550 million was attributable to Ivanhoe Mines. Profit attributable to joint venture partners were [ $513 million ] and finance income receivable through venture partners from Kamoa was $254 million. In May of 2023, we published our sixth annual sustainability report. Our group-wide sustainability team have gone to great lengths to showcase the work we do. But the statistics and picture speaks for themselves. I will highlight only a few and invite you to read the full report. Around our Kamoa-Kakula project, we have approximately 900 community farmers producing high-quality food under our livelihoods program. Our world-class tertiary education center called the Kamoa Center of Excellence is also scheduled for completion in October of 2023. At Ivanplats, we have trained in excess of 100 members of local small and medium enterprises. And at Kipushi, the mine supplies potable water to the whole town but we are also increasing potable bore holes in remote areas. One of the key statistics highlighted in our 2020 sustainability report is our constant improvement on our health and safety. We had a 40% reduction in our total recordable injury frequency rate across all our sites during 2022. This was operating, expanding and building new projects. Safety is a team effort and we are immensely proud of our staff and contractor commitment towards our Zero Harm policy. Our performance is well below the industry standard of 2.9 at our respective sites. In 2023, we will continue with our growth trajectory to deliver against our guidance. Environment, social and governance imperatives are at the heart of what we do and we intend to strive for improvement across all 3 pillars. One of our key focus areas in 2023 is to work towards a group-wide decarbonization strategy and road map to combat the identified risks associated with climate change and to strive to net zero. Key objectives of our decarbonization approach planned for 2023 include; a review of our carbon baseline, including Scope 1, 2 and 3; to determine where decarbonization is possible on an activity-by-activity basis; to review target setting and net zero options and link it to our strategy; and to use offsets aligned with our values and community objectives to achieve net zero where decarbonization is not possible. We are excited about our journey to become the global leader in the supply of essential metals for the world's growing population and its transition to clean energy. That concludes today's presentation. I will now hand back to Matt Keevil to steer today's question-and-answer session.

But if you submit a question and it goes unanswered, please do not hesitate to reach out to me after the meeting and we'll be happy to get an answer for you. So just to quickly pop over to our online questions, we'll clear those very quickly. We just have a few here today, so I'll pick them off immediately. The first one is probably for Marna. Marna, you just discussed Platreef a little bit. We just have an inbound question on our infrastructure in South Africa around Platreef, including things like power, water and shipping and transport, just wanted, if you could talk a little bit about your plans as Platreef heads into production.

Thank you, Matt. Maybe to start off with power because that's most topical with the problems that South Africa has been experiencing with Eskom. We are currently a premium customer of Eskom. So we're not subjected to load shedding at the mine. But we do have plans in place to use private power that will be generated through solar and wind. And it will be [ built ] using Eskom's infrastructure that will augment our power supply from Eskom. Eskom has generation issues. The grid is still pretty stable. So we think that should be sufficient for Phase 1 and Phase 2. And obviously, some of these initiatives can be expanded. There was a change in legislation in South Africa, where private generation can go up to 100 megawatts. So there's a lot of private entrepreneurs bringing online power generation projects, providing up to 100 megawatts into the grid. So we are quite confident in our ability to get now the necessary power. We obviously also have diesel backup for emergencies. On water, we have -- we're in the process of completing the gray water facility for the Mogalakwena Municipality, close to the mine. We will use that gray water in a closed circuit at the mine and we have sufficient affluent to that plant that will supply both Phase 1 and Phase 2 at the Platreef mine. Our road infrastructure is in a good condition. The main highways in South Africa are currently being used for most corridors exporting to -- through Durban mostly. So I think that's just on all the different infrastructure elements.

Great. Thanks, Marna. And moving on to the next one. I think it's probably for David. David, just a quick question on everyone's favorite's topic, inflation. Shareholders are wondering what you're seeing in terms of trends. Has there been any relief, et cetera, in terms of both CapEx and OpEx across the operations?

Yes. Thanks, Matt and good morning to all our shareholders just from my side as well. We have experienced an easing in inflation pressures thus far this year, particularly on logistics charges and ocean freight, which is not dissimilar from what our peers have reported. We've seen global and DRC logistic chains adapting well from last year's shortages and extremely short supply of container availability in China, is now reported to be very good. And we are seeing the effects there on the pricing. And those who has followed our Q1 results would have seen the easing of logistics cost pressures reflected in our first quarter cash costs and which was down approximately 18% from the 2022 peak and we are hopeful for further easing. And -- but I would ask shareholders to tune into our Q2 results presentation in early August to see exactly how our results has been impacted.

Fantastic. Thank you, David. And we just have one final one online. Marna, I think probably is directed at -- best for you. Just, there is a election coming up in the DRC or scheduled for this year. Just a quick question on your view on the current political situation in country and what you expect from that election?

Okay. Thanks, Matt. I've been spending a lot of time in Congo over the past couple of weeks. You can definitely see an intensity in campaigning happening for different political parties. There's been active voter enrollment. And this is all televised in the country, where well-known politicians [indiscernible] and enroll and you can just see the queues of people enrolling for voter registration, election is scheduled for the 20th of December. And in speaking to senior government officials, they are committed to stick to this date. They want to see stability in the country. They don't want there to be disruptions. So at this point in time, it looks like elections will go ahead as planned and not too much volatility around that.

Wonderful. Thanks, Marna. And that's all the questions we have at the moment. I'll pause briefly just to make sure there are no further questions and then we will proceed with closing the meeting. Okay. It doesn't look like we have anything else coming in. So that's all the time we have today. Thanks very much, everyone, for your questions and for joining us. Again, if you did not get a chance to ask a question, please do reach out to me directly after the meeting and I'd be happy to oblige. Again, my name is Matthew Keevil, I'm the Director of IR and Corporate Communications with Ivanhoe Mines. My e-mail is matthewkeevil@ivancorp.net and my direct phone line is (604) 558-1034. My contact details are also available on our website at www.ivanhoemines.com. With that, I'll pass it back to Peter to close the meeting.

Thank you, Matthew. That concludes our meeting for today. I'd like to thank everyone once again for participating in this meeting. Thank you very much for your time today and stay well.