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

Prior presentation just went a little bit over. So I just would like to say good afternoon to everybody. I would like to welcome everybody to our [ Coverstream ]. And I would like to welcome my next guest from Ivanhoe Mines. I have Marna Cloete, who is the President, and I look forward to sitting down and discussing the company with you Marna.

So a quick presentation and just a correction on that first slide. We do like promoting our sister companies. So I do work for Ivanhoe Mines and not Ivanhoe Electric. But if you're interested in copper produced right here in the U.S. or soon to be produced right in the U.S., they're the guys to speak to. So it's always nice to watch Robert do our company presentations. And unfortunately, he couldn't be here this year. And it's sort of time for him to hand over the reins to some of these understudies. So I'm going to try my best to keep you into time today. Matt, I think you got the presentation wrong because that's usually how Robert starts his presentation with the pale blue dot. Now look at that dot. So jokes aside, I think we, as copper producers have a crucial role to play in siding the planet. And the first couple of slides I'm going to show is just to reiterate to everybody, yes, and I'm sure I'm speaking to a very educated audience about the absolute intensity of copper in renewables as we grow towards [ our goal ] to net-zero. So a typical electric core requires 6x the minerals of a conventional core. And an onshore wind farm, 9x more minerals than a gas-fired power plant with a similar output. So just think about that. And as I go through the deck, you'll see what that means for copper and how we have underestimated the supply of copper that the world will need just to maintain current growth profiles. So we have a date with disaster. And net-zero is pulling the plug on America's electrical life-support system. We've seen the Texas grid go down. It doesn't just happen in Africa. And we also have emerging economies that we'd like to electrify. And what does that mean? So our global net-zero will require $21 trillion investment in power grids. That is quite a big purchase order being written for miners like ourselves. And estimate that 80 million kilometers in grid growth between 2022 and 2050 is needed. And then let's talk about the AI boom. I mean that's the buzzword. Mega factories, that will require copper. And unfortunately, the world also went through a lot of change over the past 3 years, negative change, but [ armory ], that's also very copper-intensive. So yes, what it all means, if we translate to what copper the world will need. Since the inception of mankind of 4000 BC, we've mined 700 million metric tons throughout history. We're going to need the same amount of copper in the next 22 years. So I don't know where that copper is going to come from. We just built a copper mine. It took us 26, 27 years to become an overnight success, and it is -- it's quite a tough task to deliver. So when we talk about real estate, it's all about location, location, location, when you go and buy your new house. And when it comes to finding copper, we believe that Africa is really the address to be in. It's under-explored and it's home to 30% of the world's mineral endowment. And the neighborhoods we operate in have proven to provide the copper supply that the world will need to achieve net-zero. So this is me with President Felix Tshisekedi, and I've been speaking to Matt about this photo because it's a fat angle. But things are really changing in the jurisdictions where we operate. Stability is setting in. There's a level of sophistication setting in, in the different mining jurisdictions where we operate. And Africa realized the critical role that it can play in the transition that the world needs. So just a little bit about Ivanhoe Mines for those of you who's not familiar with our portfolio, I mean we basically touch on everything through exploration straight through to production. So when it comes to exploration, we own about 6x the land size of Kamoa-Kakula, right next to Kamoa-Kakula. And we've made 2 discoveries to 3 discoveries to date on the Western Forelands. It's a land package of about 21 licenses, and we're also adding to that land package and actively exploring this year with 10 drill rigs currently drilling on the Western Forelands. We are scheduled to complete Platreef, our Phase I project, our PGM project with big -- with nickel and copper byproducts by next year. And then we are also bringing Kipushi online. It's currently being commissioned, and we will produce first ore in June. And then our flagship project, Kamoa-Kakula, will be the third-largest copper producer in the world in the next 2 years, a fully integrated mining complex, and I will speak a bit more about it soon. Oh, what's this photo? It could be Duncan's last night in a board room somewhere. No, just joking. The size of mining have really changed over the first couple of years. And at Ivanhoe Mines, we are extremely proud of the type of culture that we've achieved. We've got a very integrated team, a diverse team. And it's not just about female diversity. It's also about ethical diversity and we believe different perspectives bring a different approach to how you do your business. So we believe we're quite a modern mining company, changing the face of mining and how we do business in the different jurisdictions in which we operate. So Kamoa-Kakula, our flagship. What you see there is Phase 3. That's the plant that we're currently commissioning. We will start producing ore from this plant by the end of this month. It's a 5 million tonne per annum concentrator. And we're doing a fully integrated solution, bringing a smelter online in December. And also a large hydropower refurbishment of 178 megawatts that we're are doing at Inga II turbine farms. So what makes it so special? Extremely high grade, mechanized, a wonderful, easily minable ore body in a great jurisdiction. We don't have extreme weather conditions. We've got a key in Congolese workforce working for us, and we employ over 90% local people working at our mine. It's powered by green hydropower electricity. And this is really what sets us apart in how we do business in a jurisdiction like the DRC. Last year, we contributed 6% to the DRC GDP. That really changed the landscape for a country like the DRC. And it was a greenfield discovery, so we don't have any legacy issues where we operate. We invested $2.8 billion in local businesses. As I mentioned, we employ over 90% locals in our business where we operate. And we do a lot of community projects. We've just published our seventh sustainability report, and you can read the wonderful things we do in that report. There's also a lot of videos about the projects that we run within our communities. When it comes to contributing to payroll, close to $400 million in local payroll. Changing one household's life, it can have an impact on up to 50 people. So we are really touching our footprint in a significant way. So the DRC is an emerging copper superpower. It's the fastest-growing copper producer over the past decade and it's now the second-largest producer worldwide of the [indiscernible]. And that's a significant feat if you look at where they come from over the past decade, out of a war to becoming the second-largest producer in the world of copper. So why do we stand out? We all talk about copper. We all look at what copper is doing today. It went over $5. We were extremely excited and then it quickly went back into the high $4s, which still makes us very excited. But look at what we've achieved at Kamoa-Kakula in terms of adding additional tonnes of copper over the past from 2021 to 2026. And I would say that the industry has been sort of slow at catching up on what we would need to supply the world with the copper they need. And we've listed our peers here in terms of copper production that will be added over the next 5 years. And you can see we are at the forefront of bringing more copper tonnes online. So this is what Kamoa-Kakula looked like when I started working at Ivanhoe Mines 18 years ago. It was bush. No people around us, no roads. Today, it's a mining complex, a district, an integrated mine with a smelter, as I mentioned. And this is a picture of what it looks like today. And if you take that, we've discovered Kamoa-Kakula in 2016 and that we've basically did the bulk during COVID, from first discovery of our drill hole at Kakula to today is a story of less than 10 years to build an integrated mine. I think that is something we are -- not I think, I know that is something we are extremely proud of, and we did it mostly ahead of schedule and on budget. And that's no small task. And it's not something one person do on their own. It's a team of people from across the world that came together and did something great. One of the exciting developments in the region is the Lobito Corridor. We've shipped the first 10,000 tonnes of trial shipment that's been completed. We're currently busy with another 10,000 tonnes. We've reserved capacity between 120,000 and 240,000 tonnes of capacity on the Lobito Corridor. But it's not the only solution we will look at. We will always do a diversified logistics strategy between rail and road, but there's also talks of the rail to Dar es Salaam being developed, and that will open another avenue for us on our logistical map to bring our copper to the world. And then just a quick reminder, Kipushi, our zinc mine, also busy commissioning Kipushi as we speak. First ore will be in June. Plant is currently being commissioned, we will put out guidance for Kipushi within the next couple of weeks. And then we will put out cash cost guidance as soon as we've completed the first quarter of production at Kipushi. We will throw off quite significant cash flows at Kipushi. So I think the market is underestimating what Kipushi will bring to the table for Ivanhoe Mines. And that's just an aerial photo of what Kipushi looks like, near little mine, an easy mine, small plant, easy to commission. So we had a very successful partnership with Gécamines at Kipushi. And then just quickly about Platreef. We've taken the decision to defer bringing Platreef into production this year to next year. And that's just really as a result of hoisting capacity constraints. We're planning on producing 4 million tonnes per annum at Platreef within the next couple of years. That's just under 500,000 ounces. There's significant copper and nickel byproduct at Platreef. And we think this project will be a disruptor in the platinum space. And there, you can see what the projections is for Platreef and Platreef will definitely be, if not the largest single PGM producer, the second-largest -- the single PGM producer in the near future. And yes, I think what sits at the though is the fact that it's at the bottom of the cash cost curve. So it's very forgiving with good margins. So that's it from me. Merci beaucoup, as they say in the DRC, and I will now go and chat with Lawson. Thank you.

Thanks very much. Not quite it from you. I still have a few questions for you. I wanted to start just on strategy. First of all, primary adjectives for 2024, the long-term view of Ivanhoe? And then finally, when you think about your motto, mining with greater purpose, what does that mean to the folks at Ivanhoe?

Thanks, Lawson. So it's a very busy year for us. We're bringing Phase 3 online as we speak at Kamoa-Kakula. So that's commissioning a 5 million tonne per annum plant. We are also busy with an optimization study called Project 95. We like to give names to things, where we're trying to get our recoveries up from 88% to 95%. That would entail a few tweaks to our circuit at both Plant 1, Plant 2 and now the new plant, Plant 3 as well as potential tailings retreatment using some of the Phase 4 infrastructure that could come into play. Also planning to publish a study, a revised study on Phase 4 and sort of accelerating our development plan for Kamoa-Kakula by the end of this year. So quite exciting. Smelter, power projects. We've broken the back of power. We're going to see a record quarter in the second quarter. Fingers crossed. So we've been very active in country trying to set everything up. Then Western Forelands, that remains a priority. We -- I always joke, it reminds me of that Britney Spears song, Oops, We Did It Again. I think we're going to oops, we did it again in Western Forelands. It might take a little bit of time, but we're hopeful to see some development within the next 3 to 5 years on the Western Foreland. And talking about sort of our vision, Ivanhoe Mines has a vision of growth. We see ourselves as a major copper producer in the future. And when we evaluate projects that come across our desk, we rarely find projects that would add the same value to our shareholders and what Western Forelands could potentially add to our shareholders. And that's why sort of from a capital intensity point of view, we think we can add that value through the drill bit. And news flow will come out as we move along. We're also busy with license consolidation and adding a little bit more licenses to our land package. And then as I mentioned, Kipushi, it will be the first year of production for Kipushi. Very excited about that. That will start next month, finalizing offtake as we speak. And it's always -- there's always learnings when you go through sort of bringing a project online. We've set up our own logistics company to handle the logistics for Kipushi. So we've been quite active planning for the volumes because we're bringing Phase 3 as well as Kipushi online at the same time. So that took a bit of planning. And Platreef, as I mentioned, prioritizing sort of the development of Shaft 3 that will ultimately allow us to go up to 4 million tonnes per annum, and that should start producing sort of next year. So it's going to be a very busy couple of months for us. And then longer term, we're looking at all sorts of opportunities. So we're going to try and surprise you, hopefully, pleasantly.

I look forward to it. And would you mind commenting on the motto, mining with greater purpose?

So we came up with mining with a greater purpose as part of sort of our branding and our vision strategy. And I think for every person, it means something different. For me personally, when you operate in Africa, there's a big social focus. If you sort of tend to speak more to your North American market, there's a big environmental focus. For me, personally, I sleep well every night because I can see the impact that we are making on people's lives in the areas where we operate. And how we uplift the communities that lives next to our mine, and we -- this one lady I've employed many years ago and every year Christmas. I get a WhatsApp message that tells me, thank you. You are the reason my family can eat and you are the reason my family can have Christmas gift us here. And that's sort of what motivates me. So when we talk about mining with a greater purpose, yes, we mine the commodities we mine because it will help us transition to net-zero or save the planet, going back to my first slide. But for me, personally, I think on a micro level, we really do change people's lives with bringing these sort of mega projects online.

Yes, that's fantastic. So you kind of touched on this in your response about project evaluation. But I'm going to just ask it directly, particularly given how prominent the conversation has been at the conference, and that is on M&A. Does Ivanhoe look at corporate M&A? And probably more interestingly, does Ivanhoe consider itself an M&A target?