Ivanhoe Mines Ltd.

Good day, and thank you for standing by. Welcome to the Ivanhoe Mines' fourth quarter and annual 2022 financial results and review of mine construction and exploration activities conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Matthew Keeble, Director of Investor Relations and Corporate Communications. Please go ahead.

Thank you, operator. Hello, everyone. It's my pleasure to welcome you to the Ivanhoe Mines 2022 fourth quarter and annual financial results conference call. My name is Matthew Keeble, and I'm the Director of Investor Relations and Corporate Communications with Ivanhoe Mines. On the line today from the company, we have founder and executive co-chair Robert Friedland, President Marna Cloutier, Chief Financial Officer David Van Heerden, and Senior Vice President, Corporate Development and Investor Relations, Alex Pickard. We will finish today's event with a question and answer session. As mentioned, you can 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 Investor Relations team directly for any follow-up questions. Before we begin, I'd like to remind everyone that today's events 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 these forward-looking statements are contained in our March 13th news release, as well as on CDAR and at www.ivanhomeminds.com. It is now my pleasure to present Ivan Home Minds founder and executive co-chair, Robert Friedland. Go ahead, Robert.

Well, to everybody on our 2022 conference results here, I welcome all of you. And I'll start by saying it's great to be in a company producing real things, that everybody on this planet needs. Ivano has a very strong balance sheet, huge cash flows, the lowest cost and greenest ore bodies on this little planet in copper, in platinum, in palladium, in rhodium, gold, nickel, zinc, and germanium. Now, while clearly today confidence has not been restored by an incompetent Federal Reserve Board, which seemingly just yesterday said inflation was transitory, We now see systemic instability in the banking system with banks everywhere being long-term bonds at very low interest rates. So investors everywhere will be looking for strong cash flows, precious metals exposure, yet with minimal leverage and strong ESG performance. I believe that Ivano Mines has priceless assets. We have the best exploration and management team in the mining business. We're operating the best new copper mine in the world, and that's the world, if there's one metal that the world cannot live without, it's copper. There'll be no energy transition without copper metal, and every nation state is going from a just-in-time to a just-in-case economy. Military budgets are rising globally, and metals like copper, nickel, zinc, and germanium are at the top of the shopping lists. for national security purposes. Platte Reef is the largest precious metals development on our planet. And I believe that the Mokopani feeder is the most important precious metals exploration project in our industry. So it's getting harder and harder to finance another tier one copper or precious metals mine. And as a consequence, Ivano is attracting the deepest pocketed investors in the world. And our group's disruptive exploration technology and our new disruptive communution technology and our related companies have attracted the largest mining companies and some of the leading technology investors in the world. In a flight for safety, Ivano Mines, with the support of our host governments, our loyal young labor force, and our major institutional investors will lead our industry in mining with a higher purpose. And therefore, I'll turn this over to our great management team, and please enjoy the rest of our presentation. Thank you.

Thank you, Robert. Good afternoon and good morning, everyone. This is Marna Krüter, the president, broadcasting from a cloudy Jersey. Our management team is very excited to present a set of outstanding results for the 2022 financial year. Both our production and cash costs were within our original guidance parameters. An achievement we are very proud of in a year marked by production disruptions across the globe and extraordinary inflationary pressures. David van Heerden, our CFO, will talk you through our annual results in the next section. Next slide, please. To name a few key metrics. Kamoa Kukula produced on a 100% basis over 330,000 tons of copper. It sold over 320,000 tons of copper, resulting in net revenue of $2.15 billion, an EBITDA of $1.39 billion, and cash cost for the year was £1.39 per pound of copper produced. Our team on site also successfully completed the de-bottlemaking project, again ahead of schedule, and this increased production capacity to 450,000 tons on an annualized basis. Our phase three expansion is also on track for completion in 2024. This will increase copper production up to 650,000 tons. My colleague Alex will give you a more fulsome update on our Phase 3 progress later in this call. Earlier this year, we published an updated PFS and PEA, which includes Phase 3 and Phase 4. This resulted in an after-tax NPV at a discount rate of 8% of US$20 billion. But, as we all know, NPV models simply cannot capture the value of a multi-generational mining complex such as Kamoa Kokula. But probably our most impressive statistic to date is our zero lost time injuries recorded on the construction of the Phase 3 expansion, the smelt and refurbishment at Turbine 5 at Inga 2, which is the hydroelectric dam. Next slide. We frequently get asked what contributed to our success. And in my view, this slide captures the secret ingredients to the successful execution at the operation of the Maokukula. Our host government is a 20% equity shareholder at this multi-generational mining complex, sharing an equal, if not a slightly larger slice of the pie in the benefits to be derived from the mine's cash flows. To date, the DRC government received in excess of 500 million in taxes and royalties. We have invested in excess of 40 million in our host communities, building schools, clinics, churches, and implementing livelihood and enterprise development initiatives. Please bear in mind that we have only been producing for a year and a half. Our payroll to local employees amounted to 250 million, and our permanent staff is over 97% Congolese. If you go underground at Kamaukakula, It is Congolese personnel operating all our machinery. And here is an astonishing fact. In our first full year of production, we contributed 4% to the GDP of the country. Next slide. What sets the DRC apart is the people. The median age of the population is just below 17 years of age. It's a very young generation, eager to learn and be part of something great. To this end, we have embarked on building the Tamawa Centre of Excellence that will be completed later this year. This centre will serve as a tertiary education centre, providing access to a world-class education to young students from our host communities. We currently also have a state-of-the-art technical training facility on site, where all our Congolese operators are trained to the highest operating standards. The DRC is blessed with an abundance of minerals and a great climate, and Robert will provide some color in our exploration efforts later in this call. But most importantly, the DRC is blessed with hydropower, which means all our copper at Kamoa Kukula are green copper, with a low carbon footprint. And of course, the growth of Tamaoka Kula also significantly contributes towards the mine's low carbon intensity. With their shared value with host communities and governments, all parties involved work towards a common goal. We are immensely proud that in 2022, the DRC tied with Peru as the second largest producer of copper. With that as an introduction, I will now hand over to David van Jevden, our CFO, to take you through our 2022 annual results.

Thank you, Madna, and good day to everyone joining the call today. I'm very pleased to present our record annual and quarterly results, which is, of course, only a high-level summary of our results, and today's presentation should be viewed in conjunction with our audited annual financial results in the MD&A for the three and 12 months ended, December 2022. Move over to the next slide, please, Matt. Kamal Kakula's phase one and phase two concentrators continue to operate above design capacity in the fourth quarter, with copper sales remaining stable quarter on quarter. The record revenue in the fourth quarter was up from Q3 due to the higher average copper price and included a marked market of provisionally priced sales at $3.79 per pound. Cash costs remained stable and the higher revenue with consistent costs resulted in a record EBITDA of $451 million. On the next slide, we zoom into Kamoa Kapula's revenue and EBITDA margins. And from this slide, it's abundantly clear that significant upside can be expected with higher copper prices in Q1 2023 and beyond. When considering 2022 as a whole, this is just all the more impressive when remembering that Kamakakula only commenced commercial production in July 2021 and phase two only commenced in April 2022. The annual revenue of $2.1 billion with an EBITDA of $1.4 billion for 2022 and an EBITDA margin of 65% is really just the start for this impressive asset and equally impressive deal. Copper sales realized in the fourth quarter was done so at the weighted average price of $3.56 per pound, while 58,000 tonnes of payable copper remained provisionally priced at the end of December and was re-measured at $3.79 per pound at the end of the period. With the price of copper being elevated well above the $3.79 per pound in early 2023 to date, we do expect to see the re-measurement of the 58,000 previsioned price tons, having an additional positive impact in our Q1 2023 results. Next slide please, Matt. Operating cash flow generated by Kamau Kokula during the year was allocated to growing this exceptional asset. On completion of Phase 2, we move straight into Phase 3, with a joint venture well placed with a very healthy cash balance of $366 million in hand at the end of December 22. And we'll go into how that and additional cash flow from operations will be spent in our capital guidance on the right-hand side. Next slide, please, Bert. This slide does present our normal zoom into Kamau Kakula joint ventures accounts to illustrate how Ivano's ultimate share of profit flows from the Kamau Kakula result into Ivano's profit using the joint venture accounting. Having already discussed Kamau Kakula's revenue and EBITDA, I will further just add that the finance costs recognized by Kamau are and $295 million in 2022, is principally the interest on shelter loans from Ivano and Zijin that was advanced in 2021 and before to fund operations and initial capex. I will show the $151 million interest income Ivano recognized on this loan on the latest slide when I talk through Ivano's Additionally, I'll just mention that the tax expense is mainly deferred tax and therefore non-tax at present. The non-controlling interest of $141 million represents the profit attributable to the DRC government's 20% interest in the Camargo-Pula copper complex, leaving a profit of $513 million attributable to the joint venture partners I have no share of that being $254 million for 2022. Next slide, please, Matt. With the current headwinds of the past headwinds of 2022 and behind us, I'm very happy to say that there's no surprises on and see what cash goes. one cash cost for Q4 being stable and our cash price benefiting from the global marine freight rates coming down from its elevated levels in the second and third quarters of 2022. Importantly, Ivano was one of the Very little, if not the only company, copper company that came in within its original guidance that was set out in early 2022. So we are something we are very proud of. And our 2023 guidance is slightly up from 2022, but we'll go into that a little bit later in the next slide, which you can move to now, Matt. We are extremely excited to realize the benefits from the planned smelter as part of Phase 3, as you would have seen in the pre-feasibility study released at the end of January. Once the smelter has been commissioned, we expect a C1 cash cost of less than $1.20 per pound, placing us comfortably in the lowest quartile. This slide also illustrates our 2021-2022 cash costs of $1.39 for the year and also shows just what was considered when placing our 2020 fee guidance. Our guidance does take into account increases in power costs, tracking capacity and market dynamics. Next slide Matt. So if we move to Ivano's record profit for the year and we start from the left and Ivano has been previously mentioned, recognized $254 million of its share of profit from Kamal Kukula joint venture. We also recognized $151 million of interest on the loan to the joint venture. And the other expenditure was really in line with the rapporteur. The Capuchin project and expenditure there was expensed up until the end of June when the Ivano and Jechemins approved the budget for commercial production in line with the feasibility study and therefore expenditure at Capuchin was capitalized thereafter and deemed as development cost. The deferred tax recovery of $130 million represented on the graph also relates to Cappuccio and the decision to develop, and because of the development decision and the approval of that decision, it was deemed probable that there would be sufficient taxable income in which we could utilize the tax assets and therefore we recognized the deferred tax recovery earlier in Q2 2022. That built up to the ultimate record profit for IVANO of $434 million. We can move to the next slide, Matt. If we look at our plans for 2023 and 2024, our development teams and project teams at all three projects will be extremely busy as we continue to develop our three outstanding assets. The capital expenditure provided on this slide is as presented on the 31st of January in in our CAPEX guidance release, and the capital cost aligns well with studies we released, particularly considering the inflationary market and pressures we've experienced over the last few years. And I think it's also just important to note that these costs are based largely on committed orders we've got in place. Planned Phase 2 capital expenditure at Flat Reef remains under review as we have commenced an optimization study to potentially accelerate the production from the Phase 2 expansion, which will consider the implications of converting the 5.1 meter diameter ventilation shaft, which we call Shaft 3, which is an induction shaft. with the capability to avoid it. So we'll be on the lookout for possible changes there once the study is concluded. We can move to the next one, please, Matt. So Ivano, in this slide deck and in MDMA, we have presented our adjusted EBITDA at an Ivano group level. And this is, I think, important for analysts and investors, basically illustrating our view of how adjusted EBITDA should be calculated. And looking at the detailed reconciliation we've got in the MD&A, you will note that we have not been creative at all, and I think basically just taken... Obvious adjustments to get to our ultimate adjusted, what we feel is a good proxy for cash flow generated by Kamara Kukula and our share thereof, as well as the effects of our other expenditure on that EBITDA. We've got a breakdown, and as one would expect at this stage, the majority of Ivanhoe's adjusted EBITDA made up of the share, our share, of the Kamara kukuma and Wadaa, which we've obviously detailed earlier in this presentation. So moving, if we move to the next slide, I'll point to the, on the previous slide where we indicated our share of the EBITDA from Kamau Kakula. We had a 39.6% interest of Kamau Kakula effectively included in our adjusted EBITDA. And similarly, we've got equity ownership percentages at Flat Reef and Kapushi, which does not necessarily, or does not, at least initially, align with the proportion of cash that Ivano will be receiving from cash flow generated from our projects. This slide is, once again, just illustrates the loans and funding already advanced to those projects through holding companies held by Ivano. Because of accounting, these shareholder loans would generally cancel out, so it's not seen on a consolidated level. But it's very important to consider the higher proportionate loans advanced by Ivano because it does impact on future cash flow. What this slide effectively means is that Ivano will receive a much higher portion of distributions once they would suggest. The cash flow waterfalls for all our projects, and as one would expect, would result in cash flow when shareholder loans and other financing to be repaid first, or at least a large proportion of that to be repaid first before dividends commence. So therefore, Ivano will receive higher cash flow As we all know, time is money. So effectively, Ivano, on a valuation, from a valuation point of view, should receive a higher attributable portion of the value of our projects than just our mere equity interest. Move to the next slide, please, Matt. So just to summarize, where Ivano is placed for 2023 and beyond. Abeno has a very strong cash position with cash and cash equivalents of almost $600 million in the bank and a very limited, very small net debt position. And if one considers that the net debt of $132 million at the end of 2022 includes the convertible notes, net cash position. We've got total assets of $4 billion at the end of the year and total liabilities of $1.1 billion which includes again the convertible notes as well as $311 million of deferred revenue which relates to the flat rate stream which would be amortised And that concludes the financial highlights for me, and I will now hand over to Alex to take the presentation.

Okay, thank you, David. It's Alex Pickard here speaking from London. I'll just say in advance apologies if I sound a little bit hoarse. I'm recovering from two weeks of marketing and conferences in North America. So, in this section, we will take you through a review of all of our operations, Kamoa, Kipushi and Flat Reef. And also, Robert will be giving a bit of a flavor of the exploration that we're doing in the Western Forelands and at the Makapani feeder in South Africa. But first, I will take you through some of the highlights at Kamoa Kukula, of which there are many on the next slide. So it's quite incredible to believe really that this was Kamoa Kukula's first full year of production, given that we only started phase one operations in July of 2021. So for the full year 2022, we're very pleased to report that we delivered the upper end of our initial production guidance, which was 290,000 tons to 340,000 tons of copper for the year. and we came in at just around 333,500 tons, so just below the top end. This was really a reflection of the outstanding ramp up of the phase two mill, which began in April, but we were already at full capacity within a matter of weeks. And where you can really see that is on the right hand side, we managed to mill 7.1 million tons, which is a fantastic achievement given that we only had three quarters of production from the full phase one and phase two at a rate of 7.6 million tons per annum. We recently announced that we completed our $50 million de-bottlenecking program ahead of schedule and on budget, which is a recurring theme for Kamoa-Kakula. So this de-bottlenecking allows us to increase our nominal throughput by 20% to 9.2 million tons per annum, and we finished the very final piece, which was the commissioning of the fourth and final filter press. That was completed last week. And then since then, we are very pleased to report that we've hit daily records for both throughput and copper production, copper production being in the region of 1,500 tons daily, which shows the true capability of what this plant can hopefully do given a good run. So now as we reach steady state, one of our major targets is to improve our metallurgical recoveries across the board. So the original design parameter was 86%. We have been achieving from one day to the next, recoveries of 88% and above, and we are looking to lock these recoveries in for the long run and ultimately be sending a lot less copper to our tailings. Finally, we reiterate our 2023 production guidance of 390,000 to 430,000 tons of copper in concentrates. Next slide, please. So moving on to this phase three expansion, the phase three expansion project is continuing to advance on schedule in all facets. So that includes the three major initiatives that we've spoken about before. The first being a five million tons per annum expansion of our mine and a new concentrator located at Kamoa, which you can see towards the center of that map on the right hand side. The second part is building the largest copper smelter in Africa, which will produce 500,000 tons of 99.7% copper anode and bring with it significant cost improvements that David already mentioned. And then the third part, and a very, very important part, is the hydropower turbine refurbishment to provide 178 megawatts of clean energy for all of these expansion projects. There is no change in terms of our target. We're still aiming to tie all of these initiatives in by the end of 2024. And one major area in our favor, in fact, a couple of major areas. One is that we are using the same team, the same contractors that delivered so successfully through phase one and phase two. And the second is that all of the major equipment, I think David already mentioned, has been ordered, is undergoing fabrication. So we're expecting deliveries to start arriving in the later part of this year. And then that will be the really exciting part of the build as all of that starts to come together. But because all of these orders have been placed and committed, it also gives us a very high degree of confidence in our capital budget of $2.5 billion for the next two years. Next slide, please. And finally, on Kamauka Kula, we would just like to reiterate that we published our Life of Mine multi-generational plan for the mine in late January. That's what we refer to as the 2023 Integrated Development Plan, or IDP. We like this slide as it's a good summary of why we believe that Kamoa Kukula today is the world's best copper mine, with a unique combination of incredibly high grade of between 5% and 6% copper going into the mill. But uniquely for a very high grade mine, we also have a world class production scale, aiming to be the fourth largest producer in this chart, but with our sites set to become much bigger, and finally with a very, very long life, which is reflected by the large bubble size that you see in this diagram. One of the other striking conclusions, I think, of the IDP study is Kamoa's ability to sustain a huge production rate in excess of 600,000 tons of copper per annum for a period of almost 30 years, which is quite unparalleled, I think, in the industry today. and provides us with huge leverage to copper prices on an ongoing basis. We recommend that listeners review the study in full, and that will be published this week in 43-101 form on March 16th, and that will be available on the Ivanhoe Mines website and also available on CDAR. So with that, I will hand back to our executive co-chairman and founder, Robert Friedland, to talk a bit more about our exploration initiatives.

Thank you, Alex. Having listened to this presentation, I think we make a few more remarks. First about the smelter. It's really important to understand that a great percentage of the world's smelting capacity is in China. And there's going to be a shortage of smelting capacity. It doesn't really matter how much copper concentrate is produced if you have a bottleneck in smelting. So the fact that we're building the most modern, up-to-date smelter with technology from out of Kumpu, as well as the best Chinese technology from Niren, is going to make this a super green copper mine. What energy is required is coming from hydroelectricity, and the analog holds, like in the aluminum industry, with green hydropower and the highest grades. It has been noted by a number of major mining companies who've visited Kamoka Kula that this is the world's best copper mine, certainly the greenest. certainly with the best ESG characteristics, and that puts a lot of attention on the western forelands. The basin that we hold in the western forelands holds identical geology to Kamoa, Kukula, Kinsoko, the Bonanza Zone, Kamoa-Kukula itself. All of these deposits are hosted in sedimentary geology that is important industry on a global scale. It's difficult for me to think of a major mining company that has not approached us with interest in the Western Forelands. Now, in the Western Forelands, there are four magic ingredients. The information is proprietary to our geologists, but if we have three of them coming together, we sort of get an ocean of 3% copper. And, you know, our cutoff grade up until now is Our head grade is 5% or 6%. But even a 3% copper deposit is highly anomalous in the crust of the earth. We're using less capital intensity, less energy, less water, less carbon dioxide per unit of copper produced than any competing copper mine in the world. Now, if you get a fourth magic ingredient, you get a cuckoo luck. And it's our team that knows these ingredients. And there is a huge amount of work to be done in the western forelands. We've noted that we're working at Lupemba, Mushiji, Makoko. But we're also starting to look at the possibility of developing our own, wholly owned mine in the western forelands at Makoko, utilizing some of the high grades at Tiala. At this stage, I would only like to say if it If it walks like a duck and it quacks like a duck, it's probably a duck. And it's only a matter of time before one of our holy old minds manifests in the Western Forelands. I don't know of an exploration project at this scale in the copper industry. We've recently had some very competent new geologists join our team. We're throwing a $19 million budget at drilling through sand cover. This sand in the Western Forelands blew in from the Kalahari Desert. And so there's a blanket of anywhere between 10 and 30 meters of sand obscuring the geology. So there's very large areas in this basin where we're drilling through the sand to test what's underneath it. And we couldn't be more excited about our multi-year program at the Western Forelands. So for copper, this is the best copper hunting area in the world. But I'd like to draw attention a little bit to precious metals because the platinum price is up today more than gold. The palladium price is up as much or more than gold. Gold is not bad. Rhodium is going crazy. In a world that seems to be afraid of risk, I'd like to remind everybody we are building the world's largest precious metals mine with astronomically large precious metals endowment. If you look at the Mokopane feeder slide and you see our shafts up there on the turf sprint farm. Where did this northern limb come from? So if you if you look at the those magenta colors on the Blinkwater, Lisbon and Muckaluckas Gulf farms. We're looking at what is one of the largest gravity anomalies in the world and the host rocks on the on the critical limb. of the Bushveld are extremely heavy. So there's something enormous and something very heavy under those three farms. Seven years of patient effort was required to get those farms awarded to Ivano Mines, Blinkwater, Lisbon, and Moordrift. And this is the most significant exploration project in the precious metals business anywhere in our estimation. We don't know what's causing all that gravity, but if you go to the next slide and look at the Mokopani feeder in relation to the Bushveld complex, the Bushveld complex has produced more precious metals than any single structure in the world. The Mokopani feeder occurs at the structure of the northern limb of the Bushveld and the ring structure that represents the Bushveld. There's something extremely heavy there. And in our quarterlies, we disclose that we're going to be starting a lot of sophisticated geophysics, more detailed gravity and Aramag, and we'll be testing this unusual feature. And of course, if we're right, this would be a Norel-scale target of nickel, of copper, of gold, of platinum, of palladium, of rhodium. Perhaps this is where the mantle has been tapped and that's why PhD geologists working for the South African government call this the Mokopani feeder. If you ever want to lay awake at night dreaming about the possibility of a supergiant discovery that follows in the history and the footsteps of all the other supergiant discoveries we've made, I would also nominate the Mokopani feeder as sort of a mind-blowing opportunity in the South African industry. And I want to thank our team and the support we've had in the South African government to put this project forward. So with that, we look better to even better days. And with the continued growth of our company, I'll hand this back to our compatriots to continue the discussion about Plat Reef. Alex.

Thank you, Robert. It's back to me. And Marnie. They are. So talking about super giant discoveries, so a bit of an update as to what we've been up to at Platte Reef. Our underground development work has been focused on vertical development of waist forces and lateral development towards the oar body. We've completed more than 750 meters of lateral development and over 200 meters of vertical development. Our shaft three is currently being reamed And you can see that in that picture in the background on the slide. And we plan to complete this in the fourth quarter of this year, of 2023. We have initiated optimization work to identify value-accretive options for installing hoisting capacity in the shaft. So shaft 3 was originally planned as a ventilation shaft only. It will have a diameter of 5.1 meters, and we are now planning to equip the shaft for hoisting, which provides an alternative option to remove ore and waste from the underground mine. This has the benefit of de-risking the development and ramp-up of Phase 1, but it may also be used to accelerate the ramp-up of the underground mining activities for Phase 2. And just to remind you, phase two is planned for completion at the end of 2027. Earthworks construction for the phase one concentrator is also underway, with the mill foundation and civil activities also advancing well. And then we have also commenced with the construction of our first solar plant at the end of last year and the third quarter of 2022. and we expect to commission this in 2023. And this power will be used for mine development and construction activities. If we go to the next slide, this is a beautiful picture. This is our shaft two. The 10-meter diameter shaft two, which is required for the phase two expansion, will be among the largest hoisting shafts on the African continent and is currently under construction. Shaft 2 head frame will be equipped with up to 8 million tons per annum of hoisting capacity. And the headgear concrete slide construction has commenced and is more than 70 meters complete. And this is what you see there in the background. And that's 70 meters out of 104 meters in total. There's also a very nice photo of me, if I may say so myself, initiating the pilot role for the rice boring of Shaft 2 in the press release that was issued earlier today. And then last but not least, we go back to the DRC to give you a bit of an update on Capushi. Our long lead orders are expected to commence delivery to site in early July. And this includes the bore mill currently being fabricated by CITIC in China. And maybe I just want to stand still on Capushi a little bit. I think a lot of our shareholders will be surprised as to the progress that we are making at Capushi. Capushi is really a a easy project compared to what our team has managed to do at Kamoa and our construction work on site is advancing very well on schedule with our earthworks effectively complete and our civil works is also advancing very well. Our first concentrate at Kapushi is scheduled to occur during the third quarter of 2024 so that's next year that's as early as tomorrow. With Kapushi anticipated to bring additional trucking volumes online, we completed a scoping study investigating various border options at the Kapushi border post, and this was issued to the government for consideration. We are also doing further studies on the Zambian road network to identify preferred routes to link Kapushi to international ports. A new commercial border crossing will be a significant advantage in terms of direct imports, clearing customs, but it will also provide socioeconomic benefit to the town, which is currently mine dependent. The border crossing will, of course, also benefit logistics for Kamoa Kukula's operation. And then if we go to the next slide. Here you can see our underground mine development around Kapushi's big zinc ore body and that's advancing ahead of schedule. Our stowed perimeter drives are being developed and we are expecting to start extracting ore towards the latter part of this year. Shaft 5 is planned to be the main production shaft with a maximum hoisting capacity of up to 1.8 million tons per annum. Our off-take discussions, including a $250 million prepayment facility, have advanced to final draft term sheets. This has been received from shortlisted parties, and it's under review by the Capuchin shareholders. The off-take agreements, as well as the revised joint venture agreement, are expected to be completed during the first half of 2023. So with that, as remarks on both Platriff and Kabushi, we will now go to the Q&A section of today's call. Over to you, Matt.

Thank you, Marna. We'll now begin the question and answer session. The way this will go, we'll clear the phone lines first, and then we'll go to web questions thereafter as we have time. We probably won't be able to get to all questions today, so if we don't get to your question, please do follow up with our team directly, and we can get an answer for you. With that, I will turn it back to the operator to populate the phone line, and we will grab questions on the line first, and then we will turn to webcast. Operator?

Thank you. As a reminder, to ask a question over the phone lines, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Greg Barnes. With TD Securities, your line is now open.

Yes, thank you. I guess a question for Alex. Can you talk about the grid stability issues in the DRC and how that's impacting operations at Komoka Kula currently?

Sure. Thanks for the question, Greg. So as we've written in our annual announcement, we have been experiencing intermittent power issues in the DRC grid. That's been going on roughly since December. But the first thing to say is that that is reflected in terms of our production guidance for the year. So when we say 390 to 430,000 tons, that was on the basis of the grid stability that we were seeing at the time. I think we've mentioned it's a regional issue. It's not an issue with any of the hydro dams that we have been a part of upgrading. But it is generally caused by failures in generator capacity across the grid and some of that is avoidable through better maintenance and putting other systems in place. So what we're trying to do is mitigate this in a number of ways. The first thing is to install backup capacity. So we mentioned in the release that we will have an additional 13 megawatts in generator capacity. arriving in a little over a month at Kamoa, which will start to help. And the plan is to ramp up that generator capacity to 132 megawatts by next year, which will cover quite a bit of our operations from phase one and phase two. We'll be able to basically run at least one mill uninterrupted, even during incidences of blackouts. The second thing I think we're doing is, in terms of assisting Snell, we're doing a detailed analysis of what the weak points are in the regional grid system. And then we are going to see how we can assist in terms of the project management to perform those improvements across the grid. And a lot of them are not big capital cost items. It's small incremental improvements. And these could potentially be incorporated into our loan agreement with Snell. And then the third thing maybe to mention is that we are discussing additional dedicated grid power capacity coming in from Zambia. And we're quite confident and optimistic in terms of that potential. But maybe just to end on a more positive note, you know, I think without these power numbers, also the power intermittent capacity, I think we would be seeing some unbelievably good operational numbers from Kamoa Kukula, like the 1,500-ton daily record that I mentioned in my segment. But it's obviously the power that has a knock-on impact for how often you can run and also consequences for your recoveries.

Thanks, Alex. Maybe a question for Robert. Do you have any sense on the Makapane Cedar Zone? It may be too early yet, how deep that large zone actually could be, or is it just too early at this point to have a sense of that?

Thank you. Only God knows, and she might change her mind. You know, we see an enormous gravity feature. It's been known for a long time. It's astonishing that it's never been detailed. people used to fly and push over Botswana and turn left over a big mag anomaly that turned out to be the biggest diamond mine in the world, Zhaowang. So this big gravity feature must mean something. Now, it could be a super giant gravity anomaly at two kilometers of depth, or it could be a slightly less giant gravity anomaly at 500 meters or a kilometer of depth, and we won't know until we detail it and drill it. But it's the probable source of the magma that formed the northern limb. And the reason I'm so excited about it is that when you look at the northern limb, the further south you are in the limb, the higher the base metals content. They are the nickel and the copper. The footwall at Platte Reap is limestone. It acted as a reductant, and that's why there's such as from an enormous nitrogen-copy environment. Looking at the scale of this gravity anomaly, one could imagine that it could be the largest space metal discovery in the world. And it doesn't really matter how deep it is if it's that big. I mean, you can see that anomaly is miles across. So we're just going to have to go step by step. It took us seven years to acquire 100% of those farms. Believe me, that wasn't easy. And hats off to our people that worked right up to the president's office because we've established our credibility to look at this asset. And only drilling is going to tell us how deep it is and what its ultimate scale is. But if you're looking for an ultra-giant precious metals target, given that Platte Reef is the world's largest precious metals mine in development, the geophysics of the Mokopani feeder just dwarfs anything else on the continent. So let's drill it and see. Thank you for your interest in it.

Thank you.

Thank you. As a reminder, to ask a question at this time, please press star 1-1 on your touchtone telephone. Our next question comes from the line of Andrew McKitchick with BMO Capital Markets. Your line is now open.

Hello, can you hear me?

Yes.

Okay, just two quick questions. Maybe one for David first. Can you give us some guidance on the pace of spending for Phase 3? You know, I realize you can't give us the exact numbers, but maybe give us a sense potentially of where the peak CapEx intensity is or the peak spending, just so we have a sense of what to expect this year going into next year, please.

No problem Andrew. I think we do two things pretty well and one thing is coming online on schedule and budget and then the other is that the project teams generally underspend what they plan or spend it later. We've included ranges on our 2023 guidance specifically for that reason. We do, I probably expect us to come in closer to the smaller end of the range as shown in our 2023 guidance. But because we've incurred, placed a large amount of the commitments already as We expect the peak funding point to be close to September. That's basically the forecasted peak funding point for us internally. But that might be slightly later as there is a bit of a drag when comparing commitments

Okay, thank you. That's very helpful for us to get a sense of what to expect. Maybe my second question I assume would be for Alex. There have been discussions in previous calls and press releases about continuing to accelerate development at Kukula so that the mining activity there maybe better matches the processing rates from Phase 1 and 2 combined so that there's less reliance on the stockpile and less reliance on Consoco. How is that progressing and when should we be kind of seeing the benefits of that or start to hear more details from your team?

Yeah, thanks, Andrew. I mean, it's still an ongoing initiative that basically the plan is that Kukula Underground will be able to supply the entirety of the 9.2 million ton and large capacity for the phase one and phase two mill. And if you look at the mine today, you know, we're probably somewhere in the high eights in terms of what's coming run of mine versus coming from the stockpile. But I would just add, it's not, you know, this is not necessarily a game of chasing the highest grade possible from one week to the next. You know, part of this development is basically to open up a lot more panels and open up much more of the mining footprint and have much more of our reserve at Kukula available to be mined at any one time. So that will take us months rather than weeks to be able to be in that position where we can routinely mine 9.2 million tons from Kukula. But I think the study that we put out is a pretty good reflection of where we're intending to get to in that regard.

Thank you very much for your comments. I'll feed the microphone to the next speaker. Thank you.

Thank you. I'm sure no further phone questions. I'll hand the call back over to you, Matthew.

Thank you, operator. We have time for a couple web questions, so I will pull a few here. There's quite a few repeats, so we'll sort of group some together. First of all, I think the first one is probably for Robert. It's more of a macro strategy question. Robert, with the pending cash flows coming in 2025, could you speak a little bit to your longer-term vision for Ivanhoe Mines strategically with Cappucci and Camorra reaching peak cash flow heading towards the end of the decade?

We're going to build Ivanhoe Mines into the world's greatest new major mining company. There's just no doubt about it. We've had interest from all quarters. I'm spending my life flying around talking to sovereign wealth funds and major mining companies and investors from all over the world looking to get involved in something real for a change because these metals are required for the energy transition. Without these metals, it just won't happen. And these metals are required for national security and everybody's interested in beefing up their defense capability in a very uncertain world. And then, of course, paper assets are just trash. Nobody really trusts central banks anymore or what they have to say. And you can see that in today's precious metals prices. So there's a lot of liquidity in the world looking for real things. And paradoxically, if our mine is 10 times the grade of your mine, we're using a tenth of the energy and a tenth of the steel, a tenth of the concrete, and we're generating a tenth of the global warming today. gas per unit of metal produced. So looking at how far we've come in the last 26 years and looking where we're going to go to the next decade, we really see no limit on Ivano Mines' ability to become the next major mining company. We're already clearly the world's largest junior mining company, eh? Or we're already the world's smallest major mining company, but we have the best in class mineral assets. And we're mining in a part of the world where there's nowhere to go but up. So we have an incredible esprit de corps of a company where women are empowered and local communities are part of the effort. We've reinvented the software around mining on the ESG characteristics. We think over 26 years of effort, we have the right formula to grow. And I'm firmly of the belief in coming quarters will show the world the best-in-class strategic long-term partners to grow Ivano Mines into a century-long pursuit. You know, the great mining companies in the world like BHP came from Broken Hill, or Rio Tinto really grew when it bought Bingham Canyon from British Petroleum in Utah. It really took Rio Tinto to the moon. So when you have a great ore body like this with huge cash flows, Just imagine the cash flows of Coca-Cola to all the governments concerned as well as ourselves. We're going to grow Ivano Mines into Canada's next major mining company. Period. Full stop. Thank you.

Thanks, Robert. And I think we have time for maybe one or two more. The next one's probably best suited for Marna. It's sort of a DRC-related question. Marna, with the rise in copper production, the DRC now sort of even with Peru globally, could you just speak to the stability and the sort of political situation there, as well as I guess there's a pending election, and this has been asked a couple of times. Thanks.

Thanks, Matt. I personally spend a lot of time in the OC engaging with government and our experience has just been positive. There's been a real willingness from government to work with the investment community to see foreign investment into the country. And even with the pending elections, if I compare it to the previous election period, it was a lot more volatile. Now we see campaigns being run. but we don't see riots on a daily basis. So it's your normal campaign season. You know, things are getting a bit active, but the government should remain stable. People want to see democratic elections being held towards the end of this year. There's a firm commitment from government to do so. And, you know, government has been very supportive in our efforts. We've hosted a number of tours to our partners through the Minister of Portfolio, the Minister of Mines, the Prime Minister to Kapushi, and they were all very complimentary in terms of how we conduct our business and how they want to use Kamau Kakula as an example of how mining can be done in the country. and how we can grow the industry even further in a sustainable way as partners.

Great. Thank you, Marna. And we've just run short up here on our hour, so I think that's all we're going to have time for today. So this concludes the call. I'd just like to thank you again for attending today's event, and we look forward to speaking with everyone soon on the many exciting milestones coming in 2023. So thanks again, and back to you, operator.

Thank you all for participating. This concludes the conference call. You may now disconnect.