Ivanhoe Mines Ltd. (OTCQX:IVPAF) Q3 2022 Earnings Conference Call November 14, 2022 10:30 AM ET
Company Participants
Matthew Keevil – Director of Investor Relations and Corporate Communication
Marna Cloete – President
David van Heerden – Chief Financial Officer
Alex Pickard – Vice President, Corporate Development
Conference Call Participants
Lawson Winder – Bank of America
Farooq Hamed – Raymond James
Andrew Mikitchook – BMO Capital Markets
Operator
Good morning, ladies and gentlemen, and welcome to the Ivanhoe Mines Q3 2022 Financial Results Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we’ll conduct a question-and-answer session. [Operator Instructions] This call is being recorded today, November 14, 2022.
I would now like to turn the conference over to Matthew Keevil, Director of Investor Relations and Corporate Communications. Please go ahead.
Matthew Keevil
Thank you, operator. Hi, everyone. My name is Matthew Keevil and I’m the Director of Investor Relations and Corporate Communications with Ivanhoe Mines. It is my pleasure to welcome you to our Q3 2022 conference call. We will finish today’s event with a question-and-answer session. You can submit a question using the Q&A box on the webcast page as well as through the conference operator via your phone line. Given our time constraints, we will likely be unable to answer every question, but please follow-up with the IR team after the call.
Before we begin, I would like to remind everyone that today’s event will contain forward-looking statements which involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Details of these forward-looking statements are contained in our November 14th news release as well on SEDAR and our website at www.ivanhoemines.com.
It is now my pleasure to introduce Ivanhoe Mines’ President, Marna Cloete.
Marna Cloete
Thank you, Matt, and welcome everyone to our third quarter earnings of 2022. We’ve had an extremely busy quarter with our expansion projects at Kamoa and activities ramping up at Platreef and Kipushi. This quarter Kamoa-Kakula kept building on its reputation as a world class mine, with record sales of 94,000 tonnes of payable copper and copper production of 98,000 tonnes of copper for the quarter. This gave us the confidence to up the lower end of our production guidance to 325,000 tonnes of copper in concentrate, with the aim to achieve the upper end of guidance of 340,000 tonnes of copper in concentrate. The debottlenecking project is now 70% complete, and it is expected to reach annualized copper production of 450,000 tonnes of copper in the second quarter of 2023.
Our Phase 3 expansion activities are progressing well and is expected to increase production from Kamoa-Kakula to 600,000 tonnes by the fourth quarter of 2024. Our C1 cash costs continue to be impacted by higher-than-expected logistic charges. But with current mitigation measures in place, we reiterate our guidance and expect to be at the upper end of cash cost guidance for the year. To this end, we have tightened the range to between $1.35 and $1.40 per pound.
Before our CFO David van Heerden discuss our financial results in more detail, I would like to provide a quick update on the efforts of our sustainability team. During the quarter, Kamoa-Kakula commenced its bulk earthworks at the Kamoa Centre of Excellence, a rendering of this facility is in the background of the slide. This Centre, once in operation, aims to create a sustainable and community-centered learning environment in the heart of the DRC. It will be a world-class facility offering degrees, diplomas and short courses in collaboration with internationally accredited institutions. That are livelihood programs at Kamoa, our teams are expanding our community forming footprint, which contributes to local entrepreneurs, as well as food security.
Our team at Platreef focused on enterprise and supply development to enable small and medium enterprises to be included in our supply chain. And at Kipushi we are focused on access to water with a borehole program underway to assist our communities.
With that as a short introduction, I would like to now hand it over to David van Heerden for the financial results.
David van Heerden
Thank you, Marna, and good day to everybody joining our call today. The third quarter of 2022 was another quarter of exceptional performance at Kamoa-Kakula. However, the results was impacted by a further decline in the copper price at the end of the period and inflationary pressures, both of which I will discuss in more detail.
This call is of course just a high-level summary of our quarterly results and the presentation should be viewed in conjunction with our quarterly financial statements and MD&A for the three and nine months ended September 30, 2022.
During the quarter, Kamoa-Kakula sold almost 94,000 tonnes of payable copper in concentrate, leading to quarterly revenue from contract receivables of $570 million before negative remeasurement of $110 million at period end, bringing us to a total revenue of $460 million for Q3. C1 cash costs for the quarter was a fraction higher due to the ongoing elevated logistics charges but we will go into that in more detail in upcoming slides. Notwithstanding the lower copper prices in the quarter, Kamoa-Kakula generated very healthy EBITDA of $254 million.
Revenue from contract receivables booked at an average copper price during the month of sale was $570 million in Q3 compared to $699 million in the second quarter of 2022 with the sales provisionally priced at $3.48 per pound in Q3 compared to $4.32 per pound in the second quarter. Q2 sales was remeasured at the end of June at a copper price of $3.79 per pound, while the realized copper price for Q3 was $3.50 per pound. And at the end of September, the outstanding balance of provisionally priced sales were remeasured using a copper price of $3.36 per pound, with these collectively resulting in the negative mark-to-market at the end of Q3 of $110 million.
Kamoa-Kakula’s cost of sales for the third quarter was $216 million in total, and the $1.05 per pound of favorable copper sold, down from $1.15 in the second quarter. After deducting general and administrative expenditure, the operating profit for the third quarter of the year was $223 million and Kamoa-Kakula’s EBITDA was $254 million. Kamoa Holding recorded finance costs of $81 million in Q3, which is principally the interest on the shareholder loans from Ivanhoe infusion, as well as the interest on Kamoa-Kakula’s equipment financing facility.
The deferred tax and tax expense for the quarter was $57 million and — compared to $62 million in Q2 2022. Non-controlling interest of $20 million for the quarter represents the profit attributable to the DRC government’s 20% interest in the Kamoa-Kakula Mining Complex, leaving a profit of $69 million attributable to the joint venture partners, Ivanhoe share of which equals $34 million in Q3.
We move to the next slide. Indicated at the top left of the chart is the quarter-on-quarter comparison of Kamoa’s revenue, while also including the realized copper price in the period. The buildup of the year-to-date revenue to $1.5 billion has been exceptional considering the declining copper price. The top right chart indicates the cash Kamoa-Kakula generated from its operating activities. With the bottom left chart underlining the strong quarter-on-quarter EBITDA performance and margin, which has been more than sufficient to cover the current expansion expenditure with a capital expenditure for third quarter summarized at the bottom right hand side.
We move to the next slide. The Ivanhoe’s consolidated results for Q3 and the chart starts with Ivanhoe’s share of profit from Kamoa joint venture of $34 million, which was mentioned two slides back. Additionally, Ivanhoe owned interest income of $41 million from Kamoa Holding in the third quarter from shareholder loans advanced to the joint venture.
During the quarter, the company spent $4 million on Western Foreland’s exploration and $9 million on general and administrative expenditure. Cost incurred at the Platreef and Kipushi project are deemed necessary to bring the project to commercial production and are therefore capitalized as development costs in property, plant and equipment.
The $27 million loss on the fair valuation of the financial liability in the third quarter represents the change in the deemed fair value of the conversion feature attached to the $575 million, 2.5% convertible senior notes, which Ivanhoe closed in March 2021. The conversion feature is an embedded derivative financial liability. And the fee value changes principally due to the fluctuations in our share price, and the losses therefore result from the increase of Ivanhoe’s share price from the end of June 2022 to the end of September this year.
Further, Ivanhoe recognized finance costs of $10 million in Q3, relating mainly to the interest on the convertible notes at the effective interest rate. The aforementioned ultimately builds up to Ivanhoe’s profit for Q3 of $24 million.
We go to the next slide. And the cash cost per pound of payable copper produced for delivery to China was $1.43 per pound of payable copper for Q3 2022 and largely in line with the $1.42 per pound in the second quarter. The volume benefit from additional tonnage produced in the quarter resulted in decreases in G&A and processing cost but was offset by the increase in logistics cost. Concentrate production at Kamoa-Kakula doubled over the last year, which has not been made with a sufficient supply of trucking capacity and has led to an increase in the trucking contractor market pricing.
In addition, the Lualaba Copper Smelter was closed in June for maintenance, thereby temporarily increasing logistics volumes and costs for the last two quarters. The Lualaba Copper Smelter completed its scheduled maintenance in early September, which will assist in reducing overall shipping volumes. At the export blister copper incurs lower logistics cost per unit compared to copper concentrate. These factors, together with border congestion, further increased trucking demand resulting in higher logistics cost.
Importantly though, Kamoa-Kakula was able to sell almost all tonnes in payable copper produced in the quarter with the difference in payable copper sold and payable copper produce being less than 1,000 tonnes. And as Marna mentioned, we still expect to come in on the upper end of our guidance range. So while our costs are higher than we like, and — the previous slide has indicated that Kamoa-Kakula still generates excellent EBITDA and cash from its operating activities.
Thank you. I will now hand over to Alex Pickard, our Vice President — sorry. One more slide. Just looking at our strong balance sheet position which supports our growth, we are well positioned for further development of our projects with $663 million in cash and cash equivalents on hand and consolidated working capital of $686 million. Our liabilities of $989 million, $610 million relates to the convertible notes, with these only due in 2026 with possible earlier redemption. While $284 million relates to deferred revenue, which represents the prepayment for future sell off refined gold and palladium and platinum to be delivered by the Platreef Project in terms of our streams in the future — which in the future will be amortized as the ounces are delivered to the stream purchases.
Our forecasted spend for the remainder of 2022 is $149 million on Platreef and Kipushi as well as continued exploration on Western Foreland and overheads. All operating and capital expenditure costs at Kamoa-Kakula are expected to be funded from copper sales and facilities in place at Kamoa. And we are forecasting a very healthy cash position at the end of the year.
I will now hand over to Alex Pickard, our Vice President, Corporate Development and Marna to provide a brief update on the development of our projects.
Alex Pickard
Thank you, David, and good day to everybody on the line. It’s Alex Pickard here, VP Corporate Development. And I’ll say, I’m very glad you took us through the balance sheet there, because I wasn’t prepared to take over then. So now we’ll take you through a brief update on Kamoa-Kakula operations and projects and also talk a little bit about our exploration assets out in the field.
First of all, looking at Kamoa-Kakula’s operational performance, we are very pleased to report another record breaking production quarter of 97,800 tonnes of copper content in concentrates. This included 33,500 tonnes produced in September alone. So that comfortably exceeds an annualized production rate of 400,000 tonnes. And we were pleased to also repeat this level of production during the month of October. The charts on the right hand side give a bit of an indication of how this was achieved.
So as Phase 2 has reached steady state, we’ve gradually improved our milling rates and so for the quarter we’re now close to 2.1 million tonnes, which was up from 1.85 million tonnes in the previous quarter. And at this milling rate, we’re looking at an annualized overall milling rate of roughly 8.3 million tonnes. So that’s exceeding our original designed throughput of 7.6 million tonnes. We’re also very pleased that the grades increased widely during the quarter to 5.6%. And this is a reflection of the continuing optimization efforts that we’re going through with our mining activities at Kakula in particular.
Given that Phase 2 has also now ramped up to full capacity, we are pleased to see that the recoveries are hitting our designed targets of very close to 86% overall. So where that leaves us today is that as at the end of October, we’ve produced just over 274,000 tonnes of copper and as Marna mentioned at the beginning of the call that that’s given us the confidence to increase the lower bound of our production guidance to 325,000 tonnes up to 340,000 tonnes of copper for 2022.
Finally, just looking at the debottlenecking program, that’s also tracking ahead of schedule. We are roughly 70% complete today and so we are targeting to be fully up and running by the second quarter of next year. This will increase the overall milling capacity to 9.2 million tonnes. So that’s roughly 10% higher than what we milled in the previous quarter, or in terms of copper production that’s around 450,000 tonnes of copper output. But we will be giving more detailed guidance for 2023 early in January.
Next slide please. So moving on to our larger Phase 3 expansion project at Kamoa-Kakula. The construction activities are going ahead very much as planned. And we have no change to our targets for commissioning in the fourth quarter of 2024. So this Phase 3 project includes the construction of a new mining concentrator in the Kamoa area of the mining license. So that’s roughly 10 kilometers to the North of the existing concentrator at Kakula and as well as the mining concentrator expansion. We will also be building the largest direct-to-blister smelter in Africa, which has a capacity of 500,000 tonnes of copper anode, and we anticipate that the smelter will be very much a game changer for the overall logistics of Kamoa and will further reduce our cost structure which we already feel is very competitive.
Where we are today? We’ve completed basic engineering for the entire project and this will all be incorporated into a new technical report for Phase 3 and beyond that will be published early next year. And on-site, we are well underway with the earthworks, and the early civil works. We are in the process of advancing new declines in order to open up the new underground mines that Kamoa 1 and Kamoa 2 that will ultimately support the Phase 3 concentrated throughputs.
On the power side, we are also busy with the refurbishment of turbine 5 at Inga II dam which will provide an additional 178 megawatts of renewable power for Phase 3. And at that site, at Inga, we recently completed mobilization with the contractors. And we’re pleased to say that the manufacturing of the key long lead equipment is also well underway in China.
Now moving on to our exploration activities, and starting with the Western Foreland project adjacent to Kamoa-Kakula. So currently, we are in the process of wrapping up the bulk of our regional large scale drilling for this year as we now head into the wet season in the DRC. We’ve been busy drilling extensions at a zone known as Makoko West, so this is adjoining a copper discovery that we initially made in 2016 I believe it was, known as Makoko. And then in addition to the drilling of Makoko, we are conducting stratigraphic drilling at Lupemba, which is located in the Far Southwest of the Western Foreland as well as testing for the edge of the Roan sandstone, which is to the North of the existing Kamoa Far North mining area on the Kamoa-Kakula mining right.
Finally, a few weeks ago, we made an announcement that we’ve been awarded new exploration rights in South Africa. These are directly adjacent to Platreef’s mining rights, and are actually slightly larger in size than the two farms that make up the Platreef’s mining rights at roughly 80 square kilometers. So looking at the diagram on the right hand side is an illustration. What we are looking to understand is a very significant gravity anomaly, which is known as the Mokopane Feeder, and the intersection of this anomaly with a regional fault system which occurs on these new licenses. So following that award a few weeks ago, we are now kicking off with high resolution geophysical work and we look forward to providing more information on this new project in due course.
With that, I will hand back to Marna to finish off with Platreef and Kipushi.
Marna Cloete
Thank you, Alex. Just a quick reminder that we are currently executing Phase 1, 700,000 tonne per annum mine at our Platreef project in South Africa, which is anticipated to start first production in the third quarter of 2024. Our aim is to seamlessly [technical difficulty]
Operator
Her line just dropped. Can somebody please take over?
Alex Pickard
Sure. I’m happy to do so. So where we are with Platreef today is based on the completed Shaft 1, we are well underway with the underground mining. So we’ve completed over 300 meters of lateral development work. What we’re doing right now is working towards the bottom of the first ventilation shaft which will allow us to significantly increase the number of crews in the mining activity underground. On surface we have a lot of activity going on. We started the construction of the processing plant for Phase 1. So the civil works are underway there, the long lead time orders have been placed. We are also in construction with the first 5-megawatt solar power plant for Platreef and that’s largely to support our construction activities and also to charge the battery electric underground fleet that we are trial-using at Platreef today.
In terms of the remainder of this year, we are forecast to spend $72 million. As David mentioned, all of our expenditures at Platreef are currently being funded by the streaming agreements. And we made the final draw down on those $300 million facilities. So we’re very much targeting first production in Q3 of 2024. There’s no change there. But really with Platreef, we’re much more excited about the ultimate expansion and scale of this project, which will be dictated by Shaft 2. So we are continuing with the sinking works of Shaft 2, you will start to see the headframe going up very quickly there. And ultimately, the goal with Platreef is to become one of the largest and lowest cost producers of the PGM metals, platinum, palladium, rhodium, gold as well as a significant quantity of nickel and copper, which contribute roughly up to 30% of the total value of the resource at Platreef.
Next slide please. And at Kipushi, we also had a very busy quarter in terms of — we kicked off with a breaking of ground ceremony in August. So that was attended by Ivanhoe Mines, members of the DRC government as well, of course as our partners, Gécamines. So the first concrete pour took place last month, and we are in the process of ordering the long lead items for the processing plant. That is all underway. We have mining crews operating underground now at Kipushi for the first time since the early 1990s. So that’s a very exciting milestone for the team on site. And also we announced that we have a study underway, which is to investigate options to upgrade the DRC-Zambia border crossing at Kipushi, which will allow Kipushi to have a direct access for commercial imports and exports and will also hopefully have knock on positive effects for Kamoa.
We hope to come to the market soon with an update on our financing and offtake discussions. But it’s safe to say they are well advanced with several interested parties. And looking at the overall schedule for Kipushi, we are keeping the project on track for an 18 to 24 months construction timeline overall. So looking to have Kipushi, together with Platreef, together with the third phase of Kamoa-Kakula, all in production by the end of 2024.
Perhaps with that, I will pass back to Matt Keevil to conduct the Q&A.
Matthew Keevil
Thank you, Alex. We will now begin the Q&A session. Just a reminder that if you’d like to ask a question, please submit it via the question box on the bottom left hand corner of this webcast page or via the conference line. We will then do our best to answer as many questions as possible with the time remaining, but may not get to all of them. So please do follow-up with our IR team if you have an unanswered question. First and foremost, I think we’ll hand it back to the operator just to get to everyone who’s waiting on the line. Operator, could we jump over to some questions on the line please?
Question-and-Answer Session
Operator
Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] We’ll take our first question from Lawson Winder with Bank of America Securities.
Lawson Winder
I just wanted to ask about the logistics cost. So just to begin with the [$56] per pound reported in Q3 2022, are you able to kind of break down for us how that splits between Lualaba being closed versus trucker availability and border issues?
Marna Cloete
David, would you like to take this?
David van Heerden
Yes, I think Lawson it’s a bit of an interesting mix. And although with the, we would say, border issues probably around and these are Argonaut magnitude estimates, but border issues are around $0.03 per pound. And if we look at the — just the increase in costs from our logistics service providers, that’s gone up around 20%. I think if we look at ocean freight, in that we have seen an increase I think globally over past quarters, but we’ve seen that sort of come down in Q3. So it’s a combination of everything, if we look at the — if we compare the smelter with concentrate and logistics charges on a like-for-like comparison, and there’s about a 20% difference per pound between the two.
Lawson Winder
I’ll ask the question again, but maybe from a different point of view which is like, looking into 2023, I mean do you expect $0.56 per pound to be the transportation costs going forward?
David van Heerden
Listen, I think, we would like to see where logistics cost goes with our current initiatives that we’ve announced and see what impact that’s got on the cost in the near-term. And as that becomes apparent, we will look to include that in our guidance provided for 2023 which we will issue early next year.
Lawson Winder
Okay, and then also, a similar question. What was kind of the exit rate cost from the quarter? So as of like September 30, 2022, where would you have been run, it would have been above $0.56 or below that $0.56?
David van Heerden
So exit cost at the end of the quarter below $0.56 because of the fact that we utilized Lualaba in September.
Lawson Winder
Do you have a specific number by chance?
David van Heerden
I think I don’t want to be too specific and give too much information other than that we still expect to be within our guidance range for the fourth quarter.
Lawson Winder
And then just maybe one final question for me on the head grade. So I think, I mean, the expectation for a couple of quarters had been that head grades would start to approach 6%. Why do you think it’s still running a little bit below 6% and then into Q4 and into 2023, I mean its 6% head grade to the mill a reasonable expectation?
Alex Pickard
Maybe I’ll give a little color on that one for you, Lawson. So look, I guess in terms of where we are today is really a function of how much can Kakula on a standalone basis, because of course Kakula has significantly higher grades than Kansoko. So how much can Kakula support the current milling rates, which as I mentioned in my section, as of the last quarter was about 8.3 million, 8.4 million tonnes per annum.
And today Kakula was not necessarily planned to be able to support that in full, but that is a work in progress. And what that means in practice is doing effectively more development along the sides of the Kakula to open up more panels, so that we can have a greater availability of these high grade panels for the mining crews at Kakula. So that sounds very simple in theory, but in practice it does take some time to get it right. There is a bit of a lag. It will require putting in more ore handling infrastructure. So for example, we’re looking at an additional conveyor to complement the Kakula South decline. And all of this will take some months to get up to speed.
We’re very confident that we will get there. But in the meantime, we will continue to feed ore from the run of mine — or sorry, I should say, really the development stockpiles, which comes in I’d say slightly lower grade, but the advantages that’s already been paid for effectively from a cash flow point of view. And we can keep our mill as full as possible in the meantime.
So looking forward to 2023, we’ve got this kind of double effect, because while we should be catching up from a mining point of view, and having more availability, the mill also isn’t standing still will probably have an additional 1 million tonnes of capacity following the debottlenecking. So the mine will continue to catch up through 2023.
In terms of where we get to, I’d say we’d hopefully be somewhere between 5.6% and 6%. But we will probably give a more firm view on that at a later date.
Operator
Next, we’ll go to Farooq Hamed with Raymond James.
Farooq Hamed
My question is maybe a little bit bigger picture. Just looking at your CapEx expenditures, they seem to be ramping up as we get into the fourth quarter here. And as we’ve talked about your project timelines with all three projects, either the expansion with Platreef and Kipushi being delivered in the second half of 2024, it looks like there’s going to be quite an increase in intensity here at all three sites. So, I’m just wondering, we’ve looked at other companies when they start expanding and start trying to do work on multiple assets at the same time, there tends to be an increased risk of timeline slippage of projects, starting to have like creep in different ways, cost creep or whatever it may be, because you have just so many fronts that you’re moving forward at the same time.
So can you talk a little bit about what kind of fail-safes or what processes do you have in place to ensure that you can move all three projects forward on the timelines that you have guided for without having these risks that we’ve seen, multiple companies in the mining industry has in the past?
Marna Cloete
Maybe I’ll take this one. We’ve made great effort in ensuring that we learn from what we’ve done at Kamoa and we’ve recently announced that Mark Farren is joining us as our Chief Operations Officer, and he started on the 1st of November, so he’s fully back in the saddle, he’ll probably join us on the next quarterly call. We’ve also pulled Steve Amos who did the project execution at Kamoa-Kakula into the group to ensure that we take the learnings forward from Kamoa-Kakula. What we’ve also done over the past year is capacitating both Kipushi and Platreef with the right skilled levels to ensure that we can deliver these projects, because we do know what it takes. And we are ensuring that we remain on track with long lead order items, we shade all things well in advance. And I must say we do have a competitive edge with our Chinese shareholders assisting with procurement out of China, and ensuring that everything remains on track. So I think we actually have an edge over our peers in terms of our structures with our shareholders to deliver these projects.
And in terms of capital allocation, in the earlier part of your question, we’ve carefully crafted each and every project to sort of sustain on this — to be able to sustain itself with local facilities, and also be augmented by Ivanhoe Mines for Kipushi and for Platreef in terms of our treasury. We flashed all those numbers through and we are comfortable that we will be able to execute these projects with confidence over the next two years.
Farooq Hamed
Okay, now that’s helpful to understand kind of what you’ve done internally, and the benchmarking is done on the capital. Just a follow-up to that then, given that these projects are really getting started, and obviously they’ve been started before, but in earnest here, do you intend to provide kind of milestone updates on a quarterly basis to the market so that we can see how these projects are tracking individually, so that we know when to anticipate production and if there are issues that arise along the way?
Marna Cloete
Most definitely, we joke because everything is happening in 2024 for us. We will be delivering the smelter and Phase 3 at Kamoa-Kakula in 2024. Platreef will go into production in Q3 of 2024. Kipushi will go into production in 2024. So you will see a lot of news flow from us over the next couple of quarters to show that the progress as we do the bolts at both Platreef and Kipushi and as we ramp up our construction activities at Kamoa-Kakula.
Farooq Hamed
Okay, thanks for that. And then maybe just one last one for me. Just as it relates to the CapEx estimates, so for Platreef, I believe it was $488 million and $382 million at Kipushi. Those numbers were provided earlier in the year. Across the industry we’ve seen inflation impact CapEx estimates for projects and brownfield projects and greenfield projects. So can you tell us how are you tracking to those estimates that you provided at the beginning of the year? Are you seeing inflation pressure on those costs? Do you anticipate having to remeasure those costs in the coming quarters? Or at this point, are you still comfortable with those CapEx estimates?
Marna Cloete
So we are comfortable to a large degree, because we did place a large number of the long lead to order items based on our cost estimates. But we are seeing some element of inflation. And where we are seeing inflation, that will be communicated once those numbers are firmed up. But it’s not inflating the numbers to a degree where the project will be impacted severely negatively, but it is normal inflation that we are seeing coming through. And then David, if you maybe want to add a bit more granular information on the capital inflation we are seeing?
David van Heerden
No, thanks, Marna. I think, you’ve summarized as well. And together with our production guidance, which we will issue early next year, we will also update the market on our guidance around our capital expenditure for 2023. And that would include a more detailed indication of where we see there has been inflationary pressures and increases. Just — but maybe a bit more granular detail, I think on Platreef, specifically, because of the weakening of the South African rand and the impact of inflation has been least felt when compared to the Kipushi for instance. And then, I mean on Kamoa we’ve got the benefit of being busy with the prefeasibility study at this stage. And so we can build in any — the latest estimates on inflation as well and that will be reflected in the study.
Farooq Hamed
And sorry, did you just say the timing of that study?
David van Heerden
So the timing of that study is late this year, early next.
Operator
Next, we’ll go to Andrew Mikitchook with BMO Capital Markets.
Andrew Mikitchook
I just want to go back to the Western Foreland’s exploration at Slide 16 if I’m reading this correctly. Can you just go back to the significance or the prioritizing of Lupemba and Mushiji versus the regional work and extending the known elevations at Makoko West, just so we can stick to that please?
Alex Pickard
Hi, Andrew, perhaps I’ll take this one. I mean look, it’s difficult to give a definitive view on priority ranking, but they are sort of looking to achieve different things. So perhaps starting with Makoko that is more kind of, I would view it as low hanging fruit in terms of expanding our knowledge of an existing deposit and seeing what sort of additional resources we can add to that area. So we are drilling there with a sort of reasonable degree of certainty. Whereas what is going on elsewhere in the license, whether that is Lupemba or — which is in the far southwest or Mushiji up in the North is, what we’re trying to do really is cast the net as wide as possible to begin with on the Western Foreland as a whole, to test our knowledge based on the geophysics and the geochem information that we’ve acquired over the last couple of years. And really what we’re doing is testing our knowledge of the underlying base on those structure and what leads to the sort of Kamoa-Kakula style mineralization that ultimately we’re searching for.
And then, if we don’t find exactly what we’re looking for, because we’ve sort of gone beyond the bounds of the Roan sandstone, which is the horizon that we’re looking for, in particular, we sort of bring the net back narrower and closer towards our existing operations. But obviously, there’s a very rational reason for testing the edges and the perimeter of the portfolio first, because, we’re not sort of done in terms of looking at what else might be out there in the Western Foreland.
So hopefully, that just gives a bit of context as to the — yes, it’s not so much the ranking, but how we see things.
Operator
And I am showing we have no further questions on the phone. I’ll turn it back over to Matthew Keevil for further questions.
Matthew Keevil
Thanks very much operator, we have time for a few from the web, so we’ll dive in. Where there’s a few repeats here, so we may consolidate some questions as we move forward, just to get through as many as possible. But first and foremost, we’ll start at the top. Marna and David, this is probably a good question for you. This is a popular one on the web client. Given sort of the volatile copper environment recently, how have your expectations changed in terms of shareholder returns, dividends, and sort of the repayment of those loans over the next five years?
David van Heerden
Thanks, Matt. I think dividends and shareholder returns are obviously copper price dependent. I think at the moment the focus is on expansion, because we do feel that, firstly, expansion of Phase 3 at Kamoa-Kakula is the most value creative thing we can do; and then — and also the continued development that Platreef and Kipushi. I mean, as we’ve highlighted on the call already, everything sort of comes to an end in 2024. And I think after that, this — will definitely be a lot about options open to us.
Matthew Keevil
Great. Thanks, David. The next one, Marna, I think this is probably well placed for you. To just elaborate a little bit on the logistics situation within Congo as well as sort of what’s going on regionally in terms of those transport items?
Marna Cloete
We’ve experienced a few issues this past quarter around border congestion. And I think, we had a couple of dry cruise. During the previous quarter, there was only one border which is Kasumbalesa that was open for imports and exports. Subsequently Sakania also opened for imports and exports and we’ve got a third border that’s available for imports called Mokambo. We ourselves are currently working on a solution at Kipushi that will also cater potentially for volumes from Kamoa which would further alleviate pressures. But ultimately we are also looking at rail solutions which we see as the medium to long-term solution for Kamoa-Kakula. Not only is it a greener solution, but it will be a cheaper solution, a much shorter route if we follow the Western Corridor. So that’s a development that we have a keen interest in.
We have been working with our local logistics service providers to ensure that we get guaranteed trucking availability to Kamoa-Kakula. We haven’t really experienced truck shortages over the past quarter, besides enough availability of trucks. But it’s really been around turnaround times on borders.
One of the big items that we did also manage to negotiate was longer operating hours at some of the borders. And that also made a huge difference. It does take however, a bit of time for these costs to flush through your balance sheet and income statement. So we’re hoping to see some of the fruits of our efforts in the fourth quarter.
Matthew Keevil
Thanks, Marna. And just one another popular question on the web. Alex this is probably best positioned for you. Talking a little bit about the company’s broader sort of, not necessarily M&A strategy, but growth strategy following the Mokopane Feeder acquisition and what you see moving forward in terms of exploration and development?
Alex Pickard
Matt, it’s a good question. Look, I think, our announcement with the Mokopane Feeder, hopefully, it illustrates to the market that we’re certainly not done with the three projects that we are advancing into production of — sorry, in the case of Kamoa-Kakula in production, but expanding. And as we’ve alluded to on this call, we see a really pivotal year for Ivanhoe Mines in 2024, where we will be a material producer with three effectively diversified assets online. And that naturally leads to a bit of a question about what’s next in the hopper. I think where Ivanhoe Mines has had its greatest successes in the past have been with the drill bit, but also with our sort of differentiated approach to project development and the project development expertise that we’ve certainly built up with Kamoa-Kakula. And we feel that there are value accretive opportunities out there to find things in a similar vein where we can apply our model and hopefully generate the fourth and fifth and sixth projects, major projects for the Ivanhoe Mines portfolio. So yes, we’re certainly interested. We’re certainly looking around.
Matthew Keevil
Thanks, Alex. And with that, we’ve run slightly a bit over our time. So we’ll conclude the call. So yes, this concludes Ivanhoe Mines third quarter 2022 financial results call. Thanks again for everyone attending and we look forward to speaking you about the exciting milestones coming in 2023. Again, if you have any questions, please do not hesitate to reach out to our IR team and we can answer those on a one-on-one basis. And with that, I will pass over to the operator to close the call.
Operator
Thank you. Ladies and gentlemen, that concludes the conference call for today. We thank you for your participation. You may now disconnect your lines.
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