Ivanhoe Mines Q1 2026 Earnings Call Transcript

Quartr
Provided by Quartr
May 7, 2026

Key Takeaways

  • Positive Sentiment: Kamoa‑Kakula sold ~67,000 t of payable copper in Q1, realizing $5.79/lb and reporting $397M Q1 EBITDA (46% margin); the new smelter (60% capacity) cut C1 cash costs to ~$2.58/lb and produced ~117,000 t of sulfuric acid, with contracts now at $725/t.
  • Negative Sentiment: Rising diesel is a near‑term cost risk — Q1 diesel use was about 30 million liters with an average price near $1.80/l (now roughly double), and management warns C1 cash costs could be ~5% higher if high diesel persists and sulfuric acid prices do not hold.
  • Positive Sentiment: Platreef Phase 2 financing closed and Shaft 3 commissioning increases hoisting ~5×; earthworks for the Phase 2 concentrator have started and the project is targeting >450,000 oz PGM+Au annual production from the fourth quarter of next year.
  • Positive Sentiment: Kipushi set a quarterly production record (>65,000 t zinc) with a low cash cost (~$0.86/lb) and $58M EBITDA, and is tendering a battery energy storage system to further lower power costs.
  • Positive Sentiment: Exploration spend was increased to >$120M for 2026 (≈$86M for the Western Forelands) with 96 km of drilling planned and an updated Western Forelands resource due mid‑2026, supporting plans to fast‑track development.
AI Generated. May Contain Errors.
Earnings Conference Call
Ivanhoe Mines Q1 2026
00:00 / 00:00

There are 12 speakers on the call.

Speaker 6

Good morning, ladies and gentlemen, and welcome to the Ivanhoe Mines Q1 Financial Results Conference Call. This call is being recorded on Thursday, May 7th, 2026. I would now like to turn the conference over to Tommy Horton. Please go ahead.

Speaker 11

Thank you, operator. Hello, everyone. My name is Tommy Horton, and I am the Vice President, Investor Relations and Corporate Development for Ivanhoe Mines, and it is my pleasure to welcome you on our first quarter 2026 conference call. On the line today from Ivanhoe Mines, we have Founder and Executive Co-Chairman Robert Friedland, President and Chief Executive Officer, Marna Cloete, Chief Operating Officer, Tom van den Berg, Chief Financial Officer, David van Heerden, Executive Vice President, Corporate Development and Investor Relations, Alex Pickard, and Executive Vice President, Technical Services, Simon Bottoms. We will finish today's call with a question and answer session. You can submit your questions using the Q&A box on the webcast page, as well as through the conference operator via the telephone line.

Speaker 11

If we run low on time, our investor relations team will endeavor to collect all questions and follow up accordingly. Before we begin, I'd like to remind everyone that today's event will contain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Details of the forward-looking statements are contained in our May 6 press release, which can be found on SEDAR+ and on our website, www.ivanhoemines.com. It is now my pleasure to hand over to Ivanhoe Mines' Founder and Co-Chairman, Robert Friedland, for his opening remarks. Robert, please go ahead.

Speaker 7

Oh, thank you very much, and good morning to all of you on this call. I find myself in a beautiful morning in Southern California. We're about 30 years into our efforts in the Congo, and it's really great to talk to everybody today with so many tailwinds behind our back and our morale so high as our team executes on a number of important initiatives to really turn Ivanhoe Mines into one of the best tier-one mining companies in the world. We have a lot of problems in the world in the Middle East, and today we're hoping for a peaceful settlement.

Speaker 7

It may take time, but it's becoming increasingly obvious to everyone in a world where energy is everyone's critical concern, and by that I mean the hydrocarbon coming out of the Strait of Hormuz and all the other chemicals like helium and sulfuric acid that come with the natural gas, that the world will continue to press for an energy transition to diversify away from exclusive reliance on the hydrocarbons coming through the Strait of Hormuz, which is roughly 20% of the world's energy. This means that observers like Mercuria, one of the major metals traders, has pointed out that the second half of this year could see an unprecedented demand for copper, literally a stock out, where we could have crazy prices.

Speaker 7

We are extremely bullish for the supply-demand situation in copper metal over the next five years, let alone the second half of this year. As one of the copper producers that is the least exposed to hydrocarbon in the production of copper, Ivanhoe Mines is in a favored position. Our energy is provided by stable hydroelectric power, and you'll recall that we have made great strides in that regard, both in upgrading the electrical grid in the Congo and expanding our hydroelectric assets. In addition to that, we now have the largest solar field with battery backup that has ever been built in the mining industry. The largest solar field on the African continent will start up next month, producing about 60 megawatts of uninterruptible green power. We expect to double that and in time even triple that.

Speaker 7

With an abundance of power coming into the Congo that does not rely on hydrocarbon, the quantum of hydrocarbon that we use to produce copper as a unit of copper production is the lowest in the world. We have a tremendous tailwind in pricing, and we have an unbelievable tailwind in what we're finding with the drill bit in the Western Forelands. We're confidently executing a turnaround plan to put Kamoa-Kakula right at the top of the world's copper mines. It's the highest grade mine in the world. It will produce over 500,000 metric tons of copper for a long, long time every year, even without the Western Forelands.

Speaker 7

With that, I think we'll go into the specifics of the quarter, and I'd be happy now to turn this over to Marna, our Chief Executive Officer and President, who has worked so hard and made so much progress in the last quarter, and along with the rest of the team. Thank you, Marna. Please go ahead.

Speaker 5

Thank you, Robert. Good afternoon, good morning, everybody. I think this is quite a great photo. It showcases the Lobito corridor in action. That was the first shipment of anode sitting at the Lobito port in Angola. A lot of infrastructure development happening in Africa. As Robert mentioned in his opening remarks, not only are we a producer of copper, but we're also a user of copper with all the renewable work we are doing with our hydropower.

Speaker 5

Outfits that where we've, you know, the turbines that produce the energy that we use are very copper intensive. We are in the process of commissioning the 16 MW solar field at Kamoa. It will be up and running progressively from June onwards, up until August. At Kipushi, we are planning to do a 10 MW solar farm. Really exciting what's happening on site to move away from the use of diesel. If we move over to the next slide. It's been a very busy quarter with all our annual filings behind us, which included our updated technical report that outlines our pathway to be a producer in excess of 500,000 tons at Kamoa-Kakula from 2028 onwards.

Speaker 5

At Kamoa, for the quarter, we produced in excess of 71,000 tons of blister and anode, and we did this at a very low C1 cash cost below our guidance of $2.58. Our margin was boosted by a $0.44 smelter benefit. The smelter at Kamoa-Kakula produced over 117,000 tons of sulfuric acid, and that received an average realized price of $467 per ton. Acid prices are rising rapidly and by June it will increase to about $725 per ton. Our forecast is that this will also increase in excess of $1,000 per ton in the near future due to the scarcity of sulfuric acid and import restrictions from Zambia.

Speaker 5

In April, we attended our triple milestone celebration with our Japanese and Black Economic Empowerment partners at Platreef. This celebration earmarked the completion of shaft 3 that increased our hoisting capacity 5-fold, and it will really change our destiny because we will be able to fast-track our underground development. We also celebrated the breaking of ground for the earthworks of our phase 2 concentrator, and this will increase our production to over 450,000 ounces of platinum, palladium, rhodium and gold from the 4th quarter of next year. Yes, the 4th quarter of next year is around the corner. The 3rd milestone was the commencement of the widening of shaft 2. Kipushi also had record production in excess of 65,000 tons and a joint record cash cost of $0.86 per pound of zinc produced.

Speaker 5

Our management team also worked on a comprehensive contingency plan due to the macroeconomic uncertainty. Part of this plan is to ensure the availability of diesel, putting in place strategic orders to ensure we have business continuity over the next 12 months. If we move over to the next slide. We were also busy as we published our ninth sustainability report in April, showcasing all the great work our teams do on site. This report is available on our website and measures our performance against our 4 pillars, our governance, our people, our prosperity and our planet. I invite all our listeners to please go and download this report and read it thoroughly so that you can understand the great work we do.

Speaker 5

With that as an introduction, I will now hand over to David van Heerden, our CFO, to take you through our quarterly financials. Thank you, David.

Speaker 3

Thank you, Marna. Good morning and good day to everyone joining the call today. The anodes we see on this screen is pretty apt as this is the first quarter you will see the benefit to Kamoa of producing and selling anodes from our own smelter as opposed to the sale of concentrate like in the past. The smelter benefit will be a bit of a recurring theme today. That's for good reasons. We can move to the next slide. Kamoa-Kakula sold almost 67,000 tons of payable copper in the form of anodes and blister in the first quarter. The copper and concentrate produced through the mills was a little less than the tons sold, leading to a decrease in copper and inventory on hand. Copper and inventory on hand was still more than 40,000 tons.

Speaker 3

The smelter really performed well during the quarter, a little more of the inventory on hand is in the form of anodes and therefore ready to be sold. We expect a further destocking to take place in the second quarter. Revenue was buoyed by the higher copper price, with a copper price realized of $5.79 per pound and total revenue of $862 million includes $50 million relating to the sale of sulfuric acid and a $10 million negative impact on the mark to market of provisionally priced sales. Moving on to the next slide. Cost of sales in the first quarter of 2026 was $2.58 per pound of payable copper and saleable product produced.

Speaker 3

With grades similar to Q4, the drive lower was really the smelter benefit, but more on that and the details of that on the following slide. Power cost increased to about 18%, if illustrated on a percentage of C1 cash cost. The jump is more to do with the smelter power usage rather than it is with the impact of higher fuel prices. Q1 cash cost was Slightly below the bottom end of our guidance range. In Q1, in our Q1 guidance, which we revised or full year guidance, which we revised at the end of March, we did build in some provision for diesel prices being temporarily elevated and the current prices are quite a bit higher than what we've experienced in Q1.

Speaker 3

Having said that, sulfuric acid has really proven to be a great hedge against the rising diesel price, as we have seen the selling price of acid rise significantly as the conflict around Hormuz continues. Recently, Kamoa was able to conclude a sales contract at $725 per ton, which is much better than the $460 per ton realized in Q1. Because of that, Kamoa is a lot less sensitive than some other producers to the current pricing environment. We do caution, though, that if the current prices for the high-strength sulfuric acid and diesel remain at the current levels, Ivanhoe estimates that our C1 cash costs will be probably 5% higher than initially estimated.

Speaker 3

If all other assumptions hold, then 5% higher at the bottom of our cost range, at the bottom of our range, or even 5% higher at the midpoint of our guidance range, would still be well within our guidance. As Marna mentioned, we do think that the sulfuric acid price still has some legs, even at the current levels. Kamoa-Kakula recorded EBITDA of $397 million for Q1, that's a nice continued build on the recent growth trajectory at a margin of 46%. This was achieved irrespective of the lower tons sold due to the higher copper price and the smelter benefits. We look at the smelter benefits a little bit closer on the next slide. Here we illustrate a waterfall to better illustrate the movement in our cash costs.

Speaker 3

On the left-hand side, we start with the average C1 cash cost of the second half of last year. We do this because Q4's cash cost was a little bit elevated, we think this is a better reflection. It's pretty clear to see what drove the improvement into Q1. The smelter operating cost of $0.26 is easily offset by the reduction in logistics cost and the sulfuric acid credits and the savings in TCs. In total, the smelter caused between $0.60 and $0.70 saving on a per pound basis if a saving of road and export taxes are included. Other than the smelter, G&A is also lower, mainly due to the non-recurrence of one-off items explained in Q4.

Speaker 3

Mining and processing was also a little higher this quarter due to the slightly higher power cost, but the lower absorption of fixed cost due to the relatively lower production in Q1 also contributed. We show the quarter-on-quarter EBITDA waterfall for Kamoa-Kakula. Here you can see that the $112 million of the quarter-on-quarter EBITDA increase was due to the higher average copper price for Q1 compared to Q4 last year. You see the benefit of the smelter once again. mainly smelter-driven savings on logistics and TCs and the assets credits moved EBITDA higher by $94 million and $50 million respectively. While operating and other costs also improved when compared to Q4.

Speaker 3

The $92 million impact of remeasurement of contract receivables, which represents the mark to market of provisionally priced sales, relates more to Q4 than it does to do with Q1 this year. In Q4, we recognized a gain of $82 million, while in Q1, included a loss of $10 million, which together accounts for the negative $92 million you see on the screen. When looking at that a little bit more closely, you will see that copper took a bit of a dip at the end of the quarter. We had provisionally priced sales measured at a copper price of $5.52 per pound at the end of the quarter. Since we've consistently seen higher copper prices ever since, we do expect a positive remeasurement in Q2.

Speaker 3

Lastly, you can see the impact of selling almost 12,000 less payable copper tons in Q1 compared to Q4 last year. We move to Kipushi on the next slide. Yeah. Another record of tons produced and sold at a realized zinc price of $1.47 per pound of payable zinc led to a record revenue for Kipushi of $162 million for the quarter. Cash costs were well-maintained at the bottom end of our cash cost guidance range and at the same levels as the previous quarter. That translated into quarterly EBITDA of $58 million for Kipushi. The zinc price have remained fairly consistent and above the Q1 levels in Q2 to date, so we do expect another good quarter for Kipushi in Q2.

Speaker 3

Moving to Ivanhoe Mines' consolidated net results in the next slide. EBITDA for the quarter was higher than the three quarters before, driven by the increased share of EBITDA from Kamoa-Kakula and the continued growth in EBITDA from Kipushi. This was a little bit offset by our continued investment in exploration, particularly on the Western Forelands, but we continue to see great results, as you will see when Alex takes you through the updates there a little bit later. Our results for the quarter was impacted by a tax settlement that occurred at Kamoa-Kakula. Because of the settlement and the inclusion thereof of the, in the, share of loss from Kamoa-Kakula of $42 million, Ivanhoe recorded a loss after taxes of $2 million for the quarter. This would've been a profit of $71 million if the settlement had not occurred.

Speaker 3

Other than that, we do continue to maintain strong liquidity levels. That's illustrated on the next slide. Ivanhoe had $754 million of cash and cash equivalents and short-term deposits on hand at the end of March, which is a really good and strong position to be in. Our pro rata net debt increased slightly, actually because of the reduction in cash over the previous quarter rather than an increase in debt. The pro rata net debt ratio for the trailing 12 months, even though it's still very comfortable at 2.4 times, it includes the impact of the lower EBITDA in Q2 and Q3 last year and would've been much lower and comfortably below 2 if it is recalculated using an annualized Q1 2026 EBITDA.

Speaker 3

Our bond has continued to trade well, underlining that it is very much a pool of funds available for us again in the future if needed, and it is great to see that Fitch has updated their credit outlook for Ivanhoe Mines to positive. If we turn to where we are planning to spend some of our cash on the next slide. The capital expenditure on each of our projects remained in line with expectation and the guidance for each of them are reconfirmed. For Platreef, the phase 2 project finance closed on 30 April, with first draw successfully completed.

Speaker 3

This is just one of many big steps taken recently towards making sure that Phase 2 development is completed in Q4 next year, which is only about 18 months away, and I am sure the team will touch on the other big milestones achieved recently there. Also noteworthy at Platreef, the Japanese consortium contributed $65 million towards Phase 2 development last month, and that just underscores their support for the management team and the project as a whole, which is great and it even further reduces the remaining CapEx that needs to be funded by Ivanhoe Mines to bring Phase 2 to completion. With that, I hand over to Tom van den Berg, our Chief Operating Officer, to start the operations and projects update portion of today's presentation.

Speaker 10

Thank you, David, Marna, and Robert. I trust you can hear me. I got a picture in front of us here, which is while we were standing and using our time at the concentrators, we've been doing Project 95. What you see in the picture is Project 95, which we've been commissioning and building, and it's just about to get up and running on phase 1 and phase 2 concentrators. We expect them to be fully up and running and commissioned in the month of June. Thank you. If you look at our concentrating and we look at our grades, what you can see there is we've been milling, combined copper ore grade processes being at 2.32%.

Speaker 10

That's obviously got to do with as we go around and we've achieved the accesses to the front of the Kakula East portion. The Phase 3 concentrator has been supported by Kamoa and Kansoko very well, and we've actually done well above our design capacity. Again, we're sitting at 25% above the design capacity. We're milling a rate of 6.3 million tons per annum, and we're currently moving around the ore that we're overproducing from there across to Kakula. That is playing out well. Those mines are performing well. They are reconfigured and generating what they're required to do, to generate. Phase 1 and Phase 2 concentrators are operating at approximately 60% capacity.

Speaker 10

Our stockpiles, we've completed milling them, that were there, and we're now starting to treat the fresh ore coming across from Kamoa and Kansoko to Kakula. The turnaround at Kakula is on its way. We can see the tonnage on a daily basis is coming up, and it's looking positive at this stage. The holings have taken place at the eastern side, and we're busy at the moment building the pump stations. The combined copper recovery, as you can see, is sitting at 85%. We set the quarter one with 61,000 tons. Project 95 should be well commissioned by June, that will add further to the above as we get into the high-grade areas on the west side of Kakula and on the Kakula east side. Thank you.

Speaker 10

What you see in the picture in the background here is some of our new accesses, so this is Kansoko Sud. What this does is it allows us to access the ore body right in the middle. It improves our efficiencies, reduces our costs, and enables us to get material to be moved and a much shorter route across to Kakula as well. It is quite functional from a point of view of putting it exactly where we put it in the ore body here. This box cut, as you can see in the picture, is roundabout complete. We took a blast this morning, and we are nearing completion. The Kamoa box cut, which is on the Kamoa side, also accessing a new ore body, has also been completed and we're busy with accessing the portals at the moment as we speak.

Speaker 10

What you're seeing there, the spare capacity, we will start filling up that spare capacity with the additional tons that will come out of the Kamoa area, the Kakula area, and then as we get more into Kansoko and we'll build back Kakula and we'll fill up our concentrator. As you see there, 2027, 2028, we'll have a processing plan that will be fully ramped up and back to where we were before. You can see the mining rates, 700,000 tons per month from H2 2026. The peripheral development around Kakula, as I mentioned earlier, the northeast portion has done well. We managed to effect the hauling, busy doing the planning around the pump station and getting that into place.

Speaker 10

The southeast pump station has already been built. We're intending to commission that in the next month. That will take us further ahead. The actual mining, there are ends that are heading to the front of the northeast. They're progressing well. We've accessed the west. We're busy mining the west at this stage. Thank you. Next slide. The 500,000 ton per annum smelter is at 60% capacity. Just to remind the audience, we commissioned this in December. It's been performing very well. The actual run rate is good. We're seeing there that the capacity at 60%, we are able to achieve that. We've been able to manage that capacity.

Speaker 10

At the same time, as you heard from Marna and from Robert and from David, the amount of acid we've also been generating through the smelter has been great, and you'll see that on the next slide. At this stage, we have 15% more production than the concentrate produced. You'll see that Kamoa-Kakula produced 71,000 tons of blister anode in Q1 2026. Then we're doing some toll treatment work at the moment, where we investigating with third parties and ensuring that we can effectively put other material through and make sure that we ramp up the smelter and we improve our margins in the smelter area. The smelter's performing well.

Speaker 10

It's been stable for the last quarter as we did the commissioning and as we brought it up to full capacity, up to the full capacity of 60%. Thank you. Here you'll see the acid trucks. This is acid going into the areas in the DRC. As you would know and as you've heard, the sulfuric acid has been a win for us. We're seeing a massive benefit. As you can see at the bottom, ZAR 725 per ton. We've got new contracts that are priced in. That is double what we actually put into our cash costs. We're seeing a significant benefit.

Speaker 10

We did a guidance of around $400-$500, and currently we're pricing up, and you've heard Marna being positive about potentially we could even see more as the sulfuric acid constraints. What you'll see here as well is the solar power capacity. We have the potential to go up to 120 MW. We've just signed off another purchase agreement for 30 MW, and that's for Q3 2027. We're busy with a tender for the fourth portion, which is another 30 MW, that takes us up to a total of 120 MW. There is also further space, obviously, on the complex to do further, where we are right now, we've got 60 MW coming up in July, that will be fully commissioned by then, that will reduce our costs quite significantly.

Speaker 10

Thank you. Next slide. I'm gonna hand over to Simon Bottoms. He's gonna take us through Kipushi, and he'll take us through Platreef as well. Simon, over to you. Thanks.

Speaker 8

Thank you, Tom. Turning now to Kipushi, where we set another consecutive quarterly production record of 65,000 tons of zinc produced within the quarter. Also, further extending the run of high process recovery rates of more than 90% with associated head grades of 37% for the quarter. This production and cost run rate comfortably positions Kipushi to deliver within its annual guidance range of 240,000-290,000 tons for 2026. Added to this, we've started the tender process for the construction of a solely battery energy storage facility, which will further drop these already standout costs. We continue to work on options with our joint venture partner, Gécamines, to realize the value of other byproduct critical metals from the Kipushi concentrate. Next slide, please.

Speaker 8

Looking now to the awakening of the giant Platreef deposit, where the 4 million tons Shaft 3 on the right-hand side of this slide has successfully been commissioned for hoisting of the first stope ore from the Flatreef ore body earlier in the quarter. The commissioning of Shaft 3 with associated underground materials handling infrastructure, including underground crushers and conveyors, represents a major project milestone that will ultimately enable the commencement of Phase 1 production alongside building up a stockpile ahead of the construction of the Phase 2 concentrator. Next slide, please. Turning to the Phase 2 development, here you see Shaft 2 on the right-hand side of the slide, which is one of the largest slides on the African continent, designed to hoist approximately 8 million tons per annum.

Speaker 8

The shaft is currently being widened, targeting to reach a full bore diameter down to approximately 100 meters depth later on in the quarter. This shaft is scheduled to be commissioned at the end of 2028, and with ore hoisting in the third quarter of 2029, will ultimately support a future production ramp up to 11 million tons with the Phase 3 expansion. Now turning to the next slide, looking to the timeline of key project milestones to deliver the first feed to the Phase 2 concentrator by the end of 2027. The earthworks for the Phase 2 concentrator have successfully commenced at the beginning of April, with completion on track for the end of 2027. This will ultimately produce over 450,000 ounces of platinum, palladium, rhodium, and gold, as mentioned by Marna earlier.

Speaker 8

As you will see from this timeline, we're currently well-positioned with key contract awards underway and first concrete pours due to commence in Q3 later this year. This will also be accompanied by the commencement of the earthworks for the phase 2 TSF alongside the concentrator construction. Next slide, please. As you'll see that despite the recent cool off in PGM pricing associated with global geopolitical instabilities, we're still currently 61% above the feasibility basket prices for platinum, palladium, rhodium, and gold, which were assumed at the time of the study. The critical nature of these metals has recently been recognized with the USGS categorizing rhodium as one of the highest-risk metals to support the continuity of the automotive sector into the future.

Speaker 8

Added to this, platinum, palladium, and copper have all been categorized as critical and indispensable to the construction of data centers, green technologies, as well as catalytic converters. Given the recent rise in copper and nickel prices, this potentially represents approximately USD 70 an ounce credit to re-further reduce the already standout USD 599 per ounce basket price for the phase 2 cash costs shown on this slide. Now I will hand over to Alex, who will take you through the exciting developments at our Western Forelands exploration project.

Operator

Thank you very much, Simon. It's Alex Pickard speaking. Last but certainly not least, I'll be taking you through an update on our exploration activities. Across the group, we have a massive year plan for exploration. We've recently increased our budget to over $120 million for the year, of which $86 million is earmarked for the Western Forelands. For that $86 million, we've budgeted 96 km of drilling for the year, which is by far the largest ever year of drilling in the Western Forelands. The diagram or the map on the right-hand side is giving a few breadcrumbs just in terms of what you might expect to see when we put out our updated resource, which is coming out within 2 months.

Operator

Really there are three main focus areas for the drilling that we've been doing, at least in the Makoko district of the Western Forelands. Area number 1 that we've highlighted is the extensions of Kitoko to the south, where we're seeing very high, high-grade intercepts at depth. Added to that, we are also connecting the drilling in the area between Kitoko and Makoko West. Basically, if you look on the diagram, all of the holes that are shown there are holes that have been drilled since the previous resource.

Operator

They give you an idea of the additional continuity of the ore body that we've been demonstrating. The second area highlighted as number 2 in the, in the red box is infill drilling between the Makoko West and the Makoko Central areas. These are some of the sort of shallower potentially open pittable resources that we have on the license area. And then thirdly, we have the eastern extension of Makoko Central, which is really working back towards Kakula West, which is not shown on the diagram, but basically Kakula West is only about 7 or 8 kilometers from the extension holes to Makoko on the eastern side. All of these activities are very promising. We have an updated Western Forelands mineral resource to look forward to, planned for mid-2026.

Operator

You know, somewhere around the end of June, early July is when we will be putting that out with a lot more information. Another thing to add, part of the increased budget that we have in the Western Forelands is a much greater focus on initial project development activities. That's really looking at the critical path to fast-track the Western Forelands into production, and we'll be putting out a lot more information on that in the upcoming press release around the mineral resource. Finally, looking at all of the new horizons that Ivanhoe Mines is currently drilling in. As I mentioned, that $120 million global budget, about $20 million of that is earmarked between the two projects on the left-hand side and the center of the page.

Operator

That's in Angola and Zambia. This is searching for Western Forelands-style sedimentary copper on very, very large license packages, multiple sizes, multiple times the size of the Western Forelands license package. In Angola, we have started a drill program of 6,400 meters with 2 diamond core drill rigs. That is really to test and understand better the stratigraphy of the underlying mineralization in that area. In the northwest province in Zambia, we've been working to basically set up for a productive year of exploration. A 7,000-meter drill campaign with 14 holes of diamond will be commencing over this dry season, starting in May.

Operator

Twenty million dollars will also be spent, roughly speaking, in the Chu-Sarysu Basin in Kazakhstan, which is an Ivanhoe Mines joint venture where we're basically earning into a majority position. We have a license area there of about 17,000 sq km. The $20 million budget for this year is basically expanding the diamond drill programs of 40,000 meters across this very big land package. Lots going on across the board in exploration. Lots of things that we hope to tell you about as the year progresses. With that, I will hand back to Tommy Horton to chair the Q&A.

Speaker 11

Thank you, Alex. We now begin the question answer session. Covering analysts, you may submit your questions to the operator via the phone line, if you haven't done so already. Questions can also be submitted through the webcast. Any questions submitted that we are unable to address, our investor relations team will endeavor to follow up. Operator, over to you to answer the phone lines.

Speaker 6

Thank you. Ladies and gentlemen, as a reminder, if you have any questions, please press star one. First question comes from Lawson Winder from Bank of America Securities. Please go ahead.

Speaker 4

Thank you, operator. Good morning, Robert and Marna and team. Thank you for today's update. If I might, could I ask about the cash costs at Kamoa-Kakula? They were below guidance, which is impressive, and you provided some color on the call about the outlook, but I'm still a little bit hard pressed to see how if sulfur prices stay at current levels and sulfur sales remain near Q1 levels, how C1 cash costs won't be towards the lower end of the range, even with higher diesel prices. I mean, you've guided to, you know, the risk of potentially 5% higher C1 cash costs. Could you just help us appreciate some of the nuances in that, in that risk?

Speaker 4

You know, perhaps are sulfur volumes expected to fall or is, you know, diesel maybe just that much more impactful than maybe we had thought? I appreciate it. Thank you.

Speaker 3

Happy to take that, Lawson. I think what key things to consider or what we consider on diesel is not just the absolute cost of the diesel we use in our generators, but also through the full supply chain and include basically logistics costs. I mean, what we did mention or what we did try and sort of illustrate is that when setting our guidance, we did expect and we did cater for elevated diesel prices specifically and then the spot price of sulfuric acid. The fact that we are below our guidance range in Q1 is largely because in Q1 we, the prices were not yet elevated.

Speaker 3

We've baked in some sense of elevation already in the current pricing. That 5% is really an estimation that if over the next 9 months, there is no additional upside on the sulfuric acid over the current pricing, but the diesel prices remain at maximum level, then you could calculate a roughly 5% impact on cash cost in total for those periods.

Speaker 4

Very helpful. Thank you. If you could just provide a little bit of color on the sulfuric acid production outlook. I mean, there was a lot of sulfuric acid produced in Q1. Do you anticipate that to continue trending upward from here?

Speaker 3

Yeah, we do expect that to continue to trend nice upwards. I think the production is expected to increase, and that's partly because of the fact that we are feeding more Kamoa ore than Kakula ore, we would have probably estimated, I think, a year or so ago. The expectation is definitely for the sulfuric acid production to continue to increase quarter-on-quarter, and probably around 400 thousand tons of sulfuric acid still to be produced for the remainder of the year.

Speaker 4

Okay. Thank you very much for taking my questions.

Speaker 3

No problem.

Speaker 6

Thank you. Next question comes from Daniel Major from UBS. Please go ahead.

Speaker 2

Hi. Thanks for the questions. Yeah, first, just one on Kamoa-Kakula specifically, and just maybe to follow up on Lawson's question to help us a little bit. Can you just give us what your diesel consumption per quarter is and what the assumption for pricing was embedded in the guidance relative to the spot price?

Speaker 3

Yeah. I think it's important to remember that when you set out guidance is based on a range. It does assume a range of possible prices. I mean, specifically when you look at something like diesel where you look at a specific pricing environment that you think could be temporary only, it brings a bit more variability in. Having said that, we use around 30 million liters of diesel a month. It will or that's sort of what we used in the first quarter, 30 million liters of diesel.

Speaker 5

Oh, no, sorry, David, not per month, just per quarter.

Speaker 3

thanks, Marna. Yes.

Speaker 5

Okay.

Speaker 3

Good, good point. In the first quarter, we used roughly 30 million liters of diesel. We expect that usage to come down as the solar plant comes online, as Tom explained. That will be a little bit less. Average diesel price in the first quarter was, you know, roughly $1.80, including the levies that's charged in the DRC. At the moment, it's probably double that.

Speaker 2

Okay.

Speaker 5

No.

Speaker 2

That's helpful. Thank you.

Speaker 5

Maybe-

Speaker 2

Sorry

Speaker 5

It's also important to note that we can, to some degree, change our diesel mix. There are certain things that we can do in terms of only running concentrators when there's grid power available, for example, not switching them over to generators. We can tweak down that 10 million liters that David was alluding to per month to a lower consumption level. Then the plan would be to switch in the solar and then to reduce our diesel usage even further. That will offset the increase in pricing that we are seeing. There are certain levers that we can pull with our current production scenarios that helps us as well to manage our cost.

Speaker 2

Okay. That's useful. Thank you. The second question on Kamoa-Kakula, you destocked some inventory during the first quarter. Can you give us a guidance on how much you would expect to continue to destock inventory during the remaining quarters? Then, it seems you're still toll treating some concentrate at Lualaba. Is that on a contract and likely to continue, or will that stop in the subsequent quarters?

Speaker 3

Yeah. Thanks, Daniel. That is currently on contract and will continue, but for lesser quantities going forward. We're riding out that current contract and, I mean, depending on how quickly we return to the production levels above what our smelter can produce. I mean, it's good to have that local smelter as an additional option just in the to provide additional surety. In terms of the destocking, I think I can tell you what I would like. No, we do expect that destocking still to be a little bit gradual over the next two quarters. Probably, I think 7,500 would be a good expectation for Q2 with another 7,500 in Q3 as an expectation.

Speaker 3

Then we'll see from there.

Speaker 2

Okay. Thanks.

Operator

Sorry, Daniel. The other thing just to add on the Lualaba smelter is that that smelter is closing down for maintenance for two months, which I think is basically most of May and June.

Speaker 2

Okay. The lower volumes in Q2 then I guess hold.

Operator

Yeah.

Speaker 2

Thanks, Alex. Yeah, another question if I could. You reference in your slides the liquidity at the group level. The cash balance at the JV level is relatively low. What was it, like, $160 million or something. Is there capacity to raise further debt in DRC or would you expect to put more equity into the joint venture to improve the liquidity position?

Speaker 3

Yeah, we're looking at a number of options. Daniel, there is definitely capacity, not necessarily in country specifically, but from offshore lenders, to provide in-country facilities through some of the mechanisms we've put in place for previous funding. There's definitely capacity and there's definitely a willingness from the current lender group, to add to their current borrowings to Kamoa-Kakula. That is something we are looking at and considering adding to as needed. I mean, there might be some additional equity injections from ourselves and Zijin as well. It's a bit of a trade-off discussion. Yeah, it's another consideration.

Speaker 3

I mean, at this stage, as you would have seen, our cash balance is more than sufficient to be able to provide Kamoa-Kakula with a bit of a cash flow cushion. Yeah, there's options on the table.

Speaker 5

Okay. Okay, great. Thanks. I'll go back to Nikki.

Speaker 6

Thank you. Next question comes from Andrew Mikitchook from BMO Capital Markets. Please go ahead.

Speaker 1

Yeah, thank you for taking questions. Just a quick follow-up question for Tom. If I could just get you to give us, again, the color you discussed on how Q2 is looking versus Q1. Are you already in a position where some of the Kamoa tons are coming down to the phase 1, phase 2 concentrator?

Speaker 10

Yeah.

Speaker 1

Is that more of a QH2 type situation?

Speaker 10

No, no, the answer is a positive yes. We are currently moving tons from Kamoa and Kansoko to Phase 1 and Phase 2. The mines at Kansoko and Kamoa are running at full capacity. Phase 3 is at full capacity, and we're moving some tons across. Yeah. Those are fresh ore tons.

Speaker 1

Generally, that would be a little bit better than what's, say, portrayed even in today's press release as to the guidance for the balance of the year. The way I interpret it in the rear portion of the press release, the interpretation is that those extra tonnes are not really arriving till the second half. You're seeing some acceleration on that. Is that fair to interpret?

Speaker 10

Yes. I would say that's fair to interpret like that.

Speaker 1

Second question also for you, Tom. The wording around this toll treatment, what kind of trajectory or timeline could be imagined? Like, if additional sources were found, is it a fairly quick situation of just trucking it over and treating it in your spare capacity at the smelter? Or, is there an extended period of qualification and testing and blending or something that we should be aware of?

Speaker 10

No, I think the-

Speaker 5

Andrew, maybe I can just talk about, we do need governmental approval to toll treat through our smelter. That's our first hurdle that will take a couple of weeks, months to 2 months to obtain. We are already in discussions, it's very possible to get that additional concentrate. Tom can just answer you from a technical perspective.

Speaker 10

Yeah. I would, the government permissions and then it's obviously testing and understanding how and where best to process it. The determination of where the actual material comes from will determine where we stick it in. It'll probably be in the phase 1 and the phase 2 concentrators because that's where the capacity sits.

Speaker 5

Sorry, Tom. Andrew's referring to the additional concentrate into the smelter.

Speaker 10

Oh

Speaker 5

I don't know if Steve wants to maybe.

Speaker 9

Yeah, I can comment on that, Marna Cloete.

Speaker 5

offer a view. It's the blend. Yeah.

Speaker 9

No test work required. Just calculations based on the mineralogy and the analysis of the third-party feed. Literally a day's work. We'll know how to fit it in. It's all about the energy balance. Very quick.

Speaker 1

Just conceptually, there are clearly mines creating concentrate in-country.

Speaker 5

Yes

Speaker 1

coming to a commercial agreement, is that the reality of it?

Speaker 5

Yes. The government's actually also encouraging this because they would like a beneficiated product transported. They actually approached us to see if it's possible. But we just need to get the permitting in place. There are multiple tollers that we have been in discussion with already, so we should be able to get the smelter as full as possible.

Speaker 1

Okay. Well, that answers my questions. Thank you very much. I'll pass the microphone to the next speaker.

Speaker 6

Thank you. The next question is a follow-up from Daniel Major with UBS. Please go ahead.

Speaker 2

Hi. Didn't know I'd be back on so quickly. Yeah, couple of other follow-ups. Firstly on Platreef, when are you gonna start expensing and reporting the results from the division, moving it from it being capitalized?

Speaker 3

Daniel, we expect to achieve commercial production sort of by mid-year. In terms of accounting standards, you will see some revenue from Platreef already in the second quarter. It'll really be a closer reflection of more what we expect of steady state 1, phase 1 production from Q3 onwards.

Speaker 2

Okay, thanks. Just another follow-up on the cash flow through the business. I mean, you noted around the liquidity at the Kamoa joint venture and the near-term outlook. Given this kind of $2.1 billion on 100% basis of debt within the joint venture, given the challenges you've seen at Kamoa, would it be fair to assume you're gonna prioritize paying down that debt as the mine, you know, ramps up over the next 12-18 months and we probably don't see a huge amount of cash paid out to the shareholders?

Speaker 3

Yeah, I think, Daniel, it's a modeling question with a number of different variables. I think it is safe to say that any debt extensions will probably be done over a medium to longer term, because Kamoa can carry it, and it makes sense to have a fair level of debt at the joint venture level as well. I don't think the assumption should be that we will draw or that we would settle that joint venture level debt before sending funds up to the shareholders.

Speaker 3

I think we're agreed, at least that's our understanding, that it makes sense to have a healthy level of debt at the Kamoa and joint venture level, and it just makes sense to utilize their balance sheet as well. In terms of the timing when cash will flow upwards, that's very much copper price and production dependent.

Speaker 2

Okay, that's very helpful. Thanks a lot.

Speaker 6

Thank you. There are no further questions on the phone. I'll turn the call back over to Tommy Horton.

Speaker 11

Thank you very much, operator. Just reviewing the webcast questions that have come in. I've got one here which is directed towards Tom. If you could provide a sort of quick update on dewatering on the eastern side of Kakula, please.

Speaker 10

Yeah, sure. Thanks, Tommy. We 74% dewatered in total. It remains there. Currently, we are holding the water with the large pumps. The reason for that is so that we can do the construction of the pump station in the southeast. That southeast pump station has been constructed. We should be commissioning it in the next two weeks. That will start allowing us to do the stage 3 dewatering. On the top, on the northeast, we affected our first holing in the last two weeks, and we are currently doing assessments and planning as to where the pump station on the northeast will go.

Speaker 10

In the interim, what we've also done is we've looked at means and ways of assisting the pumps and reducing the reliance on any potential sort of blackouts or trip outs, and we've got a process we're busy working on that at the moment. That's still work in progress, but that will enable us then to further do dewatering. We're pumping around about 4,700 liters a day currently and maintaining that. I hope that's a good enough update. Thanks, Tommy.

Speaker 11

Thanks, Tom. Just one last question on Western Forelands, and what our sort of medium to long-term plans are with respect to that project. Maybe Alex or Marna, you'd like to answer that?

Operator

Yeah, I'm happy to take that, Tommy. I mean, look, I think first of all, a lot will be revealed when we put out the updated resource, and we'll talk a lot more about the sort of project development activities and the timelines that we are thinking about. I mean, basically what we already have at the Western Forelands is certainly enough of a critical mass to support a standalone milling operation. You know, while we haven't necessarily seen kind of Kakula grades of 5%-6%, you know, 2%-4% grades are very profitable. Some of them can be mined, you know, in quite a shallow and efficient fashion.

Operator

You know, the plan is once we've got this resource update out, we are going to basically move into kind of more intensive scoping activities, which are going to then sort of put the Western Forelands on a kind of project development timeline as well as a continuing exploration timeline, because there's still a hell of a lot of exploration to be done. A lot of the drilling that we're doing this year is still step out and also more broadly regional in the Western Forelands outside of the Makoko district. We'll be sort of running a two-pronged strategy of continuing that exploration at the same time as doing more infill drilling, increasing the level of confidence in the existing resource areas, and moving into a kind of scoping and more of an engineering and feasibility study stage.

Operator

Yeah, that's a sort of high level overview.

Speaker 11

Thank you, Alex. We are at time. At the 1-hour mark, this concludes the Ivanhoe Mines' first quarter 2026 financial results call. Thank you all again for attending today, and we look forward to speaking with you all again soon about our many exciting milestones ahead. Thank you very much.

Speaker 6

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your line.

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