Ivanhoe Mines Ltd. (IVN) Earnings Call Transcript

Good morning, ladies and gentlemen. Welcome to the Ivanhoe Mines Limited Second Quarter Earnings Call. [Operator Instructions] This call is being recorded on Thursday, July 30, 2026. I would now like to turn the call over to Tommy Horton, Vice President, Investor Relations and Corporate Development. Please go ahead.

Thank you, operator. Hello, everyone. As in those, my name is Tommy Horton, and I am the Vice President of Investor Relations and Corporate Development for Ivanhoe Mines. It is my pleasure to welcome you to our Second quarter 2026 conference call. This call will be recorded on today, Thursday, July 30, 2027. On the line today from Ivanhoe Mines, we have Ivanhoe Mines' Founder and Co-Chairman, Robert Friedland; President and Chief Executive Officer, Marna Cloete; Chief Operating Officer, Tom van den Berg; Executive Vice President of Technical Services, Simon Bottoms, and Executive Vice President our projects, Steve Amos. We furnished today's event with a question-and-answer session. You can submit questions using the Q&A box on our webcast page as well as through the conference operator via the phone line. Given our time constraints, we will be unlikely to finish every question, but we will endeavor to follow up after the call via our Investor Relations team. Before we begin, I'd like to remind everyone that today's event will contain forward-looking statements that will involve risks and uncertainties that could differ from actual results materially. Details for our forward-looking statements are contained in our news release on July 29 as well as on SEDAR as well as on our website, www.ivanhoe.com. It's now my pleasure to hand over to Ivanhoe Mines Founder and Co-Chairman, Robert Friedland, for his opening remarks. Robert, please go ahead.

Thank you to all of our shareholders and stakeholders. I'm speaking to you from a cloudy and relatively cool day in New York City. And I'd like to draw your attention to the slide on Page 3. As you see our Phase 1 solar power plant generating 60 megawatts of power when it's fully running at the end of this quarter in a few weeks. And you see those little white dots in the middle, those at the battery storage program. So this is not 60 megawatts only when the sun is shining. This is 60 megawatts, 20 pours a day. And in time, it will be twice as big as this vast field of solar and it will be triple this. It's a very good paradigm for our sort of vision for Ivanhoe's for the future, a company at the bottom of the world cost curve sustainably producing copper metal in a green and sustainable way in the heart of Africa and in the heart of the richest copper mining region in the world. So I've been in this game for about 45 years, and I rarely give investment advice. I've seen shares overvalued and undervalued but if you pay close attention to this conference call, you'll see why that it's intelligent to approach our shares from the long side. They're now oversold. There's nothing but upside going toward there's an incredible series of opportunities as we develop the largest precious metals mine in the world, the richest zinc mine in the world. And yes, in the near future about the Western Forelands. So with that, I'm going to turn this over to a woman I love a lot. She's our Chief Executive Officer. She just celebrated her 20th anniversary with Ivanhoe Mines, I've watched or grow enormously as a manager, as a human being, as a visionary, as a politician. She's great. And if you want blunt advice and what to do with your wallet, I'm happy to talk about it later at the end of this call. But now over to Marna, our President and CEO. Marna?

Thank you, Robert, and thank you for the kind words. And just because he loves you, doesn't mean he goes easy on you. But it's been a great 20 years working for you and learning from you. The picture in the background on this slide is quite close to my heart. Our crews, our mining crews at Kamoa actually constructed this box cut themselves. So we didn't get in a construction company to do this box cut development. We did it ourselves and they did it under budget and ahead of schedule. So definitely well-performed and well-executed box cut. I also would just like to introduce David van Heerden, who's also on the call with us today. Tommy accidentally omitted him. I was a bit nervous because I thought maybe I was going to take you through our financials, but David is also with us on the call today, and I'll introduce him shortly. We can go into the highlights, Tommy. In the second quarter, a produced in excess of 64,000 tonnes of copper, and our C1 cash cost in the first half of 2026 averaged $2.70 per pound that was towards the lower end of guidance. Our margins were significantly supported by a $0.42 per pound smelter benefit. Kamoa-Kakula sold 120,000 tonnes of sulfuric acid at an average price of $465 per tonne. And in July, our contracts up to $840 per tonne were concluded. So if you look at the sulfuric acid prices, it more than doubled from the beginning of the year to the contracts we are now concluding in July. The production rates at Kamoa-Kakula are set to progressively increase towards the second half of the year. So we're really looking at an outstanding back half of the year after we've started implementing the turnaround strategy at Kakula. We have also tightened our guidance for 2026 to between 290,000 and 310,000 tonnes of copper produced. And during the quarter, the first tower of our 60-megawatt solar facility with battery backup, as Robert alluded to, was delivered. And currently, the ramp-up is underway. Kipushi, the store of the show nowadays had another great quarter, producing in excess of 70,000 tonnes at a cash cost of $0.90 per pound. And at Western Forelands, where the Makoko discovery continues to grow. We plan to announce an upgraded mineral resource towards September of this year. Our adjusted EBITDA for Ivanhoe Mines amounted to $179 million for the quarter. We can move to the next slide. It is with great sadness that I have to report the loss of life of Mr. Mohammed Mumbai on the 6th of July at the Kakula underground mine Mr. Mumbai was conducting styling activities when the fall of ground occurred. The root cause of the incident has been identified and a large-scale training program for scaling operations and hazard identification has been implemented for all our operators and supervisors. Our operating procedures have been updated based on learnings from this incident. Our thoughts are with his family in the terribly tragic times as well as with his colleagues. In the second quarter, a large part of our sustainability initiatives focused on training and in particular, also on underground safety. On the next slide, it would be amiss of me not to focus on, and I quote a wise voice from earlier on this call, the richest copper mining district in the world. It would be a miss for us not to highlight some of the significant achievements of the DRC over the past couple of years. The DRC is now the second largest global copper exporter, 40% of the DRC's GDP is directly derived from mining. Copper production in the DRC has increased by more than 300% in the past 10 years, and that cemented its position as the second largest copper producer. There's been a 7% year-on-year increase in copper production to 3.2 million tonnes in 2025 producing 14% of the world's copper and then the DRC also my history by issuing its first inaugural sovereign eurobond in April of this year to the tune of $1.25 billion. And then Ivanhoe has been a long-standing citizen in the DRC, and we've cemented very successful strategic partnerships with the DRC government as well as with Jacomin, and we continue to foster those relationships and expand these projects that we are delivering in the DRC. With that as an introduction, I would now like to hand over to David van Heerden, our CFO, to take you through our quarterly financial results. Over to you, David.

Thanks very much, Marna. We can move to the next slide. So Kamoa-Kakula sold just over 61,000 tonnes of payable copper in the form of anodes and blister in the second quarter. The copper and concentrate produced through the mills was pretty close to the tons sold, leading to copper inventory on hand remaining flat at around 40,000 tonnes. Although there was no destocking in the second quarter, we do expect that payable copper inventory to reduce in between the 20,000 by the end of the year. And at the current copper price, it would be a significant boost to our cash flow, revenue and EBITDA in coming quarters. Revenue was again buoyed by the higher copper price with a copper price realized of $5.99 per pound. The total revenue of $880 million included $56 million and relating to the sale of sulfuric acid and a $33 million positive impact from mark-to-market of provisional price sales. With higher production on its way and the current copper price environment we definitely expect to exceed the $1 billion of revenue mark on a quarterly basis, pretty soon. Moving to the next slide. Cash costs for the second quarter of 2026 was $2.84 per pound of payable copper in salable product produced. The copper grade of ore processed was fairly similar to the previous 2 quarters. So the quarter-on-quarter decrease was primarily and higher costs, most notably the direct impact of higher diesel prices which was responsible for $0.18 or 70% of the quarter-on-quarter increase. But I'll provide more details on that on a following slide. Power costs increased to 20% of total cash cost at illustrated as a percentage of C1 cash costs. And the jump from Q4 last year was due to the smelter power usage as well as the impact of higher fuel prices. The cash cost for the year-to-date of $2.70 is still at the lower end of our guidance range, which we maintain despite the higher pricing environment. Kamoa-Kakula's EBITDA for Q2 was $385 million and only 3% lower than Q1, notwithstanding the lower tons sold and the higher cost environment. higher copper prices and of course, played a role, and we continue to realize the significant smelter benefits. Just looking at those smelter benefits again a little bit closer on the next slide. Here, we again show a water pool to better illustrate the movement in our cash cost and highlights the benefits we get from our smelter. And on the left-hand side, we start with the average C1 cash cost of the second half of last year. And then we set out on movements to end on our cash cost for the first 6 months of 2026 of $2.70 per pound. The smelter operating cost of 0.33 is easily offset by the reduction in logistics costs, the sulfuric asset credit and then the savings on treatment charges. In total, the smelter caused a roughly $0.50 saving on a per pound basis if the saving of road and export taxes are included. And but that would be even more on a normalized diesel environment being mining and processing more to the right-hand side is a little higher in the last 6 months due to the slightly higher power cost, the lower absorption of fixed cost due to the relatively lower production this year and then, of course, the higher diesel price and since the closure of the Strait of Hormuz. And that's exactly where I will focus on the next slide. Here, we look at the C1 cash costs for Q1 and Q2 with the direct diesel costs shown separately. So at the bottom left of the screen, you can see that Kamoa-Kakula spent 34 per pound of payable copper in final product on diesel in Q1 compared to $0.52 in the second quarter. That is an $0.18 increase and represents 70% of our quarter-on-quarter cash cost increase. So just to be clear here, this is the direct diesel impact. So it doesn't include the secondary impact of higher diesel prices and like increased logistics charges as an example. And it's noteworthy that the current diesel price is a little bit higher than the average diesel price we achieved in the second quarter but also that once the 60 megawatts of solar is operational later this quarter, our diesel consumption would go down with 25% to 30%. And an even bigger mover in Q3 will, therefore, be the expected increase in the sulfuric acid byproduct credit. So far this quarter, we have been selling sulfuric acid at around $840 per tonne, which is much higher than the average selling price of $465 per tonne recognized. So if the current price holds for the remainder of the quarter, then the sulfuric byproduct credit will be close to $0.60 per pound of payable copper produced in the third quarter. And that's much higher than the already nice credit of $0.38 recognized in Q2. Then on the right-hand side of the screen is just a reminder of where we forecast our C1 cash cost to be in the future as development rates and stoping tonnes and grades improve. On the next slide, here, we show the quarter-on-quarter and EBITDA water for Kamoa-Kakula. Here, you can see that $76 million of the quarter-on-quarter EBITDA increase was due to higher copper price and for the second quarter when compared to Q1. $43 million of that $76 million was the impact of the remeasurement of contract receivables, which represents the mark-to-market of provisional priced sales at the higher price in the second quarter. Revenue from asset sales was $7 million higher in Q2 than it was in Q1, and is expected to increase further, of course, as I have mentioned on the previous slide. Logistics and treatment charges. It did not move much, but this was also because we are now transporting significantly lower volumes due to the smelter. And cost was up quarter-on-quarter, mainly due to the higher diesel prices, as I've already explained. Lastly, you can see the impact of selling 5,000 tonnes and less of payable copper tonnes in the second quarter compared to Q1, and we definitely expect that block to be green and sizable in the coming quarters as we increase production and as we destock on the current stock on hand. And then you end up with the quarterly EBITDA for Kamoa-Kakula, which is very close to what it was in the previous quarter. Moving to Kipushi on the next slide. It was another great quarter for Kipushi with another record of tonnes produced. The realized zinc price was also higher at $1.58 per pound of payable zinc and Kipushi did however not sell all the and zinc produced with roughly 14,000 tonnes, and increase in finished goods due to the inability to secure sufficient trucks to transport the concentrate to port. The closure of the Strait of Hormuz significantly decreased the number of trucks entering into the DRC with sulfur from Darussalam. And with lease trucks entering the DRC less was available for backhaul with Kipushi concentrate. To add to that, the quotas and assigned to the DOC cobalt producers also impacted negatively on truck availability. But the team has since been able to make very good progress in securing the required volume of trucks and inventory on site has halved since the end of June, even with production running extremely well. And so we will take advantage of these great current zinc prices. Still Kipushi recognized revenue of $148 million in the second quarter. and an EBITDA of $51 million at a margin of 35%. Cash cost was well controlled at $0.90 per pound of payable zinc even with the inflationary pressures and was 0.88 for the year-to-date, still below the midpoint of our 2026 guidance, which we maintain. Also noteworthy is that Kipushi generated cash from operations of $94 million in the first half of this year, even with the buildup of inventory. So moving to Ivanhoe Mines' consolidated results on the next slide. So Ivanhoe Mines recorded a profit of $46 million in Q2 and an adjusted EBITDA of $179 million. both our EBITDA and our profit is expected to continue to grow with the increase of expected production at Kamoa-Kakula and Kipushi and with Blackrod contribution coming very soon. something I would just like to point out is people often forget that our profit and EBITDA is reduced by our continued investment in exploration, particularly on the Western Forelands, and expensing exploration expenditures, accounting policy decision. So it's not necessarily treated the same way and by our peers, but important to take into account when looking at our results. It might not be reflected in our profit or our EBITDA, but we do continue to see great results on exploration and Simon will touch on that and the latest news a little bit later on in the presentation. We continue to maintain strong liquidity levels, and that can be seen on the next slide. So Ivanhoe had $635 million of cash and cash equivalents on hand at the end of June, still a very strong liquidity position. Our pro rata net debt increased slightly, but more due to the reduction in cash over the quarter as opposed to an increase in debt. The pro rata and net debt ratio for the trailing 12 months remained stable but still includes the impact of the lower EBITDA in Q3 last year. And it is back to below 2 if you recalculate it using an annualized EBITDA for the last 6 months, as an example. S&P downgraded Ivanhoe's corporate rate to B- during the quarter. Our view is, of course, that it is not a fair reflection of the credit even though and S&P note in the report that there is no material liquidity risk and that our credit metrics look very positive in 2028. Their metrics, unfortunately, focuses on just 2026 and 2027 and ignore the very good 2028. But having said that, we were very encouraged with how our bonds continue to trade even after the event. And so if we turn to the next slide just to show where we are planning to spend our cash that we've got on hand. The capital expenditure on each of our projects remain in line with expectation and the guidance for each of them are reconfirmed. During the quarter, Ivanhoe mines contributed $76 million to Kamoa-Kakula for its ongoing capital and operational requirements with production and sales set to increase over the next few quarters, it is expected that no further contributions will be required and that Kamoa-Kakula will generate sufficient cash from operations and joint venture level facilities to support its own operational and capital cash requirements. At Platreef, the Japanese consortium contributed $65 million towards Phase 2 development expenditure during the quarter, highlighting its ongoing confidence in the project's long-term potential and our team's execution capabilities. The Platreef project Phase 2 finance and was also closed during the quarter and $87 million was drawn and received by Platreef in July. So our cash balance at the moment is actually higher than it was at the end of the quarter. The that financing is structured such that 2/3 of the remaining Phase 2 capital expenditure will be funded by this facility, and we will do partly drawdowns going forward. And with that, I will hand over to Tom van den Berg, our Chief Operating Officer, to start the operations and project update portion of today's presentation.

Thank you, David, and thank you for the introduction. Project 95, as you can see in the slide in front of you, just go back there, you can see those as a thickeners in the high ground, the reground back in the background there. So that was commissioned in June 2026. So that's up and running at this stage at Phase 1 and Phase 2. Thanks. Let's go to the next slide. If you look at the numbers here, you can obviously see the combined copper ore grade processed as being climbing from quarter -- the last quarter to this current quarter as we access higher-grade in the areas of Kakula. Kamoa is also producing good grade at the moment. And the tonnes milled was an increase. Phase 3 did well in the tonnage, Phase 1 and Phase 2 batching or as the stockpiles came to an end. So that's picking up at this stage, and that will go up further in the next 2 quarters. The combined copper recovery, as you can see, David spoke to it already. We're also looking at good recovery rates there. So that's also improving. The Phase II concentrator continued to mill at about greater than 25% above its design capacity, really doing well and achieving what we expected to achieve and overachieving at this stage. So equivalent to milling rate of 6.3 mega tonnes per annum. Phase 1 and 2, as I said, they were doing batching in the large portion. So they're running at about 60% of the capacity at 10.5 megatons per annum. Due to the ongoing turnaround at Kulu mine, we expect that to increase, and we are moving tonnes at this stage across from Kansoko mine to the Phase I and Phase II as the Kamoa mine builds up and fills the Phase 2Kansoko mine. we are able to move tonnage across to Phase 1 and Phase 2 from Cancelmi. Project 95 is boosting recoveries, as you can see, and that is up and running and has been commissioned at this stage. Phase 1 and Phase 2 concentrators, the feed grade and the recovery has improved in quarter 2, and that was following the depletion of the surface stockpiles because obviously, as we got to the bottom of the stockpiles, we had reduced grade but that was then picked up by fresh ore from underground, and that is what you see with the change in the grade. So the mining sets -- the mining rates are set to improve further in the second half of 2026 and we are seeing that through a combination of productivity initiatives, opening up more ends and getting into more areas on Kakula currently. If you can go to the next slide. Thank you. So the 500,000 tonne per annum smelter is running at about a 60% capacity. We started it up at the end of 2025. It's really been doing well. It's been performing very well at 60% of its capacity and it is stable, and we haven't had any issues with respect to the smelter and no major concerns. So as you can see, lots of copper anodes that have been generated in the picture. It generated 64,000 tonnes of anodes, blister and anodes in quarter 2, 2026. There's a further ramp-up of the smelter in line with Kamoa-Kakula mining rates increasing, and we will do that as we go ahead. 10,000 of unsold copper is to be destocked, as David spoke about, in H2, 2026, and then targeting the year-end inventory to go to be 25,000 to 30,000 tonnes of copper. Thank you. If you look at the ramp-up of the copper production to the 500,000. So what you're seeing there last quarter 1 to quarter 2 is -- the 9 was effectively the destocking that we're expecting to do. The 2 pink bars on quarter 3 and quarter 4 are the new destocking that we to do in the H2 portion. We did do the 64 as you have seen, and then we're targeting to do further increases in quarter 3 and quarter 4. So our production guidance has been tightened, but it sits at $290 to $310 million. And in 2027, our production guidance goes from $380 million to $420 million. And the increases are basically the new Koala box cut. The picture that you see behind this picture, it is really an salon that also then allows us to access the area of consoles midway in the ore body, reduces our training rates and then effectively gives us better mining rates inside the process. And then the mining rates will start increasing as the stoping commences and that will be at the back end of 2027. What we are doing at Kamoa and Kansoko at this stage is up and running with the stoping. So we're starting -- getting our stoping back to what it should be. And we have effectively got the mines established to the new layouts and they are performing well. So it's Kakula at this stage. We've just got to get the development, which we've done well on the front of the Northeast and the Southeast, and then will be around the front of the mine on the eastern side in 2027. Thanks. We can go to the next slide. The sulfuric acid, David spoken to most of it already. So I'm just going to highlight a few issues there. The sulfuric acid realized price was $465 per tonne. We did very well in terms of our sales and our cash costs in terms of the guidance from the acid. The sulfuric acid in the market remains tight in the DRC, and this is due to reduced supply of softer passing through the Strait of Hormuz, coupled with import constraints inside and through the DRC. So quarter 3, the 2026 contracts priced at 80% higher than quarter 2 at approximately $840 per tonne. So a really good story. The ore body is generating good acid from the smelter, and we're able to sell it into the market and make money from it. Thank you. Next slide. Over to you, Simon. Sorry.

So our feasibility study updates are well underway. We're currently finalizing updated mineral resource models with drill data from the last 3 years across all deposits in the Kamoa-Kakula complex. Alongside, we are also updating newly calibrated Tier hydrological models, particularly focused on Kakula. These models will provide us with the foundation for the commencement of multiple mine design trade-offs and then further optimization throughout this quarter. Alongside these studies, we've commenced a detailed feasibility 250-kilometer drill program, focused on 2027 to 2031 mining areas with the first drill hole at Kakula pictured in the background of this slide. This detailed drill program will be further complemented with high-definition active seismic surveys which together will provide the high-resolution geological and geotechnical models, updating our structural models to both optimize our geotechnical and hydrological dewatering designs across the complex. We anticipate that this drill campaign will extend into 2027, and we will utilize the initial results of this high-resolution data set to inform our trade-off decisions and subsequent life of mine plan optimization that we are commencing this quarter. So with that, I'll hand back to Tom to continue through the operations.

Yes, so it is Steve.

Yes. Thanks, Tom. I'll give an update on the solar project. So we've spoken about this nice picture there. You can see the batteries in the foreground and the panels in the background -- so just to remind everyone, this is baseload power, 95% availability, more reliable than grid power, and it certainly reduces our diesel consumption quite significantly. So they will be running Phase 1. There's 2 IPPs, independent power producers, each producing 30 megawatts. The first one has completed construction. We're receiving 15 of the 30. The second 15 is under commissioning, and we expect that, I would say, in about 2 weeks' time. And then the final 30 megawatts from the second IPP by the end of September this year, so by the end of Q3. We've also initiated Phase 2 of this project, which is basically a copy pace. So another 2 IPPs each producing 30 megawatts. We've signed the first power purchase agreement, PPA with the first independent power producer and the second signing of the contract is imminent. I'm expecting that in a couple of weeks' time. And then there'll be a Phase II. There's no question that this is a good initiative. And we're looking at self-build for Phase III. I think we've got enough experience now from this work to take this on ourselves. Next slide, please. Tom, over to you, yes.

Yes, Much appreciate it. So yes, well done team. They really did a great job and they continue to overperform. So thanks to Kipushi for the record 70,000 tonnes of zinc in quarter 2. Combustion milled a record of 200,000 tonnes of ore, quarter 2 at an average grade of 38.7%. That's a notable high-grade amount of zinc. Multiple concentrator records were achieved in quarter 2, 6 including recoveries averaging nearly 92% and then 25,634 tonnes of zinc produced in May. So as you can see, the graphs on the right-hand side they talk to what I'm talking to on the left here. Production guidance and change at 240. So that to be the world's third largest zinc mine in 2026. And then we're also doing the same thing as what Steve is saying. The DRC has got a very high sun belt. We've got 12 hours of sunlight today, more sunlit winter than we have in Summer. And with that, we're going to dial in 10 megawatts of constant power at Kipushi and that will also assist them in managing their constant power supply and making sure that they can mine and produce with those megawatts. Thanks. Next slide.

I'll take over, talk about Platreef. So this is the focus with the project team at the moment. Platreef Phase 2 and this is the next big thing for Ivanhoe. What you can see there is Shaft 3. It's a rock hosting shaft. We wasted our first rock from that chart at the end of March. And then we've spent this quarter constructing the underground ore moving facilities, which consist of a crusher, 2 belts feeding the shaft and 2 truck tips. It's a 1,000-meter deep shaft. It's a rock hoisting shaft only. We'll use Shaft 1 for Mana material. The shaft initially will feed the Phase 1 plant as the mining ramps up underground, we'll start building the stockpile for the Phase II plant. And when the Phase 2 plant comes online towards the end of next year, this shaft will feed to the Phase II plant. Next one, please, Tom. Here we just talking about Platreef and in particular, Phase 2. So we're developing the product in 3 phases, Phase 1 complete, Phase 2 will be complete by the end of next year, and that's about 450,000 to 500,000 ounces of 3 PGE plus gold. So a decent size, 10,000 tonnes of nickel and then Phase 3 will be a doubling of that. We're currently busy with the plant construction. Earthworks well advanced. Civil work started. We, in fact, bought mill base, which is on the critical path. We've awarded all the mechanical contracts, SMPP, structural mechanical piping and plate work, audit all the long lead items and the bulk of the equipment. So going very well on the plant construction, definitely on target for the end of next year to start milling ore, 3.3 million tonnes per annum is the milling rate of the Phase 2 plant. Another big bit of work that we're doing is Shaft 2. So Shaft 2 is the future of Platreef. It's a rock and man material shaft, 8 million tonnes per annum. So a big shaft. We're busy with a slide at what we call slipping and lining, which is basically the widening of the shaft from 3.5 meters diameter to 10 meters diameter. We will be ready to host man and material late in 2028 and then Rock about 6 months later. So as I said, 8 million tonnes per annum, huge shaft. And derisk Phase 2 and gets us ready for Phase 3. Thanks, that's all Tommy.

So looking now to the exciting Western Foreland project, we're currently updating our mineral resource models with the data that we've gathered up until the end of the first quarter this year. And with this, we are anticipating to grow our total mineral resources by more than 30% and as well as increasing the overall grade in our updated mineral resource statement, which we will publish in September this year. In parallel, we're ramping up the drilling on site to undertake the largest drill program that has ever been undertaken on the project so far. This drilling is testing the continuity of mineralization between Makoko West and Central as well as stepping out to test both the shallow eastern extensions of Makoko Central and the southern extensions around the high-grade Catoca target. We will, of course, be updating you in the upcoming months with both the updated mineral resource and with the results of ongoing step-out drilling, which we believe will further grow shallow copper resources Alongside the exploration works, we've commenced early project establishment and operational camp construction. We'll be aiming to commence a series of technical studies later in the year in which we anticipate will include multiple shallow open pits that will enable a lower capital, fast execution construction to the project. So next slide, please. So now looking across our exploration portfolio. And firstly, the Moxico provincing Angola. This is a frontier greenfields exploration program. where we're testing our interpretation that the Katanga Basin settlements extend into Angola below cover, potentially targeting Western Falland Star mineralization. We have completed a range of airborne geophysics and soil geochemistry over the prospective areas. And from the results of this, we have targeted stratigraphic drilling to test these interpretations. The preliminary results of the first few holes through this year have been very encouraging and have been confirming our regional interpretation. Whilst it is early days in this exploration program, we plan to continue drilling into 2027 as we vector in on potential mineral system targets. So then turning to the substantial exploration package in the Northwest province of Zambia. This is situated adjacent to the Angola border with similar stratigraphy to well-known neighboring mines. Here, our drilling is targeting both covered Katanga's stratigraphy and younger IOCG style mineralization targets, which were identified as part of our airborne geophysical survey. Our drilling commenced in mid-June on a number of the OCG targets, the results of which the far have identified prospective alteration and sulfide raining. In parallel to this, we're running a regional soil geochemistry and ground geophysics program on the southern licenses within the package throughout the second half of this year. The next phase of drilling in early 2027 will be planned to test the sedimentary-hosted copper targets in the northern and western permits of the product. So then turning to our strategic exploration joint venture in Kazakhstan, where we are funding a further $20 million of investment to expand the drill program, targeting sedimentary-hosted copper targets in a large sedimentary basin, which host giant Soviahera discoveries, analogous to that of the Kupashifa Basin in Northern Europe. In 2025, we completed a program of field mapping, Soyachemistry and geophysics which define the key basin architecture, and we've been subsequently drill testing. Throughout this year, we're planning to drill approximately 35,000 meters on a number of conceptual targets. We anticipate that the results of this program will refine our basin interpretation and enable us to progressively vector in on potential mineral systems within the permits.

Thank you, Simon. So we'll now start the question-and-answer session. Covering analysts, you may submit your questions to the operator or the phone line. Questions can also be submitted through the webcast. Any questions submitted via the webcast that we are unable to address during the Q&A session, our Investor Relations team will endeavor to follow up with you. So operator, let's start by clearing the phone lines.

[Operator Instructions] First question on the phone Daniel Major with UBS.

First question, just around the sort of production versus sales outlook into the second half of the year. You noted in your material Kamoa-Kakula. You expect to destock 10,000 tonnes of copper inventory. Is that all the destocking of concentrate and will flow through as production blister anode or will that also be partially an unwind of sales of copper versus production of copper through the balance of the year because year-to-date, you've sales lagged production such as where that 10,000 is going to sit.

Yes. Thanks. Happy to take that, Daniel. So Yes. Currently, we've got roughly 40,000 tonnes of copper in inventory. And that is a combination of copper and finished goods and copper in concentrate Whiting to be smolt and then copper and the smelting circuit. I mean, we've said previously that we expect the smelter circuit sort of to contain roughly 17,000 tonnes and when it's round about at steady state. So that leaves us with rounding down to about 20,000 tonnes of other copper we can realize and the expectation of that is that we will -- irrespective of which form it is. So if it's a finished goods, we will sell, yes, 10,000 more either turn concentrate into finished goods and sell it or finished because but we don't have quite have 10,000 tonnes of finished goods in stock at the moment. And so it will be -- some of it will be a conversion of concentrate into finished goods and then sale. But of that you'll see that reduced to at least 30,000 by the end of the year, meaning that we -- whatever finished product we produce and by the end of the year, over the next 2 quarters, we will see an additional 10 being sold as well.

Okay. So it's a total of 10 split between finished goods and concentrate the destocking? Is that right?

Yes, that's correct.

Okay. And then just second part of that, would you expect that to reduce working capital in the second half of the year at the Camakila JV level? Or is there any offsets?

Yes. No, we would expect that to reduce working capital and turn that into cash.

Okay. And then the second question, I believe there's a deadline or some around increasing local ownership in DRC operations at the end of July. Can you just give us an update on where you stand with respect to any such local participation thresholds and whether there's any potential changes in ownership of any of the DRC assets?

No. So I'm happy to take that one. So maybe just for a little bit of background for everybody. There's been communication received from the Minister of Mines asking mining companies to confirm local participation in its shareholding. That is based on the 2018 mining code which requires companies who converts an exploration permit to a mining permit to give 10% free carrying nondilutable participation to the state, and then also to give 18% stake, but that's not on a free carried basis and also nondilutable to Congolese nationals. Originally, the legislation envisioned that it was accompanied by regulations that stated that as an example, the 10% to Congolese nationals could be 5% to employees. So that was the -- that was the foundation of the communication by the Minister of Mines. Subsequently, there's been a number of engagement with the Minister of Mines as well as with the Prime Minister. The Minister of Mines went us for us drafting a decree, trying to implement this change retroactively. This degree cannot meant legislation as it will need to be adopted by parliament. We've -- as much as the state line is looming, we've had numerous engagements and we were hopeful to have further engagement today. So it's really happening real time. But I don't think it will necessarily conclude before the end of this month, but the industry is positive that we should be able to find common ground and try, and argue that this should only apply to conversions post 2018 and not to pre-2018 conversions as is the case with Kamoa-Kakula and our ownership in its partnership with Kapushi.

Okay. And would Western Foreland apply fall under that. So I would assume you would have to dilute that...