Good day, thank you for standing by. Welcome to the Ivanhoe Mines Second Quarter 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Matthew Keevil, Director of Investor Relations and Corporate Communications. Please go ahead.
Thank you, operator. Hello, everyone, good morning and good afternoon. It's my pleasure to welcome you to the Ivanhoe Mines second quarter 2023 financial results conference call. This is Matthew Keevil, I'm the Director of IR and Corporate Comms with Ivanhoe Mines. On the line today from IBN, we have our Founder and Executive Co-Chair, Robert Friedland, President, Marna Cloete, Chief Financial Officer, David van Heerden, Chief Operating Officer, Mark Farren, and Senior Vice President, Corporate Development and Investor Relations, Alex Pickard. 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. Please do contact our IR team directly for follow-up questions that are not addressed during the call.
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 August 3rd news release, as well as on SEDAR+ and at www.ivanhoemines.com. It is now my pleasure to introduce Ivanhoe Mines Founder and Executive Co-Chair, Robert Friedland, for some opening remarks. Go ahead, Robert.
Yes, thank you very much to all of you who are taking the time and trouble to attend this call. I'm addressing you from London, England, having flown from Washington D.C. and New York to get here. I'm happy to report, in the last few days that the United States Department of Energy has placed a number of the metals that we have under development and are already producing on the critical materials list. With the support of the United States government, it's now for the first time, I can address you with copper being on the critical materials list, as well as many other metals that we have in Ivanhoe Mines, like nickel and platinum, and gallium and germanium.
We've had a very good quarter, not only at Kamoa-Kakula, which has continued to break a, a number of records and is running at least on schedule and on budget, but also at our other two projects at Kipushi and our new plans for the Platreef. I, I appreciate that there's an enormous amount of new information in our MD&A, but I can say that our teams are executing perfectly. We've never been as strong a position as we are today in our corporate affairs, and our dreams are expanding, and we deeply appreciate the support we've had from the Congolese government, the South African government, and our incredibly dedicated workforce. I'll be back to you later to talk about exploration. I want to turn this over to Marna, our remarkable president, and she'll tell you about how things have been going. Marna?
Thank you, Robert, for those kind words. Good afternoon and good morning, everyone. We are very pleased to announce another quarter of operational and project execution excellence. A few key highlights this quarter and beyond include, we achieved record production in the second quarter with close to 104,000 tons of copper produced at Kamoa-Kakula. Our cash cost trended towards the lower end of our cash cost guidance at $1.41 per pound of copper produced. Since entering Phase I commercial production on July 1, 2021, the Kamoa-Kakula joint venture has generated in excess of $1.8 billion of net cash from operating activities. This has funded both the Phase II and Phase III expansions to date. That is truly remarkable.
With the completion of phase three, which includes additional mining areas, an additional five million tons per annum concentrator, a power project, and a smelter, copper production capacity at Kamoa is earmarked to expand to 650,000 tons of copper per annum from the end of 2024. Our phase one construction activities at Platreef is advancing well, we are on schedule for production in the third quarter of next year. Similarly, production will commence at Kipushi in the third quarter of next year. With key highlights this quarter, the conclusion of our $80 million DRC finance facility for Kipushi and our negotiations with Gécamines and Glencore for the larger $250 million off-take link facility remaining on track. What we are probably proudest of is our health and safety statistics.
We had a 40% reduction in our total recordable injury frequency rate across all sites during 2022. This whilst operating, expanding, and building new projects. We have continued this trajectory with a marked reduction in our total recordable injury frequency rate across all our sites, and our overall performance is well below the industry standard of 2.66. What you will see on your screen in front of you is our Kamoa Centre of Excellence, and we are extremely excited about the progress at this center. It's a world-class learning institution that's currently being constructed very close to Kamoa Kakula. The vision is to train the future leaders of the Copperbelt in mining-related disciplines, and then to provide practical experience at our world-class mine.
Our first students will start in September and will be funded through bursaries by Kamoa. An inaugural ceremony is currently planned for November of this year. With that as a brief introduction, I will now hand over to David van Heerden, our Chief Financial Officer, to take you through our financials for the quarter. Over to you, David.
Thank you, Marna Cloete, and good day to everyone joining the call today. Kamoa-Kakula sold close to 102,000 tons of payable copper in the second quarter of 2023, a 17% increase from approximately 87,000 tons in Q1, resulting from the completion of the de-bottlenecking in the first quarter of 2023 and the inventory levels normalizing. Because of this increase, Kamoa-Kakula achieved record revenue of $702 million, despite the lower quarter-on-quarter price. The realized copper price for Q2 was $3.79 per pound in the second quarter, down 6% from Q1. Kamoa-Kakula's cash cost. Kamoa-Kakula's cash costs have continued to be managed exceptionally well over the past year, with the quarter coming in at $1.41 per pound of payable copper produced.
This is right at the lower end of our guidance range of $1.40-$1.50 per pound. As a result, the EBITDA of $457 million is almost the same as the high-water mark we achieved in Q1, and we have maintained our strong margins at 65%. On this slide, we have presented the main drivers for the quarter-on-quarter change in EBITDA. As mentioned before, we had a significant increase in tons sold, which drove a $70 million increase in EBITDA. However, this was offset by the 5% decrease in the average copper price quarter-on-quarter, as well as the decrease in the price at which provisional price sales were realized in Q2, which was $3.79 per pound, down from $4.04 per pound in the first quarter.
What is very pleasing about this slide is that the items within our control, being the tons sold, logistics cost to some extent, and also cost of sales, showed positive movements in terms of EBITDA. You can see on this slide a graphical representation of where our C1 cost came in at, the bottom of the range on the global cost curve. It's worth highlighting again that the transformational impact on cash costs we expect from the 500,000 ton per annum on-site smelter, which is being constructed as part of Phase III. Once the smelter is operational, we expect it to drive us to the lowest cost quartile and to below $1.20 per pound. We're especially proud of our cash cost record in the context of significant inflation seen elsewhere in the industry.
On this slide, we have presented the change in Kamoa-Kakula's cash cost in comparison to our peers, including large copper miners and segmented copper division reporting from the majors. The top chart shows we were the only company in this group to meet our 2022 guidance range. The second chart shows the performance year-on-year. Despite the ongoing inflationary pressures, our cash cost is only 5% higher year-on-year, compared to the others in the range, being in the range of 17%-30% higher. The bottom chart is looking at H1 2023 in comparison to reported guidance from the start of the year. We are the only company below the midpoint of our guidance, based on half-year reported results, with many companies already significantly over guidance.
All this means that Kamoa-Kakula is delivering extra margin to shareholders as the copper price increases. Ivanhoe's group-level adjusted EBITDA for Q2 was $172 million and was consistent with Q1. Our share of profit from the Kamoa-Kakula joint venture was down by $10 million in the quarter due to unrealized foreign exchange recognized on indirect taxes to receivables, with the weakening of the Congolese franc against the dollar in Q2. On the right-hand side, we have presented our reported net profit alongside normalized net profit, which excludes the fair value adjustments on the convertible notes for each period, and Kipushi's deferred tax income recognized in the second quarter of 2022.
We have recorded a steady increase in profit through the commissioning and ramp-up of Phase II, with a profit of $87 million in Q2 and a normalized profit of $114 million. CapEx guidance and spending plans remain unchanged at each of Kamoa-Kakula, Platreef, and Kipushi. Importantly, as Alex and Marna will take you through, development is tracking well. The expenditure rate is set to increase at each of the projects in the second part of 2023, as we enter the most intensive phase of the build. However, we are likely to come in at the lower end of our guidance range this year, which isn't related to project timing, but simply timing of cash flow spikes, which is spilling in, which we expect to spill into 2024.
Other in mind is a healthy cash balance of $393 million, and plenty of cash, with plenty of balance sheet flexibility. Kamoa-Kakula also has a healthy cash balance of $333 million at quarter end, and uses its unsecured overdraft facility of $150 million in order to keep the majority of Kamoa's cash resources offshore. Platreef's $150 million senior debt facility is progressing well, as is the $250 million of that finance facility for Kipushi. We also secured an $80 million working capital facility for Kipushi, with a local DRC bank, Rawbank, during the quarter, of which $40 million was drawn in Q2.
The development of the domestic DRC banking market and lending has been very positive. We are also very pleased to report that the facility bears a very competitive interest rate of only 8%. I now hand over to Alex Pickard, our Senior Vice President, Corporate Development and Investor Relations, to commence the operations and project update.
Thank you, David, and good day to everybody on the line. As David mentioned, we will take you through a brief update on our fantastic operations projects, as well as our exploration initiatives that Robert will take you through. I'll start on the outset by saying that we will be stealing the thunder of our COO, Mark Farren, who is on the line from Kamoa currently, but he will be available for Q&As at the end of the call. Starting as usual with Kamoa-Kakula, this slide, in many ways, has become quite predictable, but really that speaks volumes for how incredibly well the operation has been performing. As David mentioned with the sales, it was also a record quarter, both from a throughput and a production point of view.
Kakula milled 2.2 million tons at 5.2% copper grade, for production of close to 104,000 tons. Included in that quarter was a record month of 35,856 tons in May, and we also got very close to that record last month in July. These are outstanding production numbers, which are in excess of 420,000 tons on an annualized basis. During the quarter and afterwards, we also achieved daily records in terms of mill throughput, which was close to 30,000 tons in a single day. That's equivalent to approximately 10 million tons annualized after accounting for availability. That's much higher than the, the new nameplate capacity of 9.2 million tons, following the debottlenecking.
Recoveries have continued strongly at 87% for the quarter. We also achieved 88% in July. I'll talk about that in a bit more detail on the next slide. And perhaps just a word on the power situation: We had much less downtime in the second quarter due to DRC grid instability than the first quarter. I would say the situation is not perfect today, but we're still working very hard with SNEL, which is the DRC power utility, on grid scale improvements that we've described previously and are laid out in the press release.
In the meantime, we have been steadily increasing our backup power generation capacity, which now stands at close to 50 MW, and we have another 30 MW arriving later this year, which is equivalent to the full power load of both phase one and phase two concentrators. Finally, just to note, with over 197,000 tons produced, year to date of copper and concentrate, I think we are confidently restating our guidance, of 390,000-430,000 tons of copper that we set at the start of the year. I mentioned the copper recoveries before, and we recently put out, some very promising test work that was conducted by Kamoa-Kakula.
Obviously, Kamoa-Kakula is among the very highest grade copper operations globally, with a head grade of 5.5% or so. We're very pleased today that the concentrator is performing in excess of its design recovery rate of 86%. However, when you look at the remaining 14%, based on the very high feed grade, this does mean that the tailing stream is still running at approximately 0.8% copper. What you can see from the chart at the bottom of the page is that this grade is effectively, significantly higher than the average feed grade of copper mines globally today. There are good reasons for this, the main reason is that the remaining copper is hosted in a very fine-grained copper sulfide, which requires extra fine grinding to liberate that copper unit.
In order to address this, we've been doing a lot of test work at Kamoa. There are 13 work streams in total to unlock this extra production and extra revenue. The promising test work that we announced is based on quite conventional technology, so that's ultra-fine grinding, followed by flotation and concentration. The early results indicate that we can recover up to 65% of the copper from the tailing stream at a grade of just under 1%. This would make it possible, if you look at it in totality, to increase our overall recovery from the 87% that we reported in the last quarter towards the mid-90s, which could be an extra 50,000 tons of copper or so production based on the current run rate.
We've run internal numbers, and this takes into account the extra capital cost and the operating cost of doing this, and the economics are very positive. The, the, the plan now is that we will conclude this work over the coming months to bring it to an investment decision. We're also evaluating this test work alongside other non-conventional technologies that may potentially yield even better results. Moving into a quick construction update on Phase III and starting with the concentrator. Overall, the expansion of the mine and the concentrator, as well as the Inga II turbine upgrade and the smelter project, are on time for the fourth quarter of next year and on, on budget, as David mentioned. You can see in the photo here that the Phase III concentrator is now really taking shape.
It's 38% complete overall, but within that, we have 85% of the steel and plate work already shipped, 90% of the concrete poured. We remind the listeners that this is the same team who delivered the Phase I and Phase II concentrators so successfully. I think we're very excited about what's to come in the next year. Just looking at the smelter briefly in isolation. The smelter is really a mega project, I think you could say, in its own right. It has a capital cost of $1 billion, of the total of roughly $2.5 billion for the whole of Phase III. Here in the photo you have a great shot, which shows the direct blister furnace and the off-gas handling facilities really starting to take shape.
In terms of overall project completion, we're at 56%, and the major equipment deliveries are starting to come in this quarter. That includes some of the largest pieces, single pieces of equipment that have ever been delivered into the DRC. We're very much looking forward to that. Finally, just from, from me at least, moving to regional logistics in the DRC. We've been talking for a while now about exporting from the DRC via Angola, along what is known as the Lobito Rail Corridor. The Lobito Corridor would very much be transformational for Kamoa Kakula. You can see that from this map, the distance to Lobito of 1,600 km is approximately half the trucking distance to Durban today. Durban is where approximately half of our volumes are going today.
Not only that, there would be significantly less carbon emissions associated with shipping by rail rather than road. Not only will we expect this route to be faster, but as a result of being faster, it should be more cost efficient and will also create much needed competition between the different logistics corridors in the Copperbelt. It's also just worth noting that the Lobito Corridor, which, which, which stands today, there is an existing rail in the DRC. It makes its journey from the DRC-Angola border to the town of Kolwezi, which is just to the east of Kamoa-Kakula, and it actually runs directly through the Western Foreland licenses and within 5kw of the Kamoa-Kakula boundary. Just looking at the bigger picture, we have seen some recent political movements here.
In May, the U.S. government announced their support for the Lobito Corridor, which includes a potential $250 million financing from the DFC. We're watching this space very closely. With that, I will now pass back to our Executive Co-Chairman for an update on exploration, starting with the Western Foreland.
Well, thank you. It's my favorite subject. We're driven by exploration, where we have a very large drilling program underway, both at the Makoko resource and the high, high-grade Kiala resource, and we will be telling the market a lot more about that in the fall. In addition, we have a major exploration program going on, which couldn't possibly have a better hunting ground to find more Tier one copper. When we get past the dog days of, of summer, I'm sure we'll have a lot more to say about the incredible mineral potential in the Western Forelands. The fact that the U.S. government has come in to support the Western Corridor Railroad through Angola, also opens up the entire Western Foreland landholding to rail access.
This is enormously attractive for the development of future mines in the Western Forelands, which is unquestionably the best hunting ground for copper that exists on this particular planet. We're also very excited about the Mokopane Feeder. PhD geologists think it could be the source of the entire Bushveld complex, which is the world's richest metallogenic province. We've been doing a lot of geophysics there. There's some very sophisticated gravity work being done there. All of this will coalesce in drilling at the Mokopane Feeder, which is an opportunity for us to find additional Tier one supergiant sulfide, nickel, and associated precious metals systems. Only about 10 kilometers away from our Shafts, that you see pictured here under Mokopane Feeder. You can see one of the aircraft doing the airborne geophysics. It's only 6 miles away to the Mokopane Feeder.
A tier one discovery in either the Western Forelands or the Mokopane Feeder will launch Ivanhoe Mines into the ranks of the tier one major mining companies. With that, let's go back and talk about the Platreef mine. Is it Alex?
Yeah, thank you, Robert. That's me. I will quickly provide a construction update on both Platreef and Kipushi, then we will open the floor for Q&A. We're here looking at the construction activities on site for the plant. It's advancing well, it's on track for first production in the third quarter, as we mentioned earlier. Most of our long-lead equipment orders were placed, is scheduled for delivery in the third quarter of 2023. 160 tons of the total of 1,500 tons of steel were erected to date. From an underground point of view, more than 2,000 meters of lateral development has been completed to date across all three levels, the 750 meter, 850 meter, and 950 meter level.
We're advancing at a rate of approximately 200 meters per month. Once we've installed the crusher and loading feeder on the 950 meter level, which is expected at the end of August, the rate of lateral underground development is expected to continue to increase to approximately 300 meters per month through the remainder of the year. From January onwards, we expect our advancement rates to increase to approximately 500 meters per month. Looking at the next slide, we initiated an optimization study at Platreef, this is to potentially accelerate production from Phase II. The study will consider converting the 5.1-meter diameter ventilation and secondary access Shaft, Shaft # 3, to a production Shaft with the capability to hoist.
Shaft # 3 is currently being reamed, with approximately 340 meters of the 950 meters completed to date, and it's planned for completion in the fourth quarter of this year. The manufacturing of the auxiliary winder for Shaft # 3 headgear is also well advanced and on schedule. Shaft # 2 construction at Platreef. The Shaft # 2 headgear concrete structure was completed early in the quarter to a height of approximately 79 meters. Shaft # 2's overall height will be approximately 100 meters above ground, and that's including the steel structure that will house the main winders. Robert always jokes that we should put a revolving restaurant at the top of the headgear. The Shaft # 2 headgear internal structure steel construction is also progressing very well.
The cable and stage winder civil construction is nearing completion, with the winder delivery planned for December of this year. The cable winder ropes were recently delivered, and drilling of the pilot drill hole for the reaming of Shaft # 2, which we commenced in February of this year, has reached the Shaft bottom, and preparations are now underway to commence reaming Shaft # 2 to an initial diameter of 3.1 meters. Raise boring will commence from the 950-meter level once we establish bottom access. Last but not least, we move over to Kipushi. In late April, we announced the signing of a tripartite offtake and financing term sheet between Kipushi, Gécamines, and Glencore.
The offtake is for 100% of Kipushi's zinc concentrates between 400,000 and 600,000 dry metric tons per annum over a five year term. The offtake and financing term sheet is subject to the execution of final binding agreements, which we expect to conclude in conjunction with the new Kipushi joint venture agreement in the next month or two. As we mentioned before, we also reached a term facility for $80 million with Rawbank S.A. It's the largest domestic bank in the DRC, with a loan book expected to reach over $1 billion by the end of 2024. It's, it's just indicative of the economic activity in the DRC. If we look at the underground construction at Kipushi, the development activity is ramping up. We're 20% ahead of schedule.
We've completed 1,526 meters of lateral development year to date. Mining of the big zinc ore body, with grades in excess of 35%, will commence ahead of schedule in January of 2024, and this will be stockpiled pending plant commissioning. Last but not least, this is a picture of the plant construction. The 800,000 ton per annum concentrator is over 50% complete. Detailed design is complete and ahead of schedule, and procurement activities are nearing completion, with only five equipment packages outstanding. To date, 15 of the total 73 equipment packages have been delivered to site, with a number, including the ball mill, currently en route. That concludes our presentation for today. I will now hand over to Matt to handle Q&A.
Thanks very much, Marna. We will now begin the question and answer session. Firstly, I'll hand it back to the operator to proceed with any questions waiting on the line. We'll get the queue going for dial-in questions. Following clearing the line, we'll look what we have on the webcast. Please go ahead, operator.
Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Lawson Winder of Bank of America Global Research. Your line is now open.
Fantastic. Thank you very much, operator. Good morning, afternoon, evening, everybody on the Ivanhoe team. Thank you for taking my question. I wanted to ask about the Western Foreland. Very exciting that we're approaching the release of a first resource. Two questions, or one question on the resource and one question generally on Western Foreland. On the resource, are we expecting an inferred resource, or is there extensive enough drilling that there could be some level of M&I coming with that? Then secondly, what is your latest vision on how Western Foreland ultimately gets developed? Do you see it being developed by Ivanhoe with a partner or potentially Ivanhoe developing it on its own? Thanks very much.
Marna, do you want, do you want to take a, a stab at that?
Well, why don't I take the first part, Robert?
Yeah, yeah, sure.
Which is, which is just to say that the resource will have an indicated portion, and it will have an inferred portion. So, so in answer to the first part. In, in terms of... Sorry, Robert, was that you?
No, it wasn't. Go ahead.
Okay. In terms of partnership, Lawson, the second part, you know, I think, the overall message is, it's far too soon to say. You know, Makoko and Kiala is really just the beginning of, you know, we, what we think we have at the Western Foreland. There is no reason why there can't be more Kamoa-Kakula scale and grade deposits within the Western Foreland. You know, in many ways, it seems too soon to be looking into partnership when all of the variables are within our control today. That's the, you know, we have more than enough money to go exploring. We have the expertise in-house, and we have the exact same team working on this who discovered Kamoa, Kakula, the Bonanza Zone, Makoko, and so on. Continues to evolve and improve.
There are things that we're learning this year about the, the Western Foreland that we certainly didn't know last year, which is, which is very exciting. So, you know, if, if we were, were to ever go down that route to partnership, I, I think it would need to be something, something quite spectacular to entice us, but perhaps I'll let Robert comment on anything else.
Yeah, you know, we're no longer a junior mining company, Lawson. We're a major mining company. We have execution capability to engineer, design, and construct mines that I think is the best in the industry. We're delivering on time, on schedule, under budget, nobody else is. We don't need a partner in the Western Forelands. We have been approached by most everybody you could think of to get exposure to copper in the Democratic Republic of the Congo, because that's where you can produce green copper. We have hydroelectric power. The main power line that we're stringing from the Inga Dam into the Western Foreland is designed for 900 MW of carrying capacity. It's enough to build a zillion mines. Where in the world can you find 5%, 6%, 7% copper with hydroelectricity and no ice or snow?
We don't need a partner, but there sure is a hell of a lot of parties that would like to be our partner, and it's just too early to talk about that now. Thank you for evidencing some interest in the subject.
Thank you for those responses. Then, maybe if I could just get your thoughts on the Lobito Corridor, and when you think this project could actually be realized to its, to its potential, where Ivanhoe can, can benefit from that logistics option.
We, we said last quarter, we, we reported that initial shipments over the Lobito Corridor should happen this year, 2023, and then it'll increase into 2024 and increase into 2025. We welcome the support of the U.S. government. Actually, the president's most senior representative, the President of the U.S., at the G7 meeting, announced U.S. government support for the corridor, so that says it all. The G7 nations view it as critically important because where else is the copper metal going to come from for the greening of the world economy, if not from the Democratic Republic of the Congo? We're, in, in our talks with Trafigura, we're actually hoping that initial shipments happen before Christmas, and then they just keep increasing.
That's fantastic news. Thank you for taking my questions, and keep up the great work.
Thank you.
Thank you. As a reminder, to ask a question at this time, please press star one one on your touch tone telephone. Our next question comes from the line of Andrew Mikitchook with BMO Capital Markets. Your line is now open.
Thank you. Congratulations on another strong and multi-record quarter. Maybe if we could just get a couple of comments from Mark Farren on the phase one, phase two combined plant, post de-bottlenecking, on how it's operating and what the prospects are for continuing to optimize that, those two initial circuits, whether there's room now, or does it have to wait for? Being in conjunction with phase three online to kind of optimize the whole thing together.
Hey, Andrew. How are you? I hope it's good. Phase I and Phase II, I think, Marna mentioned and Alex mentioned earlier that they sort of. We're definitely hitting the numbers of the 9.1 million tons that we had planned to do. We're getting the recoveries of around 88%, which I think is good. It's solid. Then what Alex spoke about with the ultra-fine grinding, getting the extra 7-ish % recovery, mid-90s, I think is a massive breakthrough for us. We will fast-track that like we always do and apply that to Phase III. That's our thinking, unless we get something that's better. There's other studies, there's quite a few studies that are running in parallel.
If we could get another 7% recovery across the whole property, we will take it very quickly. I think in terms of things running, Phase III is on track nicely. It'll be there and thereabout or slightly early. Like we, we expect it to be slightly early, I guess. And then we'll apply that same thinking to Phase III to get the, the extra recoveries going. I think you more or less steady state with Phase I and Phase II, between nine million, maybe long- term, a bit more, 9.5-10 million tons per annum, 88% recovery for now, and then pushing it with these new projects to, to get better recoveries, and then another six million tons coming out of Phase III.
It's supposed to be quarter three, quarter four next year, but I think maybe a bit earlier. It's going pretty well.
Thank you, Mark. Maybe just a follow-up question, I'm, I'm not sure for who, but, what, what should be your an expected timeline for this, dedicated crossing at Kipushi, of the border? You know, that you guys had quite a bit of disclosure in the, in the press release today about, ongoing plans for a road on the Congolese side and actual improvements of road on, on the other side already. When does that translate into, you know, crossing the border?
Andrew, maybe I can venture an answer here. There's multiple parts to the border. The first critical part for us, for Kipushi, is a bypass road to avoid the trucks running through town. That section of the border project we envision to embark on within the next two to three months, to have it ready for when we start production next year. That will be rolled up into a bigger border project, which will be a one-stop border crossing. It is not on the critical path in terms of getting the volumes of Kipushi out. We've got Sakania, as well as Kasumbalesa, as options to use to export the project, obviously it will alleviate some of the congestion at the border.
We are also looking at rail options, running rail loops into Zambia and then to truck from Zambia onwards. There's a number of alternatives on the table to ensure that we, that we move the product efficiently as soon as we go online at Kipushi. Border project, it's difficult to put an exact timeline to it because it's cross-country discussions and approvals that we require, but hopefully we can get that done within a year's time.
Okay. Well, thank you very much. I'll pass the microphone to the next speaker. Thank you very much.
Thank you. I would now like to hand the call back over to you, Matthew.
Thanks, operator. Now we'll turn our attention to a few questions that are coming in from the website. We'll just group them together because there's a few that are a little bit similar. First and foremost, staying on the DRC logistics side, Alex and Mark, I think this might be for you. Just a little bit more color on the power situation. You mentioned it being a bit more improved, as well as just general logistics currently in the DRC and how that's progressing.
Do you want me to do it, Alex?
Yeah, please.
Okay. In terms of the power, maybe just going back a little bit, I guess, we've built quite a good relationship with SNEL, which is the DRC electrical network supplier, over years. I mean, we started engaging them from about 2014, we started executing a project to refurbish Mwadingusha Hydroelectric Power Station, all six turbines. We started that project, I think, in early 2015. We've basically rebuilt a power station, all of the turbines, 78 megawatts of power, which is now running very well. We've taken on at Inga II, a G25 unit, which is a big turbine. It's 178 megawatts. That will be completed in quarter four next year.
There's, there's quite a lot of detail that we normally release in the press releases, monthly and quarterly on, on that project in particular. At the end of last year, we picked up that there were quite a few instability issues in the grid, the DRC grid. Not... It was sort of problems that were in the grid, but impacting the total-... the total country, not just our project, basically the total country. We initiated a study with Stucky, which is our EPCM contractor that's basically been working with us since 2014. We studied the whole network, and we've identified work that needs to take place to restore complete stability to that network.
It's, it's more or less, it's an increase in our, in our scope that we've now adding into our budget, but it's basically a, it's a loan agreement with, with, with SNEL. We've identified all the issues that need to be dealt with, I guess if I summarize them, it's more, compensation issues, so synchronous compensators at two different distribution points in the network, 1,700 kilometers apart. There's some STATCOM upgrades that need to take place here in the Karshi. There's some lines that need to be strengthened, and there's capacitation that needs to be introduced in various areas, to, to manage the reactive power in the system.
Then there's also simple things like grid monitoring and the ability of SNEL to be able to switch off users that are not basically towing the line when they tell them to reduce the, you know, reduce usage and things like that. That part of the project is kicking off now as we speak, and I believe in a year's time we'll have a much more stable grid. That's, that's the one portion. The other portion is we have engaged with Zambia, CEC, the company, which is Copperbelt Energy Corporation, to supply us a firm 30 megawatts of power to directly to Kamoa through the same network, through the SNEL network.
The wheeling goes back through SNEL, and obviously there's a relationship that you, that you need to have with SNEL in the first place because it goes through their infrastructure, and obviously that infrastructure needs to work properly. That, that agreement is almost there. We've got heads of agreement signing off this month in August, and we should draw from that power source from September. We're looking to increase that power supply next year to about 100 megawatts. That kind of decision helps us to expand, helps us to bring if we are gonna commission early, our phase three stuff, then we should have a firm supply from Zambia in place to assist us with that as well. The big picture to me.
Besides that, we're putting enough megawatts of diesel, so generator power, to be able to run Phase I, Phase II, and Phase III. If there's a, you know, any kind of load shedding or any kind of blackout. I believe if we stabilize the grid, we can have a stable grid, we, we allow and capacitate SNEL to manage their customers well. We're putting in a maintenance agreement that goes along with this. We are working with the Zambians to create another supply, another firm supply of up to 100 megawatts, and we have the backup generator power to protect us in the event of major load shedding.
I think if we put all of this in place, by the end of next year, we'll sit with a very stable Kamoa Copper, and that's necessary because we are a very big player now. With Phase III coming on, we're gonna be producing a lot of, a lot of tons per hour, probably around $1 million per hour that we would lose if we, if we have to have load shedding or that sort of thing. I think we're protecting ourselves nicely. We're working in the two countries. We've built up excellent relationships. We've identified the major issues, and we're addressing them.
That's great. Thanks, Mark. Just moving on here, I think, the next one here is probably best suited for Robert. It's sort of, I've got quite a few questions on gallium, and critical minerals here, Robert. Maybe talking a little bit about copper's inclusion on the DOE list, but also, China's activities in relation to restricting gallium, germanium, and sort of the implications of that strategically for a mine like Kipushi.
Yeah, I'm, I'm quite distressed about the downward spiral in American-Chinese relations. We, we have each other in a death grip that has to be relaxed. The U.S. has told China that they can't get less than five nanometer chips from producers like NVIDIA and Cisco or... So, you know, we're saying they can't, they can't buy our sophisticated chips. So President Xi responded by saying, "Well, then you need a license to buy the gallium and the germanium that they produce and refine, that we need to make the chips in the first place, that we're going to embargo." You see this again, where, you know, the Chinese are very nervous about our support in Taiwan and perhaps relaxing the One-China policy, and so all of a sudden, the Chinese are appearing in, in Cuba.
It looks like what's good for the goose is good for the gander. Now, Kipushi was historically the largest producer of germanium in the world. The zinc ore body is also very, very rich in gallium. In response to inquiries from the United States government, we have provided the statistics on the gallium and germanium at Kipushi that we never even bothered to put in the economics. We just discounted it to 0. Since this trade war has erupted and intensified, both under the Trump administration and now under the Biden administration, we may get into a situation where you literally need a telescope to see the price of gallium and germanium. We are now looking at the possibility of.
producing zinc smelter, producing 99.999 electrolytic zinc and recovery of both gallium and germanium and indium and other metals that are there in the big zinc ore body. It's perfectly possible, it's just capital. If governments want to provide us that capital, that would be in perfect alignment with Congolese government policy. Everywhere we go, we see governments wanting to see as much downstream addition of value to a country's metal endowment. That's why we're building a copper smelter in the Congo, and a state-of-the-art and ultra clean smelter at that. So the zinc smelter and downstream refinery is not impossible for Kipushi, because that's where the gallium and the germanium arise.
For our shareholders, that would just be an unanticipated windfall, and we'll just have to see how the situation evolves in the next six months. Thank you for asking the question. We love it when you point out the hidden value in the company.
Thanks very much, Robert. And I think we have time for one more. The next most popular, I think, Marna, this would be best suited for you, is just a quick update on the DRC political climate. We know there's an election coming up, so just sort of what you're seeing in country, et cetera, would be great. Thanks.
Thanks, Matt. There's still some financial and logistical challenges to facilitate the elections, but official stance of government is that we are still on track for elections on the 20th of December. Voter lists have been finalized, and the candidates for the legislative election at the end of last month. Presidential candidates submit their formal applications at the start of September, then we expect things to really start heating up. We can see some tensions. Obviously, we are still monitoring things, mainly in the main urban areas. You know, we always keep an eye on, eye out during election season just to ensure that our sites are secure, staff are safe. You know, it's, it's sort of a watching brief at this point in time.
That's great. Thanks, Marna. That sort of ends the questions we have for today. This kind of concludes the call. Thank you again, everyone, for attending, and we look forward to speaking with you again soon on the many exciting milestones coming forward for Ivanhoe Mines in 2023. With that, I'll pass it back to the operator to wrap up the call. Thanks very much.
This concludes today's conference call. Thank you for participating. You may now disconnect.