Ivanhoe Electric Announces Completion of the Initial Assessment for the Santa Cruz Copper Project in Arizona The Initial Assessment Focuses on a Small Surface Footprint, 5.9 Million Tonnes per Year High Grade Underground Copper Mining
September 6, 2023
Ivanhoe Electric Announces Completion of the Initial Assessment
for the Santa Cruz Copper Project in Arizona
The Initial Assessment Focuses on a Small Surface Footprint,
5.9 Million Tonnes per Year High Grade Underground Copper Mining
Operation Supported Solely by the High-Grade Exotic, Oxide and
Enriched Domains of the Santa Cruz and East Ridge Deposits
Additional Resources at the Texaco Deposit and the Large, Primary
Sulfide Resources at Santa Cruz Provide Potential for Future
Growth
Life of Mine (“LOM”) Copper Production Estimated to be 1.6 Million
Tonnes over a 20-Year Mine Life, with an Average Grade of 1.58%
Total Copper and C1 Cash Costs1 of $1.36 per Pound
Estimated LOM Copper Production Includes 1.0 Million Tonnes of
99.99% Pure Copper Cathode and 0.6 Million Tonnes of Copper
Contained in a Concentrate that is 48% Copper by Weight
Initial Capital Estimate of $1.15 Billion, After-tax NPV8% of $1.32
Billion and IRR of 23.0% Assuming LOM $3.80/lb Copper Price
Base Case Utilizes 70% Renewable Energy, Resulting in Low Scope
1 and 2 Carbon Dioxide Equivalent (“CO2e”) Emissions of 0.49
Tonnes of CO2e per Tonne of Copper Produced, Compared to the
Industry Average of 3.9 Tonnes of CO2e per Tonne of Copper2
1 C1 cash costs calculated per Wood Mackenzie’s definition which include mining, processing and G&A costs. C1 cash cost is not a measure
recognized by GAAP but is a standard measure used in mining as a reference point to denote the basic cash costs of running a mining
operation to allow a comparison across the industry.
2 Source: Tipple Consulting; Santa Cruz Initial Assessment, 2023 (based on public company disclosures from 2021-2022)
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Ivanhoe Electric Controls the Private Surface Land and Patented
Mineral Rights Encompassing the Entire Santa Cruz Copper Project
Ivanhoe Electric to Host Conference Call to Review the Initial
Assessment at 11:00 am ET on Wednesday, September 6, 2023
PHOENIX, ARIZONA – Ivanhoe Electric (NYSE American: IE; TSX: IE) Executive
Chairman, Robert Friedland and President and Chief Executive Officer, Taylor Melvin
are pleased to provide the results from the Initial Assessment3 (“IA”) for its Santa Cruz
Copper Project, located west of Casa Grande, Arizona. The IA is a preliminary technical
and economic study for the Santa Cruz Copper Project and associated high-grade
mineral resources included in the Santa Cruz and East Ridge deposits. The study
analyzes the potential for a high-grade underground copper mining operation supported
by modern technologies to reduce environmental impact and powered predominantly
by renewable energy.
Mr. Friedland commented: “Completing the Initial Assessment for our Santa Cruz
Copper Project is an important achievement for Ivanhoe Electric as we work to advance
a new source of responsibly produced “green” copper in the United States. Our goal is
to develop a modern copper mine that produces copper with among the lowest levels of
carbon dioxide output in the industry; a product we think has the potential to attract a
premium price in the future. Using primarily onsite renewable electricity generation, and
with the potential to increase that to meet the Project’s entire future needs, the Initial
Assessment shows us that we are on the right track to achieving our goal at Santa Cruz
and our larger goal of enhancing U.S. supply chain independence for critical metals. We
are excited about the future for our Santa Cruz Project in Arizona.”
Mr. Melvin commented: “The Initial Assessment for the Santa Cruz Copper Project is the
result of a tremendous effort by our team and an important milestone for the Project.
The study provides a first look at our plans for a technologically advanced,
underground copper mine in Arizona with attractive economics at today’s copper
prices. We are designing the Project to minimize environmental impact through the use
of modern technologies and renewable power. We believe the Santa Cruz Copper
Project will become an industry-leading example of responsibly produced copper in the
United States, and a source of high-quality jobs in Arizona during development and
throughout its anticipated long mine life.”
3 The Initial Assessment is the equivalent of a Preliminary Economic Assessment (“PEA”) under Canadian National Instrument 43-101.
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Highlights of the Initial Assessment
The Santa Cruz IA outlines a potential 5.9 million tonnes per year underground mining
operation, supported by 105.2 million tonnes of modeled mill feed with an average
grade of 1.58% copper from the Santa Cruz and East Ridge Deposits, resulting in an
estimated 20-year mine life.
The IA focuses exclusively on the high-grade exotic, oxide and enriched domains of the
Santa Cruz and East Ridge Deposits. The oxide and enriched domains of the Texaco
Deposit are not included in the current study (2.7 million tonnes indicated grading
1.42% total copper and 27.3 million tonnes inferred grading 1.39% total copper, using a
0.80% cut-off grade). Future studies could evaluate the potential addition of the large
primary sulfide domains at Santa Cruz (76.2 million tonnes indicated grading 0.88% total
copper and 8.0 million tonnes inferred grading 0.92% total copper, using a 0.70% cut-off
grade) and at the Texaco Deposit (0.9 million tonnes indicated grading 1.05% total
copper and 35.0 million tonnes inferred grading 1.06% total copper, using a 0.80% cut-
off grade), subject to market conditions.
Copper recoveries of 95.4% are expected to be achieved through a combination of
solvent extraction and electrowinning (“SX/EW”) and conventional froth flotation.
The IA includes LOM production for the Project of 1.0 million tonnes of copper in the
form of 99.99% pure copper cathode and 0.6 million tonnes of copper contained in a
48% copper concentrate with very low deleterious elements, such as arsenic or lead.
LOM average C1 cash costs are expected to be $1.36 per payable pound of copper, with
C3 total costs4 expected to average $2.84 per payable pound of copper.
The IA contemplates initial project capital expenditures of $1.15 billion, and LOM
sustaining capital expenditures totaling $0.98 billion. A three-year construction period
is envisioned to develop the underground workings and build the surface processing
facilities.
The IA estimates that the Project has a pre-tax net present value (“NPV”) of $1.6 billion
at an 8% discount rate and a pre-tax internal rate of return (“IRR”) of 25.1%, using a flat
LOM copper price assumption of $3.80 per pound. After-tax NPV is estimated at $1.3
billion with an after-tax IRR of 23.0%, using the same discount rate and copper price
assumptions.
The IA is designed to minimize environmental impact and minimize surface land
disruption. As a result of the small surface footprint required for underground copper
mining activities included in the IA, the total land area expected to be required for the
mine, plant, tailings storage facilities and potential on-site generation of renewable
solar power covers approximately one-third of the total land package.
4 C3 total costs quoted per Wood Mackenzie’s definition of C3 total costs which include mining, processing, G&A, depreciation, depletion and
royalties costs. C3 total cost is not a measure recognized by GAAP but is a standard measure used in mining as a reference point to denote
the total costs of running a mining operation to allow a comparison across the industry.
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The IA base case assumes 70% of the total electric power requirements for the Project
will be generated by onsite renewable infrastructure, enabling copper production with
very low carbon dioxide equivalent (“CO2e”) emissions of 0.49 tonnes of CO2e per tonne
of copper for Scope 1 and 2 emissions. In comparison, the global mining industry
average is approximately 3.9 tonnes of CO2e per tonne of copper equivalent5. The
subsequent Preliminary Feasibility Study (“PFS”) for the Project will evaluate the
potential use of combined solar power, battery storage and a geothermal-driven
microgrid as renewable power sources to provide up to 100% of the electricity
requirements for the Project.
An all-electric underground heavy mining fleet is assumed in the IA, in combination with
railveyor technology for material movement, which would significantly reduce carbon
dioxide emissions and improve energy efficiency. The use of an all-electric
underground heavy equipment fleet alone represents an estimated 70-80% reduction in
Scope 1 emissions when compared to a traditional high-efficiency diesel-powered
heavy equipment fleet.
The IA also contemplates placing 50% of the mine tailings back underground as
cemented paste fill. The remaining 50% will be stored on the surface as thickened
tailings at 65% solid content. Surface tailings will be contained within a ring dyke dam
with a capacity to store 56.7 million tonnes. Water management associated with tailings
storage is minimized as a result of thickened tailings and high evaporation rates in the
Sonoran Desert.
Ivanhoe Electric controls the private surface land and patented mineral rights
encompassing the entire Santa Cruz Project. The entirety of the facilities referenced in
the IA, including mining, processing, tailings storage and onsite renewable power
generation facilities, can be developed on private land under private mineral title.
Ivanhoe Electric also controls water rights associated with its Santa Cruz land package.
5 Source: Tipple Consulting; Santa Cruz Initial Assessment, 2023 (based on public company disclosures from 2021-2022)
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Video of the Santa Cruz IA operation. Click on the image below for the high-
resolution video.
Ivanhoe Electric to Host a Conference Call on the Santa Cruz Initial
Assessment
On Wednesday, September 6, 2023, Ivanhoe Electric will host a conference call to
discuss the results of the Santa Cruz IA.
The call will include remarks from Ivanhoe Electric's Executive Chairman Robert
Friedland, President and Chief Executive Officer Taylor Melvin and other members of
the Company's management team. It will also feature a question-and-answer session.
DATE: Wednesday, September 6, 2023.
TIME: 11:00 am Eastern / 8:00 am Pacific / 8:00 am Arizona.
DIAL IN: 1-888-664-6383 or 416-764-8650
LINK: https://app.webinar.net/oE8nX7LrV06
A replay of the call, together with supporting presentation slides, will be made available
on Ivanhoe Electric’s website at www.ivanhoeelectric.com.
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Table 1. Summary of the Initial Assessment Estimated Operating and Economic
Results
Production Results
Mine Life 20 years
Total LOM Mill Feed 105.2 Mt
Nameplate Mill Throughput 15,000 tpd
Average Feed Grade (total copper) 1.58%
Average Feed Grade (soluble copper) 1.01%
Average Total Copper Recovery 95.4%
Total LOM Copper Production (in cathode and concentrate) 1.59 Mt
Average Copper Production in Cathode (first 10 years) 57 ktpa
Average Copper Production in Concentrate (first 10 years) 29 ktpa
Operating Costs
Onsite Operating Costs (mining, processing, G&A) $43.48/t
Average C1 Cash Costs $1.36/lb
Average C3 Total Costs $2.84/lb
Capital Costs
Initial Capital Expenditures $1.15B
Sustaining Capital Expenditures $0.98B
Total LOM Capital Expenditures $2.12B
Economic Analysis
Copper Price $3.80/lb
Pre-Tax Undiscounted Free Cash Flow $5.22B
Pre-Tax NPV 8% $1.64B
Pre-Tax IRR 25.1%
After-Tax Undiscounted Free Cash Flow $4.23B
After-Tax NPV 8% $1.32B
After-Tax IRR 23.0%
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Robust IA Economics for the USA’s “Next Generation” Copper Mine
The IA outlines LOM copper production totaling 1.6 million over a 20-year mine life –
underpinned by 105.2 million tonnes of modeled mill feed grading 1.58% total copper.
Copper C1 cash costs are expected to average $1.36 per pound.
Figure 1. Santa Cruz IA copper sales and cost profile.
Total operating costs (mining, processing, G&A and other) are expected to average
$43.48 per tonne processed, including mining costs of $27.33 per tonne, processing
costs of $12.84 per tonne and G&A and other costs of $3.31 per tonne.
The initial capital expenditures total $1.15 billion, which includes pre-production
development of the twin declines and underground infrastructure, purchase of mining
equipment, construction of the processing plant and infrastructure facilities and
construction of the tailings storage facility.
LOM sustaining capital expenditures total $0.98 billion, which includes the capital
required to extend the twin declines to the lower portion of the Santa Cruz Deposit, as
well as the maintenance of all equipment and supporting infrastructure. It also includes
expansion and closure costs of the tailing facility.
The IA estimates LOM revenue of $12.9 billion using a flat copper price assumption of
$3.80 per pound. Pre-tax undiscounted free cash flow totals $5.22 billion and pre-tax
NPV8% totals $1.64 billion with an IRR of 25.1%.
On an after-tax basis, the IA Project is estimated to generate $4.23 billion of
undiscounted free cash flow, an NPV8% of $1.32 billion with an IRR of 23.0%.
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Figure 2. IA economics are sensitive to the input copper price and capital and
operating cost assumptions.
Note: Copper price points calculated by Ivanhoe Electric and inserted into IA sensitivity model.
The IA is preliminary in nature and includes an economic analysis that is based, in part,
on inferred mineral resources that are considered too speculative geologically to have
the economic considerations applied to them that would enable the inferred mineral
resources to be categorized as mineral reserves. Mineral resources are not mineral
reserves and do not have demonstrated economic viability. Accordingly, there is no
certainty that the results of the IA will be realized.
The IA contains economic analyses which include and exclude inferred mineral
resources. This press release focuses on the economic analysis, including inferred
mineral resources. For more information regarding the economic analysis without
inferred mineral resources, see the Initial Assessment, which is included as an exhibit
to the Form 8-K filed with the SEC in connection with this announcement.
The IA is based on Ivanhoe Electric’s December 31, 2022 Mineral Resource Estimate,
which includes the Santa Cruz, East Ridge and Texaco Deposits, using a 0.70% copper
cut-off at Santa Cruz, 0.90% at East Ridge and 0.80% at Texaco (the “2022 Mineral
Resource Estimate”, see February 14th, 2023 news release). The economic analysis
described in this release and in the IA does not include any mineral resources from the
Texaco Deposit.