Copper ore grading 8% currently being mined and stockpiled at the Kakula Mine, with underground development approximately 4.4 kilometres ahead of schedule Early implementation of extraordinary COVID-19 prevention measures has allowed development of the
May 13, 2020
Copper ore grading 8% currently being mined and
stockpiled at the Kakula Mine, with underground
development approximately 4.4 kilometres ahead
of schedule
Early implementation of extraordinary COVID-19
prevention measures has allowed development of the
flagship Kakula Copper Mine in D.R. Congo to continue
uninterrupted; initial production on track for third quarter
of 2021
Management and corporate optimization targets company-
wide cash savings of up to US$75 million to strengthen
the current treasury of approximately US$600 million
Ivanhoe issues first quarter financial results
and review of mine construction progress and exploration
activities
TORONTO, CANADA ‒ Ivanhoe Mines (TSX: IVN; OTCQX: IVPAF) today
announced its financial results for the quarter ended March 31, 2020. Ivanhoe
Mines is a Canadian mining company advancing its three mining projects in
Southern Africa: the Kamoa-Kakula copper discovery in the Democratic
Republic of Congo (DRC); the Platreef palladium-platinum-nickel-copper-gold-
rhodium discovery in South Africa; and the extensive upgrading of the
historic Kipushi zinc-copper-lead-germanium mine, also in the DRC.
The company also is exploring for new copper discoveries on its wholly-
owned Western Foreland exploration licences, adjacent to the Kamoa-Kakula
mining licence. All figures are in U.S. dollars unless otherwise stated.
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HIGHLIGHTS
Development of the Kakula Copper Mine, the first of multiple, planned
mining areas at the Kamoa-Kakula Project, is making excellent progress.
The first underground access drives intersected Kakula’s initial high-grade
ore zone (+8% copper) in April. Ivanhoe and its joint-venture partner Zijin
Mining are advancing rapidly on construction of the 3.8 million-tonne-per-
annum (Mtpa) processing plant and other surface infrastructure. Initial
copper concentrate production is scheduled for the third quarter of 2021.
In parallel with the construction of the Kakula Copper Mine, the
independent Kakula definitive feasibility study (DFS) and an updated
Integrated Development Plan for the entire Kamoa-Kakula mining complex
also remain on schedule for Q3 2020. The Kakula DFS will provide a high
level of accuracy for the project economics for Kakula’s initial phase of
mine development, as most construction contracts and orders for
significant capital items have been placed at fixed prices. The Integrated
Development Plan will include details on the planned expansion phases for
the entire Kamoa-Kakula mining complex.
In early March, Ivanhoe in conjunction with its joint-venture partners
implemented strict quarantine and lock-down procedures to ensure the
well-being of its employees and mitigate the impact of COVID-19 on its
operations. The Kamoa-Kakula minesite has been locked down and all key
personnel are on site; as a result, mine development at Kamoa-Kakula has
continued uninterrupted. Mine development work at the Platreef Project
was temporarily suspended in late March in compliance with the country-
wide lock down imposed by the South African Government. Operations at
Platreef resumed in late April with reduced staffing levels and stringent
safety protocols. Mine development operations at Kipushi remain
temporarily suspended in order to reduce the risk to the workforce and
local communities.
Also in early March, following the guidelines outlined by the World Health
Organization, the company appointed a task team with overall
responsibility for COVID-19 response planning. Ivanhoe’s response team is
led by Dr. Nicolette Du Plessis, a specialist in Pediatric Infectious Diseases
and a Professor at the University of Pretoria, and includes specialist
doctors, paramedics, nurses, as well as counsel from several external,
world-leading epidemiologists.
On March 11, 2020, the company announced that it had promoted its Chief
Financial Officer, Marna Cloete, to the position of President, in addition to
her role as Chief Financial Officer. The company’s new Executive
Committee, led by Marna Cloete, President and CFO, includes Dr. Patricia
Makhesha, Executive Vice President, Sustainability & Special Projects;
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Matthieu Bos, Executive Vice President, Africa; Peter Zhou, Executive Vice
President, China; and Pierre Joubert, who was recently promoted to
Executive Vice President, Technical Services.
Ivanhoe is in a strong financial position with cash and cash equivalents of
$603 million at the end of March 2020 and no significant debt.
In April, Ivanhoe announced cost-reduction initiatives to generate cash
savings of up to $75 million through 2021, including reducing discretionary
spending at the company’s projects, lowering general and administrative
costs, voluntary salary reduction for senior management, and deferral of
certain exploration activities. The savings will be directed towards
developing the Kakula Mine to commercial production on schedule and on
budget.
Underground development at the Kakula Copper Mine continues to
advance ahead of schedule and more than 14.4 kilometres of underground
development now has been completed ─ 4.4 kilometres ahead of plan. The
pace of development is expected to continue to accelerate as additional
mining crews are mobilized.
In April, crews at Kakula began mining ore in areas with a grade of greater
than 8% copper. This ore is being stockpiled on a dedicated high-grade
surface stockpile, which is forecast to contain 105,000 tonnes grading
5.95% copper by the end of May, 2020. Kakula’s medium-grade ore
stockpile is forecast to contain an additional 250,000 tonnes at 3.01%
copper. The high-grade stockpile is projected to significantly expand in the
coming months as the majority of Kakula’s underground development will
be in mining zones grading +5% copper.
Construction of Kakula’s processing plant is progressing well with more
than 9,000 cubic metres of concrete poured. Fabrication of structural
steel, processing plant components, and the ball mills is underway. Long-
lead-time items for the processing plant have started to arrive on site, and
the ball mills are scheduled for arrival in mid-2020.
Refurbishment of six turbines at the Mwadingusha hydro-electric power
plant and associated 220-kilovolt infrastructure, to supply the Kakula Mine
with clean hydropower, is progressing. Four turbines are expected to be
operational by December 2020, and the remaining two in Q1 2021. The
refurbished plant is projected to deliver approximately 72 megawatts of
power to the national grid.
On February 5, 2020, an updated independently verified Indicated Mineral
Resource increased the combined Kamoa-Kakula Project Indicated Mineral
Resource to 423 million tonnes grading 4.68% copper, at a 3% cut-off. The
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combined Kamoa-Kakula Project Indicated Mineral Resource now stands
at 1.4 billion tonnes grading 2.7% copper, at a 1% cut-off.
The initial Indicated Mineral Resource estimate for the Kamoa North
Bonanza Zone includes 1.5 million tonnes grading 10.7% copper, at a 5%
cut-off. Drilling in the first quarter continued to target additional resources
in the vicinity of the ultra-high-grade Bonanza Zone and the Far North
Zone. Given the shallow depth, remarkable thickness and massive copper
sulphide mineralization discovered within the Kamoa North Bonanza Zone,
Kamoa-Kakula’s engineers are evaluating potential opportunities to
accelerate the development of this discovery.
The controlling east-west striking structure, thought to be responsible for
the massive copper sulphide mineralization in the Kamoa North Bonanza
Zone, is visible as a lineament on airborne magnetic images and can be
traced over a distance of up to 20 kilometres. It trends west onto the
adjacent Western Foreland exploration licences that are 100%-owned by
Ivanhoe Mines. Ivanhoe now controls more than 2,500 square kilometres of
highly-prospective land holdings in the vicinity of the Kamoa-Kakula
mining licence.
Drilling also has confirmed the extension of the Kamoa North high-grade
copper structure for at least 800 metres in the Kiala Discovery area, part of
Ivanhoe’s 100%-owned Western Foreland licences that adjoin the Kamoa-
Kakula mining licence to the north.
At the Platreef mine development project in South Africa, the project’s first
shaft (Shaft 1) has been sunk to a depth of more than 975 metres below
surface. Completion of the shaft to a final depth of approximately 1,000
metres is planned for Q3 2020.
Ivanhoe is investigating a phased development production plan for the
Platreef Project. The plan would target significantly lower initial capital, to
accelerate first production by using Shaft 1 as the mine’s initial production
shaft, followed by expansions to the production rate as outlined in the 2017
definitive feasibility study (DFS). Concurrently, Ivanhoe is updating the
Platreef Project’s 2017 DFS to take into account development schedule
advancement since 2017 when the DFS was completed, updated costs and
refreshed metal prices and foreign exchange assumptions.
At the end of March 2020, Kamoa-Kakula had reached 2.01 million work
hours free of a lost-time injury; Platreef had reached 528,416 work hours
free of a lost-time injury; and Kipushi had reached 2.27 million work hours
free of a lost-time injury.
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COVID-19 Response Initiatives
In early April, Ivanhoe provided further details on the rigorous protective measures it
has implemented to protect the health and well-being of its employees, contractors
and local communities while ensuring business continuity at the Kamoa-Kakula
Project.
In response to government-imposed travel restrictions and emergency protocols
introduced worldwide, strict quarantine and lock-down procedures have been
implemented at all three of the company’s projects ─ Kamoa-Kakula, Platreef and
Kipushi ─ to prevent the corona virus from spreading to the minesites. To date, no
COVID-19 cases have been discovered at Ivanhoe’s projects.
At Kamoa-Kakula, the minesite has been locked down and all key personnel are on
site. The supply of food and critical equipment continues under strict delivery
protocols. At present, more than 3,450 employees and contractors are based at the
minesite, which ensures operational continuity and minimizes the impact on the
development schedule.
Platreef temporarily suspended its shaft-sinking operations in compliance with the
country-wide lock down imposed by the South African Government on March 26th.
In late April, mine development operations resumed at Platreef with reduced staffing
levels and strict COVID-19 preventative procedures. Mine development operations
at Kipushi are temporarily suspended to reduce the risk to the workforce and local
communities.
Following the guidelines outlined by the World Health Organization, the company
appointed a task team from senior management with overall responsibility for
COVID-19 response planning. The team is led by Dr. Nicolette Du Plessis, a
specialist in Pediatric Infectious Diseases and a Professor at the University of
Pretoria, and includes specialist doctors, paramedics, nurses, as well as counsel
from several external, world-leading epidemiologists. Dr. Du Plessis is president of
the Southern African Society of Pediatric Infectious Diseases and president-elect of
the Federation of Infectious Diseases Societies of Southern Africa.
The task team, together with its Kamoa-Kakula Project medical response team and
its medical service provider, Medical Support Solutions of the United Kingdom, has
access to some of the best advice from medical experts from around the globe and
has implemented key procedures across the business to ensure minimal disruption
to operations.
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In response to the COVID-19 pandemic, Ivanhoe postpones its annual
general meeting of shareholders and the date for sending out the
company’s executive compensation disclosure
Due to restrictions on public gatherings enacted by both the Federal and Provincial
governments in Canada in response to the COVID-19 pandemic and to help protect
the health and well-being of its shareholders, colleagues, communities and other
stakeholders, Ivanhoe has made the decision to postpone its annual and special
meeting (AGM) of shareholders to a date no later than the end of September 2020.
As the COVID-19 situation evolves and advice from government and medical
authorities is updated, Ivanhoe will set the new AGM date and file a notice of
meeting and record date on SEDAR (www.sedar.com).
Given the postponement of the company’s AGM, Ivanhoe also intends to postpone
the date when it will send shareholders the management information circular for the
annual general meeting, which includes the company’s executive compensation
disclosure. The company is relying on BC Instrument 51-516 ─ Temporary
Exemptions from Certain Requirements to File or Send Securityholder Materials ─
published on May 1, 2020, that is providing public companies with temporary
blanket relief from certain filing and delivery requirements related to the sending of
materials for annual general meetings.
Once a new AGM date is determined, Ivanhoe will provide shareholders with the
same disclosure documents they would normally receive ahead of an annual
meeting, including the executive compensation disclosure, in accordance with
applicable legislation.
Principal projects and review of activities
1. Kamoa-Kakula Project
39.6%-owned by Ivanhoe Mines
Democratic Republic of Congo
The Kamoa-Kakula Project, a joint venture between Ivanhoe Mines and Zijin Mining,
has been independently ranked as the world’s fourth largest copper deposit by
international mining consultant Wood Mackenzie. The project is approximately 25
kilometres west of the town of Kolwezi and about 270 kilometres west of
Lubumbashi.
Ivanhoe sold a 49.5% share interest in Kamoa Holding Limited (Kamoa Holding) to
Zijin Mining in December 2015 for an aggregate consideration of $412 million. In
addition, Ivanhoe sold a 1% share interest in Kamoa Holding to privately-owned
Crystal River for $8.32 million - which Crystal River will pay through a non-interest-
bearing, 10-year promissory note. Since the conclusion of the Zijin transaction in
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December 2015, each shareholder has been required to fund expenditures at the
Kamoa-Kakula Project in an amount equivalent to its proportionate shareholding
interest in Kamoa Holding.
A 5%, non-dilutable interest in the Kamoa-Kakula Project was transferred to the
DRC government on September 11, 2012 for no consideration, pursuant to the 2002
DRC mining code. Following the signing of an agreement with the DRC government
in November 2016, in which an additional 15% interest in the Kamoa-Kakula Project
was transferred to the DRC government, Ivanhoe and Zijin Mining now each hold an
indirect 39.6% interest in the Kamoa-Kakula Project, Crystal River holds an indirect
0.8% interest and the DRC government holds a direct 20% interest. Kamoa Holding
holds an 80% interest in the project.
Members of Kamoa-Kakula’s development team at Kakula’s growing high-
grade ore stockpile.
(L-R) Magloire Kashiba (Production Manager), Jinha Numbi (Surveyor
Assistant), Nadege Muzala (Explosive Master), Joel Maweji (Surveyor), Daniel
Jila (Data Clerk), Dorcas Tabitha (JMMC Explosive Master), Amisi Mwanana
(Safety Officer), Didier Masengo (Senior Mine Geologist), Haram Kazadi
(Ventilation observer), Wivine Mutango (Ventilation Observer Assistant),
Reagan Ngandu (Surveyor Assistant) and Pontien Kalala (Mine Overseer).
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Health and safety at Kamoa-Kakula
At the end of March 2020, the Kamoa-Kakula Project reached 2,014,404 work hours
free of a lost-time injury. A fatality occurred on February 7, 2020 when a contractor's
employee passed away due to fat embolism syndrome following a broken bone
incurred in a workplace accident on January 21, 2020. The Kamoa-Kakula Project
continues to strive toward its workplace objective of zero harm to all employees and
contractors. Since the fatality in February a number of additional safety interventions
have been implemented.
As part of the company’s the COVID-19 response initiatives, the Kamoa-Kakula
minesite has been locked down and strict isolation procedures have been
implemented in the event of higher-risk personnel, or potential COVID-19 cases.
Ten intensive care units, each equipped with a ventilator, and 20 high-care units will
be available to treat potential patients, in addition to a quarantine facility for up to 60
potential patients. The project has procured abundant critical protective supplies for
its minesite medical professionals, including surgical gloves and N95 face masks.
Definitive Feasibility Study nearing completion for the Kakula Mine
An independent definitive feasibility study (DFS) for the Kakula Mine is underway
with an expected completion date of Q3 2020. At the same time, Ivanhoe expects to
issue an updated preliminary economic assessment (PEA) for the expanded
Kamoa-Kakula combined production scenarios, incorporating Kansoko, Kakula
West and Kamoa North mining areas. The updated PEA will include the updated
Mineral Resource estimate for Kamoa North which includes the initial Mineral
Resource estimate for the Kamoa North Bonanza Zone. The updated resource
estimate technical report was filed under the company’s SEDAR profile at
www.sedar.com on March 27, 2020.
The forthcoming Kakula DFS will incorporate detailed design, engineering and
procurement, which is largely complete. A separate DFS for an on-site smelter is
underway in parallel, and will be incorporated into the integrated Kamoa-Kakula
PEA.