Development of the flagship Kakula Copper Mine continues to exceed expectations; with initial production well on track for third quarter of 2021 Definitive Feasibility Study for the Kakula Mine, and an updated Integrated Development Plan for multiple expansions of the entire
August 10, 2020
Development of the flagship Kakula Copper Mine continues
to exceed expectations; with initial production well on track
for third quarter of 2021
Definitive Feasibility Study for the Kakula Mine, and an updated
Integrated Development Plan for multiple expansions of the entire
Kamoa-Kakula mining licence, nearing completion
Mine development work at the Platreef PGMs-gold-nickel-copper
mine now focused on preparing Shaft 1 for initial production;
updated Definitive Feasibility Study and phased-development
plan to be issued in September
Ivanhoe issues second 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 six months ended June 30, 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-silver-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.
HIGHLIGHTS
Development of the Kakula Copper Mine, the first of multiple, planned mining areas at
the Kamoa-Kakula Project, is making excellent progress. The project is a joint
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venture between Ivanhoe Mines (39.6%), Zijin Mining Group (39.6%), Crystal River
Global Limited (0.8%) and the Government of the Democratic Republic of Congo
(20%). Initial copper concentrate production is scheduled for the third quarter of
2021.
The Kakula Mine is projected to be the world’s highest-grade major copper mine with
an initial mining rate of 3.8 million tonnes per annum (Mtpa) at an estimated average
feed grade of more than 6% copper over the first five years of operation. It also will
have one of the smallest footprints in terms of water, electrical energy, tailings and
carbon dioxide per unit of copper produced.
The Kamoa-Kakula Project is unique as it combines ultra-high copper grades in thick,
shallow and relatively flat-lying deposits – allowing for large-scale, highly-productive,
mechanized underground mining operations. The ultra-high copper grades and
underground mines mean that the project will use a fraction of the power, water and
consumables – and produce far less tailings per unit of production – than any large,
low-grade, open-pit copper porphyry mines currently in operation, or under
development, anywhere in the world.
The Kamoa-Kakula Project will be powered with clean, sustainable hydro-electricity.
Ongoing upgrading work at the Mwadingusha hydro-power plant in the DRC is
expected to deliver approximately 72 megawatts (MW) of power to the national power
grid by early 2021.
In early March 2020, Ivanhoe in conjunction with its joint-venture partners
implemented strict quarantine and safety procedures to ensure the well-being of its
employees, contractors and local communities, and to mitigate the impact of COVID-
19 on its operations. As a result, mine development at Kamoa-Kakula has continued
uninterrupted. Mine development at the Platreef Project was temporarily suspended
in March in compliance with government restrictions, but resumed in late April with
reduced staffing levels and stringent safety protocols. Mine development at Kipushi
has been temporarily suspended to reduce the risk to the workforce and local
communities.
In April 2020, 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.
At the end of June 2020, Ivanhoe had cash and cash equivalents of approximately
$496 million and no significant debt.
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On June 8, 2020, Ivanhoe Mines issued its third annual Sustainability Report,
showcasing the company’s achievements towards its goal of producing the world’s
“greenest copper” from the Kakula Mine.
In parallel with the development and 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 are nearing
completion and is expected shortly. The Kakula DFS will provide a high level of
accuracy for the project economics for Kakula’s initial 3.8-Mtpa 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.
Kamoa-Kakula is in detailed discussions with a number of parties with respect to the
marketing and smelting of its copper concentrates. Kakula is expected to produce an
extremely high-grade and clean copper concentrate that will be highly coveted by
copper smelters around the world. Metallurgical testwork indicate that the Kakula
concentrates contain extremely low arsenic levels, by world standards –
approximately 0.01%. Given this critical competitive marketing advantage, Kamoa’s
concentrates are expected to attract a significant premium from copper concentrate
traders for use in blending with concentrates from other mines.
The current estimate of Kakula’s initial capital costs is approximately $1.3 billion as
of January 1, 2019, which assumes commissioning of the first processing plant
module in Q3 2021 and includes pre-production ore stockpiles. The capital costs
incurred by the Kamoa-Kakula joint venture in 2019 was $309.1 million. Additional
capital costs of $242.7 million have been incurred by the joint venture in the six
months ended June 30, 2020, leaving the joint venture with an estimated $750 million
capital costs remaining until initial production.
Basic engineering design and costing for Kamoa-Kakula’s planned Phase 2
expansion, from 3.8 Mtpa to 7.6 Mtpa, is complete. The scope of facilities includes
underground expansion at the Kakula Mine to reach an annual production rate of 6
Mtpa, the commencement of mining operations at the Kansoko Mine at a steady state
1.6 Mtpa; a second 3.8-Mtpa concentrator module at Kakula; as well as associated
surface infrastructure to support the expansion at the various sites.
Underground development at the Kakula Copper Mine continues to advance ahead of
schedule. More than 18.7 kilometres of underground development has been
completed to the end of July ─ 5.5 kilometres ahead of plan. The pace of
development is expected to continue to accelerate as additional mining crews are
added.
Kakula’s 2,000-tonne-per-hour conveyor system that will transport ore from
underground to the surface processing plant is undergoing final commissioning and
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is expected to begin continuous operations shortly, which will further increase the
pace of underground development.
Underground mine development at Kakula currently is taking place primarily in ore
zones grading 3% to 5% copper. Over the next three to four months, the majority of
the mine development is expected to transition into a part of the ore zone near the
centre of the Kakula deposit that has copper grades of approximately 5% to 8%.
At the end of July 2020, the project’s high-grade ore stockpile contained an
estimated 116,000 tonnes grading 6.08% copper. Kakula and Kansoko’s medium-
grade ore stockpiles contained a combined additional 446,000 tonnes at 2.73%
copper. As underground development progresses at the Kakula and Kansoko mines
over the next few months, the grade of the project’s medium-grade stockpiles is
forecast to increase to between 3% - 5% copper.
Construction of Kakula’s initial 3.8-Mtpa processing plant is progressing rapidly with
more than 16,000 cubic metres of concrete already poured. Assembly of structural
steel and the installation of mechanical equipment also is well underway.
Manufacturing of all long-lead mechanical items for the processing plant is complete,
with the crushers, low-entrainment flotation cells and the concentrate filter delivered
to site. Final deliveries of the mills, high-pressure-grinding rolls (HPGR), flotation
cells and thickeners are expected in August.
At the Platreef tier-one, palladium-platinum-nickel-copper-gold-rhodium project in
South Africa, the project’s first shaft (Shaft 1) has been completed to a final depth of
approximately 996 metres.
Ivanhoe is finalizing 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. The DFS and phased development production plan are scheduled to be
issued in September 2020.
On July 27, 2020, Ivanhoe announced that it has had, and is continuing to have,
strategic discussions regarding its 100%-owned Western Forelands Project that
adjoins its Kamoa-Kakula mining licence also in the Democratic Republic of Congo
(DRC); the Kipushi zinc-copper-silver-lead-germanium mine in the DRC; as well as its
Platreef palladium-platinum-nickel-copper-rhodium-gold project on the Northern
Limb of South Africa’s Bushveld Igneous Complex.
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At the end of June 2020, Kamoa-Kakula had reached 4.70 million work hours free of a
lost-time injury; Platreef had reached 119,686 work hours free of a lost-time injury;
and Kipushi had reached 2.49 million work hours free of a lost-time injury.
Ivanhoe has set September 28, 2020, as the new date for its annual and special
meeting (AGM) of shareholders. The AGM was postponed due to restrictions on
public gatherings enacted by both the Federal and Provincial governments in Canada
in response to the COVID-19 pandemic.
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 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.
Health and safety at Kamoa-Kakula
At the end of June 2020, the Kamoa-Kakula Project reached 4,704,185 work hours free of a lost-time
injury. The project continues to strive toward its workplace objective of zero harm to all employees and
contractors.
The project had to adapt its activities due to the COVID-19 pandemic. In accordance with new health
guidelines from the DRC government reflecting the improving COVID-19 situation in the Lualaba
Province, DRC, Kamoa-Kakula lowered its quarantine and lockdown measures from level 3 to level 2
on July 27th. This means that the mine’s Congolese workforce have gone back to normal rotation. Most
activities on site are proceeding as normal with some delays being experienced due to reduced staff
numbers and skills on-site. Rigorous testing, physical distancing, wearing face masks, frequent hand
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washing and contact tracing measures are still in place to protect the safety and health of the workforce
and community members. All expatriate employees are still required to quarantine for two weeks upon
arrival at Kamoa-Kakula.
As part of Kamoa-Kakula’s COVID-19 readiness initiatives, the project has procured a polymerize chain
reaction (PCR) device from German-based Bosch (similar device to the GeneXpert). The device arrived
in July, with an initial supply of 500 tests. The device’s capacity is 15 tests per 24-hour period.
PCR tests are used to directly detect the presence of an antigen, rather than the presence of the body’s
immune response, or antibodies. By detecting viral RNA, which will be present in the body before
antibodies form or symptoms of the disease are present, the tests can tell whether or not someone has
the virus very early on.
Early detection of potential cases based on symptoms and contact tracing is imperative. PCR tests will
give the project’s medical team a good indication of who is infected. This allows for fast isolation, and
contact tracing of potential additional cases for quarantine.
The project has established a COVID-19 isolation facility at the Kamoa camp. Any suspected or
symptomatic cases are moved to this facility, where they are isolated, treated and tested. Once the
patient has recovered and is deemed no longer infectious, they can return to work only after an
additional quarantine period determined by the project’s medical staff. As the pandemic evolves, the
medical team at Kamoa-Kakula is purposefully reviewing and updating its risk mitigation protocols.
Definitive Feasibility Study nearing completion for the Kakula Mine
An independent definitive feasibility study (DFS) for the Kakula Mine is well advanced and is expected
to be finalized shortly. At the same time, Ivanhoe expects to issue an updated Integrated Development
Plan for the entire Kamoa-Kakula mining complex, which will include details on the planned expansion
phases for the greater Kamoa-Kakula mining complex, incorporating updates for mineral resources,
production rates and economic analysis.
A separate study for an on-site smelter has been completed in parallel to a feasibility level of detail and
will be incorporated into the integrated Kamoa-Kakula PEA.
An expansion in initial plant capacity from 3.0 Mtpa to 3.8 Mtpa is planned, which requires increasing
the underground mining crews in 2020 from 11 to 14 to ensure sufficient mining operations to feed the
expanded plant throughput. This would have the benefit of producing a larger surface stockpile of ore
before the scheduled commissioning of the processing plant, as well as accelerating the mine
development schedule, providing the opportunity to bring forward the commencement of the second
phase of development at Kakula. The second 3.8 Mtpa plant module will be primarily fed from the
Kakula Mine at a planned full production mining rate of 6 Mtpa. It is envisaged that an additional 1.6
Mtpa will be sourced from the Kansoko Mine, or elsewhere, to maximize the full milling capacity of 7.6
Mtpa.
There are currently 10 mining crews (three owner crews and seven contractor crews) at Kakula and
one mining crew at Kansoko. The project will continue to add additional crews over the next 12 months
to further accelerate development. One crew is currently being trained at the Kamoa training centre.
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Underground development completed to the end of July (in black) and scheduled
development (green, brown, blue & black) until September 30, 2020. Shown are
the 3%, 5% and 8% copper contours and the location where the northern and
southern access drives are scheduled to join in Q4 2020.
+5% copper
+8% copper
+3% copper
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The eastern portion of Kakula Mine ─ representing less than half of the overall
13.3-kilometre-long Kakula Deposit ─ overlain on southern Manhattan Island to
give a sense of the enormous scale of the underground operations.