Ivanhoe Mines advances discussions to launch a new era of production at the historic Kipushi zinc-copper-silver-germanium mine in the Democratic Republic of Congo Kipushi’s Big Zinc Deposit has an estimated 10.2 million tonnes
September 6, 2017
Ivanhoe Mines advances discussions to launch a new era of production
at the historic Kipushi zinc-copper-silver-germanium mine
in the Democratic Republic of Congo
Kipushi’s Big Zinc Deposit has an estimated 10.2 million tonnes
of Measured and Indicated Mineral Resources grading 34.9% zinc
Successful return to steady-state production will make Kipushi
the world’s highest-grade major zinc mine
Pre-feasibility study scheduled for release later this year;
excellent progress being made on mine rehabilitation work
Drilling program underway to expand and upgrade Kipushi’s Inferred Resources
KIPUSHI, DEMOCRATIC REPUBLIC OF CONGO — Robert Friedland, Executive Chairman of Ivanhoe
Mines (TSX: IVN; OTCQX: IVPAF), and Lars-Eric Johansson, Chief Executive Officer, announced today
that negotiations are underway with government agencies – Gécamines, the state-owned miner and
Ivanhoe’s partner at Kipushi, and Société Nationale des Chemins de Fer du Congo (SNCC), the DRC’s
national railway company – and potential project financiers to advance agreements to launch a new era
of commercial production at the upgraded Kipushi zinc-copper-silver-germanium mine in the
Democratic Republic of Congo (DRC).
The Kipushi Mine is owned by Kipushi Corporation (KICO), a joint venture between Ivanhoe Mines
(68%) and Gécamines (32%). Kipushi is on the Central African Copperbelt in the province of Haut-
Katanga, approximately 30 kilometres southwest of the provincial capital of Lubumbashi and less than
one kilometre from the international border with Zambia.
Kipushi’s rich future drawing on a history of distinction – and the waiting Big Zinc Deposit
Built and then operated by Union Minière for 42 years, Kipushi began mining a reported 18% copper
from a surface open pit in 1924. It was the world’s richest copper mine at the time. Then it transitioned
to become Africa’s richest underground copper, zinc and germanium mine. State-owned Gécamines
gained control of Kipushi in 1967 and operated the mine until 1993.
Over a span of 69 years, Kipushi produced a total of 6.6 million tonnes of zinc and 4.0 million tonnes of
copper from 60 million tonnes of ore grading 11% zinc and approximately 7% copper. It also produced
278 tonnes of germanium and 12,673 tonnes of lead between 1956 and 1978. There is no formal record
of the production of precious metals as the concentrate was shipped to Belgium and the recovery of
precious metals remained undisclosed during the colonial era; however, drilling by Ivanhoe Mines has
encountered significant silver values within Kipushi’s current zinc- and copper-rich deposits.
Most of Kipushi’s historical production was from the Fault Zone, a steeply-dipping ore body rich in
copper and zinc that initially was mined as an open pit. The Fault Zone extends to a depth of at least
1,800 metres below surface, along the intersection of a fault in carbonaceous dolomites (see Figure 2).
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The founding era of mining at Kipushi ended in 1993, when it was placed on care and maintenance due
to a combination of economic and political factors.
Before Kipushi was idled, Gécamines discovered the Big Zinc Deposit at a depth of approximately
1,250 metres below surface and adjacent to the producing Fault Zone (see Figure 2). The Big Zinc’s
mineral resources have never been mined. Ivanhoe’s drilling has upgraded and expanded the Big Zinc
Deposit’s Measured and Indicated Mineral Resources to an estimated 10.2 million tonnes grading
34.9% zinc, 0.65% copper, 19 grams/tonne (g/t) silver and 51 g/t germanium, at a 7% zinc cut-off,
containing an estimated 7.8 billion pounds of zinc.
Now, the planned restoration of production at Kipushi is based on initial mining that will be focused on
the Big Zinc Deposit.
Key steps toward the start of a new era of mining at Kipushi
Excellent progress has been made by KICO in modernizing the Kipushi Mine’s underground
infrastructure as part of preparations for the mine to resume commercial production. With the
underground upgrading program nearing completion, KICO’s focus now will shift to modernizing and
upgrading Kipushi’s surface infrastructure to handle and process Kipushi’s high-grade zinc and
copper resources.
The current mine redevelopment plan, as outlined in the May 2016 independent, preliminary economic
assessment (PEA), has a two-year construction period with quick ramp-up to a projected, steady-state,
annual production of 530,000 tonnes of zinc concentrate.
A pre-feasibility study (PFS) is underway to refine the findings of the PEA, and to optimize the mine’s
redevelopment schedule, life-of-mine operating costs and initial capital costs required to return the
mine to production, taking into consideration the significant capital already invested to date on critical
rehabilitation work. Ivanhoe expects to complete the PFS before the end of this year.
“The KICO team, which includes more than 390 Congolese nationals, has done a fantastic job in safely
upgrading the mine’s underground infrastructure in anticipation of restarting production,” said Mr.
Friedland.
“Given the extremely high zinc grades at Kipushi, the mine has the potential to become one of the
world’s largest and lowest-cost zinc producers, while also producing significant quantities of copper,
silver and germanium. With the current, long-term, bullish market sentiment for zinc, we look forward
to working with our partner, Gécamines, prospective project financiers and our team at Kipushi to fast-
track completion of the remaining development at the mine.
“Since the PEA was issued in May 2016, we have made major strides towards completing the
underground infrastructure upgrading program and we are much closer to achieving our vision of
building a world-class zinc operation at Kipushi,” Mr. Friedland added.
Restoration of production will make Kipushi the world’s highest-grade major zinc mine
The PFS will focus on the mining of Kipushi’s Big Zinc Deposit, which has an estimated 10.2 million
tonnes of Measured and Indicated Mineral Resources grading 34.9% zinc. This exceptional grade is
more than twice as high as the Measured and Indicated Mineral Resources of the world’s next-highest-
grade, major zinc project, according to Wood Mackenzie, a leading, international industry research and
consulting group.
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In addition to the Big Zinc Deposit, Kipushi has several copper-rich zones that also contain silver,
germanium and zinc. Measured and Indicated Mineral Resources contained in the copper-rich Série
Récurrente Zone, Fault Zone, and Fault Zone Splay total 1.63 million tonnes at grades of 4.01% copper,
2.87% zinc and 22 g/t silver, at a 1.5% copper cut-off, containing 144 million pounds of copper. Inferred
Mineral Resources in these zones total an additional 1.64 million tonnes at grades of 3.30% copper,
6.97% zinc and 19 g/t silver.
Figure 1. World’s 10 largest zinc mines, ranked by forecasted production by 2019.
Source: Wood Mackenzie. Note: Independent research by Wood Mackenzie concludes that at the forecast production and
head grade, the Kipushi Project, once in production, will rank among the world’s major zinc mines. Wood Mackenzie
compared the Kipushi Project’s life-of-mine average annual zinc production and zinc head grade of 281,000 tonnes and
32%, respectively, against production and zinc head grade forecasts for 2019.
Excellent progress made on mine rehabilitation work
The main production shaft for the Kipushi Mine, Shaft 5, has been upgraded and re-commissioned. The
main personnel and material winder has been upgraded and modernized to meet global industry
standards and safety criteria. The Shaft 5 rock-hoisting winder, which had an annual hoisting capacity
of 1.8 million tonnes, is being upgraded and is expected to be fully operational early next year.
Underground upgrading work is continuing on the crusher and the rock load-out facilities at the
bottom of Shaft 5 and the main haulage way on the 1,150-metre level between the Big Zinc access
decline and Shaft 5. This work is expected to be completed before the end of the first quarter of 2018.
The planned primary mining method for the Big Zinc Deposit in the PEA and PFS is sublevel long hole,
open stoping, with cemented backfill. The crown pillars are expected to be mined once adjacent stopes
are backfilled using a pillar-retreat mining method. The Big Zinc Deposit is expected to be accessed via
the existing decline and without any significant new development. The main levels are planned to be at
60-metre vertical intervals, with sublevels at 30-metre intervals.
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Figure 2. Schematic section of Kipushi Mine.
Optimized zinc processing methodology for the PFS
Based on recent, additional metallurgical test work and trade-off studies, Ivanhoe has revised the
planned process-plant design for the PFS. The optimized plant utilizes dense media separation (DMS),
followed by milling and a flotation recovery plant. The addition of milling and a flotation recovery plant
improved the combination of concentrate grades and recoveries from what the recent metallurgical
test work determined was achievable from a DMS plant only. DMS is a simple density-concentration
technique that preliminary test work has shown yields positive results for the Kipushi material, which
has a sufficient density differential between the waste rock (predominantly dolomite) and
mineralization (sphalerite). Furthermore, the addition of a milling and flotation circuit to DMS is
expected to improve the project economics as a result of higher concentrate grades.
Given the significant, very-high-grade zinc resource at Kipushi, which is rich in potential by-product
credits including copper, silver and germanium, Ivanhoe and the Gécamines technical team are
continuing to investigate additional downstream processing options.
Drilling program underway to expand and upgrade Inferred Resources
A 41-hole, 6,500-metre underground drilling program at Kipushi is nearing completion. The program
includes six metallurgical holes and 35 resource drill holes in the Fault Zone, the Nord Riche and
Southern Zinc zones to expand and upgrade Inferred Resources to Indicated Resources. Ivanhoe
expects to issue an updated Mineral Resource estimate for Kipushi later this year once all the assays
have been received from the drilling program.
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Exploration drilling conducted by Ivanhoe in 2015 sucessfully confirmed that both the Big Zinc Deposit
and Fault Zones remain open at depth and to the south. Additional high-grade copper-zinc-silver-
germanium mineralization also was discovered in the Fault Zone and in the Fault Zone Splay in the
immediate footwall of the Fault Zone.
Germanium is a strategic metal that is a key component of fibre-optic systems, infrared optics, high-
efficiency solar cell applications, and light-emitting diodes. The current spot price of germanium is
approximately US$1,650 a kilogram.
Initiation of cooperation agreement with the Congolese national railway
Ivanhoe has initiated a new cooperation agreement with SNCC to rehabilitate the inactive spur line that
connects the Kipushi Mine to the Congolese national railway and to the overall north-south rail
corridor that links the DRC Copperbelt to the seaport at Durban, South Africa.
“Ivanhoe and SNCC are negotiating details of an infrastructure financing agreement for the railway
rehabilitation works and the terms of operation for the spur line,” said Mr. Johansson.
“This cooperation on public infrastructure projects mirrors Ivanhoe Mines’ successful, ongoing
partnership with the DRC’s state-owned power company, La Société Nationale d’Electricité, for the
rehabilitation of three hydropower plants.”
Figure 3. Zinc prices are trading above $1.40 a pound and are at 10-year highs.
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Figure 4. Copper prices now are trading above $3.00 a pound.
May 2016 PEA findings support Kipushi’s highly attractive economics,
particularly in the context of current zinc prices
(All monetary figures in this news release are US dollars (US$), unless otherwise stated.)
The independent PEA for the planned redevelopment of the Kipushi Mine was published in May 2016
and assumed a base case, long-term zinc price of $2,227 per tonne ($1.01 per pound). The report
described the redevelopment of Kipushi as an underground mine producing an average of 530,000
tonnes of zinc concentrate annually over a 10-year mine life at a total cash cost, including copper by-
product credits, of approximately $0.54 per pound of zinc.
PEA highlights included:
At a long-term zinc price of $2,227 per tonne ($1.01 per pound), after-tax net present value (NPV) at
an 8% real discount rate is $533 million.
At a long-term zinc price of $2,227 per tonne, after-tax real internal rate of return (IRR) is 30.9%.
At a long-term zinc price of $2,227 per tonne, after-tax project payback period is 2.2 years.
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Leveraging existing surface and underground infrastructure significantly lowers the redevelopment
capital compared to a greenfield development project, as well as the time required to reinstate
production.
Life-of-mine average cash cost of $0.54 per pound of zinc is expected to rank Kipushi, once in
production, in the lower quartile of the cash-cost curve for zinc producers globally.
If the PEA assumed a long-term zinc price of $3,000 per tonne (or $1.36 per pound, which approximates
the current spot price of zinc), the after-tax NPV8% would be $1.27 billion.
Similarly, based on the information in the PEA and assuming a long-term zinc price of $3,000 per
tonne, after-tax IRR would be 53.3% and after-tax project payback period would be 1.1 years.
In addition, the PEA used a base-case zinc treatment charge of $200 per tonne, which is
substantially higher than rates observed in the current zinc concentrate market.
Table 1: After-tax NPV8% sensitivity to zinc prices and discount rates ($ millions).
Discount rate
Zinc price ($/tonne)
$2,000 $2,227 $2,500 $2,750 $3,000
Undiscounted $719 $1,076 $1,507 $1,901 $2,295
5% $436 $696 $1,008 $1,293 $1,577
8% $315 $533 $794 $1,032 $1,269
10% $249 $444 $677 $889 $1,101
12% $193 $368 $577 $767 $957
The PEA for Kipushi’s redevelopment was prepared by OreWin Pty. Ltd., of Adelaide, Australia, and the MSA Group (Pty.)
Ltd., of Johannesburg, South Africa, in compliance with Canadian National Instrument 43-101 – Standards of Disclosure
for Mineral Projects (NI 43-101).
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KICO team members at the new conveyor belt installed at Kipushi’s 1,150-metre level
as part of the ongoing infrastructure upgrading program.
A scooptram loader and haul truck, part of the fleet of new underground mining equipment
at Kipushi.