Ivanhoe Mines announces an independent pre-feasibility study (PFS) for the Tier One Kakula copper mine in the Democratic Republic of Congo The stage one, six million-tonne-per-annum (6 Mtpa) operation at Kakula, with estimated development capital of US$1.1 billion, yields an after-tax
February 6, 2019
Ivanhoe Mines announces an independent pre-feasibility study (PFS)
for the Tier One Kakula copper mine in the Democratic Republic of Congo
The stage one, six million-tonne-per-annum (6 Mtpa) operation at Kakula,
with estimated development capital of US$1.1 billion, yields an after-tax
NPV8% of US$5.4 billion and an IRR of 47% over a 25-year mine life
The Kakula Mine’s first stage will average 6.8% copper over the first 5 years,
with mine-site cash costs of US$0.43/lb copper
Ivanhoe also announces an updated independent preliminary economic
assessment (PEA) for an expanded Kakula-Kamoa production rate
of 18 Mtpa, supplied initially by a 6 Mtpa mine at Kakula,
followed by two 6 Mtpa mines at Kansoko and Kakula West,
and a world-scale direct-to-blister smelter
The PEA envisions the staged mine expansions and smelter
will be funded from internal cash flows and yields an after-tax NPV8%
of US$10.0 billion and an IRR of 41%
Once the expanded PEA production rate of 18 Mtpa is achieved,
Kamoa-Kakula is projected to become the world’s second largest copper
mine, with peak annual production of more than 700,000 tonnes of copper
CAPE TOWN, SOUTH AFRICA – Robert Friedland, Co-Chairman of Ivanhoe Mines (TSX:
IVN; OTCQX: IVPAF), announced today in a keynote address at the 25th annual Mining
Indaba that the company and its Chinese partners, Zijin Mining Group and Crystal River
Global Limited, welcome the extremely positive findings of an independent pre-feasibility
study (PFS) for the development of the Kakula copper mine and an updated, expanded
preliminary economic assessment (PEA) for the overall development plan of the Kamoa
and Kakula copper discoveries at the Kamoa-Kakula Project on the Central African
Copperbelt, in the Democratic Republic of Congo (DRC).
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“It has been a remarkable 25 years since my first keynote presentation at the very first
Mining Indaba, in this beautiful city of Cape Town, South Africa. In that inaugural speech
in 1994, we shared with delegates how African Minerals, the founding, corporate
trailblazer for Ivanhoe Mines, was focused on its quest for major discoveries in and
around Southern Africa’s legendary mineral fields,” said Mr. Friedland.
“Now, after more than a quarter of a century of exceptional field work by our team of
visionary and tenacious exploration geologists, we are about to make the ‘Great Leap
Forward’ from one of the modern world’s top mine finders to one of the world’s leading
producers of copper – as well as palladium, platinum, zinc, nickel, gold, silver and
rhodium from the other two major mining projects that Ivanhoe is developing in Southern
Africa.
“To all of our African Brothers and Sisters, you now can clearly see the fruits of the
incredibly intensive efforts by our people over the past two decades, while overcoming
countless challenges, to initially discover, then extensively expand, the Kamoa and
Kakula resource base with a massive drilling and engineering effort.
“The Kamoa-Kakula Project now stands as the ‘Beacon that Shines Light’ on the
fundamental importance of stable and transparent legal and fiscal frameworks. Looking
back on the last 25 years, we reiterate the obvious fact that mining is a very long-term
business that requires stability to attract capital. Future generations of young Congolese
people will massively benefit from the establishment of a stable and predictable fiscal
environment to attract foreign investment.
“Today, together with our strategic shareholder CITIC Metal, our Co-Chairman Yufeng
“Miles” Sun, our Chinese joint-venture partner Zijin Mining, and the newly elected DRC
government, led by His Excellency Félix Antoine Tshisekedi Tshilombo, we are proud to
share with the world these outstanding, independently-prepared, engineering studies
conducted over the past two years.
“These studies clearly prove our long-standing conviction that Kamoa-Kakula is firmly
on track to become one of the absolute greatest copper mining complexes in the world,
helping to restore Katanga’s rightful position as the world’s largest copper producing
region. This would not have happened without the extraordinary efforts of the Ivanhoe
discovery team and our investment of more than US$800 million in exploration and
development.
“We now look forward to working with the new government of the DRC and the
Congolese people to develop Kamoa-Kakula to its full potential, generating widely shared
economic benefits that will help to uplift local communities, and provide skills training to
help ensure that young Congolese can qualify for the thousands of meaningful direct and
indirect jobs that will be created.”
Today's PFS and updated PEA build on the outstanding results of the previous PEA
announced in November 2017. The PFS has advanced the detailed design and
engineering in that earlier study and has confirmed the viability of the project. As well,
the re-scoped and expanded PEA shows the potential to develop the project to a larger
scale and with a larger production capacity.
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The Kamoa-Kakula Project has been independently ranked as the world’s largest high-
grade copper discovery by international mining consultant Wood Mackenzie of London in
the United Kingdom.
The PFS and PEA encompass two development scenarios:
1. Pre-feasibility study for stage one Kakula mine development. The Kakula 2019 PFS
evaluates the development of a stage one, 6 Mtpa underground mine and surface
processing complex at the Kakula Deposit – a 2016 discovery that occurred just three
years ago.
2. Expanded, subsequent development to three producing mines. The Kamoa-Kakula
2019 PEA also includes an option for an integrated, 18 Mtpa, three-stage development,
beginning with initial production from the Kakula Mine, to be followed by a
subsequent, separate underground mining operation at the nearby Kansoko and
Kakula West mines, along with the construction of a direct-to-blister smelter. A further
four separate mines will be developed in the Kamoa North area as resources are
mined out, to maintain the production rate at 18 Mtpa.
The Kakula 2019 PFS and Kamoa-Kakula 2019 PEA were independently prepared by
Amec Foster Wheeler E&C Services Inc. (a division of Wood PLC) of Reno, USA; DRA
Global of Johannesburg, South Africa; KGHM Cuprum R&D Centre Ltd. of Wroclaw,
Poland; OreWin Pty Ltd. of Adelaide, Australia; Stantec Consulting International LLC of
Arizona, USA, and SRK Consulting Inc. of Johannesburg, South Africa.
The Kamoa-Kakula 2019 PEA is preliminary in nature and includes an economic analysis
that is based, in part, on Inferred Mineral Resources. Inferred Mineral Resources are
considered too speculative geologically for the application of economic considerations
that would allow them to be categorized as Mineral Reserves – and there is no certainty
that the results will be realized. Mineral Resources do not have demonstrated economic
viability and are not Mineral Reserves.
A National Instrument 43-101 technical report will be filed on SEDAR at www.sedar.com
and on the Ivanhoe Mines website at www.ivanhoemines.com within 45 days of the
issuance of this news release. The technical report also will include an updated Kamoa
pre-feasibility study, which evaluates the development of the Kansoko Mine as a stand-
alone 6 Mtpa underground mine and surface processing complex that would be supplied
with ore from the planned development of the Kansoko Sud and Kansoko Centrale areas
of the Kamoa Deposit. The Kamoa 2019 PFS will restate the findings of the Kamoa 2017
PFS with economics based on updated assumptions.
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Map of the Kamoa-Kakula mining licence showing the Kakula and Kansoko mining
areas, as well as Kakula West, Kamoa North, and a portion of Ivanhoe’s adjacent,
100%-owned Western Foreland exploration-licences area.
“The new PFS and PEA, independently prepared by six of the world’s top engineering
firms, reinforces the fact that Kamoa-Kakula is unquestionably the world’s best
undeveloped copper discovery,” said Mr. Friedland. “Kamoa-Kakula is unique as it
combines ultra-high copper grades in thick, shallow and flat-lying orebodies ─ allowing
for large-scale, highly-productive, mechanized underground mining operations. Kakula is
projected to have an average grade of 6.8% copper over the initial five years of
operations, and 6.4% copper over the first 10 years ─ grades that are orders of
magnitude higher than the majority of the world’s other major copper mines.
“This mine is getting built. And, most importantly, it is being built to international best
practices that will be a showcase for responsible mine development.
“As good as the economic numbers are in this PFS for Kakula, you simply cannot apply
conventional discounted cash flow analysis to Tier One projects like Kamoa-Kakula and
expect to get a sensible answer on long-term value. Massive, high-grade deposits like we
have found at Kamoa-Kakula ─ which have the potential to produce large quantities of
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copper for multiple generations ─ are very long-term plays. The real value is generated
over time, in the phased expansions.
“Ten years ago at the World Copper Conference in Santiago, Chile, we announced to the
world that Ivanhoe Mines had “made a major copper discovery of historic importance” in
a previously unrecognized area that was beyond the western end of the Copperbelt in the
Congo, and that “Kamoa will become a world-class mining camp of great importance to
the Democratic Republic of Congo”.
“Today, together with our partners, Zijin Mining and the government of the DRC, and the
outstanding work by our exceptionally talented team at Kamoa-Kakula, comprised mainly
of bright, young Congolese men and women, we are making these bold predictions come
true.
“We invite institutional investors and analysts to visit the DRC, meet the people, and see
first-hand how our team is transforming the original Kamoa discovery we announced 10
years ago into a state-of-the-art mining operation with the potential to become one of the
world’s three largest copper mines, with peak annual production of more than 700,000
tonnes of copper.
Photo. Robert Friedland greeting Kamoa-Kakula employees during a site visit.
Mr. Johansson, Chief Executive Officer and President of Ivanhoe Mines, said that
discussions for financing the construction of the initial 6 Mtpa mine at Kakula are
progressing well with China-based financial institutions. CITIC Metal, Ivanhoe’s largest
shareholder, is assisting with the discussions.
Mr. Johansson also noted that today’s economic assessments do not factor in the recent
exploration success at Kamoa North, which is a prospective new mining area. The
current study also does not factor in the ongoing drilling programs on new targets at
Kamoa-Kakula or the company’s 100%-owned Western Foreland exploration area.
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Additional exploration successes that already have occurred may well have a significant
positive influence on the size, value, and timing of the overall development plan; as such,
the Kamoa-Kakula development plans will be continuously reassessed and amended as
the project moves forward to reflect ongoing exploration success.
“The 18 million-tonne-per-annum development scenario clearly shows the economic
potential for a phased development plan for Kamoa-Kakula to become one of the largest
copper mines in existence,” said Mr. Johansson. “However, as evidenced by our
remarkable discovery hole drilled at Kamoa North announced last week ─ the thickest
high-grade intersection yet at Kamoa-Kakula returning 13.05% copper over 22.3 metres
starting at a depth of only 190 metres below surface ─ we are confident that there are
more high-grade copper discoveries to be made in the area and the ultimate scale of
operations at Kamoa-Kakula can be much larger. We see no geological limitation to the
goal of eventually producing one million tonnes of copper per year.
“While our engineers are focused on expediting the development of the initial Kakula
Mine, our geological team remains focused on unlocking the full potential of the Kamoa-
Kakula and Western Foreland copper districts. We plan to keep the drills turning as we
continue our search for the next Kakula, or perhaps an even better discovery.
Mr. Johansson also said that the implementation of community-support initiatives at
Kamoa-Kakula are central to mine-planning considerations. “Ivanhoe and Zijin are proud
of our community-support initiatives that include fish and chicken farming, agricultural
projects, and the construction of new schools, houses, clinics, roads and power
infrastructure.
“We already have made significant improvements in the lives of the Congolese people
living in the communities near Kamoa-Kakula that will help promote and define their
children’s health and education for the foreseeable future.”
Photo. Secondary students in one of the new schools built in a village near the
Kamoa-Kakula Project, as part of the project's community relations
program.
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HIGHLIGHTS
Initial 6 Mtpa mine at Kakula
The Kakula 2019 PFS analyzes the development of an initial 6 Mtpa Kakula Mine at the
Kakula Deposit in the southerly portion of the Kamoa-Kakula Project’s discovery area.
For this option, the PFS envisages an average annual production rate of 291,000
tonnes of copper at a mine-site cash cost of US$0.46 per pound (lb) copper and total
cash cost of US$1.11/lb copper for the first 10 years of operations, and copper annual
production of up to 360,000 tonnes by year four.
An initial capital cost of US$1.1 billion for this option would result in an after-tax net
present value at an 8% discount rate (NPV8%) of US$5.4 billion. The internal rate of
return of 46.9% and project payback period of 2.6 years confirm the compelling
economics for the Kamoa-Kakula Project’s stage one of production.
Kakula benefits from an ultra-high, average feed grade of 6.8% copper over the first
five years of operations, and 5.5% copper on average over a 25-year mine life.
Basic engineering is underway, expected to be completed around mid-year, running in
parallel with a definitive feasibility study expected to be completed around year-end.
Development of twin underground declines has been completed at Kakula, with
ongoing underground development activities, including access drives and ventilation
raises. In addition, a box cut for a ventilation decline on the southern side of the
Kakula orebody is nearing completion.
Modular, integrated, expanded development option of Kakula and Kamoa
deposits, mining a total of 18 Mtpa, with construction of a direct-to-blister smelter
The Kamoa-Kakula 2019 PEA presents the alternative development option of a three-
phase, sequential operation on Kamoa-Kakula’s high-grade copper deposits.
Initial production would occur at a rate of 6 Mtpa from the Kakula Mine, before
increasing to 12 Mtpa with mill feed from the Kansoko Mine. A third 6 Mtpa mine then
will be developed at Kakula West, bringing total production rate to 18 Mtpa. As
resources at Kakula and Kansoko are mined, the PEA envisages that production
would begin at several mines in the Kamoa North area to maintain 18 Mtpa throughput
over a 37-year mine life.
For the three-phase sequential operation, the PEA envisages US$1.1 billion in initial
capital costs. Future expansion at the Kansoko Mine, Kakula West Mine and
subsequent extensions could be funded by cash flows from the Kakula Mine,
resulting in an after-tax net present value at an 8% discount rate (NPV8%) of US$10.0
billion and an internal rate of return of 41%.
Under this approach, the PEA also includes the construction of a direct-to-blister flash
copper smelter at the Kakula plant site with a capacity of one million tonnes of copper
concentrate per annum to be funded from internal cash flows. This would be
completed in year five of operations, achieving significant savings in treatment
charges and transportation costs.
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The 18 Mtpa scenario delivers average annual production of 382,000 tonnes of copper
at a total cash cost of US$0.93/lb copper during the first 10 years of operations and
production of 740,000 tonnes by year 12. At this future production rate, Kamoa-Kakula
would rank as the world’s second largest copper mine.
Figure 1 describes the expanded development scenario for the Kamoa-Kakula 2019 PEA
and Figure 2 shows an overview of deposits included within the Kakula 2019 PFS (6 Mtpa
case), Kamoa 2019 PFS (6 Mtpa) and Kamoa-Kakula 2019 PEA (18 Mtpa). Additional
exploration success at Kakula West, Kamoa North or regional exploration targets may
well have a significant, positive influence on the size, value and timing of the overall
development plan.
Figure 1. Kamoa-Kakula 18 Mtpa PEA long-term development plan.
Figure by OreWin 2019.