Ivanhoe Mines announces opportunities to accelerate future expansions at the tier-one Kamoa-Kakula Copper Mine
March 29, 2021
Ivanhoe Mines announces opportunities to accelerate future
expansions at the tier-one Kamoa-Kakula Copper Mine
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US$575 million funding positions Ivanhoe and joint-venture partners
to fast-track additional hydropower upgrades to provide sufficient
clean and renewable electricity for Kamoa-Kakula expansions to 19
million tonnes of ore per annum and beyond, including a smelter
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Funding also allows for expansion and acceleration of the Western
Foreland exploration program, in pursuit of the next world-scale
copper discovery
TORONTO, CANADA – Ivanhoe Mines (TSX: IVN; OTCQX: IVPAF) Co-Chairs Robert
Friedland and Yufeng “Miles” Sun are pleased to announce a number of opportunities
to accelerate planned expansions at the company’s world-scale portfolio of mining and
exploration assets, that may be funded in part with the proceeds from the recently
completed US$575 million, 2.50% convertible senior notes offering.
The high-priority opportunities include accelerating the Phase 3 expansion at the
Kamoa-Kakula copper mine (beyond Phases 1 and 2) in the Democratic Republic of
Congo (DRC). Fast-tracking additional hydropower upgrades in the DRC also is a high-
priority opportunity to ensure abundant clean and renewable electricity for all
subsequent expansions at Kamoa-Kakula. The management team also is evaluating a
potential, state-of-the-art, direct-to-blister smelter that could bring numerous economic
benefits and further reduce the project’s Scope 3 emissions.
The funding also will provide opportunities to expand and accelerate the copper
exploration program on the company’s Western Foreland exploration licences, located
in close proximity to the Kamoa-Kakula mining licence.
Mr. Friedland commented: “The proceeds from the offering strengthen the position of
Ivanhoe Mines. The company will now look to further increase production at our Kamoa-
Kakula copper joint-venture, and to accelerate the Phase 3 concentrator expansion from
7.6 million tonnes per annum to 11.4 million tonnes per annum. Together with our
partner Zijin Mining, we have already accelerated the Phase 2 expansion to begin
production in Q3 2022 and bring copper production to approximately 400,000 tonnes, or
approximately 880 million pounds, per year. Our improved capital position now opens
the distinct possibility of earlier development of the Phase 3 expansion, which would
bring copper production at Kamoa-Kakula, up to approximately 530,000 tonnes, or
approximately 1.2 billion pounds, per year.
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“The success of the offering and new funding also gives us additional capital to
accelerate and expand our already extensive exploration program on the 2,550-square-
kilometre Western Foreland Project.
“We are delighted to welcome many new institutional investors to Ivanhoe Mines. Our
company is about to make the long-fought transition from an explorer and developer, to
becoming a major diversified mining company. It has been a remarkable journey for
Kamoa-Kakula and Platreef; to grow from grassroots discoveries to imminently joining
the ranks of the world's largest producers of copper, platinum-group metals and nickel.
“We firmly believe that Ivanhoe Mines is uniquely positioned as both a deep value and
growth equity story, with industry-leading Environmental, Social and Governance
attributes. We trust our new investors share our optimism for the disruptive potential to
realize additional world-scale copper discoveries on our Western Foreland Exploration
Project that hosts geology identical to Kamoa-Kakula.
“Given the compelling projected rates of returns generated by the phased expansions
at Kamoa-Kakula, and outstanding project economics at a discount rate of 8%, the
coupon rate of 2.50% is an extremely attractive form of financing.
“At last year’s Mining Indaba conference in Cape Town, South Africa, as well as several
other speaking venues, we made the point that it was irrational that Chile should enjoy a
significantly lower discount rate than the Democratic Republic of Congo. This 2.50%
coupon convertible bond financing is a testament to the growing recognition that
Lualaba Province, formerly part of Katanga Province, is the best place in the world to
find and develop the highest-quality, lowest-carbon-footprint copper mines that the
global energy transition so desperately needs.”
Kamoa-Kakula’s Phase 1, 3.8-Mtpa concentrator and foundations for the Phase 2
concentrator.
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Another view of Kamoa-Kakula’s Phase 1, 3.8-Mtpa concentrator (in red circle) is
nearing completion, with the civil works for the second 3.8-Mtpa concentrator
(Phase 2) advancing rapidly. Roofing of the concentrate storage shed
(foreground) is underway.
Second stage (C2) commissioning at Kamoa-Kakula’s Phase 1 ball mills (in
yellow) and the concrete foundations for the second set of ball mills for the
Phase 2 concentrator (foreground), are underway.
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Ivanhoe plans to report Kamoa-Kakula’s regular progress update for the month of
March on Tuesday, April 6, after the international Easter holidays, allowing time to
double check the assays and tonnages produced in the March reporting period.
Papi Seokolo, Technician, installing fiber optic cables in the Phase 1
concentrator plant.
Ivanhoe looking to fast-track additional hydropower upgrades in the DRC
The upgrading work at the Mwadingusha hydropower plant in the DRC is nearing
completion with the synchronization of the first turbine achieved in December 2020.
Commissioning and synchronization of the second and third turbines are underway.
Electricity from all of Mwadingusha’s six turbines, with an upgraded output of 78
megawatts, is expected to be integrated into the national power grid in the second
quarter of 2021.
The work is being conducted by engineering firm Stucky of Lausanne, Switzerland,
under the direction of Ivanhoe Mines and Zijin Mining, in private-public partnership with
the DRC’s state-owned power company, La Société Nationale d’Electricité (SNEL).
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Kamoa-Kakula’s agreement with SNEL with respect to the upgrading of the
Mwadingusha plant provides Kamoa-Kakula with up to 100 megawatts (MW) from the
national grid. Phases 1 and 2 at Kamoa-Kakula have an estimated, combined power
consumption of between 85 MW and 100 MW.
Mr. Friedland commented: “The Democratic Republic of Congo is blessed with some of
the world's greatest hydropower potential. Hydro-generated electricity, potentially
supplemented by solar power, with their virtues of being clean and renewable, are the
best energy solutions to support our development priorities as we continue to look for
ways to reduce our impact on the environment and produce the “green” copper the
world energy transition requires. A 2020 independent audit of Kamoa-Kakula's
greenhouse gas intensity metrics performed by Hatch Ltd. of Canada, confirmed that
the project will be among the world's very lowest greenhouse gas emitters per unit of
copper produced.
“The new funding will enable the expedited rehabilitation of additional sources of
hydropower in the Democratic Republic of Congo to provide additional clean, reliable
and renewable electricity for future phases of expansion at Kamoa-Kakula.”
Engineers completing the alternator assembly for Mwadingusha’s sixth
generator unit.
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Electricians from CEGELEC, a French engineering company, putting the finishing
touches to Kakula’s 220-kilovolt main substation.
Kakula’s 220-kilovolt main substation and power line connecting to the grid.
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Kamoa-Kakula joint venture is refining its longer-term downstream strategy
Kamoa Copper is considering the potential construction of a smelting complex for the
production of blister and anode copper. A downstream processing facility has a
compelling rationale, significantly reducing the overall volumes of copper concentrate
shipped from the mine and the cost of transportation and logistics, export taxes and
concentrate treatment charges, as well as producing sulphuric acid as a by-product.
There is a strong demand and market for sulphuric acid in the DRC to recover oxide
copper ores. DRC copper mines currently import significant volumes of sulphur and
sulphuric acid for the treatment of oxide copper ores.
The Kamoa-Kakula 2020 preliminary economic assessment (PEA) included the
construction of a smelter complex, based on Finland-based Outotec’s direct-to-blister
furnace technology that is suitable for treating Kakula-type concentrates with relatively
high copper/sulphur ratio, and low iron. China Nerin Engineering acted as the main
engineering consultant with Outotec, providing design and costing for propriety
equipment, including the direct blister furnace, waste heat boiler, and the slag cleaning
electric furnace. The smelter design capacity is between 750,000 and 1 million tonnes
per annum of concentrate feed, producing in excess of 400 ktpa copper in the form of
blister and anode, with a capital cost in the region of US$600 million (100%-basis) to be
jointly financed with Ivanhoe’s equal partner Zijin Mining, which is expected to be
funded through a combination of internal cash flows and project-level debt.
The power requirement for the direct-to-blister smelter is approximately 35 megawatts,
which may be supplied by additional hydropower investments in the DRC. This also
would enable the Kamoa-Kakula Project to further reduce its Scope 3 carbon-equivalent
emissions.
Further engineering studies underway at Kansoko, Kamoa North and
Kakula West as potential sources of ore to accelerate Kamoa-Kakula’s
future development phases
In September 2020, Ivanhoe announced the findings of an independent Integrated
Development Plan (IDP) for the tier one Kamoa-Kakula Copper Project. The IDP included
a PEA that evaluated an integrated, multi-staged development to achieve a production
rate of 19 Mtpa, yielding a potential after-tax NPV8% of US$11.1 billion, IRR of 56% over
a plus 40-year mine life, and payback of 3.6 years using a base case, long-term copper
price of US$3.10.
The phased expansion scenario to 19 Mtpa, in five incremental phases of 3.8 Mtpa each,
would position Kamoa-Kakula as the world’s second largest copper mining complex,
with peak annual copper production of more than 800,000 tonnes. Phase 1, which has
an estimated US$336 million (100%-basis, as at January 1, 2021) of capital costs to first
production expected in July 2021, is nearing completion and Phase 2 is under
development, with expected start-up in Q3 2022, and estimated direct capital costs of
approximately US$600 million. Phases 1 and 2 combined are forecast to produce up to
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approximately 400,000 tonnes of copper metal per year (the current copper price is
approximately US$9,000 a tonne).
Kamoa-Kakula is on track to have more than three million tonnes of high-grade and
medium-grade ore stockpiled on surface, holding more than 125,000 tonnes of
contained copper, prior to the planned start of processing in July 2021.
Given the current copper price environment, Ivanhoe, together with its partner Zijin, is
exploring the acceleration of the Kamoa-Kakula Phase 3 concentrator expansion from
7.6 Mtpa to 11.4 Mtpa, which may be fed from expanded mining operations at Kansoko
or new mining areas at Kamoa North (including the Bonanza Zone) and Kakula West.
Kamoa-Kakula has a massive resource base. At a 1% cut-off, the current, combined
Indicated Mineral Resources for the Kamoa-Kakula Project total 1.387 billion tonnes
grading 2.74% copper. At a 3% cut-off, the Indicated Mineral Resources total 423 million
tonnes grading 4.68% copper.
Kamoa-Kakula’s Indicated Mineral Resource in different areas of the project, at a 3%
cut-off:
Kakula and Kakula West: 167 million tonnes at 5.50% copper.
Kamoa: 256 million tonnes at 4.15% copper.
Included within the Kamoa total:
Kamoa North (including the Bonanza Zone): 12 million tonnes at 4.65%
copper.
Kamoa Far North: 5 million tonnes at 4.49% copper.
The Kamoa North Bonanza Zone was discovered in 2019 and represents the highest
copper grades encountered to date on the Kamoa-Kakula mining licence. The ultra-high
copper grades intercepted to date in the Kamoa North Bonanza Zone are believed to be
the result of an east-west growth fault focusing copper-rich fluids to interface with both
the typical mineralized horizon at Kamoa-Kakula and the overlying, highly-sulphidic and
reduced Kamoa Pyritic Siltstone (KPS).
The Kamoa North Bonanza Zone contains an initial Indicated Mineral Resource estimate
of 1.5 million tonnes grading 10.7% copper (162,000 tonnes of contained copper), at a
5% cut-off.
Other high-grade resources at Kamoa-Kakula are located at Kakula West, Kamoa North
and Kamoa Far North. The recent Kiala Discovery, which is an extension of the Kamoa
Far North copper zone on Ivanhoe’s 100%-owned Western Foreland licences to the
north of the Kamoa-Kakula mining licence, also has the potential to host high-grade
copper zones.