Ivanhoe Mines issues 2016 year-end results and review of operations Exceptionally high-grade Kakula Copper Discovery on the Kamoa mining licence in the D.R. Congo highlights Ivanhoe’s achievements in 2016
March 28, 2017
Ivanhoe Mines issues 2016 year-end results
and review of operations
Exceptionally high-grade Kakula Copper Discovery
on the Kamoa mining licence in the D.R. Congo
highlights Ivanhoe’s achievements in 2016
TORONTO, CANADA ‒ Ivanhoe Mines (TSX: IVN; OTCQX: IVPAF) today announced its financial
results for the year ended December 31, 2016. All figures are in U.S. dollars unless otherwise
stated. Ivanhoe Mines is a Canadian mining company focused on advancing its three mine-
development projects in Sub-Saharan Africa: the Platreef platinum-palladium-gold-nickel-copper
discovery in South Africa; and the Kamoa-Kakula copper discovery and the Kipushi zinc-copper-
lead-germanium mine in the Democratic Republic of Congo (DRC).
HIGHLIGHTS
On March 21, 2017, Ivanhoe announced that a new discovery hole had intersected a shallow,
3.8-kilometre extension of the Kakula Copper Discovery at the Kamoa-Kakula Project, in the
Democratic Republic of Congo (DRC). This latest extension has been named Kakula West. The
new discovery hole, DD1124, essentially doubled the presently-defined length of the copper-
rich mineralized system at Kakula to more than 10 kilometres.
Discovery hole DD1124 is 3.8 kilometres west of the current limit of Kakula drilling and 4.1
kilometres west of the last drill hole with returned assays – DD1093 – that was announced on
January 23, 2017. DD1124 also extended the length of the Kakula mineralized trend a further six
kilometres longer than the 4.1-kilometre strike length that was used to calculate the initial
Kakula resource estimate in October 2016. Up to five rigs are being mobilized to Kakula West to
accelerate delineation of the new discovery.
On October 12, 2016, Ivanhoe released an independently verified, initial Mineral Resource
estimate for the exceptionally-high-grade Kakula Discovery – the second major discovery at
the Kamoa-Kakula Copper Project. Kakula’s Indicated Resources presently total 192 million
tonnes at a grade of 3.45% copper, containing 14.6 billion pounds of copper. Inferred
Resources total 101 million tonnes at a grade of 2.74% copper, containing an additional 6.1
billion pounds of copper. Both estimates are at a 1.0% copper cut-off.
At a higher 3% copper cut-off, Kakula contains Indicated Mineral Resources estimated at 66
million tonnes at 6.59% copper, plus Inferred Resources of 27 million tonnes at 5.26% copper.
The combined Kamoa-Kakula Indicated Mineral Resources now total 944 million tonnes
grading 2.83% copper, containing 58.9 billion pounds of copper at a 1.0% copper cut-off grade
and a minimum thickness of three metres. Kamoa-Kakula also has Inferred Mineral Resources
of 286 million tonnes grading 2.31% copper and containing 14.6 billion pounds of copper, also
at a 1.0% copper cut-off grade and a minimum thickness of three metres.
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With the addition of Kakula’s Mineral Resources, Wood Mackenzie – a prominent, international
industry research and consulting group – independently demonstrated that the Kamoa-Kakula
Project is the largest copper discovery in Zambia and the DRC, making it the largest copper
discovery ever made on the African continent. In addition, Wood Mackenzie’s research also
shows that Kamoa-Kakula already ranks among the 10 largest copper deposits in the world.
The Kakula Discovery remains open for significant expansion along trend to the west and the
southeast, while the remainder of the Kakula Exploration Area remains virtually untested.
Fourteen rigs now are drilling in the Kakula Exploration Area. More than 63,000 metres have
been drilled since the Kakula drilling campaign began in May 2016. Ivanhoe expects to issue an
updated Mineral Resource estimate for the Kakula Discovery early in Q2 2017.
Nearly 200 square kilometres of the approximately 400-square-kilometre Kamoa-Kakula project
area remain untested. The Kamoa-Kakula geology team, with the assistance of its technical
advisors, has intensively evaluated the structural and stratigraphic controls on mineralization
of the broader Kamoa-Kakula basin. This work has highlighted at least nine high-priority
targets located in the untested parts of the Kamoa-Kakula project area that are planned to be
drill tested this year.
Kamoa Copper has retained OreWin Pty. Ltd., of Australia, to prepare a follow-up economic
assessment (PEA) for the development of the Kakula and Kamoa deposits. The new PEA will
assess the economic parameters of an eight-million-tonne-per-annum (Mtpa), stand-alone
Kakula Mine, plus expanded, combined mining scenarios of up to 16 Mtpa from mines at both
the Kakula and the adjacent Kansoko Sud deposits.
Underground mine development at Kamoa’s Kansoko Mine has made good progress and is
expected to reach the high-grade copper mineralization at the Kansoko Sud Deposit within the
next two months. The service and conveyor declines each have been advanced more than 670
metres through underground development work.
Specialist engineering firm DRA Global is finalizing the design of the Kakula box cut.
Construction of the box cut is expected to begin in Q2 2017 and take approximately six months
to complete. Engineering and design work of the planned twin declines at Kakula also is well
advanced.
In October 2016, the Kamoa-Kakula Project began drawing clean, hydroelectric power from the
DRC national grid for development and construction activities. In September 2016, ongoing
upgrading work financed by Ivanhoe at the Mwadingusha hydropower plant began supplying
an initial 11 megawatts of electricity to the national grid.
Bench-scale metallurgical flotation test work at XPS Consulting and Testwork Services
laboratories in Falconbridge, Canada, achieved copper recoveries of 87.8% and produced a
concentrate with an extremely high grade of 56% copper using the flowsheet developed during
the Kamoa pre-feasibility study. The material tested was a composite of chalcocite-rich Kakula
drill core, assaying 8.1% copper.
On February 8, 2017, Ivanhoe received the fourth of five scheduled $41.2 million installment
payments from a Zijin Mining Group Co., Ltd. subsidiary as part of a strategic co-development
agreement under which Zijin acquired 49.5% of Ivanhoe’s majority stake in the Kamoa-Kakula
copper discovery. Zijin − through its subsidiary, Gold Mountains (H.K.) International Mining
Company Limited – agreed to pay a total of $412 million for the interest in Kamoa Holding
Limited, beginning with an initial payment of $206 million in 2015. The fifth and final US$41.2
million installment payment from Zijin is due on May 23, 2017.
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Following the signing of an agreement with the DRC government in November 2016, Ivanhoe
and Zijin Mining each now hold an indirect 39.6% interest in the Kamoa-Kakula Project, Crystal
River Global Limited holds an indirect 0.8% interest and the DRC government holds a direct
20% interest. Kamoa Holding Limited continues to hold an 80% interest in the Kamoa-Kakula
Project.
A pre-feasibility study for the redevelopment of the Kipushi zinc-copper-germanium-lead-silver
mine is being prepared by OreWin, of Australia. The comprehensive study will refine Ivanhoe’s
May 2016 preliminary economic assessment of Kipushi’s proposed redevelopment. The
upgraded mine is expected to produce an annual average of 530,000 tonnes of zinc concentrate
over a 10-year mine life at a total cash cost, including copper by-product credits, of
approximately $0.54 per pound of zinc.
At the Platreef platinum-palladium-gold-nickel-copper project in South Africa, sinking of Shaft 1
has reached a depth of more than 283 metres below surface. Sinking of Shaft 1 is proceeding at
an average rate of approximately 45 metres per month and is expected to reach the Flatreef
Deposit, at a depth of 777 metres below surface, in the first half of 2018. Sinking will continue
to a planned final depth of 980 metres below surface. Development work will include four shaft
stations at depths of 450 metres, 750 metres, 850 metres and 950 metres below surface. Shaft 1
will provide development access into the Flatreef Deposit while Shaft 2 is being developed.
The design has been completed for Platreef’s Shaft 2, which will have a total hoisting capacity
of six million tonnes per annum and an internal diameter of 10 metres. Construction of the box
cut for Shaft 2 is expected to begin in Q2 2017; when completed, Shaft 2 will be the main
production shaft at the Platreef Mine.
On February 24, 2017, the five-million-volt-ampere power line connecting the Platreef site to the
South African national grid was energized and now is supplying electricity to Platreef for shaft
sinking and construction activities. The new line, a collaboration between Platreef, the South
African government and local authorities, also is providing energy to the neighbouring
community of Mzombane, which previously was without electricity.
The feasibility study for the first phase of underground mine development at Platreef, which is
being finalized by DRA Global, is expected to be completed in Q2 2017.
Ivanhoe Mines’ three projects achieved a combined 10.98 million work hours free of lost-time
injuries (LTIF) by the end of 2016. Ivanhoe had recorded 25,973 LTIF hours at Platreef, 4.94
million hours at Kipushi and 6.01 million hours at Kamoa-Kakula to the end of 2016.
Principal projects and review of activities
1. Platreef Project
64%-owned by Ivanhoe Mines
South Africa
The Platreef Project is owned by Ivanplats (Pty) Ltd, which is 64%-owned by Ivanhoe Mines. A 26%
interest is held by Ivanplats’ historically-disadvantaged broad-based, black economic empowerment (B-
BBEE) partners, which include 20 local host communities with a total of approximately 150,000 people,
project employees and local entrepreneurs. In January 2017, Ivanplats reconfirmed its Level 3 status in its
third verification assessment on a B-BBEE scorecard. A Japanese consortium of ITOCHU Corporation and
its affiliate, ITC Platinum, plus Japan Oil, Gas and Metals National Corporation and JGC Corporation, owns
a 10% interest in Ivanplats, which it acquired in two tranches for a total investment of $290 million.
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The Platreef Project hosts an underground deposit of thick, platinum-group metals, nickel, copper and gold
mineralization in the Northern Limb of the Bushveld Igneous Complex, approximately 280 kilometres
northeast of Johannesburg and eight kilometres from the town of Mokopane in Limpopo Province.
On the Northern Limb, platinum-group metals mineralization is hosted primarily within the Platreef, a
mineralized sequence that is traced more than 30 kilometres along strike. Ivanhoe’s Platreef Project, within
the Platreef’s southern sector, is comprised of three contiguous properties: Turfspruit, Macalacaskop and
Rietfontein. Turfspruit, the northernmost property, is contiguous with, and along strike from, Anglo
Platinum’s Mogalakwena group of mining operations and properties.
Since 2007, Ivanhoe has focused its exploration and development activities on defining and advancing the
down-dip extension of its original discovery at Platreef, now known as the Flatreef Deposit, which is
amenable to highly mechanized, underground mining methods. The Flatreef area lies entirely on the
Turfspruit and Macalacaskop properties, which form part of the company’s mining right.
Health and safety at Platreef
The Platreef Project reached a total of 6,686,087 million hours worked in terms of the Mines Health and
Safety Act and the Occupational Health and Safety Act (OHSA) by the end of December 2016.
A Lost Time Injury (LTI) occurred to one of the shaft-sinking contract employees in December 2016.
Various remedial actions have been implemented to prevent a re-occurrence. The Platreef Project
continues to strive toward its workplace objective of an environment that causes zero harm to any
employees, contractors, sub-contractors and consultants.
Shaft 1 construction now in fast-sinking mode
Shaft 1, with an internal diameter of 7.25 metres, will provide access to the Flatreef Deposit and enable the
initial underground capital development to take place during the development of Shaft 2, the main
production shaft.
Following the successful commissioning of the stage and kibble winders and ancillary equipment, the
permanent sinking phase started in July 2016. The initial sinking phase was completed to 107 metres
below surface and the main sinking phase has been initiated. Shaft 1 had reached a depth of 283 metres
below surface on March 27, 2017.
An average sinking rate of 45 metres per month is expected during the main sinking phase. The shaft
includes a 300-millimetre concrete lining to prevent loose rock from falling into the shaft. The main sinking
phase is expected to reach its projected, final depth of 980 metres below surface in 2018. Shaft stations to
provide access to horizontal mine workings for personnel, materials and services will be developed at
depths of 450 metres, 750 metres, 850 metres and 950 metres below surface.
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Figure 1. Platreef Project’s Shaft 1 head gear, showing removal of excavated rock
from shaft-sinking operations.
Figure 2. Shaft-sinking crew operating jumbo drill rigs underground in Shaft 1.
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Eskom’s 5MVA line supplying grid power to the Platreef Project
Work is complete on the Platreef electrical substation, which has a capacity of five million volt-amperes
(MVA). Construction recently was completed on the power transmission lines from Eskom, South Africa’s
public electricity utility, which now is supplying the electricity for shaft sinking. Back-up generators have
been installed to ensure continued sinking operations during any interruptions in Eskom’s supply. The new
transmission lines also are expected to provide power to an adjacent community near the Platreef Project,
which will be a major, added community benefit.
Figure 3. Eskom’s five-million-volt-ampere power line, energized last month,
now is supplying electricity from th e national grid for shaft sinking
and construction activities at Platreef.
Platreef implementing a phased approach to a large, underground, mechanized mine
Ivanhoe plans to develop the Platreef Mine in phases. The initial annual rate of four million tonnes per
annum (Mtpa) is designed to establish an operating platform to support future expansions. This is expected
to be followed by a potential doubling of production to eight Mtpa; and then a third expansion phase to a
steady-state 12 Mtpa, which would establish Platreef among the largest platinum-group-metals mines in
the world.
Ivanhoe has made good progress on advancing the feasibility study of the first phase, which began in
August 2015. The study is being managed by DRA Global – with specialized sub-consultants including
Stantec Consulting, Murray & Roberts Cementation, SRK, Golder Associates and Digby Wells
Environmental – and is expected to be completed in the first half of 2017.
Planned mining methods to incorporate highly productive, mechanized methods
The selected mining areas in the current mine plan occur at depths ranging from approximately 700 metres
to 1,200 metres below surface. The main access to the Flatreef Deposit and ventilation system is expected
to be through four vertical shafts: 1, 2, 3 and 4. Shaft 2 will host the main personnel transport cage,
material and ore-handling system; shafts 1, 3 and 4 will provide ventilation to the underground workings.
Shaft 1, now under development, also will be used for initial access to the deposit and early underground
development.
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The planned mining will incorporate low-cost, mechanized mining methods, including long-hole stoping and
drift-and-fill mining. Mined-out areas will be backfilled with a mixture of tailings from the processing plant
and cement. The ore will be hauled from the stopes to a series of ore passes that will connect to a main
haulage level at Shaft 2, from where it will be hoisted to the surface for processing.
Bulk water and electricity supply
The Olifants River Water Resource Development Project (ORWRDP) is designed to deliver water to the
Eastern and Northern limbs of South Africa’s Bushveld Complex. The project consists of the new De Hoop
Dam, the raised wall of the Flag Boshielo Dam and related pipeline infrastructure that ultimately is
expected to deliver water to Pruissen, southeast of the Northern Limb. The Pruissen Pipeline Project is
expected to be developed to deliver water onward from Pruissen to the municipalities, communities and
mining projects on the Northern Limb. Ivanhoe is a member of the ORWRDP’s Joint Water Forum.
The Platreef Project’s water requirement for the first phase of development is projected to peak at
approximately 10 million litres per day, which is expected to be supplied by the water network. Ivanhoe also
is investigating various alternative sources of bulk water, including an allocation of bulk grey-water from a
local source.
The Platreef Project’s electricity requirement for a four-million-tonne-per-year underground mine,
concentrator and associated infrastructure has been estimated at approximately 100 million volt-amperes.
An agreement has been reached with Eskom for the supply of phase-one power. Ivanhoe chose a self-
build option for permanent power that will enable the company to manage the construction of the
distribution lines from Eskom’s Burutho sub-station to the Platreef Mine. The self-build and electrical supply
agreements are being formulated.
First phase of the relocation of informal graves completed
On February 2, 2017, a South African judge issued a ruling in favour of Ivanplats clearing the way for the
company to proceed with the relocation of informal graves in the vicinity of its Platreef Mine development
project.
A total of 75 informal graves were successfully relocated from land outside the perimeter of the active mine
development site to new burial plots in a formal cemetery. An additional 19 locations were investigated and
found not to contain human remains. The Ivanplats support program included assistance in providing new
burial plots in a formal cemetery, tombstones and related services.
Ivanplats plans to relocate an estimated 27 additional informal graves as part of the second phase of its
relocation program after the permits for the exhumations and reburials have been received. Further phases
on peripheral infrastructure areas also are planned. The relocation of informal graves will not impact on the
development of the Platreef Project.
Development of human resources and job skills
Work is progressing well on the implementation of Ivanhoe’s Social and Labour Plan (SLP), to which the
company has pledged a total of R160 million ($11 million) during the first five years, culminating in
November 2019. The approved plan includes R67 million ($4 million) for the development of job skills
among local residents and R88 million ($6 million) for local economic development projects.
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2. Kipushi Project
68%-owned by Ivanhoe Mines
Democratic Republic of Congo
The Kipushi copper-zinc-germanium-lead mine, in the Democratic Republic of Congo, is adjacent to the
town of Kipushi and approximately 30 kilometres southwest of Lubumbashi. It is located on the Central
African Copperbelt, approximately 250 kilometres southeast of the Kamoa-Kakula Project and less than
one kilometre from the Zambian border. Ivanhoe acquired its 68% interest in the Kipushi Project in
November 2011; the balance of 32% is held by the state-owned mining company, La Générale des
Carrières et des Mines (Gécamines).
Health, safety and community development
The Kipushi Project achieved a total of 4,943,935 work hours free of lost-time injuries, equivalent to 1,604
days, to the end of 2016. Malaria remains the most frequently occurring health concern at Kipushi with
approximately 200 cases reported in 2016 – an average of approximately 17 cases per month.
In an effort to reduce the incidence of malaria in the Kipushi community, a Water Sanitation and Health
(WASH) program has been initiated in cooperation with the Territorial Administrator and the local
community. The main emphasis of the program’s first phase is cleaning storm drains in the municipality to
prevent accumulations of ponded water, where malarial mosquitos breed.
The Fionet program to improve malaria diagnostics and treatment expanded to 300 Deki readers installed
in 252 medical service providers in Haut-Katanga and Lualaba provinces in Southern DRC, which host
Ivanhoe’s Kipushi and Kamoa-Kakula Projects. Deki readers provide automated readings of rapid
diagnostic tests to remove the human-error factor and avoid prescription of unnecessary medication. The
data is uploaded to a cloud server for analysis by the Ministry of Health in planning malaria-control
measures. There were more than 30,000 patient encounters, where Deki readers provided diagnostic
testing, during the past year, with approximately 63% of patients testing negative for malaria.
Road and drainage rehabilitation on the main thoroughfare through the centre of Kipushi municipality was
completed by the Haut-Katanga Office of Roads and Drainage (Office des Voires et Drainage) following the
civil works completed by MCK on behalf of the Kipushi Project.
Project development and infrastructure
The Kipushi Mine, which had been placed on care and maintenance in 1993, flooded in early 2011 due to a
lack of pump maintenance over an extended period. At its peak, water reached 851 metres below the
surface. Ivanhoe restored access to the mine’s principal haulage level at 1,150 metres below surface in
December 2013; since then, crews have been upgrading underground infrastructure to permanently
stabilize the water levels.
Since completion of the drilling program, water levels have been lowered to the bottom of Shaft 5, which is
planned to be the mine’s main production shaft. The shaft is eight metres in diameter, 1,240 metres deep
and approximately 1.5 kilometres from the planned main mining area. It provides the primary access to the
lower levels of the mine, including the Big Zinc Deposit, through the 1,150-metre haulage level and
underground ramp decline.
Engineering work has focused on the upgrading of Shaft 5 conveyances and infrastructure, cleaning the
shaft bottom to facilitate the installation of new hoist ropes, repairs and upgrades to the hoisting
infrastructure and cleaning and stripping of the main pump station at the 1,200-metre-level. A new, high-
volume ventilation fan also has been installed and commissioned on surface at Shaft 4 to provide fresh air
to the underground workings.