Ivanhoe Mines issues 2018 full-year results and review of exploration and development activities CITIC Metal and Zijin Mining invested more than C$800 million to advance Ivanhoe’s three world-scale mine projects in Southern Africa
March 28, 2019
Ivanhoe Mines issues 2018 full-year results
and review of exploration and development activities
CITIC Metal and Zijin Mining invested more than C$800 million
to advance Ivanhoe’s three world-scale mine projects
in Southern Africa
Fast-tracking of development at the initial Kakula Copper Mine
in D.R. Congo among highlights of Ivanhoe’s 2018 achievements
New, ultra-high-grade copper discovery at Kamoa North
highlights potential of making significant new discoveries
at the Kamoa-Kakula Project and on Ivanhoe’s wholly-owned
Western Foreland exploration area
TORONTO, CANADA ‒ Ivanhoe Mines (TSX: IVN; OTCQX: IVPAF) today announced its
financial results for the year ended December 31, 2018. 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 Southern Africa: the Platreef
palladium-platinum-nickel-copper-gold-rhodium discovery in South Africa; the Kamoa-
Kakula copper discovery in the Democratic Republic of Congo (DRC); and the extensive
upgrading of the historic Kipushi zinc-copper-lead-germanium mine, also in the DRC.
HIGHLIGHTS
On September 19, 2018, China-based CITIC Metal completed a long-term, strategic
cooperation and investment agreement that saw its direct subsidiary, CITIC Metal
Africa Investments Limited (CITIC Metal Africa), invest C$723 million ($555 million)
to advance Ivanhoe’s three projects in Southern Africa. Under the terms of the
investment agreement, CITIC Metal Africa acquired a 19.5% stake in Ivanhoe Mines
through a private placement at a price of C$3.68 per share.
Also on September 19, 2018, Zijin Mining Group, Ivanhoe’s joint-venture partner at
the Kamoa-Kakula Project, exercised its anti-dilution rights at a price of C$3.68 per
share, generating additional proceeds for Ivanhoe of C$78 million ($60 million). This
resulted in Zijin retaining a 9.7% ownership stake in Ivanhoe Mines – its level of
ownership prior to the completion of CITIC Metal Africa’s strategic investment.
Pursuant to the terms of the strategic cooperation and investment agreement with
CITIC Metal, Yufeng “Miles” Sun, President of CITIC Metal Group Limited, and Tadeu
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Carneiro, former Chief Executive Officer of Brazil-based Companhia Brasileira de
Metalurgia e Mineração, joined the Ivanhoe Mines Board of Directors. Mr. Sun was
appointed Co-Chairman of Ivanhoe, alongside Robert Friedland.
Underground development at the planned initial Kakula copper mine in the
Democratic Republic of Congo is making excellent progress. Construction of the
twin northern declines has been completed, with ongoing underground
development activities now focused on constructing lateral access drives and
ventilation raises. In addition, development of a ventilation decline on the southern
side of the Kakula orebody is underway.
On February 6, 2019, Ivanhoe announced an independent pre-feasibility study (PFS)
for the Kakula Mine. The stage one, six million-tonne-per-annum (6 Mtpa) operation
at Kakula, with estimated development capital of $1.1 billion, yields an after-tax
NPV8% of $5.4 billion and an IRR of 47% over a 25-year mine life. Initial production is
scheduled for early 2021, and the mine is expected to average 6.8% copper over the
first 5 years, with mine-site cash costs of $0.43 per pound of copper.
Discussions for financing the construction of the initial 6 Mtpa mine at Kakula are
progressing well with international and China-based financial institutions. CITIC
Metal, Ivanhoe’s largest shareholder, is assisting with the discussions.
On February 6, 2019, Ivanhoe also announced 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 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 $10.0 billion and an IRR of 41%. All figures in the PFS
and PEA are on a 100%-project basis.
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.
On January 30, 2019, Ivanhoe reported a 22.3-metre intersection of 13.05% copper
(at a 2% cutoff) in a shallow, flat-lying discovery within 190 metres of surface at the
Kamoa North exploration area on the Kamoa-Kakula mining licence. The drill hole
(DD1450) is the thickest, highest-grade copper intersection drilled to date at Kamoa-
Kakula, highlighting the potential for significant additional resource expansion.
Additional drilling is underway to test the strike and width of the east-west trending
fault structure that hosts the bonanza-grade copper in hole DD1450. Nine holes now
have been completed in the discovery area, and assays are pending for eight of the
holes. Based on visual interpretation of massive bornite and chalcopyrite in the
recent drill intersections, the new, high-grade zone of shallow, thick, flat-lying,
copper mineralization has been extended over a strike length of at least 200 metres,
a width of up to 80 metres, and drilled thickness of between 13 and 30 metres. The
new discovery zone is approximately 170 to 200 metres below surface.
Discovery hole DD1450 is associated with an east-west trending fault structure that
allowed copper-rich fluids to flow into the stratigraphy above the conventional,
Kamoa-Kakula mineralized zone and into a pyrite-rich, siltstone zone called the
Kamoa Pyritic Siltstone (KPS). The shallow depth, remarkable thickness and
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massive copper mineralization in the KPS discovery could prove extremely
significant if targeted early from a future Kamoa North decline.
The controlling east-west striking fault responsible for the massive copper sulphide
mineralization in the KPS is visible on airborne magnetic images and can be traced
over a distance length at least 10 to 20 kilometres. It trends west of Kamoa-Kakula
for a considerable distance onto the adjacent Western Foreland exploration licences
that are 100%-owned by Ivanhoe Mines. Additional rigs will be added to accelerate
the drill testing of this mineralizing structure. Assays for the outstanding drill holes
have been expedited and Ivanhoe plans to provide an update on this important
exploration program in the near future.
Kamoa-Kakula geologists also are exploring another zone of shallow, high-grade
copper mineralization in the far northern region of the Kamoa-Kakula mining
licence. This mineralized corridor trends north and south for more than nine
kilometres before swinging to the northwest and is projected to continue onto the
adjacent Western Foreland exploration licences.
Ivanhoe’s DRC exploration team is continuing with its regional drilling program
targeting Kamoa-Kakula-style copper mineralization in the Western Foreland region,
just to the west of the Kamoa-Kakula mining-licence area.
On October 1, 2018, Ivanhoe announced the Makoko Copper Discovery at Western
Foreland. Makoko, Ivanhoe’s third major copper discovery in the DRC, shows
similar geological characteristics to the tier-one Kamoa-Kakula discoveries.
On July 30, 2018, Ivanhoe announced a new Mineral Resource estimate for the
Kipushi Mine in the DRC that increased zinc-rich Measured and Indicated Mineral
Resources by 16%, from 10.2 million tonnes to 11.8 million tonnes. The new
estimate also increased Kipushi’s zinc grade from 34.89% to 35.34%. In addition, the
mine’s copper-rich Measured and Indicated Resources increased by 40% from 1.6
million tonnes to 2.3 million tonnes, with a slight increase in the copper grade from
4.01% to 4.03%.
The updated Mineral Resource will be used in the preparation of the Kipushi
definitive feasibility study (DFS), which is expected in the first half of this year. The
DFS will update and refine the findings of the PFS issued in December 2017. Similar
to the PFS, the DFS will focus on the initial mining of Kipushi’s Big Zinc Zone.
The December 2017 PFS analyzed the plan to bring Kipushi’s Big Zinc Zone into
production in less than two years, with a life-of-mine, average annual production
rate of 225,000 tonnes of zinc and cash costs of $0.48 per pound of zinc. The
planned return to production would establish Kipushi as the world’s highest-grade,
major zinc mine.
Discussions are continuing with potential strategic partners and lenders to support
Ivanhoe’s continuing advance toward a new era of production at Kipushi. Ivanhoe
has made significant progress in upgrading the mine’s underground infrastructure
and the company now has a much clearer path to a resumption of production from
the high-grade Big Zinc orebody.
On October 8, 2018, Ivanhoe announced that the sinking of Shaft 1 at the Platreef
palladium-platinum-nickel-copper-gold-rhodium discovery in South Africa reached
the top of the Flatreef orebody, at a depth of approximately 780 metres. The orebody
is 29 metres thick where Shaft 1 intersected it. Sinking now has reached a depth of
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855 metres and will continue to its planned final depth of 982 metres. The Platreef
mining team delivered the first ore from the underground mine development to
surface stockpiles for metallurgical sampling.
Surface construction for Platreef’s Shaft 2 is progressing. Construction now is
focused on the concrete hitch for the headframe, which is expected to be completed
by mid-2019. Shaft 2 will have an internal diameter of 10 metres and will be
equipped with two 40-tonne rock-hoisting skips with a capacity to hoist a total of six
million tonnes of ore per year – the single largest hoisting capacity at any mine in
Africa.
On December 18, 2018, Ivanhoe announced that Ivanplats has finalized a long-term
agreement with the Mogalakwena Local Municipality for the supply of local, treated
waste water to supply most of the bulk water needed for the first phase of
production at the Platreef Mine.
Based on the findings of an independent DFS issued in July 2017, the Platreef Mine
is projected to be Africa’s lowest-cost producer of platinum-group metals, with a
cash cost of $351 per ounce of platinum, palladium, rhodium and gold, net of by-
products, including sustaining capital costs.
On February 18, 2019, Ivanhoe announced that the weighted price of the ‘basket’ of
metals contained in the ore at the Platreef Project had risen to a new, three-year
high.
Ivanhoe continues to advance the arrangement of project financing for the
development of the Platreef Project. Negotiation of a term sheet is progressing well
with the Initial Mandated Lead Arrangers (IMLAs).
At the end of 2018, Kamoa-Kakula had recorded 12.31 million work hours free of
lost-time injuries, Kipushi 165,576 work hours, and Platreef 887,097 work hours.
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Ivanhoe Mines’ Executive Co-Chairman Robert Friedland and CITIC Metal Group
President Yufeng “Miles” Sun signed the landmark agreement to complete
CITIC’s C$723 million equity investment in Ivanhoe during a ceremony in Beijing
on September 19, 2018.
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 approximately
150,000 people, project employees and local entrepreneurs. A Japanese consortium of
ITOCHU Corporation; Japan Oil, Gas and Metals National Corporation and Japan Gas
Corporation, owns a 10% interest in Ivanplats, which it acquired in two tranches for a total
investment of $290 million.
The Platreef Project hosts an underground deposit of thick, platinum-group metals, nickel,
copper and gold mineralization on the Northern Limb of the Bushveld Igneous Complex in
Limpopo Province, approximately 280 kilometres northeast of Johannesburg and eight
kilometres from the town of Mokopane.
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 two contiguous
properties: Turfspruit and Macalacaskop. Turfspruit, the northernmost property, is contiguous
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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
As at the end of 2018, the Platreef Project had reached a total of 887,097 lost-time, injury-free
hours worked in terms of South Africa’s Mine Health and Safety Act and Occupational Health
and Safety Act. At the end of 2018, it had been nine months since the last lost-time injury
occurred at the Platreef Project, which continues to strive toward its workplace objective of an
environment that causes zero harm to employees, contractors, sub-contractors and
consultants.
Positive independent, definitive feasibility study for Platreef’s first-phase
development; Platreef projected to be Africa’s lowest-cost producer of platinum-
group metals
On July 31, 2017, Ivanhoe Mines announced the positive results of an independent, definitive
feasibility study (DFS) for the planned first phase of the Platreef Project’s palladium-platinum-
nickel-copper-gold-rhodium mine in South Africa.
The Platreef DFS covers the first phase of development that would include construction of a
state-of-the-art underground mine, concentrator and other associated infrastructure to support
initial production of concentrate. As Phase 1 is being developed and commissioned, there
would be opportunities to refine the timing and scope of subsequent phases of expanded
production.
The 2017 DFS highlights include:
Indicated Mineral Resources containing an estimated 41.9 million ounces of platinum,
palladium, rhodium and gold, with an additional 52.8 million ounces of platinum, palladium,
rhodium and gold in Inferred Resources.
Increased Mineral Reserves containing 17.6 million ounces of platinum, palladium,
rhodium and gold following stope optimization and mine sequencing work.
Development of a large, safe, mechanized, underground mine, with an initial four-Mtpa
concentrator and associated infrastructure.
Planned initial average annual production rate of 476,000 ounces of platinum, palladium,
rhodium and gold (3PE+Au), plus 21 million pounds of nickel and 13 million pounds of
copper.
Estimated pre-production capital requirement of approximately $1.5 billion, at a ZAR:USD
exchange rate of 13 to 1.
Platreef would rank at the bottom of the cash-cost curve, at an estimated $351 per ounce
of 3PE+Au produced, net of by-products and including sustaining capital costs, and $326
per ounce before sustaining capital costs.
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After-tax net present value (NPV) of $916 million, at an 8% discount rate.
After-tax internal rate of return (IRR) of 14.2%.
All figures are on a 100%-project basis unless otherwise stated. The DFS was prepared for
Ivanhoe Mines by principal consultant DRA Global, with economic analysis led by OreWin, and
specialized sub-consultants including Amec Foster Wheeler E&C Services (Amec Foster
Wheeler), Stantec Consulting, Murray & Roberts Cementation, SRK Consulting, Golder
Associates and Digby Wells Environmental.
The northern excavation at Shaft 1’s 750-metre station, showing the large scale
of the underground workings − ideal for safe, mechanized mining.
Shaft 1 now extends to a depth of 850 metres below surface
Shaft 1 reached the top of the high-grade Flatreef Deposit (T1 mineralized zone) at a depth of
780.2 metres below surface in Q3 2018 and has since been extended to the 850-metre level
with the 850-metre-level station development underway.
The thickness of the mineralized reef (T1 & T2 mineralized zones) at Shaft 1 is 29 metres, with
grades of platinum-group metals ranging up to 11 grams per tonne (g/t) 3PE (platinum,
palladium and rhodium) plus gold, as well as significant quantities of nickel and copper. The
29-metre intersection yielded approximately 3,000 tonnes of ore, estimated to contain more
than 400 ounces of platinum-group metals. The ore is stockpiled on surface for metallurgical
sampling.
The 750-metre-level station, including the steelwork and concrete construction, was
successfully completed in Q4 2018. The 750-metre-level and 850-metre-level stations will
provide initial, underground access to the high-grade orebody, enabling mine development to
proceed during the construction of Shaft 2.
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As sinking of Shaft 1 advances, one more station will be developed at a mine-working depth of
950 metres. Shaft 1 is expected to reach its projected, final depth of 982 metres below surface
in early 2020. Shaft 1 ultimately will become the primary ventilation shaft during the project’s
initial four-Mtpa production case.
Ongoing development work at Shaft 1’s 850-metre-level mine access station,
showing the northern top-cut excavation.
Spraying shotcrete over 6.5-metre anchor bolts and wire mesh to reinforce
the brow at Shaft 1’s 850-metre-level mine access station.