Ivanhoe Mines issues financial results and review of operations for the third quarter of 2017 Development of twin declines starts at Kakula Discovery to provide access to high-grade copper resources Pre-feasibility study underway for a first-phase
November 9, 2017
Ivanhoe Mines issues financial results
and review of operations for the third quarter of 2017
Development of twin declines starts at Kakula Discovery
to provide access to high-grade copper resources
Pre-feasibility study underway for a first-phase
six-million-tonne-per-year mine at Kakula
New Kamoa-Kakula preliminary economic assessment
of two mines, with projected, combined production
of 12 million tonnes per year expected by the end of this year
Potential phased mine developments of up to 18 million tonnes
per year also being assessed for Kamoa-Kakula
Drilling at Kamoa-Kakula continues with 14 drill rigs focused
on expanding and upgrading copper resources,
and testing new targets
TORONTO, CANADA ‒ Ivanhoe Mines (TSX: IVN; OTCQX: IVPAF) today announced its
financial results for the third quarter ended September 30, 2017. All figures are in U.S. dollars
unless otherwise stated.
Ivanhoe Mines is a Canadian mining company focused on advancing its three principal
projects in Southern Africa: 1) Mine development at the Platreef platinum-group metals,
nickel, copper and gold discovery on the Northern Limb of South Africa’s Bushveld Complex;
2) mine development and exploration at the Tier One Kamoa-Kakula copper discovery on the
Central African Copperbelt in the Democratic Republic of Congo; and 3) upgrading at the
historic, high-grade Kipushi zinc-copper-silver-germanium mine, also on the DRC’s
Copperbelt.
HIGHLIGHTS
The comprehensive drilling program at the Kamoa-Kakula copper project continued
during the third quarter. Ten rigs are focused on expanding and upgrading copper
resources at the Kakula Discovery; four rigs are testing other targets on the 400-square-
kilometre Kamoa-Kakula mining licence.
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A new mineral resource estimate for the entire Kakula Discovery based on the current,
delineated strike extent of least 12 kilometres is expected around the end of this year.
The new evaluation will expand the May 2017 estimate and include an initial resource
estimate for the Kakula West Discovery and the saddle area between the existing Kakula
Mineral Resource area and the Kakula West Discovery.
On May 17, 2017, a mineral resource estimate for the then-defined 7.7-kilometre strike
length of the Kakula Discovery contained Indicated Mineral Resources of 116 million
tonnes at 6.09% copper, plus Inferred Resources of 12 million tonnes at 4.45% copper, at
a 3% cut-off. The combined Indicated Mineral Resources at both the Kamoa and Kakula
discoveries in the May 2017 estimate totalled one billion tonnes at 3.02% copper, plus
another 191 million tonnes of Inferred Resources at 2.37% copper, at a 1.4% cut-off.
The May 2017 Kakula estimate established the Kamoa-Kakula Project in the ranks of the
five largest copper deposits in the world. The project’s copper grades are the highest, by
a wide margin, of the world’s top 10 copper deposits. Both the original Kamoa Discovery
and the subsequent Kakula Discovery continue to remain open for significant expansion.
Ivanhoe holds an extensive, 100%-owned exploration land position in the Western
Foreland region, just to the west of the Kamoa-Kakula Mining Licence, which is highly
prospective for Kamoa-Kakula-type copper discoveries. Ivanhoe’s DRC exploration team
began an initial, $4 million exploration program on the Western Foreland exploration
licences in August.
Underground development at Kamoa’s Kansoko Mine, consisting of service and
conveyor declines, was completed in September 2017. The high-grade Kansoko Sud
copper mineralization was reached and approximately 13,500 tonnes of development ore
was stockpiled at surface. Various development options for Kansoko are being assessed
in conjunction with the ongoing mine development activities at Kakula.
On October 26, 2017, the surface box cut at the Kakula Discovery was completed.
Development of twin underground declines, similar to those at the Kansoko Mine, will
begin in the middle of this month. The first blast for the declines is scheduled for mid-
November 2017.
OreWin Pty. Ltd., of Australia, is nearing completion of a follow-up preliminary economic
assessment (PEA) for the development of the Kakula and Kamoa deposits. It is expected
that the increased resource base at Kakula will support a mine capacity of approximately
six million tonnes per annum (Mtpa). The capacity of the Kansoko Mine also is expected
to be six Mtpa, giving the two mines in the revised PEA a projected, peak mine
production of approximately 12 Mtpa from the presently delineated Kamoa and Kakula
deposits.
In light of the successful step-out drilling at Kakula West, as well as the potential to find
additional resources in high-priority targets located in the untested parts of the Kamoa-
Kakula Project area, the Kamoa-Kakula development plans will be reassessed and
amended as the project moves forward. Phased mine development options totalling up to
18 million tonnes per year are being assessed.
Orewin also is preparing a pre-feasibility study for a six-million-tonne-per-year, phase
one mine at Kakula. Given the ultra-high-grade copper mineralization at Kakula, the initial
development focus at Kamoa-Kakula is on fast-tracking advancement of the Kakula Mine.
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On November 1, 2017, Ivanhoe announced that sinking of Platreef’s Shaft 1 had reached a
depth of more than 500 metres below surface and development of the first of four planned
shaft stations – the 450-metre-level substation – had been completed. Shaft 1 is expected
to reach the top of the Flatreef mineralized zone, at a depth of 783 metres, in the third
quarter of 2018. Sinking of the shaft will continue to a planned final depth of 980 metres.
Early-works surface construction for Platreef’s Shaft 2 began last May with initial curtain
grouting around the box cut. Further work includes the excavation of a surface box cut to
a depth of approximately 29 metres and construction of the concrete hitch for the 103-
metre-tall concrete headgear (headframe) that will house the shaft’s permanent hoisting
facilities and support the shaft collar. The early-works construction is expected to be
completed in the fourth quarter of next year.
Ivanhoe is focused on advancing the Platreef Project along its critical path. The continued
development of shafts 1 and 2 will provide access to the Flatreef Deposit and help to
ensure that the project is able to meet the scheduled, first-phase start-up of the
underground mine and concentrator by 2022.
On July 31, 2017, Ivanhoe announced the positive results of an independent, definitive
feasibility study for the planned first phase of its Platreef platinum-group metals, nickel,
copper and gold mine in South Africa. The study envisages an initial annual throughput
rate of four million tonnes a year, producing 476,000 ounces of platinum, palladium,
rhodium and gold (3PE+Au), plus 33 million pounds of nickel and copper.
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 3PE+Au, net of by-products, including
sustaining capital cost. There is good potential for relatively quick and capital-efficient
expansion to six and eight million tonnes a year, and beyond, using start-up
infrastructure.
Ivanhoe has appointed five leading mine-financing institutions as Initial Mandated Lead
Arrangers to arrange debt financing for the development of the Platreef Mine. They are:
KfW IPEX-Bank, a German government-owned institution; Swedish Export Credit
Corporation; Export Development Canada; Nedbank Limited (acting through its Corporate
and Investment Banking division); and Societe Generale Corporate & Investment Banking.
Expressions of interest have been received for approximately $900 million of the targeted
$1 billion project financing.
The Platreef Project financing process is progressing, with technical and environmental
due diligence now underway. Discussions are underway on the financing of the broad-
based, black economic empowerment (B-BBEE) structure. Strategic discussions regarding
the Platreef Project also are continuing with significant global mining companies and
investors.
On October 30, 2017, Ivanhoe announced that that the company has agreed to rebuild 34
kilometres of track to connect the Kipushi Mine with the DRC national railway at Munama,
south of the mining capital of Lubumbashi. The Kipushi-Munama spur line, which has
been inactive since 2011, will be rebuilt under terms of a memorandum of understanding
(MOU) signed by Ivanhoe Mines and the DRC’s state-owned railway company, Société
Nationale des Chemins de Fer du Congo (SNCC).The DRC national railway is a key part of
the international rail corridor that links the DRC Copperbelt to major seaports at Durban
and Richards Bay in South Africa, Dar es Salaam in Tanzania and Lobito in Angola.
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A pre-feasibility study for the redevelopment of the Kipushi zinc-copper-germanium-lead-
silver mine is being prepared by OreWin. The comprehensive new study is expected to be
issued before the end of this year. It will update and refine Ivanhoe’s May 2016 preliminary
economic assessment of Kipushi’s proposed redevelopment.
Continuing strategic discussions concerning Ivanhoe Mines and its projects are ongoing
with several significant mining companies and investors across Asia, Europe, Africa and
elsewhere. Several investors that have expressed interest have no material limit on the
provision of capital. There can be no assurance that the company will pursue any
transaction or that a transaction, if pursued, will be completed.
Ivanhoe Mines’ three projects achieved a combined 8.2 million work hours free of lost-
time injuries (LTIF) by the end of Q3 2017. Ivanhoe had recorded 457,807 LTIF hours at
Platreef, 51,230 hours at Kipushi and more than 7.7 million hours at Kamoa-Kakula to the
end of Q3 2017.
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; 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, 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.
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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 platinum-group metals,
nickel, copper and gold mine in South Africa.
The independent 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 by 2022. As Phase 1 is being developed and commissioned, there
would be opportunities to refine the timing and scope of subsequent phases of expanded production.
Highlights include:
Indicated Mineral Resources contain 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 – an increase of 13% – 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 (oz.) 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.
After-tax Net Present Value (NPV) of $916 million, at an 8% discount rate.
After-tax Internal Rate of Return (IRR) of 14.2%.
The study 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 Inc. (Amec Foster Wheeler), Stantec Consulting, Murray & Roberts Cementation, SRK
Consulting, Golder Associates and Digby Wells Environmental.
Health and safety at Platreef
By the end of September 2017, the Platreef Project reached a total of 7,987,271 hours and 457,807
lost time injury-free (LTIF) hours worked in terms of South Africa’s Mines Health and Safety Act and
Occupational Health and Safety Act. The Platreef Project continues to strive toward its workplace
objective of an environment that causes zero harm to employees, contractors, sub-contractors and
consultants.
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Pre-shift safety meeting with members of the shaft-sinking team
Construction of first shaft station in Shaft 1 completed
Shaft 1, with an internal diameter of 7.25 metres, will provide access to the Flatreef Deposit and
enable the initial underground development to take place during the development of Shaft 2.
Ultimately, Shaft 1 will become the primary ventilation intake shaft during the project’s four-million-
tonne-per-annum production case. The average sinking rate is between 40 to 50 metres a month.
The shaft includes a 300-millimetre-thick, concrete-lined shaft wall.
The main sinking phase is expected to reach its projected, final depth of 980 metres below surface in
2019. Shaft stations to provide access to horizontal mine workings for personnel, materials, pump
stations and services will be developed at depths of 450 metres, 750 metres, 850 metres and 950
metres. The permanent sinking phase, which started in July 2016, had reached a depth of 480
metres on September 30, 2017. The first off-shaft lateral development on the 450-metre-level, which
will serve as an intermediate water pumping and shaft cable-termination station, was successfully
completed in September. The next off-shaft lateral development will be on the 750-metre-level and
will serve as the first mine working level.
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Members of Platreef’s shaft-sinking team in Shaft 1 at a depth of 500 metres
below surface, more than halfway to the planned final depth of 980 metres
Shaft 2 early-works construction underway
Shaft 2, to be located approximately 100 metres northeast of Shaft 1, will have an internal diameter
of 10 metres, will be lined with concrete and sunk to a planned, final depth of more than 1,100
metres below surface. It 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.
The headgear for the permanent hoisting facility was designed by South Africa-based Murray &
Roberts Cementation. The early-works for Shaft 2 include the excavation of a surface box cut to a
depth of approximately 29 metres below surface and the construction of the concrete hitch
(foundation) for the 103-metre-tall concrete headgear (headframe) that will house the shaft’s
permanent hoisting facilities and support the shaft collar. The box cut is expected to take
approximately 12 months to complete.
Drill-rig crew members during early-works surface construction at Shaft 2,
located approximately 100 metres northeast of Shaft 1
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Underground mining to use highly productive mechanized methods
The mining zones in the current Platreef mine plan occur at depths ranging from approximately 700
metres to 1,200 metres below surface. Primary access to the mining zones will be by way of Shaft 2
and secondary access to the mine will be via Shaft 1. During mine production, both shafts also will
serve as ventilation intakes. Three additional ventilation exhaust raises are planned to achieve
steady-state production.
Planned mining methods will use highly productive, mechanized methods, including long-hole
stoping and drift-and-fill. Each method will utilize cemented backfill for maximum ore extraction. The
ore will be hauled from the stopes to a series of internal ore passes and fed to the bottom of Shaft 2,
where it will be crushed and hoisted to surface.
The current mine plan has been improved over the 2015 PFS mine plan by optimizing stope design,
employing a declining Net Smelter Return (NSR) strategy and targeting higher-grade zones early in
the mine life. This strategy has increased the grade profile by 23% on a 3PE+Au basis in the first 10
years of operation and 10% over the life of the mine.
Shaft 2 engineered to allow for future expansion options
Shaft 2 has been engineered with a crushing and hoisting capacity of six Mtpa. This will allow a
relatively quick and capital-efficient first expansion of the Platreef Project to six Mtpa by increasing
underground development and commissioning a third, two-Mtpa processing module and associated
surface infrastructure as required.
A further expansion to more than eight Mtpa would entail converting Shaft 1 from a ventilation shaft
into a hoisting shaft. This would require additional ventilation exhaust raises, as well as a further
increase of underground development, commissioning of a fourth, two-Mtpa processing module and
associated surface infrastructure, as described in the Platreef preliminary economic assessment
(PEA) as Phase 2 of the project.
Preliminary expressions of interest received for approximately
$900 million of the targeted $1 billion Platreef project financing
On July 19, 2017, Ivanhoe Mines announced the appointment of another two leading, mine-financing
institutions — KfW IPEX-Bank, a German government-owned institution, and the Swedish Export
Credit Corporation (SEK) — as Initial Mandated Lead Arrangers (IMLAs) to arrange debt financing for
the ongoing development of the Platreef Mine.
KfW IPEX-Bank and SEK joined the three initial IMLAs — Export Development Canada, Nedbank
Limited (acting through its Corporate and Investment Banking division) and Societe Generale
Corporate & Investment Banking — that were appointed earlier this year.
The five IMLAs will make best efforts to arrange a total debt financing of up to $1 billion for the
development of Platreef’s first-phase, four-Mtpa mine. Preliminary expressions of interest now have
been received for approximately $900 million of the targeted $1 billion project financing. Negotiation
of a term sheet is ongoing. In addition, preliminary discussions have commenced with leading
financial institutions around the financing of the contribution by the black economic empowerment
partners to the development capital.