Ivanhoe Mines issues first quarter 2022 financial results, as well as review of mine construction and exploration activities
May 10, 2022
Ivanhoe Mines issues first quarter 2022 financial results, as well as
review of mine construction and exploration activities
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Kamoa-Kakula Copper Mining Complex in the Democratic Republic of
Congo sold 51,919 tonnes of payable copper and recognized record
revenue of $519.6 million in Q1 2022
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The Kamoa-Kakula joint venture recorded record EBITDA of $399.4
million, and operating profit of $380.5 million for Q1 2022
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Kamoa-Kakula’s cost of sales total $1.08 per pound of payable copper
in Q1 2022, with C1 cash costs trending towards lower end of 2022
guidance at $1.21 per pound
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Kamoa-Kakula Phase 2 offtake agreements concluded
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Regional exploration drill campaign commences at the Western
Foreland Copper Project in the Democratic Republic of Congo
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Kamoa-Kakula positioned to be the world’s third-largest copper
producer by Q4 2024, with projected annualized copper output of
approximately 600,000 tonnes
■
Ivanplats completes Platreef's Shaft 1 changeover to a production
shaft, commences lateral mine development toward Flatreef orebody
TORONTO, CANADA ‒ Ivanhoe Mines (TSX: IVN; OTCQX: IVPAF) today announced its
financial results for the three months ended March 31, 2022. The first quarter was
highlighted by many important milestones, including: the early declaration of Phase 2
commercial copper production at the Kamoa-Kakula Mining Complex; the
commencement of lateral mine development toward the high-grade Flatreef platinum-
group-metals orebody at Platreef; a new agreement to return the ultra-high-grade
Kipushi Zinc Mine to commercial production; and the initiation of an extensive regional
drilling program at the Western Foreland Copper Exploration Project. All figures are in
U.S. dollars unless otherwise stated.
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HIGHLIGHTS
Ivanhoe Mines recorded a profit of $21.5 million for Q1 2022, compared to a profit
of $20.4 million for the same period in 2021. Ivanhoe Mines’ share of profit from the
Kamoa-Kakula copper joint venture and finance income therefrom totaling $115.4
million, were the principal contributors to the profit recorded in the first quarter.
The Kamoa-Kakula Mining Complex set a new quarterly production record during
the period, with 55,602 tonnes of copper in concentrate produced. Commercial
production from the Phase 2 concentrator was declared on April 7, 2022.
A de-bottlenecking program is underway at Kamoa-Kakula to expand processing
capacity of Phase 1 and Phase 2 concentrators by 21%, to a combined 9.2 million
tonnes of ore per year. Copper production from Kamoa Copper’s first two phases
is projected to exceed 450,000 tonnes per year by Q2 2023.
Kamoa-Kakula’s cost of sales per pound (lb.) of payable copper sold was $1.08/lb.
for Q1 2022, while cash costs (C1) per pound of payable copper produced totaled
$1.21/lb., compared to $1.12/lb. and $1.28/lb. respectively in Q4 2021.
During Q1 2022, Kamoa-Kakula sold 51,919 tonnes of payable copper and
recognized record EBITDA of $399.4 million and revenue of $519.6 million, with an
operating profit of $380.5 million.
On May 3, 2022, Ivanhoe Mines announced details of the Phase 3 expansion at
Kamoa-Kakula, which will include an additional 5-million-tonnes-per-annum
concentrator adjacent to new underground mines at Kamoa – named Kamoa 1 and
Kamoa 2. Phase 3 will increase total processing capacity to more than 14 million
tonnes of ore per annum, and grow annualized copper production to approximately
600,000 tonnes by the fourth quarter of 2024. This production level will elevate
Kamoa-Kakula to the world’s third-largest copper mining complex, and the largest
copper mining complex in Africa.
Ivanhoe Mines has a strong balance sheet with cash and cash equivalents of $562
million as at March 31, 2022, and expects that Kamoa-Kakula’s expansion capital
for Phase 2 and Phase 3 will be funded from copper sales and facilities at Kamoa.
During the first quarter of 2022, Ivanhoe commenced a regional drilling program,
expected to total approximately 95,000 metres, targeting Kamoa-Kakula-style
copper mineralization on its Western Foreland licences, which cover approximately
2,407 square kilometres in close proximity to the Kamoa-Kakula mining licenses.
Exploration models that successfully led to the discoveries of Kakula, Kakula West,
and the Kamoa North Bonanza Zone on the Kamoa-Kakula joint-venture mining
licence are being applied to the extensive Western Foreland land package by the
team of exploration geologists responsible for the previous discoveries.
On May 9, 2022, Ivanhoe Mines announced the completion of the Platreef Project's
Shaft 1 changeover to a production shaft, as well as the first blast on the 950-metre
level, which marked the commencement of lateral mine development toward the
high-grade Flatreef platinum-group-metals, nickel, copper and gold orebody.
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In February 2022, Ivanhoe Mines announced the outstanding results of a new
independent feasibility study for the Platreef Project that builds on the alternate
scenario to expedite production, based on a steady-state production rate of 5.2
million tonnes per annum, confirming the viability of a new phased-development
pathway to fast track Platreef into production in Q3 2024.
The Platreef 2022 Feasibility Study yields an after-tax NPV8% of $1.7 billion and IRR
of 18.5% at long-term consensus metal prices. At spot prices as at May 6, 2022, the
after-tax NPV8% increases to $3.5 billion and the IRR increases to 27%.
In February 2022, Ivanhoe Mines and Gécamines signed a new agreement to return
the ultra-high-grade Kipushi Zinc Mine back to commercial production.
Ivanhoe Mines announced the positive findings of an independent feasibility study
for the planned resumption of commercial production at Kipushi based on a two-
year construction timeline. The Kipushi feasibility study’s sensitivity analysis at
spot zinc prices of approximately $1.70/lb. (May 6, 2022), results in an after-tax
NPV8% of $2.4 billion with an after-tax real IRR of 75.8%.
On May 2, 2022, Ivanhoe Mines issued its fifth annual Sustainability Report,
highlighting the company’s commitment to becoming a global ESG leader in
mining.
Conference call information
Ivanhoe Mines will hold an investor conference call to discuss the Q1 2022 financial
results at 4:30 p.m. South African time / 10:30 a.m. Eastern time / 7:30 a.m. Pacific time
on May 10. The conference call dial-in is +1-647-794-4605 or toll free 1-888-204-4368,
quote “Ivanhoe Mines Q1 2022 Financial Results” if requested. Media are invited to
attend on a listen-only basis.
Link to join the live audio webcast: https://bit.ly/3DTATay
Principal projects and review of activities
1. Kamoa-Kakula Mining Complex
39.6%-owned by Ivanhoe Mines
Democratic Republic of Congo
The Kamoa-Kakula Mining Complex, a joint venture between Ivanhoe Mines and Zijin Mining,
has been independently ranked as the world’s fourth-largest copper deposit by international
mining consultant Wood Mackenzie. The project is approximately 25 kilometres west of the
town of Kolwezi and about 270 kilometres west of Lubumbashi. Kamoa-Kakula began
producing copper in May 2021 and achieved commercial production on July 1, 2021.
Ivanhoe sold a 49.5% share interest in Kamoa Holding Limited (Kamoa Holding) to Zijin Mining
and a 1% share interest in Kamoa Holding to privately owned Crystal River in December 2015.
Kamoa Holding holds an 80% interest in the project. Since the conclusion of the Zijin
transaction, each shareholder has been required to fund expenditures at Kamoa-Kakula in an
amount equivalent to its proportionate shareholding interest. Ivanhoe and Zijin Mining each
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hold an indirect 39.6% interest in the Kamoa-Kakula Mining Complex, Crystal River holds an
indirect 0.8% interest and the DRC government holds a direct 20% interest.
Kamoa-Kakula’s Phase 1 and Phase 2 concentrator plants now are in commercial
production.
Health and safety at Kamoa-Kakula
At the end of March 2022, Kamoa-Kakula reached 796,966 work hours free of a lost-time
injury. Three lost-time injuries occurred in Q1 2022. The project continues to strive toward its
workplace objective of zero harm to all employees and contractors.
Kamoa-Kakula has successfully focused on prevention, preparation, and mitigation in
managing the risks associated with COVID-19. Large-scale testing, combined with focused
preventative measures, ensured that positive cases were quickly identified, isolated, and
treated, with cross contamination kept to a minimum. Kamoa-Kakula also continues to focus
intensively on rolling out vaccinations across the workforce and local communities. More than
two thousand employees have received at least one dose of the vaccine.
As the pandemic evolves, the medical team at the Kamoa-Kakula hospital continues to review
and update risk-mitigation protocols to protect the health and safety of employees and
community members.
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Nursing staff inside the new medical facility at the Kamoa Hospital. (L-R) Alain
Sambwe Masengo; Papy Wedialumbele Lumasa; Paulin Mwanza Umbanga;
Augustin Kabedi Mujinga; Adellard Muyambo Kazenga; Salva Mujinga
Tshibamba; Timothee Bwana Ngoie.
Johnny Masonga Mumba, Mine Safety Officer, receives a COVID-19 vaccination.
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Kamoa-Kakula summary of operating and financial data
Q1 2022 Q4 2021 Q3 2021
Ore tonnes milled (000’s tonnes)
1,083
1,059
861
Copper ore grade processed (%) 5.91% 5.96% 5.89%
Copper recovery (%) 87.10% 86.40% 83.40%
Copper in concentrate produced (tonnes) 55,602 54,481 41,545
Payable Copper sold (tonnes) 51,919 53,165 41,490
Sales revenue ($'000) 519,595 488,536 342,584
Cost of sales per pound ($ per lb) 1.08 1.12 1.08
Cash cost (C1) ($ per lb) 1.21 1.28 1.37
EBITDA ($'000) 399,391 357,619 233,212
This release includes EBITDA and "C1 cash costs per pound" which are non-GAAP financial
performance measures. For a detailed description of each of the non-GAAP financial
performance measures used in this release, and a detailed reconciliation to the most directly
comparable measure under IFRS, please refer to the Non-GAAP Financial Performance
Measures section of this release and to the company’s MD&A for the three months ending
March 31, 2022. C1 cash costs are prepared on a basis consistent with the industry standard
definitions by Wood Mackenzie cost guidelines, but are not measures recognized under IFRS.
In calculating the C1 cash cost, the costs are measured on the same basis as the company's
share of profit from the Kamoa Holding joint venture that is contained in the financial
statements. C1 cash costs are used by management to evaluate operating performance and
includes all direct mining, processing, and general and administrative costs. Smelter charges
and freight deductions on sales to final port of destination, which are recognized as a
component of sales revenues, are added to C1 cash cost to arrive at an approximate cost of
delivered, finished metal. C1 cash costs exclude royalties and production taxes and non-
routine charges, as they are not direct production costs.
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C1 cash cost per pound of payable copper produced can be further broken down
as follows:
Q1 2022 Q4 2021 Q3 2021
Mining ($ per lb) 0.30
0.27
0.36
Processing ($ per lb) 0.15 0.17 0.16
Logistics charges (delivered to China) ($ per lb) 0.36 0.37 0.35
Treatment, refining and smelter charges ($ per lb) 0.20 0.24 0.21
General and administrative expenditure ($ per lb) 0.20 0.23 0.29
C1 cash cost per pound of payable
copper produced
($ per
lb) 1.21 1.28 1.37
All figures in the above tables are on a 100%-project basis. Metal reported in concentrate is
prior to refining losses or deductions associated with smelter terms.
Record quarterly production of 55,602 tonnes of copper in Q1 2022; Phase
2 concentrator declared commercial production on April 7, 2022
First ore was introduced into the Phase 2 milling circuit on March 21, 2022, and first copper
concentrate was produced approximately four months ahead of the originally announced
development schedule. The Phase 2 concentrator plant is a mirror image of the Phase 1 plant,
with a design throughput of 475 dry tonnes per hour, or 3.8 million tonnes of ore per year. Over
the last six months, the Phase 1 plant has consistently exceeded design ore throughput by
approximately 10% to 15%.
During the first 17 days of production, Phase 2 regularly exceeded its design throughput
capacity, and continues to perform at similar throughput and recovery rates to the Phase 1
concentrator. Commercial production from the Phase 2 concentrator was declared on April 7,
2022.
Copper recoveries progressively increased from an average of approximately 81% in July
2021 to approximately 85% in September 2021. Copper flotation recoveries averaged
approximately 86% in the fourth quarter of 2021 and achieved a record 88.5% in December
2021. The Phase 1, steady-state-design copper recovery is approximately 86%, depending on
ore feed grade.
The Phase 1 concentrator currently is running at a throughput that is in excess of its design
capacity of 3.8 million tonnes per annum by more than 15%, with 117% of design throughput
achieved in December.
Kamoa-Kakula set a new quarterly production record in the first quarter of 2022 with 55,602
tonnes of copper in concentrate produced, up from the 54,481 tonnes of copper in concentrate
produced in the fourth quarter of 2021 and 41,545 in the third quarter of 2021. A total of 1.08
million ore tonnes were milled during the first quarter of 2022 at an average feed grade of
5.91% copper.
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An aerial view of Kamoa-Kakula's Phase 2 concentrator warehouse and tarping
shed.
Augustine Kapenga, Health and Safety Officer, inspects construction of the
Kakula North truck tip.