Ivanhoe Mines issues fourth quarter and annual 2021 financial results, as well as review of mine construction and exploration activities
March 8, 2022
Ivanhoe Mines issues fourth quarter and annual 2021 financial results,
as well as review of mine construction and exploration activities
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Kamoa-Kakula copper joint venture in the Democratic Republic of
Congo sold 53,165 tonnes of payable copper and recognized revenue
of $488.5 million in Q4 2021
■
Kamoa-Kakula recorded operating profit of $198.9 million and an
EBITDA of $357.6 million for the fourth quarter
■
Kamoa-Kakula’s cost of sales total $1.12 per pound of payable copper
in Q4 2021, with C1 cash costs of $1.28 per pound
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Kamoa-Kakula’s Phase 2 expansion on track to begin operations in
April 2022, doubling the size of the mine’s concentrator plant
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Kamoa-Kakula positioned to be the world’s fourth largest copper
producer by Q2 2023, with projected annual copper output of more
than 450,000 tonnes
■
Construction of Ivanhoe’s Tier-One Platreef palladium, rhodium,
nickel, platinum, copper and gold project in South Africa advancing to
first production in Q3 2024
■
New agreement signed to return the ultra-high-grade Kipushi Mine in
the Democratic Republic of Congo to commercial production
TORONTO, CANADA ‒ Ivanhoe Mines (TSX: IVN; OTCQX: IVPAF) today announced its
financial results for the year ended December 31, 2021. Ivanhoe Mines is a leading
Canadian mining company developing and expanding its four principal mining and
exploration projects in Southern Africa: the Kamoa-Kakula copper mining complex in
the Democratic Republic of Congo (DRC) that began commercial operations in July
2021; the Platreef palladium, rhodium, nickel, platinum, copper and gold discovery in
South Africa; the historic Kipushi zinc-copper-lead-germanium mine in the DRC; and
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the expansive exploration program for new copper discoveries on Ivanhoe’s Western
Foreland exploration licences, near Kamoa-Kakula. All figures are in U.S. dollars unless
otherwise stated.
HIGHLIGHTS
Ivanhoe Mines recorded a profit of $48.2 million for Q4 2021, compared to a loss of
$10.9 million for the same period in 2020. Ivanhoe Mines’ share of profit from the
Kamoa-Kakula copper joint venture (Kamoa Holding) and finance income of $103.9
million were the principal contributors to the profit recorded in the fourth quarter.
The Kamoa-Kakula Mining Complex produced 54,481 tonnes of copper in
concentrate in Q4 2021, compared to 41,545 tonnes produced in Q3 2021.
Kamoa-Kakula produced a total of 105,884 tonnes of copper in concentrate in 2021,
significantly exceeding the initial 2021 production guidance range of 80,000 to
95,000 tonnes, as well as the increased guidance of 92,500 to 100,000 tonnes for
2021.
Kamoa-Kakula’s copper recoveries increased from an average of 81% in July 2021
to a record of 88.5% in December 2021. The Phase 1, steady-state-design copper
recovery is approximately 86%, depending on ore feed grade.
During Q4 2021, Kamoa-Kakula sold 53,165 tonnes of payable copper and
recognized revenue of $488.5 million, with operating profit of $198.9 million and
EBITDA of $357.6 million.
Kamoa-Kakula’s cost of sales per pound (lb) of payable copper sold was $1.12/lb
for Q4 2021, while cash costs (C1) per pound of payable copper produced totalled
$1.28/lb; compared to $1.08/lb and $1.37/lb in Q3 2021, respectively. Cash costs are
expected to continue to trend down as the Phase 2 concentrator plant is
commissioned and the mine’s fixed operating costs are spread over increased
copper production.
Kamoa-Kakula’s Phase 2 concentrator plant is on track to begin operations in April
2022, which will see a doubling of Kamoa-Kakula’s nameplate milling capacity
throughput to 7.6 million tonnes of ore per annum (Mtpa).
A de-bottlenecking program is underway to expand processing capacity of the
Phase 1 and Phase 2 concentrators by 21%, to a combined total of 9.2 million
tonnes of ore per year. The de-bottlenecking program is projected to boost copper
production from Kamoa-Kakula’s first two phases to more than 450,000 tonnes per
year by Q2 2023, positioning Kamoa-Kakula as the world's fourth largest copper
producer.
Ivanhoe Mines has a strong balance sheet with cash and cash equivalents of
$608.2 million as at December 31, 2021, and expects that the majority of Kamoa-
Kakula’s expansion capital expenditures on Phase 2 and Phase 3 will be funded
from copper sales and project facilities already in place. Based on current market
conditions, it is expected that Ivanhoe Mines will start to receive shareholder loan
repayments from Kamoa-Kakula in 2022.
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During Q4 2021, Ivanhoe continued its copper exploration program on its Western
Foreland licences that cover approximately 2,550 square kilometres in close
proximity to Kamoa-Kakula. An extensive drilling program is planned for 2022,
commencing with the onset of the dry season in the DRC, which will build upon
Ivanhoe Mines’ 2021 work program that was focused on airborne and ground-
based geophysics, soil sampling and road construction.
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.
In December 2021, the Platreef Project secured a $200-million gold stream
financing and additional $100-million palladium and platinum stream financing,
with the first prepayment of $75 million received in December 2021.
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
Mtpa, confirming the viability of a new phased-development pathway to fast-track
Platreef into production in Q3 2024.
Platreef feasibility study’s sensitivity analysis at current metal prices of
approximately $1,121/oz platinum, $2,979/oz palladium, $22,200/oz rhodium,
$1,995/oz gold, $4.84/lb copper and $13.12/lb nickel (March 7, 2022), results in an
after-tax NPV8% of $5.1 billion with an after-tax real IRR of 33%.
In February 2022, Ivanhoe Mines and Gécamines signed a new agreement to return
the ultra-high-grade Kipushi Mine back to commercial production.
In February 2022, 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. Kipushi feasibility study’s
sensitivity analysis at current zinc prices of approximately $1.84/lb (March 7, 2022),
results in an after-tax NPV8% of $3.0 billion with an after-tax real IRR of 86%.
At the end of 2021, Kamoa-Kakula had reached 2.7 million work hours free of a lost-
time injury, Kipushi had reached approximately 4.0 million work hours free of a
lost-time injury, and Platreef had reached 677,450 work hours free of a lost-time
injury.
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
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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
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 at dusk.
Health and safety at Kamoa-Kakula
At the end of December 2021, Kamoa-Kakula reached 2,696,794 work hours free of a lost-time
injury. One lost-time injury occurred in Q4 2021. 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. Maintaining
this high standard of risk management remains a daily focus, to prevent future cases. More
than two thousand employees have at minimum received their first dose of the vaccine.
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The Kamoa Hospital continues to treat COVID-19 patients when required, as construction
progresses well for the expansion and upgrade of the primary healthcare wing. Kamoa-
Kakula’s highly experienced doctors and nurses apply the latest medical treatments, supported
by a world-leading emergency response and paramedic team.
As the pandemic evolves, the medical team at the Kamoa Hospital continues to review and
update risk-mitigation protocols, while ensuring that new medical advances are investigated
and applied to protect the health and safety of employees and community members.
The new Kamoa Hospital is a world-class medical facility featuring state-of-the-
art equipment and highly-experienced doctors, nurses and paramedics.
John Botomwito, Kamoa Copper’s Superintendent of Health, in the ICU ward of
the new hospital.
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Kamoa-Kakula summary of operating and financial data
Q4 2021 Q3 2021
Ore tonnes milled (000’s tonnes) 1,059 861
Copper ore grade processed (%) 5.96% 5.89%
Copper recovery (%) 86.40% 83.40%
Copper in concentrate produced (tonnes) 54,481 41,545
Payable Copper sold (tonnes) 53,165 41,490
Sales revenue ($'000) 488,536 342,584
Cost of sales per pound ($ per lb) 1.12 1.08
Cash cost (C1) ($ per lb) 1.28 1.37
EBITDA ($'000) 357,619 233,212
Prior to the start of commercial production on July 1, 2021, 9,858 tonnes of copper in
concentrate was produced in Q2 2021, bringing the total tonnes produced for the year ending
December 31, 2021, to 105,884.
C1 cash costs are prepared on a basis consistent with the industry standard definitions by
Wood Mackenzie cost guidelines, but are not measures recognized under IFRS. In calculating
the C1 cash cost, the costs are measured on the same basis as the company's share of profit
from the Kamoa Holding joint venture that is contained in the financial statements. C1 cash
costs are used by management to evaluate operating performance and include all direct
mining, processing, and general and administrative costs. Smelter charges and freight
deductions on sales to final port of destination, which are recognized as a component of sales
revenues, are added to C1 cash cost to arrive at an approximate cost of delivered, finished
metal. C1 cash costs exclude royalties and production taxes and non-routine charges as they
are not direct production costs.
C1 cash cost per pound of payable copper produced can be further broken down
as follows:
Q4 2021 Q3 2021
Mining ($ per lb)
0.27
0.36
Processing ($ per lb)
0.17
0.16
Logistics charges (delivered to China) ($ per lb)
0.37
0.35
Treatment, refining and smelter charges ($ per lb)
0.24
0.21
General and administrative expenditure ($ per lb) 0.23 0.29
C1 cash cost per pound of payable copper
produced ($ per lb) 1.28 1.37
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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.
Copper concentrate production from the initial 3.8-Mtpa Kakula
concentrator plant commenced in May 2021; commercial production
achieved on July 1, 2021
First ore was introduced into the Phase 1, 3.8-Mtpa concentrator on May 20, 2021, and the
first saleable concentrate was filtered on May 25, 2021, marking the start of concentrate
production of the project’s Phase 1 concentrator plant and associated facilities.
The Kamoa-Kakula Mining Complex was deemed to have reached commercial production on
July 1, 2021, after achieving a milling rate exceeding 80% of design capacity and recoveries
close to 70% for a continuous, seven-day period. Revenue recognition, as well as depreciation
of Kamoa-Kakula’s Phase 1 concentrator plant and milling operation, commenced on this date.
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 Q4 2022 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 Mtpa by more than 15%, with 117% of design throughput achieved in
December.
54,481 tonnes of copper in concentrate were produced in Q4 2021, up from 41,545 in Q3
2021, for a total of 105,884 tonnes for the year ending December 31, 2021, for delivery to
either the Lualaba Copper Smelter near Kolwezi, or to international markets.
Spot price of copper (US$/lb) over the last 12 months.
$3.6
$3.8
$4.0
$4.2
$4.4
$4.6
$4.8
$5.0
Mar-21 Jun-21 Sep-21 Dec-21 Mar-22
Copper Price (US$/lb)
Copper Price (1 Year)
Source: Bloomberg
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The Phase 2 high-pressure-grinding-rolls (HPGR) stockpile feed conveyor (on the
right) began commissioning in February 2022. The Phase 1 HPGR feed conveyor
and stockpile are on the left.
One of Kamoa-Kakula’s talented Congolese mining crews at the entrance to the
Kakula Mine’s northern decline.