Ivanhoe Mines issues Q1 financial results and review of mine construction progress and exploration activities
May 13, 2021
Ivanhoe Mines issues Q1 financial results and review
of mine construction progress and exploration activities
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Copper production at the Kamoa-Kakula Mine to begin
imminently; first phase projected to produce approximately
200,000 tonnes of copper per year
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Kamoa-Kakula’s Phase 2 expansion, scheduled for Q3 2022, will
double annual copper output to approximately 400,000 tonnes
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Ivanhoe Mines pledges net-zero greenhouse gas emissions at the
Kamoa-Kakula Copper Mine
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Expanded 2021 exploration program underway on Ivanhoe’s
Western Foreland licences, searching for DRC’s next tier-one
copper discovery
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Development of the world-scale Platreef palladium, platinum,
rhodium, nickel, copper and gold project in South Africa making
good progress
TORONTO, CANADA ‒ Ivanhoe Mines (TSX: IVN; OTCQX: IVPAF) today announced its
financial results for the three months ended March 31, 2021. Ivanhoe Mines is a
Canadian mining company advancing its three mining projects in Southern Africa: the
Kamoa-Kakula copper mining complex in the Democratic Republic of Congo (DRC); the
Platreef palladium-platinum-rhodium-nickel-copper-gold discovery in South Africa; and
the extensive upgrading of the historic Kipushi zinc-copper-lead-germanium mine, also
in the DRC. Ivanhoe also is exploring for new copper discoveries on its Western
Foreland exploration licences in the DRC, near the Kamoa-Kakula Project. All figures
are in U.S. dollars unless otherwise stated.
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HIGHLIGHTS
Development of the Kakula Mine, the first of multiple, planned mining areas at
Ivanhoe Mines’ Kamoa-Kakula joint-venture copper project, has advanced ahead of
schedule and first copper concentrate production is expected within a few weeks.
Lower-grade ore will be fed into the plant during the final commissioning phase, to
ensure plant performance and copper recovery are satisfactory before increasing
the head grade.
Kamoa-Kakula’s Phase 2 construction is progressing slightly ahead of plan and is
scheduled to start up in Q3 2022, which will see a doubling of mill throughput to 7.6
million tonnes per annum (Mtpa). Phases 1 and 2 combined are forecast to produce
approximately 400,000 tonnes of copper per year. Based on independent
benchmarking, the project’s phased expansion scenario to 19 Mtpa would position
Kamoa-Kakula as the world’s second-largest copper mining complex, with peak
annual copper production of more than 800,000 tonnes.
Kamoa-Kakula’s initial production guidance, on a 100%-project basis, is between
80,000 and 95,000 tonnes of copper in concentrate for the remainder of 2021.
At the end of April 2021, Kamoa-Kakula’s pre-production ore stockpiles held three
million tonnes grading 4.74% copper, containing more than 140,000 tonnes of
copper.
Given the current copper price environment, Ivanhoe, together with its partner Zijin,
is exploring the acceleration of the Kamoa-Kakula Phase 3 concentrator expansion
from 7.6 Mtpa to 11.4 Mtpa, which may be fed from expanded mining operations at
Kansoko or a new mining area at Kamoa North (including the Bonanza Zone).
Kamoa Copper also is refining its longer-term downstream processing strategy,
including the potential construction of a smelter or hydrometallurgical processing
facility.
In March 2021, Ivanhoe Mines completed a US$575 million, 2.50% convertible senior
notes offering. The funding positions Ivanhoe and joint-venture partners to fast-
track additional hydropower upgrades to provide sufficient clean and renewable
electricity for Kamoa-Kakula expansions to 19 million tonnes of ore per annum and
beyond, including a smelter. Funding also allows for expansion and acceleration of
the Western Foreland exploration program, in pursuit of the next world-scale copper
discovery.
In April 2021, Ivanhoe announced that Ivanhoe Mines Energy DRC signed an
agreement with the DRC’s state-owned power company SNEL to upgrade a major
turbine at the Inga II hydropower facility. The upgraded turbine is expected to
produce 162 megawatts of clean, renewable hydropower, providing the Kamoa-
Kakula Copper Mine with sufficient, sustainable electricity for future expansions,
including a copper smelter.
In May 2021, Ivanhoe pledged to achieve net-zero operational greenhouse gas
emissions (Scope 1 and 2) at the industry-leading Kamoa-Kakula Copper Mine.
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Since the mine already is powered by clean, renewable hydro-generated electricity,
the focus of the company’s net-zero commitment will be on electrifying the project’s
mining fleet with new, state-of-the-art equipment powered by electric batteries or
hydrogen fuel cells, when commercially available.
In February, Ivanhoe began its 2021 exploration program on its Western Foreland
licences that cover a combined area of approximately 2,550 square kilometres in
close proximity to Kamoa-Kakula. The 2021 exploration budget has been increased
to $21 million to include additional drilling and surveys. The budget may be further
expanded based on program results.
To support Ivanhoe’s growth plans, future capital needs and widen shareholder
support, the company is considering the viability of seeking one or more listings on
international stock exchanges. Any such listing(s) would be subject to market
conditions and meeting listing requirements.
In February 2021, Ivanhoe announced that its South African subsidiary, Ivanplats, is
arranging project-level financing of up to $420 million to advance development of
the world-scale Platreef palladium, platinum, rhodium, nickel, copper and gold
project in South Africa.
Ivanplats has signed a non-binding term sheet with Orion Mine Finance, a leading
international provider of production-linked stream financing to base and precious
metals mining companies, for a $300-million gold, palladium and platinum streaming
facility. Ivanplats also has appointed two prominent, international commercial banks
– Societe Generale and Nedbank – as mandated lead arrangers for a senior project
debt facility of up to $120 million.
Ivanplats’ proposed financings follow the November 30, 2020 issuance of the
outstanding findings of an independent Platreef Integrated Development Plan 2020
(Platreef IDP20), which consists of an updated feasibility study (Platreef 2020 FS)
and a preliminary economic assessment (Platreef 2020 PEA). The initial capital cost
for the phased development plan under the Platreef 2020 PEA, starting at a mining
rate of 700,000 tonnes per annum (700 ktpa), is estimated at $390 million.
Detailed engineering is underway on Platreef’s 700-ktpa initial mine design, 770-ktpa
concentrator and associated infrastructure for the phased development plan, which
is scheduled to be incorporated into an updated feasibility study before the end of
2021. The Shaft 1 changeover is progressing well in preparation for permanent
hoisting by early 2022.
At the Kipushi Mine redevelopment project in the DRC, the Kipushi Project’s draft
feasibility study, and development and financing plan are being reviewed by
Ivanhoe Mines together with its joint-venture partner and state-owned mining
company, Gécamines. The project is maintaining a reduced workforce to conduct
maintenance activities and pumping operations.
Ivanhoe has made excellent progress in upgrading Kipushi’s underground
infrastructure to allow for mining to quickly begin at the ultra-high-grade Big Zinc
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orebody. Resumption of production at the mine now requires the construction of a
surface processing plant and other related surface production facilities.
Discussions are continuing with Gécamines to advance a new era of production at
Kipushi and it is anticipated that these discussions will be concluded with the
finalization of the feasibility study and the agreement on the development and
financing plan by mid-2021.
At the end of Q1 2021, Kamoa-Kakula had reached 628,000 work hours free of a lost-
time injury, Kipushi had reached 3.14 million work hours free of a lost-time injury,
and Platreef had reached 202,000 work hours free of a lost-time injury.
Principal projects and review of activities
1. Kamoa-Kakula Project
39.6%-owned by Ivanhoe Mines
Democratic Republic of Congo
The Kamoa-Kakula Project, 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.
Ivanhoe sold a 49.5% share interest in Kamoa Holding Limited (Kamoa Holding) to Zijin Mining
in December 2015 for an aggregate consideration of $412 million. In addition, Ivanhoe sold a
1% share interest in Kamoa Holding to privately-owned Crystal River for $8.32 million – which
Crystal River will pay through a non-interest-bearing, 10-year promissory note. Since the
conclusion of the Zijin transaction in December 2015, each shareholder has been required to
fund expenditures at the Kamoa-Kakula Project in an amount equivalent to its proportionate
shareholding interest in Kamoa Holding.
A 5%, non-dilutable interest in the Kamoa-Kakula Project was transferred to the DRC
government on September 11, 2012, for no consideration, pursuant to the 2002 DRC mining
code. Following the signing of an agreement with the DRC government in November 2016, in
which an additional 15% interest in the Kamoa-Kakula Project was transferred to the DRC
government, Ivanhoe and Zijin Mining now each hold an indirect 39.6% interest in the Kamoa-
Kakula Project, Crystal River holds an indirect 0.8% interest and the DRC government holds a
direct 20% interest. Kamoa Holding holds an 80% interest in the project.
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The Kakula concentrator plant and some of approximately 7,000 employees and
contractors who helped construct the mine ahead of schedule and within budget.
Phase 1 concentrator plant now energized with permanent hydroelectricity.
Health and safety at Kamoa-Kakula
At the end of March 2021, the Kamoa-Kakula Project reached 627,876 work hours free of a
lost-time injury. Nine lost-time injuries occurred in Q1 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
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treated, with cross contamination kept to a minimum. Maintaining this high standard of risk
management remains a daily focus, to prevent future cases.
The Kamoa COVID-19 hospital continues to treat patients when required, as construction
progresses for the expansion and upgrade of the primary healthcare wing of the hospital.
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 Kamoa-Kakula continues to review and update
its risk mitigation protocols, while ensuring that new medical advances are investigated and
applied to protect the health and safety of the workforce and community members.
The new primary healthcare wing of the Kamoa hospital under construction.
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Initial 3.8-Mtpa Kakula concentrator plant nearing completion, with first
copper concentrate production within weeks
Overall progress of Kamoa-Kakula’s first phase, 3.8-Mtpa mining and milling operation
(covering mine infrastructure, concentrator plant and surface infrastructure) now is
approximately 94% complete (as of end of April), compared to 90% at the end of March.
Overall construction of the project’s first phase, 3.8-Mtpa concentrator plant and associated
facilities is advancing rapidly and is approximately 98% complete (as of end of April), up from
92% complete at the end of March. The concentrator plant is essentially mechanically
complete, with first copper concentrate production scheduled for later this month or early June.
Lower-grade ore will be fed into the plant during the final commissioning phase, to ensure plant
performance and copper recovery are satisfactory before increasing the head grade.
Structural steel erection, platework installation and piping and valve installation for the first
concentrator plant are effectively complete, as is electrical, controls and instrumentation
installation.
The main mine 220-kilovolt (kV) Kamoa Consumer Substation (KCS) has been energized on
grid power, as has the 33kV KCS substation. In addition, the main plant 33kV substation and
all the plant medium-voltage and low-voltage substations have been energized, and the
concentrator plant is fully energized.
Construction complete (C1) sign off is nearing completion with approximately 75% of the
certificates signed off and handed over from construction to commissioning. C2 (pre
commissioning) commissioning is well underway with some areas (crushing and screening,
milling) more than 90% complete. Early C3 activities (checking for leaks, certain instrument
calibration, control-loop checks) have started with water being circulated through certain areas
in the plant.
Electrical installation at the backfill plant is ongoing and the backfill plant is scheduled to be
completed in July 2021, well before paste backfill is required for mining operations.
The backfill plant will be used to mix tailings from the processing plant with cement to produce
paste backfill. The backfill will be pumped back into the mine and used to help support mined-
out areas. Approximately one-half of the mine’s tailings will be sent back underground,
significantly reducing the surface tailings storage. Construction of the tailings storage facility is
progressing well and is scheduled to be completed on time to receive tailings from the
processing plant.
Construction and commissioning of the surface bulk reclaim tip, bypass conveyor system and
run-of-mine stockpile feed conveyor now is complete. The bulk reclaim tip system will be used
to feed ore from Kakula’s surface stockpiles to the processing circuit, as well as ore from the
Kansoko Mine when second phase operations begin.
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The Phase 1 concentrator plant, now mechanically complete.
Copper production guidance for 2021
The Kamoa-Kakula concentrator plant is essentially mechanically complete and first copper
concentrate production is scheduled for later this month or early June 2021. Assuming first
production starts at that time, Ivanhoe’s guidance for contained copper in concentrate
expected to be produced by the Kamoa-Kakula Project for the balance of 2021 assumes a
ramp-up from first production in line with published technical disclosures, and is as follows:
Kamoa-Kakula Project 2021 Guidance
Contained Copper in Concentrate 80,000 to 95,000 tonnes
All figures in the above table are on a 100%-project basis. Metal reported in concentrate is
prior to refining losses or deductions associated with smelter terms. Cost guidance is expected
to be provided once the Kamoa-Kakula Project’s Phase 1 plant has reached steady state
production. Guidance involves estimates of known and unknown risks, uncertainties and other
factors which may cause the actual results to be materially different.