Ivanhoe Mines issues Q3 2021 financial results and review of operations, mine construction and exploration progress
November 15, 2021
Ivanhoe Mines issues Q3 2021 financial results and review
of operations, mine construction and exploration progress
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Ivanhoe Mines records a profit of $85.4 million in Q3
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Kamoa-Kakula Copper Mine achieved Phase 1 commercial production
on July 1, 2021
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More than 77,500 tonnes of copper produced year-to-date; copper
production guidance for 2021 raised to 92,500 to 100,000 tonnes
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Kamoa-Kakula sold 41,490 tonnes of payable copper and recognized
revenue of $342.6 million in Q3, with an inaugural operating profit of
$209.7 million and EBITDA of $233.2 million
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Kamoa-Kakula’s Phase 2 expansion to begin operations in Q2 2022,
doubling the mine’s projected annual copper production to
approximately 400,000 tonnes
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Excellent progress on all-weather road and geophysical surveys on
Ivanhoe’s Western Foreland exploration project
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Extensive drilling program on Western Foreland to continue in 2022
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Development of the world-scale Platreef palladium, rhodium, platinum,
nickel, copper and gold project in South Africa making rapid progress;
first production expected in 2024
TORONTO, CANADA ‒ Ivanhoe Mines (TSX: IVN; OTCQX: IVPAF) today announced its
financial results for the three and nine months ended September 30, 2021. This quarter
marks the first quarter of commercial production at the company’s Kamoa-Kakula
Copper joint-venture in the Democratic Republic of Congo (DRC).
Ivanhoe Mines also is advancing development of the Platreef palladium-rhodium-
platinum-nickel-copper-gold discovery in South Africa, which is scheduled to begin
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production in 2024, and is upgrading the historic Kipushi zinc-copper-lead-germanium
mine, also in the DRC, for a resumption of production. 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.
Watch a new video highlighting Kamoa-Kakula’s Q3 operational and financial
achievements: https://vimeo.com/645848726/9d4de9d7d6
HIGHLIGHTS
The Kamoa-Kakula Project began producing copper in May 2021 and achieved
commercial production on July 1, 2021. Production for the third quarter was 41,545
tonnes of copper in concentrate, with year-to-date production of more than 77,500
tonnes as of November 15, 2021.
The initial 2021 production guidance range for copper in concentrate of 80,000 to
95,000 tonnes was raised to 92,500 to 100,000 tonnes, reflecting the successful
completion of ramp-up of the Kakula Phase 1 concentrator.
During its first quarter of commercial production, the Kamoa-Kakula joint venture
sold 41,490 tonnes of payable copper and recognized revenue of $342.6 million, with
an operating profit of $209.7 million and an EBITDA of $233.2 million.
Kamoa-Kakula’s cost of sales per pound (lb) of payable copper sold was $1.08/lb,
while cash costs (C1) per pound of payable copper totaled $1.37/lb. Costs for the
quarter reflect the measured ramp-up of production at Kamoa-Kakula to steady-
state, and are expected to trend downward 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 construction is progressing well toward a Q2 2022 start-up,
which will see a doubling of the mine’s nameplate milling 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.
Ivanhoe Mines recorded a profit of $85.4 million for Q3 2021, compared to a loss of
$5.3 million for the same period in 2020. The company’s share of profit from the
Kamoa-Kakula joint venture and the finance income therefrom were the principal
contributors to the profit recorded in the current quarter.
The company has a strong balance sheet with cash and cash equivalents of $579.7
million on hand as at September 30, 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 facilities in place at Kamoa. Based on current market conditions, it
is anticipated that shareholder loan repayments from Kamoa-Kakula will commence
in 2022.
During Q3, Ivanhoe continued its 2021 copper exploration program on its Western
Foreland licences that cover approximately 2,550 square kilometres in close
proximity to Kamoa-Kakula. Work in Q3 primarily was focused on completing the
project’s infrastructure program (all-weather road building and bridge construction)
needed to allow Ivanhoe’s drilling crews to access the highly-prospective
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exploration licences located to the south and west of the Kamoa and Kakula
orebodies. Geophysical surveys (airborne, electromagnetic (EM), and gravity) were
advanced during the quarter and are either complete or are nearing completion.
Drilling during the quarter was focused on extending the copper discoveries at
Makoko and Kiala.
Platreef’s updated feasibility study for the phased development plan is progressing
well toward completion in early 2022. All design and engineering work has been
completed with the cost estimates well advanced. The Shaft 1 changeover is
progressing well in preparation for permanent rock hoisting in early 2022.
Construction activities on the Shaft 2 headframe also are advancing.
Financing arrangements for Platreef’s first phase of development are nearing
completion, which include a $300-million gold, palladium and platinum streaming
facility, and a senior project debt facility of up to $120 million.
The review of Kipushi’s development and financing plan with joint-venture partner
and state-owned mining company, Gécamines, is progressing well as Ivanhoe looks
to resume development activities. Discussions with potential financing sources are
in progress.
At the end of Q3 2021, Kamoa-Kakula had reached 3.00 million work hours free of a
lost-time injury, Kipushi had reached 3.66 million work hours free of a lost-time
injury, and Platreef had reached 310,000 work hours free of a lost-time injury. In
addition, the construction team at Kamoa-Kakula achieved 4.00 million hours worked
without a lost-time injury in October 2021, a milestone that underscores the strict
safety culture of the Kamoa Copper construction team.
On November 12, 2021, Ivanhoe promoted David van Heerden to the role of Chief
Financial Officer. David has been with Ivanhoe since 2011 in progressively senior
finance roles, most recently Vice President, Finance, Treasury and Tax.
Robert Friedland, Ivanhoe Mines’ Founder and Executive Co-Chair, remarked: “Today,
after a more than 25-year-long odyssey… and having overcome a myriad of challenges
worthy of Homer… that the critics claimed were impossible to hurdle… we are very
pleased to report our first full quarter of commercial production and our inaugural
operating profit. This achievement was made possible through the tireless efforts of
thousands of people over more than two decades. These include our dedicated
employees, our patient and loyal shareholders, our joint-venture partners, the
Government of the Democratic Republic of Congo, and of course, the people who live in
the vicinity of, and work at, this magnificent copper complex.
“We are immensely proud to say that Kamoa-Kakula – comprising the first world-scale,
greenfield copper discoveries in the Democratic Republic of Congo since the country
gained independence in 1960… is well on its way to joining the ranks of the world’s
largest and greenest copper producers, with the highest copper grades by a wide
margin.
“There is profound potential to discover additional tier-one copper deposits in the
Western Foreland basin, as our team of talented geologists and geoscientists search for
the next high-grade discovery, armed with our proprietary exploration knowledge
gained from 20 years of experience in the Western Foreland copper basin.
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“Turning an operating profit in just the first quarter of commercial production at Kamoa-
Kakula highlights the ability of the mine to deliver as promised, and to self-fund its
expansion to produce up to 800,000 tonnes of copper yearly, as demonstrated in
previous independent studies. Kamoa-Kakula will rapidly repay its construction costs
and pay dividends to its shareholders, including our most important partner, the
Government of the Democratic Republic of Congo.
“However, the biggest dividend from Kamoa-Kakula that will benefit everyone on Planet
Earth is invisible to the naked eye… it is the global warming gas that will never make it
into the atmosphere as the copper mined at Kamoa-Kakula makes its way into
tomorrow’s electric vehicles, energy storage systems and batteries, and renewable
power generation. That vision of a greener and more sustainable world is one we share
with all our stakeholders.
“The bright lights of Kamoa-Kakula have blinded the investment world to our Platreef
Project, which is among this planet's largest precious and electric metals deposits with
enormous quantities of palladium, rhodium, platinum, nickel and copper; and more
ounces of gold than many leading gold mines. For a long time, the development of
Platreef has been a destiny waiting to be fulfilled. However, Platreef’s time to shine now
is upon us.
“The initial scope of the phased development plan is to fast-track Platreef into
production in 2024, starting with an initial 700,000-tonne-per-annum underground mine.
The plan is designed to establish an operating platform to support potential future
expansions up to 12 million tonnes of ore per year. This would position Platreef among
the largest nickel and platinum-group-metals producing mines in the world, producing
in excess of 24,000 tonnes of nickel and 1.1 million ounces of palladium, rhodium,
platinum, and gold per year, and help feed the demand for these critical minerals that
the world needs as it transitions to a low carbon economy.”
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. The Kamoa-Kakula Project 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 the Kamoa-Kakula
Project in an amount equivalent to its proportionate shareholding interest in Kamoa Holding.
Ivanhoe and Zijin Mining 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.
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Kamoa-Kakula Q3 2021 summary of operating and financial data
Ore tonnes milled (000’s tonnes) 861
Copper ore grade processed (%) 5.89%
Copper recovery (%) 83.40%
Copper in concentrate produced (tonnes) in Q3 2021 41,545
Payable Copper sold (tonnes) 41,490
Sales revenue ($’000) 342,584
Cost of sales per pound ($ per lb) 1.08
Cash cost (C1) ($ per lb) 1.37
EBITDA ($’000) 233,212
9,858 tonnes of copper in concentrate were produced in Q2 2021, bringing the year-to-date
total tonnes produced as of September 30, 2021 to 51,403.
C1 cash costs are prepared on a basis consistent with the industry standard definitions by
Wood Mackenzie cost guidelines, but are not measures recognized under IFRS. In calculating
the C1 cash cost, the costs are measured on the same basis as the company's share of profit
from the Kamoa Holding joint venture that is contained in the financial statements. C1 cash
costs are used by management to evaluate operating performance and include all direct
mining, processing, and general and administrative costs. Smelter charges and freight
deductions on sales to final port of destination, which are recognized as a component of sales
revenues, are added to C1 cash cost to arrive at an approximate cost of delivered finished
metal. C1 cash costs exclude royalties and production taxes and non-routine charges as they
are not direct production costs.
C1 cash cost per pound of payable copper produced can be further broken down as
follows:
Mining ($ per lb) 0.36
Processing ($ per lb) 0.16
Logistics charges (delivered to China) ($ per lb) 0.35
Treatment, refining and smelter charges ($ per lb) 0.21
General and administrative expenditure ($ per lb) 0.29
C1 cash cost per pound of payable copper produced ($ per lb) 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. This news release
includes earnings before interest, tax, depreciation and amortization (EBITDA), and "Cash
costs (C1) 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 news
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 news release.
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Kamoa-Kakula’s Phase 1 (left) and Phase 2 concentrator plants. The Phase 1
plant began operations in May 2021 and the Phase 2 plant is on track to begin
operations in Q2 2022.
Nathalie Mulel, Kamoa Copper’s Senior Officer, Customs, with Kamoa Copper
blister copper ingots, containing approximately 99% copper, produced at the
Lualaba Copper Smelter near Kolwezi, DRC.
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Health and safety at Kamoa-Kakula
At the end of September 2021, the Kamoa-Kakula Project reached 3,002,776 work hours free
of a lost-time injury. Three lost-time injuries occurred early in Q3 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. Maintaining this high standard of risk
management remains a daily focus, to prevent future cases. During the first nine months of
2021, the Kamoa-Kakula Project conducted 6,083 COVID-19 tests, with 477 patients testing
positive for COVID-19.
With the support of the Democratic Republic of Congo government, UNICEF and other
stakeholders, Kamoa Copper SA completed its first round of COVID-19 vaccinations in June
2021. In conjunction with the DRC government’s extended program of vaccinations, the
second round of COVID-19 vaccinations at Kamoa-Kakula commenced in mid-August.
The Kamoa COVID-19 hospital continues to treat 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.
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 ball mills 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 first
phase, 3.8-Mtpa concentrator plant and associated facilities.
The Kamoa-Kakula Project 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 first phase, 3.8-Mtpa 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. The Phase 1, steady-state-design copper
recovery is approximately 86%, depending on ore feed grade.
41,545 tonnes of copper in concentrate were produced in Q3 2021 for a total of 51,403 tonnes
year-to-date as of September 30, 2021, for delivery to either the Lualaba Copper Smelter near
Kolwezi, or to international markets. This is an additional 4,653 tonnes to the 46,750 tonnes
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reported for the year-to-date to September 20, 2021, in Ivanhoe’s September 30, 2021 news
release.
Loading high-grade copper concentrate at the Kamoa-Kakula concentrate
storage warehouse for transport to the nearby Lualaba Copper Smelter for
processing into blister copper ingots, containing approximately 99% copper.
Producing Kamoa Copper blister copper ingots at the Lualaba Copper Smelter
near Kolwezi, DRC.