Ivanhoe Mines issues second quarter financial results and review of mine development and exploration activities CITIC Metal and Zijin Mining to invest an additional C$679 million
August 8, 2019
Ivanhoe Mines issues second quarter financial results
and review of mine development and exploration activities
CITIC Metal and Zijin Mining to invest an additional C$679 million
(US$515 million) in Ivanhoe Mines on August 16, 2019, positioning
Ivanhoe to fully finance its share of capital costs to bring the
Kakula Copper Mine in D.R. Congo to commercial production
Drilling expands the new Kamoa North Bonanza Zone to at least
550 metres, with an implied strike length of 2.7 kilometres
of shallow, thick, massive sulphide mineralization,
with copper grades up to 18.48% over 13.6 metres
New Kamoa Far North extension discovery made on Ivanhoe’s
100%-owned Western Foreland licences, immediately north
of the Kamoa-Kakula mining licence
TORONTO, CANADA ‒ Ivanhoe Mines (TSX: IVN; OTCQX: IVPAF) today announced its
financial results for the quarter ended June 30, 2019. All figures are in U.S. dollars
unless otherwise stated.
Ivanhoe Mines is a Canadian mining company focused on advancing its three mine-
development projects in Southern Africa: the Platreef palladium-platinum-nickel-copper-
gold-rhodium discovery in South Africa; the Kamoa-Kakula copper discovery in the
Democratic Republic of Congo (DRC); and the extensive upgrading of the historic
Kipushi zinc-copper-lead-germanium mine, also in the DRC. The company also is
exploring for new copper discoveries on its wholly-owned Western Foreland exploration
licences, adjacent to the Kamoa-Kakula mining licence.
HIGHLIGHTS
CITIC Metal Africa Investments Limited’s (CITIC Metal Africa) C$612 million ($464
million) second equity investment in Ivanhoe Mines is scheduled to close on August
16, 2019. The private placement transaction now has received all necessary internal
approvals, as well as recordals and registration with Chinese government regulatory
agencies. CITIC Metal Africa is a direct subsidiary of CITIC Metal Co., Ltd. (CITIC
Metal).
2
Ivanhoe’s joint-venture partner at Kamoa-Kakula, Zijin Mining Group Co., Ltd.,
exercised its existing anti-dilution rights on May 15, 2019, which will yield additional
proceeds to Ivanhoe of C$67 million (approximately $51 million) to be received
concurrently with the CITIC Metal Africa private placement.
Upon closing, the additional funds from CITIC Metal Africa and Zijin Mining will
position Ivanhoe to fully finance its share of the capital costs to bring the Kakula
Copper Mine to commercial production.
CITIC Metal Africa, currently Ivanhoe Mines’ largest shareholder with a 19.3%
ownership stake, will come to own 29.4% of Ivanhoe’s issued and outstanding
common shares when the placement is completed. Robert Friedland will remain
Ivanhoe’s second-largest shareholder and Zijin will maintain its 9.8% ownership
stake in Ivanhoe Mines.
CITIC Metal’s existing standstill provision will be amended to a maximum ownership
stake of 29.9% and extended until January 8, 2023 to provide sufficient time to bring
the Kakula mine to production, and to advance subsequent, planned expansions at
Kamoa-Kakula, as well as the Kipushi and Platreef projects.
On July 29, 2019, Ivanhoe announced that drilling on its 100%-owned Western
Foreland licences, immediately north of the Kamoa-Kakula mining licence, had
discovered the extension of the Kamoa Far North high-grade shallow copper corridor
on Ivanhoe’s wholly-owned licences for at least 400 metres. Six holes have been
completed in this new discovery area, two of which intersected visually strong
copper mineralization, and assays are pending.
On July 29, 2019, Ivanhoe announced assays from 19 new drill holes at the latest
high-grade discovery at Kamoa-Kakula ─ the Kamoa North Bonanza Zone. Multiple,
thick drill intercepts of more than 10% copper were recorded at the new discovery,
including 13.80% over 15.50 metres in the central discovery area.
The Kamoa North Bonanza Zone has been extended to at least 550 metres, with an
implied strike length of at least 2.7 kilometres. Six rigs now are drilling at Kamoa
North to extend the discovery’s strike length and fast track a resource estimate.
The controlling east-west striking structure thought to be responsible for the
massive copper sulphide mineralization in the Kamoa North Bonanza Zone is visible
as a lineament on airborne magnetic images and can be traced over a distance of up
to 20 kilometres. It trends west onto the adjacent Western Foreland exploration
licences that are 100%-owned by Ivanhoe Mines.
Development at the six million-tonne-per annum (6 Mtpa) Kakula Mine, the first of
multiple, planned mining areas at Kamoa-Kakula, is making excellent progress. The
first underground access drives are very close to intersecting Kakula’s initial high-
grade ore, and Ivanhoe and its joint-venture partner Zijin Mining are advancing
rapidly on earthworks for the processing plant and other surface infrastructure. The
joint venture also has issued purchase orders or tenders for the long-lead mining
and processing equipment. Initial copper concentrate production from the Kakula
Mine currently is scheduled for the third quarter of 2021.
3
Other engineering and construction activities underway at Kamoa-Kakula include
construction of a permanent road between the mine site and the Kolwezi airport,
construction of the first phase of accommodations for 1,000 employees and
contractors, and earthworks for the processing plant and other surface
infrastructure.
An independent preliminary economic assessment (PEA) issued in February 2019
indicates that Kamoa-Kakula has a potential production rate of at least 18 Mtpa.
Once this expanded rate is achieved, Kamoa-Kakula is projected to become the
world’s second largest copper mine, with peak annual production of more than
700,000 tonnes of copper.
At the Kipushi mine redevelopment project in the DRC, the definitive feasibility study
(DFS), which will update and refine the findings of the PFS issued in December 2017,
is being reviewed by Ivanhoe’s engineering team who continues to work toward
completion. Similar to the PFS, the DFS will focus on the initial mining of Kipushi’s
Big Zinc Zone.
At the Platreef mine development project in South Africa, the project’s first shaft
(Shaft 1) has been extended to a depth of more than 900 metres below surface. The
next station development for Shaft 1 is at 950 metres, with completion of the shaft to
a final depth of 982 metres planned for early 2020.
The concrete foundation (hitch) for the headframe was completed in mid-July. Shaft
2 will have an internal diameter of 10 metres and 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.
Ivanhoe is investigating an alternative early production plan for the Platreef Project,
targeting significantly lower initial capital, to accelerate first production by using
Shaft 1 as the mine’s initial production shaft, followed by expansions to the
production rate as outlined in the DFS.
On June 10, 2019, Ivanhoe issued its second annual Sustainability Report, which
provides an overview of the company’s sustainability programs and initiatives
conducted in 2018, and highlights the significant accomplishments achieved at its
three mine development projects and the new goals set for current and future
corporate activities.
At the end of Q2 2019, Kamoa-Kakula had recorded 15.0 million work hours free of
lost-time injuries, Kipushi 432,000 work hours free of lost-time injuries, and Platreef
1.7 million work hours free of lost-time injuries. Regrettably, a lost time injury
occurred at both the Platreef and Kipushi projects in July 2019.
4
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 approximately
150,000 people, project employees and local entrepreneurs. In Q2 2019, Ivanplats reached
Level 2 contributor status in its 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 in
Limpopo Province, approximately 280 kilometres northeast of Johannesburg and eight
kilometres from the town of Mokopane.
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 two contiguous
properties: Turfspruit and Macalacaskop. 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.
Health and safety at Platreef
As at the end of Q2 2019, the Platreef Project had reached a total of 1,700,812 lost-time,
injury-free hours worked in accordance with South Africa’s Mine Health and Safety Act and
Occupational Health and Safety Act. Unfortunately a lost-time injury (LTI) occurred in July 2019
after the project had reached 14 months without a LTI. The Platreef Project continues to strive
toward its workplace objective of an environment that causes zero harm to employees,
contractors, sub-contractors and consultants.
Platreef alternative production plan
Ivanhoe Mines is investigating an alternative production plan for the Platreef Project, targeting
significantly lower initial capital, to accelerate first production by using Shaft 1 as the mine’s
initial production shaft. This plan will focus on initially targeting the development of mining
zones accessible from Shaft 1 and maximizing the hoisting capacity of this shaft, followed by
expansions to the production rate as outlined in the DFS.
5
Shaft 1 now extends to a depth of more than 900 metres below surface
Shaft 1 reached the top of the high-grade Flatreef Deposit (T1 mineralized zone) at a depth of
780.2 metres below surface in Q3 2018 and has since been extended to a depth of more than
900 metres below surface. The thickness of the mineralized reef (T1 and T2 mineralized
zones) at Shaft 1 is 29 metres, with grades of platinum-group metals ranging up to 11 grams
per tonne (g/t) 3PE (platinum, palladium and rhodium) plus gold, as well as significant
quantities of nickel and copper. The 29-metre intersection yielded approximately 3,000 tonnes
of ore, estimated to contain more than 400 ounces of platinum-group metals. The ore is
stockpiled on surface for further metallurgical sampling.
The 750-metre-level and 850-metre-level stations have both been completed and will provide
initial, underground access to the high-grade orebody, enabling mine development to proceed
during the construction of Shaft 2. As sinking of Shaft 1 advances, one more station will be
developed at a mine-working depth of 950 metres. Shaft 1 is expected to reach its projected,
final depth of 982 metres below surface in early 2020.
The DFS planned for Shaft 1 to ultimately become the primary ventilation shaft during the
project’s four-Mtpa production case.
Shaft 2 box cut and concrete foundation completed in July
Shaft 2, to be located approximately 100 metres northeast of Shaft 1, will have an internal
diameter of 10 metres. It will be lined with concrete and sunk to a planned, final depth of more
than 1,104 metres below surface. It will be equipped with two, 40-tonne, rock-hoisting skips
capable of hoisting a total of six million tonnes of ore a 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 box-cut excavation to a depth of approximately 29 metres below
surface, including the concrete foundation (hitch), was successfully completed and will form the
foundation of the 103-metre-tall concrete headgear that will house the shaft’s permanent
hoisting facilities and support the shaft collar.
6
Construction of Platreef’s Shaft 2 headframe foundation has successfully been
completed.
Testing the ventilation at Shaft 1’s 750-metre-level station. The shaft currently is
at approximately 900 metres below surface. The next station is at 950 metres, and
completion of the shaft to a depth of 982 metres is planned for early 2020.
7
Figure 1: Schematic section of the Platreef Mine, showing Flatreef’s T1 and T2
thick, high-grade mineralized zones (red and dark orange), underground
development work completed to date in shafts 1 and 2 (white) and planned
development work (gray).
8
Underground mining to incorporate 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.
Planned mining methods will use highly productive, mechanized methods, including long-hole
stoping and drift-and-fill mining. Each method will utilize cemented backfill for maximum ore
extraction. As per the DFS, 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.
Long-term supply of bulk water secured for the Platreef Mine
On May 7, 2018, Ivanhoe announced the signing of a new agreement to receive local, treated
water to supply most of the bulk water needed for the first phase of production at Platreef. The
Mogalakwena Local Municipality has agreed to supply a minimum of five million litres of treated
water a day for 32 years, beginning in 2022, from the town of Mokopane’s new Masodi
Treatment Works. Initial supply will be used in Platreef’s ongoing underground mine
development and surface infrastructure construction.
Under terms of the agreement, which is subject to certain suspensive conditions, Ivanplats will
provide financial assistance to the municipality for certified costs of up to a maximum of R248
million (approximately $19.6 million) to complete the Masodi treatment plant. Ivanplats will
purchase the treated wastewater at a reduced rate of R5 per thousand litres for the first 10
million litres per day to offset a portion of the initial capital contributed.
Ivanplats received its Integrated Water Use Licence in January 2019, which is valid for 30
years and enables the Platreef Project to make use of water as planned in the 2017 DFS.
Development of human resources and job skills
The Platreef Project’s Social and Labour Plan (SLP), toward which it pledged a total of R160
million ($11 million) during the past five years, expires in November 2019. The approved plan
included R67 million ($5 million) for the development of job skills among local residents and
R88 million ($6 million) for local economic development projects. Consultation regarding the
project’s second SLP has commenced.
2. Kipushi Project
68%-owned by Ivanhoe Mines
Democratic Republic of Congo
The Kipushi copper-zinc-germanium-lead mine, in the Democratic Republic of Congo, is
adjacent to the town of Kipushi and approximately 30 kilometres southwest of Lubumbashi. It is
located on the Central African Copperbelt, approximately 250 kilometres southeast of the
Kamoa-Kakula Project and less than one kilometre from the Zambian border. Ivanhoe acquired
its 68% interest in the Kipushi Project in November 2011; the balance of 32% is held by the
state-owned mining company, La Générale des Carrières et des Mines (Gécamines).