Ivanhoe Mines responds to The Sentry report and Globe and Mail article impugning Ivanhoe’s business conduct in the Democratic Republic of Congo
December 19, 2022
Ivanhoe Mines responds to The Sentry report and Globe and Mail
article impugning Ivanhoe’s business conduct in the Democratic
Republic of Congo
VANCOUVER, CANADA – Ivanhoe Mines (TSX: IVN; OTCQX: IVPAF) has issued this
response today to a misleading and sensationalist “report” from an activist
organization based in the United States, called The Sentry (Sentry), and an associated
article in the Canadian Globe and Mail newspaper.
The Sentry report, and a subsequent story by Globe and Mail reporter Geoffrey York
that was published on December 15, 2022, include incomplete, selective and speculative
content pertaining to Ivanhoe Mines' business activities in the Democratic Republic of
Congo (DRC), and mineral exploration investments on its Western Foreland Exploration
Project. Both reports are irresponsibly framed to infer or theorize that some form of
corporate malpractice involving Ivanhoe’s Western Foreland Exploration Project took
place. However, they lack any tangible evidence that misconduct occurred.
The Sentry report attempts to frame a series of corporate transactions in a way that
could mislead readers into believing that Ivanhoe Mines participated in some form of
corporate malfeasance. The Sentry report resorts to the use of qualifying phrases,
including "it appears", and "concerns of corruption" while stating that it "could not
conclusively indicate" that certain events did take place.
Publishing unsubstantiated “reporting”, or frankly misinformation, represents a broad
risk to Canadian companies that have worked collaboratively with a variety of
multinational partners to build industry-leading operations for the benefit of
shareholders, host governments, employees and local communities. It is also of great
disservice to the DRC and its citizens, who have made significant strides in recent years
in increasing responsible, foreign direct investment and advancing the DRC’s pivotal
role in the development and production of strategic metals that benefit the global
economy.
The Globe and Mail participated in publishing speculative claims giving Sentry’s
inconsistent research major, unwarranted amplification, despite clearly not conducting
much of its own research on the validity of many elements of the Sentry report before
publication. It should be noted that except for the Globe and Mail, most other news
outlets have not covered the Sentry report up to this point in time.
The Globe and Mail’s December 15 story included a headline declaring that the Ivanhoe
Mines’ office in Vancouver, British Columbia, had been searched by the Royal Canadian
Mounted Police (RCMP), Canada’s federal police force. But the story did not provide
relevant context. After its introduction, the story does report that the police search took
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place more than one year ago and was publicly disclosed by Ivanhoe Mines on March
30, 2022.
Both the Sentry report and the Globe and Mail article are rife with misleading content
that selectively discloses supposed facts. This tactic has the effect of impugning
Ivanhoe Mines’ reputation, adversely impacting its business and negatively impacting
public Canadian corporations operating internationally.
Ivanhoe Mines is considering the impact on its share price correlated with the Globe
and Mail’s headline, given the sharp decline and subsequent sharp recovery in the
company’s share price over the two-day trading period that ended December 16, 2022.
Ivanhoe Mines conducts its business in alignment with national and international laws,
including in its partnering with DRC shareholders where required by law.
In this public statement, Ivanhoe Mines will now clarify certain facts, correct
misinterpretations of the Democratic Republic of Congo’s mining code and provide vital
context that is missing from the selected narrative published online by Sentry and then
widely disseminated by the Globe and Mail.
Reports by Sentry and Globe and Mail are not focused on Ivanhoe’s
Kamoa-Kakula joint venture or Kipushi project in the DRC
Ivanhoe Mines has an interest in three projects in the DRC: 1) the Kamoa-Kakula Mining
Complex in a joint venture with Zijin Mining Group (Zijin) and the Government of the
DRC (which owns a 20% interest); 2) the Kipushi Project, in a joint venture with state-
owned Gécamines (which owns a 32% interest); and 3) the Western Foreland
Exploration Project.
The Globe and Mail story refers only to the “mining project in Congo”, presumably
meaning Ivanhoe’s flagship Kamoa-Kakula Mining Complex, to date the company’s
most advanced project. Meanwhile, the Sentry report focuses on Ivanhoe’s Western
Foreland Exploration Project and related early-stage exploration work in the DRC
pursuing mineral discovery. This could mislead readers into assuming that the Globe
and Mail and Sentry reports cover all of Ivanhoe Mines’ activities in the DRC.
The Globe and Mail’s story fails to note that the search warrant obtained in 2021 by the
RCMP, Canada’s federal police force, was not related to Kamoa-Kakula or any of
Ivanhoe Mines’ other mineral projects. Ivanhoe Mines is continuing its cooperation with
the RCMP investigation, but because it is an ongoing matter Ivanhoe Mines is making
only limited comments regarding the investigation in this public statement. Ivanhoe
Mines re-iterates that no charges have been laid against the company, or any of its
directors, officers, or employees, and no financial provision has been made in relation
to this matter.
The RCMP search warrant relates to Stucky Ltd. (Stucky), Stucky Technologies and the
DRC state-owned power company, Société Nationale d’Electricité (SNEL). Stucky is now
a part of Gruner AG (https://www.gruner.ch/en/home), a century-old Switzerland-based
engineering, planning and consulting company that operates in the infrastructure and
energy sectors. Stucky itself has operated for more than 160 years.
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Since 2015, Ivanhoe Mines and Zijin through the Kamoa-Kakula joint venture, have
financed improvements in power generation and transmission across the DRC. The
upgrade of the Mwadingusha power station was completed in 2021 and the
refurbishment of unit #5 at the Inga II facility is expected to be completed in late 2024.
Over 250 megawatts (MW) of clean electricity generated from both facilities will be fed
directly into the DRC grid, benefiting the DRC, its people as well as the Kamoa-Kakula
and Kipushi operations.
All six new turbines at the 78-MW Mwadingusha hydropower plant have been
generating clean electricity since August 2021. The refurbishment of the facility,
owned by SNEL, was funded by the Kamoa-Kakula joint venture.
It is the Mwadingusha refurbishment that the Globe and Mail story fails to contextualize
for the reader. Stucky (and the Gruner group, more broadly) have a long, successful
history consulting on more than 1.5 gigawatts of hydroelectricity power projects in the
DRC. In addition to Mwadingusha, Stucky was engaged in the ongoing rehabilitation
and refurbishment of turbine #5 at Inga II. Stucky was first appointed by the World Bank
to carry out a technical assessment of the Inga II dam in 2013. However, Stucky’s
history with DRC projects dates back 70 years, when it designed the 100 MW Nzilo dam
commissioned in the early 1950s. Stucky is also the consulting engineer on Nzilo II,
which is expected to enter commercial operation in 2025.
Ivanhoe Mines and its joint-venture partner Zijin do not own any of this electrical
infrastructure, nor have they obtained any benefit aside from the increase of available
power through the grid. In fact, for funding the refurbishment of the Mwadingusha
facility, as well as unit #5 at Inga II, the Kamoa-Kakula joint venture continues to incur a
significant cost that will peak at more than US$300 million. Ivanhoe Mines’ share of the
funding is repaid solely by receiving a partial rebate on electricity charges from SNEL,
the DRC state owned electric power utility, which ceases when the loan funding is
repaid.
In addition to funding the improved electrical infrastructure that has benefited
Congolese livelihoods, the Kamoa-Kakula Mining Complex is also a major local long-
term employer and taxpayer. In Kamoa-Kakula’s short history, it has generated more
than 12,000 direct jobs, approximately 95% of which are held by Congolese nationals.
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Kamoa-Kakula has established a world-class training centre to provide opportunities for
unskilled workers, including local community members, to become highly skilled and
safe mining operators, and has actively promoted the inclusion of women in the
workforce.
Since the first copper production, which only commenced in May 2021, Kamoa-Kakula
has made tax and royalty payments to the Congolese government of more than US$500
million, as of September 30, 2022. These payments are set to continue to increase as
Kamoa-Kakula embarks upon its various expansion phases. Without the electrical
power upgrades and associated infrastructure, none of those benefits would have been
created.
The Sentry report demonstrates a fundamental misunderstanding of the
DRC mining code, the mining industry, and Ivanhoe’s Western Foreland
Exploration Project
The Sentry organization promotes itself as “an investigative and policy organization
that seeks to disable multinational predatory networks that benefit from violent conflict,
repression, and kleptocracy”. It is unclear how this relates in any way to Ivanhoe Mines’
history of exploration activities, what expertise the organization has in terms of mineral
exploration and development, or the DRC as a mining jurisdiction.
The Sentry report attempts to address title matters at Ivanhoe’s Western Foreland
Exploration Project in the DRC and implies improper corporate conduct across the rest
of Ivanhoe Mines’ portfolio in the country.
Early-stage exploration activities across Ivanhoe Mines’ vast, 2,400-sq.km
Western Foreland Exploration Project.
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The Western Foreland Exploration Project is an exploration-stage project in a remote
part of the DRC with significant mineral potential, but no operating mines. It is in an
area that lacks even basic infrastructure – including roads, electricity or
communications. It experiences a long rainy season, making the exploration for
valuable minerals seasonal, difficult and ultimately expensive. It is precisely these types
of areas that the world needs to explore to find the minerals demanded by many
governments and industries today.
Contrary to reality on the ground, the Sentry report leads readers to believe that the
Western Foreland Exploration Project is a treasure trove of valuable copper deposits
that Ivanhoe Mines has obtained through ill-gotten means by acquiring exploration
licences through “high-level connections”. This statement betrays a fundamental
misunderstanding of the exploration process and Ivanhoe Mines’ exploration activities
in the DRC. The value of the Western Foreland Exploration Project results only from
Ivanhoe Mines’ nearly 20 years of exploration activities and accumulated scientific
understanding of the region and underlying geology.
Ivanhoe Mines and its shareholders have assumed the risks and expended the time,
effort and money to explore for minerals, which may or may not be there. It is not the
case that the company obtained ownership of an existing mine. The Sentry report omits
this fundamental context as it would prefer readers believe that Ivanhoe Mines has been
awarded a valuable mining asset through dubious means. That simply is not true.
There also is a fundamental misunderstanding by Sentry of the legislative framework
under the DRC mining code and the process by which mineral licenses are granted. It is
not clear whether any person qualified to practice law in the DRC, or with any
experience in the country, assisted Sentry in understanding DRC mining and company
law. Ivanhoe Mines employs experienced, qualified executives and local counsel to
assure its understanding and compliance with the country’s laws and mining code.
For example, Sentry seem completely unaware that force majeure in the DRC extended
the stated holding periods on mineral licenses on two occasions, which naturally
extended the Western Foreland group of licence holdings. Sentry also fail to properly
disclose that it is legal under the DRC mining code for companies to re-apply for
expired licenses. Ivanhoe Mines has, on occasion, re-applied for permits that have
expired, per this legal process.
The report relies heavily on a myriad of technical legalese intended to infer some
nefarious “gaming” of the system. This concludes with “…the evidence suggests that,
with a lot of money at stake, the law didn’t seem to apply to a top operator with high-
level connections.” The law did apply. Sentry failed to understand the Congolese legal
framework it now purports to have exposed.
As the Sentry report notes, Ivanhoe Mines has held various exploration and mining
licences in the Western Foreland area since 2003 – almost 20 years ago. Although there
are signatures of copper mineralization, on none of these licences has a highly
significant mineral discovery been made, nor are there any operating mines. Not a
single dollar in revenue has been generated from the vast Western Foreland exploration
area. Rather, Ivanhoe Mines has invested more than US$100 million in this area building
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roads and bridges, conducting drilling and other exploration activities, as well as
training and employing Congolese in the effort. As a result, during the past two
decades, Ivanhoe Mines has only incurred losses from its activities on the Western
Foreland licences as it takes the risks necessary to try to find a new tier-one discovery.
Therefore, it is not clear on what basis the Sentry report suggests that there is “a lot of
money at stake.” The only money at stake is exploration risk capital that Ivanhoe Mines
and its shareholders have been using to search for copper, buried under a thick blanket
of Kalahari sands, which no other company was prepared to explore for before Ivanhoe
discovered Kamoa-Kakula.
Sentry calls Ivanhoe Mines a “top operator”, which is an accurate characterization.
Ivanhoe Mines has explored for, and identified, a world-class copper deposit at Kamoa-
Kakula which, through phased expansion, is projected to become the world’s third-
largest copper-producing mining complex. This effort was recognized in 2015 when
members of the Ivanhoe Mines exploration team received the prestigious Thayer
Lindsley Award from the Prospectors & Developers Association of Canada for the
discovery of the Kamoa copper deposit. This celebrated the experience and expertise of
Ivanhoe Mines in mineral exploration – exactly what one expects from a “top operator”.
It is logical and advantageous for the DRC government to grant exploration licences to
such a “top operator”. This is particularly true when the Western Foreland exploration
licences are adjacent to a world-class copper mine discovered by that very same “top
operator” with an unparalleled mining industry track record for discovery, development
and job creation in the DRC (and internationally). That “top operator” also has nearly
two decades of exploration experience on the Western Foreland and has invested more
than US$100 million in exploring unexplored geologic terrain. Ivanhoe Mines knows the
geology of the Western Foreland better than any other company, given its history of
exploration in the area. Accordingly, legal extensions and renewals of those licences
per the DRC legal framework allow Ivanhoe Mines to continue to use that legal and
exploration expertise in the search for the next Kamoa-Kakula – an outcome that would
be hugely beneficial to the DRC government, the Congolese people, and all of Ivanhoe
Mines’ stakeholders.
But the Sentry report frames the facts for the conclusion that it intends – if Ivanhoe
Mines was awarded an exploration licence, it must be because of “high-level
connections”. Sentry seems to not contemplate that Ivanhoe Mines was granted
exploration licences by the DRC government because it applied legally and followed the
regulatory process as prescribed by the mining code and was potentially given credit
for its distinguished track record of exploration success globally. That track record
means that it is the best candidate (both technically and financially) to explore for, and
hopefully again find, another world-class copper deposit, like the neighbouring Kamoa-
Kakula.
Instead, the Sentry report presents readers with a nearly impenetrable conspiracy
theory-like web of legal transactions. Perhaps it hopes to convince readers that Ivanhoe
Mines and the DRC government conspired and schemed to grant exploration or mining
licences to Ivanhoe Mines because the alternative thesis – that Ivanhoe Mines is the
most qualified candidate and mineral-title matters are legally complex affairs – would
not support the conclusion that Sentry has predetermined.
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Sentry’s activist approach to reporting on Ivanhoe Mines appears targeted, with the
assumption being that activity in DRC must be the result of corrupt activities. Sentry
then ignore, in this case, the qualification and experience of the applicant and the
lawfulness of the process, to continue to hold its conclusion rather than considering
that there are logical, rational and legal explanations for commercial events.
Ivanhoe Mines invites The Sentry to visit its operations and witness
genuine partnership in the DRC first-hand
Ivanhoe Founder & Executive Co-Chair Robert Friedland commented: “Ivanhoe Mines
invites the contributors of the Sentry report to Lualaba province, in the DRC to see how
we conduct our business… how we empower our Congolese stakeholders… how we
seek to minimize the environmental effects of our activities… how we foster and
support local social development… how we encourage women into the mining industry
at all levels… how we pay our taxes and royalties… and how we are reinventing mining.
The mining industry is changing. Its critics need to acknowledge that. Its critics also
must recognize that while there is always improvement to be had, pre-judging the entire
mining industry at every turn and making pre-determined conclusions before looking at
the facts neutrally and dispassionately does nothing to improve the industry, but only
serves to reduce the credibility of its critics.”
We encourage readers to review our annual sustainability and ESG reports, which can
be found here:
https://ivanhoemines.com/investors/sustainability-report/
Ivanhoe Mines has also made statements in the past on these matters, and we
encourage readers to review them again:
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https://ivanhoemines.com/news/2017/ivanhoe-mines-says-bloomberg-stories-on-
ivanhoes-success-in-the-democratic-republic-of-congo-are-flawed-by-a-deceptive-
headline/
https://ivanhoemines.com/news/2017/ivanhoe-mines-fact-based-response-issued-to-
congo-research-group-june-15-2017/
Ivanhoe Mines invites readers to review its responses provided to a series of questions
from The Sentry, as well as from Mr. York of the Globe and Mail, received just ahead of
publishing.
Responses to Globe and Mail: https://bit.ly/3BKqoXA
Responses to The Sentry: https://bit.ly/3W6TQPF
About Ivanhoe Mines
Ivanhoe Mines is a Canadian mining company focused on advancing its three principal
projects in Southern Africa: the major new, mechanized, underground mines at the
Kamoa-Kakula Mining Complex in the Democratic Republic of Congo, the development
of the Platreef palladium-rhodium-platinum-nickel-copper-gold discovery in South
Africa; and the restart of the historic Kipushi zinc-copper-germanium-silver mine, also
in the Democratic Republic of Congo.
Information contact
Vancouver: Matthew Keevil +1.604.558.1034
London: Tommy Horton +44 7866 913 207