04:20:08 EDT Fri 29 Mar 2024
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or Name
USA
CA



Ivanhoe Mines Ltd
Symbol IVN
Shares Issued 1,203,844,213
Close 2020-09-21 C$ 5.53
Market Cap C$ 6,657,258,498
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Ivanhoe Mines JV to increase Kakula processing capacity

2020-09-21 09:38 ET - News Release

Mr. Robert Friedland reports

KAMOA-KAKULA JOINT VENTURE TO IMMEDIATELY ORDER LONG-LEAD EQUIPMENT TO ACCELERATE THE EXPANSION OF THE KAKULA PROCESSING PLANT FROM 3.8 MILLION TONNES PER ANNUM (MTPA) TO 7.6 MTPA

Ivanhoe Mines Ltd.'s Kamoa-Kakula copper joint venture has agreed to immediately proceed with orders for the long-lead equipment for the second, 3.8-million-tonne-per-annum concentrator module at the Kakula mine, which will double the mine's processing capacity from 3.8 million tonnes per annum to 7.6 million tpa.

The earlier-than-planned placement of the orders for the concentrator's long-lead equipment is expected to accelerate the completion of the phase 2 mill expansion from Q1 2023 to Q2 2022.

"There are many smart people in the mining industry who strongly believe that copper is quickly approaching a supply and demand divergence; where the amount of copper being produced globally will be far outstripped by demand," said Robert Friedland, co-chairman. "As such, we want to ensure that the Kamoa-Kakula operation reaches its near-term production potential as expeditiously as possible, while also maintaining our strong balance sheet.

"Getting into the queue now for the critical long-lead-time items, such as the ball mills, costs very little upfront money and enhances our flexibility to quickly move ahead on the first of multiple planned expansions.

"The recent, independently prepared prefeasibility study for the expanded, 7.6 million tpa mining operation -- sourcing ore from both the Kakula and Kansoko mines -- highlights the exceptional economic returns of this second phase development. Notably, the study outlines an after-tax NPV 8 per cent of $6.6-billion (U.S.) and an IRR of 69 per cent over a 37-year mine life, as well as payback of just 2.5 years," Mr. Friedland added. "This economic model assumes a copper price of $3.10 (U.S.) per pound, although at least one major global investment bank is forecasting prices ranging from $3.20 (U.S.) to $3.60 (U.S.) per pound over the next six to 12 months based on its view that a supply deficit will form in 2021. The studies also assume that financing will be on the basis of 100-per-cent equity, providing the opportunity to increase returns by leveraging commercial or other debt facilities."

Construction of Kakula's initial 3.8 million tpa processing plant is well under way, with the remaining long-lead items already delivered to site, with the exception of the transformers, expected in October. The bulk of the structural steel has already been delivered to site. Ivanhoe Mines is fully financed to phase 1 copper production at the Kakula mine, which is scheduled for Q3 2021, with consolidated cash of approximately $496-million (U.S.) at the end of June, 2020, and no significant debt.

With first phase production less than a year away, Kamoa-Kakula partners accelerate expansion plans and bring phase 2 copper production forward.

In order to bring forward the expansion of the Kakula processing plant from 3.8 million tonnes per annum to 7.6 million tpa from Q1 2023 to Q2 2022, the Kamoa-Kakula joint venture will order long-lead items with a total commitment value of approximately $100-million (U.S.) within the coming weeks, of which an estimated $25-million (U.S.) is expected to be spent this year.

In parallel, Ivanhoe and Zijin are in advanced discussions with respect to various financing proposals at the joint venture level, including an equipment financing facility, a line of credit and project financing. Ivanhoe expects that one, or more, of the financing facilities will be successfully concluded in the fourth quarter of this year. Ivanhoe will continue to finance its share of approximately 50 per cent of the expansion costs until such a time that an alternative financing facility has been concluded.

Kakula is projected to be the world's highest-grade major copper mine with an estimated average ore feed grade of 6.6 per cent copper over the first five years of operation, and 6.2 per cent copper over the first 10 years.

At the end of August, the project's preproduction surface ore stockpiles totalled an estimated 671,000 tonnes grading 3.36 per cent copper, including 116,000 tonnes of high-grade ore grading 6.08 per cent copper. The stockpile grade should continue to increase as the project approaches initial production; as beginning this month the majority of mining at Kakula is expected to be in the ore zone near the centre of the deposit that has copper grades of between 5 per cent and 8 per cent.

Given that the underground development completed to date is well ahead of schedule, the project's engineers are working to further optimize the mine plans outlined in the recent definitive feasibility study and prefeasibility study in order to accelerate the ramp-up of the mine and increase the tonnes of ore in the stockpile which may be processed through the expanded processing plant.

A phased expansion scenario to 19 million tpa in the new Kamoa-Kakula integrated development plan 2020 would position Kamoa-Kakula as the world's second-largest copper mining complex, with peak annual copper production of more than 800,000 tonnes.

On Sept. 8, Ivanhoe announced the outstanding economic results of the independent integrated development plan (IDP) for the Tier 1 Kamoa-Kakula copper project. The IDP comprises three development scenarios: Kakula definitive feasibility study (DFS), Kakula-Kansoko prefeasibility study (PFS) and Kamoa-Kakula preliminary economic assessment (PEA).

The estimated remaining initial capital cost is approximately $700-million (U.S.), based on commissioning the phase 2 mill expansion in Q1 2023. Ivanhoe's share is approximately 50 per cent, with subsequent expansions financed by cash flows.

The new DFS (definitive feasibility study) evaluates the stage one, six-million-tonne-per-annum Kakula mine currently being constructed. The PFS evaluates mining 1.6 million tpa from the Kansoko mine, in addition to six million tpa from Kakula, to fill a 7.6 million tpa processing plant at Kakula. The PEA evaluates an integrated, multistage development to achieve a 19 million tpa production rate.

The full scope of the expanded facilities covered by the PFS includes: underground expansion at the Kakula mine to reach an annual production rate of six million tpa; the ramp-up of mining operations at the Kansoko mine to a steady state of 1.6 million tpa; a second 3.8 million tpa concentrator module at Kakula; and associated surface infrastructure to support the expansion at the various sites.

The Kamoa-Kakula copper project is a joint venture between Ivanhoe Mines (39.6 per cent), Zijin Mining Group (39.6 per cent), Crystal River Global Ltd. (0.8 per cent) and the Democratic Republic of the Congo government (20 per cent).

Qualified persons

Disclosures of a scientific or technical nature regarding the Kamoa-Kakula project in this news release have been reviewed and approved by Steve Amos, who is considered, by virtue of his education, experience and professional association, a qualified person under the terms of National Instrument 43-101. Mr. Amos is not considered independent under NI 43-101 as he is the head of the Kamoa-Kakula project. Mr. Amos has verified the technical data disclosed in this news release.

Other disclosures of a scientific or technical nature in this news release have been reviewed and approved by Stephen Torr, who is considered, by virtue of his education, experience and professional association, a qualified person under the terms of NI 43-101. Mr. Torr is not considered independent under NI 43-101 as he is the vice-president, project geology and evaluation. Mr. Torr has verified the other technical data disclosed in this news release.

The stockpile grade estimates contained in this news release are based upon bulk ore sampling from underground headings. Sampling is done on each heading every second blast and three five-kilogram samples are taken. The samples are pulverized at the project's on-site laboratory and analyzed used using a portable XRF (pXRF) instrument. Kamoa Copper has routinely analyzed its exploration drill core for copper using pXRF, in addition to analysis at a commercial laboratory using four-acid digest and ICP-OES. These data have demonstrated that pXRF results can be relied upon for grade control and run-of-mine sampling.

Ivanhoe Mines has prepared a current, independent, NI 43-101-compliant technical report for the Kamoa-Kakula project, which is available on the company's website and under the company's SEDAR profile: "The Kamoa-Kakula 2020 Resource Update" dated March 25, 2020, prepared by OreWin Pty. Ltd., Wood PLC, DRA Global, SRK Consulting (South Africa) Pty. Ltd. and Stantec Consulting International LLC.

The technical report includes relevant information regarding the assumptions, parameters and methods of the mineral resource estimates on the Kamoa-Kakula project cited in this news release, as well as information regarding data verification, exploration procedures and other matters relevant to the scientific and technical disclosure contained in this news release.

A new independent, NI 43-101-compliant technical report for the Kamoa-Kakula project is being prepared and will be filed on SEDAR and on the Ivanhoe Mines website within 45 days of the issuance of Ivanhoe's Sept. 8, 2020, news release.

About Ivanhoe Mines Ltd.

Ivanhoe Mines is a Canadian mining company focused on advancing its three principal projects in Southern Africa: the development of new mines at the Kamoa-Kakula copper discoveries in the Democratic Republic of the Congo (DRC) and the Platreef palladium-platinum-nickel-copper-rhodium-gold discovery in South Africa; and the extensive redevelopment and upgrading of the historic Kipushi zinc-copper-germanium-silver mine, also in the DRC. Ivanhoe also is exploring for new copper discoveries on its wholly owned Western Foreland exploration licences in the DRC, near the Kamoa-Kakula project.

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