Kakula Mine to produce the world’s most environmentally-responsible copper

Ivanhoe Mines has announced that the company and its partners, Zijin Mining Group, Crystal River Global Limited and the government of the Democratic Republic of Congo (DRC), welcome the extremely positive findings of an independent definitive feasibility study (DFS) for the development of the Kakula Copper Mine; together with an updated pre-feasibility study (PFS) that includes ore mined from the nearby Kansoko Copper Mine in addition to ore mined from Kakula; and an updated, expanded preliminary economic assessment (PEA) for the overall development plan of all the copper discoveries made to date at the Kamoa-Kakula Project on the Central African Copperbelt in the DRC.

The new DFS incorporates the advancement of development and construction activities to date, and has once again confirmed the outstanding economics of the first phase Kakula Mine. As well, the expanded PEA shows the excellent potential to develop the project to a much larger scale and with a significantly larger production capacity.

The Kamoa-Kakula Copper Project — a joint venture between Ivanhoe Mines (39.6%), Zijin Mining Group (39.6%), Crystal River Global Limited (0.8%) and the Government of the Democratic Republic of Congo (20%) — has been independently ranked as the world’s largest, undeveloped, high-grade copper discovery by international mining consultant Wood Mackenzie.

“The definitive feasibility study is an independent verification by nine of the world’s top engineering firms of the robust economics generated by our initial, 6-Mtpa starter mine at Kakula; while the updated preliminary economic assessment is further validation of Kamoa-Kakula’s potential to rapidly expand to become the world’s second largest copper mine, with annual copper output of more than 800,000 tonnes,” said Co-Chair Robert Friedland.

“The definitive feasibility study also confirms what we’ve been telling investors for the past year and a half, and showcasing monthly in our progress galleries – the Kakula Mine is being rapidly built, it is ahead of schedule, and is on budget. The estimated remaining initial capital costs for the phased development at Kamoa-Kakula is US$0.7 billion, of which an estimated US$0.65 billion is to complete the 6-Mtpa mine at Kakula. Our proportionate share of the remaining initial capital costs is approximately 50%, with subsequent expansions funded by cash flows. The economic models assume financing will be on the basis of 100% equity, providing the opportunity to increase returns by leveraging commercial or other debt facilities.”

“Most importantly, the Kakula Mine has been designed to produce the world’s most environmentally-responsible copper, which is crucial for today’s new generation of environmentally- and socially-focused investors.

“Zijin shares our commitment to build the new mines at Kamoa-Kakula to industry-leading standards in terms of resource efficiency, water and energy usage, and minimizing emissions. We are blessed with ultra-high copper grades in thick, shallow and flat-lying orebodies ─ allowing for large-scale, highly-productive, mechanized underground mining operations; and access to abundant clean, sustainable hydro electricity to power our mines ─ providing us with a distinct advantage in our goal to become the world’s ‘greenest’ copper miner and be among the world’s lowest greenhouse gas emitters per unit of copper produced.

Mr. Friedland also said that Kamoa-Kakula recently retained Hatch Ltd., of Mississauga, Canada, a leading, international environmental consulting firm, to independently audit the greenhouse gas intensity metrics for the copper that will be produced at Kamoa-Kakula, demonstrating the company’s pledge to be a leader in environmentally-responsible copper mining.

“Kakula is projected to have an average grade of 6.6% copper over the initial five years of operation ─ a grade that is an order of magnitude higher than the majority of the world’s other major copper mines. In addition, approximately one half of the mine’s tailings will be mixed with cement and pumped back underground to fill mined-out voids, resulting in a surface tailings containment facility that is tiny compared to other major mines.

“Massive, high-grade deposits like we have found at Kamoa-Kakula ─ which have the potential to produce large quantities of copper for multiple generations ─ are very long-term plays. Conventional discounted cash flow analysis does not appropriately appraise the long-term option value inherent in tier one assets like Kamoa-Kakula.  As history has shown, such large-scale assets that produce for decades − through multiple commodity cycles − tend to generate profound value through phased expansions and exploration over their mine lives.

“People involved in the mining industry understand how incredibly challenging and time consuming it is to discover, permit, and build a tier-one mine anywhere in the world today. Kamoa-Kakula’s success is a testament to the perseverance and entrepreneurial spirit of the entire Ivanhoe management team; our talented employees at Kamoa-Kakula, comprised mainly of bright, young Congolese men and women; as well as the outstanding cooperation and teamwork of our joint-venture partners − Zijin Mining, Crystal River and the government of the DRC.

“Kakula is on track to begin production in under one year from now, which, considering we’ve been working in Africa for 27 years now, feels like tomorrow morning. I look forward to welcoming our loyal institutional shareholders, mining analysts and government supporters to our grand opening ceremony to witness firsthand the state-of-the-art mining complex we are building at Kamoa-Kakula. Our guests also will see the remarkable, recent infrastructure upgrades in the area around our project, including new highways, power plants and transmission lines,” Mr. Friedland concluded.

DEVELOPING THE WORLD’S NEXT GREAT COPPER DISTRICT

Co-Chair Yufeng “Miles” Sun commented: “In our journey to build Kamoa-Kakula and our adjoining, wholly-owned Western Foreland exploration licences, into the world’s next great copper district, Kakula is the first step. Our opportunity for value creation for all stakeholders is tremendous. Together with the DRC government and our Chinese partners, we are united in our shared objective of ensuring that the major copper discoveries we have made at Kamoa and Kakula, and the new discoveries still to come, can be predictably, efficiently and expeditiously developed into a world-scale mining venture with a lifespan of multiple generations.”

“We will continue working closely with our partners and the Congolese people to realize the full potential of Kamoa-Kakula and Western Foreland, generating widely-shared economic benefits and providing skills training to young Congolese women and men for the thousands of meaningful direct and indirect jobs that will be created in the years ahead,” Mr. Sun added.

Marna Cloete, Ivanhoe President and CFO, said: “Approximately 85% of our 4,700-strong workforce at Kamoa-Kakula are Congolese from nearby communities in Lualaba Province, and we continue to train and develop our local employees into management positions. We are extremely proud of our talented team of Congolese women and men.”

DEVELOPMENT SCENARIOS AT KAMOA-KAKULA

The Kamoa-Kakula Integrated Development Plan 2020 encompasses three development scenarios:

• Definitive feasibility study for stage one Kakula Mine development. The Kakula 2020 DFS evaluates the development of a stage one, 6-Mtpa underground mine and surface processing complex at the Kakula Deposit with a capacity of 7.6 Mtpa, built in two modules of 3.8 Mtpa, with the first already under advanced construction.
• Pre-feasibility study including Kansoko Mine development. The Kakula-Kansoko 2020 PFS evaluates the development of mining activities at the Kansoko Deposit in addition to the Kakula Mine, initially at a rate of 1.6 Mtpa to fill the concentrator at Kakula, eventually ramping up to 6 Mtpa as the reserves at Kakula are depleted.
• Expanded, subsequent development to four producing mines. The Kamoa-Kakula 2020 PEA includes an analysis of the potential for an integrated, 19-Mtpa, multi-stage development, beginning with initial production from the Kakula Mine, to be followed by subsequent, separate underground mining operations at the nearby Kansoko, Kakula West and Kamoa North mines, along with the construction of a direct-to-blister smelter. The Kamoa North Area comprises five separate mines that would be developed as resources are mined out elsewhere, to maintain the production rate at up to 19 Mtpa, with an overall life in excess of 40 years.

FIRST COPPER PRODUCTION EXPECTED IN LESS THAN A YEAR

On September 1, 2020, Ivanhoe Mines issued a detailed update on the development and construction progress being made at the Kakula and Kansoko mines. Underground development at the Kakula Copper Mine totalled 1,842 metres in August, bringing the cumulative total underground development completed to date to more than 20.6 kilometres – 6.0 kilometres ahead of schedule.

A second mining crew was recently added at Kamoa-Kakula’s second underground mine – Kansoko – providing the project with another source of high-grade copper ore.

At the end of August, the project’s pre-production surface ore stockpiles totalled an estimated 671,000 tonnes grading 3.36% copper, including 116,000 tonnes of high-grade ore grading 6.08% copper.

The stockpiles grade will continue to increase as the project approaches initial production, as beginning this month the majority of mining at Kakula is expected to be in ore zones near the centre of the deposit that have copper grades of between 5% and 8%.

Installation of ball mills and other major equipment for Kakula’s first, 3.8-Mtpa processing plant module is well underway. The final shipments of long-lead equipment for the processing plant are scheduled to arrive at site by the end of September, 2020.

Ivanhoe is fully funded to first copper production at Kamoa-Kakula, which is scheduled to begin in less than one year from now, in Q3 2021.