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Ivanhoe Mines Issues 2019 Full-Year Results and Review of Mine Construction Progress and Exploration Activities

Excellent development progress being made at the high-grade Kakula Copper Mine in D.R. Congo, with initial production on track for third quarter of 2021

February 2020 Independent Resource Estimate boosts the combined Kamoa-Kakula Project Indicated Mineral Resources to 1.4 billion tonnes grading 2.7% copper, at a 1% cut-off

Initial Indicated Mineral Resource estimate for the Kamoa North Bonanza Zone includes 1.5 million tonnes grading 10.7% copper, at a 5% cut-off

Drilling extends the new high-grade Kamoa Far North extension discovery on Ivanhoe's 100%-owned Western Foreland licences to at least 800 metres and the mineralized trend remains open

Toronto, Ontario--(Newsfile Corp. - March 8, 2020) - Ivanhoe Mines (TSX: IVN) (OTCQX: IVPAF) today announced its financial results for the year ended December 31, 2019. Ivanhoe Mines is a Canadian Mining company advancing its three joint-venture mining projects in Southern Africa: the Kamoa-Kakula copper discovery in the Democratic Republic of Congo (DRC); the Platreef palladium-platinum-nickel-copper-gold-rhodium discovery in South Africa; and the extensive upgrading of the historic Kipushi zinc-copper-lead-germanium Mine, also in the DRC. All figures are in U.S. dollars unless otherwise stated.

HIGHLIGHTS

  • CITIC Metal Africa Investments Limited's (CITIC Metal Africa) C$612 million ($459 million) second equity investment in Ivanhoe Mines at C$3.98 per share successfully closed on August 16, 2019. The investment is an integral part of Ivanhoe and CITIC Metal's long-term strategic cooperation and brought CITIC Metal's investment in Ivanhoe Mines in less than one year to more than $1.0 billion. On the same date, CITIC Metal's Vice President Manfu Ma was appointed to Ivanhoe's Board of Directors, increasing CITIC Metal's appointees to Ivanhoe's 11-person Board to three.
  • Also on August 16, 2019, Ivanhoe's joint-venture partner at Kamoa-Kakula, Zijin Mining Group Co., Ltd. (Zijin Mining), provided additional proceeds to Ivanhoe of C$67 million ($50 million) also at C$3.98 per share through the exercise of its anti-dilution rights. Zijin Mining's Chairman Chen Jinghe was elected to Ivanhoe's Board on June 28, 2019.
  • CITIC Metal Africa and Zijin Mining are each subject to long-term standstill agreements with Ivanhoe Mines that limit the maximum number of shares each may acquire, which in the case of CITIC Metal Africa is 29.9% until January 8, 2023, and in the case of Zijin currently is 13.88% until December 7, 2026, beyond which each can only acquire shares on a consensual, negotiated basis with Ivanhoe Mines until the standstills expire. Zijin Mining's maximum allowable shareholding under its standstill increased from 9.9% to 13.88% on completion of the rebalancing transaction announced by Ivanhoe on October 8, 2019.
  • On October 8, 2019, Ivanhoe and Zijin announced the installation of a stand-alone executive team to take Kamoa-Kakula to commercial production. Mark Farren, formerly Ivanhoe's Executive Vice President, Operations, was appointed as the Chief Executive Officer of the Kamoa-Kakula Copper Joint Venture. Dr. Yong Chen of Zijin Mining was appointed Chief Operating Officer.
  • In two concurrent moves to further enhance Ivanhoe's development and operating capabilities, Louis Watum, Ivanhoe's DRC country manager, was appointed President of the Board of Directors of Kamoa Copper SA, the DRC operating company of the joint venture between Ivanhoe Mines, Zijin Mining, Crystal River and the Government of the Democratic Republic of Congo that is developing the Kamoa-Kakula Project. South African mining veteran Warwick Morley-Jepson was appointed as Ivanhoe's new Chief Operating Officer, assuming the duties formerly held by Mr. Farren.
  • Development of the Kakula Mine, the first of multiple, planned mining areas at Kamoa-Kakula, is making excellent progress. The first underground access drives intersected Kakula's initial high-grade ore (+3% copper) in late August, then intersected an even higher grade zone (approximately 6% copper) in late October as the drives advance towards mining zones of +8% copper in the center of the Kakula deposit. Ivanhoe and its joint-venture partner Zijin Mining are advancing rapidly on civil works for the processing plant and other surface infrastructure. The joint venture has issued purchase orders for the long-lead mining and processing equipment. The first oversized loads of equipment for the processing plant arrived at the mine on February 21, 2020. Initial copper concentrate production from the Kakula Mine is scheduled for the third quarter of 2021.
  • In parallel with the construction of Kamoa-Kakula's phase 1 Kakula Mine, work is progressing on the independent Kakula Definitive Feasibility Study (DFS) and an updated Integrated Development Plan for the entire Kamoa-Kakula mining complex. The Kakula DFS will provide an increased level of accuracy for the design, production schedule and expenditures for the initial phase of mine development at Kakula. The Integrated Development Plan will include details on the planned expansion phases for the greater Kamoa-Kakula mining complex, incorporating updates for mineral resources, production rates and economic analysis.

  • Following the completion of basic engineering and procurement, as part of the forthcoming Kakula DFS, Kakula's initial processing plant capacity has increased from 3.0 Mtpa to 3.8 Mtpa. The expansion in initial plant capacity requires increasing the underground mining crews in 2020 from 11 to 14 to ensure sufficient mining operations to feed the expanded plant and create pre-production stockpiles of approximately 1.5 million tonnes of high-grade ore and an additional 700,000 tonnes of material grading approximately 1% to 3% copper. This should allow the plant to ramp up quickly and maintain a steady state throughput of 3.8 Mtpa.
  • In November 2019, the Kamoa-Kakula Project team completed basic engineering design and costing for Kakula's initial mine and underground infrastructure, the first concentrator module and associated surface infrastructure. The updated estimate of the project's initial capital costs is approximately $1.3 billion (from January 1, 2019), which assumes commissioning of the processing plant in Q3 2021.
  • Ivanhoe will continue to fund its share of approximately 40% of the initial capital costs, plus it will fund its share of capital associated with the 20% carried interest owned by the Government of the DRC, from its existing cash resources. Ivanhoe and Zijin Mining are jointly reviewing equipment and project-related financing options to potentially accelerate the timeline for Kakula's Phase 2 development ─ a doubling of mill throughput to 7.6 Mtpa.
  • Other engineering and construction activities underway at Kamoa-Kakula include the refurbishment of six turbines at the Mwadingusha hydro-electric power plant and associated 220-kilovolt infrastructure to supply the mine with clean hydropower, construction of the first phase of accommodations for 1,000 employees and contractors, civil works 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.
  • On February 6, 2020, Ivanhoe announced an updated independently verified Indicated Mineral Resource increased the combined Kamoa-Kakula Project Indicated Mineral Resource to 423 million tonnes grading 4.68% copper, at a 3% cut-off. The combined Kamoa-Kakula Project Indicated Mineral Resource now stands at 1.4 billion tonnes grading 2.7% copper, at a 1% cut-off.
  • The initial Indicated Mineral Resource estimate for the Kamoa North Bonanza Zone includes 1.5 million tonnes grading 10.7% copper, at a 5% cut-off. Drilling continues to target additional resources in the vicinity of the ultra-high-grade Bonanza Zone and the Far North Zone. Given the shallow depth, remarkable thickness and massive copper sulphide mineralization discovered within the Kamoa North Bonanza Zone, Kamoa-Kakula's engineers are evaluating potential options to accelerate the development of this new discovery.
  • 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.
  • Drilling also has confirmed the extension of the Kamoa North high-grade copper structure for at least 800 metres in the Kiala Discovery area, part of Ivanhoe's 100%-owned Western Foreland licences that adjoin the Kamoa-Kakula mining licence to the north. The high-grade copper zone on Ivanhoe's 100%-owned exploration licences is being delineated through a series of step-out fences of holes drilled in a northerly direction.
  • During 2019, Ivanhoe significantly expanded the size of its 100%-owned exploration licences in the Western Foreland area. Ivanhoe now controls more than 2,500 square kilometres of highly-prospective land holdings in the vicinity of the 400-square-kilometre Kamoa-Kakula mining licence.
  • At the Kipushi mine redevelopment project in the DRC, the project team continues to work towards the completion of the Kipushi Project's definitive feasibility study (DFS). The DFS will update and refine the findings of the pre-feasibility study (PFS) issued in December 2017 and will focus on the initial mining of Kipushi's Big Zinc Zone.
  • Ivanhoe has made excellent progress in upgrading the mine's underground infrastructure to allow for mining to quickly begin at the ultra-high-grade Big Zinc orebody. Resumption of production at Kipushi now requires the construction of a surface processing plant and other related surface production facilities. Discussions are continuing with Ivanhoe's joint-venture partner, Gécamines, in order to help advance a new era of production at Kipushi.
  • At the Platreef mine development project in South Africa, the project's first shaft (Shaft 1) has been sunk to a depth of more than 957 metres below surface. The 950-metre-level station development for Shaft 1 is nearing completion, with completion of the shaft to a final depth of approximately 1,000 metres planned for mid-2020.
  • Palladium prices continued to surge to new record highs in 2019 and early 2020, recently topping $2,800 an ounce as stricter air-quality rules boost demand for the metal used in vehicle pollution-control devices. Rhodium prices also have soared to more than $12,700 an ounce. The price increases of palladium and rhodium ─ two key metals in the Platreef orebody ─ has propelled Ivanhoe's Platreef Project 'metals-price basket' to a new, multi-year high.
  • Platreef contains an estimated 26.8 million ounces of palladium and 1.8 million ounces of rhodium in Indicated Resources, plus an additional 43.0 million ounces of palladium and 3.1 million ounces of rhodium in Inferred Resources, at a cut-off grade of 1 gram per tonne.
  • Ivanhoe is investigating a phased development 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.
  • Ivanhoe is evaluating various project-related financing options to fast-track Platreef's development schedule and accelerate initial production.

  • The concrete foundation for Platreef's Shaft 2 headframe was completed in July 2019. Work on Shaft 2 has been temporarily deferred while the company completes its review of the phased development production plan. Shaft 2 is designed with an internal diameter of 10 metres and equipped with two Koepe winding plants, one equipped with 40-tonne rock-hoisting skips providing the mine with a total capacity to hoist six million tonnes of ore per year - the single largest hoisting capacity at any mine in Africa.
  • Ivanhoe Mines deeply regrets to report that a fatal accident involving a contractor's employee occurred at the Kamoa-Kakula Project in September 2019. The accident involved a civil contractor at a surface cement batching plant. On February 6, 2020 a second contractor's employee passed away due to fat embolism syndrome causing severe brain damage following a broken bone incurred in a workplace accident on January 21, 2020 at Kamoa-Kakula. The project had gone more than 7.5 years without a lost-time injury prior to the fatal injury in September 2019.
  • At the end of 2019, Kipushi had reached 1.88 million work hours free of a lost-time injury, and Platreef 171,525 work hours free of a lost-time injury.

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A sample of chalcocite-rich development ore from the Kakula Mine. Based on Niton (X-ray fluorescence or XRF) analysis, this sample grades 62.9% copper.

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Principal projects and review of activities

COVID-19 Response Plan

Ivanhoe Mines is closely monitoring the impact of the COVID-19 virus and is prepared for potential short-term impacts on its projects and operations worldwide. The company has appointed a team with overall responsibility for COVID-19 response planning, which includes senior Ivanhoe Mines representatives with expertise in health and safety, operations, law, human resources, and communications as well as outside counsel from world-leading epidemiologists. As part of its COVID-19 Response Plan, the company is putting particular focus on the health and safety of all its employees and contractors as well as its host communities. In addition, the company is conducting a careful review of purchase orders and its supply chain to minimize disruption to its projects.

1. Platreef Project
64%-owned by Ivanhoe Mines
South Africa

The Platreef Project is owned by Ivanplats (Pty) Ltd (Ivanplats), 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 the 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.

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Aerial view of the Platreef Project, with Shaft 1's headframe and the boxcut and concrete shaft collar foundation for Shaft 2. Ivanhoe is looking into accelerating first production by using Shaft 1 as the mine's initial production shaft.

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Health and safety at Platreef

At the end of 2019, the Platreef Project reached a total of 171,525 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 November 2019. 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 phased development production plan

In July 2017, Ivanhoe Mines announced the results of an independent, definitive feasibility study (DFS) for the then planned first phase of the Platreef Project's palladium-platinum-nickel-copper-gold-rhodium mine in South Africa.

The Platreef DFS covered a four million tonnes per annum first phase of development that would include construction of a state-of-the-art underground mine, concentrator and other associated infrastructure to support initial production of concentrate.

During 2019 and early 2020, palladium prices have continued to surge to new record highs, recently topping $2,800 an ounce as stricter air-quality rules boost demand for the metal used in vehicle pollution-control devices, while the price of rhodium hit a record high of more than $12,700 an ounce. The price increases have propelled Ivanhoe's Platreef Project 'metals-price basket' to a new, multi-year high.

Platreef contains an estimated 26.8 million ounces of palladium and 1.8 million ounces of rhodium in Indicated Resources, plus an additional 43.0 million ounces of palladium and 3.1 million ounces of rhodium in Inferred Resources, at a cut-off grade of 1 gram per tonne.

Given the recent surge in Platreef's 'metals-price basket', Ivanhoe Mines is investigating a phased development 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.

Led by the surge in prices of palladium and rhodium, Platreef's 'metals-price basket' revenue per tonne of probable reserves recently reached a new, all-time high of more than $300.

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Platreef’s Revenue Per Tonne of Probable Reserves (US$/t ore)

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Shaft 1 now extends to a depth of more than 957 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 957 metres below surface. The thickness of the mineralized orebody (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 with the 950-metre-level station currently in development and approximately 80% completed. Development is being carried out on the east drift of the 950-metre-level with the north drift and temporary refuge bay completed.

The final shaft bottom depth has been revised to 1,000 metres below surface in order to cater for a long-term life of mine spillage arrangement. This projected final depth is expected to be reached in mid-2020. The three development stations will provide initial, underground access to the high-grade orebody, enabling mine development to proceed concurrently with the construction of Shaft 2. Shaft 1 changeover detailed designs have commenced and will enable Shaft 1 to be configured for permanent rock hoisting.

Shaft 2 box cut and concrete foundation completed in July 2019

Shaft 2, 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 Koepe winding plants, one equipped with 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, has been 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. Work on Shaft 2 has been temporarily deferred while the company completes its review of the phased development production plan using Shaft 1 as the mine's initial production shaft.

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. Shaft 2 will provide primary access to the mining zones; secondary access will be via Shaft 1. During mine production, both shafts also will serve as ventilation intakes. Three additional ventilation exhaust raises are planned to achieve steady-state production.

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. 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.

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Members of the sinking crew at the Platreef Project's Shaft 1.

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Ivanhoe has prioritized an increase in the number of female employees at all three of our mine development projects. At Platreef, females now make up more than 31% of the project's employees. 

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From left to right: Raisibe Ntini (Geology Intern); Vongani Nkuna (Group Manager, Metallurgy); Maenetja Lebea (Intermediate Life Support Practitioner); Ayakha Mbongonya (Geotechnical Engineer); Sinah Tjale (Safety Officer).

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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 the 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 $16 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 first Social and Labour Plan (SLP), towards which it pledged a total of R160 million ($11 million) during the past five years, ended in November 2019. That approved plan included R67 million ($4 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 is in the final stages.

2. Kipushi Project
68%-owned by Ivanhoe Mines
Democratic Republic of Congo

The Kipushi copper-zinc-germanium-lead mine, in the DRC, 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, Gécamines.

Health, safety and community development

At the end of 2019, the Kipushi Project reached a total of 1,887,093 work hours free of a lost-time injury.

The Kipushi Project operates a potable-water station to supply the municipality of Kipushi with water. This includes power supply, disinfectant chemicals, routine maintenance, security and emergency repair of leaks to the primary reticulation. The Kipushi Project also installed and commissioned new overhead powerlines to the pump station. Other community development projects continued during 2019 included the Kipushi women's literacy project, the sewing training centre project and the upgrading of the Mungoti School in Kipushi.

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Ivanhoe Mines and its joint-venture partners have committed to bringing clean water solutions to local communities near all of its mining projects. A potable water storage tank at a small village near the Kipushi Mine, where 700 families collect their daily water.

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Ivanhoe also funds an adult literacy program as part of its community skills development initiative at Kipushi. The program is a partnership with Alfa Congo, a Kinshasa-based non-profit NGO dedicated to improving literacy levels among vulnerable social groups.

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Kipushi's construction team assisting in civil works for the new 850-metre-level pumping station that will significantly reduce power consumption and electricity costs during production. From left to right: K. Mudikike, M. Kalula, K. Mukendi, G. Graham, P. Dikwenda, K. Nyandwe, M. Ngoyi, M. Mutomb, E. Ditend.​

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The Kipushi Project's PFS, announced by Ivanhoe Mines on December 13, 2017, anticipated annual production of an average of 381,000 tonnes of zinc concentrate over an 11-year, initial mine life at a total cash cost of approximately $0.48 per pound (lb) of zinc.

Highlights of the PFS, based on a long-term zinc price of $1.10/lb include:

• After-tax net present value (NPV) at an 8% real discount rate of $683 million.

• After-tax real internal rate of return (IRR) of 35.3%.

• After-tax project payback period of 2.2 years.

• Pre-production capital costs, including contingency, estimated at $337 million.

• Existing surface and underground infrastructure allows for significantly lower capital costs than comparable greenfield development projects.

• Life-of-mine average planned zinc concentrate production of 381,000 dry tonnes per annum, with a concentrate grade of 59% zinc, is expected to rank Kipushi, once in production, among the world's largest zinc mines.

All figures are on a 100%-project basis unless otherwise stated. Estimated life-of-mine average cash cost of $0.48/lb of zinc is expected to rank Kipushi, once in production, in the bottom quartile of the cash-cost curve for zinc producers internationally. The project team continues to work towards the completion of the Kipushi Project's definitive feasibility study (DFS).

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Alfons Molepo, Senior Electrical Foreman (left), discussing the electrical drawings with Tshilay Pascal, Electrician (right), at the newly installed, medium voltage switchgear at the 850-metre-level pump station.

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Prince Kaomba, Electrician (left), and Paul Dikwenda, Mining Manager (right), inspecting diagrams of the 17.5-megawatt variable speed drives for the five high-volume water pumps installed on Kipushi's 1,200-metre level.

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Project development and infrastructure

Significant progress has been made in modernizing the Kipushi Mine's underground infrastructure as part of preparations for the mine to resume commercial production, including upgrading a series of vertical mine shafts to various depths, with associated head frames, as well as underground mine excavations and infrastructure. A series of crosscuts and ventilation infrastructure still is in working condition and have been cleared of old materials and equipment to facilitate modern, bulk mechanized mining. The underground infrastructure also includes a series of pumps to manage the mine's water levels, which now are easily maintained at the bottom of the mine.

Shaft 5 is eight metres in diameter and 1,240 metres deep. It now has been upgraded and re-commissioned. The main personnel and material winder has been upgraded and modernized to meet international industry standards and safety criteria. The Shaft 5 rock-hoisting winder now is fully operational with new rock skips, new head- and tail-ropes, and attachments installed. The two newly manufactured rock conveyances (skips) and the supporting frames (bridles) have been installed in the shaft to facilitate the hoisting of rock from the main ore and waste storage silos feeding rock on the 1,200-metre level.

The main haulage way on the 1,150-metre level, between the Big Zinc access decline and Shaft 5 rock load-out facilities, has been resurfaced with concrete so the mine now can use modern, trackless, mobile machinery. A new truck-tipping bin, which feeds into the large-capacity rock crusher located directly below, has been installed on this level. The old winder at P2 Shaft has been removed and construction of the new foundation, along with assembly and installation of the new modern winder, has been completed and fully commissioned after passing safety inspection and testing procedures.

3. 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.

Ivanhoe sold a 49.5% share interest in Kamoa Holding Limited (Kamoa Holding) to Zijin Mining in December 2015 for an aggregate consideration of $412 million. In addition, Ivanhoe sold a 1% share interest in Kamoa Holding to privately-owned Crystal River for $8.32 million - which Crystal River will pay through a non-interest-bearing, 10-year promissory note. Since the conclusion of the Zijin transaction in December 2015, 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.

A 5%, non-dilutable interest in the Kamoa-Kakula Project was transferred to the DRC government on September 11, 2012 for no consideration, pursuant to the 2002 DRC mining code. Following the signing of an agreement with the DRC government in November 2016, in which an additional 15% interest in the Kamoa-Kakula Project was transferred to the DRC government, Ivanhoe and Zijin Mining now 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. Kamoa Holding holds an 80% interest in the project.

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Wide-angle, aerial view of Kakula's main declines (centre), ore stockpiles (right), Kakula workshops under construction (left) and the first phase of accommodations for 1,000 employees and contractors (upper centre).

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Health and safety at Kamoa-Kakula

At the end of 2019, the Kamoa-Kakula Project reached 2,629,889 work hours free of a lost-time injury. Regrettably a fatality occurred in September 2019 and the Company reported on February 7, 2020, that a contractor's employee passed away due to fat embolism syndrome causing severe brain damage following a broken bone incurred in a workplace accident on January 21, 2020 at the Kamoa-Kakula Project. These incidents occurred after the project had gone more than 7.5 years without a lost-time injury. The Kamoa-Kakula Project continues to strive toward its workplace objective of an environment that causes zero harm to all employees and contractors.

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Approximately 90% of Kamoa-Kakula's more than 4,400 current employees and contractors are Congolese nationals. A training program is in place to increase the number of local employees in management positions.

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Definitive Feasibility Study underway for the Kakula Mine

An independent definitive feasibility study (DFS) for the Kakula Mine is underway with an expected completion date of Q3 2020. At the same time, Ivanhoe expects to issue an updated preliminary economic assessment for the expanded Kamoa-Kakula combined production scenario that will include an updated Mineral Resource Estimate for Kamoa North, including the initial Mineral Resource estimate for the Kamoa North Bonanza Zone. 

The forthcoming Kakula DFS will incorporate detailed design, engineering and procurement, which is largely complete, with plans to increase the initial processing plant ore capacity by approximately 26% from 3.0 Mtpa to 3.8 Mtpa.

Based on the results of the February 2019 PFS, Kakula's average feed grade over the first five years of operations is projected to be 6.8% copper, and 5.5% copper on average over a 25-year mine life. An increase in the initial processing plant throughput is expected to result in improved cash flows, which may be used to accelerate subsequent expansions.

Additional mining crews being added at Kakula to increase pre-production ore stockpiles and to position the mine to accelerate commencement of the second phase of development

The expansion in initial plant capacity from 3.0 Mtpa to 3.8 Mtpa would require increasing the underground mining crews in 2020 from 11 to 14 to ensure sufficient mining operations to feed the expanded plant throughput. This would have the benefit of producing a larger surface stockpile of ore prior to the scheduled commissioning of the processing plant, as well as accelerating the mine development schedule, providing the opportunity to bring forward the commencement of the second phase of development at Kakula. The second 3.8 Mtpa plant module will be fed from the Kakula mine at a planned full production rate of 6 Mtpa. Further study work will determine the amount of tonnes to be sourced from the Kansoko Mine, or elsewhere, to maximize the full milling capacity of 7.6 Mtpa. Any plans to accelerate the second module of Kakula's processing plant would be subject to securing the necessary project-level financing.

Kakula's original 3.0 Mtpa first processing plant module has already been redesigned during the basic engineering phase to a nameplate capacity of 3.8 Mtpa. Purchase orders have been placed for all major long-lead time mechanical equipment, and plant civil works have started. The contract for the SMPP (structural, mechanical, piping and platework) supply and erection portion of the plant construction has been awarded and steel fabrication is underway. The capital cost estimate related to the construction of the processing plant has been estimated to a basic engineering level of accuracy and is thus well defined.

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The first oversize loads of equipment for Kakula's initial 3.8 Mtpa processing plant module being transported from Kolwezi to Kamoa-Kakula on the newly constructed road. The equipment, which has been delivered to site, is two low-entrainment flotation cells (Jamison cells) that will be used as cleaner cells to produce a final copper concentrate, before thickening and filtration.

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The current updated estimate of the project's initial capital costs is approximately $1.3 billion as of January 1, 2019, which assumes commissioning of the first processing plant module in Q3 2021 and includes expanded plant capacity and pre-production ore stockpiles.

The capital costs incurred by the Kamoa-Kakula joint venture in 2019 amounted to $309.1 million, of which $125.2 million was spent on the Kakula declines and mine development.

Ivanhoe will fund its share of approximately 40% of the initial capital costs, plus it will fund its share of capital associated with the 20% carried interest owned by the Government of the DRC, a portion which will be repaid through future cash flows from the project. Ivanhoe expects that it will continue to have sufficient cash resources or project-related financing options available to cover its share of the potential increase in initial capital costs.

Kamoa-Kakula Mineral Resources increased again

Ivanhoe announced the completion of an independently-verified, updated Mineral Resource estimate for the Kamoa-Kakula Project on February 5, 2020. The new Mineral Resource estimate is the culmination of an infill drilling program designed to better define higher-grade copper zones within the existing Kamoa Deposit.

At a 1% cut-off, Kamoa's Indicated Mineral Resources now total 760 million tonnes grading 2.73% copper, containing 45.8 billion pounds of copper. At the same 1% cut-off, Kamoa's Inferred Mineral Resources now total 235 million tonnes grading 1.70% copper, containing 8.8 billion pounds of copper. At a 3% cut-off, the new Mineral Resource estimate boosts the Kamoa Deposit's Indicated Mineral Resource tonnages by 15% and contained copper by 15.5%, to a total of 256 million tonnes at a grade of 4.15% copper. At the same 3% cut-off, Kamoa's Inferred Mineral Resources now total 13 million tonnes at a grade of 3.51% copper.

The entire Kamoa Deposit was updated in the new Mineral Resource estimate. The majority of recent drilling, however, targeted the ultra-high-grade Bonanza Zone at Kamoa North, and an approximated north-south corridor of elevated copper grades in the far north of the mining licence area (the Far North Zone).

The new Kamoa Mineral Resource estimate covers approximately 600 metres of strike length in the deeper western portions of the Bonanza Zone (west of the West Scarp Fault), and 1,500 metres of strike length in the shallower eastern portions of the Bonanza Zone, defined by drill sections spaced 50 metres apart on strike in the central section, and 100 metres apart on strike elsewhere.

At a 1% cut-off, the current, combined Indicated Mineral Resources for the Kamoa-Kakula Project now totals 1.387 billion tonnes grading 2.74% copper, containing 83.7 billion pounds of copper. At the same 1% cut-off, Kamoa-Kakula's combined Inferred Mineral Resources now total 339 million tonnes grading 1.68% copper, containing 12.5 billion pounds of copper.

At a higher 3% cut-off, the current, combined Indicated Mineral Resources for the Kamoa-Kakula Project now totals 423 million tonnes grading 4.68% copper, containing 43.7 billion pounds of copper. At the same 3% cut-off, Kamoa-Kakula's combined Inferred Mineral Resources now total 17 million tonnes grading 3.51% copper, containing 1.3 billion pounds of copper.

The new Kamoa Indicated and Inferred Mineral Resource estimate was prepared by George Gilchrist, Ivanhoe Mines' Vice President, Resources, under the direction of Gordon Seibel, RM SME, of the Wood Group (formerly Amec Foster Wheeler E&C Services Inc.) of Reno, USA, and is reported in accordance with the 2014 CIM Definition Standards for Mineral Resources and Mineral Reserves. Mr. Seibel is the Qualified Person for the estimate. The effective date of the estimate is January 30, 2020, and the cut-off date for drill data is January 20, 2020. There has been no change to the Mineral Reserve estimate at Kamoa-Kakula.

Approximately eight kilometres of underground development was completed in 2019 as the project tracks towards first production in Q3 2021

The underground development work at Kakula is being performed by mining crews operating large-capacity, semi-autonomous mining equipment, such as jumbo drilling rigs and 50-tonne trucks. A total of 7.8 kilometres of underground development was completed during 2019, which was 1.7 kilometres ahead of plan.

Mine access drives 1 and 2 (interconnected, parallel tunnels that will provide access to ore zones) continue to progress, with both access drives currently in the high-grade zone.

The number of underground mining crews has increased from six at the start of the fourth quarter, to eight working at Kakula at the end of 2019, including one owner crew. The project will continue to add additional crews over the next 12 months to further accelerate development. By the end of 2019, approximately 900 metres of development had been completed at the southern ventilation decline, which will facilitate the acceleration of critical early mine development.

Engineering, procurement and construction advancing well

Project engineering and procurement activities are advancing well. The current primary construction focus that runs through the project's critical path is the installation of the underground rock handling system, the processing plant and the electrical high-voltage infrastructure installation.

Construction progress on the underground rock handling system is progressing well with an expected commissioning date of early April 2020. The reaming of Ventilation Shaft 2 is underway and once complete, the raise bore machine will be moved to Ventilation Shaft 3. Ventilation Shaft 1 was fully commissioned earlier in 2019.

The plant earthworks is complete and civil construction is underway. Initial civil construction has prioritized the run of mine stockpile, HPGR stockpile and mill foundation, and concrete is in the process of being poured in these areas. The process plant long lead items will start to arrive on site from April 2020, with the mills scheduled for arrival in June 2020.

The Kamoa-Kakula Project sources a number of infrastructure items and equipment from Chinese based companies, whose operations have been impacted by the COVID-19 virus (Novel Coronavirus), and which has and can continue to be expected to, result in delays in obtaining such equipment for the continuing development of the project.

The contract for the 220 kilovolt overhead power line, as well as the contract for the new electrical substation, has been awarded. Bush clearing for the overhead line has started and earthworks for the electrical substation is underway.

Construction of the new road linking Kamoa-Kakula with the Kolwezi airport is operational with only minor items outstanding. The bulk of the accommodation at the Kakula village is complete and occupied, while the kitchen, mess area and laundry still is being constructed.

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A Kamoa transport bus, used for carrying Kamoa-Kakula employees to the mine site from the city of Kolwezi, along a recently-completed section of the permanent new highway linking the Kakula Mine with the Kolwezi airport.

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Housing units are being constructed at Kamoa-Kakula to provide on-site accommodations for employees and contractors.

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Exploration success leads to discovery of shallow thick ultra-high grade Kamoa North Bonanza Zone

Most of the drilling in 2019 focused on the extension and definition of the Kamoa North Bonanza Zone, however some holes were drilled to target the typical K1.1.1 mineralized horizon and the Far North trend. In total, 51,187 metres were completed in 182 holes, of which 6,453 metres were completed in Q4 2019.

Ultra-high-grade mineralization previously identified over an approximately 350 metre strike length, and an implied 2.7 km potential, was further defined on 50-metre east-west spaced sections at 20-metre to 25-metre spaced centres, approximately 300 metres east and west of the discovery hole DD1450 (13.05% copper over 22.3 metres (true thickness)).

Beyond the central core of the Bonanza Zone, drilling was done on wider 100-metre spaced section lines to fully define the limits of the system. This drilling constrains the shallow portion of the Central Bonanza Zone, however the zone remains untested along considerable strike length on the western side of the West Scarp Fault.

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On February 6, 2020, Ivanhoe announced an updated Mineral Resource estimate for the extensive Kamoa deposit, including the recent high-grade discoveries at the Kamoa North Bonanza Zone and Kamoa Far North (circled in red).

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Assay results of holes from the Kamoa North Bonanza Zone were included in the updated Mineral Resource estimate announced on February 5, 2020.

Several geophysical studies such as ground gravity, ground magnetics and "Excalibur" airborne were conducted in the Kamoa North area to better understand the controls of the ultra-high-grade mineralization which is hoped will assist in locating additional targets. Additional geological studies are planned for 2020. Packer testing has been completed in the Kamoa North Bonanza Zone and the report is expected in Q1 2020.

In the Kakula area, 2,362 metres were completed in five holes to test the extension of the Kakula West Deposit.


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Conceptual model of the Kamoa North Bonanza Zone.

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Grade profiles plotted on the same scale show the significance of the grades between the different discovery areas on the Kamoa-Kakula Project.

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Development options at Kamoa North being considered

Given the shallow depth, remarkable thickness and massive copper sulphide mineralization d



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Ivanhoe Mines Issues 2019 Full-Year Results and Review of Mine Construction Progress and Exploration Activities

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