Ivanhoe Mines announces outstanding economic results of updated, independent Integrated Development Plan (2023 IDP) for world-leading Kamoa-Kakula Copper Complex
January 30, 2023
Ivanhoe Mines announces outstanding economic results of updated, independent Integrated Development Plan (2023 IDP) for world-leading Kamoa-Kakula Copper Complex
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Ivanhoe’s 26-year odyssey of discovery realizes a globally significant copper complex essential for the energy transition
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2023 IDP consists of a pre-feasibility study (PFS) for the Phase 3 and 4 expansions of Kamoa-Kakula, and a preliminary economic assessment (PEA) life-of-mine extension case
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Phase 3 expansion, to be completed in 2024, increases Kamoa-Kakula’s annual copper production to a ten-year average of 620,000 tonnes of copper, at cash costs (C1) of $1.22/lb.
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Expansion to 19.2 Mtpa in PFS case yields after-tax NPV8% of $19.1 billion, over a 33-year mine life
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$20.2 billion after-tax NPV8% in 42-year PEA life-of-mine extension case ■
Kamoa-Kakula 500,000 tonne-per-annum copper smelter completion in late 2024; brings operating cost reductions and environmental benefits, producing ultra-low carbon 99+% copper blister anodes
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Kamoa-Kakula to rank as the 4th largest copper producer globally in 2025, with lowest-quartile cash costs
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Mineral Reserves tonnage increased by 101% to 472 million tonnes ■
Kamoa-Kakula generates powerful cash flow to fund expansions, with an average annual EBITDA of over $3 billion for the first 10 years ■
Phase 3 and 4 expansions deliver significant blessings to all Kamoa- Kakula stakeholders, including host communities, 12,000+ employees and contractors, as well as the Democratic Republic of Congo as a major 20% shareholder
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Ivanhoe Mines to host conference call on Tuesday, January 31, 2023 ■
Ivanhoe Mines provides 2023 cost guidance for Kamoa-Kakula
KOLWEZI, DEMOCRATIC REPUBLIC OF CONGO – Ivanhoe Mines’ (TSX: IVN; OTCQX: IVPAF) Co-Chairs Robert Friedland and Yufeng “Miles” Sun announced today that the company and its partners, Zijin Mining Group, Crystal River Global Limited and the Democratic Republic of Congo (DRC), welcome the extremely positive findings of an independent Integrated Development Plan (2023 IDP) for the world-leading Kamoa-Kakula Copper Complex. The 2023 IDP consists of a Pre- Feasibility Study (Kamoa-Kakula 2023 PFS) for the Phase 3 and Phase 4 expansions of the Kamoa-Kakula Copper Complex over a 33-year mine life, as well as an updated Preliminary Economic Assessment (Kamoa-Kakula 2023 PEA) that includes a life-of-mine extension case to 42 years overall.
The Kamoa-Kakula 2023 PFS evaluates a staged increase in production capacity at Kamoa-Kakula from the current nominal throughput rate of 7.6 million tonnes per annum (Mtpa) up to a total of 19.2 Mtpa by 2030. First, the throughput of the Phase 1 and 2 concentrators is increased to 9.2 Mtpa by the imminent completion of the debottlenecking program.
Phase 3 includes the ongoing construction of a new 5.0 Mtpa concentrator, located at Kamoa, which is targeted to be completed in Q4 2024. As part of the Phase 3 expansion, a direct-to-blister (DBF) flash smelter is under construction to produce approximately 500,000 tonnes of 99+% pure copper metal, and the replacement of Turbine #5 at the Inga II hydroelectric power station is well underway. The turbine replacement will supply an additional 178 megawatts (MW) of clean hydroelectric power to the national grid and provide power for Phase 3.
Phase 4, planned for later in the decade, includes the construction of an additional 5.0 Mtpa concentrator in parallel to Phase 3, which will be fed by mines in the Kamoa area, bringing overall production up to 19.2 Mtpa.
The Kamoa-Kakula 2023 PEA evaluates a further 9-year extension to mine life, from four additional mines, maintaining production from the Phase 1 – 4 concentrators until beyond 2060.
The Kamoa-Kakula 2023 PEA is preliminary and includes an economic analysis that is based, in part, on Inferred Mineral Resources. Inferred Mineral Resources are considered too speculative geologically for the application of economic considerations that would allow them to be categorized as Mineral Reserves – and there is no certainty that the results will be realized. Mineral Resources do not have demonstrated economic viability and are not Mineral Reserves.
The world-class economic results confirm Kamoa-Kakula’s position as one of the world’s largest, ultra-green and lowest-cost producers, which will be a world leader in the empowerment of women and the development of Congolese youth for many decades to come
Watch a video encompassing the core elements of the 2023 IDP as well as ongoing expansion activities at Kamoa-Kakula: https://vimeo.com/793832552/c6e4f1f11d
Figure 1: World’s projected top 20 copper mines in 2025, by key metrics.
Bubble size: M&I Resource 6.0% Kamoa-Kakula 5.0%
Kamoto 4.0%
3.0% Polish Copper 2.0% Oyu Tolgoi Grasberg Kansanshi Escondida 1.0%
Collahuasi 0.0% 0 200 400 600 800 1,000 1,200 1,400 Paid Copper Production (Kt)
Source: Wood Mackenzie, 2023
Notes: Kamoa-Kakula production and grade are based on average paid copper production and average copper feed grade during the first 10 years as detailed in the Kamoa-Kakula 2023 PFS. Kamoa-Kakula resource is based on the contained copper in the Measured & Indicated category in the Kamoa-Kakula 2023 PFS. The ‘Copper Head Grade’ reflects the average reserve grade. 2025 Measured & Indicated resources take into account 2023-2024 production figures (which have been subtracted from the starting 2023 M&I resources balance). Measured & Indicated resources are inclusive of reserves and are on a 100% basis.
Source: Wood Mackenzie (based on public disclosure, the Kamoa-Kakula 2023 PFS has not been reviewed by Wood Mackenzie).
Ivanhoe Mines’ Executive Co-Chairman, Robert Friedland commented: "In a world where it is exceedingly rare for tier-one ore bodies to be discovered, developed and mined ... Kamoa-Kakula stands out as a beacon of what is possible given the exceptionally hard work of a ‘United Nations’ of highly dedicated people. This study marks the culmination of a 26-year journey that began with the conviction of visionary geologists and now has become one of the world's leading, lowest-carbon emitting, long-life suppliers of vital copper metal, which humankind desperately requires as we transition to a more sustainable future underpinned by renewable energy.
"This monumental achievement would not have been possible without our leading engineers, technicians and consultants, the invaluable contributions of our partners at Zijin Mining and CITIC Metal, our international shareholders ... as well as the progressive partnerships at Kamoa-Kakula with the Democratic Republic of Congo government and our local communities.
"This integrated development plan reveals the true, long-life nature of the Kamoa- Kakula Copper Complex, which will be producing 'green', high-grade copper metal for the better part of this century. It also demonstrates the bright future and vast potential for the Democratic Republic of Congo and its people, which is ready to become a world leader in the responsible supply of vital electric metals required by governments around the world to enact policies to combat climate change.
"Kamoa-Kakula is one of the world's largest, highest-grade copper complexes, and a major economic engine that generates leading returns on capital and exceptional free cash flow. This marks another milestone on a great journey, and we look forward to the many successes to come with our partners and shareholders.
“Ivanhoe Mines is ready to take the next step in becoming the world’s next major, diversified mining company … and Kamoa-Kakula will become the model for future mines as we embark on the next generation of tier-one developments at our Platreef and Kipushi projects.”
Kamoa-Kakula to build on outstanding achievements of Phase 1 and 2, developing into a multi-generational major copper producer in partnership with the DRC and local communities
Ivanhoe Mines’ President, Marna Cloete said: "When we set out to build the tier-one Kamoa-Kakula Copper Complex, alongside our joint-venture partners at Zijin and the Democratic Republic of Congo government, we were resolute in our commitment to industry-leading standards in terms of resource efficiency, water and energy usage, and minimizing emissions. We knew Kamoa-Kakula had the potential to become an example of how modern mining must be done – in partnership with local governments and communities, and with an unwavering focus on transparency and environmental, social and governance best practices.
"The Democratic Republic of Congo is blessed with exceptional hydropower potential, world-class geology, and a young, vibrant population ready to enter the workforce as the next generation of accomplished engineers, geologists and skilled technicians. Kamoa-Kakula now has generated over 12,000 jobs from its operations and construction activities, with over 95% of those positions filled by Congolese nationals. We are endeavouring to continue this excellent track record of local employment and training with the construction of the Kamoa Centre of Excellence. The centre will create a sustainable and community-focused higher learning environment, offering international degrees and diplomas in the heart of the Lualaba province in the DRC.
"Meanwhile, the Kamoa-Kakula Sustainable Livelihoods program has succeeded in nurturing local businesses and value chains around the mining complex, including sustainable agriculture and farming, improved water security, and investments in early childhood education and gender equality, thereby advancing our commitment towards the United Nations’ Sustainable Development Goals.
"I would like to congratulate all the dedicated employees and contractors responsible for these industry-leading initiatives, which have turned Kamoa-Kakula into the operation we had all hoped for when we started this journey. Mining remains a vital industry, and its role is only growing more important as we attempt to decarbonize our economies and electrify the world. We must still mine, but when we do, we must mine with a greater purpose."
Ivanhoe to host a conference call on the Kamoa-Kakula 2023 IDP
On January 31, 2023, Ivanhoe will host a conference call to discuss the findings of the updated 2023 IDP for the Kamoa-Kakula Copper Complex, as well as guidance for cash costs in 2023, and capital costs in 2023 and 2024 across the Kamoa-Kakula, Platreef and Kipushi projects.
The call will include a video update from the Kamoa-Kakula Copper Complex, as well as remarks from Ivanhoe's Co-Chairman Robert Friedland, President Marna Cloete, and members of the company's management team. It also will feature a question- and-answer session.
DATE: Tuesday, January 31, 2023 TIME: 10:30 am Eastern / 7:30 am Pacific / 3:30 pm London LINK: https://app.webinar.net/Xxn3K9eK9Ap
A recording of the call, together with supporting presentation slides, will be made available on Ivanhoe Mines’ website at www.ivanhoemines.com.
The Kamoa-Kakula 2023 IDP encompasses two studies:
- Kamoa-Kakula 2023 PFS (Phase 3 and 4 expansion): a staged increase in
nameplate production up to a total of 19.2 Mtpa, over a 33-year mine life. The first stage is the debottlenecking of the operational Phase 1 and Phase 2 concentrators from the current nameplate capacity of 7.6 Mtpa up to 9.2 Mtpa by Q2 2023. The Phase 1 and 2 concentrators will process ore initially from the Kakula Mine, which is being expanded to meet this capacity, and then supported by the Kakula West Mine from 2029. This will be followed by the construction of the 5.0 Mtpa Phase 3 concentrator, which is on target to be commissioned in Q4 2024. This concentrator will be fed with ore from the existing Kansoko Sud Mine, as well as new mines under development known as Kamoa 1 and 2. Phase 3 is planned to coincide with the commissioning of a DBF flash copper smelter capable of producing 500,000 tonnes per annum of copper in the form of 99+% anode or blister. In addition, the smelter will produce 650,000 to 800,000 tonnes per annum of high-strength sulphuric acid for sale in the domestic DRC market. The final stage is Phase 4, an additional 5.0 Mtpa concentrator which will take the total processing capacity up to 19.2 Mtpa fed by an expansion of the Kamoa mines. Kamoa and Kakula will supply a blend of copper concentrate for the smelter, as the ore reserve grade tapers over time. The Kamoa-Kakula 2023 PFS case yields an after-tax NPV8% of $19.1 billion at a long-term copper price of $3.70/lb.
- Kamoa-Kakula 2023 PEA (Life-of-mine extension case): a nine-year mine life
extension of the Kamoa-Kakula Copper Complex, in addition to the Kamoa- Kakula 2023 PFS. This case includes the addition of four new underground mines in the Kamoa area (called Kamoa 3, 4, 5 and 6) to maintain the overall production rate of up to 19.2 Mtpa. The Kamoa-Kakula 2023 PEA case yields an after-tax NPV8% of $20.2 billion. The Kamoa-Kakula PEA is preliminary and includes an economic analysis that is based, in part, on Inferred Mineral Resources. Inferred Mineral Resources are considered too speculative geologically for the application of economic considerations that would allow them to be categorized as Mineral Reserves and there is no certainty that the results will be realized. Mineral Resources do not have demonstrated economic viability and are not Mineral Reserves.
The Kamoa-Kakula 2023 PFS and Kamoa-Kakula 2023 PEA were independently prepared by OreWin Pty Ltd. of Adelaide, Australia; China Nerin Engineering Co., Ltd., of Jiangxi, China; DRA Global of Johannesburg, South Africa; Epoch Resources of Johannesburg, South Africa; Golder Associates Africa of Midrand, South Africa; Metso-Outotec Oyj of Helsinki, Finland; Paterson and Cooke of Cape Town, South Africa; SRK Consulting Inc. of Johannesburg, South Africa; and MSA Group of Johannesburg, South Africa
A National Instrument 43-101 technical report will be filed on SEDAR at www.sedar.com and the Ivanhoe Mines website at www.ivanhoemines.com within 45 days of the issuance of this news release.
Figure 2: Kamoa-Kakula 2023 IDP life-of-mine development plan by deposit
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Kakula Kakula Stockpiles Processed Kakula West Kamoa Stockpiles Processed Kamoa 1 Kansoko Sud Kamoa 2 PEA Milled Cu Grade
Figure by OreWin, 2023.
Phases 1 and 2 approaching full capacity with de-bottlenecking program over 90% complete; delivering increased copper production and operating cash flow to fund Phase 3 and 4 expansions
The Kamoa-Kakula Copper Complex’s Phase 1 concentrator began producing copper in May 2021 and achieved commercial production ahead of schedule in July 2021. The Phase 2 concentrator, which doubled nameplate production capacity, was also commissioned several months ahead of schedule in April 2022.
In late February 2022, the Company announced that Kamoa Copper approved a debottlenecking plan to increase the combined design processing capacity of the Phase 1 and Phase 2 concentrator plants by approximately 21%, from 7.6 Mtpa to 9.2 Mtpa. As of early January 2023, the debottlenecking program was over 90% complete.
To meet the expanded plant capacity of Phase 1 and 2, the Kakula Mine and associated material-handling capacity is undergoing an expansion which will enable an increased mining rate of between 8 Mtpa and 9 Mtpa. Together with existing stockpiled material at Kakula, this will provide the feed for the Phase 1 and Phase 2 debottlenecked concentrators at a throughput rate of 9.2 Mtpa. As of the end of December 2022, Kakula’s surface ore stockpiles totalled approximately 3.01 million tonnes at an estimated grade of 4.2% copper, containing over 126,000 tonnes of copper. The long-term development plan for Kamoa-Kakula can be seen in Figure 2, as well as a plan showing all the deposits in the Kamoa-Kakula 2023 IDP shown in Figure 3.
As the Kakula stockpiles near depletion, high-grade ore fed into the Phase 1 and Phase 2 concentrators from Kakula Mine will be supplemented with ore from a new underground mine at Kakula West, as shown in Figure 2.
Figure 3: Overview of deposits included within the Kamoa-Kakula 2023 PFS (outlined in blue) and Kamoa-Kakula 2023 PEA (outlined in green)
Figure by OreWin, 2023.
Kamoa-Kakula produced 333,497 tonnes of copper in concentrate in 2022, achieving the upper end of its original 2022 production guidance range of 290,000 to 340,000 tonnes. Kamoa-Kakula’s 2022 production achievement represents a year-over-year increase of 215%. Kamoa-Kakula’s 2023 guidance range for production and cash costs is provided below.
Kamoa Copper Managing Director, Riaan Vermeulen added: “This study demonstrates why Kamoa-Kakula is the world’s fastest-growing copper mine, and will surely be among the leading mining operations globally for years to come. The fantastic team we have at Kamoa Copper is committed wholeheartedly to executing this plan, as we did so successfully with Phases 1 and 2.
“Whilst operating Phase 1 and 2 and seeking to improve on operational efficiencies, we are progressing well with the major construction activities for the Phase 3 expansion. We still have a lot to learn about this mine as we execute, and so we are focused on opening up the orebody in advance by prioritizing the development of the panel access drifts to increase readily available ore reserves for stoping. This will not only lower production risk in the long term but also greatly improve our orebody knowledge, especially around reef geometry, ground conditions and water management. We are in the very early stages of the development of several new underground orebodies in the Kamoa area, and the operating knowledge we gain daily will feed into continuing improving plans and projections, adapting the mining to best suit the conditions as we progress.”
The construction of a new concentrate thickener nears completion as part of the debottlenecking program. Once complete, the Phase 1 and 2 concentrators are expected to reach a combined processing capacity of 9.2 million tonnes per annum
Kamoa-Kakula 2023 Guidance
Contained copper in concentrate (tonnes) 390,000 - 430,000 Cash cost (C1) ($ per pound of payable copper) 1.40 – 1.50
All figures are on a 100%-project basis and metal reported in concentrate is before refining losses or payability deductions associated with smelter terms.
Kamoa-Kakula’s 2023 guidance is based on several assumptions and estimates as of December 31, 2022. Guidance involves estimates of known and unknown risks, uncertainties and other factors that may cause the actual results to differ materially.
Production guidance is based on assumptions about the timing for the completion of the debottlenecking program, among other things.
Cash cost (C1) guidance factors in an increase in the grid power tariff supplied by DRC state-owned utility, Société Nationale d'Electricité (SNEL), which was increased from approximately $0.06 per kilowatt-hour (kWh) to $0.10 per kWh from December 2022. This marks the first increase by the predominantly hydro-powered grid in over 10 years. Kamoa-Kakula’s energy subsidiary continues to receive a 40% rebate on the power invoices payable, which repays the loan made to SNEL to rehabilitate state-owned hydropower infrastructure assets. Based upon the Kamoa-Kakula 2023 PFS, the loan is anticipated to be amortized over approximately 9 years.
Cash cost (C1) guidance is based on assumptions including, among other things, prevailing logistics costs based on estimated regional trucking capacity, particularly as idled operations may come online, as well as increased benchmark treatment and refining charges, and inflation in consumables and other inputs.
Cash cost (C1) per pound of payable copper for Q3 2022 was $1.43/lb. and $1.38/lb. for the nine months ended September 30, 2022, with the cost of sales per pound of payable copper sold for the same periods being $1.05/lb. and $1.09/lb. respectively.
C1 cash cost is a non-GAAP measure used by management to evaluate operating performance and includes all direct mining, processing, stockpile rehandling charges, and general and administrative costs. Smelter charges and freight deductions on sales to the final port of destination (typically China), which are recognized as a component of sales revenues, are added to C1 cash cost to arrive at an approximate cost of delivered finished metal.
For historical comparatives see the Non-GAAP Financial Performance Measures section of this news release. Please also see the Management’s Discussion and Analysis for the three and nine months that ended September 30, 2022, for a discussion of non-GAAP measures. All figures in the above table are on a 100%- project basis.
Figure 4: Plan view of the Kakula site layout, with the direct-to-blister smelter to be constructed adjacent to the existing Kakula Phase 1 and 2 concentrators
Phase 3 expansion to increase average annual production to 620,000 tonnes of copper over the next ten years, with annual EBITDA of over $3 billion
Kamoa-Kakula's Phase 3 expansion is expected to increase annualized copper production to an average of approximately 620,000 tonnes per year over the next ten years, which will position Kamoa Copper as the world’s fourth largest copper mining complex (Figure 5), and the largest copper mine on the African continent. With an average grade of 4.9% over the next ten years, the project generates over $3 billion in EBITDA per year, based on consensus commodity prices, a significant increase from Phase 1 and 2.
Figure 5: World’s projected top 10 copper mines in 2025, by key metrics
Note: Kamoa-Kakula production and grade are based on average paid copper production and average copper feed grade during the first 10 years as detailed in the Kamoa-Kakula 2023 PFS. The ‘Copper Head Grade’ for the projects benchmarked by Wood Mackenzie reflects the average reserve grade.
Source: Wood Mackenzie (based on public disclosure, the Kamoa-Kakula 2023 PFS has not been reviewed by Wood Mackenzie).
Phase 3 includes a new 5.0-Mtpa concentrator that is located approximately 10 kilometres (km) north of the Phase 1 and 2 concentrators, as shown in Figure 6. The design of the concentrator is similar to that of the existing Phase 1 and 2 concentrators, albeit with an enlarged capacity. Based on extensive metallurgical test work, the Kamoa concentrator is expected to achieve an overall recovery of 87%, producing a concentrate at an average grade of 37% copper. The Kamoa deposits, like that of Kakula, also benefit from having very low deleterious elements, including arsenic levels of 0.02%.
The Phase 3 concentrator will be fed by ore from the existing adjacent underground mining operation at Kansoko Sud (formerly referred to as Kansoko), as well as two new underground mining operations, Kamoa 1 and Kamoa 2, which are currently under development.