KOLWEZI - Ivanhoe Mines (TSX: IVN; OTCQX: IVPAF) Co-Chairs Robert Friedland and Yufeng 'Miles' Sun announced today that Kamoa Holding Limited, the joint-venture holding company of the Kamoa-Kakula Copper Project in the Democratic Republic of Congo (DRC), has secured an equipment financing facility of up to EUR 176 million (approximately US$211 million), together with a US$9 million down-payment facility.
The two facilities will be used by the project to purchase underground mobile mining equipment and services from leading Swedish manufacturers Sandvik AB and Epiroc AB, and Finnish manufacturer Normet Oy.
In addition, Gold Mountains (H.K.) International Mining Company, a subsidiary of Zijin Mining Group, has provided Kamoa Holding Limited with a limited recourse line of credit of US$200 million secured by the project's pre-production ore stockpiles to fund the Phase 2 concentrator expansion. US$200 million is sufficient to cover the cost of the second, 3.8 million-tonne-per-annum (Mtpa) concentrator module at the Kakula Mine doubling the mine's processing capacity from 3.8 Mtpa to 7.6 Mtpa.
At the end of October 2020, the project's pre-production surface stockpiles contained approximately one million tonnes of high-grade and medium-grade ore at an estimated grade of 3.47% copper. An additional 622,000 tonnes of low-grade development ore also has been stockpiled on surface. The project is positioned for a significant acceleration in the tonnage, as well as a marked increase in the grade, of ore added to the surface stockpiles as more mining crews soon will begin working in the higher-grade areas of the Kakula and Kansoko mines.
The combined funds from the credit facilities will be used to fast track the overall development of Kakula's Phase 2 module, including the mill and associated infrastructure, as well as to accelerate mining activities at the Kakula and Kansoko deposits to keep both concentrator plants operating at full capacity. The additional funding is expected to accelerate the completion of the Phase 2 mill expansion from Q1 2023 to Q3 2022.
Kamoa-Kakula expects to soon draw down the equivalent of approximately US$50 million of the equipment financing and down-payment facilities to account for the large fleet of mobile mining equipment already purchased and in operation at the Kakula Mine.
Mr. Friedland commented, 'Kamoa-Kakula remains solidly on track to begin Phase 1 copper production in July 2021, and these two non-dilutive, project-level credit facilities allow us to draw down funds as needed to execute the Phase 2 concentrator plant expansion project well ahead of our previous schedule. We share this vision for project optimization and advancement with our partners at the Kamoa-Kakula Project.
'Collectively, we have a very positive outlook for copper prices in the coming years; so we want to ensure that the operation reaches its near-term production capacity as expeditiously as possible, while also maintaining our strong balance sheet. Given today's uncertain macroeconomic environment, we view these credit facilities as judicious and timely, with an amortization schedule that fits well with the planned start-up of Kamoa-Kakula's Phase 2 expansion, which is expected to significantly increase the project's cash-generating capabilities.
'The recent, independently-prepared pre-feasibility study for the expanded, 7.6 Mtpa mining operation - sourcing ore from both the Kakula and Kansoko mines - highlights the exceptional economic returns of this second phase development. Using a copper price assumption of US$3.10 a pound, the study outlines an after-tax NPV8% of US$6.6 billion and an IRR of 69% over a 37-year mine life, as well as payback of just 2.5 years,' Mr. Friedland added. 'The pre-feasibility study also assumed that financing will be on the basis of 100% equity, so we have the opportunity to significantly increase returns by leveraging these credit facilities.'
Kakula is projected to be the world's highest-grade major copper mine with an initial mining rate of 3.8 Mtpa at an estimated average feed grade of 6.6% copper over the first five years of operation. Kamoa-Kakula also is forecast to become the world's second-largest copper mine through a series of phased expansions to 19 Mtpa or more.
The long-lead items for the second 3.8 Mtpa concentrator plant have been ordered and the second phase of the project's development officially is underway. Requests for tenders for the second-phase earthworks and civil works also have been issued.
The full scope of the Phase 2 expanded facilities includes the underground expansion at the Kakula Mine to reach an annual production rate of 6 Mtpa, the commencement of commercial mining operations at the Kansoko Mine at a 1.6-Mtpa steady state, a second 3.8-Mtpa concentrator module at Kakula, and associated surface infrastructure to support the expansion at the various sites. A portion of the Phase 2 capital expenditure and subsequent expansions are expected to be funded by cash flows.
The Kamoa-Kakula Copper Project is a joint venture between Ivanhoe Mines (39.6%), Zijin Mining Group (39.6%), Crystal River Global Limited (0.8%) and the DRC government (20%).
Kamoa-Kakula committed to be a leader in environmentally-responsible copper mining
A recent independent audit of Kamoa-Kakula's greenhouse gas intensity metrics performed by Hatch Ltd. of Mississauga, Canada, a leading, international environmental consulting firm, confirmed that Kamoa-Kakula will be among the world's lowest greenhouse gas emitters per unit of copper produced, validating the project's commitment to be a leader in environmentally-responsible copper mining.
Kamoa-Kakula will be powered by clean, renewable hydroelectricity and 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.
The Swedish Export Credit Agency (EKN), the Swedish Export Credit Corporation (SEK) and Standard Bank South Africa have conducted an environmental and social due diligence of the project based on the existing Environmental and Social Impact Assessment. The project has developed an Environmental and Social Action Plan with the purpose of managing identified risks in line with international standards.
'We are proud to combine the project's outstanding economics detailed in the recently released, independent Integrated Development Plan 2020, with first-class environmental, social, and community initiatives,' Mr. Friedland stated.
About Ivanhoe Mines
Ivanhoe Mines is a Canadian mining company focused on advancing its three principal joint-venture projects in Southern Africa: the development of major new, mechanized, underground mines at the Kamoa-Kakula copper discoveries in the DRC and at 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. Kamoa-Kakula is expected to begin producing copper in July 2021 and, through phased expansions, is positioned to become one of the world's largest copper producers. Kamoa-Kakula and Kipushi will be powered by clean, renewable hydroelectricity and will be among the world's lowest greenhouse gas emitters per unit of metal produced. Ivanhoe also is exploring for new copper discoveries on its wholly-owned Western Foreland exploration licences in the DRC, near the Kamoa-Kakula Project.
Certain statements in this release constitute 'forward-looking statements' or 'forward-looking information' within the meaning of applicable securities laws. Such statements and information involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the company, its projects, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements or information. Such statements can be identified by the use of words such as 'may', 'would', 'could', 'will', 'intend', 'expect', 'believe', 'plan', 'anticipate', 'estimate', 'scheduled', 'forecast', 'predict' and other similar terminology, or state that certain actions, events or results 'may', 'could', 'would', 'might' or 'will' be taken, occur or be achieved. These statements reflect the company's current expectations regarding future events, performance and results and speak only as of the date of this release.
Such statements include without limitation, the timing and results of: (i) statements regarding the Kamoa-Kakula Project is positioned for a significant acceleration in the tonnage, as well as a marked increase in the grade, of ore added to the surface stockpiles as more mining crews will soon begin working in the higher-grade areas of the Kakula and Kansoko mines; (ii) statements regarding Kamoa-Kakula expects to soon draw down the equivalent of approximately US$50 million of the equipment financing and down-payment facilities to account for the large fleet of mobile mining equipment already purchased and in operation at the Kakula Mine; (iii) statements regarding the additional funding from the credit facilities is expected to accelerate the completion of the Phase 2 mill expansion from Q1 2023 to Q3 2022; (iv) statements regarding a portion of the Phase 2 capital expenditure and subsequent expansions are expected to be funded by cash flows; (v) statements regarding the planned start-up of Kamoa-Kakula's Phase 2 expansion is expected to significantly increase the project's cash-generating capabilities; (vi) statements regarding the project has the opportunity to significantly increase the returns outlined in the recent pre-feasibility study by leveraging these credit facilities; (vii) statements regarding Kakula is projected to be the world's highest-grade major copper mine with an initial mining rate of 3.8 Mtpa at an estimated average feed grade of 6.6% copper over the first five years of operation; (viii) statements regarding Kamoa-Kakula also is forecast to become the world's second-largest copper mine through a series of phased expansions to 19 Mtpa or more; (ix) statements regarding the full scope of the Phase 2 expanded facilities is estimated to cost approximately US$750 million; (x) statements regarding a portion of the Phase 2 capital expenditure and subsequent expansions are expected to be funded by cash flows; (xi) statements regarding Kamoa-Kakula will have the lowest emissions per tonne of copper concentrate produced of any of the world's major copper mines and (xii) statements regarding the contained copper in the project's pre-production stockpiles is projected to grow to approximately 125,000 tonnes by July 2021, when the Phase 1 copper production is forecast to begin.
As well, all of the results of the Kakula definitive feasibility study, the Kakula-Kansoko pre-feasibility study and the Kamoa-Kakula preliminary economic assessment, constitute forward-looking statements or information, and include future estimates of internal rates of return, net present value, future production, estimates of cash cost, proposed mining plans and methods, mine life estimates, cash flow forecasts, metal recoveries, estimates of capital and operating costs and the size and timing of phased development of the projects. Furthermore, with respect to this specific forward-looking information concerning the development of the Kamoa-Kakula Project, the company has based its assumptions and analysis on certain factors that are inherently uncertain. Uncertainties include: (i) the adequacy of infrastructure; (ii) geological characteristics; (iii) metallurgical characteristics of the mineralization; (iv) the ability to develop adequate processing capacity; (v) the price of copper; (vi) the availability of equipment and facilities necessary to complete development; (vii) the cost of consumables and mining and processing equipment; (viii) unforeseen technological and engineering problems; (ix) accidents or acts of sabotage or terrorism; (x) currency fluctuations; (xi) changes in regulations; (xii) the compliance by joint venture partners with terms of agreements; (xiii) the availability and productivity of skilled labour; (xiv) the regulation of the mining industry by various governmental agencies; (xv) the ability to raise sufficient capital to develop such projects; (xvi) changes in project scope or design and (xvii) political factors.
Forward-looking statements and information involve significant risks and uncertainties, should not be read as guarantees of future performance or results and will not necessarily be accurate indicators of whether or not such results will be achieved. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements or information, including, but not limited to, the factors discussed below and under 'Risk Factors', and elsewhere in this release, as well as unexpected changes in laws, rules or regulations, or their enforcement by applicable authorities; the failure of parties to contracts with the company to perform as agreed; social or labour unrest; changes in commodity prices and the failure of exploration programs or studies to deliver anticipated results or results that would justify and support continued exploration, studies, development or operations.
Although the forward-looking statements contained in this release are based upon what management of the company believes are reasonable assumptions, the company cannot assure investors that actual results will be consistent with these forward-looking statements. These forward-looking statements are made as of the date of this release and are expressly qualified in their entirety by this cautionary statement. Subject to applicable securities laws, the company does not assume any obligation to update or revise the forward-looking statements contained herein to reflect events or circumstances occurring after the date of this release.
The company's actual results could differ materially from those anticipated in these forward-looking statements as a result of the factors set forth below in the 'Risk Factors' section in the company's Q3 2020 MD&A and its current annual information form.