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Ivanhoe swings to second-quarter profit

15th August 2022

By: Donna Slater

Features Deputy Editor and Chief Photographer

     

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TSX-listed diversified miner Ivanhoe Mines recorded a profit of $5-million for the second quarter of the year, up from a loss of $108.6-million for the same period of 2021.

The profit in the period includes Ivanhoe Mines’ share of profit and finance income from the Democratic Republic of Congo-based Kamoa-Kakula joint venture of $84.6-million, which set a new quarterly production record during the period with 87 314 t of copper in concentrate produced.

Commercial production at the Phase 2 concentrator of Kamoa-Kakula was achieved on April 7.

As at June 30, Ivanhoe had cash and cash equivalents of $507.1-million, and expects that Kamoa Copper’s operating and expansion capital expenditure on Phase 3 will be funded from copper sales and facilities at Kamoa-Kakula.

As such, the miner is increasing the lower end of its production guidance range for Kamoa-Kakula this year, to between 310 000 t and 340 000 t of copper in concentrate, following the early commissioning of the Phase 2 expansion.

This mine’s production cost in the second quarter was $1.15/lb, while cash costs totalled $1.42/lb, compared with $1.21/lb and $1.28/lb in the first quarter of the year and fourth quarter of 2021, respectively.

Ivanhoe Mines reiterates its cash cost guidance for Kamoa-Kakula of between $1.20/lb and $1.40/lb for the full 2022, as a result of cash costs over the first six months totalling $1.34/lb.

During the second quarter, Kamoa Copper sold 85 794 t of copper, realising revenue of $494.1-million, with an operating profit of $253.1-million and earnings before interest, taxes, depreciation and amortisation of $286.3-million.

Kamoa Copper mined 1.66-million tonnes of ore, grading at 5.57% copper in the period, including 780 000 t, grading 6.74% copper from the Kakula mine’s high-grade centre.

Over the first half of this year, Kamoa Copper milled about three-million tonnes of ore at an average feed grade of 5.59% copper, and produced 142 916 t of copper in concentrate.

After the end of the second quarter, Kamoa Copper set another new monthly production record with 32 877 t of copper produced in July, equivalent to an annualised production rate of 387 100 t.

The miner reports that Kamoa Copper’s de-bottlenecking programme is progressing according to schedule. The programme will increase the combined design processing capacity of the Phase 1 and Phase 2 concentrators to about 9.2-million tonnes of ore a year.

Copper production from Kamoa-Kakula’s first two phases is projected to reach about 450 000 t/y by the second quarter of 2023.

Ivanhoe also reports that basic engineering design for Kamoa Copper’s five-million-tonne-a-year Phase 3 concentrator is nearing completion with engineering and procurement activities under way.

During June, orders were placed for long-lead items, including ball mills, concentrate filters, cone crushers and flotation cells. The earthworks contract also has been placed.

In addition, the miner notes that earthworks excavation for the Phase 3 direct-to-blister flash smelter is advancing quickly. In June, purchase orders were placed for the smelter’s slag-cleaning furnace and the anode refining furnaces.

In terms of exploration, Ivanhoe continues its copper exploration programme on its Western Foreland licences that cover about 2 407 km2, neighbouring the 400 km2 Kamoa-Kakula mining licences.

Here, the miner reports that this year’s extensive drilling programme is well under way, with 39 diamond drill holes totalling 7 539 m having been completed during the second quarter.

Meanwhile, lateral underground mine development at Ivanhoe’s South Africa-based Platreef operation's 950-m-level – towards the location of the first ventilation shaft position – progressed well during the period under review.

Over 200 m of lateral development has been completed since work started in April.

Construction of Platreef’s first solar-power plant is scheduled to start this quarter, with commissioning expected in 2023. The electricity generated from this power plant will be used for mine development and construction activities, as well as for charging Platreef’s battery-powered underground mining machinery fleet.

Ivanhoe reports that the Platreef 2022 feasibility study yields an after-tax net present value of $1.7-billion and an internal rate of return of 18.5% at long-term consensus metal prices. Based on spot metal prices at the time of the study (February 22), the after-tax net present value increases to $4.1-billion and the internal rate of return increases to 29%.

Further, Ivanhoe, in June, approved the development budget for the Kipushi project, also in the DRC, in line with the 2022 feasibility study. Ordering of long-lead equipment and other construction activities have started; while financing and offtake discussions are advancing with several interested parties, the miner notes.

The Kipushi 2022 feasibility study yields an after-tax net present value of $941-million and an internal rate of return of 40.9% at long-term consensus metal prices. At a zinc price of $1.60/lb (the current zinc spot price), the after-tax net present value increases to $2-billion and the internal rate of return increases to 68%.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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