Name of the Project
Kamoa-Kakula copper project.

Location
The project is located on the Central African Copperbelt, west of the Democratic Republic of Congo’s (DRC’s) Katanga mining region.

Client
The project is a joint venture between Ivanhoe Mines, Zijin Mining Group and the DRC government.

Project Description
The project has been independently ranked as the world’s largest high-grade copper discovery by international mining consultant Wood Mackenzie. It boasts combined indicated mineral resources of 944-million tonnes grading 2.83% copper, and inferred mineral resources of 286-million tonnes grading 2.31% copper at a 1% copper cutoff over a minimum thickness of 3 m.

The preliminary economic assessment (PEA) results finalised in December 2016 presents two initial scenarios for development of the high-grade copper deposits at the project. 

Scenario 1:
The development of a four-million-tonne-a-year Kakula Phase 1 mine at the Kakula deposit, in the southerly portion of the project’s discovery area. For this option, the PEA envisages an average production rate of 216 000 t/y of copper and peak copper production of 262 000 t by Year 3. In this option, the project has an initial mine life of 23 years.

Scenario 2:
Two mines producing a total of eight-million tonnes a year, comprising a two-phase sequential expansion of the proposed Kakula Phase 1 mine at the Kakula deposit and the Kansoko mine at the adjacent Kamoa deposit. The PEA envisages an average production rate of 292 000 t/y and peak production of 370 000 t by Year 7. In this option, the project has an initial mine life of 29 years.

Jobs to be Created
Not stated.

Net Present Value/Internal Rate of Return
The option for a four-million-tonne-a-year mine estimates an after-tax net present value (NPV), at an 8% discount rate, of $3.66-billion – an increase of 272% compared with the after-tax NPV of $986-million projected in the March 2016 Kamoa prefeasibility study (PFS). The internal rate of return (IRR) of 38% is more than double the return that was estimated in the March 2016 PFS, with a payback of 2.3 years. 

The option for two mines producing a total of eight-million tonnes a year forecasts an after-tax NPV, at an 8% discount rate, of $4.75-billion, an increase of 382% compared with the after-tax NPV of $986-million estimated in the 2016 Kamoa PFS. The after-tax IRR is estimated at 34.6%, which is more than double the IRR of the 2016 Kamoa PFS, with a payback period of 3.5 years. 

Value
The Kakula Phase 1 mine proposal estimates preproduction capital cost of $999-million. This is about $200-million less than previously estimated in the March 2016 Kamoa PFS. 
 
In the Kakula Phase 1 mine and Kansoko mine proposal, the PEA estimates $999-million in capital costs.

Duration
Not stated.

Latest Developments
Ivanhoe Mines is fast-tracking a new resource estimate and an expanded preliminary economic assessment (PEA) at its Kamoa-Kakula copper project to examine expanded development options.

This follows the latest assay results from another 25 holes in the ongoing 2016/17 drilling campaign that has significantly expanded the Kakula copper discovery and reinforced the “exceptional continuity” of high-grade copper mineralisation and the relatively flat-lying geometry.

“The open-ended nature of the extremely high-grade copper mineralisation at the unfolding Kakula discovery certainly has caught the attention of the mining industry. The ongoing results speak for themselves – and leave me speechless,” Ivanhoe executive chairperson Robert Friedland has said.

On the back of what Friedland has described as “spectacular exploration success”, a new Kakula mineral resource estimate is expected early in the second quarter of 2017 to update the mineral resource that was defined in October 2016, following a drilling programme covering 8.7 km2 within the larger 60 km2 Kakula exploration area.

Further, Ivanhoe is planning for the expanded PEA to analyse the potential of mining the combined Kamoa and Kakula discoveries under expanded development scenarios of up to 16-million tonnes a year.

The December 2016 PEA estimated that the initial phase of production from Kakula, at a rate of four-million tonnes a year, would have a projected average grade of 7.52% copper over the initial five years of operation.

“Given the potential to significantly expand Kakula’s high-grade resources, the project engineering team is targeting a life-of-mine average yearly copper production scenario for a mine of up to eight-million tonnes a year at Kakula, potentially producing more than 400 000 t/y,” Friedland has said.

“The next version of the PEA will focus on determining the optimal initial development scenario, as well as the best steady-state mining rate, which balances capital efficiency with effective scale and long-term operating costs to maximise the project’s net present value.”

Further, Ivanhoe has said data collection and testwork to support a subsequent prefeasibility study are also under way to enhance the findings of the Kakula 2016 PEA.

Ivanhoe and partner Zijin Mining have accelerated the Kakula exploration programme with the mobilisation of additional contracted drill rigs.

Nine rigs now are drilling at Kakula, focused in the north-west resource expansion area, to initially infill an area of 2.6 km2 immediately north-west of Kakula’s current inferred resource boundary.

Infill drilling of inferred resources is ongoing in the central section of Kakula. To the south-east, step-out drilling is continuing to explore extensions of the Kakula high-grade zone along trend,” the company has said.

Ivanhoe has also highlighted the potential of the untested 200 km2 of the 400 km2 Kamoa-Kakula project area, with the geology team and technical advisers now “intensively” evaluating the structural and stratigraphic controls on mineralisation of the broader Kamoa-Kakula basin to define and rank priority targets located within the untested parts of the licence.

Initial work has highlighted a number of high-priority drill targets that are planned to be tested this year.

Key Contracts and Suppliers
Orewin, Amec Foster Wheeler E&C services and SRK Consulting (PEA).

On Budget and on Time?
Not stated.

Contact Details for Project Information
Ivanhoe Mines investor contact Bill Trenaman, tel +1 604 512 4856 or email billtr@ivancorp.net.