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
Following the signing of a partnership agreement with the DRC government in November 2016, Ivanhoe Mines and Zijin Mining now each hold an indirect 39.6% interest in the Kamoa-Kakula project, while Crystal River Global holds an indirect 0.8% interest and the DRC government a direct 20% interest.

Kamoa Holding has an indirect 80% interest in the tier-one Kamoa-Kakula copper project.

Project Description
The project has been independently ranked as the world’s largest high-grade copper discovery by international mining consultant Wood Mackenzie.

On May 17, 2017, Ivanhoe Mines announced that the company had completed an independently verified, updated mineral resource estimate for the Kamoa-Kakula copper project.

The mineral resource estimate covers a strike length of about 7.7 km along the eastern section of the Kakula discovery. It boosts the tonnage of Kakula’s estimated indicated resources by 75%, compared with the October 2016 resource estimate, which covered a strike length of 4.1 km.

Kakula’s indicated mineral resources increased by 50-million tonnes to 116-million tonnes at 6.09% copper, at a 3% cutoff grade. This compares with 66-million tonnes at 6.59% copper estimated in October 2016, also at a 3% cutoff grade.

Kakula’s estimated inferred mineral resources include an additional 12-million tonnes at 4.45% copper, at a 3% cutoff.

The estimate further boosts the combined Kamoa-Kakula indicated mineral resources to about one-billion tonnes, at 3.02% copper, and another 191-million tonnes of inferred resources at 2.37% copper, at a 1.4% cutoff.

The preliminary economic assessment (PEA) results, finalised in December 2016, present 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.

Potential Job Creation
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 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 March 2016 Kamoa PFS, with a payback period of 3.5 years.

Value
The Kakula Phase 1 mine proposal estimates a 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 has started work on the twin declines at the ultrahigh-grade Kakula copper discovery, at the Kamoa-Kakula copper project, with the first blast.

The Kakula boxcut was successfully completed on October 26, followed by the first blast for the twin declines at Kakula on November 16 – ten days ahead of schedule.

The Kakula 3 600 m decline development work, which is being undertaken by Chinese firm JCHX Mining Management’s DRC subsidiary JMMC, is scheduled to be completed within one year.

Meanwhile, the 14 rigs on site continue to drill at Kamoa-Kakula, with ten rigs focused on expanding and upgrading the resources in the Kakula high-grade zone along trend to the west and south-east.

A fresh resource estimate for Kakula is being prepared and is expected to result in a major upgrade and expansion of the Kakula mineral resources.

The updated resource estimate is expected to be released in January 2018.

Further, the new, expanded Kamoa-Kakula preliminary economic assessment (PEA), based on the upcoming January 2018 resource model, is progressing well and is scheduled for completion during this quarter.

The study will be considered as the base case for the first phase of development at Kamoa-Kakula, the development plans of which will be reassessed and amended as the project progresses, owing to the successful step-out drilling at Kakula West.

Key Contracts and Suppliers
Orewin, Amec Foster Wheeler E&C services and SRK Consulting (PEA), and JCHX Mining Management’s DRC subsidiary JMMC (decline development work).

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.