Ivanhoe Mines to start sinking $80m bulk sample shaft at SA project

9th September 2013 By: Henry Lazenby - Creamer Media Deputy Editor: North America

TORONTO (miningweekly.com) – TSX-listed Ivanhoe Mines has been given permission to sink a bulk-sample shaft at its Flatreef platinum/palladium/nickel/copper/gold/rhodium discovery, at its Platreef project, in South Africa's Bushveld Igneous Complex.

The company, which recently changed its name from Ivanplats to better reflect its diverse portfolio of high-grade projects, on Monday said it would start digging the 7.25-m-diameter Shaft 1 during the fourth quarter.

The vertical shaft would descend to a depth of 800 m, where the company would collect a bulk sample in the second half of 2015, which it would use to complete a development assessment of the Flatreef deposit.

The shaft would cost about $80-million, which would be fully funded from the $180-million in dedicated funds remaining in Ivanhoe's treasury from the $280-million received in 2011 for the sale of an 8% interest in the Platreef project to a Japanese consortium of Itochu Corporation, Japan Oil, Gas and Metals National Corporation and JGC Corporation.

Mining analysts at UK-based investment dealership Griffiths McBurney said they saw this news as a “significant positive”.

In a note to clients on Monday, analyst Brock Salier said that despite the news not being as critical a catalyst as mine licensing/funding, the development effectively allowed the company to start digging, something that might surprise people in the market.

The analyst said that, for context, they saw three critical catalysts for Ivanhoe. The first was an imminent secondary cross deal on lock-in stock; the second was receiving a mining licence, organising funding and starting mine construction at Platreef; and the third was funding the start of construction at its Kamoa copper project, in the Democratic Republic of Congo.

Salier said the latter two were not expected until 2014 at the earliest, but ahead of this there were two other critical milestones that enabled the company to start digging, namely the granting of a bulk sample licence effectively allowing Ivanhoe to start the two-year shaft build, and short-term funding at Kamoa that would allow decline construction to start in the first quarter of 2014.

“As such, while not a top-three catalyst, today’s permit is on the critical path, demonstrates support from the South African government, and really allows the company to resume forward momentum.

“With the ‘best’ undeveloped copper and platinum group metals assets globally, we think this permit should remind the market of the project’s quality,” Salier said.

Ivanhoe said work was currently under way on the environmental impact assessment process, ahead of the submission deadline of February 24, 2014.

Meanwhile, drilling continued on-site with 11 rigs in operation. The focus remained on advancing technical studies, as well as expanding the current resource in the Zone 1 target area, which is believed to host the southern continuation of the Flatreef deposit. Four more drill rigs would be added here.

In the March Platreef technical report, consulting engineers Amec provided an exploration target tonnage for this area and suggested it could contain between 31-million and 62-million tonnes grading 3.36 g/t to 5.03 g/t of platinum, palladium, gold and rhodium (4E), 0.26% to 0.38% nickel and 0.13% to 0.19% copper over an area of 2.5 km2.

Amec also identified a second exploration target area that surrounds the declared mineral resources and was estimated to contain an additional 50-million to 220-million tonnes grading 2.9 g/t to 4.1 g/t 4E, 0.24% to 0.32% nickel and 0.12% to 0.16% copper over an area of 7.6 km2. The tonnage and grades were based on intersections of mineralisation in adjacent drill holes within the inferred mineral resources.

At a 2 g/t cutoff grade for 4E, the Flatreef deposit contained an estimated indicated resource of 214-million tonnes grading 4.1 g/t 4E, 0.34% nickel and 0.17% copper, containing about 28.5-million ounces of 4E, 1.61-billion pounds of nickel and 794-million pounds of copper.

At the same cutoff grade, the inferred resource totalled 415-million tonnes grading 3.5 g/t 4E, 0.33% nickel and 0.16% copper, containing about 47.2-million ounces 4E, three-billion pounds of nickel and 1.5-billion pounds of copper.

However, at a higher cutoff grade of 3 g/t 4E, Flatreef was estimated to contain indicated resources totalling 137-million tonnes grading 5.09 g/t 4E, 0.38% nickel and 0.19% copper, containing an estimated 22.4-million ounces of 4E, 1.13-billion pounds of nickel and 558-million pounds of copper.

At the same cutoff grade, the inferred resources totalled 211-million tonnes grading 4.6 g/t 4E, 0.38% nickel and 0.18% copper, containing about 31.4-million ounces of 4E, 1.76-billion pounds of nickel and 855-million pounds of copper.

The Flatreef deposit averaged 24 m in true thickness at a 2 g/t cutoff grade for 4E and was potentially amenable to large-scale mechanised underground mining.

The thick Flatreef mineralisation remains open, with about 37.5 km2 of the property untested.

In June, Ivanhoe filed a mining right application for the Platreef project with the South African Mineral Resources Department. A mining right would allow the company to mine and process minerals from the mining area for a maximum period of 30 years, which could be extended upon application.