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Ivanhoe Mines Issues Second Quarter 2022 Financial Results, and Review of Mine Construction and Exploration Activities

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Johannesburg, South Africa, Aug 15, 2022 (Newsfile Corp via COMTEX) -- Ivanhoe Mines reports record profit of $351.5 million for Q2 2022

Kamoa-Kakula Mining Complex in the Democratic Republic of Congo sold record 85,794 tonnes of payable copper and recognized revenue of $494.1 million in Q2 2022

Kamoa Copper's cost of sales total $1.15 per pound of payable copper during the second quarter, with C1 cash costs of $1.42 per pound

Over the first half of 2022, Kamoa-Kakula milled approximately three million tonnes at 5.59% copper, and produced 142,916 tonnes of copper

Kamoa-Kakula produced record 32,877 tonnes of copper in July for an annualized production rate of 387,100 tonnes of copper

Platreef underground mining advancing well, with more than 200 metres of lateral development completed during the quarter

Johannesburg, South Africa--(Newsfile Corp. - August 15, 2022) -  Ivanhoe Mines /zigman2/quotes/207656050/delayed CA:IVN -2.01% (otcqx:IVPAF) President Marna Cloete and Chief Financial Officer David van Heerden are pleased to announce the financial results for the three and six months ended June 30, 2022. Ivanhoe Mines is a leading Canadian mining company developing and expanding its four principal mining and exploration projects in Southern Africa: the Kamoa-Kakula Mining Complex in the Democratic Republic of Congo (DRC), which commenced commercial production in July 2021; the Platreef palladium, rhodium, nickel, platinum, copper and gold discovery in South Africa; the historic Kipushi zinc-copper-lead-germanium mine in the DRC; and the expansive exploration program for new copper discoveries on Ivanhoe's Western Foreland exploration licences, near Kamoa-Kakula. All figures are in U.S. dollars unless otherwise stated.

HIGHLIGHTS

  • Ivanhoe Mines recorded a profit of $351.5 million for Q2 2022, compared to a loss of $108.6 million for the same period in 2021. The profit in the quarter includes Ivanhoe Mines' share of profit and finance income from the Kamoa-Kakula joint venture of $84.6 million.

  • Kamoa-Kakula set a new quarterly production record during the period, with 87,314 tonnes of copper in concentrate produced. Commercial production from the Phase 2 concentrator was declared on April 7, 2022.

  • Ivanhoe Mines increases the lower end of its 2022 production guidance range for Kamoa-Kakula to between 310,000 and 340,000 tonnes of copper in concentrate following the early commissioning of the Phase 2 expansion.

  • Kamoa-Kakula's cost of sales per pound (lb.) of payable copper sold was $1.15/lb. for Q2 2022, while cash costs (C1) per pound of payable copper produced totalled $1.42/lb., compared to $1.21/lb. and $1.28/lb. in Q1 2022 and Q4 2021 respectively.

  • Ivanhoe Mines reiterates its C1 cash cost guidance for Kamoa-Kakula of $1.20/lb. to $1.40/lb. for the calendar year 2022. C1 cash costs over the first six months of 2022 total $1.34/lb.

  • During Q2 2022, Kamoa Copper sold 85,794 tonnes of payable copper and recognized revenue of $494.1 million, with an operating profit of $253.1 million and an EBITDA of $286.3 million.

  • Kamoa Copper mined 1.66 million tonnes of ore grading 5.57% copper in Q2 2022, including 0.78 million tonnes grading 6.74% copper from the Kakula Mine's high-grade centre.

  • Over the first half of 2022, Kamoa Copper milled approximately three million tonnes of ore at an average feed grade of 5.59% copper, and produced 142,916 tonnes of copper in concentrate.

  • After the end of Q2, Kamoa Copper set another new monthly production record, with 32,877 tonnes of copper produced in July, equivalent to an annualized production rate of 387,100 tonnes.

  • Kamoa Copper's de-bottlenecking program is progressing to schedule. The program will increase the combined design processing capacity of the Phase 1 and Phase 2 concentrators to approximately 9.2 million tonnes of ore per annum. Copper production from Kamoa-Kakula's first two phases is projected to reach approximately 450,000 tonnes per annum by Q2 2023.

  • Basic engineering design for Kamoa Copper's Phase 3, 5.0-million-tonne-per-annum concentrator is nearing completion with engineering and procurement activities underway. During June, orders were placed for the following long-lead items: ball mills, concentrate filters, cone crushers and flotation cells. The earthworks contract also has been placed.

  • 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.

  • Ivanhoe Mines has a strong balance sheet with cash and cash equivalents of $507.1 million as at June 30, 2022, and expects that Kamoa Copper's operating and expansion capital expenditures on Phase 3 will be funded from copper sales and facilities at Kamoa-Kakula.

  • Ivanhoe continues its copper exploration program on its Western Foreland licences that cover approximately 2,407 square kilometres neighbouring the 400-square-kilometre Kamoa-Kakula mining licences. The extensive 2022 drilling program is well underway, with 39 diamond drill holes totalling 7,539 metres completed during the second quarter.

  • Lateral underground mine development on Platreef's 950-metre-level, towards the location of the first ventilation shaft position, progressed well during the quarter. Over 200-metres of lateral development has been completed since work commenced in April 2022.

  • Construction of Platreef's first solar-power plant is scheduled to commence in Q3 2022, 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 fleet.

  • The Platreef 2022 Feasibility Study yields an after-tax NPV8% of $1.7 billion and IRR of 18.5% at long-term consensus metal prices. Based on spot metal prices at the time of the study (February 23, 2022), the after-tax NPV8% increases to $4.1 billion and the IRR increases to 29%.

  • In June 2022, Kipushi and Gécamines approved the development budget for the Kipushi Project in line with the 2022 Feasibility Study. Ordering of long-lead equipment and other construction activities now has commenced. Financing and offtake discussions are advancing with several interested parties.

  • The Kipushi 2022 Feasibility Study yields an after-tax NPV8% of $941 million and IRR 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 NPV8% increases to $2.0 billion and the IRR increases to 68%.

Watch a July fly-over of mining and construction activities at Kamoa-Kakula: https://vimeo.com/739389126/d7bf137f91



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Kamoa Copper undertaking optimization of logistics costs

Due to the early commissioning and highly successful ramp-up of the Phase 2 concentrator during Q2 2022, Kamoa Copper dispatched approximately 177,000 tonnes of copper concentrates, a significant increase on approximately 103,000 tonnes dispatched during Q1 2022.

Copper C1 cash costs per pound of payable copper for Q2 2022 were higher than Q1 2022 largely due to a 42% increase in logistics charges for the transportation of Kamoa-Kakula's copper products.

The increase in logistics charges for the quarter were impacted by limitations in truck availability caused by the sharp increase in volumes, interrupted port operations at Durban caused by flooding, customs clearing times and border congestion between the DRC and Zambia, as well as higher diesel prices.

However, mine site operating costs are somewhat shielded from higher diesel prices, as site power is provided by the DRC national grid at a rate of approximately 6 cents per kilowatt hour, following the refurbishment of the Mwadingusha hydropower facility under a public-private partnership with Société Nationale d'Électricité (SNEL), the DRC state power utility company.

In addition, the Lualaba Copper Smelter located near Kolwezi, which is expected to treat approximately 150,000 tonnes of copper concentrates from Kamoa-Kakula annually, is undergoing scheduled maintenance that is expected to be completed in early September. Until then, Kamoa Copper's concentrate production will be wholly transported and exported as copper concentrate (approximately 50% contained copper), without the expected quantity of blister copper (approximately 99% contained copper), thereby temporarily increasing logistics costs.

Kamoa Copper, working alongside its offtake partners, Zijin Mining and CITIC Metal as well as the government of the DRC, is undertaking several initiatives to optimize the transportation of Kamoa Copper's products.

These activities include working with its offtake partners, logistics service providers and local entrepreneurs to increase regional trucking capacity, improving processes for clearing products for export and opening up alternative export borders between the DRC and Zambia. A second import-export border crossing recently was opened at Sakania, in addition to the existing border at Kasumbalesa, DRC.

Kamoa Copper is also working to increase flexibility to ship from a variety of ports, including Durban in South Africa, Dar es Salaam in Tanzania, Walvis Bay in Namibia and Beira in Mozambique, and longer-term to the port of Lobito in Angola.

A step-change improvement in cash costs of 10% to 20% is anticipated once Kamoa Copper's on-site 500,000-tonne-per-annum, direct-to-blister flash smelter is commissioned as part of the Phase 3 expansion, expected by the end of 2024. This cash cost reduction is in large part due to the significant decrease in volumes shipped, with approximately 600,000 tonnes of blister copper product shipped (including local toll smelting) instead of approximately 1.3 million tonnes of copper concentrate. In addition, the smelter will generate valuable by-product credits from the sale of sulphuric acid, which is in deficit in the DRC Copperbelt.

Kakula Mine optimization work targeting grades towards 6% copper

Ongoing mining optimization work at the Kakula Mine is targeting improved head grade during the second half of 2022 towards 6% copper. Kamoa Copper is also evaluating additional material handling capacity at Kakula to increase mining rates to feed the de-bottlenecked Phase 1 and 2 processing capacity of 9.2 million tonnes of ore per annum, which will be incorporated into the Phase 3 expansion Pre-Feasibility Study scheduled for the end of the year.

While the near-term expansion of underground infrastructure at Kakula takes place, ore will be drawn periodically from the surface stockpiles to maximize copper production as the Phase 1 and 2 concentrators are currently operating in excess of design capacity. As at the end of June 2022, Kamoa-Kakula's high- and medium-grade ore surface stockpiles totalled approximately 4.6 million tonnes at an estimated grade of 4.42% copper.

Management anticipates that the early commissioning of the Phase 2 concentrator plant in March 2022, approximately four months ahead of schedule, has enabled Kamoa Copper to increase the lower end of its full year 2022 production guidance from a range of between 290,000 to 340,000 tonnes of copper in concentrate, to between 310,000 and 340,000 tonnes.

Ivanhoe Mines' President Marna Cloete commented: "Ivanhoe Mines is very well positioned to manage the current commodity-market volatility and industry-wide inflationary pressures, with a strong balance sheet, tier-one, low-cost mining assets, and an experienced management team. Kamoa-Kakula is the fastest-growing, highest-grade major copper complex on the planet, and will be a long-life, cornerstone supplier of critical, high-quality, low-carbon copper metal. We remain extremely confident in copper's mid-to-long term fundamentals as the world navigates the transition to clean energy. The increase in Kamoa Copper's annual production guidance estimate is a further testament to the excellent work by the mine operations team during the Phase 1 and Phase 2 construction and ramp-up.

We are working closely with our partners to identify opportunities to improve the efficiency of Kamoa-Kakula's concentrate transport and logistics to mitigate any further cost pressures over the coming quarters. We are confident we can work proactively alongside the government of Democratic Republic of Congo to identify potential infrastructure pathways that improve our trucking and shipping conditions. With respect to Kamoa-Kakula's on-site costs, these have been largely insulated from the recent inflationary market conditions."

Ivanhoe Mines to host conference call for investors on August 15

The company will hold an investor conference call to discuss the Q2 2022 financial results at 10:30 a.m. Eastern time / 7:30 a.m. Pacific time on August 15. The conference call dial-in is +1-647-484-0258 or toll free 1-800-289-0720, quote "Ivanhoe Mines Q2 2022 Financial Results" if requested. Media are invited to attend on a listen-only basis.

Link to join the live audio webcast: https://bit.ly/3I7kaCR

An audio webcast recording of the conference call, together with supporting presentation slides, will be available on Ivanhoe Mines' website at www.ivanhoemines.com .

After issuance, the Financial Statements and Management's Discussion and Analysis will be available at www.ivanhoemines.com and at www.sedar.com .

Principal projects and review of activities

1. Kamoa-Kakula Mining Complex
39.6%-owned by Ivanhoe Mines
Democratic Republic of Congo

The Kamoa-Kakula Mining Complex, operated as the Kamoa Copper joint venture between Ivanhoe Mines and Zijin Mining, has been independently ranked as the world's fourth-largest copper deposit by international mining consultant Wood Mackenzie. The project is approximately 25 kilometres west of the town of Kolwezi and about 270 kilometres west of Lubumbashi. Kamoa-Kakula began producing copper in May 2021 and achieved commercial production on July 1, 2021.

Ivanhoe sold a 49.5% share interest in Kamoa Holding Limited (Kamoa Holding) to Zijin Mining and a 1% share interest in Kamoa Holding to privately owned Crystal River in December 2015. Kamoa Holding holds an 80% interest in the project. Since the conclusion of the Zijin transaction, each shareholder has been required to fund expenditures at Kamoa-Kakula in an amount equivalent to its proportionate shareholding interest. Ivanhoe and Zijin Mining each hold an indirect 39.6% interest in Kamoa-Kakula, Crystal River holds an indirect 0.8% interest, and the DRC government holds a direct 20% interest.

Construction of an additional scavenger-cleaner flotation cell at the Phase 1 concentrator, part of the de-bottlenecking program to boost copper production to approximately 450,000 tonnes per annum by Q2 2023.

To view an enhanced version of this graphic, please visit:
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Health and safety at Kamoa-Kakula

At the end of June 2022, Kamoa-Kakula reached 4,272,520 work hours free of a lost-time injury. Two lost-time injuries occurred underground at the Kakula Mine in Q2 2022. Kamoa Copper continues to strive toward its workplace objective of zero harm to all employees and contractors.



Nursing staff inside the new medical facility at the Kamoa Hospital.

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Kamoa-Kakula summary of operating and financial data

Q2 2022 Q1 2022 Q4 2021 Q3 2021
Ore tonnes milled (000's tonnes) 1,950 1,083 1,059 861
Copper ore grade processed (%) 5.44% 5.91% 5.96% 5.89%
Copper recovery (%) 84.0% 87.1% 86.4% 83.4%
Copper in concentrate produced (tonnes) 87,314 55,602 54,481 41,545
Payable copper sold (tonnes) 85,794 51,919 53,165 41,490
Cost of sales per pound ($ per pound) 1.15 1.08 1.12 1.08
Cash cost (C1) ($ per pound) 1.42 1.21 1.28 1.37
Sales revenue before remeasurement ($'000) 699,381 467,453 458,880 355,022
Remeasurement of contract receivables ($'000) (205,248) 52,142 29,656 (12,438)
Sales revenue after remeasurement ($'000) 494,133 519,595 488,536 342,584
EBITDA ($'000) 286,313 399,391 357,619 233,212
EBITDA margin (%) 58% 77% 73% 68%

 

C1 cash costs are prepared on a basis consistent with the industry standard definitions by Wood Mackenzie cost guidelines, but are not measures recognized under IFRS. In calculating the C1 cash cost, the costs are measured on the same basis as the Company's share of profit from the Kamoa Holding joint venture that is contained in the financial statements. C1 cash costs are used by management to evaluate operating performance and includes all direct mining, processing, and general and administrative costs. Smelter charges and freight deductions on sales to final port of destination, which are recognized as a component of sales revenues, are added to C1 cash cost to arrive at an approximate cost of delivered, finished metal. C1 cash costs exclude royalties and production taxes and non-routine charges as they are not direct production costs.

C1 cash cost per pound of payable copper produced can be further broken down as follows:

Q2 2022 Q1 2022 Q4 2021 Q3 2021
Mining ($ per lb.) 0.39 0.30 0.27 0.36
Processing ($ per lb.) 0.14 0.15 0.17 0.16
Logistics charges (delivered to China) ($ per lb.) 0.51 0.36 0.37 0.35
Treatment, refining and smelter charges ($ per lb.) 0.21 0.20 0.24 0.21
General and administrative expenditure ($ per lb.) 0.17 0.20 0.23 0.29
C1 cash cost per pound of payable copper produced ($ per lb.) 1.42 1.21 1.28 1.37

 

All figures in the above tables are on a 100%-project basis. Metal reported in concentrate is prior to refining losses or deductions associated with smelter terms. This release includes EBITDA, "EBITDA margin" and "Cash costs (C1) per pound" which are non-GAAP financial performance measures. For a detailed description of each of the non-GAAP financial performance measures used herein, and a detailed reconciliation to the most directly comparable measure under IFRS, please refer to the Non-GAAP Financial Performance Measures section of the Q2 2022 MD&A.

Record quarterly production of 87,314 tonnes of copper in Q2 2022

In late March 2022, Ivanhoe Mines announced that Kamoa-Kakula's Phase 2 concentrator plant began hot commissioning significantly ahead of schedule. First ore was introduced into the Phase 2 milling circuit on March 21, 2022, and first copper concentrate was produced approximately four months ahead of the originally announced development schedule. Commercial production from the Phase 2 concentrator was declared on April 7, 2022, while steady state production was achieved at the end of May 2022. During June 2022, copper recoveries were averaging more than 86%, with feed grades averaging approximately 5.5% copper.

Kamoa-Kakula set a new quarterly production record in the second quarter of 2022 with 87,314 tonnes of copper in concentrate produced, up from 55,602 tonnes of copper in concentrate produced in Q1 2022 and 54,481 tonnes of copper in concentrate produced in the fourth quarter of 2021. A total of 1.95 million ore tonnes were milled during the second quarter of 2022 at an average feed grade of 5.44% copper.

Over the first half of 2022, Kamoa-Kakula milled approximately three million tonnes of ore at an average feed grade of 5.59% copper, and produced 142,916 tonnes of copper in concentrate.

Phase 1 and Phase 2 debottlenecking project to boost throughput to 9.2 million tonnes of ore per year remains on schedule

Kamoa Copper's previously announced de-bottlenecking program is also progressing on schedule to increase the combined design processing capacity of the Phase 1 and Phase 2 concentrator plants to approximately 9.2 million tonnes per annum (from 7.6 million tonnes per annum).

After successfully commissioning and operating the Phase 1 and 2 concentrators, the Kamoa-Kakula team identified several relatively minor modifications that are expected to increase ore throughput from the current design of 475 tonnes per hour to approximately 580 tonnes per hour. These modifications include increasing the diameter of several pipes, replacing several motors and pumps with larger ones and installing additional flotation, concentrate-thickening, concentrate-filtration and tailings-disposal capacity. Detailed planning is underway to maximize the use of planned maintenance shutdowns of the concentrators for the installation of the new debottlenecking equipment, which is expected to take place later this year.

Once completed in the second quarter of 2023, the de-bottlenecking program will enable the copper production from Kamoa-Kakula's first two phases to reach approximately 450,000 tonnes per annum, positioning Kamoa Copper as the world's fourth largest copper producer.



Construction is advancing well on the additional tailings thickener at Kamoa-Kakula's Phase 1 and Phase 2 concentrator plants as part of the de-bottlenecking program.

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Civil works are also advancing well for the planned installation of a fourth Larox filter press at Kamoa-Kakula's concentrate warehouse.

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Safety Officer Franck Katende inspects construction of additional scavenger cleaner flotation capacity at the Phase 1 and Phase 2 concentrator plants.

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Phase 3 Pre-Feasibility Study nearing completion

The Pre-Feasibility Study for the Phase 3 expansion is expected to be announced towards the end of this year. Kamoa-Kakula's Phase 3 will consist of two new underground mines, known as Kamoa 1 and Kamoa 2. A new, 5-million-tonne-per-annum concentrator plant will also be established adjacent to the two new mines at Kamoa. In addition, Kamoa-Kakula's Phase 3 expansion includes a 500,000-tonne-per-annum, direct-to-blister flash smelter to produce approximately 99% copper metal, and the replacement of Turbine #5 at the Inga II hydroelectric power station. The turbine replacement will supply an additional 178-megawatts (MW) of clean hydroelectric power to the national grid.



Figure 1: Kamoa-Kakula's base-case, pro-forma Phase 3 copper production (after de-bottlenecking of Phase 1 and 2 is complete) relative to the world's projected top 10 producing mines in 2022 by payable copper production.

To view an enhanced version of this graphic, please visit:
https://images.newsfilecorp.com/files/3396/133832_f35aafe354d7a80b_008full.jpg

Source: company filings, Wood Mackenzie (April 2022). Note: Kamoa-Kakula production of 600 kt copper in concentrate is based on expected Phase 1, 2 and 3 steady state production, following de-bottlenecking of both Phase 1 and 2 concentrators, and commercial ramp-up of the Phase 3 concentrator.



Figure 2: Kamoa-Kakula's Phase 1, Phase 2 and Phase 3 mine, processing plants and infrastructure layout.

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Phase 3 basic engineering nearing completion, procurement activities have commenced

Basic engineering design for the Phase 3, 5-million-tonne-per-annum concentrator plant, smelter and associated infrastructure is nearing completion. Procurement activities have commenced with the following long-lead order items placed in June: ball mills, concentrate filters, cone crushers and flotation cells. The earthworks contract has also recently been placed. The associated power and surface infrastructure for Phase 3 will be designed to support future expansions.

Following the commissioning of Phase 3, expected by the end of 2024, Kamoa-Kakula will have a total processing capacity of more than 14 million tonnes per annum. The completion of Phase 3 is expected to increase copper production capacity to approximately 600,000 tonnes per annum. This production rate will position Kamoa-Kakula as the world's third-largest copper mining complex, and the largest on the African continent.

Phase 3 boxcut for the new Kamoa 1 and Kamoa 2 underground mines nearing completion, excavation of the twin declines advancing rapidly

Construction is nearing completion on the Phase 3 box cut and decline ramp at the Kamoa 1 and Kamoa 2 mines, while excavation of the twin declines to access Phase 3 mining areas also is advancing well. Construction works for the ramp, cut-off drains, and water-collection sumps are well advanced.



Construction progress on the new twin declines is advancing rapidly at the Kamoa 1 and Kamoa 2 mines.

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Machine operator Serge Muteba at work on a new tunnel connection at the Kamoa 1 and Kamoa 2 twin declines.

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Basic engineering complete and initial long-lead equipment ordered for Kamoa-Kakula's direct-to-blister flash smelter

Kamoa-Kakula's Phase 3 expansion includes a 500,000-tonne-per-annum, direct-to-blister flash smelter to produce approximately 99% copper metal, and the replacement of Turbine #5 at the Inga II hydroelectric power station. The turbine replacement will supply an additional 178-megawatts (MW) of clean hydroelectric power to the national grid.

Earthworks excavation at the smelter site is progressing well, adjacent to Kamoa-Kakula's Phase 1 and Phase 2 concentrator plants, with bush clearing and top-soil stripping well advanced.

In June, purchase orders were placed for the smelter's slag cleaning furnace, anode refining furnaces and electrostatic precipitators, while basic engineering on the smelter design has been completed.

The Kamoa-Kakula smelter uses technology supplied by Metso Outotec of Espoo, Finland, and meets the International Finance Corporation's (IFC) emissions standards. The smelter has been sized to process most of the copper concentrate forecast to be produced by Kamoa-Kakula's Phase 1, Phase 2, and Phase 3 concentrators.

Phase 3 and the smelter will be powered by hydroelectricity generated from the 178-MW Inga II hydro facility, which is currently undergoing refurbishment, at a cost of approximately 6 cents per kilowatt hour.



Smelter civil works (as part of the earthworks package), including the erection of concrete retaining walls, now are well underway.

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Geotechnical drilling is underway in preparation of construction of the main structure for Kamoa-Kakula's direct-to-blister flash smelter.

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Draw-down of surface ore stockpiles has commenced; stockpiles hold approximately 4.6 million tonnes grading 4.42% copper, containing more than 201,000 tonnes of copper

Kamoa-Kakula's total high- and medium-grade ore surface stockpiles totalled approximately 4.6 million tonnes at an estimated grade of 4.42% copper as of the end of June 2022. The operation mined 1.66 million tonnes of ore grading 5.51% copper in Q2 2022, which was comprised of 1.62 million tonnes grading 5.57% copper from the Kakula Mine, including 0.78 million tonnes grading 6.74% copper from the mine's high-grade centre.



Surface ore stockpiles contained more than 201,000 tonnes of copper as of the end of June 2022.

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Kamoa-Kakula delivering Phase 1 and 2 copper concentrate and blister under off-take agreements

During the quarter, Kamoa Copper entered into an amendment to the existing off-take agreements for Phase 1 copper concentrate with CITIC Metal (HK) Limited (CITIC Metal) and Gold Mountains (H.K.) International Mining Company Limited, a subsidiary of Zijin, which includes the additional production volumes from Phase 2. The revised off-take agreements with CITIC Metal and Gold Mountains are evergreen for 50% each of the production volumes from Phase 1 and 2, and include both copper concentrate and blister copper resulting from processing of Kamoa-Kakula's copper concentrates at the nearby Lualaba Copper Smelter.

Kamoa Copper also recently entered into a third off-take agreement with Trafigura Pte. Ltd. (Trafigura) for a fixed volume of Kamoa-Kakula's concentrate production from 2022 to 2024, with such volume re-allocated on a pro-rata basis from CITIC Metal and Zijin.

Trafigura is one of the largest physical commodities trading groups in the world, and has significant experience in managing commodity logistics flows on the African continent.

All three off-takers are purchasing either the copper concentrate at the Kamoa-Kakula Mine or the blister copper at the Lualaba Copper Smelter on a free-carrier basis, meaning the buyers are responsible for arranging freight and shipment to the final destination, which is reimbursed on an open-book basis.

Kamoa Copper's concentrates and blister copper are exported via the ports of Durban in South Africa and Dar es Salaam in Tanzania, and to a lesser extent Walvis Bay in Namibia and Beira in Mozambique.

Inga II partnership to supply additional clean hydroelectric power for the Phase 3 expansion and smelter; EPC contract signed for Turbine #5 refurbishment

In July 2021, Ivanhoe Mines Energy DRC, a sister company of Kamoa Copper tasked with delivering reliable, clean, renewable hydropower to Kamoa-Kakula, signed an addendum of the financing agreement under a public-private partnership with the Democratic Republic of Congo's state-owned power company, La Société Nationale d'Electricité (SNEL), to upgrade a major turbine (#5) at the existing Inga II hydropower facility on the Congo River.

It was this same partnership that successfully refurbished the Mwadingusha hydropower plant in 2021, which now supplies approximately 78 MW of power into the Democratic Republic of Congo's national grid.

The Inga II project is expected to produce an additional 178 MW of renewable hydropower, providing Kamoa-Kakula and its associated smelter with sustainable electricity for Phase 3 and future expansions, while also benefitting local communities. The Inga II upgrade project is scheduled for completion in Q4 of 2024.

The work at Turbine #5 will include the upgrade and replacement of all the unit line from intake equipment, turbine, speed governor, alternator, voltage regulator and transformers (water to wire).

The Inga II Turbine #5 project has much lower unitary capital cost per megawatt produced ($0.58/MW) compared to the completed Mwadingusha project ($1.45/MW). The engineering, procurement, and construction (EPC) contract for the upgrading of Turbine #5 was signed in Heidenheim, Germany, on April 26, 2022, by SNEL and Voith Hydro, a leading German hydropower company.



Rehabilitation work under the private-public partnership now is underway to refurbish Turbine #5 at the Inga II hydropower facility.

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Empowering local communities through sustainable development

Ivanhoe Mines founded the Sustainable Livelihoods Program in 2010 to strengthen food security and farming capacity in the host communities near Kamoa-Kakula. Today, approximately 900 community farmers are benefiting from the program, producing high-quality food for their families and selling the surplus for additional income. Sustainable Livelihoods commenced with maize and vegetable production, and now includes fruit, aquaculture, poultry and honey.

The banana plantation project began in 2018 and now consists of 11 hectares of banana trees. The 27 women from local communities who own this project harvested and sold more than 350 kilograms of bananas in July 2022.



Farmers from the local communities of Tshomeka, Katayi and Mundjendje harvesting bananas in July 2022.

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Construction of additional livestock farming facilities is underway and planned to be completed in October. Together with the aquaculture project -comprised of approximately 140 fishponds with plans for the construction of another 100 new ponds - the livestock farm will significantly contribute toward local entrepreneurship and enhanced regional food security.

Construction of a health clinic at Muvunda Village has been completed and equipping of the facility is underway. Construction of a church at Tshilongo Village is approximately 60% complete. Kamoa-Kakula continued its support for the adult literacy training program, being implemented by a group of community participants who have been trained as facilitators.

Implementation of the first regulatory five-year community development plan, the Cahier des Charges , which provides $8.6 million towards educational, healthcare, agricultural, potable water provision, and other initiatives, is well underway. Construction of two early childhood development centres, planned for operation in September 2022, is nearing completion. The associated curriculum has been developed and is ready for implementation, thereby enabling access to these formative educational programs for the first time in the region. The Mupenda aquaculture project and the Muvunda poultry project also have been launched, and the planning and design of two rural community health centres has progressed well.

Local community enterprise programs continued, including the expansion of the brick-making and sewing facilities, as well as landscaping and gardening, which are under review seeking to enhance business efficiency and growth. An order has been placed for a new brick-making machine, which will see the production capacity double the average production to approximately 120,000 bricks per month. The extension of the sewing facility aims to double the current average monthly production rate of approximately 600 items of personal protective equipment.



Construction of a health clinic at the local community of Muvunda has been completed and equipping of the facility is underway.

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Kamoa-Kakula 2022 Guidance
Contained copper in concentrate (tonnes) 290,000 to 340,000
Cash cost (C1) ($ per pound) 1.20 to 1.40

 

Copper Production and Cash Cost Guidance for 2022

The Kamoa-Kakula Phase 2, 3.8 million tonne per annum concentrator plant successfully declared commercial production on April 7, 2022. First ore was introduced into the Phase 2 milling circuit on March 21, 2022, with first copper concentrate produced approximately four months ahead of the originally announced development schedule. Management expects that with the early commissioning of the Phase 2 concentrator plant, Kamoa-Kakula will be able to deliver the upper end of its original 2022 copper production guidance of 290,000 to 340,000 tonnes. As a result, Ivanhoe Mines increases its 2022 production guidance range for Kamoa-Kakula to between 310,000 and 340,000 tonnes of copper in concentrate.

Kamoa-Kakula produced a total of 87,314 tonnes of copper in concentrate in Q2 2022, and 55,602 tonnes in the first quarter of 2022. The figures are on a 100% project basis and metal reported in concentrate is prior to refining losses, or deductions associated with smelter terms. Guidance involves estimates of known and unknown risks, uncertainties and other factors which may cause the actual results to be materially different.

Cash costs (C1) per pound of payable copper amounted to $1.42 for the second quarter of 2022, as compared to $1.21 and $1.28 in the first quarter of 2022 and the last quarter of 2021 respectively.

Cash costs for the second quarter included a significant increase in off-site concentrate transportation and logistics charges, which is projected to continue during the third quarter as a result of the ongoing maintenance at the Lualaba Copper Smelter and as Kamoa Copper and its partners implement logistical optimizations.

The previously announced cash cost (C1) per pound guidance for the 2022 financial year of $1.20 to $1.40 per pound remains unchanged. Cash cost is projected to come in at the upper end of the guidance range, subject to logistics costs easing in the fourth quarter.

Cash costs (C1) is a non-GAAP measure used by management to evaluate operating performance and includes all direct mining, processing, and general and administrative costs. Smelter charges and freight deductions on sales to final port of destination (typically China), which are recognized as a component of sales revenues, are added to C1 cash cost to arrive at an approximate cost of delivered finished metal.

For historical comparatives, see the Non-GAAP Financial Performance Measures section of this news release.

A breakdown of realized and provisionally priced copper production is as follows:

At the end of June 2022 there was an outstanding balance of 125,673 tonnes of provisionally priced copper in concentrate. Following the recent decline in the copper price, a remeasurement of $205 million was made to account for the change in copper price at period end.

Q2 2022 Q1 2022
Realized payable copper [ (1] [)] (tonnes) 50,642 53,056
Realized copper price [ (1] [)] ($ per lb.) 4.34 4.51
New provisionally priced payable copper [ (2] [)] (tonnes) 85,794 51,919
Average price of new provisionally priced copper ($ per lb.) 4.32 4.54
Copper price for remeasurement (mark-to-market) of provisional sales at period end ($ per lb.) 3.79 4.69
Outstanding balance of provisionally priced payable copper [ (] [3)] (tonnes) 125,673 90,544

 

Notes: (1) Payable copper that was provisionally priced in prior quarters and settled during the quarter. (2) Provisionally priced payable copper sold is subject to final pricing over the next several months. (3) Outstanding balance is made up of new provisionally priced payable copper from the current quarter, with the balance from the previous quarter.

2. Platreef Project
64%-owned by Ivanhoe Mines
South Africa

The Platreef Project is owned by Ivanplats (Pty) Ltd (Ivanplats), which is 64%-owned by Ivanhoe Mines. A 26% interest is held by Ivanplats' historically disadvantaged, broad-based, black economic empowerment (B-BBEE) partners, which include 20 local host communities with approximately 150,000 people, project employees and local entrepreneurs. A Japanese consortium of ITOCHU Corporation, Japan Oil, Gas and Metals National Corporation, and Japan Gas Corporation, owns a 10% interest in Ivanplats, which it acquired in two tranches for a total investment of $290 million.

The Platreef Project hosts an underground deposit of thick, platinum-group metals, nickel, copper and gold mineralization on the Northern Limb of the Bushveld Igneous Complex in Limpopo Province - approximately 280 kilometres northeast of Johannesburg and eight kilometres from the town of Mokopane.

On the Northern Limb, platinum-group metals mineralization is primarily hosted within the Platreef, a mineralized sequence traced for more than 30 kilometres along strike. Ivanhoe's Platreef Project, within the Platreef's southern sector, is comprised of two contiguous properties: Turfspruit and Macalacaskop. Turfspruit, the northernmost property, is contiguous with, and along strike from, Anglo Platinum's Mogalakwena group of mining operations and properties.

Since 2007, Ivanhoe has focused its exploration and development activities on defining and advancing the down-dip extension of its original discovery at Platreef, now known as the Flatreef Deposit, which is amenable to highly mechanized, underground mining methods. With Shaft 1, the initial access to the deposit, now in operation and hoisting development rock from underground, Ivanhoe is focusing on construction activities to bring Phase 1 of Platreef into production by Q3 2024.

Aerial view of the Platreef project showcasing latest construction activities, with Shaft 1 on the right, Shaft 2 hitch-to-collar construction on the left, and the radial stacker in the foreground.

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Health and safety at Platreef

As at the end of June 2022, the Platreef Project reached 1,243,146 lost-time, injury-free hours worked.

Shaft 1 changeover to a production shaft completed, lateral underground mine development progressing well

Shaft equipping was successfully completed in March 2022, with Shaft 1 now fully commissioned for Phase 1 mining as planned. Following the completion of this changeover initial development started on the 950-metre level in April 2022.

Underground development work is focused on establishing the waste passes from the 750-metre and the 850-metre levels to the 950-metre level, installing the required underground infrastructure on the various stations, developing towards the first reef and stoping areas, as well as developing towards the first ventilation shaft location. Mine development on the 950-metre level progressed well with more than 200 metres of development successfully completed during the quarter. Mining on the 750-metre level and the 850-metre level will commence in Q3 and Q4 of 2022.

Ivanplats' initial order with Epiroc of Stockholm, Sweden, for its primary mining fleet includes emissions-free, battery-electric jumbo face drill rigs, 14-tonne battery-electric scooptrams, battery-electric bolting rigs and 42-tonne battery-electric dump trucks. The first ordered fleet has been delivered, slung down and are progressing with lateral underground development.

Construction of Platreef's first solar-power plant is scheduled to commence in Q3 2022, with commissioning expected in 2023. The solar-generated power from the plant will be used for mine development and construction activities, as well as for charging Platreef's battery-powered underground mining fleet.



A battery electric ST14 Scooptram from Epiroc operating underground at Platreef. Mine development on the 950-metre-level progressed well in Q2 2022.

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Shaft 2 headgear construction from hitch to collar successfully completed

The 10m diameter Shaft 2, which will be the among the largest hoisting shafts on the African continent, is on the critical path for the future Phase 2 expansion of Platreef. Following the completion of the 26m concrete hitch to collar construction in August 2022, Ivanplats plans to continue with the construction of the 103-metre-tall concrete headgear (headframe) which will house the shaft's permanent personnel and rock hoisting facilities. The pilot drilling required for the raise bore center hole of the shaft and the commencement of the sliding of the headframe are both planned to commence before the end of 2022. This will allow for optionality in bringing forward the timeline of Phase 2 production.



Shaft 2 headgear construction from hitch to collar (in red circle) now is complete.

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/zigman2/quotes/207656050/delayed
CA : Canada: Toronto
$ 9.28
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Volume: 358,446
Oct. 5, 2022 12:09p
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18.72
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