TORONTO, ONTARIO--(Marketwired - Nov. 16, 2015) - Ivanhoe Mines (TSX:IVN) today announced its financial results for the third quarter ended September 30, 2015. All figures are in U.S. dollars unless otherwise stated.
HIGHLIGHTS
The Kamoa pre-feasibility study (PFS) is expected to be finalized in early 2016. The PFS is based on the project's planned first phase and is consistent with the phased approach to project development outlined in the 2013 Kamoa preliminary economic assessment. Phase one will see the construction of an underground operation producing three million tonnes a year and feeding an adjacent concentrator. Metallurgical test work has indicated that copper recoveries averaging 86% and concentrate grades averaging 39% copper are achievable.
Initial shaft sinking activities (drilling, blasting and mucking) at Platreef's Shaft 1 commenced on October 26, 2015, following successful construction of the shaft collar and ventilation plenum. Shaft 1 will have an internal diameter of 7.25 metres; it is projected to intersect the Flatreef deposit at a depth of 777 metres below surface in late 2017 and reach its total depth of 975 metres in 2018. Selected mining areas in the current Platreef mine plan occur at depths ranging from approximately 700 metres to 1,200 metres below the surface.
In early August, Ivanhoe Mines began work on a feasibility study that will cover the first phase of mine development at the company's Platreef Project in South Africa. The study will build upon the findings of the pre-feasibility study completed in January 2015 that included construction of an underground mine, an initial four-million-tonne-per-year concentrator and associated infrastructure to support initial concentrate production by 2019. The pre-feasibility study estimated a planned initial, average annual production rate of 433,000 ounces of platinum, palladium, rhodium and gold (3PE+Au), plus 19 million pounds of nickel and 12 million pounds of copper per year, at an estimated cost of $322 per ounce of 3PE+Au, net of by-products. There will be opportunities to refine and modify the timing and capacities of subsequent phases of production to suit market conditions during the development and commissioning of the first phase.
At the Kipushi zinc-copper project in the DRC, a total of 2,708 metres in six drill holes were completed in Q3 2015 in the Big Zinc and Nord Riche zones and the southern exploration area. By the end of Q3 2015, a total of 24,035 metres of drilling had been completed in 96 holes since Ivanhoe started its drilling program in March 2014. Ivanhoe completed the exploration drilling program in October 2015. Ivanhoe is working with MSA of Johannesburg to finalize an updated Mineral Resource Estimate for the Kipushi Project that will incorporate all of the drill results received to date. The independent estimate, which is being prepared in accordance with 2014 CIM definition standards, is expected to be completed and issued during Q4 2015. A preliminary economic assessment will be undertaken based on the updated resource estimate.
The three projects achieved a combined 12.8 million hours of lost-time-injury-free (LTIF) work by the end of Q3 2015, reflecting, in part, the company's continued efforts to prioritize the management of health and safety on its job sites. Ivanhoe recorded 4.8 million LTIF hours at Platreef, 4.4 million hours at Kamoa and 3.6 million hours at Kipushi by the end of Q3 2015. The Platreef Project subsequently has reported two lost-time injuries.
Principal projects and review of activities
Ivanhoe Mines is advancing and developing its three principal projects in Southern Africa:
The Kamoa Copper Project, based on development of a planned mine on the company's copper discovery in a previously unknown extension of the Central African Copperbelt in the Democratic Republic of Congo. In March this year, members of the Ivanhoe Mines exploration team received the prestigious Thayer Lindsley Award from the Prospectors & Developers Association of Canada for the Kamoa copper discovery, recognized as 2014's top international mineral discovery.
The Platreef Project, with construction of a planned mine now underway on the company's discovery of platinum, palladium, nickel, copper, gold and rhodium on the Northern Limb of South Africa's Bushveld Complex. The South African beneficiaries of a broad-based, black economic empowerment structure have a 26% stake in the Platreef Project and the remaining 10% is owned by a Japanese consortium of ITOCHU Corporation and its affiliate, ITC Platinum Development Ltd.; Japan Oil, Gas and Metals Corporation; and Japan Gas Corporation.
The Kipushi Project, involving the confirmation and expansion of resources at the historic, high-grade Kipushi zinc, copper and germanium mine, also on the Copperbelt in the DRC, which now are being drilled and upgraded by Ivanhoe following its acquisition of a majority interest in the mine in 2011. Kipushi was operated by previous owners between 1924 and 1993.
1. Kamoa Project
95%-owned by Ivanhoe Mines
Democratic Republic of Congo (DRC)
The Kamoa Project is a very large, stratiform copper deposit with adjacent prospective exploration areas within the Central African Copperbelt, approximately 25 kilometres west of the town of Kolwezi and about 270 kilometres west of Lubumbashi. Ivanhoe has agreed to sell a 49.5% share interest in Kamoa Holding Limited (Kamoa Holding), the Ivanhoe subsidiary that presently owns 95% of the Kamoa Project, to Zijin Mining Group Co., Ltd (Zijin) for an aggregate consideration of $412 million. The purchase price will be satisfied by an initial payment of $206 million in cash upon the closing of the transaction. The agreements specify that the remaining $206 million will be paid in five equal instalments, payable every 3.5 months from closing.
In addition, Ivanhoe has agreed to sell 1% of its share interest in Kamoa Holding to Crystal River Global Limited (Crystal River) for $8.32 million - which Crystal River will pay through a non-interest-bearing, 10-year promissory note.
A 5%, non-dilutable interest in the Kamoa Project was transferred to the DRC government on September 11, 2012, for no consideration, pursuant to the DRC Mining Code. Ivanhoe also has offered to transfer an additional 15% interest to the DRC government on terms to be negotiated.
Kamoa is the world's largest undeveloped, high-grade copper deposit. On January 17, 2013, an updated mineral resource estimate was issued that increased Kamoa's Indicated Mineral Resources to a total of 739 million tonnes grading 2.67% copper and containing 43.5 billion pounds of copper. This was an increase of 115% over the previous estimate, prepared in September 2011, of 348 million tonnes grading 2.64% copper and containing 20.2 billion pounds of copper. Both estimates used a 1.0% copper cut-off grade and a minimum vertical mining thickness of three metres.
In addition to the Indicated Resources, the updated estimate included Inferred Mineral Resources of 227 million tonnes grading 1.96% copper and containing 9.8 billion pounds of copper, also at a 1.0% copper cut-off grade and a minimum vertical mining thickness of three metres.
At a higher, 2.0% copper cut-off grade, Kamoa's Indicated Resources total an estimated 550 million tonnes grading 3.04% copper and containing 36.9 billion pounds of copper. At the 2.0% cut-off, Kamoa also has 93 million tonnes of Inferred Resources grading 2.64% copper, which contain an estimated 5.4 billion pounds of copper.
Health and safety at Kamoa
Health and safety remain key priorities at the mine site. The Kamoa Project is very proud of the excellent safety record achieved to date. By the end of Q3 2015, 4,396,729 hours had been worked without a lost-time injury.
The Ivanhoe Mines Fionet program was launched during Q3 2015. The first phase of the program will cover two established provincial health zones that provide services to a total of approximately 300,000 residents living in 40 urban centres and 330 villages. The Kipushi Health Zone, in southern Haut-Katanga province, includes Ivanhoe's Kipushi Mine project. The Kanzenze Health Zone, in Lualaba province, includes Ivanhoe's Kamoa Project.
The Fionet™ system, developed by Canada-based Fio Corporation, will be introduced into the DRC through the three-year program being sponsored by Ivanhoe Mines. Fionet combines mobile, intelligent devices and cloud data services to help health workers improve the accuracy of diagnostic testing and quality of care that they provide to patients. The Fionet system also improves the quality and usefulness of the accumulated data, which can be accessed to assist with the monitoring of patient care, research and the planning of future prevention and treatment programs. With support from U.S.-based Chemonics International, DRC health workers will use Fionet to strengthen activities under the country's National Malaria Control Program.
Figure 1: Fio's Deki Reader introduces a new dimension in malaria detection, helping to deliver a rapid, accurate diagnosis and transmitting results to a cloud database. To view Figure 1, visit: http://media3.marketwire.com/docs/1033028fig1.jpg.
The program utilizes mobile smart devices to rapidly diagnose infectious diseases in rural settings. The initiative is being implemented by Chemonics International, an organization with extensive experience in managing development projects in the DRC and elsewhere in Africa.
Diamond drilling progress
Limited drilling occurred in Q3 2015, with 725 metres completed in five shallow holes. This brought the total metres drilled to 1,719 for the nine months ended September 30, 2015. One hole was completed in Kamoa Nord to test for shallow mineralization close to the Kamoa Dome, three holes were completed in Kansoko Nord to gain confidence in the high grade mineralization up-dip, and one hole was drilled on one of the regional exploration licences to assist with relinquishment decisions.
The newly purchased deep-drilling Dando rig began drilling in Q3 2015 and is expected to continue drilling through the remainder of 2015. Ivanhoe also is considering mobilizing the two company-owned Landcruiser-mounted rigs. The exploration program will focus on completing the assessment of regional exploration targets to the west of Kamoa, then begin an exploration drilling program at Kakula where previously high-grade copper mineralization was intersected. Initial drilling at Kakula is planned at 800-metre centres within the previously intersected high-grade zone, with additional, wider spaced drilling to increase the potential size of the mineralized area.
Preparation for construction of first declines
The construction of the box cut for the first access declines to the initial, planned underground mine was completed at the end of 2014. This will enable the construction of the twin declines that have been designed to intersect the high-grade copper mineralization in the Kansoko Sud area, approximately 150 metres below the surface.
Ivanhoe's drilling program in this area has defined a thick, near-surface zone of high-grade copper mineralization where a recent hole intercepted 15.7 metres (true width) of 7.04% copper, at a 1.5% total copper cut-off.
Byrnecut Underground Congo SARL (BUCS) was selected as the contractor to carry out the permanent support of the box-cut walls and the initial, 1.2 kilometres of development for each of the two declines. Contract negotiations are complete and a letter of award has been issued to BUCS for the permanent support of the box cut. Work is expected to start early in 2016, expected to be followed by the initial development for each of the two declines. In the meantime, Ivanhoe is conducting repair and modification work on the box-cut berms. A geotechnical evaluation report for decline support design has been completed by SRK; the findings have been incorporated into the design.
A local DRC contractor, Tanga Logistics and Mining SA (TLM), recently completed the civil works in the box cut, including the drains, sump and roadway. Ivanhoe is preparing the box-cut site for the mobilization of the decline contractor, which includes upgrading of existing accommodation, the supply of power, diesel fuel, workshops and offices.
Figure 2: Box-cut civil works in progress on the sump and roadway. To view Figure 2, visit: http://media3.marketwire.com/docs/1033028fig2.jpg.
Pre-feasibility study progressing
The Kamoa pre-feasibility study (PFS) is progressing and the completed report is expected to be finalized in early 2016. The PFS is based on the project's planned first phase and therefore will be consistent with the phased approach to project development outlined in the 2013 Kamoa preliminary economic assessment. Phase one will see the construction of an underground operation producing three million tonnes a year and feeding an adjacent concentrator.
Metallurgical test work has indicated that copper recoveries averaging 86% and concentrate grades averaging 39% copper are achievable.
Continued focus on community and sustainability
During Q3 2015, the construction of the community office for the Muvunda chiefdom was completed and handed over to the community. A local contractor has been appointed and soon will start work on upgrades and extensions to the Mbwetsi school.
Ivanhoe continued with its Livelihood sustainability program. During the quarter, the team focused on vegetable production, establishing new beehives, training village residents on poultry management and harvesting of the 2014/2015 maize (corn) crop. Current community-based activities include the construction of poultry coops in two local villages, the ploughing of maize fields and ongoing training.
Figure 3: Newly built community office for the Muvunda chiefdom. To view Figure 3, visit: http://media3.marketwire.com/docs/1033028fig3.jpg.
A social and environmental management system has been developed to monitor and record environmental and community statistics. The environment team continued with regular monitoring of air quality, ground and surface water and noise during Q3 2015.
Hydroelectric power plant upgrading project
The installation of four new overhead cranes and the repair of turbine number one, under the terms of the pre-financing agreement with SNEL, is progressing well at the Mwadingusha hydroelectric power plant on the Lufira River, near the town of Mwadingusha, approximately 250 kilometres northeast of Kamoa. The repairs are required to secure 10 megawatts (MW) of power for the construction of the Kamoa Project. Electrical connection to the national power grid is underway and expected to be completed in Q4 2015.
Tender documents for the implementation of the construction power line and substation are being finalized.
Figure 4: Mechanical installation of four overhead cranes completed at the Mwadingusha hydroelectric plant. To view Figure 4, visit: http://media3.marketwire.com/docs/1033028fig4.jpg.
2. Platreef Project
64%-owned by Ivanhoe Mines
South Africa
The Platreef Project in South Africa's Limpopo province is 64%-owned by Ivanhoe through its subsidiary, Ivanplats (Pty.) Ltd. (Ivanplats), and 10%-owned by a Japanese consortium of ITOCHU Corporation and its affiliate, ITC Platinum; Japan Oil, Gas and Metals National Corporation; and Japan Gas Corporation. The consortium's interest in the Platreef Project was acquired in two tranches for a total investment of $290 million. The remaining 26% interest is held by Ivanhoe's broad-based, black economic empowerment (B-BBEE) partners, which include communities, employees and entrepreneurs. Ivanplats announced in February that it had achieved Level 3 status in its first verification assessment on a B-BBEE scorecard, the highest-ranking platinum-sector mining company in compliance with South Africa's black empowerment laws.
The Platreef Project hosts an underground deposit of thick, platinum-group metals, nickel, copper and gold mineralization in the Northern Limb of the Bushveld Igneous Complex, approximately 280 kilometres northeast of Johannesburg.
On the Northern Limb, such mineralization is hosted primarily within the Platreef, a mineralized sequence that is traced more than 30 kilometres along strike. Ivanhoe's Platreef Project, within the Platreef's southern sector, is comprised of three contiguous properties: Turfspruit, Macalacaskop and Rietfontein. 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 activities on defining and advancing the down-dip extension of its original Platreef discovery, now known as the Flatreef Deposit, which is amenable to highly mechanized, underground mining methods. The Flatreef area lies entirely on the Turfspruit and Macalacaskop properties.
Health and safety at Platreef
The Platreef Project achieved more than four years without a lost time injury to the end of Q3 2015, accumulating 4,828,558 Lost-Time-Injury-Free worker hours. However, two unfortunate lost-time injuries occurred in October 2015. The Platreef Project continues to strive toward its workplace objective of an environment that causes zero harm to any employees, contractors, sub-contractors and consultants.
Figure 5: Aerial view of the Platreef Project infrastructure area, October 2015. To view Figure 5, visit: http://media3.marketwire.com/docs/1033028fig5.jpg.
Shaft 1 construction
The construction of the large, concrete shaft collar and ventilation intake plenum is complete. Mechanical installations continue on the stage and kibble winders. The pre-sink winder that will be operated during initial sinking down to 60 metres has been commissioned. Initial sinking activities (drilling, blasting and mucking) have begun. Work is complete on the internal electricity substation, which will have a capacity of five million volt amperes (MVA). Construction is underway of the power transmission lines from Eskom, the South African public electricity utility, which will be used for the sinking of Shaft 1. Back-up generators have been installed to ensure continuous sinking operations even if the power supply from Eskom is interrupted.
Figure 6: Top of Shaft 1 collar and pre-sink winder installation. To view Figure 6, visit: http://media3.marketwire.com/docs/1033028fig6.jpg.
Figure 7: Initial sinking activities at Shaft 1 bottom. To view Figure 7, visit: http://media3.marketwire.com/docs/1033028fig7.jpg.
Figure 8: Overall view of Shaft 1 works. To view Figure 8, visit: http://media3.marketwire.com/docs/1033028fig8.jpg.
Other on-site work includes the construction of the primary terraces for Shaft 1, storm-water drains and ponds, workshops and stores. A total of 485, or 72%, of the 678 permanent and contract workers presently employed by Ivanplats are from the local area.
Platreef implementing a phased approach to a large, underground, mechanized mine
Ivanplats completed a pre-feasibility study (PFS) in January 2015 that covered the first phase of development that is expected to include construction of an underground mine, concentrator and other associated infrastructure to support initial concentrate production by 2019. There will be opportunities to refine and modify the timing and capacities of subsequent phases of production to suit market conditions during the development and commissioning of the first phase. The feasibility study, based on the first phase, began in August 2015.
PFS highlights
Development of a large, mechanized, underground mine with an initial four-million-tonne-per-year concentrator and associated infrastructure.
Planned initial average annual production rate of 433,000 ounces of platinum, palladium, rhodium and gold (3PE+Au), plus 19 million pounds of nickel and 12 million pounds of copper.
Estimated pre-production capital requirement of approximately $1.2 billion, including $114 million in contingencies, at a ZAR:USD exchange rate of 11 to 1.
Platreef would rank at the bottom of the cash-cost curve, at an estimated $322 per ounce of 3PE+Au, net of by-products.
The planned Platreef mine is projected to require a workforce of approximately 2,200 within four years of the start of production.
After-tax Net Present Value (NPV) of $972 million, at an 8% discount rate.
After-tax Internal Rate of Return (IRR) of 13%.
The development scenarios describe a staged approach structured to provide opportunities to expand the operation based on demand, smelting and refining capacity and capital availability. As the Phase one production scenario is developed and placed into production, there is expected to be an opportunity to modify and optimize the subsequent phases, allowing for changes to the timing of capacity expansions to suit market conditions.
Mineral resources in the Flatreef underground discovery
The Flatreef Mineral Resource, with a strike length of 6.5 kilometres, lies predominantly within a flat to gently dipping portion of the Platreef mineralized belt at relatively shallow depths of approximately 700 to 1,100 metres below the surface.
The Flatreef Deposit is characterized by its very large vertical thicknesses of high-grade mineralization and a platinum-to-palladium ratio of approximately 1:1, which is significantly higher than other recent PGM discoveries on the Bushveld's Northern Limb. The grade shells used to constrain mineralization in the Flatreef Indicated Mineral Resource area have average true thicknesses of approximately 24 metres at a cut-off grade of 2.0 grams per tonne (g/t) of platinum, palladium and gold (2PE+Au). The Indicated Mineral Resource grade at an equivalent 2.0-gram-per-tonne 3PE+Au cut-off is 4.1 g/t 3PE+Au, 0.34% nickel and 0.17% copper. Flatreef's Indicated Mineral Resources of 214 million tonnes contain an estimated 28.5 million ounces of platinum, palladium, gold and rhodium, 1.6 billion pounds of nickel and 0.8 billion pounds of copper. Ivanplats has declared an initial Probable Mineral Reserve of 15.5 million ounces of platinum, palladium, rhodium and gold, using a declining Net Smelter Return (NSR) cut-off of $100/t-$80/t.
Mining methods
The selected mining areas in the current Platreef mine plan occur at depths ranging from approximately 700 metres to 1,200 metres below the surface. The main access to the ore body and ventilation system is expected to be comprised of four vertical shafts. Shaft 2 will host the main personnel transport cage, material and ore-handling systems, while Shafts 1, 3 and 4 will be utilized for ventilation to the underground workings. Shaft 1, now under development, will be used for initial access to the ore body and early underground development.
Mining will be performed using highly productive, mechanized methods, including long-hole stoping, drift-and-bench and drift-and-fill mining methods. The mined out areas within the ore body will be backfilled with a paste mixture that utilizes tailings from the process plant and cement. The ore will be hauled from the stopes to a series of ore passes that connect to a main haulage level, connected to Shaft 2, where it will be crushed and hoisted to surface for further beneficiation.
Metallurgical and processing
Metallurgical test work has focused on maximizing the recovery of platinum-group elements (PGE) and base metals, while producing an acceptably high-grade concentrate suitable for further processing and/or sale to a third party. The three main geo-metallurgical units and composites have produced smelter-grade final concentrates of approximately 85 g/t PGE + Au at acceptable PGE recoveries. Testwork also has shown that the material is amenable to treatment by one stage of mainstream grinding followed by conventional flotation, without the need for concentrate re-grinding. Batch open-circuit and locked-cycle flotation testwork has been performed.
Comminution and flotation testwork has indicated that the optimum grind size is 80% passing 75 µm (micrometres), which is consistent with sizes commonly reported by platinum mines in South Africa. The circuit developed during 2014 and 2015 includes the use of industry-standard reagents and has replaced the previous circuit that included niche flotation reagents.
Platreef ore is classified as ranging from hard to very hard, and thus is not suitable for semi-autogenous grinding. A multi-stage crushing and ball-milling circuit is the preferred option.
A two-phased development approach was used for PFS flow-sheet design. The selected flow sheet is comprised of a four-million-tonne-per-year, three-stage crushing circuit that will feed crushed material to two parallel milling-flotation modules, each with a capacity of two million tonnes per year. Flotation is followed by a four-million-tonne-per-year tailings handling and concentrate thickening, filtration and storage circuit.
Contracts for Shafts 1 and 2
Shaft 1 will have an internal diameter of 7.25 metres; it is projected to intersect the Flatreef deposit at a depth of 777 metres below surface in late 2017 and reach its total depth of 975 metres in 2018. South Africa-based Aveng Mining, the shaft-sinking contractor, see more on
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