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Ivanhoe, Zijin Mining partner to develop DRC copper discovery

26th May 2015

By: Natalie Greve

Creamer Media Contributing Editor Online

  

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JOHANNESBURG (miningweekly.com) – Canadian mineral explorer Ivanhoe Mines and China’s Zijin Mining Group have agreed to codevelop the Kamoa copper discovery, in the Democratic Republic of Congo (DRC).

Under the terms of the agreement, Zijin, through its subsidiary Gold Mountains International Mining, would buy a 49.5% interest in Kamoa Holding – an Ivanhoe subsidiary that owned 95% of the Kamoa project – for $412-million.

Zijin would make an initial cash payment of $206-million upon the closing of the transaction, which was expected at the end of July, subject to it receiving approval for the deal by the government of the People's Republic of China.

In addition, Ivanhoe had agreed to sell 1% of its interest in Kamoa Holding to Hong Kong-based Crystal River Global for $8.32-million.

Zijin, meanwhile, committed to arranging or procuring project financing for 65% of the capital required to develop the first phase of the Kamoa project, as set out in the feasibility study.

Upon the successful arrangement or procurement of project financing, Zijin would have the right to acquire Crystal River's 1% interest in Kamoa Holding.

The agreements also provided that, upon exercise of the 1% option, for an amount to be determined by an independent expert valuator, Zijin would be required to arrange or procure project financing for all subsequent phases of the Kamoa project.

In addition, since 65% of the preproduction capital required to develop the first phase of Kamoa was to be funded through project financing, the balance of 35% of the required capital would be funded pro rata by the shareholders.

Therefore, Zijin and Ivanhoe would each effectively be required to fund 17.5% of the remaining first-phase development costs.

"This agreement with Zijin is further confirmation of Kamoa's distinction as one of the most significant, undeveloped mineral discoveries of our age and charts a course for the realisation of significant benefits for all of Ivanhoe's and Zijin's stakeholders, as well as the Congolese people.

“Together with the Congolese government and Zijin, we aim to meet the expectations of the Congolese people and our stakeholders in Katanga as we proceed to build a world-class, new copper mine," commented Ivanhoe CEO Lars-Eric Johansson.

TWO-PHASED DEVELOPMENT
A 2013 preliminary economic assessment (PEA) reflected a two-phased approach to Kamoa’s development, with the first phase of mining targeting high-grade copper mineralisation from shallow, underground resources to produce some 100 000 t of contained copper in a high-value concentrate.

The PEA estimated required preproduction capital of $1.4-billion.

To date, Ivanhoe had invested $337-million in equity capital in discovering and developing the project.

The proposed second phase would entail a major expansion of the mine and mill, and construction of a smelter to produce about 300 000 t/y of blister copper.

“The PEA highlights the rare combination of a very high copper grade and very large tonnage – qualities that position Kamoa to have the potential to become a substantial copper producer with one of the lowest cash costs anywhere in the world,” said Ivanhoe chairperson Robert Friedland.

The successful negotiation of the strategic codevelopment arrangement for Kamoa followed Zijin's acquisition of a 9.9% interest in Ivanhoe Mines for $85-million in April.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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