Canadian mineral explorer Ivanhoe Mines and China’s Zijin Mining Group have agreed to co-develop 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, will buy a 49.5% interest in Kamoa Holding – an Ivanhoe subsidiary that owns 95% of the Kamoa project – for $412-million.

Zijin will make an initial cash payment of $206-million on the closing the transaction, expected at the end of July, subject to receiving approval for the deal by the government of the People’s Republic of China.

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

Zijin, meanwhile, has 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.

n successfully arranging or procuring project financing, Zijin will have the right to acquire Crystal River’s 1% interest in Kamoa Holding.

The agreements also provides that, on exercising the 1% option, for an amount to be determined by an independent expert valuator, Zijin will 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 is to be funded through project financing, the balance of 35% of the required capital will be funded pro rata by the shareholders.

Therefore, Zijin and Ivanhoe will 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,” comments Ivanhoe CEO Lars-Eric Johansson.

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 to be $1.4-billion.

To date, Ivanhoe has invested $337-million in equity capital, which went into discovering and developing the project.

The proposed second phase will 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 as a potentially substantial copper producer with one of the lowest cash costs anywhere in the world,” says Ivanhoe chairperson Robert Friedland.