Name and Location
Kamoa copper project, Katanga, Democratic Republic of Congo (DRC).

Client
Ivanhoe Mines and China’s Zijin Mining Group have agreed to co-develop the Kamoa copper discovery.

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 upon the closing of the transaction, which is expected at the end of July, subject to Zijin’s 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.

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

The agreements have also provided that, upon 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 the subsequent phases of the Kamoa project.

Since 65% of the preproduction capital required to develop the first phase of Kamoa will 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 be required to fund 17.5% of the remaining first-phase development costs.

Project Description
The Kamoa project is a large, stratiform copper deposit, with adjacent prospective exploration areas within the Central African Copperbelt, about 25 km west of the town of Kolwezi and about 270 km west of the provincial capital of Lubumbashi.

As of January 2013, Ivanhoe Mines had discovered indicated mineral resources of 739-million tonnes grading 2.67% copper, containing 43.5-billion pounds of copper, and inferred mineral resources of 227-million tonnes grading 1.96% copper, containing 9.8-billion pounds of copper. A 1% copper cutoff grade and a minimum vertical mining thickness of 3 m were applied in each classification.

Key elements have been established for a new study to encourage the cost-effective development of a mine and processing plant at the Kamoa copper discovery.

Ivanhoe is proposing two principal phases of development:
• Phase 1 will target production of high-grade copper mineralisation from shallow, underground resources to yield a high-value concentrate. Initial mill feed will come from Kansoko Sud and will lead into the Centrale area of Kamoa’s gently-dipping mineralised zones, which collectively contain estimated indicated resources of 224-million tonnes, grading 3.85% copper at a 3% copper cutoff and a minimum 3 m vertical mining thickness.
• Phase 2 entails a major expansion of the mine and mill, as well as the construction of a large smelter, supported by the full extent of the Kamoa resources.

Net Present Value/Internal Rate of Return
Not stated.

Value
Not stated.

Duration
If confirmed by current studies and financial modelling, copper production from Kamoa’s first phase of development could start in 2017, subject to available financing.

Latest Developments
Ivanhoe Mines has reported that “positive discussions” with the government of the DRC are continuing. This is after the company recently sent a high-level delegation to the country to address any “misunderstandings” that might exist between itself and government, following the company’s announcement to sell nearly half of the Kamoa copper project to a Chinese miner.

Shortly after the $412-million deal to sell a 49.5% stake in the Kamoa copper project to Zijin Group had been announced, the DRC government, which owns a 5% minority stake in the project reportedly said that it had been sidestepped in discussions between shareholders.

Ivanhoe has also revealed that there have been “no material changes” in the negotiation process between itself and the DRC government about the State buying a further 15% stake in the project. However, the company remains optimistic about striking a deal as soon as possible.

Ivanhoe originally reported in September 2012 that the company had a 5% nondilutable free-carried interest in the company’s Kamoa subsidiary to DRC, as required under the country’s mining code, in conjunction with government granting exploitation permits (mining licences). At the same time, the company reported that it had offered to sell a further interest of up to 15% in the project to the DRC on commercial terms.

Key Contracts and Suppliers
Hatch (development study), Mining Company Katanga (construction of boxcut).

On Budget and on Time?
Not stated.

Contact Details for Project Information
Ivanhoe investor relations, Bill Trenaman, tel +1 604 688 6630 or email billtr@ivancorp.net.