Name of the Project
Kamoa-Kakula copper project.

Location
The project is located on the Central African Copperbelt, west of the Democratic Republic of Congo’s (DRC’s) Katanga mining region.

Client
The project is a joint venture between Ivanhoe Mines, Zijin Mining Group and the DRC government.

Project Description
The project has been independently ranked as the world’s largest high-grade copper discovery by international mining consultant Wood Mackenzie. It boasts combined indicated mineral resources of 944-million tonnes grading 2.83% copper, and inferred mineral resources of 286-million tonnes grading 2.31% copper at a 1% copper cutoff over a minimum thickness of 3 m.

The preliminary economic assessment (PEA) results, finalised in December 2016, present two initial scenarios for development of the high-grade copper deposits at the project.

Scenario 1:
The development of a four-million-tonne-a-year Kakula Phase 1 mine at the Kakula deposit, in the southerly portion of the project’s discovery area. For this option, the PEA envisages an average production rate of 216 000 t/y of copper and peak copper production of 262 000 t by Year 3. In this option, the project has an initial mine life of 23 years.

Scenario 2:
Two mines producing a total of eight-million tonnes a year, comprising a two-phase sequential expansion of the proposed Kakula Phase 1 mine at the Kakula deposit and the Kansoko mine at the adjacent Kamoa deposit. The PEA envisages an average production rate of 292 000 t/y and peak production of 370 000 t by Year 7. In this option, the project has an initial mine life of 29 years.

Jobs to be Created
Not stated.

Net Present Value/Internal Rate of Return
The option for a single four-million-tonne-a-year mine estimates an after-tax net present value (NPV), at an 8% discount rate, of $3.66-billion – an increase of 272%, compared with the after-tax NPV of $986-million projected in the March 2016 Kamoa prefeasibility study (PFS). The internal rate of return (IRR) of 38% is more than double the return that was estimated in the March 2016 PFS, with a payback of 2.3 years.

The option for two mines producing a total of eight-million tonnes a year forecasts an after-tax NPV, at an 8% discount rate, of $4.75-billion, an increase of 382%, compared with the after-tax NPV of $986-million estimated in the 2016 Kamoa PFS. The after-tax IRR is estimated at 34.6%, which is more than double the IRR of the 2016 Kamoa PFS, with a payback period of 3.5 years.

Value
The Kakula Phase 1 mine proposal estimates preproduction capital cost of $999-million. This is about $200-million less than previously estimated in the March 2016 Kamoa PFS.

In the Kakula Phase 1 mine and Kansoko mine proposal, the PEA estimates $999-million in capital costs.

Duration
Not stated.

Latest Developments
A follow-on PEA under way will examine a potential doubling of yearly production beyond the limited scenarios covered in the initial PEA.

The PEA, which is expected to be released in the first quarter of 2017, will investigate the development of one eight-million-tonne-a-year mine on the Kakula deposit. This option is expected to have substantial advantages over the development of two mines to achieve the same production rate.

Planned studies will also assess higher mining rates of up to 16-million tonnes a year, which would use high-grade copper mineralisation from the Kakula deposit and the Kansoko Sud and Kansoko Centrale areas of the adjacent Kamoa deposit.

The project engineering team is targeting a life-of-mine average yearly copper production scenario for one eight-million-tonne-a-year mine at Kakula of more than 400 000 t/y.

Key Contracts and Suppliers
Orewin, Amec Foster Wheeler E&C services and SRK Consulting (PEA).

On Budget and on Time?
Not stated.

Contact Details for Project Information
Ivanhoe Mines investor contact Bill Trenaman, tel +1 604 512 4856 or email billtr@ivancorp.net.