Robert Friedland and Yufeng ‘Miles’ Sun, Co-Chairmen of TSX-listed Ivanhoe Mines, have announced that CITIC Metal Co, Ltd, through its subsidiary CITIC Metal Africa Investments Limited (CITIC Metal Africa), has agreed to invest an additional C$612 million (approximately US$454 million) in Ivanhoe Mines.
Mine development underway at Kakula.
CITIC Metal’s second major investment in less than a year, together with Ivanhoe Mines’ current cash balance of approximately US$512 million, will increase the company’s total cash on hand to approximately C$1,3 billion (US$1,0 billion). Ivanhoe’s pro-forma cash balance is almost double the approximately US$540 million required to be funded by Ivanhoe to construct the US$1,1 billion Kamoa-Kakula project’s initial 6 Mt/a high-grade copper mine at the Kakula deposit in the DRC.
Ivanhoe’s joint venture partner in the project, Zijin Mining Group, is required to fund its equivalent share of approximately US$540 million of the mine’s initial capital costs. Ivanhoe and Zijin also are in financing discussions with international export-credit agencies and equipment-finance providers, which could materially reduce the amount of funding that Ivanhoe and Zijin would have to contribute.
The CITIC Metal investment is expected to close no later than September 7, 2019, much sooner than could be expected for a typical project-finance facility. This timing will allow Ivanhoe to rapidly move forward with construction without relying on third-party project financing and being subject to the fees, interest, or hedging requirements typically associated with project financing.
This second major investment by CITIC Metal, bringing its total investment in Ivanhoe to US$1 billion, will position Ivanhoe to become a leading copper and zinc producer in the DRC and a leading producer of platinum-group metals, nickel and copper in South Africa.
In addition to the Kamoa-Kakula project, Ivanhoe is upgrading the historic Kipushi zinc-copper-germanium-silver mine in the DRC, in partnership with Gécamines, and developing the Platreef palladium-platinum-nickel-copper-gold discovery in South Africa with its broad-based, black empowerment partners and a Japanese consortium led by ITOCHU Corporation.
“CITIC Metal has been a shareholder in Ivanhoe Mines for eight months now, and in that time, CITIC has seen what we already know – that the Kamoa-Kakula project is unquestionably the best copper development project in the world,” said Friedland.
“The investment announced today will comfortably provide Ivanhoe with the equity cushion required to fast-track Kamoa-Kakula’s 6 Mt/a Phase 1 mine to production. More importantly, it also is a profound vote of confidence in our management, in our key stakeholders and partners, and in the promising future of the Democratic Republic of Congo and South Africa. We look forward to hosting the DRC President at the Kamoa-Kakula and Kipushi projects later this year,” Friedland added.
“We now are in a position to finance our first two mines – Kakula and Kipushi – to commercial production, and significantly advance, or achieve, production at the Platreef project. Ivanhoe also is positioned to have its planned expansions at the Kamoa-Kakula project funded from internally generated cash flows.”
Ivanhoe is developing an alternative production plan for the Platreef project, targeting significantly lower initial capital, to accelerate production by using Shaft 1 as the mine’s initial production shaft. Shaft 1, presently at a depth of 855 m below surface, is expected to reach its final depth of 980 m, complete with working stations on three levels, in early 2020.
Ivanhoe is continuing to advance the arrangement of a project financing for the development of the Platreef Project with a syndicate of international banks and export-credit agencies. Discussions also are underway with leading South African financial institutions for financing the black economic empowerment partners’ contribution to development capital. Ivanhoe also is in discussions with various streaming companies interested in acquiring exposure to one or more of the metals that will be produced at Platreef.
At Kipushi, discussions also are continuing with a number of potential project financiers to launch a new era of commercial production at the upgraded zinc-copper-silver-germanium mine.
Photo courtesy of Ivanhoe.