Kipushi Signs Offtake Agreement and Financing Term Sheet

Kipushi Corp. SA (KICO), Gécamines SA and Glencore International AG have signed a tri-partite off-take and $250 million financing term sheet. KICO is 68% owned by Kipushi Holding, a subsidiary of Ivanhoe Mines, and the remaining 32% of KICO is owned by Gécamines. The offtake is for 100% of Kipushi’s zinc concentrates; between 400,000 and 600,000 dry metric tons per year (mt/y) over a five-year term. The offtake term sheet contains standard, international commercial terms, including payables and treatment charges based on the zinc industry’s annual benchmark. The concentrate produced by Kipushi is expected to contain approximately 55% zinc and low levels of impurities.

“The off-take and financing milestones are critical deliverables that allow us to return Kipushi to production by the third quarter of next year,” Ivanhoe Mines’ President, Marna Cloete said.

The Kipushi underground mine will be the world’s highest-grade major zinc operation, with an average grade of approximately 36% zinc over the first five years of production. “We will also endeavor, with our partner Gécamines, to continue exploring Kipushi, including copper-rich and silver-rich zones,” Cloete said.

“In partnership with Gécamines, we are closing in on a monumental achievement to return the great Kipushi mine to production,” Ivanhoe Mines’ Executive Co-Chair, Robert Friedland said. “When Ivanhoe Mines acquired its interest in Kipushi almost 12 years ago, the mine was flooded and in a dilapidated state. We commend the efforts of the Kipushi employees, who restored this crown jewel of the DRC. We are proud to see new, state-of-the-art mining equipment, operated by our Congolese employees, underground for the first time in three decades as we begin to open up the Big Zinc deposit, one of the richest mineral endowments anywhere on earth.

Activities to date at Kipushi have been funded by way of a shareholder loan from Kipushi Holding, which totaled $661 million. The remaining initial capital cost for the Kipushi project in 2023 and 2024 is $380 million, in line with Ivanhoe’s guidance. The company is also evaluating an interim bank financing facility of up to $80 million.

Underground mining activities are advancing ahead of schedule, in preparation for stoping of the ultra-high-grade Big Zinc deposit to commence in January 2024

In preparation for the start of underground development, early works activities were completed ahead of schedule in Q3 2022. This comprised the refurbishment and supporting of key mining excavations, as well as blasting of the truck-tip turning bays and truck passing bays on the mine’s 1,150-meter level.

In Q1 2023, the underground mining contractor was appointed and commenced the mobilization of its mining equipment to site. The majority of the primary mining fleet is from Epiroc of Stockholm, Sweden, which include six drill rigs, six scooptrams (LHDs) and 13 haul trucks, as well as additional secondary support equipment. Delivery to site of the first batch of mobile mining equipment has taken place.

Mining equipment is slung down to Kipushi’s 1,150-metre level via the P5 shaft. The bulk of the primary and secondary fleet will be delivered by June, with the remainder arriving later in the year as underground development ramps up ahead of the commencement of stoping in early 2024. Stoping is the process of extracting the ore from an underground mine, leaving behind an open space known as a stope.

Underground development is currently taking place to establish access to the Big Zinc orebody. A total of 682 m of horizontal development was completed in the first quarter of 2023, over 30% more than planned. Perimeter, access and ventilation drives are now under development at several locations between the 1,220-metre and 1,335-metre levels, while decline development continues parallel to the Big Zinc deposit. The decline is currently at 1,340 m below surface.

The development rate during Q1 2023 averaged 227 m per month. The rate is expected to increase to 300 m per month by the end of Q2 2023 and reach more than 400 m per month by the end of Q4 2023.

Stoping of the ultra-high-grade Big Zinc orebody has been accelerated to commence ahead of schedule, in January 2024. The mining method of the Big Zinc deposit will be transverse sublevel open stoping in a primary and secondary sequence, filled with cemented aggregate fill to maximize the extraction. The underground operation is fully mechanized, cost-effective and designed to enable a quick ramp-up to a steady state of 800,000 tonnes of ore per annum.

Ore and waste are crushed underground, through a recently installed 1,085-mt-per-hour primary jaw crusher, and then hoisted to the surface via the P5 shaft. Work on restoring shaft P5’s nameplate hoisting capacity is underway and is expected to be completed in Q4 2023. The hoisting rate is scheduled to increase from the current 101 mt/h to the nameplate 257 mt/h The crushed ore hoisted to surface will be conveyed via an overland conveyor to the Kipushi concentrator, where it will be stockpiled.

To prepare for concentrator commissioning, approximately six months of run-of-mine ore is planned to be stockpiled on surface to derisk the ramp-up of operations. Medium-to-low-grade ore, as well as mineralized waste from development, is already being stockpiled on surface.

The Kipushi concentrator will have a nameplate capacity of 800,000 tonnes of ore per annum and is anticipated to annually produce 437,000 mt of zinc concentrate, at an average grade of 55% zinc. Total life-of-mine production is anticipated to be 10.8 million tonnes of ore at an average head grade of 31.9% zinc over a 14-year mine life (based only on the reserves in the 2022 Feasibility Study), generating 3.3 million tonnes of zinc metal in concentrate.

The concentrator consists of conventional crushing and screening, dense media separation (DMS), ball milling, rougher flotation, tailings and concentrate dewatering and concentrate filtration. The filtered concentrate is bagged in a dedicated bagging plant for dispatch to market. Thickened tailings will be pumped to a new tailings storage facility.

Discarded material from the DMS plant will be mixed with cement in a dedicated cemented-aggregate fill plant and piped back underground where it will be used as a backfill for mined-out stopes.

Since the start of construction activities in late August 2022, overall project progress is tracking marginally ahead of schedule, at 27% complete.

Detailed engineering design for the Kipushi concentrator and associated surface infrastructure is effectively complete. Procurement activities are advancing on schedule and are currently 79% complete. All long and medium-lead-order equipment items have been ordered and are undergoing fabrication. The ball mill, fabricated by CITIC Heavy Industries of Luoyang, China, is undergoing final inspection and is due to be shipped in the coming week. The DMS plant, fabricated by Bond Equipment of Sandton, South Africa, is expected to be complete and shipped to site in the next month. The fabrication of the rougher flotation cells by FLSmidth of Copenhagen, Denmark, is 24% complete and the cells are expected to be shipped in late July.

Surface construction activities are 11% complete, currently tracking ahead of schedule. The bulk of the earthworks and civil works are nearing completion. The structural steel, piping and plate work (SMPP) contractor has been appointed and mobilized to site. Two-thirds of the structural steel requirement has been ordered, with approximately 500 mt already fabricated and either en route to or delivered to site. To date, 2,400 cubic meters of concrete have been poured and the first steel erection has recently taken place (see pictures below).