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Kamoa-Kakula copper project

The Kamoa-Kakula copper project in the DRC

Ivanhoe Mines intends to spend a combined $3.78-billion in capital expenditure (capex) on its Kamoa-Kakula copper project and Kipushi zinc/copper mine, in the Democratic Republic of Congo, as well as on its Platreef platinum group metals mine, in Limpopo, South Africa, in 2023 and 2024. 

In an update to shareholders published on January 31, Ivanhoe said it was planning to spend $2.53-billion on Kamoa-Kakula’s Phase 3 expansion, in addition to $120-million on the Phase 2 expansion.  

Moreover, $260-million in sustaining capital was announced for the project, bringing the total to about $2.91-billion. 

The capex guidance for Platreef was set at $490-million – $390-million for Phase 1 and $100-million for Phase 2. 

Initial capital for Kipushi was announced at $380-million. 

These capex estimates, which were announced by Ivanhoe president Marna Cloete and CFO David van Heerden, assume that the Phase 3 expansion at Kamoa-Kakula, including the smelter and Inga II refurbishment, are completed in the fourth quarter of 2024.  

It is also assumed that the construction of Platreef’s Phase 1 mine and the construction of the Kipushi mine are both completed by the third quarter of 2024.  

The company said Kamoa-Kakula Phase 3 and future expansion capital costs are expected to be funded from operating cash flow. 

As stated in Ivanhoe’s Kamoa-Kakula 2023 Integrated Development Plan (IDP 2023), announced on January 30, the remaining capital cost for the total Phase 3 expansion is estimated at $3-billion, including the mine, concentrator, smelter, infrastructure and investment in off-site hydropower infrastructure. 

Of this figure, about $2.53-billion will be spent over the next two years, up to the commissioning of the Phase 3 concentrator and other infrastructure, with about 60% expected to be spent during 2023.  

In parallel, the Phase 1 and 2 operations are expected to generate significant operating cash flow this year and next and are expected to fund capital cost requirements at current copper prices. 

Kamoa Copper’s unaudited cash balance at the end of last year was $343-million. Ivanhoe said short-term financing facilities at Kamoa are being arranged should a shortfall occur owing to a significant decrease in copper prices. 

Meanwhile, construction of Platreef’s Phase 1 mine is under way, with the first production on track for the third quarter of next year. On surface, earthworks and civil construction activities are advancing, with long-lead equipment orders placed and manufacturing under way. 

Underground development work is focused on establishing the required infrastructure and developing towards the first mining areas, as well as the first ventilation shaft location. The remaining capital cost to the completion of Phase 1 is estimated at $390-million, of which about 50% is expected to be spent this year. 

Ivanhoe said the $300-million stream facilities already in place have been fully drawn down and are being used for the funding of the development of the Phase 1 project. 

Meanwhile, the company is continuing to progress the Platreef project’s senior debt facility of $150-million with its mandated lead arrangers Société Générale and Nedbank. The facility, which is targeted to close during the first half this year, subject to due diligence, is expected to limit potential equity contributions for Platreef’s Phase 1 development.

The Phase 2 capex of $100-million at Platreef represents mainly the continuation of sinking Shaft 2 and the construction of the Shaft 2 headframe, allowing optionality for possible acceleration in Phase 2, which is currently under review.

Construction of the Kipushi mine is also under way, Ivanhoe said, with the processing plant scheduled for completion by the third quarter of next year. Long-lead equipment items have been ordered and manufacturing is under way, while earthworks and civil construction activities take place on the surface.

The company noted that rehabilitation activities for the underground mine are complete, while drilling and blasting activities have started for the development of the Big Zinc orebody. 

As the project has advanced into execution, Ivanhoe said, the project team has updated the budget from the feasibility study published last year to reflect work packages placed to date and incorporating any changes associated with the scope and in line with inflationary pressures. Of the $380-million capital budget to completion, about $95-million has been committed so far. 

Ivanhoe said offtake discussions, including a proposed $250-million prepayment financing facility, have now advanced to final draft term sheets, which have been received from shortlisted parties and are currently under review by Kipushi’s shareholders. The agreements are intended to be completed, as well as a final, revised joint venture agreement between Kipushi Holding and Gécamines, during the first half of the year.

The company also is evaluating a possible $50-million working capital facility for Kipushi.