Kamoa-Kakula’s off-take agreements signed for Phase 1 blister copper & copper concentrate

Kamoa-Kakula’s off-take agreements signed for Phase 1 blister copper and copper concentrate. Kamoa-Kakula fully authorized to commence exports of blister copper and copper concentrate to international markets

KOLWEZI, DEMOCRATIC REPUBLIC OF CONGO – Ivanhoe Mines (TSX: IVN; OTCQX: IVPAF) Co-Chairs Robert Friedland and Yufeng “Miles” Sun are pleased to announce that Kamoa Copper SA – the operating company of the joint venture between Ivanhoe Mines, Zijin Mining Group, Crystal River and the Government of the Democratic Republic of Congo (DRC) – has signed copper concentrate and blister copper off-take agreements on competitive arm’s-length commercial terms, for 100% of Kamoa-Kakula’s Phase 1 copper output, which is projected to be approximately 200,000 tonnes of copper per year.

Kamoa Copper began producing copper concentrate on May 25, 2021, and made its first delivery of concentrates to the nearby Lualaba Copper Smelter, outside of Kolwezi, on June 1, 2021.

Watch a new video showcasing Kamoa-Kakula’s milling, flotation and recovery processes involved in producing the ultra-high grade, clean copper concentrate: https://vimeo.com/560814916/6db2333083

Kamoa Copper has signed off-take agreements with CITIC Metal (HK) Limited (CITIC Metal) and Gold Mountains (H.K.) International Mining Company Limited, a subsidiary of Zijin, for 50% each of the copper products from Kamoa-Kakula’s Phase 1 production. The off-take agreements are evergreen for the production volumes from Phase 1, including copper concentrate and blister copper resulting from processing of copper concentrates at the Lualaba Copper Smelter.

The off-take agreements contain standard, international commercial terms, including copper payables and treatment and refining charges based on the annual benchmark across the copper industry. The ultra-high-grade, clean concentrate produced by Kamoa-Kakula is expected to contain approximately 57% copper and very low levels of impurities.

CITIC Metal and Zijin will purchase the copper concentrate at the Kakula Mine and the blister copper at the Lualaba Copper Smelter on a free-carrier basis, meaning the buyers will be responsible for arranging freight and shipment to the final destination, initially via the port of Durban, South Africa.

CITIC Metal and Zijin each will provide an advance payment facility of up to US$150 million (US$300 million in total) to be drawn at the election of Kamoa Copper from June 10, 2021, until May 31, 2023. The facility will bear an annual interest rate of 8% and will be offset against provisional payments due to Kamoa Copper from product deliveries. Payment terms include an option to receive a provisional payment on a 100%-basis within three business days of invoicing, at the end of each delivery month.

Agreement signed with nearby Lualaba Copper Smelter to produce 99% blister copper in the Democratic Republic of Congo

On May 31, 2021, Kamoa Copper signed a 10-year agreement with the Lualaba Copper Smelter, located outside the town of Kolwezi, for the processing of a portion of Kamoa’s copper concentrate production. Kamoa Copper delivered its first copper concentrates to the Lualaba smelter on June 1, and will receive first blister copper ingots within 30 days of delivery.

The Lualaba Copper Smelter is 60%-owned by China Nonferrous Metal Mining Group (CNMC) of Beijing, China. Yunnan Copper of Kunming, China, owns the remaining 40%.

The smelter, which began operations in early 2020, will treat up to 150,000 wet metric tonnes of copper concentrates from Kamoa-Kakula, in return for a treatment charge and market-based realization fee, and produce blister copper containing approximately 99% copper that will be returned to Kamoa Copper, and collected by CITIC Metal and Zijin from a dedicated storage area at the Lualaba Copper Smelter.

The Lualaba Copper Smelter is the first modern, large, pyro-metallurgical copper smelter built in the Democratic Republic of Congo, and is approximately 40 kilometres from Kamoa-Kakula via the recently-constructed, dedicated by-pass road.

Marna Cloete, Ivanhoe Mines President and CFO, commented: “We are very pleased to have reached agreements with our partners CITIC Metal and Zijin at internationally-competitive terms. The agreements reflect the great partnership we have with CITIC Metal and Zijin, and the advance payment facilities significantly reduce the mine’s working capital requirements as Phase 1 production ramps up.

“We also are pleased to secure a long-term tolling agreement with the local Lualaba Copper Smelter, in keeping with our commitment to in-country beneficiation that includes Kamoa Copper’s longer-term plan to construct its own direct-to-blister smelter.

“We have all necessary authorizations in place and will commence exports of clean, hydro-electricity-produced copper products from the Kamoa-Kakula mine to meet the burgeoning international demand for electrification of the global economy.”

Copper production guidance for 2021

Ivanhoe’s guidance for contained copper in concentrate expected to be produced by the Kamoa-Kakula Project for the balance of 2021 assumes a ramp-up from first production in line with published technical disclosures, and is as follows:

Contained copper in concentrate                                                         80,000 to 95,000 tonnes

All figures are on a 100%-project basis. Metal reported in concentrate is prior to refining losses or deductions associated with smelter terms. Cost guidance is expected to be provided once the Kamoa-Kakula Project’s Phase 1 plant has reached steady-state production.

Kakula is projected to be the world’s highest-grade major copper mine, with an initial mining rate of 3.8 million tonnes per annum (Mtpa), ramping up to 7.6 Mtpa in Q3 2022. Phase 1 is expected to produce approximately 200,000 tonnes of copper per year, and Phases 1 and 2 combined are forecast to produce approximately 400,000 tonnes of copper per year. Based on independent benchmarking, the project’s phased expansion scenario to 19 Mtpa would position Kamoa-Kakula as the world’s second-largest copper mining complex, with peak annual copper production of more than 800,000 tonnes.

Given the current copper price environment, Ivanhoe and its partner Zijin are exploring the acceleration of the Kamoa-Kakula Phase 3 concentrator expansion from 7.6 Mtpa to 11.4 Mtpa, which may be fed from expanded mining operations at Kansoko, or new mining areas at Kamoa North (including the Bonanza Zone) and Kakula West.

A 2020 independent audit of Kamoa-Kakula’s greenhouse gas intensity metrics performed by Hatch Ltd. of Mississauga, Canada, confirmed that the project will be among the world’s lowest greenhouse gas emitters per unit of copper produced.

The Kamoa-Kakula Copper Project is a joint venture between Ivanhoe Mines (39.6%), Zijin Mining Group (39.6%), Crystal River Global Limited (0.8%) and the Government of the Democratic Republic of Congo (20%).

Loading copper concentrate for bulk transportation to the nearby Lualaba Copper Smelter, outside of Kolwezi.

Samples of Kamoa Copper’s copper concentrate being collected before it is shipped to the Lualaba Copper Smelter.

Trucks transporting bulk copper concentrate from the Kamoa-Kakula Project to the Lualaba Copper Smelter via the recently-completed by-pass road connecting Kamoa-Kakula to Kolwezi. The new 220-kilovolt powerline carrying clean hydro-generated electrity to Kamoa-Kakula is on the right.

A blister copper ingot produced at the Lualaba Copper Smelter, containing approximately 99% copper, ready for export to international markets.