China’s CITIC ups Ivanhoe stake to 29.9%

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Kakula’s new, southern box cut. A third decline tunnel will be driven from the bottom of the box cut to provide access and ventilation to the southern side of the underground, high-grade Kakula Deposit. Source: Ivanhoe Mines Ltd.

Ivanhoe Mines Ltd. [IVN-TSX; IVPAF-OTC] Chairman Robert Friedland said Thursday April 25 that CITIC Metal Co. Ltd. has agreed to invest an additional $612 million in Ivanhoe at $3.98 a share.

The announcement comes almost one year after Ivanhoe signed a long-term strategic co-operation and investment agreement with CITIC Metal, which is a subsidiary of the Chinese state-owned CITIC Group.

Under the original agreement, Ivanhoe issued 196.6 million common shares to CITIC Metal through a private placement priced at $2.68 per share, yielding proceeds of $723 million (US$560 million).

As a result, CITIC emerged as Ivanhoe’s largest single shareholder with a 19.9% stake in the company, ahead of Friedland’s 17% interest.

On Thursday, Ivanhoe said CITIC’s second major investment, together with Ivanhoe Mines’ current cash balance of approximately US$512 million, will increase Ivanhoe’s cash on hand to $1.3 billion.

Under the new agreement, Ivanhoe will issue 153.8 million common shares to CITIC Metal Africa at $3.98 per share, raising CITIC’s stake in Ivanhoe to 29.9%.

Ivanhoe shares rallied on the news, rising 13.6% or 42 cents to $3.50 on volume of almost 3.5 million. The shares are trading in a 52-week range of $2 and $3.59.

Ivanhoe is developing the Kamoa-Kakula mining complex in the Democratic Republic of Congo. A joint venture between Ivanhoe Mines, China’s Zijin Mining, and the DRC government, it is expected to be among the world’s biggest copper mines. Peak annual production is expected to exceed 700,000 tonnes.

A resource estimate released in February 2018 states that Kamoa-Kakula  contains an indicated mineral resource of 1.03 billion tonnes at 3.17% copper, or 72 billion pounds of copper, plus an additional 182 million tonnes of inferred resources at 2.31% copper at a 1.5% cut-off.

Kamoa-Kakula is one of three projects that the company is advancing in Southern Africa. They also include:

  • Mine development at the Platreef platinum-palladium-gold-nickel copper discovery on the Northern Limb of South Africa’s Bushveld Complex.
  • The high-grade Kipushi zinc-copper-silver-germanium mine, which is located in the Democratic Republic of Congo.

Ivanhoe said its cash balance is almost double the US$540 million required to be funded by Ivanhoe to construct the US$1.1 billion Kamoa-Kakula project’s initial 6 million tonne-per-year copper mine.

Ivanhoe said 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 are also 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 investment announced today will comfortably provide Ivanhoe with the equity cushion required to fast-track Kamoa-Kakula’s six million tonne per annum Phase 1 mine to production,” Friedland said. “We are now 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,” he said. “Ivanhoe also is positioned to have its planned expansions at the Kamoa-Kakula project funded from internally generated cash flows.”

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