Ivanhoe shares rally on DRC negotiations update

Ongoing construction of access tunnels at the Ivanhoe Mines Kamoa-Kakula Copper Project's initial high-grade Kansoko Sud mining area in D.R. Congo. Source Ivanhoe Mines Ltd.

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Ivanhoe Mines Ltd. [IVN-TSX; IVPAF-OTC] on Wednesday March 21 released an update on the state of negotiations between mining companies and the Democratic Republic of Congo following recent revisions to a DRC mining code that are expected to impact every mining project in the African country.

Ongoing construction of access tunnels at the Ivanhoe Mines Kamoa-Kakula Copper Project’s initial high-grade Kansoko Sud mining area in D.R. Congo. Source Ivanhoe Mines Ltd.

On March 9, 2018, DRC President Joseph Kabila signed into law a new mining code that raises royalties and taxes on mining operations, while removing a stability clause in the current law that has been protecting miners from changes to the fiscal and customs regime for 10 years.

International mining companies with operations in the DRC are collectively negotiating with the DRC government in a bid to resolve corporate concerns about anticipated impacts on their DRC operations, resulting from changes to the mining code.

The group includes Randgold Resources Ltd. [GOLD-NASDAQ, LSE], AngloGold Ashanti Ltd. [AU-NYSE; AGG-ASX; ANG-JSE], Glencore PLC, Ivanhoe Mines, Gold Mountain International/Zijin Mining Group, MMG (PTY) Ltd. and China Molybdenum Co. Ltd.

Ivanhoe said the DRC mining code negotiations are scheduled to begin March 26, 2018, following an initial, high-level meeting in Kinshasa on March 7, during which Kabila gave an assurance that the companies’ concerns would be resolved through transitional arrangements, mining regulations and respect for existing agreements and guarantees.

“The international companies have confirmed their willingness to negotiate royalties and changes to other taxes as part of this process,” Ivanhoe said in a press release Wednesday.

“The companies expect that the negotiations will give priority to respecting the legislated guarantee of stability and protection of rights specified in Article 276 of the 2002 mining code, and other protections afforded under established mining conventions and bilateral agreements,” it said.

Ivanhoe shares advanced 9.7% or $0.27 to $3.05 on Wednesday.

Ivanhoe Mines, headed by billionaire financier Robert Friedland, is advancing its three principal projects in Southern Africa, including:

  • Mine development at the Platreef platinum-palladium-gold-nickel copper discovery on the Northern Limb of South Africa’s Bushveld Complex.
  • Mine development and exploration at the Tier One Kamoa-Kakula copper discovery on the Central African Copperbelt in the DRC.
  • Advancement towards a new era of production at the high-grade Kipushi zinc-copper-silver-germanium mine, which is also located on the DRC’s Copperbelt.

A prefeasibility study for Kipushi, announced in December, 2017, is forecasting life-of-mine average annual planned zinc concentrate production of 381,000 tonnes per annum, with a concentrate grade of 59% zinc. Total zinc production is expected to be 8.6 million tonnes of ore at 32.14% zinc over a period of 11 years to produce 2.5 million tonnes of zinc metal in concentrate.

The Kipushi prefeasibility study anticipates annual production of an average of 381,000 tonnes of zinc in concentrate over an 11-year initial mine life at a total cost of approximately $0.48 per pound of zinc.

Back in October, 2017, Ivanhoe said it had agreed to rebuild 34 km of track to connect the Kipushi Mine with the DRC national railway at Munama, south of the mining capital of Lubumbashi. The Kipushi-Munama spur line, which has been inactive since 2011, will be rebuilt under the terms of a Memorandum of Understanding signed by Ivanhoe Mines and the DRC’s state-owned railway company.

A February, 2018 mineral resource estimated has boosted the combined Kamoa-Kakula indicated mineral resource to 1.03 billion tonnes at 3.17% copper, containing 72 billion pounds of copper, plus an additional 182 million tonnes of inferred mineral resources at 2.31% copper at a 1.5% cut-off.

The new mineral resource estimate establishes the Kamoa-Kakula Project as the world’s fourth largest copper discovery. Kamoa-Kakula’s copper grades are the highest, by a wide margin, of the world’s top 10 copper deposits.

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