Ivanhoe Mines Issues Q3 2021 Financial Results and Review of Operations, Mine Construction and Exploration Progress

2021-11-15

TSX - Toronto Stock Exchange · Copper · Silver · Germanium · Zinc · Lead · Platinum · Palladium · Rhodium · Nickel · Gold · Cobalt · Platinum Group Metals · Canada

Ivanhoe Mines records a profit of $85.4 million in Q3

Kamoa-Kakula Copper Mine achieved Phase 1 commercial production on July 1, 2021

More than 77,500 tonnes of copper produced year-to-date; copper production guidance for 2021 raised to 92,500 to 100,000 tonnes

Kamoa-Kakula sold 41,490 tonnes of payable copper and recognized revenue of $342.6 million in Q3, with an inaugural operating profit of $209.7 million and EBITDA of $233.2 million

Kamoa-Kakula's Phase 2 expansion to begin operations in Q2 2022, doubling the mine's projected annual copper production to approximately 400,000 tonnes

Excellent progress on all-weather road and geophysical surveys on Ivanhoe's Western Foreland exploration project

Extensive drilling program on Western Foreland to continue in 2022

Development of the world-scale Platreef palladium, rhodium, platinum, nickel, copper and gold project in South Africa making rapid progress; first production expected in 2024

Toronto, Ontario--(Newsfile Corp. - November 15, 2021) - Ivanhoe Mines (TSX: IVN) (OTCQX: IVPAF) today announced its financial results for the three and nine months ended September 30, 2021. This quarter marks the first quarter of commercial production at the company's Kamoa-Kakula Copper joint-venture in the Democratic Republic of Congo (DRC).

Ivanhoe Mines also is advancing development of the Platreef palladium-rhodium-platinum-nickel-copper-gold discovery in South Africa, which is scheduled to begin production in 2024, and is upgrading the historic Kipushi zinc-copper-lead-germanium mine, also in the DRC, for a resumption of production. Ivanhoe also is exploring for new copper discoveries on its Western Foreland exploration licences in the DRC, near the Kamoa-Kakula Project. All figures are in U.S. dollars unless otherwise stated.

Watch a new video highlighting Kamoa-Kakula's Q3 operational and financial achievements: https://vimeo.com/645848726/9d4de9d7d6

HIGHLIGHTS

The Kamoa-Kakula Project began producing copper in May 2021 and achieved commercial production on July 1, 2021. Production for the third quarter was 41,545 tonnes of copper in concentrate, with year-to-date production of more than 77,500 tonnes as of November 15, 2021.

The initial 2021 production guidance range for copper in concentrate of 80,000 to 95,000 tonnes was raised to 92,500 to 100,000 tonnes, reflecting the successful completion of ramp-up of the Kakula Phase 1 concentrator.

During its first quarter of commercial production, the Kamoa-Kakula joint venture sold 41,490 tonnes of payable copper and recognized revenue of $342.6 million, with an operating profit of $209.7 million and an EBITDA of $233.2 million.

Kamoa-Kakula's cost of sales per pound (lb) of payable copper sold was $1.08/lb, while cash costs (C1) per pound of payable copper totaled $1.37/lb. Costs for the quarter reflect the measured ramp-up of production at Kamoa-Kakula to steady-state, and are expected to trend downward as the Phase 2 concentrator plant is commissioned and the mine's fixed operating costs are spread over increased copper production.

Kamoa-Kakula's Phase 2 construction is progressing well toward a Q2 2022 start-up, which will see a doubling of the mine's nameplate milling throughput to 7.6 million tonnes per annum (Mtpa). Phases 1 and 2 combined are forecast to produce approximately 400,000 tonnes of copper per year.

Ivanhoe Mines recorded a profit of $85.4 million for Q3 2021, compared to a loss of $5.3 million for the same period in 2020. The company's share of profit from the Kamoa-Kakula joint venture and the finance income therefrom were the principal contributors to the profit recorded in the current quarter.

The company has a strong balance sheet with cash and cash equivalents of $579.7 million on hand as at September 30, 2021, and expects that the majority of Kamoa-Kakula's expansion capital expenditures on Phase 2 and Phase 3 will be funded from copper sales and facilities in place at Kamoa. Based on current market conditions, it is anticipated that shareholder loan repayments from Kamoa-Kakula will commence in 2022.

During Q3, Ivanhoe continued its 2021 copper exploration program on its Western Foreland licences that cover approximately 2,550 square kilometres in close proximity to Kamoa-Kakula. Work in Q3 primarily was focused on completing the project's infrastructure program (all-weather road building and bridge construction) needed to allow Ivanhoe's drilling crews to access the highly-prospective exploration licences located to the south and west of the Kamoa and Kakula orebodies. Geophysical surveys (airborne, electromagnetic (EM), and gravity) were advanced during the quarter and are either complete or are nearing completion. Drilling during the quarter was focused on extending the copper discoveries at Makoko and Kiala.

Platreef's updated feasibility study for the phased development plan is progressing well toward completion in early 2022. All design and engineering work has been completed with the cost estimates well advanced. The Shaft 1 changeover is progressing well in preparation for permanent rock hoisting in early 2022. Construction activities on the Shaft 2 headframe also are advancing.

Financing arrangements for Platreef's first phase of development are nearing completion, which include a $300-million gold, palladium and platinum streaming facility, and a senior project debt facility of up to $120 million.

The review of Kipushi's development and financing plan with joint-venture partner and state-owned mining company, Gécamines, is progressing well as Ivanhoe looks to resume development activities. Discussions with potential financing sources are in progress.

At the end of Q3 2021, Kamoa-Kakula had reached 3.00 million work hours free of a lost-time injury, Kipushi had reached 3.66 million work hours free of a lost-time injury, and Platreef had reached 310,000 work hours free of a lost-time injury. In addition, the construction team at Kamoa-Kakula achieved 4.00 million hours worked without a lost-time injury in October 2021, a milestone that underscores the strict safety culture of the Kamoa Copper construction team.

On November 12, 2021, Ivanhoe promoted David van Heerden to the role of Chief Financial Officer. David has been with Ivanhoe since 2011 in progressively senior finance roles, most recently Vice President, Finance, Treasury and Tax.

Robert Friedland, Ivanhoe Mines' Founder and Executive Co-Chair, remarked: "Today, after a more than 25-year-long odyssey… and having overcome a myriad of challenges worthy of Homer… that the critics claimed were impossible to hurdle… we are very pleased to report our first full quarter of commercial production and our inaugural operating profit. This achievement was made possible through the tireless efforts of thousands of people over more than two decades. These include our dedicated employees, our patient and loyal shareholders, our joint-venture partners, the Government of the Democratic Republic of Congo, and of course, the people who live in the vicinity of, and work at, this magnificent copper complex.

"We are immensely proud to say that Kamoa-Kakula - comprising the first world-scale, greenfield copper discoveries in the Democratic Republic of Congo since the country gained independence in 1960… is well on its way to joining the ranks of the world's largest and greenest copper producers, with the highest copper grades by a wide margin.

"There is profound potential to discover additional tier-one copper deposits in the Western Foreland basin, as our team of talented geologists and geoscientists search for the next high-grade discovery, armed with our proprietary exploration knowledge gained from 20 years of experience in the Western Foreland copper basin.

"Turning an operating profit in just the first quarter of commercial production at Kamoa-Kakula highlights the ability of the mine to deliver as promised, and to self-fund its expansion to produce up to 800,000 tonnes of copper yearly, as demonstrated in previous independent studies. Kamoa-Kakula will rapidly repay its construction costs and pay dividends to its shareholders, including our most important partner, the Government of the Democratic Republic of Congo.

"However, the biggest dividend from Kamoa-Kakula that will benefit everyone on Planet Earth is invisible to the naked eye… it is the global warming gas that will never make it into the atmosphere as the copper mined at Kamoa-Kakula makes its way into tomorrow's electric vehicles, energy storage systems and batteries, and renewable power generation. That vision of a greener and more sustainable world is one we share with all our stakeholders.

"The bright lights of Kamoa-Kakula have blinded the investment world to our Platreef Project, which is among this planet's largest precious and electric metals deposits with enormous quantities of palladium, rhodium, platinum, nickel and copper; and more ounces of gold than many leading gold mines. For a long time, the development of Platreef has been a destiny waiting to be fulfilled. However, Platreef's time to shine now is upon us.

"The initial scope of the phased development plan is to fast-track Platreef into production in 2024, starting with an initial 700,000-tonne-per-annum underground mine. The plan is designed to establish an operating platform to support potential future expansions up to 12 million tonnes of ore per year. This would position Platreef among the largest nickel and platinum-group-metals producing mines in the world, producing in excess of 24,000 tonnes of nickel and 1.1 million ounces of palladium, rhodium, platinum, and gold per year, and help feed the demand for these critical minerals that the world needs as it transitions to a low carbon economy."

Principal projects and review of activities

1. Kamoa-Kakula Project 39.6%-owned by Ivanhoe Mines Democratic Republic of Congo

The Kamoa-Kakula Project, a joint venture between Ivanhoe Mines and Zijin Mining, has been independently ranked as the world's fourth-largest copper deposit by international mining consultant Wood Mackenzie. The project is approximately 25 kilometres west of the town of Kolwezi and about 270 kilometres west of Lubumbashi. The Kamoa-Kakula Project began producing copper in May 2021 and achieved commercial production on July 1, 2021.

Ivanhoe sold a 49.5% share interest in Kamoa Holding Limited (Kamoa Holding) to Zijin Mining and a 1% share interest in Kamoa Holding to privately-owned Crystal River in December 2015. Kamoa Holding holds an 80% interest in the project. Since the conclusion of the Zijin transaction, each shareholder has been required to fund expenditures at the Kamoa-Kakula Project in an amount equivalent to its proportionate shareholding interest in Kamoa Holding.

Ivanhoe and Zijin Mining each hold an indirect 39.6% interest in the Kamoa-Kakula Project, Crystal River holds an indirect 0.8% interest and the DRC government holds a direct 20% interest.

Kamoa-Kakula Q3 2021 summary of operating and financial data

| Ore tonnes milled (000's tonnes) | 861 | | Copper ore grade processed (%) | 5.89% | | Copper recovery (%) | 83.40% | | Copper in concentrate produced (tonnes) in Q3 2021 | 41,545 | | Payable Copper sold (tonnes) | 41,490 | | Sales revenue ($'000) | 342,584 | | Cost of sales per pound ($ per lb) | 1.08 | | Cash cost (C1) ($ per lb) | 1.37 | | EBITDA ($'000) | 233,212 |

9,858 tonnes of copper in concentrate were produced in Q2 2021, bringing the year-to-date total tonnes produced as of September 30, 2021 to 51,403.

C1 cash costs are prepared on a basis consistent with the industry standard definitions by Wood Mackenzie cost guidelines, but are not measures recognized under IFRS. In calculating the C1 cash cost, the costs are measured on the same basis as the company's share of profit from the Kamoa Holding joint venture that is contained in the financial statements. C1 cash costs are used by management to evaluate operating performance and include all direct mining, processing, and general and administrative costs. Smelter charges and freight deductions on sales to final port of destination, which are recognized as a component of sales revenues, are added to C1 cash cost to arrive at an approximate cost of delivered finished metal. C1 cash costs exclude royalties and production taxes and non-routine charges as they are not direct production costs.

C1 cash cost per pound of payable copper produced can be further broken down as follows:

All figures in the above tables are on a 100%-project basis. Metal reported in concentrate is prior to refining losses or deductions associated with smelter terms. This news release includes earnings before interest, tax, depreciation and amortization (EBITDA), and "Cash costs (C1) per pound" which are non-GAAP financial performance measures. For a detailed description of each of the non-GAAP financial performance measures used in this news release, and a detailed reconciliation to the most directly comparable measure under IFRS, please refer to the Non-GAAP Financial Performance Measures section of this news release.

Kamoa-Kakula's Phase 1 (left) and Phase 2 concentrator plants. The Phase 1 plant began operations in May 2021 and the Phase 2 plant is on track to begin operations in Q2 2022.

[](https://orders.newsfilecorp.com/files/3396/103491_f60c1055b4118933_002full.jpg)

To view an enhanced version of this graphic, please visit: https://orders.newsfilecorp.com/files/3396/103491_f60c1055b4118933_002full.jpg

Nathalie Mulel, Kamoa Copper's Senior Officer, Customs, with Kamoa Copper blister copper ingots, containing approximately 99% copper, produced at the Lualaba Copper Smelter near Kolwezi, DRC.

[](https://orders.newsfilecorp.com/files/3396/103491_f60c1055b4118933_003full.jpg)

To view an enhanced version of this graphic, please visit: https://orders.newsfilecorp.com/files/3396/103491_f60c1055b4118933_003full.jpg

Health and safety at Kamoa-Kakula

At the end of September 2021, the Kamoa-Kakula Project reached 3,002,776 work hours free of a lost-time injury. Three lost-time injuries occurred early in Q3 2021. The project continues to strive toward its workplace objective of zero harm to all employees and contractors.

Kamoa-Kakula has successfully focused on prevention, preparation, and mitigation in managing the risks associated with COVID-19. Large-scale testing, combined with focused preventative measures, ensured that positive cases were quickly identified, isolated, and treated, with cross contamination kept to a minimum. Maintaining this high standard of risk management remains a daily focus, to prevent future cases. During the first nine months of 2021, the Kamoa-Kakula Project conducted 6,083 COVID-19 tests, with 477 patients testing positive for COVID-19.

With the support of the Democratic Republic of Congo government, UNICEF and other stakeholders, Kamoa Copper SA completed its first round of COVID-19 vaccinations in June 2021. In conjunction with the DRC government's extended program of vaccinations, the second round of COVID-19 vaccinations at Kamoa-Kakula commenced in mid-August.

The Kamoa COVID-19 hospital continues to treat patients when required, as construction progresses well for the expansion and upgrade of the primary healthcare wing. Kamoa-Kakula's highly experienced doctors and nurses apply the latest medical treatments, supported by a world-leading emergency response and paramedic team.

As the pandemic evolves, the medical team at the Kamoa hospital continues to review and update risk-mitigation protocols, while ensuring that new medical advances are investigated and applied to protect the health and safety of employees and community members.

Copper concentrate production from the initial 3.8-Mtpa Kakula concentrator plant commenced in May 2021; commercial production achieved on July 1, 2021

First ore was introduced into the ball mills on May 20, 2021, and the first saleable concentrate was filtered on May 25, 2021, marking the start of concentrate production of the project's first phase, 3.8-Mtpa concentrator plant and associated facilities.

The Kamoa-Kakula Project was deemed to have reached commercial production on July 1, 2021, after achieving a milling rate exceeding 80% of design capacity and recoveries close to 70% for a continuous, seven-day period. Revenue recognition, as well as depreciation of Kamoa-Kakula's first phase, 3.8-Mtpa concentrator plant and milling operation, commenced on this date.

Copper recoveries progressively increased from an average of approximately 81% in July 2021 to approximately 85% in September 2021. The Phase 1, steady-state-design copper recovery is approximately 86%, depending on ore feed grade.

41,545 tonnes of copper in concentrate were produced in Q3 2021 for a total of 51,403 tonnes year-to-date as of September 30, 2021, for delivery to either the Lualaba Copper Smelter near Kolwezi, or to international markets. This is an additional 4,653 tonnes to the 46,750 tonnes reported for the year-to-date to September 20, 2021, in Ivanhoe's September 30, 2021 news release.

Loading high-grade copper concentrate at the Kamoa-Kakula concentrate storage warehouse for transport to the nearby Lualaba Copper Smelter for processing into blister copper ingots, containing approximately 99% copper.

[](https://orders.newsfilecorp.com/files/3396/103491_f60c1055b4118933_004full.jpg)

To view an enhanced version of this graphic, please visit: https://orders.newsfilecorp.com/files/3396/103491_f60c1055b4118933_004full.jpg

Producing Kamoa Copper blister copper ingots at the Lualaba Copper Smelter near Kolwezi, DRC.

[](https://orders.newsfilecorp.com/files/3396/103491_f60c1055b4118933_005full.jpg)

To view an enhanced version of this graphic, please visit: https://orders.newsfilecorp.com/files/3396/103491_f60c1055b4118933_005full.jpg

Copper production guidance for 2021

Overall construction of the Kamoa-Kakula Project's first phase, 3.8-Mtpa concentrator plant and associated facilities is complete. First ore was introduced into the ball mills on May 20, 2021, and first saleable concentrate was filtered on May 25, 2021, marking the start of concentrate production.

As at November 15, 2021, contained copper in concentrate produced by the Kamoa-Kakula Project amounted to more than 77,500 tonnes. Ivanhoe's production guidance for contained copper in concentrate at Kamoa-Kakula in 2021 has been raised to 92,500 to 100,000 tonnes. The figures are on a 100%-project basis and metal reported in concentrate is prior to refining losses or deductions associated with smelter terms.

Cost of sales per pound of payable copper sold and C1 cash costs per pound of payable copper produced for Q4 2021 are not expected to be materially different to actual expenditure for Q3 2021.

Copper production, cost of sales and cash cost guidance for 2022, including the start of Phase 2 operations, will be provided in January 2022.

Commissioning of the initial 3.8-Mtpa Kakula concentrator plant and C5 performance tests complete

Commissioning of the first phase, 3.8-Mtpa concentrator now has been completed, with the final commissioning performance tests which consisted of a 72- hour continuous run successfully carried out in early September. The plant now has been handed over to operations. During commissioning, the concentrate filter was identified as a potential bottleneck, and a second filter recently has been installed and commissioned. The second filter will allow Kamoa-Kakula to take advantage of ultra-high-grade copper ore and milling throughputs in excess of design. A third filter will be installed as part of the Phase 2 expansion.

Hot commissioning of the backfill plant is nearing completion with one underground stope already filled with paste backfill. All areas of the backfill plant now are C4 (hot commissioning) complete with just the C5 (performance tests) outstanding.