Ivanhoe Mines Issues 2022 Fourth Quarter and Annual Financial Results, plus Overview of Construction and Exploration Activities

2023-03-13

CSE - Canadian National Stock Exchange · Phosphate · Iron · Titanium · Canada

Kamoa-Kakula Copper Complex sold 323,733 tonnes of payable copper in 2022 and recognized record annual revenue of $2.15 billion and record EBITDA of $1.39 billion

Ivanhoe Mines recognized a record profit of $434 million in 2022, driven by record income from the Kamoa-Kakula joint venture of $405 million

Kamoa-Kakula's 2022 cost of sales total $1.09 per lb. of payable copper; C1 cash costs of $1.39 per lb. within guidance

Kamoa-Kakula sold 92,208 tonnes of payable copper in Q4 2022 for record quarterly revenue of $673 million and record EBITDA of $451 million at a margin of 67%

Kamoa-Kakula's Phase 3 expansion on target for Q4 2024 completion; increasing copper production to a ten-year average of 620,000 tonnes per annum, at C1 cash cost of $1.22/lb.

Ivanhoe Mines commences optimization work to accelerate Phase 2 expansion of the Tier-One Platreef palladium, nickel, platinum, rhodium, copper and gold mine in South Africa; Phase 1 on target for first production in Q3 2024

Construction ongoing at ultra-high-grade Kipushi zinc-copper-germanium-silver mine; on track for Q3 2024 production

Johannesburg, South Africa--(Newsfile Corp. - March 13, 2023) - Ivanhoe Mines (TSX: IVN) (OTCQX: IVPAF) today announced its financial results for the year ended December 31, 2022. Ivanhoe Mines is a leading Canadian mining company that is advancing its four principal mining and exploration projects in Southern Africa: the Phase 3 expansion of the Kamoa-Kakula Copper Complex in the Democratic Republic of Congo (DRC) that commenced commercial operations in July 2021; the construction of the Platreef palladium, nickel, platinum, rhodium, copper and gold project in South Africa, scheduled for first production in the third quarter of 2024; the restart of the historic Kipushi zinc-copper-lead-germanium mine in the DRC, also scheduled for first production in the third quarter of 2024; and the exploration for new copper discoveries on Ivanhoe's 2,407-square-kilometre Western Foreland exploration project, which is adjacent to Kamoa-Kakula.All figures are in U.S. dollars unless otherwise stated.

FINANCIAL HIGHLIGHTS

Ivanhoe Mines reported a record profit of $434 million for 2022, compared with a profit of $45 million for 2021. Ivanhoe's profit in Q4 2022 was $37 million compared to a profit of $24 million in Q3 2022.

Kamoa-Kakula sold 323,733 tonnes of copper in 2022, and recognized record revenue of $2.15 billion, record operating profit of $1.27 billion and record EBITDA of $1.39 billion.

During Q4 2022, Kamoa-Kakula sold 92,208 tonnes of payable copper and recognized record revenue of $673 million, record operating profit of $418 million and record EBITDA of $451 million.

Kamoa-Kakula's cost of sales per pound (lb.) of payable copper sold was $1.08/lb. for Q4 2022 compared with $1.05/lb. in Q3 2022. Cash costs (C1) per pound of payable copper produced in Q4 2022 totalled $1.42/lb., compared to $1.43/lb. in Q3 2022.

Ivanhoe Mines presents adjusted EBITDA for the group of $489 million for 2022, and $162 million for Q4 2022, which includes an attributable share of EBITDA from Kamoa-Kakula.

Since entering Phase 1 commercial production on July 1, 2021, the Kamoa-Kakula joint venture has generated $1.22 billion of net cash from operating activities, which has funded both the Phase 2 and Phase 3 expansion activities to date.

Ivanhoe Mines has a strong balance sheet with cash and cash equivalents of $597 million on hand as at December 31, 2022, and total debt of $739 million, the majority of which relates to the $575 million of unsecured 2.5% convertible notes that mature in April 2026, unless redeemed earlier.

OPERATIONAL HIGHLIGHTS

Production at the Kamoa-Kakula Copper Complex for the fourth quarter of 2022 was 92,761 tonnes of copper in concentrate.

The debottlenecking program of Kamoa-Kakula's Phase 1 and Phase 2 concentrators was completed ahead of schedule, increasing nameplate processing capacity by 22% to a combined total of 9.2 million tonnes of ore per annum. The final installation and commissioning of a fourth Larox filter press are now also complete, increasing copper production capacity to 450,000 tonnes per annum.

Kamoa-Kakula's Phase 3 expansion, 500,000-tonne-per-annum on-site, direct-to-blister copper smelter and refurbishment of Turbine #5 at the Inga II hydroelectric facility are all advancing on schedule and are expected to be complete in late 2024. At current copper prices, it is expected that cashflow from Kamoa-Kakula's Phase 1 and Phase 2 operations will be sufficient to fund the 2023 and 2024 expansion capital cost requirements of $2.53 billion.

In January 2023, Ivanhoe Mines announced outstanding economic results of an updated, independent Integrated Development Plan (2023 IDP) for the world-leading Kamoa-Kakula Copper Complex. The Pre-Feasibility Study (PFS) for a phased expansion from 9.2 to 19.2 million tonnes per annum yields an after-tax NPV8% of approximately $19 billion, over a 33-year mine life. Kamoa-Kakula to rank as the fourth largest copper producer globally from 2025, with lowest-quartile C1 cash costs.

Ivanhoe continues its expansive copper exploration program on its Western Foreland licences that cover approximately 2,407 square kilometres adjacent to Kamoa-Kakula. The 2023 exploration program is budgeted at approximately $19 million and includes up to 70,000 metres of total drilling.

In mid-2023, Ivanhoe plans to release a maiden Mineral Resource estimate for its Makoko and Kiala high-grade copper discoveries in the Western Foreland, to be followed by a Preliminary Economic Assessment.

Ivanhoe has commenced an optimization study at its Tier-One Platreef palladium, nickel, platinum, rhodium, copper and gold mine in South Africa to potentially accelerate production from the Phase 2 expansion. The study will consider the implications of converting the 5.1-metre-diameter ventilation shaft (Shaft 3), which is under construction, to a production shaft with the capability to hoist.

Underground development work at Platreef continues to focus on establishing underground infrastructure on the 750-metre, 850-metre and 950-metre levels around Shaft 1, as well as developing towards the first reef and stoping areas on all three levels. Mine development across all three levels has progressed well, with more than 750 metres of lateral development completed to date. The first concentrate is scheduled for Q3 2024.

The pilot drilling required for the raise-boring of Platreef's Shaft 2 commenced in February 2023. Headgear construction began in November 2022 with more than 70 metres of the 104-metres completed to date. In addition, raise boring of Shaft 3 also commenced in February 2023.

Surface earthworks and civil works for the Kipushi concentrator continue on schedule, with over 1,700 cubic metres of foundation concrete poured to date. First concentrate is on track for Q3 2024.

Underground mine development around Kipushi's Big Zinc orebody is advancing ahead of schedule. Development waste, as well as low-grade mineralized rock from the advancement of the perimeter and access drives surrounding the Big Zinc orebody, is being hoisted to the surface and stockpiled.

At the end of December 2022, Kamoa-Kakula achieved 1.53 million work hours free of a lost-time injury. Zero lost time injuries have been recorded on the construction projects of the Phase 3 expansion, smelter construction and Inga II Turbine #5 refurbishment. In addition, the Platreef Project reached 408,360 hours worked free of a lost-time injury, and the Kipushi Project reached 658,142 hours worked free of a lost-time injury.

According to estimates by the United States Geological Survey, the Democratic Republic of the Congo is now the World's second-largest copper-producing country, tied with Peru, having produced 2.2 million tonnes in 2022. This achievement would not be possible without Kamoa-Kakula, the fastest-growing major copper mine on the planet.

Watch an updated, detailed timeline on the history of the Kamoa-Kakula Copper Complex:https://vimeo.com/806783775/fa83ffbb7c

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Read Ivanhoe's Fourth Quarter 2022 Sustainability Update: https://bit.ly/3l95VGI

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Conference call for investors on Monday, March 13

Ivanhoe Mines will hold an investor conference call to discuss its 2022 fourth quarter and annual financial results at 10:30 a.m. Eastern time / 7:30 a.m. Pacific time on Monday, March 13. The conference call will conclude with a question-and-answer (Q&A) session. Media are invited to attend on a listen-only basis.

To view the webcast please use the following link: https://edge.media-server.com/mmc/p/vcbrd72a

Analysts are invited to join by phone for the Q&A using the following link: https://register.vevent.com/register/BI2a229263d9634c82ab5ad144f57d6398

An audio webcast recording of the conference call, together with supporting presentation slides, will be available on Ivanhoe Mines' website at www.ivanhoemines.com.

After issuance, the Financial Statements and Management's Discussion and Analysis will be available at www.ivanhoemines.comand www.sedar.com.

Principal projects and review of activities

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

The Kamoa-Kakula Copper Complex operated as the Kamoa Holding 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 from 2025. The project is approximately 25 kilometres southwest of the town of Kolwezi and about 270 kilometres west of Lubumbashi. Kamoa-Kakula Copper Complex's Phase 1 concentrator began producing copper in May 2021 and achieved commercial production on July 1, 2021. The Phase 2 concentrator, which doubled nameplate production capacity, was commissioned in April 2022.

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 Kamoa-Kakula in an amount equivalent to its proportionate shareholding interest. Ivanhoe and Zijin Mining each hold an indirect 39.6% interest in Kamoa-Kakula, Crystal River holds an indirect 0.8% interest, and the DRC government holds a direct 20% interest.

Kamoa-Kakula summary of operating and financial data

| | FY 2022 | | | Q4 2022 | | | Q3 2022 | | | Q2 2022 | | | Q1 2022 | | | Ore tonnes milled (000's tonnes) | 7,121 | | | 2,006 | | | 2,082 | | | 1,950 | | | 1,083 | | | Copper ore grade processed (%) | 5.54% | | | 5.40% | | | 5.60% | | | 5.44% | | | 5.91% | | | Copper recovery (%) | 85.6% | | | 86.1% | | | 85.9% | | | 84.0% | | | 87.1% | | | Copper in concentrate produced (tonnes) | 333,497 | | | 92,761 | | | 97,820 | | | 87,314 | | | 55,602 | | | Payable Copper sold (tonnes) | 323,733 | | | 92,208 | | | 93,812 | | | 85,794 | | | 51,919 | | | Cost of sales per pound($ per lb.) | 1.09 | | | 1.08 | | | 1.05 | | | 1.15 | | | 1.08 | | | Cash cost (C1) ($ per lb.) | 1.39 | | | 1.42 | | | 1.43 | | | 1.42 | | | 1.21 | | | Realized copper price ($ per lb.) | 3.79 | | | 3.54 | | | 3.50 | | | 4.34 | | | 4.51 | | | Sales revenue before remeasurement ($'000) | 2,357,335 | | | 619,997 | | | 570,504 | | | 699,381 | | | 467,453 | | | Remeasurement of contract receivables ($'000) | (209,664) | | | 53,473 | | | (110,031 | ) | | (205,248 | ) | | 52,142 | | | Sales revenue after remeasurement ($'000) | 2,147,671 | | | 673,470 | | | 460,473 | | | 494,133 | | | 519,595 | | | EBITDA ($'000) | 1,391,497 | | | 451,371 | | | 254,423 | | | 286,313 | | | 399,391 | | | EBITDA margin (% of sales revenue) | 65% | | | 67% | | | 55% | | | 58% | | | 77% | |

All figures in the above tables are on a 100%-project basis. Metal reported in concentrate is before refining losses or deductions associated with smelter terms. This release includes "EBITDA", "Adjusted EBITDA", "EBITDA margin" and "Cash costs (C1)" which are non-GAAP financial performance measures. For a detailed description of each of the non-GAAP financial performance measures used herein and a detailed reconciliation to the most directly comparable measure under IFRS, please refer to the non- GAAP Financial Performance Measures section of the company's MD&A for the year ended December 31, 2022.

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

| | FY 2022 | Q4 2022 | | Q3 2022 | | | Q2 2022 | | | Q1 2022 | | | Mining ($ per lb.) | 0.39 | 0.40 | | 0.41 | | | 0.39 | | | 0.30 | | | Processing ($ per lb.) | 0.14 | 0.16 | | 0.12 | | | 0.14 | | | 0.15 | | | Logistics charges (delivered to China) ($ per lb.) | 0.50 | 0.50 | | 0.56 | | | 0.51 | | | 0.36 | | | Treatment, refining and smelter charges ($ per lb.) | 0.21 | 0.23 | | 0.21 | | | 0.21 | | | 0.20 | | | General and administrative expenditure ($ per lb.) | 0.15 | 0.13 | | 0.13 | | | 0.17 | | | 0.20 | | | C1 cash cost per pound of payable copper produced ($ per lb.) | 1.39 | 1.42 | | 1.43 | | | 1.42 | | | 1.21 | |

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 the 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.

Kamoa-Kakula produced 333,497 tonnes of copper in 2022, an increase of 215% compared with 2021

Kamoa-Kakula's Phase 1 and 2 concentrator plants milled approximately 2.0 million tonnes of ore during the fourth quarter at an average feed grade of 5.4% copper, for a total of 7.1 million tonnes at an average grade of 5.5% copper for the year ended December 31, 2022. This included high-grade, run-of-mine ore from the Kakula Mine, supplemented with ore from the surface stockpiles to meet the throughput over design capacity. In line with design parameters, copper recoveries averaged approximately 86% for the year.

The Kamoa-Kakula Copper Complex produced 92,761 tonnes of copper in concentrate in the fourth quarter of 2022, for a total of 333,497 tonnes of copper in concentrate for the year. This represents an increase of 215% compared with 2021 due to the successful commissioning of the Phase 2 concentrator in April 2022 and achieved the upper end of 2022 guidance.

All figures are on a 100% project basis and metal reported in concentrate is before refining losses or deductions associated with smelter terms.

Phase 1 and Phase 2 debottlenecking program to boost throughput to 9.2 million tonnes of ore per year is complete

In late February 2023, the debottlenecking of Kamoa-Kakula's Phase 1 and 2 concentrators was completed ahead of schedule. The program increases the combined design processing capacity of the Phase 1 and 2 concentrator plants by 22%, from 7.6 to 9.2 million tonnes per annum (Mtpa).

Commissioning of the fourth filter press took place on March 4, 2023. The debottlenecking program boosts Kamoa-Kakula's annual production capacity to approximately 450,000 tonnes of copper in concentrate.

Since the completion of the debottlenecking, the concentrator has achieved record daily throughput of 27,796 tonnes and a record daily copper production of 1,505 tonnes.

However, since December and persisting during the first quarter of 2023, Kamoa-Kakula has experienced intermittent grid stability issues in the DRC, impacting the ability to run the Phase 1 and 2 concentrators continuously. The issues have been prevalent across the southern grid power system in the DRC Copper Belt.

Kamoa Copper is liaising with the DRC's state-owned power company La Société Nationale d'Electricité (SNEL), to identify the issues and assist with potential solutions, as well as evaluate options to insulate Kamoa-Kakula from future disruptions.

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Representatives from DRA Global and Outotec standing in front of the first batch of concentrate produced from the newly installed fourth Larox filter press. The commissioning of the filter press ahead of schedule marks the completion of the debottlenecking program.

To view an enhanced version of this graphic, please visit: https://images.newsfilecorp.com/files/3396/158213_ce549303d451d8ca_002full.jpg

Outstanding economic results of updated, independent Integrated Development Plan (2023 IDP) for world-leading Kamoa-Kakula Copper Complex

After the end of the quarter on January 30, 2023, Ivanhoe Mines announced the results of an updated independent Integrated Development Plan (2023 IDP) for the Kamoa-Kakula Copper Complex. The 2023 IDP consists of a Pre-Feasibility Study (Kamoa-Kakula 2023 PFS) for the Phase 3 and Phase 4 expansions of the Kamoa-Kakula Copper Complex over a 33-year mine life, as well as an updated Preliminary Economic Assessment (Kamoa-Kakula 2023 PEA) that includes a life-of-mine extension case to 42 years overall.

The Kamoa-Kakula 2023 PFS (Phase 3 and 4 expansion) plans for a staged increase in nameplate processing capacity from the current combined capacity of 9.2 Mtpa, up to a total of 19.2 Mtpa. The Phase 1 and 2 concentrators will continue to process ore from the Kakula Mine, as well as the new adjacent Kakula West mine from 2029. The Phase 3, 5.0 Mtpa concentrator, which is under construction and on target for the first concentrate in Q4 2024, will be fed with ore from the existing Kansoko Sud Mine (formerly Kansoko Mine), as well as new mines currently under development in the Kamoa area, known as Kamoa 1 and 2. The Phase 4 expansion consists of an additional 5.0 Mtpa concentrator that will take the total processing capacity of the Kamoa-Kakula Copper Complex up to 19.2 Mtpa. The Phase 4 concentrator will be fed by new mines in the Kamoa area.

The completion of the Phase 3 expansion in Q4 2024 is planned to coincide with the commissioning of an on-site, direct-to-blister flash copper smelter capable of producing 500,000 tonnes per annum of copper anode.

Highlights of the Kamoa-Kakula 2023 PFS (Phase 3 and 4 expansion) include:

Phase 1 and 2 at steady-state production (9.2 Mtpa) for the first two years, following the completion of the debottlenecking program by Q2 2023, generating cash flow to fund the ongoing capital expenditures. Phase 3 expansion to 14.2 Mtpa processing capacity from late 2024 drives a significant increase in copper production, which is forecast to average 620,000 tonnes during the first ten years. Commissioning of the 500,000 tonne-per-annum smelter in conjunction with Phase 3 results in a significant improvement in operating cost. A significant period of cash flow generation in the first five years following Phase 3 (2025 to 2029) with copper production averaging approximately 650,000 tonnes at a cash cost (C1) of $1.15/lb. Phase 4 expansion, ramping up 19.2 Mtpa production capacity after 2030, will allow sustained copper production of over 500,000 tonnes per year through 2047.

The remaining Phase 3 capital cost, including contingency, is $3.04 billion, excluding $255 million already spent through December 2022. Of the $3.04 billion, $2.53 billion is spent during 2023 and 2024 up to the commissioning of the Phase 3 concentrator, with the remaining capital cost for the continuing ramp-up of the mining operations thereafter.