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Exploration is at the base of transforming Ivanhoe

Milestone copper discovery in DRC augmented with the Platreef project.

The Canadian mining company has made the transmission from a junior exploration company to a mining juggernaut, having made game-changing discoveries over the last decade. Last week the company announced the results of drilling efforts at its Kamoa Copper project, near the mining centre of Kolwezi in the Democratic Republic of Congo (DRC).

In 2013, the Kamoa project was heralded as the world’s largest, undeveloped, high-grade copper discovery, with Ivanhoe’s exploration team earning the Prospectors & Developers Association of Canada’s Thayer Lindsley International Discovery Award in 2015.

The award annually recognises an individual or a team of geologists credited with a recent significant mineral discovery or series of discoveries anywhere in the world.

Eight new holes were drilled at the Kakula discovery, revealing copper grades that are substantially richer, thicker and more consistent than other known mineralisation elsewhere on the Kamoa project.

Initial metallurgical test results from a sample of drill core from exploration drilling in the Kakula discovery zone achieved copper recoveries of 86% and produced a copper concentrate with an extremely high grade of 53% copper.

Robert Friedland, executive chairman of Ivanhoe Mines, said in a statement last week that the Kakula discovery is a complete game changer in our planning for the development of the Kamoa project.

“We believe that this new copper discovery is substantially richer, thicker and more consistent than other mineralisation that we have found elsewhere on the Kamoa project,” he said.

In December, Ivanhoe Mines and China’s Zijin Mining Group signed a landmark agreement where the latter would pay C$412 million (approximately R4.2 billion) for a 49.5% interest in Ivanhoe subsidiary Kamoa Holding Limited that presently owns 95% of the Kamoa project.

“This proves that there is confidence in the projects. Getting such a large Chinese investor speaks volumes of the value that their project has,” says EY’s Africa mining & metals leader Wickus Botha.

Platreef will also change the game

Meanwhile, Ivanhoe is developing South Africa’s first mechanised platinum mine through its subsidiary Ivanplats’ Platreef Project, which is set to become one of the world’s biggest and most profitable platinum mines.

Most platinum mines are located on the eastern and western limb of the bushveld complex. But it is the northern region, where Anglo American Platinum’s (Amplats) world class Mogalakwena mine is situated, that has the richest ore bodies.

“The Platreef project has been touted as a game changer because the ore body in that particular part of the northern limb is so thick that it lends itself to mechanisation,” says Botha

“People working on the Platreef mine are going to have very different jobs to typical mineworkers and the pay grade will be substantially higher.”

Although initial costs will be high, Botha says the savings in labour costs and vast improvements in safety will rank low on the cost curve compared to other platinum mines in the world. Initial estimates show the project has the highest concentration of base metals among Africa’s PGM-producers, with an estimated 42 million ounces of PGMs plus gold.

“Mogalakwena is an open-pit mine, but Platreef will be an underground mine, meaning it will be able to achieve the scale required to recoup the capital investment for a mechanised underground mine,” he says.

Impact on commodity fundamentals

What is concerning about the two projects is that such a vast injection of copper and platinum into what appears to be an already saturated market has the potential to depress prices even further than where they currently stand. But Botha does not think this will necessarily be a problem because both projects are still a long way from becoming operational.

Says Botha: “Ivanhoe’s view is that supply-demand mismatch is already starting to work itself out because most of the mining companies have taken the unprofitable ounces out of the system. Their mines will only operate at full scale in about ten years or so, so it is safe to assume that by the time the Platreef project comes on-stream, for example, the market fundamentals will be very different.”

Although Kamoa and the Kamushi project, a zinc and copper project also in the DRC, are both colossal mining projects, Botha supports Friedland’s view that demand for these commodities will rise as innovative uses for them are adopted more widely.

The Japanese automotive industry has set itself a target to have zero combustion engines on their roads by 2050, which means people will either have to use battery operated cars or hydrogen fuel cells, which require platinum.

And, although copper is mainly used for electrification and industrial use, it is increasingly going to be used in the medical industry because copper is a natural bacteria and germ killer. Similarly, zinc is a natural pesticide, and will see increased demand in line with the growth of agriculture in Africa.

Lastly, he feels there is a big difference between copper and platinum as the platinum market is much smaller, with a global market of 4 to 5 million ounces per year.

“Copper is a massive market, so bringing on another 400 000 tonnes is not necessarily going to sink the industry, but what it will do is put pressure on high-cost producers,” says Botha.

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