Kakula hit drives up Ivanhoe shares

A new step-out hole has doubled the strike length of the copper-rich mineralized system at the Kakula deposit in the Democratic Republic of the Congo, Ivanhoe Mines (TSX: IVN; US-OTC: IVPAF) says, and the company is mobilizing up to five drill rigs to fast-track exploration at its new Kakula West discovery.

Ivanhoe says hole 1124 has extended the length of the Kakula mineralized trend to 10.1 km — twice the length of the 5.5 km strike length the company reported at the end of January — and the deposit remains open for expansion.

The unassayed hole was drilled 5.4 km west of Kakula’s current inferred resource, and 4.1 km west of the last drill hole with returned assays — 1093. This hole, whose assays were announced on Jan. 23, intersected 11.1 metres (true width) of 5.8% copper at a 3% copper cut-off, beginning at 993 metres downhole.

Hole 1124 penetrated the zone closer to surface. It intersected a relatively shallow, 16.3-metre zone of typical Kakula-style, chalcocite-rich copper mineralization, beginning at 422 metres downhole (410 metres below surface), similar to holes drilled in the centre of the Kakula deposit, Ivanhoe says.

Robert Friedland, Ivanhoe’s founder and executive chairman, said in a press release that “in the mining exploration business, the very idea that a crew would drill a step-out hole almost 4 km away from the last known mineralization is virtually unheard of … the remarkable success with 1124 is further validation of our team’s judgment and expertise.”

The Kakula discovery is “vastly larger and more important than it was last year, when Kamoa-Kakula was independently ranked among the 10 largest copper deposits in the world,” Friedland said. “The resource estimate that we announced for Kakula last October only covers 40% of the defined 10.1 km strike length of Kakula’s mineralized trend.”

News of the stepout hole sent Ivanhoe’s shares up 9.3%, or 40¢, to $4.70 per share, with 9.1 million shares traded.

Andrew Mikitchook, a metals and mining analyst at BMO Capital Markets in Toronto, noted that mineralization in the hole “is interpreted to have intersected the top of an antiform,” and that there are two takeaways from the Kakula West discovery.

Drillers at Ivanhoe Mines’ Kamoa copper project in the Democratic Republic of the Congo. Credit: Ivanhoe Mines.

First, he says, it means there is “potential for another mining centre” that would “allow substantially increasing overall throughput and, in turn, would increase net present values,” and second, the drill hole suggests there is “potential for more Kakula-style discoveries.”

In a research note, Mikitchook wrote that “Ivanhoe’s geologists are clearly increasing their understanding of the Kakula system, and, more importantly, where to look for more,”

Mikitchook has a price target on the company of $7 per share.

The Kamoa-Kakula project is a joint venture between Ivanhoe, China’s Zijin Mining and the DRC government. It lies near the mining centre of Kolwezi on the Central African Copperbelt.

Kakula is the second major discovery on Ivanhoe’s Kamoa mining licence and is described as a gently dipping blanket of thick, chalcocite-rich copper mineralization. Initial mine development is planned to focus on the flat, near-surface mineralized section, which, along the deposit’s axis, has mineralized zones ranging between 7.1 metres and 11.7 metres thick, and grading between 8.1% and 10.3% copper, at a 3% copper cut-off grade.

In January, the company reported that 200 sq. km of the 400 sq. km Kamoa-Kakula project area remained untested. It also said that it expects to complete a resource estimate for Kakula in the second quarter of 2017.

The first resource on Kakula, completed in October 2016, and based on 24,000 metres of drilling in 65 holes, delineated 66 million tonnes grading 6.6% copper in the indicated category and 27 million tonnes of 5.3% copper in the inferred. The estimate used a 3% copper cut-off grade.

The addition of Kakula boosted the combined Kamoa-Kakula indicated resource to 944 million tonnes of 2.8% copper, and the inferred resource to 286 million tonnes of 2.3% copper at a 1% cut-off grade.