Ivanhoe boosts Kakula resource, receives final payment from Zijin

Ivanhoe Mines’ (TSX: IVN; US-OTC: IVPAF) 75% increase in indicated resources at its high-grade Kakula discovery in the Democratic Republic of the Congo has prompted the company’s executive chairman, Robert Friedland, to predict that “the potential exists to find another Kakula, or perhaps something even better.”

With 12 rigs drilling at Kakula and Kakula West and another two rigs about to test targets on the licence area, Kakula is “an international story of discovery that has earned the mining world’s attention,” Friedland said in a prepared statement.

Kakula remains open in multiple directions, its grades are higher than the average grades found at Ivanhoe’s nearby Kamoa discovery and nearly 200 sq. km of the 400 sq. km Kamoa-Kakula project remain untested.

The updated resource estimate, released on May 17, covers a 7.7 km strike length along the eastern section of the Kakula discovery and boosts the indicated resource by 50 million tonnes to 116 million tonnes grading 6.1% copper at a 3% cut-off grade (15.6 billion contained lb. copper). This compares to 66 million tonnes grading 6.59% copper in the October 2016 estimate. The project’s inferred resource at the same cut-off grade adds 12 million tonnes at 4.45% copper (1.1 billion contained lb. copper).

The 75% increase in indicated tonnes exceeded the expectations of Canaccord Genuity’s Tony Lesiak, who had predicted a 40–50% increase. The mining analyst raised his target price on the stock from $6.50 per share to $7 per share.

“While the increase is impressive, we anticipate further resource growth,” Lesiak says in a research note. “The resource is now defined over a 7.7 km strike length (from 4.1 km). But drill results announced earlier this year have extended the known mineralization trend to 12 km, with the boundary not yet defined along strike in both directions.”

Since making the Kakula discovery in April 2016, more than 85,000 metres of drilling have been completed — 25,000 metres of which were drilled since Jan. 1.

The latest resource update is based on results from 121 drill holes (61,400 metres). The October 2016 resource was based on 65 drill holes (24,000 metres).

Ivanhoe notes that Kakula already has enough resources grading 6% copper or higher for a 20-year mine life at 6 million tonnes a year, and the company’s management team is confident that Kakula West, 3 km west of the new Kakula resource boundary, “has similar potential.”

Ivanhoe says Kakula West is emerging as another shallow, high-grade discovery. In March, the company announced that a step-out hole drilled 3 km west of the boundary of Kakula’s inferred resource intersected a 16.3-metre zone of typical Kakula-style, chalcocite-rich copper mineralization similar to holes drilled in the eastern part of the Kakula deposit. The discovery hole returned an 8.9-metre intercept grading 5.83% copper at a 2.5% cut-off.

Subsequent drilling around the discovery hole extended the mineralized zone at Kakula West to more than 1 km and 850 metres wide. The zone is still open in many directions. Three of the company’s 12 rigs are drilling in the Kakula West discovery area.

Five other rigs are extending the western limit of the Kakula resource area, another two are drilling expansion holes in the southeast and the others will drill infill holes between Kakula West and the Kakula deposit.

The company’s geologists have examined the structural and stratigraphic controls on mineralization of the broader Kamoa-Kakula basin and have at least nine targets in the untested areas that will be drilled this year.

Kakula is 10 km southwest of the Kansoko mine development at Kamoa. Ivanhoe found Kamoa in 2009 and is completing twin declines at the Kansoko mine. Kamoa is also open for expansion. Kamoa has an indicated resource of 752 million tonnes grading 2.67% copper and an inferred resource of 185 million tonnes grading 2.08% copper.

Together, Kamoa and Kakula rank as one of the five largest copper deposits in the world.

On May 23, Ivanhoe received the fifth and final US$41.2-million installment from its Chinese partner, the Zijin Mining Group. Zijin committed US$412 million as part of a strategic co-development agreement, under which Zijin acquired 49.5% of Ivanhoe’s majority stake in Kamoa Holding Limited. Kamoa Holding has an indirect 80% interest in the Kamoa-Kakula project.

After a partnership agreement with the DRC government in November 2016, Ivanhoe and Zijin Mining each hold an indirect 39.6% interest in the project, while Crystal River Global Ltd. holds an indirect 0.8% interest, and the DRC government a direct 20% interest.