Ivanhoe taps Glencore for US$250M to start world-beating Kipushi early 

Ivanhoe Mines (TSX: IVN; US-OTC: IVPAF) says it has signed off-take and financing agreements with Glencore (LSE: GLEN) to restart the world’s highest grade zinc mine at Kipushi in the Democratic Republic of Congo next year.  

Glencore, the Switzerland-based miner and commodity trader, will take all of the mine’s zinc concentrate for five years and fund the operation with a US$250 million loan to be repaid by 2028, Ivanhoe said in a news release on Thursday. The mine near the Zambian border in far southern Haut-Katanga province has US$380 million in capital costs remaining, it said.  

“When Ivanhoe Mines acquired its interest in Kipushi almost 12 years ago, the mine was flooded and in a dilapidated state,” company executive co-chair Robert Friedland said in the release. “We are proud to see new, state-of-the-art mining equipment, operated by our Congolese employees, underground for the first time in three decades.” 

Kipushi, 68% owned by Ivanhoe and the rest held by state-owned Gécamines, plans to mine a global-leading 36% zinc over the first five years of production.  

The site, which produced from 1925 to 1993, is expected to yield 10.8 million tonnes of ore at an average head grade of 31.9% zinc over a 14-year mine life, generating 3.3 million tonnes of zinc metal in concentrate, according to a feasibility study last year.  

Andrew Mikitchook, a mining analyst for BMO Capital Markets, noted the agreements with Glencore matched previous statements from Ivanhoe and the project is ahead of schedule. 

“Detailed engineering is complete and procurement is 79% complete with all medium- and long-lead items ordered,” Mikitchook said in a note on Thursday. “Underground mining is also ahead of schedule, with first equipment deliveries achieved and horizontal development of 682 metres (30% above plan) in the first quarter.”  

Mining the Big Zinc deposit is planned to start in January, followed by the first concentrate deliveries in the third quarter, Ivanhoe said. The concentrator is to process 800,000 tonnes of ore a year for 437,000 tonnes of zinc concentrate annually at an average grade of 55% zinc. 

Operations so far have been funded by a US$661 million Kipushi shareholder loan. The company is also considering interim bank financing of up to US$80 million, it said.  

Vancouver-based Ivanhoe is working with Haut-Katanga to develop a dedicated commercial border crossing into Zambia at Kipushi to avoid shipping costs and congestion at Kasumbalesa and Sakania, 110 km and 230 km, respectively, by road to the southeast. A new portal would also help Ivanhoe’s Kamoa-Kakula copper mine about 350 km to the northwest and provincial capital Lubumbashi less than 20 km away. 

“We will also endeavour, with our partner Gécamines, to continue exploring Kipushi, including copper-rich and silver-rich zones,” Ivanhoe President Marna Cloete said in the release. “Kipushi soon will join Kamoa-Kakula as another tier-one production asset in our portfolio, and mark the next step as we execute our plan to emerge as the world’s newest diversified major mining company.” 

Ivanhoe shares rose by almost 2% in Thursday morning trading in Toronto to reach $12.18 apiece, in a 52-week window of $6.41 and $13.05, valuing the company at $14.8 billion.