Kakula discovery a potential ‘game changer’ for Kamoa

VANCOUVER — The latest drilling by Ivanhoe Mines (TSX: IVN; US-OTC: IVPAF) at the Kakula target — 5 km southeast of its large Kamoa copper deposit, being codeveloped with Chinese partner Zijin Mining Group in the Democratic Republic of the Congo (DRC) — is unveiling what Ivanhoe says could be “Africa’s most significant copper discovery.”

Exploration drilling at Kakula has outlined what appears to be a blanket of high-grade copper mineralization more than 3 km long, at 350 metres depth. Intercepts within two drill holes spaced 2 km apart have returned 6.8 metres of 7.5% copper and 10.3 metres of 6.9% copper, assuming a 2.5% copper cut-off.

Ivanhoe says the Kakula discovery is “substantially richer, thicker and more consistent than other known mineralization elsewhere on the Kamoa project,” and that it is “a complete game-changer in our planning for the development of Kamoa.”

A recently installed ventilation system for excavation of twin tunnels that extend more than 130 metres from the box cut since May, at Ivanhoe Mines’ Kamoa copper project. Credit: Ivanhoe Mines.

The partners have increased the current drill program by another 9,000 metres to 34,000 metres, using seven rigs. The first resource estimate for Kakula is due later next month, at which time the partners would work on Kakula’s preliminary economic assessment.

Ivanhoe’s technical team is contemplating a box cut at Kakula to accommodate decline ramps that would provide underground access into the deposit.

“It’s the richest thing we’ve ever seen, and it will stand as our best discovery,” Ivanhoe executive chairman Robert Friedland said during a presentation at the Sprott Natural Resource Symposium in Vancouver in July, before the most recent assay results.

Meanwhile at Kamoa, 25 km west of the town of Kolwezi, twin declines into the deposit’s initial mining area at Kansoko Sud are progressing ahead of schedule, and the company expects to reach the orebody at 150 metres deep by early 2017.

One of the seven drill rigs operating at Ivanhoe Mines’ Kakula copper prospect in the Democratic Republic of the Congo. Credit: Ivanhoe Mines.

Ivanhoe plans to mine Kansoko’s 71.9 million probable tonnes at 3.9% copper, or 5.1 billion lb. copper — using a 1% cut-off — for the next 24 years at 3 million tonnes per annum.

But that’s little compared to the 52.9 billion lb. copper in the rest of the sediment-hosted copper deposit.

Kamoa’s indicated and inferred resources — which are based on 400- and 800-metre drill centres — stand at 752 million indicated tonnes of 2.7% copper and 190 million inferred tonnes of 2.1% copper, using a 1% total copper cut-off grade.

Zijin acquired 49.5% of Ivanhoe’s 95% stake in Kamoa for US$412 million, and the partners are negotiating a 15% interest transfer in Kamoa to the DRC government.

Maps of the Kakula discovery Aaea. Drill-hole location plan for the Kakula Area shows holes completed and in progress, superimposed on 1% composite grade thickness contours. Credit: Ivanhoe Mines.

Platreef

In South Africa at Ivanhoe’s 64%-owned Platreef platinum group metals project, 280 km northeast of Johannesburg, early mine construction is also progressing. In July, the company sunk the first shaft into the deposit, and expects to reach the shaft’s final 1 km depth by 2018.

The project would operate at 4 million tonnes per year during the first phase. Ivanhoe has a plan to double that rate in a second phase, reaching 12 million tonnes per year in phase three.

“Nobody at the mines will lift anything heavier than a pencil. They’ll be in air-conditioned cabs and everything will be mechanized,” Friedland said. “If we put a WiFi system underground we can run the entire mine with one 19-year-old boy or girl on an iPad. In the future, underground mines will be completely mechanized and robotic.”

Platreef hosts 214 million indicated tonnes grading 4.1 grams per tonne platinum, palladium, gold and rhodium (4PE), 0.3% nickel and 0.2% copper, as well as 415 million inferred tonnes at 3.54 grams 4PE, 0.3% nickel and 0.2% copper, using a 2-gram 4PE cut-off.

The rest of Platreef is owned by a local black-empowerment group (26%) and a Japanese consortium (10%).

In the DRC, the company is also advancing its Kipushi zinc-copper project and historic mine, 30 km southwest of Lubumbashi, with 32% joint-venture partner Gecamines, a state-owned mining company.

The sub-vertical orebody occurs in the same rock belt that hosts the region’s sediment-hosted copper and cobalt occurrences. But unlike the sediment-hosted deposits, where copper precipitated out of migrating groundwater and into sedimentary horizons, Kipushi formed due to high-fluid flow along a pipe-shaped fault or karst breccia.

The deposit hosts measured and indicated resources of 10.2 million tonnes of 34.9% zinc and 0.7% copper, and inferred resources of 1.9 million tonnes of 28.2% zinc and 1.2% copper.

In May, Ivanhoe released a preliminary economic assessment for redeveloping the mine, which was placed on care and maintenance in 1993. The report envisages a 530,000-tonne zinc concentrate per annum underground operation, over a 10-year mine life, which would rank it among the world’s major zinc mines.

Based on the PEA, the project has a US$533-million post-tax net present value at an 8% discount rate, and a 31% internal rate of return.

Friedland foresees a deficit in the zinc market this year, largely due to MMG’s Century zinc mine closure in Australia, Vedanta Resources’ Lisheen mine closure in Ireland and Glencore’s cuts to its zinc operations.

Massive chalcocite mineralization at a depth of 619 metres in hole DD1041 at Ivanhoe Mines and Zijin Mining Group’s Kakula copper project in the Democratic Republic of the Congo. Credit: Ivanhoe Mines.

During his presentation, Friedland flipped between photos of Wall Street in 1900 and 1913. In the first, the street is populated with horse and buggies, and in the latter, it’s packed with motor vehicles.

His point was to demonstrate how quickly disruptive technologies can transform demand and “change the world.” He says the era of gasoline-powered vehicles is coming to a close, and it will require a “huge amount of metal” to make the transformation.

“Your typical car has 55 lb. copper, a Toyota Prius has 110 lb. copper and an electric car uses 165 lb. copper,” he said. “That’s a huge amount of metal under your feet.”

Extra weight also comes from an electric vehicle’s lithium-ion batteries, which include lesser amounts of cobalt and spherical graphite. (An all-electric Tesla Model S weighs 2,108 kg, compared to a gasoline-powered V6 Toyota Camry’s curb weight of 1,551 kg.)

In hydrogen-powered cars, in contrast, fuel cells use platinum as a catalyst to split hydrogen fuel into ions and electrons.

Other disruptive technologies include wind turbines, solar panels and even drones — all of which require copper and platinum group metals to function.

Friedland drew attention to air pollution, which he called “a tremendous problem,” especially in China. “A huge source of it comes from vehicles, so we need to retool the auto industry — and that has massive implications on what we’re going to mine and how we’re going to mine it,” he said.

“We’re in a position now where the central banks have exhausted monetary policy, interest rates have gone to zero pretty much everywhere — in many countries they’ve gone negative — so the next great wave is fiscal policy,” he said. “Governments are going to engage in deficit spending again, and they need a rationale to that, and that will be to clean the air.”