Released on Tuesday (November 28), the PEA examines three scenarios, looking at expanded production options of up to 12 million tonnes per annum, double the rate see in the previous December 2016 PEA.
Kamoa-Kakula, a joint venture between Ivanhoe, Zjin Mining Group (HKEX:2899) and the DRC government, has been named the world’s largest undeveloped high-grade copper discovery by Wood Mackenzie. With a production rate of 12 million tonnes per annum, the operation would rank among the world’s five largest copper mines.
“Kamoa-Kakula is, without a shadow of a doubt, the most disruptive tier one copper project in the world today,” said Ivanhoe Executive Chairman Robert Friedland on Tuesday.
The first PEA scenario analyzes the development of an initial 6-million-tonne-per-year mine at the Kakula discovery. The study estimates an average production rate of 246,000 tonnes of copper per year and up to 385,000 tonnes per year by the fourth year of operation. The option assumes an after-tax net NPV of $4.2 billion at an 8-percent discount rate, and an after-tax IRR of 36.2 percent.
The second scenario looks at an expanded two-mine development plan. This option would start with initial production from the Kakula mine to be followed by mining operations at the nearby Kansoko mine and the construction of a smelter. Under that plan, output would increase from 6 million tonnes per annum to 12 million tonnes, with average copper production of up to 542,000 tonnes per year.
“The 12 million-tonne-per-annum development scenario clearly shows the economic potential for a phased development plan for Kamoa-Kakula to become one of the largest copper mines in existence,” Friedland commented.
A third option that looks at a prefeasibility study for a 6-million-tonne-per-annum mine at Kansoko. For this option, an average copper production rate of up to 245,000 tonnes per year is estimated. It also assumes an after-tax NPV of $7.2 billion at an 8-percent discount rate, and an IRR of 33 percent.
Ivanhoe said it will continue to explore options to increase production at Kamoa-Kakula to 18 million tonnes per year and beyond. “We remain focused on unlocking the full potential of the Kamoa-Kakula copper district while expediting the development of the initial Kakula Mine,” Friedland added.
Raymond James analysts said that the market was already modeling a scenario close to the results of today’s PEA. The second development option seems to be the most likely, “as this scenario maximizes value from both areas of the project [Kakula and Kansoko] while providing optionality for further value enhancement,” they said.
On Tuesday, Ivanhoe’s share price was up 0.22 percent in Toronto at C$4.60. The company’s share price has been on an uptrend since January, and is up more than 80 percent year-to-date.
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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.