The announcement was made by Ivanhoe Mines executive chairman Robert Friedland and CEO Lars-Eric Johansson.
Under terms of agreements signed in Xiamen, Zijin, through its subsidiary, Gold Mountains (H.K.) International Mining Company, will buy a 49.5% share interest in Kamoa Holding, an Ivanhoe subsidiary that presently owns 95% of the Kamoa project, for an aggregate consideration of US$412 million.
Ivanhoe has further agreed to sell 1% of its share interest in Kamoa Holding to Crystal River Global for US$8.32 million – which Crystal River will pay through a non-interest-bearing, 10-year promissory note. Crystal River is a private company incorporated in the British Virgin Islands but operated in Hong Kong and controlled by So Hon Chun who has a long involvement with Ivanhoe Capital Corporation and Zijn.
Zijin also has committed to use its best efforts to arrange or procure project financing for 65% of the capital required to develop the first phase of the Kamoa project, as set out in the feasibility study.
Upon the successful arrangement or procurement of project financing, Zijin will have the right to acquire Crystal River’s 1% share interest in Kamoa Holding within seven years of a completed feasibility study.
In addition, since 65% of the pre-production capital required to develop the first phase of the Kamoa project – as described in the feasibility study – is to be funded through project financing, the balance of 35% of the required capital will be funded pro rata by the shareholders. Therefore, Zijin and Ivanhoe each effectively will be required to fund 17.5% of the remaining first phase development costs.
Following Zijin’s exercise of the 1% option, Zijin will be entitled to negotiate an off-take agreement, on commercial, arm’s-length terms acceptable to Ivanhoe, to acquire up to that portion of the total production from the Kamoa Project attributable to Kamoa Holding for at least the term of the project financing.
“This agreement with Zijin, one of the world’s most accomplished miners, is further confirmation of Kamoa’s distinction as one of the most significant, undeveloped mineral discoveries of our age and charts a course for the realisation of significant benefits for all of Ivanhoe’s and Zijin’s stakeholders as well as the Congolese people. Together with the Congolese government and Zijin, we aim to meet the expectations of the Congolese people and our stakeholders in Katanga as we proceed to build a world-class, new copper mine,” says Friedland.
Kamoa positioned to become one of the world’s largest copper mines
The 2013 Kamoa preliminary economic assessment (PEA) reflects a two-phased approach to development of the project. The first phase of mining considered in the PEA would target high-grade copper mineralisation from shallow, underground resources to produce approximately 100 000 tpa of contained copper in a high-value concentrate. The Kamoa PEA estimated that the pre-production capital required for Kamoa’s first phase of development would be approximately US$1.4 billion. To date, Ivanhoe has invested approximately US$337 million in equity capital in discovering and developing the Kamoa project.
The proposed second phase would entail a major expansion of the mine and mill, and construction of a smelter to produce approximately 300 000 t of blister copper each year.