CITIC buys 19.9% of Ivanhoe

CITIC Metal, subsidiary of Chinese company CITIC, will acquire a 19.9% stake in Ivanhoe Mines (TSX: IVN; US-OTC: IVPAF), making it the company’s largest single shareholder. The companies signed the agreement on June 11 in Beijing.

Ivanhoe shares rose 2¢ on the news to $3.37, but had tumbled to $2.83 by the end of the trading week. 

Ivanhoe will issue CITIC 196 million shares at $3.68 per share for a private placement valued at $723 million. Ivanhoe will use the proceeds to advance its three sub-Saharan African projects: the Kamoa-Kakula copper project, the Platreef platinum-rich polymetallic project and the historic Kipushi zinc-copper project.

CITIC will provide Ivanhoe a nine-month, interim, US$100-million loan with a 6% interest rate. Ivanhoe will have the loan within a month, and may choose to repay it with part of the private-placement proceeds.

Geotechnical engineer Ayakha Mbongonya in Shaft 1 at Ivanhoe Mines’ Platreef PGM-nickel-copper-gold project in South Africa. Credit: Ivanhoe Mines.

Ivanhoe executive chair and founder Robert Friedland, who owns more than 17% of Ivanhoe, will become the company’s second-largest shareholder.

The deal entitles 9.9% Ivanhoe owner Zijin Mining to exercise its non-dilution rights through a private placement, which could net Ivanhoe as much as another $78 million.

“A fundamental, qualifying condition has been that any new partner must be complementary to our established partners, Zijin and the Japanese consortium led by Itochu Corporation,” Friedland said in a prepared statement. “We are confident that CITIC Metal shares our vision and has the experience and financial resources to help us advance our three projects to production.”

Portals for twin declines at Ivanhoe Mines and Zijin Mining’s Kakula copper project in the Democratic Republic of the Congo. Credit: Ivanhoe Mines.

Friedland went on to say CITIC’s investment validated the quality of Ivanhoe’s assets.

Said Sun Yufeng, president of CITIC Metal, “Mr. Friedland is a respected friend of CITIC and through this strategic investment we are delighted to become a partner in Ivanhoe’s projects. CITIC Metal and Ivanhoe are truly complementary to one another. This cooperation will result in a win-win scenario.”

Closing the deal entitles CITIC Metal the right to nominate two members to Ivanhoe’s board, one of whom will likely be Sun Yufeng. He would also become co-chairman of Ivanhoe with Friedland. Both CITIC and Friedland have agreed not to increase their ownership in Ivanhoe until January 2022.

CITIC Metal also agreed to try to arrange financing for the first phase of development of Kamoa-Kakula.

The project is a joint venture between Ivanhoe, Zijin and the government of Democratic Republic of the Congo located in the central African copper belt, 25 km west of the town of Kolwezi. Ivanhoe tabled several different mine development scenarios in 2017’s Kakula preliminary economic assessment and Kamoa pre-feasibility study.

As of a February 26 resource update, the Kakula deposit contains 585 million indicated tonnes grading 2.92% copper for 37.7 billion lb. copper as well as 113 million inferred tonnes at 1.9% copper for 4.7 billion lb. copper, all at a 1% copper cut-off grade.

In total, Kamoa-Kakula contains 1.34 billion indicated tonnes grading 2.72% copper for 80.7 billion lb. copper and 315 million inferred tonnes grading 1.87% copper for 13 billion lb. copper.

In May, Ivanhoe secured enough local, treated bulk water to cover most of the first phase of production at Platreef. According to the agreement signed by the company on May 3, the Mogalakwena local municipality will supply Ivanhoe with at least 5 million litres of water a day for 32 years, beginning in 2022, from the town of Mokopane’s new Masodi Treatment Works.

According to a 2017 feasibility study, a 4-million-tonne-per-year, first phase of production would require 7.5 million litres of bulk water per day. The company expects to collect the remaining water from local boreholes and rainwater-storage ponds that would be built at the mine.

Drilling at the Kamoa deposit, part of Ivanhoe Mines’ Kamoa-Kakula copper project in the Democratic Republic of the Congo. Credit: Ivanhoe Mines.

The company sunk Platreef’s Shaft 1 to 750 metres below surface in mid-April and is currently building Shaft 2.

Later in May, the company installed a primary crusher 1,150 metres below surface at its historic Kipushi underground mine. The crusher has a maximum capacity of 1,085 tonnes an hour.

The company said installing the crusher marked the major infrastructure upgrade needed to resume mining at Kipushi. Ivanhoe expects to finish a feasibility study at Kipushi by year-end. The project has 10.2 million measured and indicated tonnes grading 34.9% zinc, 0.65% copper, 0.96% lead, 19 grams silver and 51 grams germanium for 7.83 billion lb. zinc, 144 million lb. copper, 216.4 million lb. lead, 6.22 million oz. silver and 16.71 million oz. germanium.

Ivanhoe says it will update its Kipushi resource estimate by the end of June. Its shares are trading at $2.97 apiece within a 52-week range of $2.50 to $5.05. The company has a $2.35-billion market capitalization.