Ivanhoe Mines: A CEO’s view on the copper boom
Ivanhoe Mines Founder & Chairman Robert Friedland believes the Democratic Republic of Congo (DRC), the African nation now emerging from decades of conflict and corruption, holds the key to greening the global economy.
Ivanhoe Mines – Kamoa-Kakula
Ivanhoe’s Kamoa-Kakula venture began production last month and has the potential to become the world’s highest-grade major copper mine. Production started ahead of schedule with expected output of 80,000 to 95,000 tonnes of copper in concentrate this year and peak annual output of over 800,000 tonnes after several phases of expansion.
Energy transition needs copper
After scouring 59 countries over more than three decades, Canadian billionaire Robert Friedland says the Congo has the world’s best deposits of the metal used in everything from electric cars to solar panels and power grids.
Governments and companies are embracing electrification to wean the world off fossil fuels, but shortages of metals loom as a major bottleneck unless miners can crank up output at an unprecedented rate. Congolese deposits are taking the spotlight as growth in top supplier Chile slows amid deteriorating ore quality and huge investment burdens, reports Bloomberg.
“If we came from Mars and we were sent in our flying saucer to orbit the Earth to find copper, we would definitely go to Katanga in the southern part of the Democratic Republic of the Congo as the richest place on the planet for copper,” Friedland said in an interview.
Robert Friedland expects copper boom in DRC
While geologists have long known about Congo’s potential, exploration and extraction have been hampered by political instability and a lack of transparency and infrastructure.
Some deterrents linger. The need for power in particular is holding back development, said Paul Mabolia Yenga, head of the planning agency at Congo’s mining ministry. While the largest miners are building or renovating hydroelectric plants, dirty diesel generators are still the norm at many sites.
Legal security is also still an issue in the central African nation, with producers having to negotiate waivers on a ban on semi-processed copper exports. Companies including Glencore Plc, which runs two large copper and cobalt mines in Congo, have been pressing to amend a mining code that was revised in 2018 to boost the country’s share of industry profits.
Copper is the new oil
Robert Friedland’s Ivanhoe Mines is comfortable operating in Congo and “certain” of being able to ship concentrates until it builds a smelter, he said. The company’s Founder and Chairman - who made his fortune from a Canadian nickel project and was behind a massive copper-gold discovery in Mongolia - wants to turn the new DRC mine into one of the world’s largest and greenest.
With a nascent energy transformation making copper the new oil, he likens Congo to Saudi Arabia in the 1950s when the giant Ghawar oil field started. With a government focused on fighting corruption and poverty, money from China, the Middle East and Europe is coming in to a nation whose young, skilled population is anxious to lift up the country, Friedland said.
Copper supply gap looming
While more established copper jurisdictions such as Chile and Peru still command a greater share of mining investment, project development is accelerating faster in Congo, according to CRU Group.
“It’s not that the DRC has really reduced its country risk dramatically,” said Erik Heimlich, a Santiago-based copper analyst with the research firm. “Everywhere is becoming more complicated to develop projects so by comparison they look better.”
The enormous task of meeting supercharged copper demand in the coming decades means developing more of Congo’s mineral potential will be just a part of the solution. CRU estimates the industry will need to commit an additional $100bn to fill a supply gap of 5.9 million tons by 2031.
Copper supply growth in the 1990s and 2000s was centred around Latin America’s porphyry deposits mined at giant open pits like BHP Group’s Escondida in Chile. The tide is turning against such deposits as declining ore quality and the need to de-carbonize operations expose how much power and water mines use, Friedland said. Richer deposits in Congo can run at a much smaller scale using hydro power, limiting their carbon footprint.
“It’s not clear any longer, when global warming gas becomes a central indicia, that Chile is the obvious place to mine,” Friedland said. “Quite the contrary. The obvious place to mine is now the Congo.”
Ivanhoe Mines partnering with Zijin Mining Group
A push by politicians in Chile and Peru to take a bigger share of industry profits also challenges country-risk assumptions as Congo appears to welcome back investors. The presence of BlackRock and Fidelity on Ivanhoe’s shareholder register underscores the transparency of the Vancouver-based company’s Congo operations, he said.
Ivanhoe started churning out concentrates late last month at its Kamoa-Kakula venture with partners Zijin Mining Group Co. and the DRC government. A first phase is set to produce 200 000 tons a year. Eventually output could exceed 800,000 tons given the “ocean” of available mineral, as long as the operation gets enough hydroelectricity.
“Our geologists are very confident that, with continued exploration and given what we know about the district, it could be ten times bigger than what we see today,” Friedland said.
The discovery and development of such a large deposit by a relatively small company shows Congo’s mineral wealth is still untested and deserves more exploration, he said. “We need scores of discoveries at this scale if we are going to electrify the world economy.”
Robert Friedland predicts “revenge of the miners”
The industry must reinvent itself to gain the trust and participation of host nations, investors and the broader community to sustainably produce enough conductive metals for electrification, he said.
It’ll be a massive task after a period of low prices saw miners slash budgets to focus on balance sheets and dividends, leading to a dearth of discoveries. Projects are getting trickier and pricier to build and run amid rising environmental and social standards, and there’s general ignorance about where the building blocks of a carbon-neutral world will come from, Friedland said.
“The average person just doesn’t understand the scale of the implication for raw materials,” he said. “If you’re not just green washing, and you really mean it, then it is the revenge of the miners.”
Ivanhoe Mines copper set for China with Zijin, Citic deal
Ivanhoe Mines has inked significant deals with JV partner Zijin Mining and its subsidiary CITIC Metal to sell each 50% of the copper production from the recently launched first phase of its Kamoa-Kakula mine in the Democratic Republic of Congo (DRC)
The copper concentrate and blister copper off-take agreements will see wholly-owned Zijin unit Gold Mountains (H.K.) International Mining Co Ltd and CITIC Metal split the initial offtake from Kakula.
The DRC government has authorised exports to international markets and Ivanhoe has also announced a 10-year processing deal to utilise the DRC Lualuba smelter owned by CNMC.
CITIC Metal becomes Ivanhoe’s largest shareholder
Following a new share agreement, CITIC Metal will come to own 19.9% of Ivanhoe Mines’ issued and outstanding common shares when the placement is completed, establishing CITIC Metal as Ivanhoe’s largest single shareholder. Chairman and Founder Robert Friedland will be Ivanhoe’s second-largest shareholder, with over 17% shareholding.
Ivanhoe Mines intends to use the proceeds for the advancement of the company’s world-scale mine development projects in Southern Africa ─ Kamoa-Kakula, Platreef and Kipushi ─ and also for working capital and general corporate purposes.
CITIC Metal part of a bright future with Kamoa-Kakula’s potential to become the world’s highest-grade major copper mine
Friedland said the agreement with CITIC Metal is the culmination of a 15-year relationship between the leaderships of Ivanhoe Mines and CITIC.
“In 2003, the original Ivanhoe Mines was grappling with the challenge of developing its vast copper-gold discoveries at the Oyu Tolgoi Project in southern Mongolia. Following extensive discussions, Ivanhoe and CITIC established a strategic alliance to cooperatively pursue a number of selected common interests in metals production and related technologies.
“For some time now, the board of directors and senior management of today’s Ivanhoe Mines have been evaluating potential transactions that would combine the critical elements needed for Ivanhoe to advance the development of our exceptional assets that have been established in Southern Africa in recent years,” Friedland added.
“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. 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, creating value for Ivanhoe’s stakeholders in the DRC and South Africa, and our international shareholders.”