Ivanhoe Mines Ltd (IVPAF)

[JB3729]

From Stockhouse: Portion of the 11/28 conference call. Robert Friedland speaking. The conference call has been archived for later playback until December 12, 2016 and may be accessed by dialling [phone] or 1-800-408-3053 and entering the passcode 4305756.


Kipushi

On Financing:

I think we can just tell you that great mines always get financed.  That's rule number one.  And I can also make the editorial observation that the wind is very clearly now at our backs.  We used to be developing these assets with the wind blowing in our face.  So we now have a favourable tail wind, to say the least.  In fact, earlier today copper nearly touched $6,000 a tonne in London, and we don't think the rally's over yet.  So it's fair to say, as we've said in the past, that we have been approached by numerous — primarily financial — investors, as well as international industry participants in all of our assets.  So a lot of the capital cost to put Kipushi in production has already been borne; every day we're effectively putting the mine back in production.  When we rebuild the winders and the shafts and the skips and the Maryannes and the underground development, we are essentially going ahead with the capital to redevelop the mine.  So when we give you a new pre-feasibility study in the second quarter of 2017 we do expect the capital cost to be lower than it was a year or two ago by virtue of the fact that we are developing the mine now!  It's essentially being redeveloped now.

On Corporate Activity:

So far as our alternatives are concerned, as we've indicated publicly in the past, they range from bankers and investors interested in us taking Kipushi public as a pure play on zinc, which could be done with or without our partner, Gecamines, through a joint venture, or a joint public listing with other parties, or do an outright and complete sale.  If our shareholders think that that is an attractive thing to do we might go in that direction.  We don't negotiate against ourselves in the media, and we don't negotiate in public.  All we can tell you is that we are feeling better about our condition in the industry and in the evolution of these assets than we have ever felt in a twenty year period.  We have never been as strong as we are today, and we've never felt that we had as many suitors that would like to marry us as we have this evening.  So I'll just leave it at that.  Thank you.

On Developments in the Zinc Market:

We've also seen a very significant reduction in transportation costs.  So there's clearly a panic for zinc concentrate by the smelters.  That's definitely the case, since we've had an incredible decline in the costs [treatment charges].  We've also seen an incredibly significant reduction in transport costs.  So all the factors are now at the moment quite beneficial, with higher metals prices, greater interest from industry and financial people, and reduced treatment and transportation costs.  So I hope you keep tuned to the second quarter of 2017 when the Big Zinc will nearly be back in production.

On Progress at the Big Zinc:

You can go up there and literally kiss the Big Zinc.  When we bought the asset the mine was flooded, and the Big Zinc was sort of like the Loch Ness Monster: some people claimed to have seen it many times, but it was definitely under water.  Now you can go down there and kiss Loch Ness Monster any time you like.  We think an 80-metre-thick ore body with 35% zinc — with all the other metals, 42 or 43% equivalent — speaks for itself.

On Capital Savings:

We do think the capital cost is coming down.  And how far is it coming down?  Well, the more the better, actually.  But as the price of the metal skyrockets - last time I checked it's up 70% since January 1 — we are less and less sensitive to capital costs.  So we are looking at extremely attractive rates of return.  Now, how good is extreme?  Well, we'll let you know at the end of the second quarter when the numbers are independently audited.

On a Production Decision: 

I think we've already made the decision to put the richest zinc deposit in the world into production.  It's just that we can't give you the parameters around that decision without announcing an independent study.  We've spoken to Chinese players who've said, "why are you even bothering to do a feasibility study on the richest zinc mine in the world?!"  It's by definition richer than the other zinc deposits by a very wide margin, so by definition, it should be more economic, given that the capital has already been sunk.  This is a brownfields restart, not a greenfields development.  I think Kipushi is an asset that is not really understood by the mining industry.  I think that the continued drilling down-dip, the scale of the potential resource, and the unique geologic setting reminds me of what Dr Murray Hinzman told me.  Dr Hinzman is the head of the geology department at the Colorado School of Mines, and he made the remark that he thought that "the crack in the earth at Kipushi is the richest crack in the earth, period, full stop."  It rivals any ore in the world.  It's a lot more valuable per tonne than Voisey's Bay was, and you can go down and touch it.

Kamoa-Kakula

On Capital Commitments:

There are no particular capital commitments in our agreement with the Congolese government.  There is no reference to the capital commitments.  We are the owner of the licence.  We have all the rights, environmental rights and approvals, to go ahead and develop the mine, but we are not subject to any particular schedule or capital commitments.  Of course, we want to develop a historically important groundbreaking mine as quickly as we can do so safely and efficaciously.

On Exploration Opportunities:

We hold about a 460 square kilometer mining licence, which holds essentially a perpetual mining right.  Everything developed on that licence would be subject to this new agreement with the Congolese government and in fact with Zijin, our current partner.  Outside of that area we hold a lot of very important proprietary geological information about where there very well might be additional Kamoas or Kakulas.  However, all of that work would be only for our own account, subject to the government's interest of 5% under the 1912 mining law.  So we do have a broad regional interest in exploration which would be held totally by Ivanhoe Mines and would not involve our joint venture with Zijin or in fact this new agreement with the Congolese government.  And in future I hope we can tell you more good news about where we hope to find more Kakulas.

On Financing:

We see no issue in procuring debt finance in China, let alone from other international sources.  The highest grade copper mine in the world always gets financed.

On Kansoko Sud vs. Kakula:

The declines in both cases are production declines.  And there's nothing to say you can't mine 4 million tonnes a year at Kakula, and also mine 1 or 2 million tonnes a year of much higher-grade ore out of Kansoko Sud.  They can both supplement each other.  They're both giant resources.  It's just that the very best is the enemy of what used to be the very best, but is no longer the very best.  It's in the miserable nature of our business that the best ore always is supposed to get to the concentrator first.  It's a nice, elegant problem to have.
 
On Kakula Resource Estimation:
 
When we announced the first estimate it was already obsolete by the time we announced it.

On the Current Drill Programme:

We're running about five rigs to the rain.  We have been doing some step-out drilling, particularly to the north-west, and I think I can tell you that we will probably be updating the Kakula resource for many years.  For many years.  Geologically it's open in many directions, and there may be more Kakulas to come!!!

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