KINSHASA—Ivanhoe chairman Robert Friedland, and CEO Lars-Eric Johansson reiterated a statement issued on June 9 reconfirming Ivanhoe’s commitment to finalize an agreement for the sale of a further 15% in the company’s Kamoa Copper Project to the government of the Democratic Republic of Congo.
An announcement issued yesterday by the D.R. Congo’s Minister of Mines and Minister of Portfolio stated that any sale of up to 15% in Kamoa Copper SA, the entity that holds the Kamoa Copper Project exploitation permits, or mining licences, to the Congolese State would dilute China-based Zijin Mining Group’s future interest in the project. The company says this is correct and is understood by both Zijin and Ivanhoe, which have acknowledged the expected future dilution in their agreement announced on May 26, 2015. Both Zijin and Ivanhoe would be diluted pro rata by any sale of a further interest of up to 15% in Kamoa Copper SA as their interests would be held through Kamoa Holding Limited, which that currently owns 95% of Kamoa Copper SA, and accordingly that entity’s interest in Kamoa Copper SA would be reduced as a result of an increased DRC State interest. The government already is aware of this provision.
The communication also suggested that a due diligence review be performed of Kamoa Copper SA. Ivanhoe does not believe that such a review is warranted, and should not delay the closing of its proposed transaction with Zijin. Ivanhoe previously obtained legal advice to confirm that no consent to the transaction with Zijin is required under Congolese law.
Ivanhoe remains committed to finalizing negotiations for the proposed sale of up to a further 15% interest in Kamoa Copper SA to the Congolese State. During a recent series of meetings, a senior Ivanhoe Mines team, led by Johansson, made a number of proposals to senior representatives of the DRC government regarding the proposed sale. Ivanhoe is awaiting a response to those proposals. While the recent meetings also discussed Zijin’s planned investment in the Kamoa Project, the two transactions are separate matters and Ivanhoe’s legal advice confirms that there is no basis for delaying the Zijin transaction pending settlement of the increased DRC State interest in Kamoa Copper SA.
The D.R. Congo government has held a 5% free-carried interest in Kamoa Copper SA since 2012 in full accordance with provisions of the country’s 2002 official mining law. Transfer of the 5% interest immediately followed the government’s granting of the Kamoa exploitation licences and represents the only legally required transfer of interest to the government under the mining law. On May 26, Ivanhoe announced that China-based Zijin Mining Group intended to invest in the development of the planned Kamoa mine by buying a 49.5% share interest in Kamoa Holding Limited. Zijin has pledged to use its best efforts to arrange project financing for Kamoa’s first phase. Ivanhoe previously has stated that the proposed transaction with Zijin is not expected to close until, on or about, July 31 this year.
Mr. Friedland said that the company’s internationally acknowledged discovery, which was announced in 2009, established the Kamoa district as an extension of the Central African Copperbelt. The discovery was a culmination of six years of government-licensed exploration activity in D.R. Congo by Ivanhoe subsidiary, Kamoa Copper SA. More than US$330 million has been invested to date by Ivanhoe and Kamoa Copper in Kamoa’s exploration and mine planning. In September 2012, the D.R. Congo government granted the necessary exploitation permits, or mining licences, for Ivanhoe’s development of the Kamoa Project, as provided by the official mining law.