Louis Watum, Managing Director, Ivanhoe Mines DRC Operations

MACIG Connect Series

Ivanhoe Mines describe the challenges and opportunities facing international investors in the DRC.

Could you please give us some insight into Ivanhoe Minesstrategy for success in DRC and what we should expect from the company in 2018?

Ivanhoe Mines has been in DRC for over 10 years now, and exploration has been a main activity. Thanks to an exceptionally talented and disciplined team of geologists the Kamoa copper deposit was discovered by Ivanhoe Mines in 2008. Later in early 2016, Ivanhoe Mines discovered the Kakula deposit approximately 10 km south-west of the Kamoa deposit, making the combined discoveries together to be ranked the world’s largest, undeveloped, high-grade copper discovery ever made. We are now exploring Kakula West, which is also very promising in terms of its near-surface source of high-grade copper mineralization that could be incorporated into the early years of the Kamoa-Kakula mine plan.

We remain focused in expediting the development of the initial Kakula mine whilst unlocking the full potential of the Kamoa-Kakula copper district. We have already sank twin declines to reach the ore at Kansoko mine at our initial Kamoa copper discovery and are now fast tracking the development of Kakula mine with sinking of twin declines currently underway, pre-feasibility study in progress, and surface infrastructure construction due to start in 2018.

How does Ivanhoe Mines mitigate the risks of exploring in a country with a risk profile like the DRC to find something as successful as Kamoa?

Discovering significant deposits like Kamoa is not something that happens by itself; there are several necessary ingredients that need to be combined in order to discover something of this magnitude. Firstly, the mining code introduced in 2002 allowed investors to feel secure in investing in the country since the fiscal regime was straightforward and had built-in stability clauses extending over a 10 year period.  Given the natural mineral endowment of the country money was therefore naturally rolling in because it felt like a safe environment for investors in search of good returns. Secondly, the political stability over the past 15 years created a platform where FDI started coming into the country across all sectors of the economy. Finally, it really comes down to the work done by our amazing geologists under the leadership of Robert Friedland and Lars-Eric Johansson. Even the most sophisticated exploration techniques like airborne or satellite ones cannot possibly beat the talents of a great geologist that has the feel for a good spot of land.

Mine-access declines at the Kakula box cut that’s continuing to advance toward the high-grade copper resources for the planned Kakula Mine. Courtesy of Ivanhoe Mines.

 

What sort of expectations do you have for the new mining code coming out soon?

In the early 90’s the DRC managed to produce almost half a million tonnes of copper in a single year. Then through bad choices we destroyed the industry completely, producing a mere 20,000 tonnes of copper per annum. Today, 15 years after the mining code was put in place, we are producing over one million tonnes of Copper per annum. There is no country on this Earth that has ever accomplished such a dramatic turn around so quickly. However, where we are now is exactly the same scenario as we were in during the early 90’s before the collapse of our mining industry. We can either choose to implement the right policies and take Congo to the next level, or do the opposite and completely destroy our industry again. We need to strongly caution our country decision makers to look at the real challenges to be addressed, which are preventing our mining industry to create and distribute wealth to all stakeholders more effectively: Poor infrastructure, energy deficit, and lack of good governance. The current mining code clauses which helped attract much needed investment in the country over the past 15 years should not be tampered with, instead the government should build sufficient institutional capacity to manage the implementation of the current mining code more effectively.

What is Ivanhoe Mines doing to help with the energy initiatives in DRC?

Congo is suffering from a deficit of power. Ivanhoe Mines has defined its needs in terms of power and has entered into a partnership with DRC’s state-owned power company, La Société Nationale d’Electricité (SNEL), to eventually overhaul and boost output from three of its hydropower plants. The hydropower rehabilitation project is being conducted by engineering firm Stucky of Lausanne, Switzerland, under the direction of Ivanhoe Mines and its joint-venture partner, Zijin Mining Group, in conjunction with the DRC’s state-owned power company, La Société Nationale d’Electricité (SNEL).

Ongoing upgrading work at SNEL’s Mwadingusha hydropower plant has almost tripled the plant’s interim power output from 11 to 32 megawatts (MW). This represents 45% of the plant’s designed capacity.

Once fully reconditioned, the three plants (Mwadingusha, Koni and Nzilo respectively) will have installed capacity of approximately 200 MW of electricity from the national grid, which is expected to be more than sufficient for the Kamoa-Kakula copper project.

What is Ivanhoe’s strategy concerning CSR in the DRC?

We are firstly coming from a position of understanding that most people are frustrated with the lack of follow-through from many mining projects where companies have promised so much and severely under-delivered. What we do is firstly sit with the communities to discuss and understand their needs then, together with them, rank their needs in priority before managing the implementation of the relevant community development programs.

It is highly unusual by industry standards that, despite being in the early exploration and engineering phases of a project, Ivanhoe and our partner Zijin are proud to be leading by example and have invested heavily in community development initiatives. Our joint efforts include the “KNOW FOR SURE” anti-malaria campaign utilizing revolutionary technology developed by Fio Corporation of Toronto, Canada. Other initiatives include fish and chicken farming, agricultural projects, and the construction of schools, roads and power infrastructure.

What final message would you send to international investors about opportunities in the DRC mining sector?

We have learned one key thing while working in the Congo: the biggest risk in doing business here is not political, it is instead failing to put together a competent local team who understands the complexity of DRC business environment and has the capability to effectively execute your business plan. I like to use the example of a plane encountering turbulence; there are two good reasons why this plane will not go down despite the turbulence encountered: When it has a competent flying crew which is equivalent to your competent local management team, and good engines which are equivalent to the robustness of your business model. If you have a solid business model in DRC, that can really sustain the different cycles of mining and, with a competent local management team able to execute your business plan, you will sail through any turbulence in Congo. The decision to invest in DRC is binary: After you’ve calculated your investment risk and profitability you are either in or you are not. You do not come to DR Congo just to test the waters, you must instead be fully committed and prepared for the long haul.

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