On Wednesday, Ivanhoe Mines reported production for the first quarter of this year. The Kamoa-Kakula copper complex in the Democratic Republic of Congo, which it co-owns with Zijin Mining, mined about 2.06 million tons of ore in the first quarter and produced 86,203 tons of copper, down from 93,603 tons in the same period last year and a 7.9% decline in quarterly production.
As one of the world's top copper mining projects, Kamoa-Kakula copper mine has 43.12 million tons of copper resources, with an average grade of 2.54% (data from Zijin Mining website). Zijin Mining holds 44.98% of its interest (including 13.59% of Ivanhoe Mines through indirect shareholding by Ivanhoe Mines) and is the largest interest holder of the mine.
As for the Kamoa-Kakula copper mine, the reason for the decline in production is mainly attributed to the Democratic Republic of Congo (DRC) power grid problems and low-grade ore. Ivanhoe Mines said that in the first quarter of this year, the Congo (DRC) rainy season received more rainfall than last year, and the rainfall caused the Congo (DRC) river water level to rise, causing debris to block the water intake that supplies the Inga hydroelectric dam complex, adding to the instability of the power grid. Meanwhile, the Kamoa-Kakula mine's average feed grade in the first quarter was 4.8%, also lower than the 5.4% in the first quarter of 2023.
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Kamoa-kakula produced a total of 394,000 tonnes of copper in 2023, 18% more than in 2022. According to the plan, Kamoa-Kakula 2024 fine mineral copper guidance target of 440,000 to 490,000 tons, although the opening in 2024 is not smooth, but it is worth noting that the current Kamoa-Kakula copper mine Phase III plant expansion has been completed 92%, is expected to put into production from the end of the second quarter to May, Kamoa-kakula's combined design capacity will increase to 14.2 million tons/year and copper production is expected to increase to more than 600,000 tons/year in the first 10 years, making Kamoa-Kakula the third largest copper mine in the world and the largest in Africa. In this view, the full-year copper concentrate guidance target for 2024 May not be difficult to achieve.
Zijin Mining said that in the future, Kamoa-Kakula production capacity will be increased to 19.2 million tons of ore per year, will become the world's second largest copper production mine, with an annual output of more than 800,000 tons of copper.
As the main mine of Zijin Mining and Ivanhoe Mines, and the main source of copper in the future, Kamoa-Kakula mine's power supply may also have to go up several steps to match the stable operation and production of the mine. The good news is that mines are also actively ensuring a stable power supply.
In December 2023, the DRC state power company SNEL and Ivanhoe Mines Congo Energy, a subsidiary of Kamoa Holdings Limited, signed an amendment to the existing financing agreement, increasing the total loan to $450 million, which will be used exclusively for the upgrading of grid infrastructure. Including capacity additions to the grid between Inga and Coluvezi.
In addition, Kamoa Copper is planning to expand the backup power supply system at the mine. The standby capacity expansion plan is being implemented in phases from the current 48 MW to over 200 MW. In addition, talks to bring in 30 megawatts of electricity from Zambia's grid have been agreed and transmission will soon begin. In the long term, electricity will be transmitted from outside Zambia, adding up to 100 megawatts of power.
Copper prices have continued to rise in recent days, with LME copper futures, the global benchmark, jumping to their highest level in 14 months. Meanwhile, early signs of a return to growth in the global manufacturing sector have revived hopes among commodity traders that tighter market conditions amid a rebound in global manufacturing could help push copper prices to new highs.
In the case of Goldman Sachs, its analysts pointed out in a research note that copper will suffer a supply deficit of 250,000 tons in the second quarter, 450,000 tons in the second half of 2024, and copper will rise to $10,000 per ton by the end of the year. Goldman Sachs analysis pointed out that, on the one hand, China's demand has recovered strongly, and copper demand in the first quarter is expected to increase by 12% year-on-year, which will greatly improve copper demand. On the other hand, copper supply continues to be disrupted. Morgan Stanley said in its latest report that it expects copper prices to rise to $10,500 / ton by the fourth quarter of 2024, compared with the current LME copper price of about $9,260.
In the face of sharp price fluctuations, ensuring the supply of copper resources is crucial to the safety and stability of the industrial chain. Happily, such as overseas equity mines Kamoa - Kakula, TFM&KFM copper and cobalt mine, Milado copper mine, Las Bambas copper mine, etc., as well as domestic Yulong copper mine, Yulong copper mine, etc., China's voice in the upstream of the copper industry chain is becoming more and more important.
