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Ivanhoe sells China's Zijin a stake in its Kamoa project in the DR Congo

Last updated: 00:27 27 May 2015 AEST, First published: 05:27 27 May 2015 AEST

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The project faced construction costs of about US$1.4 billion and in the absence of realistic financing option, Ivanhoe looked for partners

Shares of Ivanhoe (TSE:IVN) soared almost 10 percent today as the copper miner sold a 49.5% stake of Kamoa Holdings, which owns the majority of the Kamoa copper project in the Democratic Republic of Congo’s Katanga province to China’s Zijin for US$412 million in cash.

The project faced construction costs of about US$1.4 billion and in the absence of realistic financing option, Ivanhoe looked for partners, reaching a deal with the Chinese Hong Kong listed mining giant with a citalization of US$10 billion.

Under the deal terms, Zijin will pay half of the total upon closing, following up with five successive tranches, each every 3.5 months after the closing date.

Ivanhoe will benefit as Zijin now has inherited the task of securing financing for two thirds of the Kamoa’s total construction cost. The Chinese would gain control of the Project, should it choose to exercise its option to buy an additional one percent stake.

“This agreement with Zijin, one of the world’s most accomplished miners, is further confirmation of Kamoa’s distinction as one of the most significant, undeveloped mineral discoveries of our age and charts a course for the realization of significant benefits for all of Ivanhoe’s and Zijin’s stakeholders as well as the Congolese people,” said Ivanhoe’s chairman, Robert Friedland in a statement.

In April, Zijin, which also acquired a major stake in a Barrick Gold operated project in Papua New Guinea today, acquired a 9.9 per cent stake in Ivanhoe itself for US$105 million inevitably leading to its interests in Africa, where Chinese companies have accumulated considerable experience.

China is has become Africa’s biggest source of direct investment and its capital is now making it possible for companies from all over the world to complete costly projects.

In March, Zijin bought a 9.9 percent stake in Toronto-listed Ivanhoe Mines (TSE:IVN) for about C$105 million, becoming a major stakeholder in the base metals company.

Ivanhoe has been seeking Chinese collaboration for some time and Zijin is one of China’s largest gold, copper and zinc producers, among other minerals.

Last February, Ivanhoe said it had discovered a major new deep sulphide mineralization harboring zinc, copper and pyrite thick over 60 m in the Kipushi mine, located close to the Kamoa project.  Ivanhoe Mines owns 68% of Kipushi while Gecamines owns 32%.

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