Abstract
That is my analysis on ivanhoe mines and the copper play. report did get a bit longer then i anticipated. english is my second language and that i do have dyslexia so there are in all probability a whole lot of spellings errors.
i do maintain a stake earlier than i wrote this up so there is perhaps biased and it is best to do your personal analysis.
Fundamentals
each market has a couple of particular methods to worth the business these are some fundamental for mining companys.
an enormous mistake is to worth the pure reserves. not all mining companys do discover the whole area they personal and go away the mine so known as open ended. because of this on 1 or all sides the reserves maintain going and that there’s a minimum of a bit extra resoureces there. an organization that holds an open ended mine would due to this fact come out loads decrease then an organization that has their full landpackage in examine. this might be achieved to protected cash. they’ve the information to construct the mine and dont wish to spend some huge cash and time on one thing they will do after the mine is construct.
mine life is an imporant metric it tells you the way lengthy the mine will function a mine firm that has much less then 10 years has an issue. much less then 20 years (earlier than operatiing ) isnt an actual investable mine. constructing a brand new mine from scratch may take as much as a decade if you’re fortunate. 20 years+ a minimum of earlier than you make an funding ensures that you simply dont have to fret about quick time period worth swings. the resell worth of the mine can also be excessive.
mine grade is a % of how a lot is copper and the way a lot is waste. the upper the grade the decrease the price of working (most occasions) and the cleaner the mine is. a 1%+ is seen as excessive grade for copper however it’s completely different for each metallic. decrease then 0,5 you dont wish to put any cash on increased then 2% is realy good.
Roi or IRR is the preferd metric to worth investments. since mining can require excessive investments the amouth of property dont matter. a ten billion mine may produce much less copper then a 5 billion one and the 5 billion one may additionally make extra revenue.
npv issues loads too however an organization can current many NPV the latest one will apply the most effective but when a mine ends open ended like some it is best to absorb account that it might be upgraded.
Copper Market
ivanhoe mines principally function within the copper business which is a market set for progress. for EV’s they want 4x the amouth of copper and most electrifications wants much more copper.
the market must develop from 24.000ktpa to 40.000ktpa in 2040 to make the EV revolution occur and hit internet zero. the possibility of hitting 40.000ktpa is low since a mine improvement can take a very long time. there must be round 16.000kpta of recent manufacturing.
For the world to succeed in internet zero a whole lot of new copper manufacturing is required to come back on-line and besides africa i dont consider any continent has the potential to do what it takes.
per continent primarily based manufacturing
South america
Sout america is the biggest producer of copper with chile en peru alone producing 35%+ of world provide.
south america runs in to large points with the manufacturing they’ve already. as the most important producer they’re going to have a tough time maintaing these numbers.
south america has an a whole lot of socialist management comming up which isnt unhealthy however it these regimes principally concentrate on getting in essentially the most taxes for the goverment insted of rising manufacturing.
it’s a lot more durable to draw new investmenst with increased revenue taxes and different new types of taxations.
The brand new points that do appear to be forming within the continent like droughts, protest and environmental points. (copper mines do have a large influence on the native enviroment)
The underdeveloped locations in south america are principally the amazon rainforrest and another locations with uncommon animales or protected space’s.
los andes is a mining space with a big assets physique with virtually 30 years of mine life which can’t be developed since a endangerd animal lifes there. (the corporate proudly owning this mine does wish to develop it however it’s famous at an excessive low cost for it stage in improvement)
Africa
africa holds the reply to a significant a part of the brand new provide however it has a significant concern
the most important lately construct mine Kamoa kakula wanted 25 years to get from exploration to manufacturing and it’s nonetheless partly underneath improvement for one more 7 years. simply constructing these enormous mines takes a decade by it self.
since africa is giant and underdeveloped it takes an extended time to construct a mine. these mines are construct in the course of no the place and essentially the most fundamental assets like power and staff lack. companys typically want to coach lokals construct their very own power companys and generally construct cities.
The african envirment makes both discovery or manufacturing laborious. since heavy rainfall makes it laborious to do drill work and different exploration work and for the reason that dry components of africa lack water infrastructure they would wish to discover a protected provide since mining prices a whole lot of water.
Africa can resolve the problem however it requires a whole lot of time and inside 18 years i dont see the continent make up the whole shortfall however amouth of it’s doable if companys would make investments loads.
it’s form of logical that the majority nations in africa are going to try to get many of the income doable from these mines insted of worrying in regards to the manufacturing numbers which is what the west wants.
in africa there’s a rebellion in a brand new manner of doing enterprise the place countrys dont export any uncooked supplies anymore and wish the refinery’s to come back to africa. it’s a great way for africa to get a whole lot of jobs to come back over and it does make africa much more intressting for investments.
North america-Europa
north america isnt but a big producer however does have the potential to be
there have been some main discovery’s in america however america appear to have a problem with the not in my backjard mentality. a significant discovery and mine mission on sacred lands of the natives is in a regulatory limbo proper now. the mine ought to have produced 400ktpa however it would possibly or may not undergo. it’s authorized however the natives are protesting it heavly.
america holds main potenial for developemnt and can in all probability develop to turn into a bigger participant however to fill within the demand hole is unlikley since each mine goes to get a good amouth of disadvantage.
arizona and utah especialy have had some huge discovery’s however not but a big sufficient to make a dent within the concern.
canada does maintain a whole lot of potential to get a wealthy mining business in copper however it doenst but excist. most canadian firm’s uncover copper else the place. there are some very wealthy mines in canada with excessive grades.
to fill the hole of copper demand north america can be the most effective place to search for because it already has many of the wanted infrastructure however we havent but seen the push for it.
Europa does have the not in my backjard mentality aside from spain who has a wealthy and lengthy histroy however it doenst have the capability or the abilty to make it a large influence on the availability aspect of copper.
Asia
Asia has a really sophisticated copper market.
china does have some manufacturing of copper however the mines are laborious to confirm a whole lot of demand comes from china and chinees firm are aggressively investing oversees in africa especialy.
russia has the potential for an giant business however sanctions make it laborious to develop discovery’s or develop mines and even proceed to run them. an organization that focusses on the russian copper and gold business has a tough time with export and insted wish to go for kazachistan
iran runs in to the identical concern with sanctions and there largest mine needs to be run with a whole lot of miltary pressure and there’s a lot of potenial but no firm is keen to take these dangers. a mine there lately claimed to have twice the amouth of ores for instance.
the middel east has the potential for nice copper discovery’s however there hasnt been a whole lot of exploration but. so uncertain when or if we see giant improvement. saudi arabia has began to do some license gross sales for litium seeminly wanting to construct an non oil business with assets they usually do have the cash to start out this up.
indonesia does have a wealthy mining advanced with 2 giant mines however these are in laborious to extra locations and took a long time to simply develop however they’ve the abilty to operated for many years.
india and kazachistan even have some respectable manufacturing however there arent any intressting discovery’s or improvement underway.
asia may see a lower in manufacturing or a rise however i dont consider the abilty to take up a big portion of the availability hole is there.
oceania.
austrialia is doing fairly good with an energetic mining business being able to develop. many of the miners do have the exploration packages and capital to develop (goverment help can also be avalable).
australia doesnt realy have an giant mine in its nation and many of the mining business are smaller and low mine life mines which doesnt make it a resiliant business if costs get realy low.
australia doesnt realy have a whole lot of the posh’s that different continents have. reserves are loads decrease then in mines in different nation’s and the grades are low. they do have a terrific federal coverage to assist new mining companys begin up and provides giant mining permits.
the assets base of australia isnt ok to assist the world out.
Pricing
We have now seen a worth spike in litium. litium can also be an ev metallic however has 2 enormous negatives that copper doesnt and why a worth spike in copper can be extra sustainble.
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litium isnt uncommon in any respect and there’s extra then sufficient of it
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litium might be changed by different metals.
even with these 2 enormous flaws litium is standing at file costs and virtually each mission can get a 100% return if it may be introduced on-line.
some mines are already operating at a loss or near a loss so the monetary incentive to get on-line a bunch of copper continues to be abcent which makes a future excessive worth extremely possible.
Goldman sachs did ship out a goal for 7,5$ copper worth spike which might make ever copper miner an amzing funding however a particular goal cant be made for sure.
A 5$ copper worth would make the market extremely profitble and that i do consider we’re going to so see that worth earlier than the top of the last decade.
Conclusion
To hit 16.000ktpa there would should be a whole lot of improvement in africa and america which arent likley to construct a whole lot of mines quick for each their very own causes.
it’s unlikley that inside a short while body we’re in a position to hit these goal with out a extreem incentive to take action which might be a really likley probability to get a copper bull run.
Ivanhoe mines
Ivanhoe mines is a mining firm in africa. The corporate holds 1 working mine 2 in improvement and a pair of intressting exploration performs. all of the property of the corporate are world class mines. sturdy administration and a robust long run imaginative and prescient.
The property.
Ivanhoe’s 2 greatest mines are kamoa kakula and platreef they’re the principle worth drivers of the corporate. they maintain to exploration patches subsequent to those mines. the third mine is kipushi which is extra a redevelopment and can be principally previous over to the congolese govement.
Kamoa kakula.
The mine is working proper now however it’s nonetheless in improvement. it produces 400ktpa however after improvement it ought to produce round 800ktpa. there are already developemnts to extend manufacturing additional. for instance a debottle necking progamme would enhance manufacturing from 400ktpa to 450ktpa. the roi of the mine is round 50%.
the mine operates at 5% grade which is an extreem excessive grade for a mine. with escondida (the biggest copper mine on the earth) producing round 0,6-0,7%. this comes with the benefit that even when price have gone up they nonetheless produce for round 1,45 per pound (copper worth round 3,80). it additionally makes them in a position to produce with virtually no emmisions. the mine may also run till the top of the 2050’s and the plan ends with the corporate nonetheless producing 3% which makes it possible that manufacturing might be extended. since there’s a important amouth of undiscoverd land proper subsequent to the north a part of kamoa and in addition round half of the land remained untested. additionally on many components of the mine the ore physique ends open so that they havent discovered the top of the advanced.
https://ivanhoemines.com/website/property/information/5080/kakula-2.jpg
The low break even costs will ensure that the mine will preform nicely when the worth is low. they do have a progamme to decrease price even additional. in a couple of methods.
The largest of them is their very own refinery. most of their price is delivery and smelting. delivery price can be lower in half and the refinery would scale back different firm revenue margins since congo has decrease labour and power costs. the refinery can also be excessive qualty refinery and goes to be one of many greatest in congo.
the refinery can save the corporate round 18-28 cents since delivery price realy got here down it might be loads much less. however on the peak the funding would save 308.000.000 (120 mil for ivanhoe) in delivery price alone. refinery’s revenue margins additionally peaked lately so it will save a bit there 2 however delivery would save essentially the most.
the corporate can also be busy with constructing greater roads for the reason that mine is so huge it created a far lengthy site visitors cease and check the infrastructure of hte congo. which isnt unhealthy if congo compelled to construct extra roads it is going to be good for the whole nation.
the kamoa- kakula mining advanced is price round 14 billion after tax on 3,5 copper worth. excluding additional exploration of the land and the 2023 manufacturing enhance. (8% discounted).
ivanhoe mines owns 40% of the advanced. 5,6 billion can be the worth for ivanhoe.
Platreef
the platreef advanced continues to be in improvement and will begin manufacturing in 2024. the advanced holds many various metals like platium palladium, copper, gold, nickel and rhodium. the mine is positioned in south africa.
the plans offers the mine a lifetime of 20 years however there’s sufficient ore to make the mine being operated for round a century with a big portion of the land not but being discoverd makes additional improvement doable.
https://ivanhoemines.com/website/property/information/1906/image008-20160511070520.638×0-is-pid1510.png
the mine nonetheless has a whole lot of land to check and there’s a good probability that there are higher ores within the south as you may see why on later footage.
the roi is round 20% which is loads decrease then kamoa-kakula however nonetheless above common for different mines. (the costs taken to get the 20% are decrease then costs are proper now so roi might be a bit increased relying on how a lot inflation takes a quantity on prices)
there arent but plans to develop the open space however after 2024 there can be a whole lot of cashflow left over for the reason that greatest investments have been and each property is producing.
the most effective a part of the mining advanced is south of the mine i’ll later share a picture that will clarify why. this half is excluded from the NPV.
the worth of platreef mining mission change loads primarily based on costs however the spot costs of at the moment would make the mine price 4,1 billion greenback
ivanhoe mines owns 64% of this mine or 2,6 billion. that doenst seem like loads however the a big portion of the advanced is excluded from this so excessive probability that it will look loads higher sooner or later.
Kipishu
kipishu is an outdated mining advanced within the congo. the mine will get redeveloped after which ivanhoe mines will move over stakes within the mine to the congolese goverment untill the they maintain a stake of 20%. it’s nonetheless one of many highest grade mines on the earth especialy in zinc.
the switch of stakes is partly primarily based on time after which the amouth of ores mined.
Manufacturing ought to begin in 2024 q1.
https://ivanhoemines.com/website/property/information/3593/worlds_top_20_zinc_projects-_by_contained_zinc.602×0-is-pid1514.png
the mine is a really excessive grade mine and the assets received an improve lately making the mission much more intresting. the mine will produce excessive grade zinc.
the mine goes to provide a bunch of metals. the advanced maintain zinc, copper silver and germanium. Ivanhoe doesnt maintain any exploration rights subsequent to kipishu so there wont be any progress for a brand new mine.
the mine is predicted to run for 14 years which sounds quick however there hasnt been achieved a whole lot of exploration and that is additionally across the time ivanhoe solely holds 20% stake in kipishu. The roi and irr are extreemly excessive for the reason that investments that must be made are low as a result of there’s already a mine there. I couldnt discover an up to date irr however primarily based on 20% decrease zinc costs and loads decrease manufacturing it’s round 40%. the manufacturing price is round 0,65.
ivanhoe is aloud to mine 12 million tons of zinc (different metals excluded) earlier than passing the mine up.
the NPV could be very laborious to search out since it is just primarily based on zinc. however at these costs however that alone can be 2,64 billion (excluding the opposite metals there)
ivanhoe maintain 68%. which is price round 1,8 billion
The npv’s mixed makes 10 billion however like i stated these are discounted. on assets, manufacturing and worth already.
Exploration
Ivanhoe mines additionally has 2 giant and excessive qualty exploration performs with the possibility to out prefom one among their already developed mines being moderately excessive.
Platreef
ivanhoe lately aquired the èxploration permits subsequent to platreef
https://ivanhoemines.com/website/property/information/5667/1.801×0-is.png
https://ivanhoemines.com/website/property/information/5667/2.638×0-is.png
like i stated earlier for this reason the soutern a part of platreef mine is much more intresting. that space has remained untested aswell. the brand new half can also be higher then platreef mine (probably) which makes a really intressting guess.
the brand new space can also be loads bigger then the already aquired mine part. there’s a good probability that there are assets right here and that they’re loads higher then the mine underdevelopment.
i’d speculate that ivanhoe mines waited with testing the south a part of the already aquired space till they might recieve the brand new rights. since it will draw a whole lot of eyes on the mission and competitors for this allow.
since ivanhoe now holds 100% of the brand new space a big discovery can be much more benfitial to ivanhoe mines then platreef already.
that is hypothesis and till examined nothing is certain however the potential remians nice.
Westernforeland
round Kamoa-kakula ivanhoe holds 2400km2 of land with already 2 discovery. which is perhaps pretty much as good or higher then kamoa. ivanhoe maintain round 90-100% of those land rights. relying on the precise allow.
kamoa kakula is round 400km2 which exhibits how giant this space is i cant discover a full image of it however this may do.
https://ivanhoemines.com/website/property/information/5080/kakula-2.jpg
many of the land cant match on the image however it’s 6x the dimensions of the kamoa kakula. ivanhoe has determined to concentrate on drilling in 2020. for the reason that kamoa mine has been on-line ivanhoe has achieved a whole lot of drilling and we are able to anticipate comparatively quickly some outcomes. (perhaps subsequent yr). a mine right here would make ivanhoe mines a big participant like freeport.
ivanhoe is nearly completed with the whole airial exploration of the land package deal which makes drilling much more enticing.
we’re already conscious that there are small packages of copper proper on the border of western foreland.
1 kamoa-kakula mine on the western foreland package deal would Dubbel ivanhoe’s NPV and hopefully marketcap aswell.
that is the latest drilling
https://ivanhoemines.com/website/property/information/4165/2019-03-14-western-foreland4.jpg
it exhibits an 4,5-1,5 km (6,75km2) copper discover of excessive grade copper. the kamoa kakula mining is round 77km2. that is nonetheless open ended that signifies that at no aspect the top of the copper physique has been discovered and it retains going. proper now a whole lot of drilling is taken place however for positive you may solely say 6,75km2 is discovered.
kamoa kakula ends in 1,73% grade of copper and makoko ends (openended they’re drilling the sting’s proper now ) at 4,88% the possibility that this goes on could be very excessive and a excessive qualty mine might be constructed right here
Steadiness sheet.
Ivanhoe maintain 649million in debt and did get authorized for a brand new mortgage lately for the platreef mine.
Ivanhoe has 663 million of money so the corporate has a internet money reserve at this level.
The operting cashflow is round 364 YTD from the kamoa kakula enterprise. anullized the working cashflow is 19x market cap. which isnt low cost however subsequent yr a 12,5% manufacturing progress needs to be reached and the corporate already develop manufacturing 90% this yr (Q1vsQ3)
so working cashflow doesnt symbolize the corporate nicely at this level.
Ivanhoe wants a robust steadiness sheet within the quick time period since they wish to develop manufacturing and put money into the corporate.
Prior to now ivanhoe had to surrender stakes of their initiatives to get the mines underdevelopment. since they’re profitble they will develop them themselfs.
Why ivanhoe mines?
Since i talked in regards to the copper play generally and the corporate why would you decide ivanhoe mines over different firm’s.
since demand for copper goes to develop over a very long time and costs aren’t predicitble within the quick time period you’ll need an organization that may wait round for costs to rise. ivanhoe has with their lengthy mine life the most effective potential.
congo and south africa deal generally with increased mine life higher high quality reserves and a better ROI and ivanhoe maintain essentially the most intressting exploration permits and mines within the nation which makes them an already intressting play.
ivanhoe has operated in congo over 2,5 a long time with none main points . growing in an underdeveloped nation just like the congo and construct a mine out of no the place is already an incredible accomplishment. this provides a whole lot of belief for them do to it once more.
The exploration permits may not sound that good however any firm that aquires permits subsequent to an incredible mine with the identical knowledge they’ve already can be famous for a premium of what they payed for it. It’s realy probably the greatest exploration property you could possibly get i’m not realy in a position to phrase it in a manner that makes it pretty much as good as it’s and be sensible in regards to the probability of there not being a mine there sooner or later which is feasible.
A tremendous excessive qualty assets base, low price mines, steadiness sheet, sturdy administration, Excessive roi/IRR and a robust exploration package deal. make the corporate set for progress and excessive income for a very long time.
the corporate is barely undervalued since NPV come at 10billion and the market cap sits at 9,6billion which is a 4% low cost. (they already had been discounted on reserves of kamoa kakula kipishu and platreef, kamoa kakula manufacturing, the whole a part of non zinc kipishu , the worth of copper and the whole exploration package deal). this makes the corporate low cost.
Ivanhoe maintain what’s an wonderfull firm for a good worth.
Although it’s heavly discounted the worth continues to be honest since different mining firm are in all probability cheaper should you hand over on high quality. I moderately lower my danger as a lot as doable and the corporate presents a whole lot of upside for comparatively no danger (excluding the geopolitcal danger).
a wonderfull firm means to me that the corporate has superb property, good steadiness sheet, good administration and a transparent technique for progress. there is no such thing as a different firm that has the standard that ivanhoe has. so that you do personal probably the greatest mining firm’s within the business. virtually no firm can produce as low cost as ivanhoe can with the identical long run minelife and measurement.
The technique
The technique of Ivanhoe mines is completely different then different mines who have a look at quick time period demand or quick paybacks. focus is totally on returing capital to shareholders.
Ivanhoe’s focus is on essentially the most intressting ore bodys and exploration permits. this might trigger a geopoltical concern since the most effective locations appear to get a whole lot of political points.
the mines must have a protracted mine life ,excessive ore grade and a low break even worth. ivanhoe needs to provide the long run demand and wish to reinvest income in to new mines. ESG can also be an vital issue
The excessive mine life mines dont appear to be an enormous factor for too many buyers within the copper market however should you have a look at the biggest gamers. BHP rio tinto and Freeport all of them maintain stakes in mines with 70 yr+ mine lifes. the big gamers all have been construct of the backs of 1 or 2 lengthy mine life mines.
The journalist articel.
lately there was an articel positioned on ivanhoe about corruption within the congo. The articel made the inventory worth take successful.
the articel has been largely debunked. it’s a couple of corrupt goverment offical and ivanhoe mines doing a deal about an exploration package deal. the deal hasnt been signed by the corrupt polition and ivanhoe is i nonetheless making an attempt to amass that land package deal via the goverment with out the officail gaining a stake for the reason that allow continues to be a top quality landpackage.
there was a suggestion of a fee however after a yr there hasnt been any proof but and the workplace already received raided final yr with none outcomes.
there isnt but aligation and never but any authorized trubble however share worth did take a major hit.
CMMC
I feel that each time i have a look at an funding it’s nice to maintain observe of a loser of the business an organization that both failed or went bankrupt that might be used as a case to be taught from.
CMMC is that firm.
they’ve a working mine in canada however the break even worth went far above the copper worth it even went above the ATH of copper.
the corporate has offered their most intressting facet their exploration.
their exploration package deal was realy good with an discovery on it for a big mine and a nonetheless undiscoverd package deal proper subsequent to it. it wasnt a realy excessive qualty package deal like ivanhoe has however nonetheless respectable for his or her market cap.
the exploration and their mission received offered for 230 mil if i’m not mistaken. which might come right down to about 1 yr of revenue after the primary mine was construct.
it wanst offered realy low cost however they’re an empty shell of what the corporate was and their isnt motive to put money into them proper now since there isnt any doable quick time period progress or mid time period progress.
Disclaimer
I do consider this firm to be excessive qualty and i’m very intressted on this enterprise myself. I received the corporate advisable to take a look at by somebody contained in the business and been in love with the enterprise ever since.
i’d recommendation you to examine the enterprise out your self and perform some research or within the copper promote it self. ALWAYS DYOR.
You probably have any spelling errors simply point out it to me and i’ll recheck
