Ivanhoe Hires Bankers for Review of DR Congo Copper Projects

POSTED ON August 18, 2014 BY Travis McPherson
CATEGORY Ivanhoe Mines, Stories,

Friedland and co at Kipushi (Photo: Govind Friedland)

There has been a lot of discussion from both Ivanhoe Mines (IVN:TSX) and the investing community about what the best course of action is for the company given the fact they have three world-class assets in their portfolio but are only getting valued as if they had one (if that).

This morning, Ivanhoe announced that they have formally engaged BMO Capital Markets and Morgan Stanley as financial advisers to conduct a strategic review of the Kamoa and Kipushi projects in Congo.

In May, Robert Friedland hinted that the company he owns hundreds of millions of shares of was open to and currently was undergoing a strategic review process for their assets. These could include a sale (or partial sale) or spinout of an asset or assets, joint venture partners and/or financing alternatives.

The company said in the release this morning that the initial focus would be to get introductions to strategic investors and/or joint venture partners on the projects, but would also be looking at all of the options.

Recall, Ivanhoe has the Platreef platinum deposit in South Africa which was funded at a project value of $3 billion by a Japanese consortium of investors. The deposit is the thickest and richest platinum deposit discovered in recent times with a 24 metre ore body at an average grade of over 2.00 g/t PGMs.

Kipushi hosts one of the richest copper-zinc deposits in the world with grades in excess of 15% and 60% copper and zinc, respectively. It was, historically, one of the most prolific copper mines in the world for most of the last century. It is estimated that it mined over 60 million tonnes grading 11% zinc and 7% copper between 1924 and 1993.

The Kamoa exploration camp (Image: Ivanhoe Mines)

Kamoa was a grassroots discovery made by the Ivanhoe team and currently hosts a massive 36.9 billion pound Indicated resource at an average grade of 3.04% copper (using a 2% copper cut-off grade). The project is estimated to produce 300Kt of copper annually but would cost $1.4 billion to put into production (according to the most recent PEA).

Critics are concerned with the huge capital spend necessary for each of the projects and the dilution that often comes along with that. A strategic or joint venture partner would alleviate a lot of that concern.

The company is trading at a $1 billion market cap with over $100 million in cash remaining from the Japanese investment and the recently closed $169 million equity investment.

As with any of these types of reviews, there is no timeline offered. That said, given the size and quality of these assets I would imagine it wouldn't take long to drum up interest.

Read: Ivanhoe appoints financial advisers for strategic review of its Kamoa and Kipushi projects

Disclosure: I am long Ivanhoe and am therefore biased. This is not investment advice. Always do your own due diligence.

Travis McPherson

trav@ceo.ca

Travis McPherson

trav@ceo.ca

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