Entering text into the input field will update the search result below

Ivanhoe's Kamoa-Kakula Now Bigger Than Grasberg, But The Political Risks Weigh On The Share Price


  • The Kamoa-Kakula resources have grown notably.
  • Some new targets will be drilled in 2018.
  • The new mining code is still the biggest problem.
  • The short-term price development is questionable, due to the political situation.

This week, Ivanhoe Mines (OTCQX:IVPAF) announced the results of the updated resource estimate for its world-class Kamoa-Kakula deposit. The resource has increased significantly, which is not surprising as various drill results from the Kakula area reported in 2017 indicated that the update should be very positive. The Kamoa-Kakula project has successfully surpassed the Indonesian Grasberg mine operated by Freeport-McMoRan (FCX) and is officially the 4th largest copper deposit right now. As the deposit is still open in several directions, there is a good chance that it will climb even higher.

At a 1% cut-off grade, Kakula contains indicated resources of 37.7 billion lb, at a copper grade of 2.92% and inferred resources of 4.7 billion lb copper, at a 1.9% copper grade. At a 3% cut-off grade, it is 21.5 billion lb and 0.7 billion lb copper, at copper grades of 5.62% and 3.66% respectively. The exceptionality of the Kakula discovery is further underlined by the fact that even at an extremely high cut-off grade of 7%, the indicated resources contain 7.3 billion lb copper, at a copper grade of whopping 8.07%.

When comparing the May 2017 and February 2018 resource estimates (chart below), the total volume of contained copper has increased notably. At a 1% copper cut-off grade, Ivanhoe was able to add 12.8 billion lb copper of indicated and 1.7 billion lb copper of inferred resources. It means an increase of 51.4% and 56.7% respectively. The indicated resources experienced a respectable growth also at the 3% and 7% copper cut-off grades.

Source: own processing, using data of Ivanhoe Mines

Although the resource grades have declined slightly (chart below), the decline was more than compensated by the resource growth. Moreover, the grades are still at very high levels. All of the other copper miners can only dream about 37.7 billion lb copper at a

This article was written by

Peter Arendas profile picture

I am an associate professor at the University of Economics in Bratislava, Department of Banking and International Finance. My dissertation was focused on commodity markets and my habilitation was focused on the calendar anomalies. I have more than 15 years of investing experience. My investments mostly focus on small- and mid-cap companies in the resource sector. Since May 2019, I have been preparing regular monthly reports focused on the precious metals royalty & streaming industry. Based on positive feedbacks and numerous inquiries, I decided to launch a Marketplace Service named "Royalty & Streaming Corner", which provides an in-depth analysis of this exciting market segment, as well as investment ideas from the mining industry.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in IVPAF over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (33)

The minerals will not move from their present location. If the extraction is done by Zijin and Ivanhoe, who both have a history of operating in countries where the social licence can be bought through employment of nationals, having the government as a partner, and by developing infrastructure in the province where the mines are located, then we, as shareholders should benefit from getting into production. The mining code does nothing for the DRC if the mines are not brought into production. The greed of politicians will never be satisfied-no matter in whatever country they are located- look at the NDP in the 70's in British Columbia, or the National Energy policy of the Trudeau Liberals. Getting elected trumps reason most of the time-and I think the reality of the economic benefit to the electorate in the DRC will determine the outcome. Money need s certainty and if the DRC wants the investment-they will have to set the rules to ensure benefit for the companies, and their citizens as well as the pigs at the trough. I expect reason to prevail and a timely resolution to the obstacles.
You might be correct but unfortunately history suggests otherwise. Even where African governments act in the name of 'the people' they can do it in such a ham-fisted manner that it destroys international business confidence for years (see Tanzania and Acacia Mining, as one of many examples).

BTW - a sack of fufu and free T-shirt per person at the appropriate time will get a person/party elected in many countries in Africa.
Hope this bleeds off to $2. Chomping to buy later this year.
March 8, 2018
Ivanhoe Mines, industry principals and the DRC Government jointly commit to ongoing detailed discussions to resolve issues arising from DRC’s 2018 mining code
Ivanhoe Mines (TSX: IVN; OTCQX: IVPAF) welcomes the commitment made yesterday by mining industry representatives and Democratic Republic of Congo President Joseph Kabila Kabange to continue productive and mutually advantageous discussions to resolve industry concerns arising from the DRC’s 2018 mining code.
Peter Arendas profile picture
The good news is that the question is still opened. The bad news is that technically, there's nothing new and the uncertainty continues.
We should be mindful of how the farms were acquired by the white farmers in SA in the beginning. I don't think they were ever there's to begin with however I also don't believe the SA government will move along the same path as Zimbabwe either given the outcome. The mining properties were never stolen from anyone. Two different things all together.
I’m with you Peter I sold but will re enter after more clarity. Hoping to buy close to $2 which would be unbelievable given the potential worth.
Killing the Goose that lays the golden eggs has never been a satifactory result for any government and is never an intended consequence of any legislation. DFriedland has proveen success in other countries-Mongolia Canada,and now South Africa and the DRC in locating monstrous orebodies that will affect the countries where the resources are located. Canada and Mongolia have Voiseys Bay and Olgoy Tolgoi respectively which demonstrates that there is a solution available when the chips are on the table. Friedland has been serially successful in dealing with political posturing and I see no reason to think that the result this time will be any different. The DRC wants the living standards of this, one of the countries with a very low standard of living to benefit from mineral wealth extraction as opposed to leaving it in the ground. China wants and needs the Copper and the DRC needs the economic activity and wants there to be real benefits to the DRC and the populace as a whole. There will be an increase in royalties and there will be taxes to be paid-but in the end their will be a reward for discovery and it is to everyones benefit that there be ground rules that work.
I am afraid you are extremely naive. I lived for 3 years in the DRC providing services to almost all the largest mining companies in Kolwezi at the peak of the mining boom there. Both the government and tax department in the DRC is 100% corrupt, and cares nothing for either its people or the long term future of the country (I could provide endless examples but won't bother). Do you really think the Chinese have prospered there through good governance? Read through the list of companies in the country 10-15 years ago and now, and you will see the shift from reputable entities to questionable entities (and yes, I would definitely include Glencore as a questionable entity). Even better, read up about Dan Gertler - 'the king of Congolese mining'. Either you pay bribes in the DRC or you do not exist - there is no other way.
Very realistic conclusion !! Living standards of local people won't be influenced in any way. This is only about personal portfolios of politicians !!
Africa will only make a change if they get leaders who care more about their peolple than about their personal portfolio. In the meanwhile these 'fonctionnaires' will give in as soon as they've have secured their pensions. An African president has no 'after-carreer'.
Listened to a commodities specialist and he said impact to IVN.TO is minimal as a result of recent changes in the new 10yr code and increase in royalties in “super” profits??? Some amount of insider buying activity...
I agree because super profits refers to strategic materials like cobalt and Ivanhoe hasn't got about any cobalt.
Peter Arendas profile picture
Actually, super profit refers to any commodity that experiences a more than 25% price growth compared to the feasibility study (https://seekingalpha.c...)
Da Shi Research profile picture
you're mad for selling out. A compromise deal will be reached and the stock will be back above $4 in no time. Above $8 when production starts later.
Peter Arendas profile picture
I agree that if a compromise is reached, the share price will jump. However, I don't expect it to return to the $4 level immediately, it will take some time.
What's the estimated start of production date? Tia
Peter Arendas profile picture
Around 2020.
Oliver Sudden Jr profile picture
If South Africa can take white owned farms without compensation then I'm not confident that they won't take the mines in the Congo eventually. Africa remains a basket case.
Da Shi Research profile picture
Read between the lines a bit more. Of course the government wont seize farms in south africa. The new president understands investment would crash along with the rand. What you are reading in the press is simply political posturing.
It wasn't political posturing in Zimbabwe - and that IS now a basket case. Nevertheless a number of countries in Africa are following the Zim model. Don't underestimate the stupidity (or greed) of African politicians. I've lived in 5 countries in Africa and worked in about 15, so I do have personal experience of the situation there.
Peter Arendas profile picture
Yes, it wasn't posturing in Zimbabwe, on the other hand, all of the other African countries could see how Zimbabwe ended up. One of the richest African countries turned into one of the poorest ones.
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.