Rick Rule Interview with Robert Friedland – Part II
Ivanhoe’s Platreef and Kipushi Projects
The Mining Journal named Ivanhoe’s Kamoa copper deposit the top undeveloped mineral asset in the world, but Ivanhoe CEO Robert Friedland thinks the company’s two other projects may be set to surpass Kamoa in quality. In a recent interview with Rick Rule, Robert explains the Platreef and Kipushi Projects.
“Internally, we have a lot of debate about whether [Kamoa is] our best project or not.”
The Platreef Project, in South Africa’s Limpopo province 174 miles from Johannesburg, may be the number one contender trying to outshine Kamoa. The Platreef project is 64% owned by Ivanhoe, 10% owned by a Japanese consortium (who paid $290 million for their ten percent) and 26% owned by the broad-based black economic empowerment partners (B-BBEE).
“The first thing about our platinum interest is that its not just platinum… the Platreef discovery is platinum and palladium and nickel and copper and rhodium and gold.”
And it’s no small project either. According to a positive pre-feasibility study completed in 2015, the planned initial average production rate would be 433,000 ounces of platinum, palladium, rhodium and gold, plus 19 million pounds of nickel and 12 million pounds of copper per year.
While six economic minerals make the mine difficult to value over a period of time (the prices of each of those metals can change dramatically), the optionality offered by the mine is quite attractive, and the bi-product credits would make it one of the lowest cost PGM (platinum group metals) producers in the world, at US$322 per ounce. Simultaneously, the South African rand has been falling in value against western currencies, meaning the exchange rate has moved in Friedland’s favor, making the project cheaper still to produce on a U.S. dollar basis.
Importantly, Friedland believes the structure of Platreef makes it amenable to mechanized mining. This makes for a far safer underground mining environment for workers, lowers the cost of production, and eliminates the risk of labor strikes, which have historically crippled production for other PGM producers.
The Kipushi Project is back in the Kamoa neighborhood in the Democratic Republic of Congo. The so-called “smaller project” was discovered in 1920 and was one of the richest copper producers in the world by 1926 at a staggering 18% copper grade. It was mined successfully for nearly 60 years at an average grade of 11% zinc and 7% copper until 1993, when the mine was put on care and maintenance and, generally, ignored.
Just before it was shut down, there was an accidental discovery of a new zone of mineralization, so called “The Big Zinc.” This zone quickly piqued the interest of Ivanhoe, who wanted to know how big the “Big Zinc” really is.
“Think of it as sort of a 20-story tall building with a lobby and contained in that volume is eight or ten billion dollars worth of metal. Very contained area... The deposit is comfortably more than twice the grade of any competing zinc mine on earth.”
Ivanhoe purchased the mine, and then set to tidying it up and upgrading the infrastructure. $400 million later, the mine is ready for near-term production. While many mines can take five years, Kipushi is a one- or two-year run to production.
So with three world-class projects, where does Ivanhoe stand today?
Like all the mining industry, Ivanhoe has not been immune to negative market sentiment. The stock has had patches of trouble, but the company has spent that troubled time improving the assets, and Robert has taken out a significant portion of the financing risk by bringing in capable and well-cashed joint venture partners.
As Rick noted, “Essentially, you’re getting $1.2 billion in extraordinarily successful efforts for free.”
To listen to the full interview, including more in depth discussion on the three projects and the financial status of Ivanhoe, click here.
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