Ivanhoe Set To Begin Production At World’s Second-Largest Copper Project
Copper has had an incredible run, surging 45 percent since its March low on plunging global inventories and the prospect of heightened usage by China, its biggest purchaser. It’s also been a good year for one of the world’s top explorers of the red metal, Ivanhoe Mines, which just last week released stellar economic results of its tier-one Kamoa-Kakula Copper Project in the Democratic Republic of the Congo (DRC).
One of our favorite natural resource companies, Ivanhoe has returned more than 146 percent in the past six months alone as investors anticipate the start of production at the Kakula Mine. The project has the potential to become the world’s second-largest copper mining complex, with annual output projected to be 800,000 metric tonnes a year.
We now know approximately when phase one of mining is set to begin. The company is fully funded to begin operations in the third quarter of 2021, according to a press release dated September 8.
“Kakula is on track to begin production in under one year from now, which, considering we’ve been working in Africa for 27 years now, feels like tomorrow morning,” commented Robert Friedland, Ivanhoe’s billionaire founder and co-chairman.
It’s impossible to overstate how exciting the news is. As many of you know, a new mine of this scale and quality doesn’t come online too often these days. The copper grade at Kakula is ultra-high at 6.6 percent over the first five years of production, a grade “that is an order of magnitude higher than the majority of the world’s other major copper mines,” according to Robert.
Sure to please ESG investors, operations at the complex will be powered by clean, renewable hydropower, allowing the company to achieve its goal of becoming the world’s “greenest” copper miner.
As you can see in the chart above, production will continue to ramp up in phases until full processing capacity is reached sometime between 2028 and 2030. This makes Ivanhoe a true long-term play on copper, a metal that should only increase in importance as the “electrification of everything” trend accelerates.
Like copper, shares of Ivanhoe have been on a tear since mid-March. Its stock jumped more than 8 percent last Wednesday following the positive news, its biggest single-day increase since May. The company is now trading at its highest level in seven years, with the best still yet to come. Last week, Canaccord Genuity raised its 12-month price target to C$7.00 ($5.30), a 20 percent increase from where it stands today.
Copper Price May Soar on “Historic Squeeze”
Robert Friedland visited our office in San Antonio, TX in January 2018. He told us then that you’ll need a telescope to see copper prices in 2021.
He may have been on to something.
Copper’s supply-demand profile looks incredibly favorable, with the pace of China’s new orders running red hot. Meanwhile, copper inventories in warehouses monitored by the London Metal Exchange (LME) have fallen to a 15-year low.
Some analysts see the same market conditions developing that propelled the price of copper up 450 percent between 2000 and 2011, during China’s industrial explosion. As I recently shared with you, manufacturing activity is expanding at a rapid pace, as measured by the purchasing manager’s index (PMI).
Citigroup is extremely bullish, telling clients last week that a price of $8,000 per ton is possible.
With Kakula set to begin production, Ivanhoe is very well-positioned to ride the wave higher.
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