The Year So Far: Ivanhoe Looks Busy

Robert Friedland’s Ivanhoe Mines (TSX:IVN) has released its financial results for Q2 2018 as it powers its three major projects through to production.

In its Monday (August 13) release, the company also exhaustively details everything it’s been up to in the first half of the year, from the release of its inaugural sustainability report, to the announcement of a deal with China’s CITIC (HKEX:0267) and a constant stream of development updates.

Looking at the numbers, the company had a total comprehensive loss of US$38 million for Q2 compared to a loss of US$11.4 million for the same quarter of 2017. Ivanhoe explains that this was primarily due to a 16-percent weakening of the South African rand between the two periods.

A loss on paper says little, however, as over the quarter the arrangement with CITIC has led to over US$800 million in investments in Ivanhoe’s three African projects — the Kipushi zinc-copper project and the Kamoa-Kakula copper project in the Democratic Republic of Congo (DRC), and the Platreef platinum-group metals project in South Africa.

“Finance income for the three months ending June 30, 2018, amounted to US$10.9 million, and was US$1.7 million more than for the same period in 2017 (US$9.2 million). The increase mainly was due to interest earned on loans to the Kamoa Holding joint venture to fund operations that amounted to US$9.7 million in 2018, as the accumulated loan balance increased,” the company said.

Over Q2, the company spent US$2.8 million on exploration, with almost all going towards its Western Foreland licenses in the DRC. While exploration expenses are down year-on-year by over 70 percent, that’s mainly because the three major projects are so advanced they no longer require exploration.

“In Q2 2017, US$9.5 million of the total US$9.6 million exploration and project expenditure related to the Kipushi Project,” said the company — revealing that in 2018 the Western Foreland licenses will receive a huge increase in funding overall.

The Western Foreland licenses, where the company completed 6,857 meters of drilling in Q2, are to the west of the Kamoa-Kakula project and target high-grade copper trends “emanating from Kamoa North.” Drilling is also allowing the company to detail the characteristics of the Makoko area.

“In September, Ivanhoe expects to be in a position to provide an important update on its Makoko and Kamoa North exploration programs,” the company stated.

The arrangement with China’s CITIC, announced in June, will see C$723 million injected into the major projects, while anti-dilution rights by Zijin Mining (HKEX:2899), which holds a stake in Ivanhoe, will see another C$78 million go towards the projects.

The deal makes Beijing-headquartered CITIC the Canadian company’s largest single shareholder, with Friedland now in second place with a 17-percent stake. Friedland will also become a co-chairman alongside a CITIC-appointed co-chairman.

The Platreef project has seen progress with the sinking of shaft 1 to 750 meters with a planned final depth of 982 meters. The target orebody is located 783 meters below the surface and is projected to be reached in Q3. Meanwhile, surface work on shaft 2 at the platinum–palladium–nickel-copper-gold project is continuing.

The copper-zinc Kipushi project is powering ahead also, with an improved mineral resource estimate released at the end of July that will enhance the mineral resources available for the definitive feasibility study due to be released at the end of this year or the beginning of 2019.

The Kamoa-Kaluka project is still undergoing a prefeasibility study, with a mineral resource estimate released earlier this year.

In Toronto, shares of Ivanhoe were trading down 1.91 percent at C$2.30 at 2:30 p.m. EST on Monday.

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Securities Disclosure: I, Scott Tibballs, hold no direct investment interest in any company mentioned in this article.