RBC Comment - Outperform
Ivanhoe Mines
Risk Qualifier: Outperform
Speculative Risk
Positive Results from Kamoa Pre-feasibility Study
Bottom line: Ivanhoe released the results of the pre-feasibility study for the First Phase of the Kamoa project. The results of the study are generally in-line with our current estimates, with cash costs for the first 5 years of production better than our estimate, while production and capex estimates are in-line with our forecast.
We view the result a positive for the shares. Cash cost better than our estimates: The pre-feasibility study expects mine-site cost to be US$0.55/lb Cu for the first five years, better than our estimate of US $0.58/lb. Life of mine (LOM) mine site cost is expected to be US$0.75/lb, in-line with our forecast. C1 cash cost is expected to be US$1.27/lb for the first five years, below our forecast of US$1.75/lb, and US$1.48/lb LOM, in-line with our estimate. Production essentially in-line with our forecast: Kamoa is expected to produce 100,000 tonnes of copper every year for the first phase, with copper grades averaging 3.86% and copper recovery averaging 86.36%, essentially in-line with our forecasts of 102Kt of production at 3.93% Cu and 85.90% recovery. Capex in-line with our expectation: Initial capital cost including contingency is US$1.21 billion, roughly in-line with our estimate of US$1.24 billion.