Waterhouse C$6.50Posted on ceo.ca
TDW report Event We have reviewed our model following the release of updated forecasts from Ivanhoe contained within the company's Q3/19 financial results release. Impact: NEUTRAL Kakula plant processing capacity increased 26%. Throughput capacity for the two initial processing plant modules for the Kakula operation has been increased to 3.8 mmtpa each (from 3.0 mmtpa). The number of underground mining crews in 2020 has been increased to 14 from 11 to support the expanded mill throughput and to build sufficient stockpiles ahead of the plant start-up in H2/21. The project's initial capital cost has been increased to ~$1.3 billion on a go-forward basis from January 1, 2019 (TD's previous forecast: $1.05 billion). Based on the current schedule, commissioning of the first 3.8 mmtpa plant module would start in Q3/21. Definitive feasibility study (DFS) for the Kakula Mine expected to be complete mid-2020. With the DFS, Ivanhoe expects to issue an updated preliminary economic assessment (PEA) for the expanded Kamoa-Kakula combined production scenario that will include an updated mineral resource estimate for Kamoa North, including an estimate for the Kamoa North Bonanza zone. We expect that Ivanhoe will seek to introduce higher-grade ore from Kamoa North and the Bonanza zone into the mine plan as early as possible. Management notes that it intends to process 6.0 mmtpa from the Kakula mine. Further study work will determine the amount of ore sourced from the Kansoko mine, or elsewhere (i.e. Kamoa North), to maximize the full processing capacity of 7.6 mmtpa. Kakula Mine/plant development progressing. More than 5 km of underground development has been completed at Kakula and basic engineering and costing for the initial five years has been completed. The focus for the onsite construction, which is focused on the project's critical path, is the installation of the underground rock handling system, the process plant, and the electrical highvoltage infrastructure installation. Refurbishment of the Mwadingusha hydro power station is underway, with expected completion in Q3/20. TD Investment Conclusion We are maintaining our SPECULATIVE BUY recommendation and C$6.50 target price.