The Kamoa dealFrom a certain point of view Zijin is getting 49% interest in the Kamoa project for “free”
“To date (
May 26, 2015), Ivanhoe has invested approximately US$337 million in equity capital in discovering and developing the Kamoa Project.”
https://ceo.ca/2015/05/26/zijin-to-acquire-49-5-of-ivanhoes-kamoa-stake-for-a-total-cash-consideration-of-us412-million/
Zijin is paying US$412 for a 49% stake on a project that has been de-risked from many angles. This only represents a 30% premium over the amount that Ivanhoe has already spent into this project.
From Zijin’s statements:
“Currently, bulk commodities are in sluggish stage. International mining corporations are accelerating the selling of their assets, bringing down the valuation of mineral resources.
It is a favourable timing for China to accelerate merger and acquisition of overseas resources. The Company will grasp the opportunity to achieve material breakthroughs in the acquisition of large-scale and high-quality resources.”
...
“Through the acquisitions this time, the Company will be able to significantly
increase its mineral resource reserve volume: estimated by the proportion of shareholding...the total resource reserve volume of copper will increase from 15,433,000 tonnes to 26,000,000 tonnes (representing
an increase of by 68.47%).
These will help lay a solid foundation for the long-term sustainable development of the Company.”
...
“In 2014, global production volume of copper was 21.55 million tonnes, and consumption volume was 21.25 million tonnes. The demand and supply basically remained balanced. The production and consumption volume in China were 6.82 million tonnes and 8.72 million tonnes respectively. China has become the largest copper consumer in the world. Since there is a
huge gap between the supply and demand of copper resources in China, it has to rely on import. In 2014, China imported 3.58 million tonnes of copper concentrates, representing 41.06% of its total consumption. It is expected that import volume will continue to grow.”
...
“Ivanhoe currently owns some large-size deposits including the Kamoa copper mine in the DR Congo and the Platreef platinum group mine in South Africa, etc. By disposal of partial interests in the Kamoa copper mine,
Ivanhoe will be able to introduce a strategic partner with strong economic and technological strengths, to help solve the funding needs and technological challenges the copper mine has for subsequent development, and push forward early production of the mine”
This is a mutually beneficial arrangement for Ivanhoe and Zijin. Ivanhoe needs a partner to develop/finance this project. Zijin needs the resources from Kamoa and basically is getting them with reduced risk and without paying a large premium.