RE:Stock target prices I cut this out of the RBC Research paper. I confirmed the timetable for the catalysts with Bill Trenaman on Friday. Hopefully the timing of the news releases are a little better than the last one and have some impact on share price.
Target price/base case
Our C$5.50 price target is based on 1.0x our NAVPS estimate
of C$5.36. Our base case NAVPS is based on a $2.85/lb copper
price in real terms and an 8% discount rate. We model Kakula
starting at 3Mtpa, growing to 6Mtpa, at Platreef we model
4Mtpa for Phase I and later expanded to 8Mtpa, and for
Kipushi use similar assumptions to the 2016 PEA. The C$5.50
target price supports our Outperform rating. We assign a
Speculative risk qualifier to Ivanhoe given geopolitical risk in
the DRC and South Africa and its early stage of development
and lack of cash flow.
Upside scenario
Our upside NAV of $7.00 includes additional value for the
Kansoko deposit and Phase 3 at Platreef.
Downside scenario
Our downside NAVPS of $2.00 factors in 20% higher operating
and capital costs and heightened geopolitical risks which could
imply a higher discount rate.
Investment summary
Ivanhoe Mines has the potential to realize significant value
as it advances its three main projects through development
and into production over the next five years. The company
intends to become a global, diversified mining and exploration
company by advancing Kamoa-Kakula (Cu) and Platreef (PGM)
from discovery to production, reopening the Kipushi (Zn)
mine, and maintaining active exploration and acquisition
programs. Kamoa-Kakula is one of the largest undeveloped
high-grade copper deposits in the world, and Platreef could
emerge as a low-cost PGM producer.
The near-term potential catalysts for Ivanhoe Mines
include:
• Onoing: Drill results from Kakula with 12 rigs active
• Q2/2017: Platreef Phase 1 feasibility study
• Q3/2017: Kipushi pre-feasibility study
• Q4/2017: Kakula PEA
Risks for our investment thesis include:
Risks for our Price Target and Rating include geo-political
risk in the DRC and South Africa, financing risk, execution
risk at the company’s development projects given that they
are early stage and long-dated, and risks associated with
the development of infrastructure for the projects, including
transportation in the DRC and power and water in South
Africa.