Comparison of IVN and KATTotal KAT debt as of Sept 30, 2017:
$7.45 billion CAD or $5.96 billion USD at an 80 cent Canadian dollar.
I don't mean to pick on KAT, and really have nothing against that Company. This is intended as a handy comparison with IVN, since they are located relatively close to Kamoa-Kakula in the Congo. This is a response for those who claim IVN is fairly valued at $4 share, even though the Company owns large percentages of the world's most valuable zinc, copper, and PGM projects. These projects are all advanced stage, and there is little doubt all three mines will go into production. The following is from the financial statements of Sept 30, 2017 from both companies.
KAT total Financial Liabilities (Note 4) both current and long term.
Accounts Payable: $343.98 million USD
Customer Prepayments from Glencore: $ 2.01286 billion USD
Loan: $3.60453 billion USD
Customer prepayments from Glencore are huge, and must eventually be filled, along with the long term loan. This bears interest of 4% plus, depending on the Libor rate. The interest rate on the loan is more complex Libor + 3% as above, and recently amended to 10%. So, they must not only pay off principal, but substantial cumulative interest as well (Note 13).
This is balanced by just over $264 million USD in Financial Assets, cash + receivables.
It's worth noting IVN has $28.66 million in debt, $14.34 million accounts payable, and over $200 million USD in cash.
Despite this, KAT has been assigned by the market an enterprise value of $11.3 billion CAD (market cap + debt - cash and receivables). If you remove receivables it's higher. While enterprise value for IVN is only around $3.1 billion CAD.
By any objective measure either KAT is grossly overvalued, or IVN must be undervalued. You can't claim political risk is the problem, since KAT is in the same neighbourhood. And you can't resort to the explanation that KAT is in production. That doesn't mean much when you owe $7.45 billion CAD. It will be years before shareholders see any profit. IVN will probably be in production within a couple of years and realize profits before they do. And if for whatever reason KAT can't pay off that debt, their shareholders stand to lose more control.
Once again, I've got nothing against KAT. Yet by comparing the two companies it's easy to see that the usual excuses to explain low IVN share price are pretty lame. It also illustrates what a good job IVN management has done to guide these three projects forward. All three are advanced stage, with very modest debt, insignificant really, and $200 million plus USD in the bank. That's quite an achievement. Recognition has been lagging, but this is not due to underlying fundamentals which are rock solid.