RE:RE:RE:RE:This is FANTASTIC for our Platreef projectAccording to every analyst, most of the value is tied to Kamoa-Kakula. Overall analysts have been very conservative, assigning a short term value of about $1 each to Platreef and Kipushi. The balance has been assigned to K-K. Long term is another story. With an economy of scale, Platreef can grow far beyond 4 Mtpa.
As far as we know, Kabila has still not signed the new mining proposals into law. There may be internal divisions within the Congolese government, with some as nationalist ideologues and others more pragmatic. They have already scared off anyone considering further investment. If the mining law was intended to bring in more revenue for the government, it will probably have the opposite effect. It can't be that complicated to sign a piece of paper. Kabila may be having second thoughts as to the wisdom of proceeding further along this path. Behind the scenes mining companies must be lobbying furiously.
If the worst does come to pass, IVN stands to lose about 10% of it's value. I don't want to minimize the impact, but honouring preexisting Stability Pacts seems to be the core issue for mining companies. Otherwise we're looking at an extra 1.5% royalty, 5% income tax, and a 50% supertax once metal prices exceed an upper limit of about $3.75 copper and $1.40 zinc. The supertax would only apply to any balance beyond a preset amount. For example, up to approximately $3.75, copper profits would be taxed at 35%. Any amount exceeding $3.75 would be taxed at 50%. Today, copper is at $3.19. The 50% supertax would not kick in until the price rises a further 55 cents. Zinc currently has about 20 cents in the supertax bracket. So, the impact on the bottom line is not disastrous.
A bigger issue is that the government must honour legal agreements. If they are not willing to do that now, then why would anyone expect them to do so in the future? I believe this is what has stayed Kabila's hand. He must recognize the danger in running roughshod over existing legal agreements recognized under international law. He is perhaps seeking an alternate solution. We have no way of knowing for sure, but the only reason I can see not to sign the proposed legislation into law is that it would be illegal.
However, that's not what caused the recent price drop for IVN. Another mining company, KAT, mired in debilitating debt and operating in the exact same region as IVN, traded relatively flat during IVN's recent plunge. They even jumped sharply in price on the day the proposed new law was announced. So, political instability can be eliminated as a reasonable explanation for the recent price tumble. In the absence of any other logical explanation, my own opinion is that the drop is a result of market manipulation on thin trading volume. Yes, volume went up, but it was still low. Political instability simply provided a suitable cover for action, one that doesn't hold up well on closer inspection.