Some Useful Facts about the New Mining Law For those considering investment, here are some things you're not being told by the pumpers:
1) The government reserves the right to declare a metal "strategic", and subject to a 10% royalty of the gross, not income. They take it right off the top. The government was talking about doing this with copper, but when the price fell back they abandoned the idea for now. But if the price starts climbing, they can ratchet up the royalty without notice.
2) The DRC government reserves the right to impose a 50% supertax on income if the price of a metal increases. Pumpers here keep talking about $4 copper, but there's a good chance both a 10% "strategic" royalty and a 50% supertax will apply. In other words, investors lose out when the price of copper falls, but they probably won't benefit in the event copper rises. You take all the risk, and the DRC government reaps the reward.
3) All earned income on copper sales exports must be repatriated to the DRC. You can't just take the proceeds and put them in your bank account. While paying off the CapEx -- your initial investment -- repatriation is set at 60%, and then 100% thereafter. A 2% fee is charged for any transaction in a DRC bank. If you want to send $50 million overseas, you must pay them $1 million for the privilege. That 2% is charged on EVERY transaction. And the bank sets the exchange rate. This is supposed to set by agreement with miners. But if you don't agree with their exchange rate, they don't send the money. In the DRC any street money changer offers a better exchange rate than banks.
This is why my price target for IVN never exceeded $7.50, even as prices for metals were soaring.
Another thing: It doesn't matter if there is a century's worth of copper at K-K. Any income earned beyond 25 years is of little value to an investor. The economic model proposed in the 18 Mtpa PEA study spans 39 years, including the construction phase that they're in currently. Money received in the year 2055 is worth a lot less than money in your hands today. The LOM economic model, life of mine, somewhat overstates the practical value to an investor.
I'm stating this information here because pumpers have tried to shut down all honest discussion. Circumstances were completely different pre-COVID-19. Copper had realized the base case scenario price of $3.10 and PGMs had gone parabolic. What's more, this wasn't some short term blip. We had every reason to expect those high metal prices would continue indefinitely. It was the perfect scenario for a decent buyout price three years down the road. The unexpected reversal in price should be taken into consideration in any valuation of the Company. Please refer to Table 24-7 of the most recent resource update from March 2020. It provides preliminary economic modeling for an 18 Mtpa mine at K-K.