From Scotia this MorningIvanhoe Mines Ltd. Kamoa-Kakula Continues to Make Solid Progress
OUR TAKE: Positive.
IVN released its monthly development update on the company's flagship Kamoa-Kakula Cu mine in the DRC. As previously disclosed, the Phase I 3.8Mtpa concentrator entered production on May 25, well ahead of the previous July target. Ore stockpiles now total 3.3Mt grading 4.87% Cu, containing more than 160kt of copper, as the operation mined a 406kt of ore grading 5.77% Cu in May. Mining exceeded the 3.0Mt of ore planned prior to start-up.
Total underground mine development of 45.7km is ~16.5km ahead of schedule. 2021 Cu production guidance of 80-95kt was reaffirmed. The company disclosed that it has signed an off-take agreement with a local Cu smelter (Lualaba) to process ~40% of Phase I concentrate volumes, which will reduce export requirements. In our view, the local offtake agreement could also potentially help accelerate the receipt of the required export permit (see our recent note).
Development of Phase II (7.6Mtpa) remains on schedule for a Q3/22 startup; engineering and procurement is already >50% compete. IVN continues to explore the potential acceleration of the Phase III expansion (11.4Mtpa). Overall, given the recent start-up of Phase I, which appears well supported by strong mining rates and a significant ore stockpile, we view the update as positive for the shares. IVN's attributable share of Kamoa-Kakula (39.6%) represents 65% of our asset level 10% NAVPS estimate for the compan