Ivanhoe Mines
IVN-TSX Rating Price: Oct-29 Target Total Rtn Outperform $9.71 $15.00 54%
Kamoa-Kakula Phase 1 Reaches Steady State; Phase 2 60% Complete
Bottom Line:
Ivanhoe's monthly Kamoa-Kakula production update this morning announced 16,211 tonnes of copper produced as Phase 1 reaches steady-state design capacity, and narrowed guidance to 90-95,000t (the upper end of the previous 85-95,000t). Phase 2 construction continues with completion reaching 60% and evaluations for an expanded Phase 3 and construction of a smelter are both underway. We expect optimization of Phase 1, construction of Phase 2 and plans for Phase 3 to revalue Ivanhoe's shares.
Key Points
October's copper production was 16,211 tonnes (to October 20) and on October 25 delivered a new daily production record of 729t; Phase 1 targets production of 16,666t/month. The Phase 1 processing plant is now operating at design rates, with ore throughput exceeding design capacity by 2%; IVN notes that it expects ongoing optimizations at the plant to further increase its production. Ivanhoe added a second filter press earlier in the month that removes a bottleneck from the processing circuit, and copper recovery in October at 85.1% was close to design recovery of 86%.
2021 production guidance was narrowed to 90-95,000t as October production came in strong despite power supply issues, with intermittent blackouts at Kamoa-Kakula for the first three weeks of the month due to regional transmission issues (which IVN is working to help correct). Ivanhoe also maintained mining production despite facing significant water inflows in the northern part of the mine that have been resolved; mining rates continue to exceed milling rates and surface stockpiles have grown to 3.73Mt at 4.72% copper.
Construction of the Phase 2 concentrator plant is 60% complete after passing
the 50% mark in September. Construction is currently focused on structural steel and equipment installation, and electrical cable installation has started. Final deliveries of structural steel, piping and platework are expected by the end of November. Phase 2 is expected to start production in Q2 2022 and will double production capacity at Kamoa- Kakula.
Planning is underway for an expanded Phase 3. The scoping study for an expansion of Phase 3, which was originally intended to replicated Phases 1 & 2, is expected to be finished in 2022. Ivanhoe is also evaluating building a smelter near the mine to produce up to 500,000tpy of copper in blister and has initiated EPCM work to advance the concept.