February 28, 2022 | 10:13 ET~
Ivanhoe Mines
IVN-TSX Rating Price: Feb-25 Target Total Rtn Outperform $11.86 $16.50 39%
Platreef Feasibility Shows Q3/24 Production From World-Class Deposit
Bottom Line:
The Platreef feasibility further de-risks the world-class project in terms of its scale, with projected delivery of 590,000oz/yr of 3PE+Au, and its development timeline. The two-phase development proposal allows near-term production in Q3/24 and significant growth post completion of Shaft 2 in 2027. Updating our valuation model leaves our net valuation relatively unchanged. The market will continue to watch for updates of performance and ramp-up at Kakula/Kamoa, mobilization of the Western Foreland exploration, as well as advancing the Platreef and Kipushi world-class deposits.
Key Points
Feasibility provides further detail on the development plan to deliver Phase 1 production by Q3/24. The feasibility study adjusts the phased development plan to maintain early production while increasing the size of Phase 2 to 5.2mtpa, generating an average of 591,000oz of 3PE+Au. With first production in Q3/24, we remind investors that Ivanhoe secured a $300mm streaming facility and is pursuing a $120mm debt facility to cover the majority of the $488mm initial capex. First draw-down of $75mm from the stream facility occurred in December 2021 (see our note here).
The feasibility accelerates completion of Shaft 2 by 18 months over the 2020 PEA
and Ivanhoe indicates they are continuing to evaluate opportunities to further shorten the shaft sinking schedule. At Phase 2 production levels, Platreef would be the fifth- largest PGM mine in the world
Phases 1&2 combined develop only a third of the measured and indicated resources. The scale of the Platreef resource will justify further expansions; we remind investors that the 2014 PEA presented expansion through 12mtpa compared to the 5.2mpta throughput in the feasibility. The current resource base makes Platreef the largest precious metals deposit under development globally, and any possible expansion to 12mtpa would place the mine among the top PGM producers worldwide.
Capex is always a focus for investors of companies with significant development projects. The Platreef feasibility delivered a $488mm capex for Phase 1 and a $1.5B expansion for Phase 2, which in our opinion are broadly in line with previous capex guidance in the 2020 PEA. Most importantly this is a manageable capex schedule when overlaid development plans across Ivanhoe's development project pipeline. The combined capex and expansion capex stands at about $100mm in 2022, then holds steady at about $200mm/yr for an additional four years before peaking in 2027.