BMO - Q2 "BOTTOM LINE"Bottom Line:
Yesterday, Ivanhoe Mines announced Q2 EPS of $0.06, in line with our expectations
($0.06) and within the range of consensus. A notable takeaway from the release was
the strong ramp-up performance of Kamoa Phase 3 reaching a single-day throughput
of 19% above design capacity — steady-state run rates are expected in August. Ivanhoe
continues to extend its track record of construction and operational excellence — we
expect the market to continue to reward this performance.
Key Points
Ivanhoe Mines Q2 financials were highlighted by record adjusted EBITDA of $203
million. EPS of $0.06 was in line with our expectations ($0.06) and within the range
of consensus. C1 cash costs (US$1.52/lb) are at the lower end of guidance with
production pre-released at 100,812t of copper in concentrate from Kamoa-Kakula.
Kamoa-Kakula produced daily record copper output on July 28, with the newly
completed Phase 3 concentrator exceeding nameplate capacity (5mtpa) by 19%
and achieving a daily milling record of 16,703t of ore. Concentrator ramp-up to
steady-state production is expected in August. In our opinion, strong performance to
date would suggest risk of major challenges is likely low — both Phase 1 and 2 ramped
up in a matter of weeks. Looking ahead Q3 and Q4 will likely deliver record production
and strong quarter-on-quarter results.
Commentary on the conference call indicated that the first dividend from the Kamoa
JV is expected in Q3 with IVN to receive 40% of $98 million with management
highlighting that future dividends will be considered depending on reinvestment
into de-bottlenecking (Project 95) and expansions (Phase 4).
Earlier this month, Ivanhoe completed the restart of the Kipushi Mine, declared
first zinc production, and set 2024 guidance at 100-140,000t of zinc in
concentrate. Management also reiterated guidance for Kamoa-Kakula at 440-490,000t
of copper in concentrate at US$1.5-1.7/lb cash cost.
Ivanhoe ended the quarter with $246 million in cash/cash equivalents and the company
expects to meet forecast capital requirements from a combination of cash flow from
Kamoa-Kakula and project-level financing.