globe article 15.00 price 12 monthsIvanhoe continues to tumble
Mine development cost cited by analyst
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By WENDY STUECK
00:00 EST Friday, November 21, 2003
VANCOUVER -- Ivanhoe Mines Ltd.'s shares continued to retreat yesterday, a development that one analyst said reflected the company's potential move from early stage exploration to production. Others attributed the slide to a lower copper price.
Ivanhoe shares, which fell $1.05 or 9 per cent to close at $10.66 on the Toronto Stock Exchange yesterday, had enjoyed a spectacular climb this year, hitting a intraday high of $15.30 on Nov. 4. However, they have fallen 30 per cent since then.
"When a company has reached a point where they have outlined an ore body, then they move to the next level, of engineering and feasibility, then of course everyone thinks: 'How are you going to finance it?' " said Catherine Gignac, an analyst withLoewen Ondaatje McCutcheon Ltd. in Toronto.
"Quite frankly, I think that's the plateau Ivanhoe has reached."
However, Canaccord analyst Greg Barnes said a retreat in copper prices was hitting the shares of copper producers yesterday as the metal dropped back slightly from the six-year high reached last week.
For example, Phelps Dodge Corp. fell $1.71 (U.S.) to close at $58.86 on the New York Stock Exchange.
Vancouver-based Ivanhoe is developing the Turquoise Hill, or Oyu Tolgoi, copper-gold deposit in Mongolia, where Ivanhoe's promising exploration results have sparked an exploration boom and attracted lots of attention from investors.
This week's volatile trading followed a report in Forbes magazine that drew a strongly worded objection from Ivanhoe chairman Robert Friedland.
He called the Forbes report a "contrived, one-sided account" that ignored independent reports outlining the size and scope of the Turquoise Hill discovery.
Speculation over the potential size and grade of the Turquoise Hill deposit has helped propel Ivanhoe to a market capitalization of $2.7-billion (Canadian).
Canadian mining major Noranda Inc. has a market capitalization of $4.8-billion and Teck Cominco Ltd. has a market capitalization of $3.6-billion.
Yesterday, the focus on media reports continued, with Mr. Friedland issuing a statement that welcomed a correction published in The New York Times on Nov. 18 concerning an article published on Oct. 3.
The correction said the article misstated the terms of a legal settlement reached in Colorado in 2000 by Mr. Friedland over accusations that the Summitville gold mine -- run by a company in which he was a large shareholder -- contributed to pollution of the Alamosa river.
The article also misstated the source of the contamination of the river, the Times correction said.
While Mr. Friedland might be keen on correcting the record over past events, analysts are focusing on the future, with a string of "buy" recommendations and share target prices as high as $17..
On Nov. 10, Ivanhoe released an updated independent resource estimate for its Mongolia project that boosted the amount of inferred resources in the deposit.
Inferred resources are based on limited drilling, and further exploration is required before they can be upgraded to proven or probable reserves.
There's no question that Ivanhoe has discovered world-class ore bodies in the region, Ms. Gignac said, but the question now becomes how a mine will be financed and built.
"Any additional drilling results are not going to make a material positive impact on the company -- it's very much moved to the next level," she said.
Ms. Gignac has a "buy" recommendation on the stock with a 12-month target of $15.
© The Globe and Mail