Ivanhoe (IVN) versus Nevada Copper (NCU) on a future free cash flow comparison basis.
I use IVN as a comparison because it is low priced relative to future free cash-flow. Ivanhoe suffers a discount for being in the DRC. Both mines are 3 or 4 years until full production free cash flow.
IVN only owns 40% of KK and KK is about 85% of IVN’s total value that includes 3 more properties.
I am now using a larger $1.2 billion future cost to build the NCU open pit.
To this I add $600 million EV to arrive at $1.8 billion future EV for NCU versus $8.5 billion EV for IVN adjusted to the KK mine only.
| Based on copper production about 4 years from now | IVN 40% owned DRC | | NCU 100% owned USA |
| IVN 500,000 tonnes (copper study group avg est.) Adjusted to 40%`owned | 440 million pounds | 220 million (prob more now since video) + 70 million underground | 290 million pounds |
| IVN av cost $1.15 all in cost | $3.45 C/F | NCU av cost $2.00 all in | $2.60 C/F |
| Long term avg annual free cash flow using $4.60 copper | $1.52 billion | | $750 million |
| IVN E/V adjusted to KK only | $8.5 billion | NCU EV adjusted to incl the open pit | $1.8 billion |
| IVN E/V divided by 2 to equalize free cash flow between IVN and NCU | $4.25 billion | NCU E/V is only 42% of IVN before discounting for DRC risk (see next line) | $1.8 billion |
| DRC 30 year risk adjustment is to say that the $4.25 b E/V would be $5.3 b if the KK mine were in the USA instead | $5.3 billion | NCU is currently trading at 33.9% the risk adjusted price of IVN | $1.8 billion |
| This means IVN is 3 times more expensive on future C/F basis | | | |
What this comparison tells me is that Investors in IVN are willing to pay 3 times as much per share for future cash flow versus buying shares in NCU.
There is no doubt that estimated share value and cash flow is always decoupled from what buyers are actually willing to pay.
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