Ivanhoe announced this morning it is expanding the processing capacity of its
Phase 1&2 concentrators at Kamoa-Kakula by 21% as it looks to lock in the recent outperformance of Phase 1 by implementing a debottlenecking plan by Q2/23. IVN also flagged a Phase 3 that will be "significantly larger" than the first phases. We have updated our production assumptions for the mine and are increasing our target to $16.50, maintaining our Outperform rating and top pick designation for IVN as a rapidly growing copper producer.
Key Points
Expanding Phases 1&2 adds significant value. The 21% increase in throughput to
a combined 9.2mtpa increases the total NAV of Phase 1 & 2 in our model by US$1b
to US$5.3b. While Phase 1 has been delivering above-capacity throughput we had
not modeled any throughput increases due to lack of guidance on the sustainable processing rates. We now model a long-term 4.6mtpa each from Phases 1&2 starting in Q1 2024 to match this morning's update.
Raising our target price to $16.50. The expanded production profile of the first two phases of Kamoa-Kakula drives most of our target increase to $16.50 from $15. We reiterate our top pick designation for IVN as a growing copper producer with world-class assets.
Phase 3 to be significantly larger. While IVN has previously foreshadowed a larger Phase 3, this is the strongest language to date and indicates a larger Phase 3 than we previously expected. We have updated our model to change from a 5-Phase scenario to a 4-Phase scenario where Phases 3&4 are about 20% larger than the debottlenecked phases 1&2 at 5.4mtpa each. The total modeled throughput of 20mtpa is slightly higher than the previous 19.2mtpa PEA life of mine plan.
Phase 2 on track for April startup. IVN expects to produce the first copper concentrate from Phase 2 in April, and early stage commissioning activities are already underway.
Expanded Phase 1&2 production would make Kamoa-Kakula the fourth-largest copper mine globally. IVN expects the mine's copper production rate to exceed 450,000tpa by Q2 of 2023 once Phase 2 is online and the debottlenecking plan has been implemented.
Pending catalysts include the Platreef definitive feasibility study this quarter, the Phase 3 PFS in Q3, and exploration updates at Western Foreland.