CAPITAL MARKETS

"The [Ivanhoe] pullback investors have been waiting for"

The incoming Democratic Republic of Congo mining charter has knocked around 15% off Ivanhoe Mines'(CN:IVN) share price but this is an opportunity, according to Bernstein's Paul Gait.

Staff reporter
Slight decline: Kamoa-Kakula is still worth a bucketload even with higher copper royalties in the DRC

Slight decline: Kamoa-Kakula is still worth a bucketload even with higher copper royalties in the DRC

Since recent clarification on the new laws, Ivanhoe's share price has fallen from C$4 (US$3.25) per share to $3.61. 

The DRC national assembly has passed a new mining code that ups the copper royalty from 2% to 3.5% and the ‘strategic minerals' rate up to 10%.

The government's existing stake in Kamoa-Kakula means the new 5-10% "state participation" measure will not affect the project.  

The new law - which is four years late - has not yet been signed off by president Joseph Kabila.

Gait said the sell-off on Ivanhoe shares was unnecessary but provided an opportunity for others wanting in on the stock.

"Investors are now able to buy a dollar's worth of Ivanhoe's copper in the ground much more cheaply than they could for most of last year," he said.

Gait questioned investors' focus on the DRC, even though its political instability is a proper investment risk. 

"Were this any other developing country, the reaction from commentary around what is being proposed would not have been anywhere near as severe," he said.

Bernstein's price target for Ivanhoe is still $15, an almost-300% increase on the current level. 

Gait's hypothesis for mining development continuing in the DRC is simple: the world needs its resources. 

In the note, he said the country "unambigously" needs mining investment, but that the world needs the DRC "even more so". 

"We have described the DRC as the Saudi Arabia of the electric vehicle age, and we mean it," he said. 

"The world's use of electricity, and green electricity at that, will increase dramatically over the next few decades; this demand must be met with raw materials and, in particular, with copper and cobalt.

"There are no new Chiles but there is the Congo." 

 

 

A growing series of reports, each focused on a key discussion point for the farming sector, brought to you by the Kondinin team.

A growing series of reports, each focused on a key discussion point for the farming sector, brought to you by the Kondinin team.

editions

Mining Journal Intelligence Investor Sentiment Report 2024

Survey revealing the plans, priorities, and preferences of 120+ mining investors and their expectations for the sector in 2024.

editions

Mining Journal Intelligence Mining Equities Report 2023

Access an exclusive, inside look on the quarterly mining IPOs and secondary raisings data and mining equities performance tables with an annual Stock Exchange Comparisons supplement.

editions

Mining Journal Intelligence World Risk Report 2023 (feat. MineHutte ratings)

A detailed analysis of mining investment risks across 121 jurisdictions globally, built on 11 ‘hard risk’ metrics and an industrywide survey.

editions

Mining Journal Intelligence Global Leadership Report 2023: Social licence

Gain insights into social licence trends and best practices from interviews with 20+ top mining company executives and an industrywide survey.