Picture: Boxer Ngwenya. Picture: Boxer Ngwenya.
Ivanplats, a mine developer based in Canada, is the worst performer among its global peers this year. Analysts say its stock should be almost three times higher.
Ivanplats has three main projects in copper, zinc and platinum group metals located in South Africa and the Democratic Republic of Congo (DRC).
Its Toronto-listed stock has slid 69 percent this year, the most among 115 companies in a Bloomberg global mining index, which has lost 30 percent.
The Vancouver-based company’s capital expenditure needs, the geopolitical risk inherent in its African projects and the general doldrums in the global mining industry had spurred the decline, said John Goldsmith, the deputy head of equities at Montrusco Bolton Investments in Toronto.
Ivanplats is studying the development of Kipushi, a base metals mine in DRC that has operated on and off since 1924, and is evaluating the Platreef platinum group metals discovery in South Africa.
Its Kamoa copper project in the DRC might produce at least 143 000 tons of copper a year in its first 10 years of operations, according to a statement from the company on May 15. Ivanplats said it was the world’s biggest undeveloped high-grade copper discovery.
The company owns 95 percent of the project and the DRC government holds the balance. Ivanplats had offered to sell another 15 percent stake to the government, according to the company’s website.
Ivanplats said in April that it was in “detailed discussions” with major international mining industry “participants” over the financing and developing of the project and associated infrastructure.
“Ivanplats is optimistic that the value of the company’s projects will be more broadly recognised as the company continues to make good progress advancing its three principal projects in South Africa and the DRC,” the company said in reply to questions.
The statement also noted that the Ivanplats share began trading out of step with its peers in the Standard & Poor’s/TSX Global Mining index in late April, about the time that lock-ups related to its initial public offering (IPO) last year started to expire.
Fraser Phillips, a Royal Bank of Canada analyst, said last month: “Ivanplats has the potential to realise significant value as it advances its three main projects through development and into production over the next five years.”
Alex Terentiew, an analyst at Raymond James, said each of the company’s “world class” projects had the potential to be “one of the largest mines in terms of production in their respective metals”.
Ivanplats had an experienced management and board that could advance the company’s projects to the point at which market confidence was boosted, leading to a “significant appreciation” in the company’s value, Terentiew said.
Robert Friedland, the billionaire founder and chairman of Ivanplats, has succeeded in the past with large deposits.
His most recent promotion is Ivanhoe Mines, which has been renamed Turquoise Hill Resources and owns 66 percent of the Oyu Tolgoi copper and gold project in Mongolia.
Rio Tinto, which now controls the company, said last week that it had made the first commercial shipment of copper from the $6.6 billion (R66bn) mine.
Friedland has been advancing mine projects for more than two decades and led the C$4.3bn (R41bn) sale of the Voisey’s Bay nickel deposit in Canada in 1996, according to the Ivanplats IPO prospectus.
Friedland had shown he was able to raise the money for big projects, said Frank Holmes, the chief executive of San Antonio-based US Global Investors, which holds Ivanplats shares.
“I’ve bought some more on the down days because it will have its day,” Holmes said. “It’s Robert Friedland and he’s a visionary and he’s relentless.”
Ivanplats’s C$300.8m IPO in October last year was the biggest Canadian mining listing since Tahoe Resources raised C$348m in 2010. It has also been the worst-performing IPO bigger than $100m globally in the past 12 months.
Copper has fallen 14 percent in New York since October 17, the date of the Ivanplats IPO, while platinum has dropped 14 percent. Over the same period, the S&P/TSX Materials index has shed 33 percent.
Concerns around Ivanplats were “the insufficient installed power capacity, the political risk of higher taxes, royalties or asset expropriation, and the need to raise over $4bn to bring these projects into production”, Terentiew said.
Goldsmith said the decline in Ivanplats shares made equity financing difficult. The geopolitical risk would also be an issue.
“Because of where it’s located it’s never going to fetch premium valuation,” Goldsmith said. “It is what it is: great asset, wrong location means you don’t get premium price.”
Five analysts who rate the company have an average target price of C$4.19, almost triple Ivanplats’s closing price of C$1.54 a share on Thursday last week. Six analysts rate the stock a buy, two have the equivalent of hold, and none recommend selling. – Liezel Hill from Bloomberg