In a May 21 research note, BMO Capital Markets analyst Andrew Mikitchook reported that during a recent multisite tour, Ivanhoe Mines Ltd.'s (IVN:TSX; IVPAF:OTCQX) "world-class assets and technical management showed very well."
Mikitchook's overall impression was that "the CITIC financing has transitioned Ivanhoe to preconstruction with the company now considered a financed copper development company that will see positive market reactions to incremental construction milestones," he indicated.
The analyst provided the current status of each of Ivanhoe's projects in Africa and the Democratic Republic of the Congo, noting the "takeaway from the site visit was the notable progress towards preparing for construction, particularly at Kakula and Kamoa."
The company has advanced both to the preconstruction phase while continuing its successful exploration efforts, specifically discovering recently the new bonanza high-grade Kamoa North and Kamoa Far North zones. Ivanhoe intends to begin drilling these zones' extensions after the rainy season, thereby providing further exploration leverage.
At Platreef, the company has made significant progress on sinking shaft 1 and making collar preparations for shaft 2. BMO expects management to discuss possibly rescheduling the production ramp-up to "accelerate production at a lower capacity by converting shaft 1 from ventilation to production," Mikitchook pointed out.
Regarding Kipushi, Ivanhoe made notable progress there also, with developing the shaft and underground infrastructure. Next for Kipushi is a feasibility study, anticipated in Q2/19, after which the company will officially start construction.
Mikitchook noted that during the site visit, management discussed financing. It is working on various options, including debt, offtake and mining fleet vendor financing, for Platreef and Kipushi. Management again confirmed it will finance Kakula/Kamoa with equity.
Upcoming catalysts for Ivanhoe are further results from ongoing drilling, a Kipushi feasibility study in Q2/19, closing of the CITIC financing before Sept. 7 and a Kakula feasibility study in early 2020.
BMO has an Outperform rating and a CA$9 target price on Ivanhoe. This represents a potential return of 175% as the company is currently trading at around CA$3.25 per share.[NLINSERT]
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Disclosures from BMO Capital Markets, Ivanhoe Mines, May 21, 2019
I, Andrew Mikitchook, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients.
Company Specific Disclosures
Disclosure 2: BMO Capital Markets has provided investment banking services with respect to Ivanhoe Mines within the past 12 months.
Disclosure 4: BMO Capital Markets or an affiliate has received compensation for investment banking services from Ivanhoe Mines within the past 12 months.
Disclosure 5: BMO Capital Markets or an affiliate received compensation for products or services other than investment banking services within the past 12 months from Ivanhoe Mines.
Disclosure 6A: Ivanhoe Mines is a client (or was a client) of BMO Nesbitt Burns Inc., BMO Capital Markets Corp., BMO Capital Markets Limited or an affiliate within the past 12 months: A) Investment Banking Services.
Disclosure 6C: Ivanhoe Mines is a client (or was a client) of BMO Nesbitt Burns Inc., BMO Capital Markets Corp., BMO Capital Markets Limited or an affiliate within the past 12 months: C) Non-Securities Related Services.
Disclosure 16: A research analyst has extensively viewed the material operations of Ivanhoe Mines.
Disclosure 17: Ivanhoe Mines has paid or reimbursed some or all of the research analyst's travel expenses.
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