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Jarrod Wesson
Published on
November 17, 2017
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Today, we are going to introduce a junior miner that has delivered astonishing returns in the last two years. It is IVANHOE MINES LTD (OTCMKTS:IVPAF). It is a Canadian mineral exploration and development company located in Vancouver, British Columbia.The company has three projects in Congo and South Africa containing very different minerals; platinum, palladium, nickel, copper, gold, and rhodium.We believe that the company is worth a look.The projects are shared with international operators as well as state-owned companies, which we appreciate. Company LogoFurthermore, the most interesting seems to be the Kamoa-Kakula Project. According to company materials, it has been demonstrated that it is the "largest copper discovery ever made in the history of mining in the African continent and already ranks among the 10 largest copper deposits in the world."https://youtu.be/iGyYPaDBuMcSourceThe stock returns delivered in the last two years have been astonishing. From trading, in 2016, close to $0.5, the share price increased to touch the level of $4.0 in 2017. For those who need a calculator, it is triple digit returns.Have a look at it before we explain you what's driving the share price: 2 years chart for IVPAFBusinessIvanhoe Mines is focused on exploration and development of mining projects. It was incorporated in 1993 and as of September 2016, the company reported 964 employees.It is a company that seems to have accumulated large amount of expertise in the mining business mainly in Southern Africa, wherein the company has operated for the last 24 years.The company has three projects, from which the Kamoa-Kakula Project is the flagship. It seems to be quite unique.According to Wood Mackenzie, the consultancy firm, it is the largest high-grade copper deposit in the world. The following presentation comes from the company's website: Presentation from IVANHOE MINES LTD OTCMKTS:IVPAFThe project is a joint venture between Ivanhoe Mines and Zijin Mining Group Co., Ltd., within the Central African Copperbelt in the Democratic Republic of Congo’s southern Lualaba province. The company signed an agreement with the government in November 2016 transferring a large percentage of the mine. It holds right now 20% interest. Additionally, Ivanhoe Mines and Zijin Mining (each) hold an indirect 39.6% interest, whereas Crystal River Global Limited holds an indirect 0.8% interest.The fact that the company could receive almost 40% of the project is very beneficial and shows the bargaining power of IVPAF. Usually, governments want a large piece of the project, so when we find companies owning large stakes, it means that the expertise, know-how of capital of the company was needed. It is definitely a good sign.IVPAF also controls 64% interest of the Platreef project, wherein the company is expected to extract platinum, palladium, nickel, copper, gold, and rhodium. It is located on the Northern Limb of South Africa’s Bushveld Complex.This project is also shared with other international operators. A Japanese consortium of ITOCHU Corporation (Japan Oil, Gas and Metals Corporation and Japan Gas Corporation) holds 10% of the project. Additionally, the South African beneficiaries have a combined 26% stake.Furthermore, the company owns 68% interest in Kipushi Mine, which is located on the Central African Copperbelt in the Democratic Republic of Congo. It is a very old mine, which operated between 1924 and 1993, in which the state also owns 32% interest. From this project, our readers will be very interested in the following expected financial figures:

  • After-tax net present value at 8% real discount rate is $533 million.
  • After-tax real internal rate of return is 30.9%.
  • After-tax project payback period is 2.2 years.

Recent Developments and Share price dynamicsWe believe that the company's share price is correlated to the price of Copper. The following is a chart of the copper futures. Please note the price jump in 2016, which is similar to that of the company's share price. 2 years chart for COPPERThe following are the most significant developments that affected the share price recently: 2 months chart for IVPAFOn September 14, 2017, the company released that it had filed a National Instrument 43-101 (NI 43-101) technical report on the independent definitive feasibility study for the Platreef platinum-group metals, nickel, copper, and gold project in South Africa. In our opinion, market participants studied the report and reacted positively to the information contained.We believe that market participants will be interested in the following table. The project has a net present value of $916, a 5.3 payback period and a IRR of 14.2%: Platreef - IVANHOE MINES LTD OTCMKTS:IVPAFAdditionally, On October 30, 2017, the company noted that it had agreed to rebuild 34 kilometres of track to connect the Kipushi Mine with the DRC national railway at Munama, south of the mining capital of Lubumbashi. A Memorandum of Understanding (MoU) signed with the Société Nationale des Chemins de Fer du Congo was noted. We believe that we need to highlight two features. Firstly, the company will be able to reduce transportation costs in the Kipushi mine. Secondly, this news really prove the good relationship that the government has with the company.On November 1, 2017, the company released an important development in the Platreef mine. The Shaft 1 had reached a "depth of 500 metres below surface, more than halfway to the planned final depth of 980 metres."Executive Chairman, Robert Friedland, was quoted:

“Our focus is to keep advancing the Platreef Project along its critical path. Our continued development of shafts 1 and 2 will provide access to the Flatreef Deposit and help to ensure that the project is able to meet the scheduled, first phase start-up of the underground mine and concentrator by 2022.” Source

The last two announcements seemed to be the most significant for the last two months. The market reacted by pushing the stock from $3.2 to $3.7, delivering stock returns to those who were quick in assessing the announcements.ConclusionCurrently trading with a market cap of $2,972 million, IVPAF is an exciting story among small caps. With $285 million in cash, $1,002 million in total assets and only $26 million in total debt, the company is very well financed. To sum up, there's a lot to like with IVPAF.We will be updating our subscribers as soon as we know more. For the latest updates on IVPAF, sign up below!Image courtesy of jbdodane via FlickrDisclosure: We have no position in IVPAF and have not been compensated for this article.

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