- Check out this epic rant from billionaire miner Robert Friedland on the discounts offered to copper miners in the Democratic Republic of the Congo
- Friedland said the Martians could see Congo as the best place in the world to mine copper, joking analysts about the ratings, noting that BHP target OZ Minerals had “necessarily Tier 1′ says nothing
- Gold miners surge as US Fed confirms ‘light’ 25bps rate hike
Robert Friedland is a mining game legend and Canadian political science major whose passion for metals led him to discover the Voisy Bay nickel deposit in Newfoundland and Labrador and the Oyu Tolgoi copper-gold mine in Mongolia. bottom.
The chairman of Ivanhoe Mines, which is worth US$3 billion according to Forbes, is well versed in high-risk, remote or overlooked jurisdictions and exploration activities.
And his latest development is in some ways his boldest yet. Capped at his C$15 billion Ivanhoe has been in production for two years with JV partner China’s Zijin at the Kamoa-Kakula copper mine in the Democratic Republic of the Congo.
The largest Tier-1 development in years, the operation is an industry-leading nearly 5% grade copper mine of approximately 400,000 tpa.
However, the proposal to develop Phases 3 and 4 at a combined capital cost of US$4.5 billion would involve a US$906 million smelter producing 500,000 tons of 99% pure blister anode copper per year. It will be included and will be one of the largest in the world. It is the largest copper mine producing an average of 620,000 tpa of copper in its first ten years.
The Phase 3 expansion, which is expected to be completed in the fourth quarter of 2024, will cost approximately US$3 billion. Ivanhoe also announced his US$490 million and US$380 million capital estimates for the Platreef development in South Africa and the Kipushi development in the DRC. .
The NPV of the project will be US$19.1 billion at US$3.70 per pound, or US$23 billion at a spot price of approximately US$4.25 per pound. However, this includes his 8% discount rate, which Friedland has trouble with.
In his view, the “Africa discount” commonly applied by analysts because of the political risks of doing business in Africa is all bullish, and in Wednesday’s self-proclaimed rant told analysts that the DRC is “a world It’s the most desirable location in the world,’ and in the process barely exposed BHP (ASX:BHP)’s $9.6 billion cash purchase of OZ Minerals (ASX:OZL).
where do i start?
Friedland’s first target is Canadian analysts.
“That’s why the world’s largest mining companies are throwing these NPV models out the window.
they should be burned. They should be put in the trash. They should never appear again.
“The management of these banks that are allowing analysts to create these ridiculous models should just change their minds. Because modeling is not the only way to model mines.
“The market models superior mines at a premium.
“And I think Oyu Tolgoi will be a Tier 1 mine. Kamoa-Kakula is already a Tier 1 mine. I don’t think all of the Oz Minerals are necessarily Tier 1.” GB)
“But to pay the 68% premium, BHP and Rio Tinto buyers must have used $6 a pound of copper in their models.
“Paying US$6 per pound of copper for Kamoa-Kakula’s model shows how undervalued this asset is at the moment.”
Technology companies are next to the bill.
“Tech companies are modeled at a discount rate of 0% and gold companies are modeled at a discount rate of 0%, but without this copper there would be no tech revolution,” said Friedland.
“There is no electric vehicle industry without this copper, so it no longer makes sense for analysts to use discount rates of 10% or 8% that give no value to this asset.
“It took us 26 years to discover and build an asset. It is really, really hard to do this.
“It’s literally as rare as a chicken tooth. Thank you for giving me the opportunity to tell everyone on the phone that the only discount rate that makes sense for this property is zero.”
is there really anything there?
Here is our favorite part.
“We have no ice or snow. We have many young children desperate for work, so if I came from Mars in a flying saucer and was sent here by my master, obviously I Go to Katanga to mine copper,” he said.
“I am pleased to inform you on this conference call that there is no major mining company in the world that has not been in touch with us.
First of all, when it comes to mining in Congo, the word young children is probably not the best choice.
The Alien Theory – often put forward by basketball savant Bill Simmons to explain the bulky players who appear to be the best players on the court to aliens but often aren’t – is our theory. One of my favourites. Bush chalk at Summer Barbie.
The Democratic Republic of the Congo ranked last year in the bottom three behind Spain and Zimbabwe in the Mining Investment Attractiveness Index released by the Fraser Institute in its annual survey of mining companies last year, making it a better candidate for copper than Chile or Peru. Friedland thinks it’s a good bet.
(As an aside, ask AVZ (ASX:AVZ) investors about the predictability of their business in the DRC.)
Chile and Peru, the world’s two largest producers, are plagued by a series of outages and disruptions as Chile’s new left-wing government and political unrest seek to curb supplies. Peru’s Las Bambas mine ceased operations on Wednesday.
“I got a lot of snickers when I first said I’d rather mine copper in Congo than in Chile. It was written in the Financial Times of London as a ridiculous statement,” Friedland said. .
“However, under Chile’s 35-year-old young communist[President Gabriel Boric]we see that Chilean industry has failed to develop meaningful expansion.
“The Chilean grid is not green. Most of the grid is burning coal. .
“As I said a hundred times. If my mine is ten times the grade of yours, and our mine is ten times the grade of Escondida, the world’s largest copper mine, we are steel. 1/10th of concrete, 1/10th of copper, 1/10th of water and electricity, and 1/10th of greenhouse gases per unit of copper. is generated intentionally.
“It makes no sense to apply a 10% discount rate to Congo’s copper production, which is one of the world’s greenest copper mines.”
He says the development of a new transport network known as the Lobito Corridor being developed by a Trafigura-led consortium will further improve it. Friedland then returns to the theme.
“We solve problems by conducting tours to mines, speaking at conferences like BMO and Bank of America, and ultimately discovering that this is exactly the kind of asset your children need to live on. In a greener, cleaner world,” Friedland said.
“Not only children in rich countries but also Africans and South Americans and people in developing countries need to live and eat and survive. I think we need a sensible evaluation method.
“I recently tweeted a chart showing how ridiculous mining market capitalization is compared to tech companies. because they are afflicted.”
— Robert Friedland (@robert_ivanhoe) January 30, 2023
“It’s nearly impossible to build a new BHP or a new Rio Tinto. These companies have 50-year reserves. They shouldn’t be modeled on an NPV basis. It doesn’t make sense.”
“If anything needs a discount, it’s the one south of the Panama Canal.”
China real estate, Caterpillar copper slide
Copper suppliers have certainly been hit hard as Chile and Peru struggle to recover from COVID-19.
Codelco, Chile’s state-owned copper mining company and the world’s largest single producer, has confirmed that its output in 2022 fell by about 10%, or 172,000 tonnes. 75%.
Overnight, however, copper prices fell due to a worsening demand profile, falling 1.5% to US$9,087 per tonne.
“Copper led with a lower complex as the market shifted focus from supply disruptions to signs of weak demand. I warned them not to,” ANZ’s John Bromhead said in a note this morning.
“This comes after data showed China’s home sales remained weak in January. % decrease to 325.3 billion yuan.
“Nevertheless, supply-side problems appear to be worsening. China’s MMG has completely closed its Las Bamba operations amid civil unrest in Peru.”
Major iron ore miners were mediocre, but a modest 25 basis points fell in 2019, in a sign that US Federal Reserve Chairman Jerome Powell believes last year’s hawkish approach helped keep inflation in check. The materials sector rose 0.22% after announcing the rate hike.
Gold miners went wild as the price surged an astounding 1.46% to US$1955.34 (US$2736/oz AUD).
Evolution Mining (ASX:EVN) rose 7.41% while Northern Star (ASX:NST) rose 5.1% to lead the large-cap miners.
NST’s stock price is now up almost 65% over the past six months, giving it a market capitalization of over $15 billion.
Gold mining stock prices today: