Ivanhoe Mines’ Kamoa-Kakula reaches cruising speed

Ivanhoe Mines (IVN.TO) has confirmed the Kamoa-Kakula copper mine in the DRC has produced in excess of 93,000 tonnes of copper in the first quarter, with a new record monthly production in March when just under 35,000 tonnes of copper were produced thanks to a new weekly and daily production record of respectively 9,000 tonnes of copper and 1,563 tonnes of copper respectively. The average mill throughput during the quarter was 1.93 million tonnes of rock at an average grade of 5.4% copper. Interestingly, the recovery rates are also increasing and are even exceeding the design rate. At the end of March, the average recovery rate reached 88.3% (with some days even reaching 90%) which compares very favorably to the anticipated 86% recovery rate.

Looking at the March quarter production result, the company appears to be on track to reach its nameplate capacity of 450,000 tonnes of copper (37,500 tonnes of copper per month) in the next few months as Ivanhoe continued to work to solve bottleneck issues during the first quarter (which also weighed on the total copper output). Fortunately the company has a very extensive surface stockpile with an anticipated 4.2 million tonnes at an average grade of 3.9% copper. Having an extensive surface stockpile will ensure the company can keep the mill filled, even if the mine would temporarily produce at a lower rate.

The attributable net profit from the 39.6% stake in Kamoa-Kakula was US$82.7M in the first quarter of this year as the ownership of a minority stake means the company is not consolidating the financial performance of the mine. It reports a ‘net profit from joint venture’ in its income statement but as the joint venture did not pay a dividend to its shareholders, Ivanhoe did not record any cash inflow.

Disclosure: The author has no position in Ivanhoe Mines. Please read our disclaimer.

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