Canadian junior mining stock promoter Robert Friedland has aonther new copper discovery play ready to bring to the world.
The Kamoa copper project in Democratic Republic of Congo is being developed by Ivanhoe Mines, which is a Vancouver-based, publicly listed junior mining company that Friedland founded and also heads as Executive Chairman of the Board of Directors.
This company was formerly called Ivanplats, and it changed its name to Ivanhoe in August 2013 when the name became available. A year earlier another mining company Friedland had earlier founded with that name was taken over in April 2012 by Rio Tinto. Rio Tinto then immediately changed its name to Turquoise Resources to put their mark the change in ownership, and in doing so aligned it with the local name of the project as well.
In response to having being pushed out the door by Rio Tinto, Friedland promptly turned around and, Phoenix like, in October 2012 raised US$307 million for another of his companies, Ivanplatts, which as a company focused on exploring for minerals in Africa. Then in August of 2013 he finally re-named Ivanplats as Ivanhoe Mines again, now without possibility of confusion after the interval of time.
Ivanhoe last week published an updated preliminary economic assessment (PEA), by respected independent consultants, for a major copper discovery there that, according to Friedland, and Ivanhoe’s CEO Lars-Eric Johansson, could become one of the world’s lowest-cost copper producers once developed.
The PEA indicates a two-phase development of a mine at the site might have a positive net present value of as US$4.3 billion, in constant prices, before taxes and as much as US$2.5 billion after taxes.
Kamoa copper project in Democratic Republic of Congo
Friedland has a prior record of developing some major mining projects, including the Voissey’s Bay nickel deposit in Labrador and the Oyu Tolgoi (which quite literally means Turquoise Hill) copper gold and silver mining complex in Mongolia.
According to Friedland, the Kamoa copper discovery in the Katanga province of the Democratic Republic of Congo has a rare combination of high-grade copper and large volumes of ore that could, in his opinion, make it one of the lowest-cost, major producers of copper in the world.
The study reports cash costs of producing copper at the mine could be very low indeed, at about US$1.18 per pound.
The discovery Friedland is excited about forms an extension of the Central African Copper-belt, and should also have access to transportation at reasonable cost, with a rail extension to a line reported to be only 10 kilometers away.
The PEA does however include some reserve estimates that are only “inferred mineral resources” as the term of art puts it, and these would still remain to be confirmed as actual mineral reserves. This, in turn, implies a good deal of caution should be attached to its overall conclusions until they are confirmed, as that can make a potentially very large swing item in the economics of such a project. Get it wrong and your profits go down the river very fast.
The market didn’t seem to favour the findings of the PEA much, either. After rising slightly shares of Ivanhoe Mines settled back about 5% to just under US$2 per share in trading on the Toronto Stock Exchange afterwards. With a market capitalization of aroundUS$1 billion it is a fair sized company though, with a book equity base of US$450 million.
With corporate exploration and development costs at Ivanhoe currently running north of about US$47 million each quarter and “only” $187 million of cash left in the bank, clearly the company will likely need to find a strategic partner to help pony up the estimated US$1.4 billion initial investment required to develop this prospect just to bring it to the first phase of production. Adding the second phase and then ongoing sustaining capital costs would bring the total eventually to US$7.5 billion (at today’s prices).
The company announced early in October it had closed a previously reported US$100 million offering of additional common equity by way of a non-brokered private placement, to which Friedland himself contributed $25 million (both in Canadian dollars).
This after announcing earlier in the year as well that the company was in detailed discussion with… “major international major mining industry participants”. Clearly from last week’s stock market reaction people is waiting for that to happen before getting too excited about Kamoa.
The mining business is a uniquely quixotic combination of fact-based and often mundane detail, with careful and painstaking verification of geological facts on, or rather in, the ground, analyses every which way in great financial detail, with everything quintessentially long term in nature, yet sometimes coexisting side by side with the romance of getting rich quick on speculative short term market infatuations, that have cropped up regularly in the mining industry going back many centuries. Bubbles are far from unique to the mining industry but it does seem to love them from time to time.
Robert Friedland clearly has the charisma of a stock promoter but has also demonstrated staying power and success, and ultimately he has delivered the goods. It will be fascinating therefore to see this new venture of his demonstrate the staying power to become a viable project and ultimately come to fruition.
About Robert Friedland
Robert Friedland, 63, was born Chicago. After graduating from high school he was busted for drugs possession while at Bowdoin College along with other students there, and paid his debt to society for this youthful indiscretion for two years at the time.
He then attended Reed College in Oregon, where he shared an interest in Oriental mysticism with Steve Jobs whom he met there. He later studied Sanskrit and Buddhism in India after graduating with a degree in political science.
Friedland made his first fortune stumbling on a large nickel deposit at Voisey’s Bay in Canada. He sold the nickel-rich property to Canadian mining company Inco for US$3.1 billion in 1996.
Friedland’s Ivanhoe Mines company also discovered the Oyu Tolgoi major copper, gold and silver deposits in Mongolia which are now becoming producing properties, though now under the control of Rio Tinto. Turquoise Resources holds an almost 58% interest in the project and Friedland continues to hold a residual 10% interest in Turquoise Resources.
Robert Friedland resides today in Singapore, where he also maintains his private holding company Ivanhoe Capital Corporation, and he holds dual American and Canadian citizenship.
As of September 2013, Robert Friedland’s net worth is estimated at US$1.2 billion by Forbes magazine. He is married to Darlene and they have three children.
It is unlikely to be a coincidence that Friedland has an affection for the name Ivanhoe, which is both the name of his holding company and, since August, again of his principal operating company as well, of which he holds a little over 25% of the shares.
All the novels of Walter Scott, including Ivanhoe in particular, are nineteenth century tales of derring-do and romantic adventure; where heroic deeds and ideals do battle with the conflicts that come from modernizing societies. I do not know Mr. Friedland but would not be at all surprised if this indeed describes him too, to at least some extent.