Ivanhoe Mines rating cut after 'materially weaker than anticipated update'
Investing.com -- Scotiabank analysts downgraded Ivanhoe Mines (OTC:IVPAF) to Sector Perform from Sector Outperform in a note Thursday, following a "materially weaker than anticipated update pertaining to the company's flagship Kamoa-Kakula Cu complex in the DRC."
The rating cut is primarily driven by "significant uncertainty on the future operating outlook" after preliminary geotechnical findings indicated that recent seismic activity at Kakula "appears self-induced by mining."
While Ivanhoe Mines has implemented a short-term mine plan, it includes "substantially weaker 2025 Cu guidance of 370-420kt (vs. 520-580kt previously and our estimate of 440kt)."
More critically, Scotiabank (TSX:BNS) notes that the "medium to long-term mine plan at the complex has been placed under review."
Overall, the analysts "anticipate a future revised LOM operating plan (including Kakula) that is still very economic due to grade, but is likely based on lower mining rates, lower reserves, and higher costs."
Given the remaining significant uncertainty, Scotiabank has reduced its corporate 10% NAVPS. by "another C$2.02 per share or by 19% based on a materially weaker outlook." Their asset-level Kamoa-Kakula 10% NAVPS declined by 27%.
As a result of these revised expectations, Scotiabank has lowered its 12-month target price for Ivanhoe Mines to C$12.00 per share compared to the previous C$16.00 target."
The new target is said to be based on "1.4x (vs. 1.5x previously) our 10% NAVPS estimate."
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