A Gold Study Worth Scanning

Plus: Ivanhoe Mines Outpaces Copper Indexes

TCRs:

1. Copper miner Ivanhoe Mines shares IVN IVPAF at $12.78 look to be challenging a $12.90 high mark from February 2022. The shares are sidestepping declines this week in many copper-company stocks (Global X Copper Mines COPX). Copper futures prices also are giving back recent gains. An Ivanhoe spokesman, Matthew Keevil, explained the other day how “flash smelting” of copper concentrate in DRC Congo’s Kamoa Kakula plant likely will lead to reduced shipping costs and more profit margin.

   “It allows the roasting and smelting of sulfide concentrates in a single furnace, so there is a bit of variance on the capex side, though we are building the largest single furnace (manufacturer) Outotec has ever made, so it is still around $1 billion in capex for the complex,” he begins.

   

   “From an opex perspective, not much changes on the backend directly, you are producing 99.5%+ copper anode as product. The big savings for us is actually largely related to logistics since we’ll be shipping effectively half the material to port (50% concentrate vs. 99.5% anode). So you’re cutting basically ~1.2Mt of wet concentrate into ~500kt of anode. That’s a big saving obviously on trucking, fuel and related inputs, and that drives the C1 cost improvements outlined in the 2023 Feasibility Study —  wherein C1 costs drop to around $1.22/lb. while Kamoa’s production rises towards 650kt copper in con annually (100%).”

   Probable bonus: The smelter also produces approx. 700kt of sulfuric acid as a by-product, which is in heavy demand on the DRC Copper Belt for the oxide operations,  and has traded as high as ~$400/t in the past year. Obviously, as we bring that amount to market it will change the dynamic (I think the entire market is around 1.3Mt), but we still expect somewhere north of $200/t from the by-product. So another helper on the opex side at Kamoa. “

   Thank you, Matthew. Here is the flash about the new flash smelter in the recent IVN update. Also the background on flash, or direct-to-blister.

   

    

   IVPAF shares are our largest nat-resources stake — approx. 80,000 shares, some held since 2003 ,when Ivanhoe (Ivanplats Africa) was a private company.

2. This one — the Chicago Fed’s study of gold price influencers, I will let you access from my TWITTER here. The Economist article about the study, which might support West Vault Mining WVM WVMDF and Sun Valley Gold Fund’s (Idaho) Peter Palmedo and his Reciprocal Gold thesis. Essentially, the Chicago research supports some of Peter Palmedo’s quantified thesis. To wit: stock market buoyancy and investor momentum have more influence than inflation or crisis events on the price of gold.Paul Schulstad, former Wall Street merger arbitrage trader and a WVM WVMDF shareholder, as are we here at home, tells me:

   “If you go back to January 2021, the gold price at the time had long reflected the 2021-2022 inflation spike. Gold is a lot smarter than we mere mortals! Real economists were forecasting problems with inflation after March 2020.

   “I have to believe that the price starting in April/May 2020 started to reflect the points (the Chicago study) raises  — as the economic shutdowns made it clear that money printing must follow. (I owned zero gold and gold stocks on March 1 and owned a lot as of June 30, 2020). That said, the real interest rate factor is important and has undoubtedly been a headwind recently: real interest rates were low in 2020 and are higher today. In some ways, the surprise is the strength of gold.”

Thank you, Paul.

— Thom Calandra