Inside Friedland’s massive Ivanplats prospectus

Mining magnate Robert Friedland looks poised to take the market by storm yet again, with an aggressive portfolio of advanced-stage base and precious metal properties in Africa underpinning an initial public offering (IPO) for Ivanplats (IVP-T), his upcoming Toronto Stock Exchange listing.

On Oct. 16, Ivanplats filed its final long-form prospectus, which outlined an IPO totalling 63.3 million shares at $4.75 per share, for gross proceeds of US$305 million. Shares are expected to start trading publicly on Oct. 23.

The final issuance clocked in on the lower end of an offering range between $4.50 and $5.40 per share, and featured established underwriters, including Bank of Montreal, Morgan Stanley, Macquarie Capital and the Royal Bank of Canada. An over-allotment option could see an additional 15%, or 9 million shares issued, raising proceeds to around US$350 million.

Friedland’s financing marks the largest industry offering on Canadian markets since Tahoe Resources (THO-T, TAHO-N) raised US$350 million in 2010 for its Escobal silver project in Guatemala. If pre-IPO bond issuances are included, Ivanplats’ total cash raise jumps to nearly US$500 million.

Ivanplats reported 423 million shares outstanding at the time of filing — Friedland holds roughly 26% of the company — which would equate to an initial market valuation in excess of US$2 billion. During pre-market trading on Oct. 17, Ivanplats shares leapt above the $5 level, with transactions scheduled to close on Oct. 23.

Ivanplats has three early to development-stage projects: the Platreef platinum group elements (PGE) property, Kamoa copper project and past-producing Kipushi underground zinc-copper mine.

The 90%-owned Platreef PGE project is Ivanplats’ most well-publicized endeavour and sits on the relatively underdeveloped but highly prospective northern limb of South Africa’s prolific Bushveld complex — located 280 km northeast of Johannesburg.

Major PGE producer Anglo Platinum operates its Mogalakwena group of properties along-strike to the north, and Michael Jones’ Vancouver-based Platinum Group Metals (PTM-T, PLB-X) is exploring its Waterberg PGE joint venture with Japan Oil, Gas and Metals National, even farther north along the Platreef horizon.

Ivanplats’ near-term focus at Platreef is an inferred resource identified as containing “favourable PGE grades and attractive thickness and geometry.” The company has identified 175 million inferred tonnes grading 4.6 grams platinum-palladium-rhodium (3PE) per tonne, 0.41% nickel and 0.2% copper, which looks promising for non-bulk underground mining.

According to technical documents, the resource lies within a gently dipping portion of the Platreef at depths between 700 metres and 1,000 metres. Average vertical thickness clocks in at 16.8 metres, with an average grade thickness of 77 grams metre per tonne 3PE. Metallurgical flotation test work on high-grade portions of Platreef mineralization completed in 2010 returned recoveries to concentrates totalling 63% to 67% nickel, and 63% to 71% 3PE.

Ivanplats maintains there is significant exploration upside to the resource, which remains open along strike for several kilometres, as well as downdip. With two earlier-stage drill targets and a 40 sq. km swathe of untested ground on its 107 sq. km land package, the company appears to have significant blue sky.

Over the next 12 months, Ivanplats is focusing on updating its mineral resource at Platreef, as well as applying for permits that would see it receive its mining rights by early 2013. The company intends to break ground on an exploration shaft during the first quarter.

Platreef’s potential value is apparent by a deal Ivanplats cut with Japanese interests Itochu and ITC Platinum in June 2011. The Japanese companies finalized a deal to purchase an effective 10% in the Platreef project for US$290 million.

Ivanplats’ 95%-owned Kamoa property hosts a large stratiform copper deposit on the Central African copper belt in the Democratic Republic of the Congo’s (DRC) Katanga province. Located 270 km west of Lubumbashi, the provincial capital, Kamoa represents one of the more promising undeveloped copper deposits worldwide in terms of tonnage and grade.

The company has delineated 348 indicated tonnes grading 2.64% copper — representing 9.2 million contained tonnes — in addition to 462 million inferred tonnes averaging 2.72% copper.

The resources are defined over a 20 by 15 km zone contained primarily within an area where Ivanplats has acquired its exploitation licences, which were granted in late August and carry a 30-year term. The company has agreed to sell an additional 15% of the project to the DRC government, which will bump domestic ownership to 20%. 

Ivanplats completed a preliminary economic assessment (PEA) on Kamoa that modelled a US$2-billion mine with a 61-year life. The operation would run at an average throughput rate of 5 million tonnes per year, and produce roughly 143,000 tonnes of copper annually over the first 10 years, at cash costs totalling US$1.19 per lb.

At a US$3.50 per lb. copper price, the PEA returns a $2 billion after-tax net present value and 21.5% internal rate of return, assuming a 10% discount rate. The company intends to spend US$70 million over the next two years at Kamoa on drilling and modelling work.

Ivanplats’ Kipushi zinc-copper project marks a second asset in the DRC’s Katanga province. Kipushi lies 30 km southwest of Lubumbashi, and produced 60 million tonnes grading 11.03% zinc and 6.78% copper from 1924 to 1993. Ivanplats owns 68% of the project, with the DRC’s state-owned La Générale des Carriéres et des Mines (Gécamines) holding the remainder.

Ivanplats submitted an application to extend its exploitation permit at Kipushi on June 15. The property hosts surface mining and processing infrastructure, including two concentrators, administrative offices, workshops and housing, as well as a connection to the national power grid.

Underground access is provided through five shafts, with the No. 5 shaft providing primary access to the lower levels. Ivanplats is in the process of dewatering the mine in a bid to refurbish existing shaft infrastructure to the 1,150-metre level. According to filings, the company estimates US$30 million in remaining expenditures on refurbishment over the next two years.

Kipushi holds a historic resource totalling 17 million indicated tonnes grading 2.23% copper and 16.76% zinc, but the company’s undergound exploration will focus on the Big Zinc high-grade zone, which hosts 4.7 million historic tonnes grading 38.6% zinc and 0.76% copper.

Ivanplats reported US$85 million in cash and equivalents and US$163 million in short-term deposits as of June 30. Advancement of the Kamoa and Platreef projects to production is listed as a “near-term objective,” and the company cites a large, 9,000 sq. km land package in the DRC, South Africa, Gabon and Australia as a long-term exploration driver.