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CITIC Metal Administrator Ivanhoe Mines

CITIC metal entered the field of Ivanhoe Mines, purple gold is more powerful, Camoa copper mine development to usher in significant progress!

Source: Zijin Mining


1. according to the report of the colored net, in June 11, 2018, Ivanhoe Mines signed a long-term strategic cooperation and investment agreement with CITIC metals. CITIC metals will invest 723 million Canadian dollars (US $560 million) to get 19.9% of the shares of the finen ho mining industry and provide 100 million RMB US medium term loan financing to the company. Ivanhau Mining will issue 196,602,037 additional common shares to CITIC Metals at C$3.68 per share. CITIC Metal will own 19.9% of the common shares issued by Ivanhoe Mining after the placement is completed, and CITIC Metal will be the largest single shareholder of Ivanhoe. Friedland, founder and chairman of Ivanhoe, holds 17% of the shares and retires as the second largest shareholder. The fund will be used for the development of Kamoa-Kakula copper mine, Kipushi zinc mine and Platreef platinum gold deposit in the field of AI Jin Hao.

2. The transaction is subject to CITIC due diligence and internal approval and is expected to last about 30 days. In addition, it is subject to approval by the stock exchange, other customary closing conditions and registration and registration with Chinese regulators. It is expected that it will take four months to receive all the necessary approvals and complete the transaction. After the private placement is completed, CITIC Metal and Ivanhoe Mining will sign an investor equity agreement. The main provisions include:

1) CITIC Metals will be entitled to nominate two directors, one of whom is an independent director and the board of directors of Ivanhoe will be expanded to 11. Sun Yufeng, chairman of CITIC Metals, is expected to join the board and co-chair Friedland.

2) CITIC Metals will be granted anti-dilution rights to maintain its 19.09% stake.

3) CITIC Metal will use its reasonable commercial efforts to arrange project financing for the first phase of the Kamoa-Kakula project.

4) CITIC Metal and Friedland also agreed separately that the ownership of Ivanhoe will be maintained within 19.9% by January 8, 2022.

3. Zijin Mining previously owned 9.9% of Ifenhao Mining and had anti-dilution rights. If Zijin followed up with the allotment, it would need about C$78 million (US$60 million).

Anxin Nonferrous Comments

I. Three Key Facts

1. The ownership structure of Camoa: Zijin Mining 39.6%, Ivanhau 39.6%, Gecamine 20%, Jinghe Global 0.8%. (Zijin Mining owns the financing of the first phase of the project and has the option of purchase.)

1) Camoa copper 100% holds the Camoa kkura copper mine project; kamua holding holds 80% stake in Camoa copper industry (the other 20% stake is held by Gecamine, which is not diluted).

2) Zijin Mining and Ivanhoe respectively hold 49.5% of Camoa Holdings and 1% of Jinghe Global Holdings. At the same time, Zijin has a purchase option with a 1% interest in Camoa Holdings. Zijin arranges the financing of the first stage of project development. The buyer issues an exercise notice and Jinghe Global must sell its 1% equity to Zijin.

2. Effenhouse Equity Structure: After CITIC Metal became the owner, the major shareholder of CITIC Metal was 19.09%. Robert Friedland, the former major shareholder, held 17%. Zijin Mining previously held 9.9% of Effenhouse Mining and had anti-dilution rights. If Zijin followed up with the allotment, it would need about C$78 million (US$60 million).

3. Importance of Camoa-Kakula Copper Mine Project: The fourth largest copper mine in the world, the highest grade copper mine in the world and the largest undeveloped copper mine in the world. Calculated by 1% of the boundary grade, the total amount of copper resources in the control level + inference level of Camoa-Kakula Copper Mine project is 4.249 million tons, the ore quantity is 1.655 billion tons, and the average grade is 2.56%. Moreover, according to the current exploration progress, the ore body boundary of the Kamoa-Kakula copper deposit project is still not closed, and there is a great prospecting prospect. Encryption and edge drilling are still under way to upgrade resource levels and edge control. It is preliminarily estimated that the annual output of copper in the first phase of the development plan will be 400,000 tons, and doubled to 800,000 tons in the second phase.

CITIC metal entered the field of Ivanhoe Mines, purple gold is more powerful, Camoa copper mine development to usher in significant progress!

CITIC metal entered the field of Ivanhoe Mines, purple gold is more powerful, Camoa copper mine development to usher in significant progress!

Source: Ifenhao official website, Anxin Securities Research Center II, CITIC Metal Owner Ifenhao, Camoa Copper Mine development ushered in significant progress, bringing significant benefits to Zijin Mining Industry!

1. Previous ownership structure has brought constraints to the development of Camoa project. At the project level, Zijin and Ivanhoe hold 39.6% equity respectively, which makes it necessary for both shareholders to invest in the Camoa project on the same scale of capital in order to maintain the share ratio. However, because of the mining industry, the financing capacity is limited (the asset liability ratio is 72%, the market capitalization is 2 billion 660 million yuan, the shareholding ratio of large shareholders is only 17%), it is obviously difficult to undertake the scale of investment and financing that is comparable with Zijin mining industry, which has brought great obstacles to Camoa's project development.

Plan A: Ivanhoe attaches great importance to Camoa's investment prospects. He does not want to give up his equity easily. He advocates reducing the scale of development and the corresponding financing scale to match Ivanhoe's financing capacity. By the end of 2020, the first phase is expected to be put into operation. The annual ore processing capacity given by Eifenhao is 6 million tons per year, but Zijin hopes 8 million tons per year.

Plan B: AI van Hau dragged on in the progress of the project and sold his stake to the top.

It can be seen that both PlanA and PlanB have delayed the development progress and reduced the scale of Camoa Copper Mine, and also improved Zijin.


2. CITIC metal entered the field of Ivanhoe Mines, Zijin Mining is more powerful, Camoa copper mine development is expected to accelerate!

1) CITIC: CITIC Group's investment in Metal Trading (mainly copper, niobium and zinc, platinum group metals, iron ore, coal, silver, etc.) and metal mining projects. In 2011, the Chinese consortium led by CITIC metals jointly purchased 15% of the world's largest niobium company CBMM for $1 billion 950 million. In 2014, the Minmetals consortium acquired the largest copper mine in the world, the Las Bambas copper mine. CITIC metals participated in the investment and gained 15% stake. These two investments have benefited CITIC Metals a lot.

2) We believe that CITIC Metal's relative holding of Ifenhao will bring great help to Zijin Mining to accelerate the development of Camoa Copper Mine.

First, CITIC Metal's ownership enabled Ivanhoe to acquire sufficient investment and financing strength for the Camoa project. CITIC Metals raised $723 million ($560 million) to acquire 19.9% of Ivanhoe Mining, and provided Ivanhoe with $100 million in medium-term loan financing. Zijin would increase its capital by about $78 million ($60 million) if it followed up the share allocation, which made Ivanhoe get a total of about $620 million equity increase and $100 million in medium-term loan financing. Considering that the development of Camoa Phase I needs about US$1.3 billion, according to the 49.5% investment ratio of Ivanhoe to Camoa, the current financial strength is enough to support the development investment.

Second, CITIC metals will be a good financial investor. CITIC metal has entered the field of Ai Feng Hao, breaking the previous deadlock, and Zijin Mining is more powerful. From the company's positioning and past business experience, CITIC Metal is a good financial investor. It basically gets huge profits by participating in 15% of CBMM and 15% of Las Bambas. We have reason to believe that this CITIC metal entered the field of AI Fei Hao, breaking the deadlock of the original Camoa's lack of financing ability, or hoping to rely mainly on Zijin's excellent transnational mine development and operation capability, providing enough financial financing and other related support for the opening of the Camoa project. Zijin Mining can be more powerful. At the same time, compared with Zijin's privatization of Ivanhoe, considering that privatization will objectively slow down the development progress of Camoa, and cause Zijin's share capital dilution and financial burden, CITIC's ownership of Ivanhoe and full support for Zijin's mining development project is obviously a more realistic and wise choice.

3. Standing at the present time, it is suggested to focus on Zijin Mining.

First, the 2018Q3 colored broad-spectrum varieties represented by copper, zinc and gold are expected to come up resonance. Mainly from the Federal Reserve's interest rate tightening in mid June, the situation of global liquidity tightening is expected to come to a peak. The repression of economic recovery is expected to ease, and domestic policy is gradually trimming to "expand domestic demand" and at the same time superimpose the peak season.

Second, the marginal supply and demand of copper is tightening, and copper prices are expected to rise strongly. Mainly benefiting from Q3 overseas copper mine concentrated labor negotiations, the strike expected to rise; 13 batches of seven types of scrap copper import approval volume was 485,100 tons, down 83.86%, January-April scrap copper import volume was 740,000 tons, down 38.5%, domestic scrap copper import continued to be tense, as well as domestic electricity investment, air conditioning, real estate industry marginal better in the second half.

Third, Zijin Copper Mine has a strong growth. From 2018 to 2019, 240,000 tons and 300,000 tons respectively. With the putting into operation of Camoa Copper Mine in 2020, it will gradually bring about a low-cost increment of 200,000 tons of equity output and great elasticity.

Fourthly, the company announced on June 9 that the Baxin Pogra Gold Mine (50% of the shares) which was suspended due to the earthquake damage to the power plant in the early period is expected to resume production within the next 6-8 weeks and will receive insurance compensation. At present, the repair work of Hides Power Station is progressing smoothly. The gas-fired power station has restored local power generation in early June. The power generation capacity has reached about 50% before the earthquake. It is expected that the normal power supply will be restored in the next six to eight weeks. At the same time, the Pogra Gold Mine has insured "property damage and business interruption insurance". At present, the insurance company is still in the process of acceptance and evaluation of claims. At the end of May, the Pogra Gold Mine has received the first payment of $25 million from the insurance company.

Five is the 2019 Congo Jinke Lu Weiqi Commus copper mine (holding 72%) is expected to have 55 thousand tons of copper, cobalt 2400 tons of capacity, cobalt ore will increase the volume of new profits.

Our profit estimates show that the net returns of Zijin Mining from 2018 to 2019 are expected to reach 5 billion yuan and 7.5 billion yuan. According to the market value of A shares at 402 yuan/share, 23 billion shares correspond to 92.4 billion yuan, corresponding to 1.85 X and 1.23 billion X in 2018-2019, respectively. Considering the rising elasticity of medium and long-term copper, zinc and gold in the process of re-inflation, as well as the significant progress in the development of Camoa Copper Mine, the company's valuation elasticity is enormous and is currently significantly underestimated, with a target market value of 150 billion!