Ivanhoe Mines stock drops after Congo shocker

Constructing access tunnels at the Kamoa-Kakula Copper project’s high-grade Kansoko Sud mining area | Image: Ivanhoe Mines.

Shares in Vancouver’s Ivanhoe Mines (TSX:IVN) fell sharply Wednesday (January 31) after lawmakers in the Democratic Republic of Congo, where Ivanhoe is advancing two major projects, voted in favour of new mining laws that immediately lift a provision which exempted licence holders from compliance with the new code for 10 years.

Ivanhoe Mines, headed by billionaire mining financier Robert Friedland, ended down 11.3% on the Toronto Stock Exchange Wednesday, not far off its lows for the day.

Ivanhoe, worth $2.8 billion after the day's losses, is in partnership with China's Zijin Mining on the Kamoa-Kakula copper deposit in the Central African nation. Kamoa-Kakula is considered the largest high-grade copper project in development globally with a copper resource of more than 30m tonnes.

Ivanhoe is also building a new operation at Kipushi, a past producing zinc-copper mine in partnership with Congo's state-owned Gécamines. Ivanhoe's most advanced project – Platreef platinum – is located in South Africa.

Firms operating inside the country, including Glencore, Randgold Resources, China Molybdenum, Eurasian Resources Group and MMG, will immediately be subjected to higher royalties on metals including copper, cobalt and gold, as well as a new 50% tax on so-called super profits.

Super profits are being defined as income realized when commodity prices rise 25% above levels included in a project's bankable-feasibility study. Given the improvement in the price of most metals over the past couple of years – copper is up 67% since January 2016 and zinc +130% – having to deal with the new levy is more than just a possibility.