There were a few interesting pieces of news in the mining space this week, one of which was certainly CITIC Metals, a Chinese state-owned enterprise that is the largest conglomerate in the country and one of the world’s biggest buyers of metals, investing $723 million in Ivanhoe Mines (TSX: IVN) to take a 19.9% stake in the company.
The financing really strengthens Ivanhoe, which needed a substantial cash injection to continue advancing its three incredible but huge and expensive projects: the Kamoa-Kakula and Kipushi projects in Democratic Republic of Congo (DRC) and the Platreef platinum project in South Africa.
Another Chinese group, Zijin Mining, already owns 9.9% of IVN; if Zijin wants to use its anti-dilution right to maintain its stake, it would have to cough up $78 million.
CITIC’s investment says the Chinese, at least, are confident that the DRC is a functional place to operate. That’s a significant vote of confidence, especially since the DRC just signed a new mining code that increases royalties, introduces a super profits tax, and removes a 10-year amnesty for existing miners on the new rules. Miners in the DRC have been pushing back against the new code collectively and vocally, but the government signed it into law without any changes last week.
As for Ivanhoe, the market barely blinked on the news. Let me say that again: the market had almost no reaction to news of a company investing three-quarters of a billion dollars into Ivanhoe, in support of three developing mines.