More Thomwhore
Hopefully this media piece on strutting strumpets will be preserved for posterity
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As promised, this is the first interview with John Macken, the
longtime Freeport McMoRan project director who promises to bring
Ivanhoe Mines' Oyu Tolgoi copper and gold deposit to the
ore-production stage within the next 12 to 16 months. The interview,
conducted in California, is relevant to those watching the sharp
rebound in gold and copper prices Wednesday morning in London and New
York trading.
UBS Investment Research's Tony Lesiak, not usually a heads-over-heels
believer in any emerging mining project of Oyu Tolgoi's scale, just
handed me his latest equity research report on Ivanhoe Mines (HUGO on
Nasdaq). The analyst, using a 10 percent discount rate and a $325 gold
price/90-cent copper price, calculates fair value for Ivanhoe Mines'
shares at roughly $17 Canadian and $13 U.S., or about 40 percent
higher than the shares change hands for now. Ivanhoe Mines' American
share price is $9.
Lesiak is enthusiastic about Ivanhoe Mines' continuing upgrades of
high-grade drill results from the Hugo North part of Oyu Tolgoi. He
estimates the entire Oyu Tolgoi deposit contains about 34 billion
pounds of copper and 18.5 million ounces of gold as an inferred
resource, making the site the world's sixth largest copper discovery
and ninth largest gold find -- "after only two years of deep-drilling
activities." Aggressive drilling (some 18 rigs are working the Gobi
Desert property at present) makes it almost inevitable that greater
grades and extents of this massive sulphide will be unearthed in
coming months and years.
Ivanhoe Mines' advanced scoping study, explained by Ivanhoe Mines
founder Robert M. Friedland in my television-broadcast interview with
him (available this weekend on the CBS MarketWatch Weekend show on CBS
in North America and on CBS.MarketWatch.com on the Web), is due out in
late December. The study, says Lesiak, "should establish the economic
viability of the project and analyse a number of alternative mining
and development scenarios."
Says the 52-year-old Macken, in my interview: "The scoping study will
give us a path forward. In 10 years' time, this (Oyu Tolgoi) will be
the center of a large mining district."
Macken's work at the Grasberg Mine in Indonesia helped to turn it into
one of the most efficient and profitable copper and gold mines -- in
abominable conditions of constant rain, terrorism and political
strife, not to mention extreme altitude. Freeport McMoRan (FCX) has a
lot to thank Macken for, but the Irishman is anything but promotional
about his past achievements.
First off, I asked Macken, as we nibbled several pieces of
cocktail-style nigiri at the Belvedere home of his boss, Ivanhoe
founder Friedland, about the 15 or more mining companies that are said
to have visited Oyu Tolgoi in their own search for what could become a
minority stake in one of the world's largest copper and gold projects.
"If you ask me whether it's good to have a partner, I'd say, 'Yes.'
There are synergies."
Macken, who is based in Perth, Australia, right now but plans to spend
most of his time in Mongolia, continued. "At this stage, we are
thinking about access to open pits, logical sizes for cuts into the
mine, how that leads to an underground operation, and of course, going
forward with an (ore) concentrator. The independent scoping study
(AMEC is one of the engineering firms on the study) will help
immensely," he said.
There are -- I have seen with my own eyes -- well more than 400 people
working Oyu Tolgoi. Is the new president of Ivanhoe Mines going to
pepper the lot with his own folks? "People keep saying, 'Are you going
to bring in your own team?' But why lose a head of steam? We've got
500 people out there almost. We're now building long-term accomodation
for our people. And we'll be mining in 12 months, mostly stockpiling
ore and prestripping," Macken said.
As for power plants, possible smelter, tonnage estimates and so on,
Macken says, "That's what you have feasability studies for. It takes
quite a while to learn your boundaries on a project of this size.
Look, we know it's easy to build roads out there. You've seen it. We
have a deposit right next to China, a place that could be the highest
buyer of concentrate in the market for the next 10 years. I have no
problem shipping concentrates by road. We don't need a smelter. There
are more than several in China. We're 200 kilometers or less to (China
industrial city) Bao-Tao. Some smelters are very close to us there in
the Gobi. Freeport doesn't have a smelter at Grasberg. They ship it to
Spain and to Java and to 23 countries as concentrate. Every ton of it
goes to a ship at a port. And look at how well that long-distance
relationship has been. In contrast, we have land links to a buyer or
buyers that are right there."
Friedland, Ivanhoe Mines' largest shareholder and a figure revered and
scorned in the mining world because of the larger-than-life size of
his past successes, interrupts to tell us, "We could ship by rail all
the way to western Europe if need be."
Subscribers of The Calandra Report take note. This is not the
definitive interview with Macken. Nor is it the last. It is merely the
beginning of what I see as an information-gathering process that will
monitor the development of a copper and gold resource with world-class
probability. I own shares of Ivanhoe Mines, as you know. I think I'm
in good company with Capital Research and other large asset managers
from New York, Boston, London, Toronto, Sydney, Abu Dhabi, Zurich and
San Francisco.
Says Macken, just before we head to the Chilean sea bass platter, "As
Jim Bob Moffett (head of Freeport McMoRan and Macken's former boss)
likes to say, 'I have no intention of making a sow's ear out of this
silk purse.'" (For more on Ivanhoe Mines, see the latest video
interview:
cbs.marketwatch.com
For those who may have ejected Ivanhoe Mines' shares during gold and
copper's tiny setback last week, or in the wake of comments from
technicians who can't see the mine for the trees, see this from the
local newspaper:
marinij.com.
And more ...
You have not heard the last from The Calandra Report on Ivanhoe Energy
(IVAN), a longstanding member of the Recommended List. Coming next
week: I'll provide figures on cash flow, and financial projections
Ivanhoe Energy's Dagang oil field efforts and the Sichuan natural gas
basin, from Ivanhoe Energy's David Martin. The former Occidental
Petroleum executive expects a rapid impact on the company's financials
in the wake of last week's China pact.
Finally, pay special attention to small-cap fund manager Dick Gould's
comments on the small-cap technology rally, the wireless rage and
those technology equipment companies whose sales are at "inflection
points." The text alert was delivered earlier this week. I'm headed to
Southern California to visit what could become another
sales-inflection success story in the field of bio-informatics.
See you next week in The Calandra Report.
Thom Calandra owns shares of natural resources companies
Atlas-Cromwell, Bitterroot Resources, Caledonia Mining, Ivanhoe
Energy, Ivanhoe Mines, IMC Ventures, Nevsun Resources and Victoria
Resource. Thom also owns shares of Sunridge Gold, Pacific Minerals,
Sparton Resources and Gold Marca Ltd. He owns shares of diamond
exploration company Tahera Corp. He is an owner of shares of
MarketWatch.com, the publisher of this newsletter. Thom owns shares of
Intraware, an electronic software manager, and he owns shares of
Cardima, a medical device developer. He owns GigaMedia, a Taiwan
Internet music and service provider. He owns the Australian dollar in
a revolving six-month certificate of deposit.
Thom Calandra
The Calandra Report |
