Ivanhoe Mines Chief Executive Robert Friedland flagged on Thursday the company he founded is worth more than double its current value, based on recent deals in the copper sector and the quality of its Oyu Tolgoi mine in Mongolia.
The market is expecting global miner Rio Tinto, Ivanhoe’s biggest shareholder, to buy out Ivanhoe to secure full ownership of the massive Oyu Tolgoi copper-gold-silver mine, which it operates, sometime after January 2012.
Friedland said based on the 1.4 times net asset value that top gold miner Barrick Gold paid for copper miner Equinox Minerals earlier this year, Ivanhoe would be worth between $34 and $46 a share.
That compares with Ivanhoe’s last trade at $25.50. “Actually 1.4 times net asset value is not enough,” Friedland said at the annual Diggers & Dealers conference.
Xstrata paid 2.1 times net asset value for Falconbridge and Lundin Mining paid 2 times net asset value for its stake in the Tenke mine in the Democratic Republic of Congo, he said.
“Oyu Tolgoi is an all around a far superior asset than the Equinox ore body,” Friedland said.
Oyu Tolgoi has much higher copper and gold reserves, higher copper grades, a lower cash cost and much longer life compared with Equinox’s Lumwana mine in Zambia. “And more importantly, we sit on the doorstep of the world’s largest copper consumer,” Friedland said.
Oyu Tolgoi, 66 percent-owned by Ivanhoe with the remainder owned by the Mongolian government, is on track to start producing in 2013, he said.
Rio Tinto owns 46.5 percent of Ivanhoe, after increasing its stake at just $9.10 a share, and can increase it to 49 percent on or before 18 January 2012 by exercising options.
It is operating under a standstill agreement to not make a full takeover offer before then.
Friedland is clearly holding out for a big price for Ivanhoe. He referred to Barrick founder and chairman Peter Munk, who said, “The guy who laughs last has the best laugh,” after he succeeded in snaring Equinox by trumping a bid from Minmentals and killing a planned bid by Equinox for Lundin Mining.
“We’re hoping to have the best laugh of all,” Friedland said.