Friday, May 16, 2014

Ivanhoe warns of funding crunch at two mines in Congo

* To spend almost all working capital on South Africa mine
* Q1 net loss $48.8 mln vs $ 42.4 mln year earlier
* Shares fall as much as 7 percent (Adds analyst comments, updates shares)

By Anannya Pramanick

May 15 (Reuters) - Canada's Ivanhoe Mines Ltd said it would not be able to develop two mines in the Democratic Republic of Congo unless it gets more funds by the end of June, sending its shares down as much as 7 percent in early trading.

Ivanhoe, which does not have any producing mine, said it would spend most of its funds on its Platreef mine in South Africa, which is estimated to produce about 785,000 ounces of platinum, palladium, rhodium and gold a year.

The company said it had consolidated working capital of about $149.8 million as of March 31, down from $201.7 million at Dec. 31. It needs about $1.7 billion to bring the mechanized Platreef mine into production.

The company said on Thursday its access to financing was uncertain and that there was no assurance that additional funding would be available to the company in the near future.

"Realistically the only option available at the moment is probably to raise equity," Raymond James analyst Alex Terenview said.

The Congo mines, Kamoa and Kipushi, make up 83 percent of the company's net asset value, he said.

Ivanhoe holds a 95 percent stake in Kamoa copper mine and a 68 percent stake in Kipushi, which mines zinc, lead and germanium apart from copper.

Ivanhoe will likely look for a partner to develop Kamoa, Terenview said.

It would be less likely to sell its stake in Kipushi as it could be the company's first source of cash flow, he said.

The company owns 90 percent of Platreef and a Japanese consortium led by Itochu Corp owns the rest.

Ivanhoe also posted a bigger loss in the first quarter, hurt by higher exploration costs. Net loss widened to $48.8 million in the quarter ended March 31 from $42.4 million a year earlier.

Robert Friedland, Ivanhoe's founder and chairman, made a name for himself in 1996 by selling an undeveloped Canadian nickel-copper project called Voisey's Bay for C$4.3 billion ($3.94 billion). The mine is now owned by Brazil's Vale SA .

He solidified his reputation with the earlier incarnation of Ivanhoe Mines, now called Turquoise Hill Resources, building the Oyu Tolgoi copper-gold mine in Mongolia. Global miner Rio Tinto now controls Turquoise Hill and operates the massive mine.

Ivanhoe's shares fell to C$1.67 on the Toronto Stock Exchange on Thursday. They have fallen more than 27 percent in the last 12 months. ($1 = 1.0906 Canadian Dollars) (Additional reporting by Swetha Gopinath in Bangalore; Editing by Don Sebastian)

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