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File photo of an Ivanhoe Mines operation.

Ivanhoe Mines

Canada has a new stock-market crush.

Ivanhoe Mines Ltd., the Vancouver-based company founded by Robert Friedland, is the best-performing stock on the S&P/TSX Composite Index in the past six months as expectations build over its African copper project.

While Teck Resources Ltd. still rules the index over a year with a 576-per-cent gain versus Ivanhoe's 562 per cent, Ivanhoe's stock has been on a tear since summer. That's when the company began describing the Kakula deposit, which is in the southern portion of the company's Kamoa project in the Democratic Republic of Congo, as "Africa's most significant copper discovery."

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Drill results, including those released Jan. 23 that expand the length of the deposit by 40 per cent, "leave me speechless," Mr. Friedland, one of the world's best-known mine developers and Ivanhoe's largest shareholder, said in a statement. Ivanhoe closed at $4.17 on Friday, giving the company a market value of $3.29-billion.

Ivanhoe Mines is the second company to bear that name founded by Mr. Friedland; the first was built around the massive Oyu Tolgoi copper-and-gold mine discovered in Mongolia's Gobi Desert in 2001. Rio Tinto Group gained control of the company in 2012 and it's now known as Turquoise Hill Resources Ltd. Mr. Friedland is also known for the discovery of the Voisey's Bay nickel discovery in Labrador, which he sold to Inco Ltd. in 1996 for more than $3-billion.

It's difficult to find a cautionary voice on the stock amid the euphoria being fed by the geological results, Mr. Friedland's track record, and copper's 23-per-cent surge in the past three months in London. The company has five buys, two holds and no sells, according to analyst ratings compiled by Bloomberg.

The most bullish view is held by Paul Gait, an analyst at Sanford C Bernstein. His $10 target -- more than double the price at Friday's close -- is based on a belief that Mr. Friedland has struck the motherlode for the third time.

Different Magnitude

"Copper is the most strategically important commodity on the planet," and the Kakula project is "the most important discovery in copper in the last 30 years," Mr. Gait said in a phone interview Thursday from London. "Apart from my friend Mr. Friedland, we haven't discovered anything of any quality in the last 30 years: basically since he last did it with Oyu Tolgoi."

Mr. Gait believes copper prices could hit $10,000 a ton within "a couple of years." The metal for delivery in three months rose 0.7 per cent to $5,899 a ton on the London Metal Exchange on Friday.

Ivanhoe's other projects are the Platreef platinum group metals deposit in South Africa and the Kipushi zinc deposit, also in the Congo. Both are "phenomenal" assets, Mr. Gait says, but Kakula "is an order of magnitude different."

Mr. Friedland declined to comment ahead of the release of annual financial statements, Bob Williamson, an Ivanhoe spokesman, said by e-mail on Friday. Friedland said last year he received "unsolicited interest" for the company and its projects from would-be buyers in Asia, Europe and Africa.

Political Risk

One of the biggest risks for the stock is the location of its projects in the Congo. The country has been politically unstable and subject to violent protests and allegations of bribery. Capitalizing on investments can be difficult, as seen in the lengthy negotiations -- and ultimate financial settlement -- that was required before Freeport-McMoRan Inc. and Lundin Mining Corp. were able to sell their stakes in the Congo's Tenke Fungurume mine in the past year.

A research report on Jan. 23 by Canaccord Genuity Group Inc.'s Tony Lesiak said political risk in the country is declining as a more peaceful transition of power from President Joseph Kabila appears more likely. Since that note came out the Catholic church, which has a powerful presence in the country, has warned that a smooth transition may now be in jeopardy.

"Country risk" is the greatest challenge for Ivanhoe, Mr. Gait acknowledged. "Would you as an individual mining shareholder want to own Ivanhoe as your only mining stock? Probably not." Investors can diversify away from that risk by buying the stock in tandem with large miners that are already producing copper in more stable political environments, he said.

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"If the Congo goes south, it takes a million and a half tons of African copper with it," Mr. Gait said. "Ivanhoe is in a tricky position during that period -- but the copper price will more than double."

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