Higher Santa Cruz capital costs weigh on Ivanhoe Electric

A recent prefeasibility study has revealed that Ivanhoe Electric's Santa Cruz copper project in Arizona has become more costly to build, while its economic potential has improved slightly. The project's capital expenditure has risen to $1.43 billion from $1.24 billion last year, a 15% increase, despite an increase in the estimated net present value (NPV) to $1.5 billion from $1.4 billion.

The project's internal rate of return has decreased to 19% from 20%, and the payback period has lengthened to 4.8 years from 4.4 years. Ivanhoe Electric's 2026 prefeasibility study, released on Wednesday, assumes an 8% discount rate and a copper price of $4.75 per pound, which is lower than the current spot price. The project, located in Casa Grande, is Ivanhoe Electric's most advanced operation and is targeted for first cathode production in 2029.

The higher capital spending is attributed to redesigning an access tunnel to mitigate groundwater risk, as well as increased construction materials and labor costs. Despite the increased cost, the company remains optimistic about the project's prospects, noting that the higher life-of-mine production and greater confidence in the development plan offset the additional capital expenditure.