Ivanhoe Mines Ltd (IVPAF)

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BMO RAISES TO $7 AFTER ANALYST SITE VISIT
Site Visit of Ivanhoe's Four World-Class Assets

Bottom Line: With our return from Ivanhoe Mines’ hosted site visit to its African assets, we are reiterating our Outperform rating driven by progress at all four projects as well as increasing confidence in the flagship Kakula discovery's expansion potential. We are further updating our NAV10%-based target price to C$7.00 from C$5.75.

Key Points

In this report we discuss our observations from site visits. The highlight of the
trip was the increased confidence in understanding of geological controls of copper mineralization at Kakula and implications to expansion of the current resource. At Kakula drilling has escalated to 12 rigs from 9 in January as the company pursues success beyond the 40% strike increase announced in January. Management is targeting defining this leverage with an early Q2 resource update followed by a PEA.

Not to be outdone, the Kipushi zinc mine is preparing a PFS (pre-feasibility) expected to show capex improvements while the Platreef platinum deposit is completing a FS (feasibility) guiding for increased grade and mining widths early in the mine plan.

The political risk associated with DRC election delays is in our opinion at this point modest. Opposition leaders remain in mediated negotiations with the Kabila government and are expected to push for elections later this year. Foreign investment into the DRC has not been diminished and there have been no reports of mining production interruptions or interference.

Financing risk is always a consideration when advancing multiple world-class assets.

Ivanhoe holds US$397mm of working capital and purchase price receivables, which in our opinion is sufficient to meet our conservative 2017 expenditure estimates (Exhibit 1).

Potential Catalysts:

Early Q2 2017: Kakula/Kamoa updated resource and PEA

Early Q2 2017: Platreef Feasibility

Early Q2 2017: Kipushi Pre-feasibility