BMO re Q1 Production...and they expect WF updates mid-yearApril 11, 2022 | 09:54 ET~ Ivanhoe Mines IVN-TSX Rating Price: Apr-8 Target Total Rtn Outperform $11.55 $16.50 43% Q1 Production First of Several Expected Record Quarters Bottom Line: Ivanhoe's Q1 record production update highlighted 55,602t of copper produced in the quarter from Kakula/Kamoa, and a declaration of commercial production at Phase 2 on April 7. Q1 production exceeded our estimates of 52,000t, and IVN is expecting annual production at the top end of their 290-340,000t guidance range driven by the quick ramp-up of Phase 2. Looking ahead, we are expecting record production in the next couple of quarters driven by the ramp-up of Phase 2, as well as the PFS for Phase 3 expected in Q3. Key Points Phase 1 continues to deliver. Kakula/Kamoa produced 55,602t of copper in Q1 beating our expectation of 52,000t. Our updated 2022 production forecast is 318kt (vs. 315kt previously). Commercial production from Phase 2. The second phase of Kakula/Kamoa began processing ore ahead of schedule on March 21 and entered commercial production on April 7. Commentary in the press release indicated that Phase 2 is already regularly surpassing its design throughputs. Guiding for upper end of 290-340,000t range. With Phase 2 up and running ahead of previous expectations, IVN now expects to produce at the top end of their 2022 guidance range. We will revisit our production assumptions for Phase 2 after incorporating further commentary in the upcoming Q1 earnings and conference call on May 10 (1-647-794-4605, 1-888-204-4368). Keeping an eye on throughputs. IVN has launched a debottlenecking plan that is expected to expand the throughput of the combined Phase 1 & 2 plants by 21%, after achieving consistent outperformance in the 10-15% range at Phase 1. IVN expects the optimizations to be complete by Q2/23. Looking ahead, we expect the market to focus on the operational performance of Phase 2 over the coming months and quarters as it doubles Kakula/Kamoa's production capacity. Attention will also turn to Phase 3 once the PFS is released in Q3 IVN has flagged a larger Phase 3 compared with the first two phases at the mine, including construction of a 500ktpa direct-to-blister copper smelter. Today's release indicated that the Kamoa 1 and 2 decline excavations remain on track and detailed design, budgeting and engineering are well advanced. Lastly, the market should expect exploration updates towards mid-year from the 100%-owned Western Foreland licenses.