Executive Summary / Key Takeaways

• Tech-Driven Domestic Supply: Ivanhoe Electric ($IE) is strategically positioned to bolster American supply chain independence in critical metals, particularly copper, by leveraging proprietary AI-powered geophysical exploration technology (Typhoon/CGI) and innovative, lower-carbon processing methods for its flagship Santa Cruz Copper Project.
• Santa Cruz Project De-Risked: The recently completed Preliminary Feasibility Study (PFS) for the Santa Cruz Copper Project confirms robust economics, projecting 1.4 million tonnes of copper cathode over a 23-year mine life with an after-tax NPV of $1.4 billion (8% discount rate) and a 20% IRR at a base case copper price of $4.25/lb, alongside first-quartile cash costs of $1.32/lb.
• Strategic Capital Infusion & Focus: Recent financing activities, including a $65.8 million public offering and an indicative $825 million EXIM Bank debt financing for Santa Cruz, coupled with the strategic divestment of the Alacrán Copper Project for up to $128 million, significantly enhance liquidity and sharpen the company's focus on its U.S. assets.
• Emerging Energy Storage Play: Beyond mining, the 90%-owned VRB Energy subsidiary is establishing a U.S.-based vanadium redox flow battery manufacturing business, offering a complementary long-term growth vector in grid-scale energy storage, though it currently generates no revenue.
• High Potential, High Capital Needs: While the Santa Cruz project presents substantial upside, the company faces recurring losses and negative operating cash flows, necessitating significant additional financing for development, with initial construction targeted for H1 2026 and first production in 2028.

The Dawn of a New Mining Era: Ivanhoe Electric's Vision for Critical Metals

Ivanhoe Electric Inc. ($IE), incorporated in 2020, is not merely a mining company; it is a technology-first mineral exploration and development firm with a clear mandate: to secure America's supply chain independence for critical metals. Headquartered in Tempe, Arizona, the company focuses predominantly on copper, alongside nickel, cobalt, platinum group elements, gold, and silver, all vital for advanced manufacturing, infrastructure, technology, and national security. This strategic focus is particularly pertinent given the growing global demand for these materials, driven by the accelerating energy transition and electrification trends.

The company's overarching strategy is built upon a dual foundation: pioneering advanced exploration technologies and developing high-potential critical metals projects within the United States. This approach aims to de-risk the inherently uncertain process of mineral discovery and accelerate project timelines, setting Ivanhoe Electric apart in a competitive industry dominated by established giants.

Technological Edge: The Typhoon System and CGI's AI Prowess

Ivanhoe Electric's core competitive advantage stems from its proprietary technological ecosystem. At its heart is the powerful Typhoon geophysical surveying system, complemented by the advanced data analytics and artificial intelligence services provided by its 94.30%-owned subsidiary, Computational Geosciences Inc. (CGI). This integrated technology suite is designed to "accelerate and de-risk the mineral exploration process," enabling the discovery of new deposits that might otherwise remain "undetectable by traditional exploration technologies."

The tangible benefits of this technology are significant. By offering superior subsurface imaging and predictive modeling, Typhoon and CGI aim to enhance exploration efficiency, reduce drilling costs, and improve the success rate of identifying viable mineral resources. While specific quantitative performance metrics for the Typhoon system's detection capabilities or efficiency gains are not publicly detailed, the company's strategic intent is to achieve a "significantly higher efficiency" in data analysis, allowing for faster project identification. This technological differentiation is crucial for a company like Ivanhoe Electric, which operates on a smaller scale compared to industry behemoths. It allows the company to compete effectively by focusing on precision and innovation, potentially leading to "superior margins" through optimized resource extraction and "more robust growth" in exploration segments.

Beyond exploration, Ivanhoe Electric is also making strides in energy storage through its 90%-owned subsidiary, VRB Energy Inc. VRB is establishing a U.S.-based grid-scale vanadium redox flow battery manufacturing business, a technology critical for integrating renewable power sources into the grid. While VRB Energy did not generate revenue in the recent periods, its focus on vanadium flow batteries offers "notably better performance under challenging conditions" for grid stability, positioning Ivanhoe Electric for future growth in the clean energy sector.

Strategic Portfolio Evolution and the Santa Cruz Cornerstone

Ivanhoe Electric's historical trajectory underscores its commitment to this tech-driven, domestic critical metals strategy. The company's formation in 2020 laid the groundwork for its current focus. Key historical developments include the 2021 issuance of a $24.00 million convertible bond by VRB to fund its energy storage ambitions, and the October 2022 agreement to purchase six Typhoon transmitters from I-Pulse, with four already received by June 2025, demonstrating ongoing investment in its core exploration technology.

A pivotal moment for the mineral exploration segment was the May 2023 acquisition of 5,975 acres of surface title and associated water rights for the Santa Cruz Copper Project in Arizona, secured by an $82.60 million promissory note. Subsequent repayments in November 2023 ($34.30 million) and November 2024 ($12.10 million) have reduced this obligation. The 2024 exploration alliance with BHP Mineral Resources Inc. (BHP) further validated the company's exploration capabilities and strategic importance in the U.S.

In May 2025, its subsidiary Cordoba Minerals Corp. (CDM) entered a definitive agreement to sell its remaining 50% interest in the Alacrán Copper Project in Colombia for up to $128.00 million. This divestment, which is subject to regulatory and shareholder approvals, is expected to yield a cash distribution of over $40 million for Ivanhoe Electric from the initial proceeds. This move signals a clear intent to concentrate resources on its core U.S. assets, particularly the Santa Cruz project, while shedding non-core international ventures that carried geopolitical and legal risks, such as the ongoing class action claim by the Alacrán Community.

Santa Cruz Copper Project: A Blueprint for Domestic Production

The Santa Cruz Copper Project stands as the cornerstone of Ivanhoe Electric's mineral exploration efforts. The completion of its Preliminary Feasibility Study (PFS) on June 23, 2025, marked a significant de-risking event. The PFS confirmed the economic viability of an underground copper mining operation combined with a chloride-assisted heap leach processing facility, designed to produce copper cathode directly on-site for U.S. customers.

This innovative processing method is a key differentiator, "eliminating the need for smelting, tailings storage, and transportation and refining of concentrates." This integrated approach is projected to "significantly reduce the project's overall carbon intensity," aligning with modern environmental standards and potentially offering a premium for its "green" copper. The PFS outlines a robust project profile:

• Production: 1.40 million tonnes of copper cathode over a 23-year mine life.
• Economics: After-tax Net Present Value (NPV) of $1.40 billion (at an 8% discount rate) and an Internal Rate of Return (IRR) of 20.00%, based on a base case copper price of $4.25/lb.
• Capital & Costs: Initial project capital is estimated at $1.24 billion, with "First Quartile Unit Cash Costs of $1.32 Per Pound of Copper." This low cash cost is a significant competitive advantage, positioning Santa Cruz among the most efficient copper producers globally.

The project's compact site layout and advanced water management tailored for arid conditions further underscore its modern, responsible design. Initial construction is targeted for the first half of 2026, with first copper cathode production projected in 2028.

Financial Performance and Liquidity: Fueling Future Growth

Ivanhoe Electric's financial performance in the first half of 2025 reflects its transition from intensive exploration to project de-risking and strategic capital allocation. For the three months ended June 30, 2025, the net loss attributable to common stockholders decreased significantly to $23.90 million ($0.18 per share) from $46.80 million ($0.39 per share) in the prior-year period. Similarly, for the six months ended June 30, 2025, the net loss narrowed to $54.40 million ($0.42 per share) from $102.30 million ($0.85 per share).

This improvement was primarily driven by a substantial reduction in exploration expenditures, particularly at the Santa Cruz Copper Project. In Q2 2025, Santa Cruz exploration costs were $5.40 million, down from $20.50 million in Q2 2024, as activities shifted from intensive infill drilling to technical engineering studies supporting the PFS. General and administrative expenses also saw a decrease, partly due to reduced administration costs at VRB following the deconsolidation of VRB China in October 2024, and lower insurance premiums. However, net interest expense increased due to lower average cash balances, and the share of loss from equity method investees rose, primarily from the Maaden Joint Venture and the newly formed VRB China Joint Venture.

The company's sole revenue stream currently comes from its Data Processing segment (CGI), which demonstrated robust growth. Revenue for the three months ended June 30, 2025, increased by 98% to $1.10 million, and for the six months, it grew by 101% to $1.80 million, driven by increased data processing services. Gross profit growth was consistent with revenue, highlighting the value of its specialized technology services.

Liquidity has seen a significant boost. Cash and cash equivalents increased to $88.00 million at June 30, 2025, from $41.00 million at December 31, 2024, with working capital improving to $77.10 million from $35.90 million. This was largely due to net proceeds of approximately $65.80 million from a public offering in February 2025, which included the issuance of 11.79 million units, each with a common stock share and an accompanying warrant exercisable at $7.00 until February 17, 2026. The exercise of these warrants could further augment cash resources.

Management has stated, "As at August 5, 2025, we believe that we have sufficient cash resources to carry out our business plans for at least the next 12 months, after which we expect to need additional financing to further advance our projects and conduct our business provided, however, that if we make a development decision at the Santa Cruz Copper Project within the next 12 months, our need for additional financing will be accelerated." This underscores the significant capital requirements for advancing Santa Cruz to production. Encouragingly, the Export-Import Bank of the United States (EXIM Bank) has indicated potential debt financing of up to $825 million for the Santa Cruz project, reinforcing its strategic importance for domestic copper supply and providing a strong signal of government support.

Competitive Landscape and Strategic Positioning

Ivanhoe Electric operates in a "very competitive and rapidly changing industry," facing off against established global mining giants like Freeport-McMoRan Inc. (FCX), BHP Group Ltd. (BHP), Rio Tinto Group (RIO), and TECK Resources Ltd. (TECK). These competitors benefit from extensive operational scale, diversified portfolios, and robust cash flow generation, often exhibiting strong revenue growth and solid profitability margins. For instance, FCX reported a gross profit margin of 0.29 and an operating profit margin of 0.26 in 2024, while BHP showed 0.82 and 0.31 respectively, and RIO 0.56 and 0.29. In stark contrast, Ivanhoe Electric, as an exploration-stage company, reported negative gross, operating, and net profit margins for the trailing twelve months, reflecting its pre-revenue mining status and significant R&D and exploration investments.

Ivanhoe Electric's competitive strategy is not to out-scale these giants but to out-innovate them. Its proprietary Typhoon geophysical surveying system and CGI's advanced data analytics provide a distinct technological advantage, enabling more precise and efficient resource targeting. This allows Ivanhoe Electric to "accelerate and de-risk the mineral exploration process," potentially discovering deposits "otherwise undetectable by traditional exploration technologies." This technological edge is a critical moat, offering a pathway to "superior margins" through efficient operations and "stronger customer loyalty" for its data processing services.

Furthermore, the Santa Cruz Copper Project's innovative chloride-assisted heap leach process, which eliminates smelting and tailings, provides a significant environmental and cost advantage, contributing to "First Quartile Unit Cash Costs of $1.32 Per Pound of Copper." This positions Santa Cruz favorably against competitors who rely on more conventional, and often more carbon-intensive, processing methods. While Ivanhoe Electric lags its larger rivals in financial stability and operational scale, its agility in technology adoption and focus on domestic critical metals positions it uniquely for growth in a market increasingly prioritizing sustainable and secure supply chains. The company's strategic alliances, such as the exploration partnership with BHP, further validate its technological capabilities and market relevance.

Risks and Challenges Ahead

Despite the promising outlook for Santa Cruz and its technological advantages, Ivanhoe Electric faces significant risks. As most of its mineral projects are in the exploration stage, they are inherently subject to substantial uncertainties. The Santa Cruz Copper Project, while advanced, still faces considerable risks associated with mine construction and commissioning, including potential delays, cost overruns, and unanticipated technical problems. Securing all required permits and the substantial funding needed for its $1.24 billion initial capital expenditure remains critical. The PFS estimates are based on assumptions, and actual economic outcomes could vary materially.

The company has recurring net losses and negative operating cash flows, and it expects this to continue for the foreseeable future. While recent financing has bolstered liquidity, the need for additional capital will be accelerated if a development decision for Santa Cruz is made within the next 12 months. There is no assurance that additional financing will be secured on favorable terms, or at all.

Geopolitical risks, particularly in Colombia, remain a concern, as evidenced by the ongoing legal proceedings involving the Alacrán Project, which "could have a material adverse effect on its business, results of operations, financial condition and prospects" if resolved adversely. The company is also exposed to commodity price volatility, which can impact the recoverability of its mineral interests and project economics. A new risk factor concerning "tariffs, trade restrictions and changes to tariffs, international trade policies and regulations" has also emerged, potentially impacting operations, financial performance, and outlook.

Conclusion

Ivanhoe Electric Inc. is carving out a compelling narrative as a technologically advanced player in the critical metals and energy storage sectors, strategically aligned with the imperative for American supply chain independence. The company's core investment thesis rests on its differentiated exploration technology, exemplified by the Typhoon system and CGI's AI capabilities, and the high-potential, environmentally innovative Santa Cruz Copper Project. The recent PFS for Santa Cruz, projecting robust economics and first-quartile cash costs, provides a tangible blueprint for future value creation.

While Ivanhoe Electric's current financial profile reflects its exploration-stage status with recurring losses and negative cash flows, recent capital raises and the indicative EXIM Bank financing underscore growing confidence in its flagship project. The strategic divestment of non-core assets further sharpens its focus. The company's technological leadership and commitment to domestic supply position it favorably against larger, more traditional competitors, offering a unique value proposition for investors seeking exposure to the future of critical metals and clean energy. However, the path to production for Santa Cruz is capital-intensive and fraught with execution risks, making successful financing and project development the paramount factors for realizing its significant long-term potential.