Ivanhoe Electric’s Cordoba signs milestone agreements with JCHX

Ivanhoe Electric’s subsidiary, Cordoba Minerals and JCHX Mining Management have agreed to a strategic arrangement for the joint development of Cordoba’s flagship Alacran Project in Colombia. Ivanhoe Electric owns a 63.27% interest in Cordoba. Key terms of the milestone agreements signed on December 7, 2022: JCHX, through a wholly owned subsidiary, will purchase a 50% ownership interest in CMH Colombia, a company existing under the laws of Colombia, for aggregate consideration of $100 million. CMH will own 100% of the Alacran Project and will be the joint venture vehicle for Cordoba and JCHX in this strategic project level partnership. JCHX will satisfy the purchase price of $100 million as follows: At the closing of the transaction, which is expected to occur before the end of the first quarter of 2023, $40 million will be payable in cash. A second installment of $40 million is payable in cash upon completion of a Feasibility Study of the Alacran Project and the submission of the Environmental Impact Assessment to the relevant Colombian Government authority. A third and final installment of $20 million is payable in cash once the approval of the EIA is obtained, which must be within two years of the transaction’s closing date. Should the EIA not be approved by the second anniversary of the closing date, JCHX will have the option to elect not to complete this final installment, which will result in JCHX being diluted to 40% and Cordoba increasing to a majority 60% shareholding in CMH. JCHX will advance a bridge loan of $10 million in cash to Cordoba, which is expected to be funded prior to the end of December 2022, following the signing of these milestone agreements and conditional upon JCHX shareholder approval. Upon closing of the transaction, the entire balance owing under the bridge loan and accrued interest will be applied towards the first installment payment as a payment in kind. Closing of this transaction is subject to: FOR CORDOBA: Approval from the TSX Venture Exchange and approval of shareholders; FOR JCHX: Approval from the Board of Directors, shareholders, China’s State Administration of Foreign Exchange, and Beijing Municipal Bureau of Commerce. The bridge loan comes into effect immediately upon execution of a bridge loan agreement, with the advance occurring immediately after approval from the JCHX board and shareholders, which is expected to occur by the end of December 2022. The remainder of the transaction agreements do not become effective until JCHX obtains shareholder approval, which is expected in mid-January 2023. Cordoba will repay $2.5 million of the short-term loans that were previously provided by Ivanhoe Electric, upon receiving the $10 million bridge loan from JCHX. All outstanding amounts of the short-term loans will be repaid to Ivanhoe Electric, with interest, upon the closing of the transaction and the receipt of the $40 million installment from JCHX, which is expected to occur before the end of the first quarter of 2023. Key decisions to be governed by a Joint Venture Shareholders’ Agreement: A Joint Venture Shareholders’ Agreement will govern the strategic relationship between Cordoba and JCHX, and will set forth the general responsibility and authority of the CMH board of directors, in addition to the entitlements of each shareholder. The JV SHA which will be entered at closing, provides for among other things: The CMH board will comprise of four individuals, of which two directors will be nominated by Cordoba and the other two directors will be nominated by JCHX; and for so long as the shareholdings in CMH remain 50%-50%, a Cordoba representative will serve as the Chairperson of the Board of Directors, and will possess a casting vote on all matters subject to a list of reserved matters. Cordoba will be appointed as the operator and manager of the Alacran Project pursuant to a management services agreement and will be responsible for setting the annual programs and budgets for the CMH board’s approval. JCHX has right of first offer to bid on the Engineering, Procurement and Construction and Detailed Design Agreement contracts, provided that Cordoba has the right to open the process out to competitive tender; with JCHX having the right to match any competitive bid. JCHX shall be entitled to up to 100% of the offtake from the production under the current Feasibility Study of the Alacran Project, provided that they are paying fair market value and they are the most competitive offer.