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Ivanhoe Electric
IE
#4784
Rank
$1.92 B
Marketcap
๐Ÿ‡จ๐Ÿ‡ฆ Canada
Country
$12.23
Share price
0.33%
Change (1 day)
136.56%
Change (1 year)
โ›๏ธ Mining
Categories
  1. Ivanhoe Electric
  2. Quarterly Reports (10-Q)
  3. Financial Year FY2023 Q1

Ivanhoe Electric - 10-Q quarterly report FY2023 Q1


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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2023
OR
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-41436
Ivanhoe Electric Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware32-0633823
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
606 – 999 Canada Place
Vancouver, BC Canada
V6C 3E1
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code: (604) 689-8765
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.0001 per shareIE
NYSE American
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x     No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x    No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated fileroAccelerated filero
Non-accelerated filerxSmaller reporting companyx
Emerging growth companyx
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No x
As of May 15, 2023, the registrant had 92,979,197 shares of common stock, $0.0001 par value per share, outstanding.

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Table of Contents
IVANHOE ELECTRIC INC. Form 10-Q
For the Quarter Ended March 31, 2023
Page
3
3
3
4
5
6
7
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
15
23
23
25
25
25
25
27
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Table of Contents
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
IVANHOE ELECTRIC INC.
Condensed Interim Consolidated Balance Sheets (Unaudited)
(Expressed in thousands of U.S. dollars)
March 31,
2023		December 31,
2022
Assets
Current assets:
Cash and cash equivalents$106,995 $139,660 
Accounts receivable2,207 1,497 
Inventory5,869 5,648 
Prepaid expenses and deposits3,085 4,226 
118,156 151,031 
Non-current assets:  
Investments subject to significant influence6,118 5,998 
Other investments1,656 2,220 
Exploration mineral interests88,520 86,758 
Property, plant and equipment4,214 3,934 
Intangible assets546 1,249 
Other non-current assets8,157 9,296 
Total assets$227,367 $260,486 
Liabilities and Equity  
Current liabilities:  
Accounts payable and accrued liabilities$12,934 $13,943 
Lease liabilities, current831 706 
Contract liability3,572 2,783 
17,337 17,432 
Non-current liabilities:  
Deferred income taxes3,878 3,888 
Convertible debt26,427 25,918 
Due to related party10,305 10,010 
Lease liabilities, net of current portion294 403 
Other non-current liabilities44 388 
Total liabilities58,285 58,039 
Commitments and contingencies (Note 14) 
Equity:  
Common stock, par value $0.0001; 700.0 million shares authorized; 93.0 million shares issued and outstanding as of March 31, 2023 (December 31, 2022 - 700.0 million shares authorized; 93.0 million issued and outstanding)
9 9 
Additional paid-in capital414,897 409,683 
Accumulated deficit(238,202)(202,128)
Accumulated other comprehensive income(1,235)(1,189)
Equity attributable to common stockholders175,469 206,375 
Non-controlling interests(6,387)(3,928)
Total equity169,082 202,447 
Total liabilities and equity$227,367 $260,486 
3
Table of Contents
IVANHOE ELECTRIC INC.
Condensed Interim Consolidated Statements of Loss and Comprehensive Loss (Unaudited)
(Expressed in thousands of U.S. dollars, except for share and per share amounts)
Three Months Ended
March 31,
20232022
Revenue$679 $6,762 
Cost of sales(184)(52)
Gross profit495 6,710 
Operating expenses:   
Exploration expenses26,559 17,323 
General and administrative expenses10,633 5,226 
Research and development expenses1,843 1,331 
Selling and marketing expenses49 36 
Loss from operations38,589 17,206 
Other expenses (income):   
Interest (income) expense, net(32)762 
Foreign exchange (gain) loss(161)189 
Loss (gain) on revaluation of investments375 (4,659)
Loss on revaluation of convertible debt— 2,632 
Share of loss of equity method investees622 — 
Other (income) expenses, net(741)223 
Loss before income taxes38,652 16,353 
Income taxes(72)1,321 
Net loss38,580 17,674 
Less loss attributable to non-controlling interests(2,506)(2,222)
Net loss attributable to common stockholders or parent36,074 15,452 
Net loss38,580 17,674 
Other comprehensive loss (income), net of tax:
Foreign currency translation adjustments68 (106)
Other comprehensive loss (income)68 (106)
Comprehensive loss$38,648 $17,568 
Comprehensive loss attributable to:
Common stockholders or parent36,120 15,350 
Non-controlling interests2,528 $2,218 
$38,648 $17,568 
Net loss per share attributable to common stockholders
Basic and diluted$0.39 $0.24 
Weighted-average common shares outstanding
Basic and diluted92,964,24963,925,334
4
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IVANHOE ELECTRIC INC.
Condensed Interim Consolidated Statements of Changes in Equity (Unaudited)
(Expressed in thousands of U.S. dollars, except share amounts)
Three months ended March 31, 2023 and 2022
Additional
paid-in
capital		Accumulated
deficit		Accumulated
other
comprehensive
Income (loss)		Non-controlling
interest		Total
Common Stock
SharesAmount
Balance at January 1, 202263,925,334$6 $75,743 $(52,314)$(1,502)$5,881 $27,814 
Net loss—— — (15,452)— (2,222)(17,674)
Other comprehensive income—— — — 102 4 106 
Share-based compensation—— 882 — — 73 955 
Balance at March 31, 202263,925,334$6 $76,625 $(67,766)$(1,400)$3,736 $11,201 
Balance at January 1, 202392,960,584$9 $409,683 $(202,128)$(1,189)$(3,928)$202,447 
Net loss—— — (36,074)— (2,506)(38,580)
Other comprehensive loss—— — — (46)(22)(68)
Issuance of common stock; earn-in payment10,281— 150 — — — 150 
Stock options exercised1,000— 3 — — — 3 
Share-based compensation —— 5,067 — — 65 5,132 
Other changes in non-controlling interests—— (6)— — 4 (2)
Balance at March 31, 202392,971,865$9 $414,897 $(238,202)$(1,235)$(6,387)$169,082 
5
Table of Contents
IVANHOE ELECTRIC INC.
Condensed Interim Consolidated Statements of Cash Flows (Unaudited)
(Expressed in thousands of U.S. dollars)
Three months ended March 31, 2023 and 2022
20232022
Operating activities
Net loss$(38,580)$(17,674)
Adjustments to reconcile net loss to cash provided by (used in) operating activities:
Depreciation and amortization1,040 1,053 
Share-based compensation5,132 955 
Non-cash exploration expense662 — 
Non-cash research and development expense645 — 
Unrealized foreign exchange (gain) loss(155)225 
Interest expense804 758 
Income taxes(72)1,321 
Loss on revaluation of convertible debt— 2,632 
Loss (Gain) on revaluation of investments375 (4,659)
Share of loss of equity method investees622 — 
Other(141)344 
Changes in other operating assets and liabilities:
Trade accounts receivable(710)253 
Inventory(144)(449)
Operating lease liabilities(283)(267)
Accounts payable and accrued liabilities(1,108)1,134 
Other operating assets and liabilities1,894 (245)
Net cash used in operating activities(30,019)(14,619)
Investing activities
Purchase of mineral interests(1,763)(4,714)
Purchase of property, plant and equipment and intangible assets(348)(93)
Purchase of investments subject to significant influence(555)(793)
Net cash used in investing activities(2,666)(5,600)
Financing activities
Proceeds from exercise of stock options3 — 
Net cash provided by financing activities3 — 
Effect of foreign exchange rate changes on cash and cash equivalents17 138 
Decrease in cash and cash equivalents(32,665)(20,081)
Cash and cash equivalents, beginning of the year139,660 49,850 
Cash and cash equivalents, end of the period$106,995 $29,769 
Supplemental cash flow information
Cash paid for income taxes1,069 $208 
Supplemental disclosure of non-cash investing and financing activities
Issuance of common stock; earn-in payment$150 $— 
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IVANHOE ELECTRIC INC.
Notes to the Condensed Interim Consolidated Financial Statements
(Unaudited - Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

1. Background and basis of preparation:
Ivanhoe Electric Inc. (“Ivanhoe Electric” or “the Company”) was incorporated in the State of Delaware, USA, on July 14, 2020. Ivanhoe Electric is a mineral project exploration and development company with a focus on identifying and developing mineral projects, and ultimately mines, associated with the metals necessary for electrification, in particular, copper, nickel, cobalt, vanadium, gold, silver, and the platinum group metals.
The Company’s current mineral projects are located predominantly in the United States. In addition to mineral projects in the United States, the Company also holds direct and indirect ownership interests, and in some cases controlling financial interests, in other non-U.S. mineral projects, and in proprietary mineral exploration and minerals-based technologies.
The Company conducts the following business activities through certain subsidiaries:
•VRB Energy Inc. (“VRB”), develops, manufactures and installs vanadium flow batteries for grid-scale energy storage. Ivanhoe Electric had an ownership interest in VRB of 90.0% as at March 31, 2023 (December 31, 2022 — 90.0%).
•Computational Geosciences Inc. (“CGI”), provides data analytics, geophysical modeling, software licensing and artificial intelligence services for the mineral, oil & gas and water exploration industries. Ivanhoe Electric had an ownership interest in CGI of 94.3% as at March 31, 2023 (December 31, 2022 — 94.3%).
•Cordoba Minerals Corp. (“Cordoba”) holds the San Matias copper-gold-silver project in northern Colombia. Ivanhoe Electric had an ownership interest in Cordoba of 63.3% as at March 31, 2023 (December 31, 2022 — 63.3%).
•Kaizen Discovery Inc. (“Kaizen”) holds the Pinaya copper-gold exploration project in Peru. Ivanhoe Electric had an ownership interest in Kaizen of 82.5% as at March 31, 2023 (December 31, 2022 — 82.7%).
The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all information and disclosures required by generally accepted accounting principles in the United States. Therefore, this information should be read in conjunction with the Company's consolidated and combined carve-out financial statements and notes contained on its Form 10-K for the year ended December 31, 2022. The information furnished herein reflects all normal recurring entries, that are in the opinion of management, necessary for a fair statement of the results for the interim periods reported. Operating results for the three month period ended March 31, 2023, are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.
Reverse stock split:
In June 2022, the Company’s stockholders approved an amendment to the Company’s certificate of incorporation to effect a reverse stock split of the Company’s outstanding common stock at a ratio of 3-for-1 (the “Reverse Stock Split”) effective as of June 16, 2022. The number of authorized shares and the par value of the common stock were not adjusted as a result of the Reverse Stock Split. For periods before June 16, 2022, all references to common stock, options to purchase common stock, per share data, and related information contained in the condensed interim consolidated financial statements have been retrospectively adjusted to reflect the effect of the Reverse Stock Split.
The condensed interim consolidated financial statements have been prepared on a going concern basis, which presumes the realization of assets and satisfaction of liabilities in the normal course of business.
References to “$” refer to United States dollars and “Cdn$” to Canadian dollars.
2. Significant accounting policies:
The Company discloses in its consolidated financial statements for the year ended December 31, 2022, those accounting policies that it considers significant in determining its results of operations and financial position. There
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IVANHOE ELECTRIC INC.
Notes to the Condensed Interim Consolidated Financial Statements
(Unaudited - Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated)
have been no material changes to, or in the application of, the accounting policies previously identified and described in the Company’s consolidated and combined carve-out financial statements for the year ended December 31, 2022.
Recent accounting pronouncements not yet adopted:
In August 2020, the FASB issued ASU 2020-06 Debt — Debt with Conversion and Other Options (Topic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Topic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The update is to address issues identified as a result of the complexity associated with applying generally accepted accounting principles for certain financial instruments with both liability and equity characteristics. The Company is required to adopt ASU 2020-06 for fiscal years beginning after December 15, 2023 and is currently evaluating the expected impact on the consolidated financial statements.
In June 2022, the FASB issued ASU 2022-03 Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. The update is to clarify the guidance in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security. The update clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The Company intends to adopt ASU 2022-03 on January 1, 2024 and is currently evaluating the expected impact on the consolidated financial statements.
3. Use of estimates:
The preparation of consolidated financial statements requires management of the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities, the related disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. Actual results may differ from these estimates.
The significant judgments made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated and combined carve-out financial statements for the year ended December 31, 2022.
4. Cash and cash equivalents:
Of the total cash and cash equivalents at March 31, 2023 and December 31, 2022, $10.2 million and $20.7 million, respectively, was not available for the general corporate purposes of the Company as it was held by non-wholly-owned subsidiaries.
At March 31, 2023, the Company does not have any cash equivalents in the form of redeemable short-term investments (December 31, 2022 - $2.3 million).
5. Investments subject to significant influence:
The Company’s principal investment subject to significant influence is Sama Resources Inc. (“Sama”). Others include its investments in Fjordland Exploration Inc. (“Fjordland”) and Sama Nickel Corporation (“SNC”).
Carried at fair valueEquity method
Sama FjordlandSNCTotal
Balance at December 31, 20224,799 309 890 5,998 
Change in fair value189 — — 189 
Investment— — 555 555 
Share of loss— — (622)(622)
Foreign currency translation— — (2)(2)
Balance at March 31, 2023$4,988 $309 $821 $6,118 
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IVANHOE ELECTRIC INC.
Notes to the Condensed Interim Consolidated Financial Statements
(Unaudited - Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated)
6. Exploration mineral interests:
Santa
Cruz 		Tintic Pinaya San
Matias 		OtherTotal
Balance at December 31, 2022$40,880 $27,138 $2,525 $15,315 $900 $86,758 
Acquisition costs— 1,763 — — — 1,763 
Foreign currency translation— — (1)— — (1)
Balance at March 31, 2023$40,880 $28,901 $2,524 $15,315 $900 $88,520 
7. Convertible debt:
VRB
Convertible
Bond
Balance at December 31, 2022$25,918 
Interest expense509 
Balance at March 31, 2023$26,427 
On July 8, 2021, VRB issued a convertible bond for gross proceeds of $24.0 million. The bond has a five-year term and interest accrues at a rate of 8% per annum.
Prior to the maturity date, the convertible bond is automatically converted into equity of VRB upon an equity financing or sale event, at a price per share equal to the lower of:
•the transaction price of the equity financing or sale event; and
•the valuation cap price of $158.0 million divided by the total shares outstanding at the time of the event.
If no equity financing or sale event occurs, VRB must repay the outstanding principal and interest on maturity.
The Company has accounted for the convertible bond, including its embedded features, as a debt instrument accounted at amortized cost, as it was determined the embedded features are not required to be bifurcated.
Directly attributable transaction costs of $1.1 million were recorded against the carrying value of the debt and are amortized using the effective interest method at a rate of 9.1%.
8. Equity:
(a) Stock-based compensation:
(i) Stock options:
During the three months ended March 31, 2023, the Company granted stock options to certain new management of the Company. The options have a seven-year term and comprise three equal tranches vesting in one-third annual increments beginning one year from the grant date. The stock options were granted at an exercise price equal to the closing stock price on the grant date.
The fair value of each stock option is estimated on the date of grant using the Black-Scholes option valuation model. Expected volatility was calculated based on the historical volatility of a group of peer companies’ common stock and a group of relevant stock market indices over the expected option life. Management exercised judgment in determining the expected life of the options and considered factors such as the contractual term of the options, the vesting schedule and expected volatility. The risk-free interest rate is based on Federal Reserve rates in effect for bonds with maturity dates equal to the expected term of the option.
Information related to stock options granted during the three months ended March 31, 2023 is presented below.
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IVANHOE ELECTRIC INC.
Notes to the Condensed Interim Consolidated Financial Statements
(Unaudited - Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated)
Grant date: February 1, 2023Grant date: March 1, 2023
Exercise price$13.23 $15.46 
Number of options granted500,000 100,000 
Weighted average assumptions used to value stock option awards:
Expected volatility69.8 %69.5 %
Expected life of options (in years)44
Expected dividend rate0 %0 %
Risk-free interest rate3.73 %4.52 %
Weighted average grant-date fair value (per option)$7.22 $8.53 
(ii) Stock settled restricted stock units ("RSUs"):
On January 1, 2023, Ivanhoe Electric granted 750,000 stock-settled RSUs to a new executive of the Company. The RSUs comprise five equal tranches vesting in one-fifth annual increments beginning one year from the grant date. The fair value of the stock-settled RSUs is amortized over the vesting period. The total fair value of the January 1, 2023 RSU grant was $9.1 million.
9. Revenue:
The Company recognized revenue from the following sources:
Three months ended
March 31:
Revenue type20232022
Software licensing$400 $6,702 
Data processing services279 60 
Renewable energy storage systems (Note a)— — 
Total$679 $6,762 
(a)At March 31, 2023, the Company had a contract liability of $3.6 million (December 31, 2022 — $2.8 million) relating to the sale of renewable energy storage systems.
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IVANHOE ELECTRIC INC.
Notes to the Condensed Interim Consolidated Financial Statements
(Unaudited - Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated)
10. Exploration expense:
Three months ended
March 31:
Project20232022
Santa Cruz, USA $14,682 $9,798 
San Matias, Colombia 4,658 2,376 
Tintic, USA1,121 289 
Hog Heaven, USA638 560 
White Hill, USA (Note a)491 — 
Lincoln, USA295 13 
Carolina, USA238 — 
Pinaya, Peru 157 686 
Generative exploration and other4,279 3,601 
Total$26,559 $17,323 
(a)White Hill project:
On February 22, 2023, the Company entered into an agreement with Exiro Minerals USA Corp. (“Exiro”) which gives the Company the right to earn an 80% interest in the White Hill Project located in the Gillis Range, Mineral County, Nevada, by incurring $10.0 million of expenditures and making payments to Exiro totaling $5.0 million ($3.6 million in cash and $1.4 million in our common stock) within six years of signing the agreement.
11. Related party transactions:
Related parties include entities with common direct or indirect shareholders and/or directors. Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions.
The following table summarizes transactions between the Company and significant related parties.
Balance outstanding as atTransactions for the
three months ended
March 31,
March 31,
2023		December 31,
2022		20232022
Total Expenses
Global Mining (Note a)1,538 1,383 4,316 2,737 
Ivanhoe Capital Aviation (Note b)— 83 250 250 
I-Pulse (Note c)— — 1,157 — 
Total1,538 1,466 5,723 2,987 
Advances
Global Mining (Note a)1,988 1,987 — — 
Deposit
I-Pulse (Note c)5,971 7,128 — — 
Loan
JCHX Mining Management Co., Ltd (Note d)10,305 10,010 — — 
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IVANHOE ELECTRIC INC.
Notes to the Condensed Interim Consolidated Financial Statements
(Unaudited - Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated)
Transactions for the
three months ended
March 31,
20232022
Expense classification
Exploration expenses3,042 1,515 
General and administrative expenses2,031 1,472 
Research and development expenses650 — 
5,723 2,987 
(a)Global Mining Management Corp. (“Global Mining”) is a private company based in Vancouver, Canada, that provides administration, accounting, and other office services to the Company on a cost-recovery basis. The Company held 7.1% of Global Mining’s outstanding common shares at March 31, 2023 (December 31, 2022 — 7.1%).
(b)Ivanhoe Capital Aviation (“ICA”) is an entity beneficially owned by the Company’s Executive Chairman. ICA provides use of its aircraft to the Company.
(c)I-Pulse Inc. (“I-Pulse”) is a significant shareholder of the Company. On October 24, 2022 the Company entered into an agreement with I-Pulse, to purchase six Typhoon™ transmitters to be delivered in stages over approximately three years. The total purchase price for the six Typhoon™ transmitters is $12.4 million, which includes research and development costs of $2.8 million. The agreement also includes annual maintenance costs of $1.7 million per year. The Company is recognizing the research and development costs and annual maintenance costs on a straight line basis in the condensed interim consolidated statement of loss. In October 2022, the Company made deposit payments totaling $7.1 million, representing 50% of each component of the agreement. The remaining payments will be made as each Typhoon™ transmitter system is delivered.
(d)JCHX Mining Management Co., Ltd (“JCHX") held 19.9% of Cordoba’s issued and outstanding common stock as at March 31, 2023 (December 31, 2022 - 19.9%).
In December 2022, JCHX advanced a bridge loan of US$10 million to Cordoba. The bridge loan is for an 18-month term and bears interest at 12% per annum during the first 12 months of the term and 14% per annum during the remaining six months.
Upon closing the project financing transaction described in Note 15, all of the principal and interest outstanding on the bridge loan was applied towards that transaction’s first installment as a payment in kind.
In the event the bridge loan was not repaid, JCHX had the option to receive payment in kind equal to 20% of the total issued shares of CMH Colombia S.A.S. (“CMH”), a Colombian subsidiary of Cordoba.
12. Fair value measurement:
The following table provides the valuation hierarchy classification of assets and liabilities that are recorded at fair value and measured on a recurring basis in the combined balance sheets:
March 31, 2023December 31, 2022
Level 1Level 2Level 3Level 1Level 2Level 3
Financial assets:
Investments subject to significant influence5,297 — — 5,108 — — 
Other investments1,656 — — 2,220 — — 
Total financial assets$6,953 $— $— $7,328 $— $— 
Financial liabilities:     
Total financial liabilities$— $— $— $— $— $— 
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IVANHOE ELECTRIC INC.
Notes to the Condensed Interim Consolidated Financial Statements
(Unaudited - Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated)
There were no movements in level three instruments for the three months ended March 31, 2023.
13. Segment reporting:
The Company’s President & Chief Executive Officer and its Executive Chairman combine to form the Chief Operating Decision Maker (“CODM”) of the Company. The CODM evaluates how the Company allocates resources, assesses performance and makes strategic and operational decisions. Based upon such evaluation, the Company has determined that it has three reportable segments. The Company’s reportable segments are critical metals, data processing and energy storage.
Critical metals is focused on mineral project exploration and development with a focus on identifying and developing mineral projects, and ultimately mines, associated with the metals necessary for electrification.
The data processing segment provides data analytics, geophysical modeling, software licensing and artificial intelligence services for the mineral, oil & gas and water exploration industries.
The energy storage segment develops, manufactures and installs vanadium flow batteries for grid-scale energy storage.
Segment information for the periods presented is as follows:
Three months ended March 31, 2023
Critical
Metals		Data
Processing		Energy
Storage		Total
Revenue$— $679 $— $679 
Intersegment revenues— 48 — 48 
Loss (income) from operations36,159 399 2,031 38,589 
Segment Assets208,441 3,633 15,293 227,367 
Three months ended March 31, 2022
Critical
Metals		Data
Processing		Energy
Storage		Total
Revenue$— $6,762 $— $6,762 
Intersegment revenues— 43 — 43 
Loss (income) from operations20,780 (5,549)1,975 17,206 
Segment Assets106,792 8,529 26,334 141,655 
14. Commitments and contingencies:
The Company has entered into a contractual arrangement to purchase six Typhoon™ transmitters from I-Pulse (Note 11).
In the ordinary course of business, the Company may be involved in various legal proceedings and subject to claims that arise. Although the results of litigation and claims are inherently unpredictable and uncertain, the Company is not currently a party to any legal proceedings the outcome of which, if determined adversely to it, are believed to, either individually or taken together, have a material adverse effect on the Company’s business, financial condition or results of operations.
15. Subsequent events:
(a) On May 8, 2023, Cordoba announced that Cordoba and JCHX had satisfied all necessary conditions to close the $100 million strategic arrangement for the joint development of the Alacran Project in Colombia. As a result of the closing, JCHX has funded the initial installment of $40 million towards its 50% ownership interest in CMH, which owns 100% of the Alacran Project and is the joint venture vehicle for Cordoba and JCHX in this strategic project level partnership.
For its 50% interest, JCHX will pay the $100 million purchase price in three installments. The first payment of $40 million was made by JCHX at closing. A second installment of $40 million is payable in cash upon the board of
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IVANHOE ELECTRIC INC.
Notes to the Condensed Interim Consolidated Financial Statements
(Unaudited - Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated)
directors of Cordoba approving the Feasibility Study of the Alacran Project, and the filing of the Environmental Impact Assessment (“EIA”) to the relevant Colombian Government authority, but in no event shall such second installment be paid later than the second anniversary of the closing of the transaction. 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.
In December 2022, JCHX advanced a bridge loan of $10 million to Cordoba. Upon closing of the transaction, the entire balance owing under the bridge loan and accrued interest was applied towards the first installment as a payment in kind.
(b) On May 10, 2023, Ivanhoe Electric signed a binding purchase and sale agreement (“PSA”) for the acquisition of surface land at its Santa Cruz Project in Arizona. The acquisition totals 6,205 acres of surface title and associated water rights.
Under the terms of the PSA, Ivanhoe Electric will acquire the land for a total purchase price of $120.5 million to be paid in installments, as follows:
•$5.0 million deposit, paid May 11, 2023, becomes non-refundable upon successful completion of due diligence;
•$34.3 million payable at the time of closing, expected in May 2023, inclusive of the $5.0 million deposit;
•$34.3 million, plus accrued interest, payable on or before six months following the date of closing;
•Four equal principal payments of $13.0 million on the first, second, third and fourth anniversaries of the Second Closing Payment, plus applicable accrued interest.
Interest on future payments will accrue at a rate of Prime plus 1%.
(c) On May 15, 2023, Ivanhoe Electric signed a definitive agreement with Saudi Arabian Mining Company Ma’aden (“Ma’aden”) which finalized the terms of the transactions previously announced on January 11, 2023. The transactions include the establishment of a 50/50 exploration joint venture between Ma’aden and Ivanhoe Electric to explore approximately 48,500 km2 of prospective land in Saudi Arabia and a $126.5 million strategic investment by Ma'aden in Ivanhoe Electric common stock.
The Company expects to issue approximately 10.2 million common shares to Ma’aden, representing 9.9% of common shares outstanding, at a purchase price of $12.38 per share. Of the $126.5 million total proceeds from the private placement, $66 million will go to the joint venture to fund exploration activities, including the purchase of three new TyphoonTM machines. The remaining $60 million will be retained by Ivanhoe Electric to advance our portfolio of US mineral projects, and for working capital and general corporate purposes.
At closing, Ivanhoe Electric will grant Ma’aden a top-up right allowing Ma’aden to maintain its 9.9% ownership, and Ma’aden will agree to a five-year standstill limiting its shareholding to a maximum of 19.9%, subject to certain exceptions. Ma’aden will have the right to appoint a nominee to the Ivanhoe Electric board of directors.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with the condensed interim consolidated financial statements and related notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q (this “Quarterly Report”) and with our audited consolidated and combined carve-out financial statements and the related notes for the fiscal year ended December 31, 2022 included in Part II of our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities and Exchange Commission (the “SEC”) on March 14, 2023 (the “2022 Form 10-K”).

Special Note Regarding Forward-Looking Statements
This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended, (the "Exchange Act"), that involve risks and uncertainties, including statements based on our current expectations, assumptions, estimates and projections about future events, our business, financial condition, results of operations and prospects, our industry and the regulatory environment in which we operate. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. Those statements include, but are not limited to, statements with respect to: estimated calculations of mineral reserves and resources at our properties including changes in those estimated calculations, anticipated results of exploration activities, plans and objectives, industry trends, our requirements for additional capital, treatment under applicable government regimes for permitting or attaining approvals, government regulation, environmental risks, title disputes or claims, synergies of potential future acquisitions, and our anticipated uses of the net proceeds from our initial public offering. In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “could,” “should,” “would,” “achieve,” “budget,” “scheduled,” “forecasts,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue,” the negative of these terms and other comparable terminology. These forward-looking statements may include projections of our future financial performance, our anticipated growth strategies and anticipated trends in our industry. All forward-looking statements speak only as of the date on which they are made. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions concerning future events that are difficult to predict. Therefore, actual future events or results may differ materially from these statements. We believe that the factors that could cause our actual results to differ materially from those expressed or implied by forward-looking statements include the following: our mineral projects are all at the exploration stage; we have no mineral reserves, other than at the San Matias project; we have a limited operating history on which to base an evaluation of our business and prospects; we depend on our material projects for our future operations; our mineral resource calculations at the Santa Cruz Project are only estimates; actual capital costs, operating costs, production and economic returns may differ significantly from those we have anticipated; the title to some of the mineral properties may be uncertain or defective; our business is subject to changes in the prices of copper, gold, silver, nickel, cobalt, vanadium and platinum group metals; we have claims and legal proceedings against two of our subsidiaries; our business is subject to significant risk and hazards associated with future mining operations; we may fail to identify attractive acquisition candidates or joint ventures with strategic partners or be unable to successfully integrate acquired mineral properties or successfully manage joint ventures; our business is extensively regulated by the United States and foreign governments as well as local governments; the requirements that we obtain, maintain and renew environmental, construction and mining permits are often a costly and time-consuming process; our non-U.S. operations are subject to additional political, economic and other uncertainties not generally associated with domestic operations; and our operations may be impacted by the COVID-19 pandemic, including impacts to the availability of our workforce, government orders that may require temporary suspension of operations, and the global economy.
You should carefully consider these risks, as well as the additional risks described in other documents we file with the SEC. We also operate in a very competitive and rapidly changing environment. New risks emerge from time to time and it is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in, or implied by, any forward-looking statements.
These factors should not be construed as exhaustive and should be read in conjunction with the risks described under the heading “Risk Factors” in our 2022 Form 10-K. Important factors that could cause actual results to differ materially from our expectations, or cautionary statements, are disclosed under “Risk Factors” in the 2022 Form 10-K. These risks and uncertainties, as well as other risks of which we are not aware or which we currently do not believe to be material, may cause our actual future results to be materially different than those expressed in our forward-looking statements. We caution you not to place undue reliance on these forward-looking statements. We do not undertake any obligation to make any revisions to these forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events, except as required by law.
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Business Overview
We are a United States domiciled minerals exploration and development company with a focus on developing mines from mineral deposits principally located in the United States in order to support domestic supply chain independence and to deliver the critical metals necessary for electrification of the economy. We believe the United States is significantly underexplored and will yield major new discoveries of these metals. Our mineral exploration efforts focus on copper, nickel, vanadium, cobalt, platinum group elements, gold and silver. All of our mineral properties are in the exploration stage.
“Our” mineral projects refers to our interests in such projects which may be a direct ownership interest in mineral titles (including through subsidiary entities), a right to acquire mineral titles through an earn-in or option agreement, or, in the case of our investments in publicly listed companies in Canada, through our ownership of the equity of those companies, that have an interest in such mineral projects.
Our two material mineral projects are the Santa Cruz Copper Project (“Santa Cruz” or the “Santa Cruz Project”) in Arizona and the Tintic Copper-Gold Project (“Tintic” or the “Tintic Project”) in Utah. We have the option to acquire 100% of the mineral rights constituting the Santa Cruz and Tintic projects. On May 11, 2023, we announced the signing of a binding purchase and sale agreement for the acquisition of 6,205 acres of surface title and associated water rights at the Santa Cruz Project for a total purchase price of $120.5 million to be paid in installments over a 4.5-year period. We also hold the option to acquire all the mineral titles contiguous with the acquired surface lands. Those mineral rights will be formally acquired upon the completion of scheduled option payments in August 2023 and 2024. At that time, we will have a unified land and mineral package encompassing the entire Santa Cruz Project.
Our other key mineral projects include the Hog Heaven Project, located in Montana (the “Hog Heaven Project”), and the Ivory Coast Project located in the Ivory Coast, West Africa, which is held through our 22.8% equity interest in Sama Resources Inc. (“Sama”) and our 30% direct interest in the Sama Nickel Corporation Inc. joint venture.
We also have investments in publicly traded companies in Canada, and through our ownership of equity in those companies, we have an indirect interest in mineral projects in the United States, Canada, Colombia and Peru.
In addition to our mineral projects, we also own controlling interests in two technology companies: VRB and CGI. As of March 31, 2023, we owned 90.0% of the outstanding shares of VRB. VRB and its subsidiary companies are primarily engaged in the design, manufacture, installation, and operation of energy storage systems. As of March 31, 2023, we owned 94.3% of CGI’s outstanding shares. CGI has developed technology that consists of sophisticated codes to process geophysical data and build 3D subsurface images that could indicate the presence of various natural resources, including metallic minerals and water. CGI offers mineral prospectivity and drill target identification services, data analytic tools and optimization of operational processes. CGI provides fee-for-service and licensing agreements for one-off technology applications to customers in the area of critical minerals, energy and water exploration.
On May 15, 2023, we signed a definitive agreement with Saudi Arabian Mining Company Ma’aden (“Ma’aden”) which finalized the terms of the transactions previously announced on January 11, 2023. The transactions include the establishment of a 50/50 exploration joint venture between Ma’aden and Ivanhoe Electric to explore approximately 48,500 km2 of prospective land in Saudi Arabia, and a $126.5 million strategic investment by Ma'aden in Ivanhoe Electric common stock. We expect to issue approximately 10.2 million common shares to Ma’aden, representing 9.9% of common shares outstanding, at a purchase price of $12.38 per share. Of the $126.5 million total proceeds from the private placement, $66 million will go to the joint venture to fund exploration activities, including the purchase of three new-generation TyphoonTM machines. The remaining $60 million will be retained by Ivanhoe Electric to advance our portfolio of US mineral projects, and for working capital and general corporate purposes. The transactions are expected to close by the end of June 2023 subject to the approval of a supplemental listing application by the New York Stock Exchange and the corporate and regulatory formalities required in Saudi Arabia to incorporate the joint venture entity.
On June 30, 2022, we completed an initial public offering and the Company’s shares were listed on the NYSE American and the TSX under the ticker symbol “IE”.
Reverse Stock Split
On June 16, 2022, we effected a reverse stock split of our outstanding common stock at a ratio of 3-for-1 (the “Reverse Stock Split”). The number of authorized shares and the par value of the common stock were not adjusted as a result of the Reverse Stock Split. All references to common stock, options to purchase common stock, per share data and related information have been retrospectively adjusted to reflect the effect of the Reverse Stock Split for all periods presented.
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Impact of the COVID-19 Pandemic
The COVID-19 global pandemic has caused governments worldwide to implement measures to slow the spread of the outbreak through quarantines, travel restrictions, business shutdowns, and other measures. The COVID-19 pandemic has negatively affected the global economy, disrupted financial markets and international trade, resulted in increased unemployment levels and significantly affected global supply chains, all of which have and are expected to continue to affect our future exploration activities and business. To the extent the COVID-19 pandemic adversely affects our business prospects, financial condition, and results of operation, it may also have the effect of exacerbating many of the other risks described in the Item 1A. Risk Factors section in our 2022 Form 10-K.
Segments
We account for our business in three business segments – (i) critical metals, (ii) data processing and software licensing services and (iii) energy storage systems.
Significant Components of Results of Operations
Revenue, Cost of Sales and Gross Profit
We generate revenue from our technology businesses CGI and VRB, which are included in the data processing and software licensing business segment and the energy storage systems business segment, respectively.
We have not generated any revenue from our mining projects because they are in the exploration stage. We do not expect to generate any revenue from our mining projects for the foreseeable future.
Exploration Expenses
Exploration expenses include topographical, geological, geochemical and geophysical studies, exploratory drilling, trenching, sampling and activities in relation to identifying a mineral resource and then evaluating the technical feasibility and commercial viability of extracting the mineral resource, as well as value-added taxes in relation to these direct exploration and evaluation costs incurred in foreign jurisdictions where recoverability of those taxes is uncertain. Exploration expenses also include salaries, benefits and stock-based compensation expenses of the employees performing these activities.
Exploration expenses also include payments under earn-in and option agreements where the option right is with respect to ownership interests in legal entities owning the underlying mineral project in the exploration project phase. Through our earn-in and option agreements, we have the right (and in some cases, the obligation) to fund and conduct exploration on the underlying mineral project prior to determining whether to acquire a minority or majority ownership interest through further funding the costs of such exploration and, in some cases, through direct payments to the owners of the project. In the event we cease making expenditures on an exploration mineral project or fail to incur the agreed level of exploration expenditures, we will not obtain an ownership right beyond any which may have been acquired as of the date of termination.
Included in exploration expenses are exploration costs that we incur in relation to generating new projects. These activities may or may not proceed to earn-in agreements depending on our evaluation. These are categorized as “Generative exploration and other”.
General and Administrative Expenses
Our general and administrative expenses consist of salaries and benefits, stock-based compensation, professional and consultant fees, insurance and other general administration costs. Our general and administrative expenses have increased significantly now that we are operating as a public company and have added to our management team. In particular, we expect to incur increased general and administrative expenses costs in 2023 compared to 2022 for salaries, non-cash stock-based compensation, compliance related costs and directors’ and officers’ insurance expense.
Research and Development Expenses
Expenditures on research and development activities are recognized as an expense in the period in which they are incurred. We expect research and development expenses to increase as our technology-based businesses continue to grow.
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Since 2018, the majority of our research and development expenses came from CGI’s data processing business, which includes amortization expenses related to its artificial intelligence intellectual property acquired in 2018. VRB also conducts research and development activities to continue to advance its energy storage system technology.
We also have research and development expenses that we incur in relation to TyphoonTM. In 2023, we have commenced design and development activities for our next generation of TyphoonTM equipment.
Three Months Ended March 31, 2023 Compared to the Three Months Ended March 31, 2022
For the three months ended March 31, 2023 we recorded a net loss attributable to common stockholders of $36.1 million ($0.39 per share), compared to $15.5 million ($0.24 per share) for the three months ended March 31, 2022, which was an increase of $20.6 million. Significant contributors to this increase for the three months ended March 31, 2023 included an increase of $9.2 million in exploration expenditures, an increase of $5.4 million in general and administrative expenses, and a decrease of $6.1 million in revenue compared to the three months ended March 31, 2022.
Exploration expenses were $26.6 million for the three months ended March 31, 2023, an increase of $9.2 million from $17.3 million for the three months ended March 31, 2022. Exploration expenses consisted of the following:
Three months ended
March 31,
(In thousands)20232022
Exploration Expenses:
Santa Cruz, USA $14,682 $9,798 
San Matias, Colombia 4,658 2,376 
Tintic, USA1,121 289 
Hog Heaven, USA638 560 
White Hill, USA491 — 
Lincoln, USA295 13 
Carolina, USA238 — 
Pinaya, Peru 157 686 
Generative exploration and other4,279 3,601 
Total$26,559 $17,323 
During the three months ended March 31, 2023, exploration expenditures largely focused on activities at:
•the Santa Cruz Project where $14.7 million of exploration expenditure was incurred in the three months ended March 31, 2023 compared to $9.8 million incurred in the three months ended March 31, 2022. Activities during the three months ended March 31, 2023 at Santa Cruz were focused on a program of exploration and infill resource, geotechnical, hydrological and metallurgical drilling, advancing technical studies, completing an updated mineral resource estimate and beginning an Initial Assessment Study for the Santa Cruz Copper Project.
•the San Matias Project where $4.7 million of exploration expenditure was incurred by Cordoba Minerals for the three months ended March 31, 2023 focused on continuing work on the feasibility study on the Alacran deposit. Activities during the three months ended March 31, 2023 included ongoing infill geotechnical, metallurgical, hydrological and infill resource drilling to advance the feasibility study. During the three months ended March 31, 2023 a total of 3,946 meters of infill diamond drilling was completed. To date, a total of approximately 40,000 meters out of the planned 42,000 meter infill diamond drilling campaign have been completed; and
•the Tintic Project where $1.1 million of exploration expenditure was incurred in the three months ended March 31, 2023 compared to $0.3 million incurred in the three months ended March 31, 2022. Activities during the three months ended March 31, 2023 at Tintic were focused on completing an initial diamond drill hole which we commenced drilling in November 2022 and completed in February 2023 in challenging snowy conditions. We expect to execute a more extensive drilling campaign at Tintic during the spring of 2023 when operating conditions improve; and
General and administrative expenses were $10.6 million for the three months ended March 31, 2023, an increase of $5.4 million from $5.2 million in three months ended March 31, 2022. Several items contributed to the increase, including:
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•a $3.8 million increase in stock-based compensation expense largely due to impact of the additional non-cash stock-based compensation expense of the additional Ivanhoe Electric stock option and RSU grants that occurred in November 2022 and during the three months ended March 31, 2023; and
•a $1.6 million increase in directors and officers insurance expenses for the three months ended March 31, 2023 in relation to the new director and officers insurance policy we entered into when we became a public company in June 2022. There was no similar expense in the three months ended March 31, 2022.
CGI’s software licensing and data processing services to the mining and oil and gas industries represented 100.0% of our revenue for the three months ended March 31, 2023 ($0.7 million) and 100.0% for the three months ended March 31, 2022 ($6.8 million). VRB generated no revenue during these periods.
Three Months Ended
March 31, 2023		Three Months Ended
March 31, 2022		Percentage Change
(In thousands)
Software licensing and data processing services:
Revenue$679 $6,762 (90)%
Cost of sales(184)(52)254 %
Gross profit$495 $6,710 (93)%
CGI’s revenue for the three months ended March 31, 2023 was $0.7 million a decrease of $6.1 million from $6.8 million for the three months ended March 31, 2022. The decrease in CGI’s revenue was a result of revenue for the three months ended March 31, 2022 including a one-time amount of $6.5 million relating to a new contract that CGI entered into with one of its customers upon the expiration of a previous three-year contract. Under that agreement with this customer, CGI agreed to license certain software for a one-time fee of $6.5 million, which was received and recognized in the first quarter of 2022. CGI’s revenue for the three months ended March 31, 2023 consisted of $0.4 million of software licensing revenue and $0.3 million in revenue from processing data.
CGI’s gross profit for the three months ended March 31, 2023 was $0.5 million, a decrease of $6.2 million from $6.7 for the three months ended March 31, 2022. The licensing of certain software for a one-time fee of $6.5 million had a direct impact on gross profit for the three months ended March 31, 2022 as the licenses had no underlying carrying value and therefore resulted in a $6.5 million gross profit being recognized.
Research and development expenses for the three months ended March 31, 2023 were $1.8 million, an increase of $0.5 million from the same period in 2022 primarily attributable to incurring $0.6 million of expenditure in the first quarter of 2023 on commencing research and development activities for our next generation of TyphoonTM equipment.
Stock-Based Compensation
During the three months ended March 31, 2023, we granted stock options to certain new employees of the Company. In February 2023, we granted 500,000 stock options at an exercise price of $13.23 per share and in March 2023, we granted 100,000 stock options at an exercise price of $15.46. The fair value of the option grants was determined using the Black-Scholes option-pricing model as $7.22 and $8.53 per share, respectively. In addition, in January 2023, we granted 750,000 RSUs to a new senior officer of the Company which had a fair value on the grant date of $12.15 per share.
Liquidity, Capital Resources and Capital Requirements
Cash Resources
We have recurring net losses and negative operating cash flows and we expect that we will continue to operate at a loss for the foreseeable future.
We generate revenue from our technology businesses. We have not generated any revenue from our mining projects and do not expect to generate any revenue from our mining projects for the foreseeable future.
We have funded our operations primarily through the sale of our equity and convertible securities.
At March 31, 2023 and December 31, 2022, we had cash and cash equivalents of $107.0 million and $139.7 million, respectively, and a working capital of $100.8 million and $133.6 million, respectively. Of the total cash and cash
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equivalents at March 31, 2023 and December 31, 2022, $10.2 million and $20.7 million, respectively, was not available for the general corporate purposes of the Company as these amounts were held by non-wholly-owned subsidiaries.
We believe that we will have sufficient cash resources to carry out our business plans for at least the next 12 months. We have based these estimates on our current assumptions which may require future adjustments based on our ongoing business decisions as well as, in particular, exploration success at our mineral projects. Accordingly, we may require additional cash resources earlier than we currently expect or we may need to curtail currently planned activities.
Our significant operational expenses include the payments that we anticipate making under the various earn-in and option agreements to which we are a party. These agreements are structured to provide us with flexibility whereby our ability to continue to explore on a mineral project is contingent on funding agreed specified levels over specified time intervals.
Cash Balances as of March 31, 2023
The table below discloses the amounts of cash disaggregated by currency denomination as of March 31, 2023 in each jurisdiction that our affiliated entities are domiciled.
Currency by Denomination (in USD Equivalents)
US dollars
Canadian
dollars
Chinese
Renminbi
Colombian PesosOtherTotal
(In thousands)
Jurisdiction of Entity:
USA$95,456 $776 $— $— $— $96,232 
Colombia— — — 123 — $123 
Cayman Islands5,843 4 — — — $5,847 
Canada3,041 917 — — — $3,958 
China— — 336 — — $336 
British Virgin Islands422 1 — — — $423 
Other42 1 — — 33 76 
Total$104,804 $1,699 $336 $123 $33 $106,995 
Our subsidiary VRB, domiciled in the Cayman Islands, is subject to certain foreign exchange restrictions with respect to its People's Republic of China ("PRC") subsidiaries. There are foreign exchange policies in the PRC that limit the amount of capital that can be directly transmitted offshore from VRB’s PRC subsidiaries to VRB. Since their incorporation, these PRC subsidiaries have had accumulated losses and have not declared or paid any dividends or made any distribution of earnings.
There were no cash transfers to or from our PRC subsidiaries in the form of intercompany loans during the three months ended March 31, 2023.
Refer to Note 18 of our consolidated and combined carve-out financial statements in our 2022 Form 10-K which outlines other restrictions on transfers of net assets from our consolidated subsidiaries to the Company.
Convertible Bond — VRB.
In 2021, VRB issued a convertible bond for gross proceeds of $24.0 million. The bond has a five-year term and interest accrues at a rate of 8% per annum. Prior to the maturity date, the convertible bond will be automatically converted into equity of VRB upon an equity financing or sale event, at a price per share equal to the lower of (A) the transaction price of the equity financing or sale event, and (B) the valuation cap price of $158.0 million divided by the total shares outstanding at the time of the event. If no equity financing or sale event occurs, VRB must repay the outstanding principal and interest on maturity.
Bridge Loan — Cordoba Minerals.
In December 2022, JCHX advanced a bridge loan of $10 million to Cordoba Minerals in connection with the strategic arrangement for the joint development of Cordoba Mineral’s Alacran Project. The bridge loan is for an 18-month term and bears interest at 12% per annum during the first 12 months of the term and 14% per annum during the remaining six months, calculated on the basis of a 365-day year. Upon closing the strategic arrangement on May 8, 2023, all of the principal and interest outstanding on the bridge loan was applied towards the first installment as a payment in kind.
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Cash Flows
The following table presents our sources and uses of cash for the periods indicated:
Three Months Ended
March 31,
20232022
Net cash (used in) provided by:
Operating activities(30,019)(14,619)
Investing activities(2,666)(5,600)
Financing activities3 — 
Effect of foreign exchange on cash17 138 
Total change in cash(32,665)(20,081)
Operating activities.
Net cash used in operating activities for all periods presented largely was spent on our exploration expenses and our general and administrative costs. We do not generate adequate cash from operations to cover our operating expenses and therefore rely on our financing activities to provide the cash resources to fund our operating and investing activities.
Net cash used in operating activities for the three months ended March 31, 2023 was $30.0 million, an increase of $15.4 million from the $14.6 million of net cash used for the three months ended March 31, 2022.
Investing activities.
Our investing activities generally relate to acquisitions of mineral property interests, purchases of public company shares in companies that we may partner with and capital expenditures at our projects. To date, due to our mining projects being in the exploration stage we have not incurred material capital expenditures.
Net cash used in investing activities for the three months ended March 31, 2023 of $2.7 million was mainly attributable to $1.8 million related to payments for mineral interests and $0.6 million for the purchase of investments that are subject significant influence. The $1.8 million of cash used for purchases of mineral interests related to option payments at our Tintic Project. The $0.6 million for the purchase of investments that are subject to significant influence relates to the funding of our 30% interest in the Sama Nickel Corporation Inc. joint venture in the Ivory Coast.
Financing activities.
During the three months ended March 31, 2023, there were no significant financing activities as we continued to fund our operations with proceeds from our IPO.
Contractual Obligations
As of March 31, 2023, there have been no material changes, outside the ordinary course of business, in our contractual obligations since December 31, 2022. Refer to Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 14, 2023, for information regarding our contractual obligations.
Off Balance Sheet Arrangements
As of March 31, 2023, we were not involved in any off-balance sheet arrangements that have or are reasonably likely to have a material effect on our financial condition, results of operations, or liquidity.
Related Party Transactions
See Note 11 of our consolidated and combined carve-out financial statements for the three months ended March 31, 2023.
Critical Accounting Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated and combined carve-out financial statements which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of
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assets, liabilities, revenues and expenses, as well as the disclosure of contingent assets and liabilities as of the date of our financial statements.
Below are the accounting matters that we believe are critical to our financial statements due to the degree of uncertainty regarding the estimates or assumptions involved and the magnitude of the asset, liability, revenue, expense, gain or loss being reported. Actual results may vary from our estimates in amounts that may be material to the financial statements. An accounting estimate is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact our financial statements.
We base our assumptions and estimates on historical experience and various other sources that we believe to be reasonable under the circumstances. Actual results may differ from the estimates we calculate due to changes in circumstances, global economics and politics and general business conditions. A summary of our significant accounting policies are detailed in Note 3 to our consolidated and combined carve-out financial statements included in our 2022 Form 10-K. We have outlined below those policies identified as being critical to the understanding of our business and results of operations and that require the application of significant management judgment in developing estimates.
Recoverable value of exploration mineral interests
We review and evaluate exploration mineral interests for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The recoverability of our exploration mineral interests and intangible assets did not involve significant estimation in the periods presented as circumstances did not indicate the carrying amount of our assets may not be recoverable. However, the recoverability of our recorded mineral interests is subject to market factors that could significantly affect the recoverability of our assets, such as commodity prices, results of exploration activities that may affect our intentions to continue under option or earn-in agreements and geopolitical circumstances, particularly in Colombia. By nature, significant changes in these factors are reasonably possible to occur periodically, which could materially impact our financial statements.
Stock-based compensation
Compensation expense for options granted to employees, directors and certain service providers is determined based on estimated fair values of the options at the time of grant using the Black-Scholes option pricing model, which takes into account, as of the grant date, the fair market value of the shares, expected volatility, expected life, expected dividend yield and the risk-free interest rate over the expected life of the option. The use of the Black-Scholes option pricing model requires input estimation of the expected life of the option and volatility, which can have a significant impact on the valuation model and resulting expense recorded.
In February 2023, we granted 500,000 stock options at an exercise price of $13.23 per share and in March 2023, we granted 100,000 stock options at an exercise price of $15.46. The fair value of the option grants was determined using the Black-Scholes option-pricing model as $7.22 and $8.53 per share, respectively. The following assumptions were used to compute the fair value of the options granted:
February 1, 2023 Grant DateMarch 1, 2023 Grant Date
Risk-free interest rate3.7%4.5%
Dividend yieldnilnil
Estimated volatility69.8%69.5%
Expected option life4 years4 years
The risk-free interest rate assumption was based on the U.S. treasury constant maturity yield at the date of the grant over the expected life of the option. No dividends are expected to be paid. We calculated the estimated volatility based on the historical volatility of a group of peer companies’ common stock and a group of relevant stock market indices over the expected option life as we only commenced publicly trading in June 2022. The computation of expected option life was determined based on a reasonable expectation of the option life prior to the option being exercised or forfeited.
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Income taxes
We make estimates and judgments in determining the provision for income tax expense, deferred tax assets and liabilities and liabilities for unrecognized tax benefits, including interest and penalties. We are subject to income tax laws in many jurisdictions, including the United States, Canada, Colombia, Peru, Australia, the Ivory Coast and the PRC.
We report income tax in accordance with U.S. GAAP, which requires the establishment of deferred tax accounts for all temporary differences between the financial reporting and tax bases of assets and liabilities, using currently enacted tax rates. In addition, deferred tax accounts must be adjusted to reflect new rates if enacted into law.
Realization of deferred tax assets is contingent on the generation of future taxable income. As a result, we consider whether it is more likely than not that all or a portion of such assets will be realized during periods when they are available, and if not, we provide a valuation allowance for amounts not likely to be recognized. In determining our valuation allowance, we have not assumed future taxable income from sources other than the reversal of existing temporary differences. The extent to which a valuation allowance is warranted may vary as a result of changes in our estimates of future taxable income. In addition to the potential generation of future taxable income through the establishment of economic feasibility, development and operation of mines on our exploration assets, estimates of future taxable income could change in the event of disposal of assets, the identification of tax-planning strategies or changes in tax laws that would allow the benefits of future deductible temporary differences in certain entities or jurisdictions to be offset against future taxable temporary differences in other entities or jurisdictions.
We recognize the effect of uncertain income tax positions if those positions are more likely than not of being sustained. The amount recognized is subject to estimates and our judgment with respect to the likely outcome of each uncertain tax position. The amount that is ultimately incurred for an individual uncertain tax position or for all uncertain tax positions in the aggregate could differ from the amount recognized. We had no uncertain tax positions as of March 31, 2023.
Emerging Growth Company Status
We are an “emerging growth company”, as defined in the Jumpstart Our Business Startups Act of 2012 (the (“JOBS Act"). The JOBS Act exempts emerging growth companies from being required to comply with new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. We have elected not to opt out of this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our consolidated and combined carve-out financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.
The accounting policies applied in our consolidated and combined carve-out financial statements included elsewhere in this Quarterly Report reflect the early adoption of certain accounting standards as the JOBS Act does not preclude an emerging growth company from early adopting a new or revised accounting standard to the extent early adoption is allowed by the accounting standard.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Not Applicable.
Item 4. Controls and Procedures.
Management’s Evaluation of our Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.
As of March 31, 2023, our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily
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applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our principal executive officer and principal financial officer have concluded based upon the evaluation described above that, as of March 31, 2023, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
During the quarter ended March 31, 2023, there were no changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15(d)-15(f) promulgated under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time, we may become subject to various legal proceedings that are incidental to the ordinary conduct of our business. Although we cannot accurately predict the amount of any liability that may ultimately arise with respect to any of these matters, we make a provision for potential liabilities when we deem them probable and reasonably estimable. These provisions are based on current information and legal advice and may be adjusted from time to time according to developments. We believe that none of the litigation in which we are currently involved, or have been involved in since the beginning of our most recently completed fiscal year, individually or in the aggregate, is material to our financial condition, cash flows or results of operations.
Two of our subsidiaries are involved in legal proceedings described below.
Our subsidiary Kaizen was involved in litigation in British Columbia, Canada which commenced in 2017. The proceedings related to a claim by AM Gold Inc. (“AMG”) against Kaizen in respect of its acquisition of the Pinaya Project. On September 2, 2022, the Supreme Court of Canada dismissed the application of AM Gold (“AMG”) seeking leave to appeal the January 21, 2022 decision of the British Columbia Court of Appeal, which upheld the March 23, 2021 decision of the trial judge dismissing all of AMG’s claims. The British Columbia Court of Appeal concluded that no errors were made in the trial judge’s reasoning. The Supreme Court of Canada’s dismissal means that the decision of the British Columbia Court of Appeal is final and conclusive. There is no further avenue of appeal or review available to AMG as a result of the Supreme Court of Canada’s dismissal of the claims. Kaizen was entitled to payment from AMG on account of the costs of the litigation and has now reached a settlement agreement regarding that entitlement with AMG and recovered costs of Cdn$500,000 in March 2023.
Our subsidiary Cordoba is currently involved in two legal proceedings. The first is a criminal lawsuit filed by Cordoba in late 2018 and in January 2019 with the Colombian prosecutors against nine members of former Colombian management alleging breach of fiduciary obligations, abuse of trust, theft and fraud. This proceeding is ongoing. In the second proceeding, Cordoba (along with the National Mining Agency, Ministry of Mines and Energy, the local environmental authority, the Municipality of Puerto Libertador and the State of Cordoba) were served with a class action claim by the Alacran Community. This class action seeks (i) an injunction against Cordoba´s operations in the Alacrán area and (ii) an injunction against the prior declaration by the authorities that the Alacran Community´s mining activities were illegal. The claim was initially filed with the Administrative Court of Medellín, which remanded the case to the Administrative Court of Montería, which contested it and submitted the case to the Council of State. The Council of State determined the Administrative Court of Montería as the competent tribunal, where the process is currently being conducted. The Administrative Court of Montería admitted the commencement of the class action on September 2021. The decision was challenged by Cordoba and other defendants and confirmed by the Court. Cordoba timely filed its: (i) response to the lawsuit and statement of defense; and (ii) opposition to the injunction requested by plaintiffs. The Court now should: (i) issue a decision on the injunction; and (ii) schedule date and time for the initial hearing. While the court matters proceed, Cordoba will incur additional costs that will negatively impact its financial position. As well, the litigation process is uncertain and it is possible that the second proceeding is resolved against Cordoba, which could have a material adverse effect on its business, results of operations, financial condition and prospects.
Item 1A. Risk Factors.
There have been no material changes to our risk factors previously disclosed in Part I, Item 1A. “Risk Factors” of our 2022 Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Unregistered Sales of Equity Securities for the Three Months Ended March 31, 2023
During the three months ended March 31, 2023, we have issued and sold the securities described below without registering the securities under the Securities Act.
On February 21, 2023 we entered into an earn-in agreement pursuant to which we agreed to issue up to $1,400,000 worth of our common stock to Exiro Minerals USA Corp. as partial consideration for the right to earn in on the White Hill Copper Project. The first tranche of 10,281 shares was issued on March 3, 2023 at a deemed price of $14.59 per share. Additional shares may be issued by the Company in connection with an earn-in right over the course of up to six years. Such shares will be valued at the greater of $11.75 per share or the 5-day volume-weighted average price of such shares for
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the five consecutive trading day period ending on the trading day prior to the applicable anniversary date of the agreement that requires the issuance.
The issuance of the above securities was exempt pursuant to Section 4(a)(2)of the Securities Act, as the securities were issued to financially sophisticated purchaser in a privately negotiated transaction.
Use of Proceeds from our IPO
On June 27, 2022, our Registration Statement on Form S-1 (File No. 333-265175) relating to our IPO of our common stock was declared effective by the SEC.
On June 30, 2022, we completed our IPO and issued and sold 14,388,000 shares of our common stock at a price to the public of $11.75 per share for aggregate gross proceeds of $169.1 million. BMO Capital Markets Corp. and Jefferies LLC acted as joint book-running managers for the IPO and as representatives of the underwriters.
The net proceeds from the IPO to us, after deducting underwriting discounts and commissions and offering expenses of $11.1 million, were $158.0 million. No IPO expenses were paid directly or indirectly to any of our directors or officers (or their associates) or persons owning 10.0% or more of any class of our equity securities or to any other affiliates. As at March 31, 2023, the Company's use of net proceeds is materially in-line with the planned use of net proceeds as described in the final prospectus.
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Item 6. Exhibits.
Exhibit
Number
Description
10.1*
Executive Employment Agreement dated January 24, 2022 between the Company and Glen Kuntz
10.2*
Executive Employment Agreement dated January 4, 2023 between the Company and Cassandra Joseph
10.3
Heads of Terms Agreement between Ivanhoe Electric Inc. and Saudi Arabian Mining Company Ma’aden dated January 11, 2023 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on January 11, 2023).
31.1*
Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INSInline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
101.SCHInline XBRL Taxonomy Extension Schema Document
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document
101.LABInline XBRL Taxonomy Extension Label Linkbase Document
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File (embedded within the Inline XBRL document)
*Filed herewith.
27

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: May 15, 2023
By:/s/ Taylor Melvin
Taylor Melvin
Chief Executive Officer
(Principal Executive Officer)
Date: May 15, 2023
By:/s/ Jordan Neeser
Jordan Neeser
Chief Financial Officer
(Principal Financial Officer)
28

What is the market capitalization of a company?

The market capitalization sometimes referred as Marketcap, is the value of a publicly listed company.
In most cases it can be easily calculated by multiplying the share price with the amount of outstanding shares.

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