Ivanhoe Electric Inc. 10-Q

Item 1. Financial Statements. ​ IVANHOE ELECTRIC INC. Condensed Interim Consolidated Balance Sheets (Unaudited) (In thousands of U.S. dollars) ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, December 31, ​ ​ 2022 ​ 2021 Assets ​ ​ ​ ​ ​ ​ Current assets: ​ ​ Cash and cash equivalents ​ $ 223,833 ​ $ 49,850 Accounts receivable ​ 1,139 ​ 1,385 Inventory ​ 6,344 ​ 5,878 Prepaid expenses, deposits and other ​ 8,079 ​ 1,152 ​ ​ 239,395 ​ 58,265 Non-current assets: ​ ​ ​ Investments subject to significant influence ​ 6,837 ​ 7,701 Other investments ​ 1,605 ​ 1,802 Exploration mineral interests ​ 82,269 ​ 73,039 Property, plant and equipment ​ 3,443 ​ 2,523 Intangible assets ​ 2,788 ​ 4,340 Other non-current assets ​ 4,657 ​ 5,861 Total assets ​ $ 340,994 ​ $ 153,531 ​ ​ ​ ​ ​ ​ ​ Liabilities and Equity ​ ​ Current liabilities: ​ ​ Accounts payable and accrued liabilities ​ $ 20,503 ​ $ 10,195 Deferred consideration payable ​ — ​ 26,562 Lease liabilities, current ​ 405 ​ 342 Contract liability ​ 3,275 ​ 3,484 ​ ​ 24,183 ​ 40,583 Non-current liabilities: ​ ​ ​ Deferred income taxes ​ 4,952 ​ 5,382 Convertible debt ​ 24,879 ​ 78,832 Lease liabilities, net of current portion ​ 751 ​ 55 Other non-current liabilities ​ 371 ​ 865 Total liabilities ​ 55,136 ​ 125,717 ​ ​ ​ ​ ​ ​ ​ Commitments and contingencies (Note 15) ​ ​ ​ ​ ​ ​ ​ ​ ​ Equity: ​ ​ Preferred stock, par value $ 0.0001 ; 50,000,000 shares authorized; none issued and outstanding ​ ​ — ​ ​ — Common stock, par value $ 0.0001 ; 700,000,000 shares authorized; 92.9 million shares issued and outstanding as of June 30, 2022 (December 31, 2021 - 63.9 million) ​ 9 ​ 6 Additional paid-in capital ​ 406,851 ​ 75,743 Accumulated deficit ​ ( 122,132 ) ​ ( 52,314 ) Accumulated other comprehensive income ​ ( 1,567 ) ​ ( 1,502 ) Equity attributable to common stockholders ​ 283,161 ​ 21,933 Non-controlling interests ​ 2,697 ​ 5,881 Total equity ​ 285,858 ​ 27,814 Total liabilities and equity ​ $ 340,994 ​ $ 153,531 ​ ​ ​ 3 Table of Contents IVANHOE ELECTRIC INC. Condensed Interim Consolidated and Combined Carve-out Statements of Loss and Comprehensive Loss (Unaudited) (In thousands of U.S. dollars, except for share and per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended June 30, ​ Six Months Ended June 30, ​ 2022 2021 2022 2021 Revenue ​ $ 229 ​ $ 1,495 ​ $ 6,991 ​ $ 3,054 Cost of sales ​ ( 115 ) ​ ( 324 ) ​ ( 167 ) ​ ( 641 ) Gross profit ​ 114 ​ 1,171 ​ 6,824 ​ 2,413 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ Exploration expenses ​ ​ 23,863 ​ ​ 8,348 ​ ​ 41,186 ​ 14,609 General and administrative expenses ​ 4,659 ​ 3,425 ​ 9,885 ​ 6,220 Research and development expenses ​ 1,257 ​ 756 ​ 2,588 ​ 1,712 Selling and marketing expenses ​ 21 ​ 22 ​ 57 ​ 45 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loss from operations ​ 29,686 ​ 11,380 ​ 46,892 ​ 20,173 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other expenses (income): ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest expense, net ​ ​ 523 ​ ​ 26 ​ ​ 1,035 ​ 115 Foreign exchange loss (gain) ​ 242 ​ 22 ​ 431 ​ ( 354 ) Loss on revaluation of investments ​ 6,102 ​ 1,475 ​ 1,443 ​ 258 Loss on revaluation of convertible debt ​ 16,083 ​ — ​ 18,965 ​ — Share of loss of equity method investees ​ ​ 1,550 ​ ​ — ​ ​ 1,550 ​ ​ — Other expenses, net ​ 1,359 ​ 67 ​ 1,582 ​ ( 422 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loss before income taxes ​ 55,545 ​ 12,970 ​ 71,898 ​ 19,770 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income taxes ​ ( 70 ) ​ 52 ​ 1,251 ​ ( 184 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net loss ​ 55,475 ​ 13,022 ​ 73,149 ​ 19,586 Less loss attributable to non-controlling interests ​ ( 1,109 ) ​ ( 2,286 ) ​ ( 3,331 ) ​ ( 4,197 ) Net loss attributable to common stockholders or parent ​ 54,366 ​ 10,736 ​ 69,818 ​ 15,389 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net loss ​ 55,475 ​ 13,022 ​ 73,149 ​ 19,586 Other comprehensive income, net of tax: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Foreign currency translation adjustments ​ 147 ​ 206 ​ 41 ​ 198 Other comprehensive income ​ 147 ​ 206 ​ 41 ​ 198 Comprehensive loss ​ $ 55,622 ​ $ 13,228 ​ $ 73,190 ​ $ 19,784 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Comprehensive loss attributable to: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common stockholders or parent ​ 54,533 ​ 10,912 ​ 69,883 ​ 15,551 Non-controlling interests ​ 1,089 ​ $ 2,316 ​ ​ 3,307 ​ $ 4,233 ​ ​ $ 55,622 ​ $ 13,228 ​ $ 73,190 ​ $ 19,784 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net loss per share attributable to common stockholders ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic and diluted ​ $ 0.85 ​ $ 0.18 ​ $ 1.09 ​ $ 0.26 Weighted-average common shares outstanding ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic and diluted ​ 64,243,603 ​ 59,909,344 ​ 64,085,348 ​ 59,909,344 ​ ​ ​ 4 Table of Contents IVANHOE ELECTRIC INC. Condensed Interim Consolidated and Combined Carve-out Statements of Changes in Equity (Unaudited) (In thousands of U.S. dollars, except share amounts) Six months ended June 30, 2022 and 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ ​ ​ other ​ ​ ​ ​ ​ ​ ​ Common Stock ​ paid-in ​ Net parent ​ Accumulated ​ comprehensive ​ Non-controlling ​ ​ ​ ​ ​ Shares ​ Amount ​ capital ​ investment ​ deficit ​ income(loss) ​ interest ​ Total Balance at January 1, 2021 — $ — $ — $ 43,520 $ — $ ( 1,538 ) $ 6,710 $ 48,692 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net loss ​ — ​ ​ — ​ ​ — ​ ​ ( 4,653 ) ​ ​ — ​ ​ — ​ ​ ( 1,911 ) ​ ​ ( 6,564 ) Other comprehensive income (loss) ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 13 ​ ​ ( 5 ) ​ ​ 8 Net transfer from parent ​ — ​ ​ — ​ ​ — ​ ​ 5,606 ​ ​ — ​ ​ — ​ ​ — ​ ​ 5,606 Other changes in non-controlling interests ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 398 ​ ​ 398 Balance at March 31, 2021 ​ — ​ ​ — ​ ​ — ​ ​ 44,473 ​ ​ — ​ ​ ( 1,525 ) ​ ​ 5,192 ​ ​ 48,140 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net loss — ​ — ​ — ​ ( 2,353 ) ​ ( 8,383 ) ​ — ​ ( 2,286 ) ​ ( 13,022 ) Other comprehensive loss — ​ — ​ — ​ — ​ — ​ ( 175 ) ​ ( 31 ) ​ ( 206 ) Net transfer from parent — ​ — ​ — ​ 23,534 ​ — ​ — ​ — ​ 23,534 Restructuring upon spin off (Note 1) ​ — ​ ​ 6 ​ ​ 65,648 ​ ​ ( 65,654 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ — Share based compensation ​ — ​ ​ — ​ ​ 236 ​ ​ — ​ ​ — ​ ​ — ​ ​ 80 ​ ​ 316 Other changes in non-controlling interests — ​ — ​ ( 28 ) ​ — ​ — ​ — ​ 1,567 ​ 1,539 Balance at June 30, 2021 — ​ $ 6 ​ $ 65,856 ​ $ — ​ $ ( 8,383 ) ​ $ ( 1,700 ) ​ $ 4,522 ​ $ 60,301 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at January 1, 2022 63,925,334 ​ $ 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, 2022 ​ 63,925,334 ​ ​ 6 ​ ​ 76,625 ​ ​ — ​ ​ ( 67,766 ) ​ ​ ( 1,400 ) ​ ​ 3,736 ​ ​ 11,201 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net loss — ​ — ​ — ​ — ​ ( 54,366 ) ​ — ​ ( 1,109 ) ​ ( 55,475 ) Other comprehensive income (loss) — ​ ​ — ​ — ​ — ​ — ​ ( 167 ) ​ 20 ​ ( 147 ) Issuance of common stock, net of issuance costs ​ 14,388,000 ​ ​ 2 ​ ​ 158,200 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 158,202 Issuance of common stock upon conversion of debt ​ 13,628,958 ​ ​ 1 ​ ​ 160,139 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 160,140 Issuance of common stock upon settlement of liability ​ 945,626 ​ ​ — ​ ​ 11,111 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 11,111 Share-based compensation — ​ — ​ 784 ​ — ​ — ​ — ​ 54 ​ 838 Other changes in non-controlling interests ​ — ​ ​ — ​ ​ ( 8 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 4 ) ​ ​ ( 12 ) Balance at June 30, 2022 92,887,918 ​ $ 9 ​ $ 406,851 ​ $ — ​ $ ( 122,132 ) ​ $ ( 1,567 ) ​ $ 2,697 ​ $ 285,858 ​ ​ ​ 5 Table of Contents IVANHOE ELECTRIC INC. Condensed Interim Consolidated and Combined Carve-out Statements of Cash Flows (Unaudited) (In thousands of U.S. dollars) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Six months ended June 30, ​ 2022 2021 Operating activities ​ ​ ​ ​ Net loss $ ( 73,149 ) ​ $ ( 19,586 ) Adjustments to reconcile net loss to cash provided by (used in) operating activities: ​ ​ ​ ​ Depreciation of property, plant and equipment ​ 410 ​ 218 Amortization of intangible assets ​ 1,506 ​ 1,435 Amortization of operating lease right-of-use-assets ​ 372 ​ 328 Share-based compensation ​ 1,793 ​ 1,103 Unrealized foreign exchange (gain) loss ​ 392 ​ ( 225 ) Interest expense ​ 1,022 ​ 130 Income taxes ​ 1,251 ​ ( 184 ) Loss on revaluation of convertible debt ​ 18,965 ​ — Loss on revaluation of investments ​ 1,443 ​ 258 Share of loss of equity method investees ​ ​ 1,550 ​ ​ — Other ​ 1,566 ​ ( 1,215 ) ​ ​ ​ ​ ​ ​ ​ Changes in other operating assets and liabilities: ​ ​ Trade accounts receivable ​ 247 ​ ( 373 ) Inventory ​ ( 466 ) ​ ( 659 ) Operating lease liabilities ​ ( 430 ) ​ ( 375 ) Accounts payable and accrued liabilities ​ ( 102 ) ​ 2,092 Other operating assets and liabilities ​ ( 567 ) ​ 170 Net cash used in operating activities ​ ( 44,197 ) ​ ( 16,883 ) ​ ​ ​ ​ ​ ​ ​ Investing activities ​ ​ ​ ​ ​ ​ Purchase of mineral interests ​ ( 25,727 ) ​ ( 3,050 ) Purchase of property, plant and equipment and intangible assets ​ ( 615 ) ​ ( 1,707 ) Purchase of investments subject to significant influence ​ ( 1,962 ) ​ — Other ​ ( 110 ) ​ ( 515 ) Net cash used in investing activities ​ ( 28,414 ) ​ ( 5,272 ) ​ ​ ​ ​ ​ ​ ​ Financing activities ​ ​ ​ ​ ​ ​ Net proceeds from issuance of common stock ​ ​ 160,576 ​ ​ — Proceeds from convertible notes ​ ​ 86,200 ​ ​ — Net transfer from parent ​ — ​ 23,152 Proceeds from subsidiary financings ​ — ​ 1,382 Other ​ ​ ( 12 ) ​ ​ — Net cash provided by financing activities ​ 246,764 ​ 24,534 ​ ​ ​ ​ ​ ​ ​ Effect of foreign exchange rate changes on cash and cash equivalents ​ ( 170 ) ​ 124 Increase in cash and cash equivalents ​ 174,153 ​ 2,379 Cash and cash equivalents, beginning of the year ​ 49,850 ​ 9,341 Cash and cash equivalents, end of the period ​ $ 223,833 ​ $ 11,844 ​ ​ ​ ​ ​ ​ ​ Supplemental cash flow information ​ ​ ​ ​ ​ ​ Cash paid for income taxes ​ $ 438 ​ $ 348 ​ ​ ​ ​ ​ ​ ​ Supplemental disclosure of non-cash investing and financing activities ​ ​ ​ ​ ​ ​ Issuance of common stock upon conversion of debt ​ $ 160,140 ​ $ — Issuance of common stock upon settlement of liability ​ ​ 11,111 ​ ​ — Settlement of loan from parent ​ ​ — ​ ​ 5,886 Issuance of common stock in exchange for assets (Note 1) ​ ​ — ​ ​ 65,654 ​ ​ ​ 6 Table of Contents IVANHOE ELECTRIC INC. Notes to the Condensed Consolidated and Combined Carve-Out Financial Statements (Unaudited - Tabular amounts 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, as a wholly-owned subsidiary of High Power Exploration Inc. (“the Parent” or “HPX”). On April 30, 2021, HPX completed a restructuring whereby HPX contributed (i) all of the issued and outstanding shares of HPX’s subsidiaries, other than those holding direct or indirect interests in its Nimba Iron Ore Project (“Nimba Project”); (ii) certain property, plant and equipment; and (iii) certain financial assets (collectively the “Contributed Assets”) in exchange for common stock of Ivanhoe Electric. HPX then distributed 59,909,344 shares of common stock of Ivanhoe Electric to HPX stockholders by way of an in-kind dividend, with each HPX stockholder receiving one share of common stock of Ivanhoe Electric for each HPX share held by the stockholder. On June 30, 2022, Ivanhoe Electric completed an initial public offering (“IPO”) of 14,388,000 shares of the Company’s common stock at a price of $ 11.75 per share, resulting in gross proceeds from the offering of $ 169.1 million. The Company’s shares were listed on the NYSE American and the Toronto Stock Exchange under the ticker symbol “IE”. 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, gold, silver, nickel, cobalt, vanadium and the platinum group metals. While the Company’s current mineral projects are predominantly in the United States, it also holds significant ownership interests, and in some cases controlling financial interests, in other non-U.S. mineral projects, in proprietary mineral exploration technology and in minerals-based high technology. The Company conducts the following business activities through certain subsidiaries: ● Kaizen Discovery Inc. (“Kaizen”) holds the Pinaya copper-gold exploration project in Peru. Ivanhoe Electric had an ownership interest in Kaizen of 82.7 % as at June 30, 2022 (December 31, 2021 — 82.7 % ). ● 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 June 30, 2022 (December 31, 2021 — 63.3 % ). ● 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 June 30, 2022 (December 31, 2021 — 90.0 % ). ● Computational Geosciences Inc. (“CGI”), provides data analytics, geophysical modelling, 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 June 30, 2022 (December 31, 2021 — 94.3 % ). As HPX continued to hold its interest in Ivanhoe Electric immediately following the transfer of the Contributed Assets, there was no resultant change of control in either Ivanhoe Electric or the Contributed Assets. As such, the acquisition by Ivanhoe Electric of the Contributed Assets has been accounted for at historical cost as a transaction between entities under common control. Basis of preparation — Prior to the restructuring: These condensed interim consolidated and combined carve-out financial statements have been prepared under U.S. Generally Accepted Accounting Principles (“U.S. GAAP”). These condensed interim consolidated and combined carve-out financial statements include results of the Company for periods prior to the restructuring on April 30, 2021. Up to the date of restructuring, these financial statements have been prepared on a combined basis and the Parent’s net investment in the Company’s operations is shown in lieu of stockholders’ equity. All intercompany balances and transactions have been eliminated in the condensed interim consolidated and combined carve-out financial statements. 7 Table of Contents IVANHOE ELECTRIC INC. Notes to the Condensed Consolidated and Combined Carve-Out Financial Statements (Unaudited - Tabular amounts in thousands of U.S. dollars, unless otherwise indicated) ​ Prior to the restructuring, the financing of operations was historically managed by the Parent. Net parent investment represents the Parent’s historical investment in the Company and includes accumulated net earnings or losses attributable to the Parent, intercompany balances that were capitalized at the time of the restructuring and direct capital contributions and expense allocations from the Parent to the Company. Assets contributed to Ivanhoe Electric at the time of restructuring have been recorded by the Company during the periods the assets were under the control of the Parent, except for certain loan receivables and advances that have not been allocated to the Company prior to the restructuring completion date (Note 12). A description of the costs allocated to the Company is included in Note 12. Management believes the assumptions underlying the condensed interim consolidated and combined carve-out financial statements, including the assumptions regarding allocation of expenses, are systematic, rational and reasonable. Nevertheless, the condensed interim consolidated and combined carve-out financial statements may not include all of the actual expenses that would have been incurred by the Company on a stand-alone basis, and may not accurately reflect the Company’s historical financial position, results of operations and cash flows that would have been reported if the Company had been a stand-alone entity during the periods prior to the restructuring. The amounts that would have been or will be incurred on a stand-alone basis could differ from the amounts allocated due to economies of scale, management judgment, cash management and financing obtained as a stand-alone company, or other factors. Basis of preparation — Subsequent to the restructuring: The Company’s financial statements for the periods subsequent to April 30, 2021 are consolidated financial statements based on the reported results of Ivanhoe Electric as a stand-alone company. 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 and combined carve-out financial statements have been retrospectively adjusted to reflect the effect of the Reverse Stock Split. The condensed consolidated and combined carve-out 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 accompanying condensed interim consolidated and combined carve-out financial statements are unaudited, but include all adjustments, consisting of normal recurring entries, which management believes to be necessary for a fair presentation for the dates and periods presented. Interim results are not necessarily indicative of results for a full year. The condensed interim consolidated and combined carve-out financial statements have been prepared in accordance with U.S. GAAP for interim financial information. Accordingly, they do not include all financial information and disclosures required by U.S. GAAP for complete financial statements and should be read in conjunction with the Company’s audited consolidated and combined carve-out financial statements for the year ended December 31, 2021. The Company discloses in its consolidated and combined carve-out financial statements for the year ended December 31, 2021, those accounting policies that it considers significant in determining its results of operations and financial position. There 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, 2021. The Company adopted ASU 2019-12 effective January 1, 2022. The new guidance which simplifies the accounting for income taxes, eliminates certain exceptions with ASC 740 and clarifies certain aspects of the current guidance to promote consistency 8 Table of Contents IVANHOE ELECTRIC INC. Notes to the Condensed Consolidated and Combined Carve-Out Financial Statements (Unaudited - Tabular amounts in thousands of U.S. dollars, unless otherwise indicated) ​ among reporting entities. The adoption of ASU 2019-12 did not have a material impact on the Company’s condensed interim consolidated and combined carve-out financial statements. 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. Non-public entities and emerging growth companies applying extended transition periods for new or revised accounting standards are required to adopt the update effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years with early adoption permitted. The Company is currently evaluating the expected impact on the financial statements. 3. Use of estimates: The preparation of consolidated financial statements in conformity with U.S. GAAP 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, 2021. 4. Cash and cash equivalents: Of the total cash and cash equivalents at June 30, 2022 and December 31, 2021, $ 21.5 million and $ 28.5 million, respectively, was not available for the general corporate purposes of the Company as it was held by non-wholly-owned subsidiaries. 5. Investments subject to significant influence: The Company’s principal investment subject to significant influence is Sama Resources Inc. (“Sama”). Others include the Company’s investments in Fjordland Exploration Inc. (“Fjordland”) and Sama Nickel Corporation (“SNC”). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Carried at fair value ​ Equity method ​ ​ ​ ​ Sama Fjordland SNC Total Balance at January 1, 2022 ​ 5,719 ​ 1,325 ​ 657 ​ 7,701 Change in fair value ​ ( 481 ) ​ ( 769 ) ​ — ​ ( 1,250 ) Investment during the period ​ — ​ — ​ 1,962 ​ 1,962 Share of loss ​ — ​ — ​ ( 1,551 ) ​ ( 1,551 ) Foreign currency translation ​ — ​ ( 13 ) ​ ( 12 ) ​ ( 25 ) Balance at June 30, 2022 ​ $ 5,238 ​ $ 543 ​ $ 1,056 ​ $ 6,837 ​ ​ 6. Exploration mineral interests: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Santa Cruz Tintic Project San Matias Pinaya Project Mineral Royalty Other Total Balance at December 31, 2021 ​ $ 35,075 ​ $ 19,588 ​ $ 13,607 ​ $ 2,511 ​ $ 1,708 ​ $ 550 ​ $ 73,039 Acquisition costs ​ 4,952 ​ 4,025 ​ — ​ — ​ — ​ 250 ​ 9,227 Foreign currency translation ​ — ​ — ​ — ​ 3 ​ — ​ — ​ 3 Balance at June 30, 2022 ​ $ 40,027 ​ $ 23,613 ​ $ 13,607 ​ $ 2,514 ​ $ 1,708 ​ $ 800 ​ $ 82,269 ​ ​ 9 Table of Contents IVANHOE ELECTRIC INC. Notes to the Condensed Consolidated and Combined Carve-Out Financial Statements (Unaudited - Tabular amounts in thousands of U.S. dollars, unless otherwise indicated) ​ 7. Deferred consideration payable: Upon completion of the Company’s IPO on June 30, 2022, the deferred consideration payable was settled with Central Arizona Resources Ltd. (“CAR”). The Company paid CAR $ 15.0 million in cash and issued 945,626 shares of common stock to CAR in accordance with the original terms of the agreement. 8. Convertible debt: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Series 1 Series 2 VRB ​ ​ ​ Convertible ​ Convertible ​ Convertible ​ ​ ​ ​ Notes (Note a) ​ Notes (Note a) ​ bond (Note b) ​ Total ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at December 31, 2021 ​ $ 54,975 ​ $ — ​ $ 23,857 ​ $ 78,832 Issuance of Series 2 Convertible Notes ​ — ​ 86,200 ​ — ​ 86,200 Interest expense ​ — ​ — ​ 1,022 ​ 1,022 Fair value adjustments ​ 8,709 ​ 10,256 ​ — ​ 18,965 Conversion to common stock ​ ( 63,684 ) ​ ( 96,456 ) ​ — ​ ( 160,140 ) Balance at June 30, 2022 ​ $ — ​ $ — ​ $ 24,879 ​ $ 24,879 (a) Ivanhoe Electric convertible notes (i) Series 1 Convertible Notes: Between August 3, 2021 and November 17, 2021, the Company completed a financing which included the issuance of $ 50.0 million aggregate principal amount of unsecured convertible promissory notes (“Series 1 Convertible Notes”). Upon completion of the Company’s IPO on June 30, 2022, the Series 1 Convertible Notes, including accrued interest of $ 0.9 million, were automatically converted into 5,419,923 shares of common stock of the Company at a conversion price of $ 9.39 per share (Note 9). (ii) Series 2 Convertible Notes: On April 5, 2022, the Company completed a financing in which it issued $ 86.2 million aggregate principal amount of unsecured convertible promissory notes (“Series 2 Convertible Notes”). The Series 2 Convertible Notes were unsecured and bore interest at 3 % per annum, in arrears and payable on the maturity date of July 31, 2023. Upon completion of the Company’s IPO on June 30, 2022, the Series 2 Convertible Notes, including accrued interest of $ 0.6 million, were automatically converted into 8,209,035 shares of common stock of the Company at a conversion price of $ 10.58 per share being a 10 % discount to the gross price per share at which common stock was sold in the IPO (Note 9). The convertible notes along with their embedded features did not contain any equity components, and therefore were recognized as a liability on issuance. The Company elected to measure the convertible notes at fair value, with subsequent changes in fair value recorded in net loss. (b) VRB Convertible bond: 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. The Company has accounted for the convertible bond as a debt instrument accounted at amortized cost. 10 Table of Contents IVANHOE ELECTRIC INC. Notes to the Condensed Consolidated and Combined Carve-Out Financial Statements (Unaudited - Tabular amounts in thousands of U.S. dollars, unless otherwise indicated) ​ The book value of the VRB convertible debt approximates fair value as VRB’s operations are early stage and there have been no significant changes to the business since the issuance date. The fair value determination is a level 3 assessment. 9. Equity: Common stock transactions (a) IPO: On June 30, 2022, the Company completed an IPO of 14,388,000 shares of common stock which were issued at a price of $ 11.75 per share for gross proceeds of $ 169.1 million. Directly attributable issuance costs of $ 10.9 million incurred in conjunction with the IPO were recorded as a reduction in paid in capital. (b) Debt conversions: On June 30, 2022, $ 50.9 million of Series 1 Convertible Notes including accrued interest were automatically converted into 5,419,923 shares of common stock of the Company at a conversion price of $ 9.39 per share. On June 30, 2022, $ 86.8 million of Series 2 Convertible Notes including accrued interest were automatically converted into 8,209,035 shares of common stock of the Company at a conversion price of $ 10.58 per share. The stock issuance resulting from the Series 1 and Series 2 debt conversions was recorded at fair value based on the IPO price of $ 11.75 per share. (c) Stock issuance to CAR: On June 30, 2022, the Company issued 945,626 shares of common stock to CAR (Note 7). The stock issuance was recorded at fair value based on the IPO price of $ 11.75 per share. 10. Revenue: The Company recognized revenue from the following sources: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended Six months ended ​ ​ June 30: ​ June 30: Revenue type 2022 2021 2022 2021 Software licensing (Note a) ​ $ 9 ​ $ — ​ $ 6,711 ​ $ — Data processing services ​ 220 ​ 1,464 ​ 280 ​ 2,950 Renewable energy storage systems (Note b) ​ — ​ 31 ​ — ​ 104 Total ​ $ 229 ​ $ 1,495 ​ $ 6,991 ​ $ 3,054 (a) On October 15, 2021, the Company entered into a software license agreement whereby the Company provided software that can be used by the licensee in perpetuity for a one-time fee of $ 6.5 million, which was received in January 2022 and at which time its performance obligation with respect to the license was met. As such, in accordance with the Company’s accounting policy for the sale of software licenses, the license fee revenue was recognized in 2022. Software licensing revenue includes associated services included in the software license agreement. This revenue is included in the data processing segment. (b) At June 30, 2022, the Company had a contract liability of $ 3.3 million (December 31, 2021 — $ 3.5 million) relating to the sale of renewable energy storage systems. 11 Table of Contents IVANHOE ELECTRIC INC. Notes to the Condensed Consolidated and Combined Carve-Out Financial Statements (Unaudited - Tabular amounts in thousands of U.S. dollars, unless otherwise indicated) ​ 11. Exploration expense: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended Six months ended ​ ​ June 30: ​ June 30: Project 2022 2021 2022 2021 Santa Cruz, USA $ 14,763 $ 237 ​ $ 24,561 ​ $ 434 San Matias, Colombia ​ 3,397 ​ 3,653 ​ ​ 5,773 ​ ​ 6,824 Pinaya, Peru ​ 1,465 ​ 502 ​ ​ 2,151 ​ ​ 718 Perseverance, USA ​ 166 ​ 44 ​ ​ 1,659 ​ ​ 98 Hog Heaven, USA ​ 308 ​ 681 ​ ​ 868 ​ ​ 1,321 Tintic, USA ​ 407 ​ 678 ​ ​ 696 ​ ​ 1,042 Yangayu, Papua New Guinea ​ 333 ​ — ​ ​ 651 ​ ​ — Carolina, USA ​ ​ 316 ​ ​ — ​ ​ 514 ​ ​ — Bitter Creek, USA ​ 149 ​ 55 ​ ​ 508 ​ ​ 68 Lincoln, USA ​ 326 ​ — ​ ​ 339 ​ ​ — Ivory Coast Project, Ivory Coast ​ 5 ​ 1,443 ​ ​ 26 ​ ​ 1,930 Project generation and other ​ 2,228 ​ 1,055 ​ ​ 3,440 ​ ​ 2,174 Total ​ $ 23,863 ​ $ 8,348 ​ $ 41,186 ​ $ 14,609 ​ ​ 12. 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 Parent The nature of the Company’s related party relationship with the Parent is disclosed in Note 1. Cost allocations Prior to completing the restructuring described in Note 1, the Parent incurred corporate and technical costs attributable to the Company and the Nimba Project. Accordingly, the condensed interim consolidated and combined carve-out financial statements include costs allocations from the Parent, including executive oversight, occupancy, office overhead, accounting, tax, treasury, legal, information technology, human resources and mineral exploration. These allocations were made on the basis of direct usage. All such amounts were deemed incurred and settled by the Company in the period in which the costs were recorded and are included in net parent investment. Allocated costs for the four months ended April 30, 2021 totaled $ 1.3 million and are solely from the period prior to the restructuring. The allocated costs are primarily included in general and administrative expenses and exploration expenses in the consolidated and combined statements of loss. 12 Table of Contents IVANHOE ELECTRIC INC. Notes to the Condensed Consolidated and Combined Carve-Out Financial Statements (Unaudited - Tabular amounts in thousands of U.S. dollars, unless otherwise indicated) ​ Other related parties The following table summarizes transactions between the Company and significant related parties. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Transactions for the ​ Transactions for the ​ ​ ​ ​ ​ ​ three months ended ​ six months ended ​ Balance outstanding as at June 30, ​ June 30, ​ ​ June 30, December 31, ​ ​ ​ ​ ​ ​ 2022 ​ 2021 ​ 2022 ​ 2021 ​ 2022 ​ 2021 Total Expenses ​ ​ ​ ​ ​ ​ Global Mining (Note a) 1,208 993 3,345 ​ 1,803 ​ 6,082 3,250 Ivanhoe Capital Aviation (Note b) — — 250 ​ — ​ 500 — HPX (Note c) ​ — ​ — ​ — ​ 487 ​ — ​ 487 Total 1,208 993 3,595 ​ 2,290 ​ 6,582 3,737 Advances ​ ​ Global Mining (Note a) 1,833 1,855 — ​ — ​ — — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Transactions for the Transactions for the six ​ ​ three months ended ​ months ended ​ ​ June 30, ​ June 30, ​ 2022 2021 2022 2021 Expense classification ​ ​ General and administrative expenses 1,580 ​ 1,153 ​ 3,052 1,935 Exploration expenses 2,015 ​ 1,137 ​ 3,530 1,802 ​ 3,595 ​ 2,290 ​ 6,582 3,737 (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 Parent and the Company on a cost-recovery basis. The Company held 7.1 % of Global Mining’s outstanding common shares at June 30, 2022 (December 31, 2021 — 7.1 % ). Transactions incurred with Global Mining include cost allocations from the Parent totaling $ 645,000 from the period January 1, 2021 to April 30, 2021. (b) Ivanhoe Capital Aviation (“ICA”) is an entity beneficially owned by the Company’s Chief Executive Officer and Chairman. ICA provides use of its aircraft to the Company. (c) HPX was the parent of the Company prior to the restructuring on April 30, 2021 (Note 1). After the restructuring there was reimbursement to HPX for certain costs paid by HPX on the Company’s behalf. 13 Table of Contents IVANHOE ELECTRIC INC. Notes to the Condensed Consolidated and Combined Carve-Out Financial Statements (Unaudited - Tabular amounts in thousands of U.S. dollars, unless otherwise indicated) ​ 13. 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2022 December 31, 2021 ​ ​ Level 1 Level 2 Level 3 ​ Level 1 Level 2 Level 3 Financial assets: ​ ​ ​ ​ ​ ​ ​ ​ Investments subject to significant influence ​ 5,781 ​ ​ — ​ — ​ 7,044 ​ — ​ — Other investments ​ 1,605 ​ ​ — ​ — ​ 1,802 ​ — ​ — Total financial assets ​ $ 7,386 ​ $ — ​ $ — ​ $ 8,846 ​ $ — ​ $ — Financial liabilities: ​ ​ ​ ​ ​ ​ ​ ​ Convertible notes ​ — ​ ​ — ​ — ​ — ​ — ​ 54,975 Deferred consideration payable ​ — ​ ​ — ​ — ​ — ​ — ​ 26,562 Total financial liabilities ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 81,537 ​ The Ivanhoe Electric Series 1 and Series 2 Convertible Notes were converted into common stock of the Company on June 30, 2022 (Note 8(a)). ​ ​ 14. Segment reporting: The Company’s Chief Executive Officer and Chairman is 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. 14 Table of Contents IVANHOE ELECTRIC INC. Notes to the Condensed Consolidated and Combined Carve-Out Financial Statements (Unaudited - Tabular amounts in thousands of U.S. dollars, unless otherwise indicated) ​ Segment information for the periods presented is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended June 30, 2022 Six months ended June 30, 2022 ​ ​ Critical Data Energy ​ ​ ​ Critical Data Energy ​ ​ ​ ​ Metals Processing Storage Total Metals Processing Storage Total Revenue ​ $ — ​ $ 229 ​ $ — ​ $ 229 ​ $ — ​ $ 6,991 ​ $ — ​ $ 6,991 Intersegment revenues ​ — ​ 96 ​ — ​ 96 ​ — ​ 139 ​ — ​ 139 Loss (income) from operations ​ 27,103 ​ 953 ​ 1,630 ​ 29,686 ​ 47,883 ​ ( 4,596 ) ​ 3,605 ​ 46,892 Segment Assets ​ 309,574 ​ 7,259 ​ 24,161 ​ 340,994 ​ 309,574 ​ 7,259 ​ 24,161 ​ 340,994 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended June 30, 2021 Six months ended June 30, 2021 ​ ​ Critical Data Energy ​ ​ ​ Critical Data Energy ​ ​ ​ ​ Metals Processing Storage Total Metals Processing Storage Total Revenue ​ $ — ​ $ 1,464 ​ $ 31 ​ $ 1,495 ​ $ — ​ $ 2,950 ​ $ 104 ​ $ 3,054 Intersegment revenues ​ — ​ 16 ​ — ​ 16 ​ — ​ 44 ​ — ​ 44 Loss (income) from operations ​ 10,351 ​ ( 101 ) ​ 1,130 ​ 11,380 ​ 18,140 ​ ( 282 ) ​ 2,315 ​ 20,173 Segment Assets ​ 59,522 ​ 9,245 ​ 9,256 ​ 78,023 ​ 59,522 ​ 9,245 ​ 9,256 ​ 78,023 ​ ​ 15. Commitments and contingencies: 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 Table of Contents