What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-14 compared with 2023-05-15 · 173 added, 96 removed, 186 unchanged (59% of the section changed)

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S pecial 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.

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, our 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.

estimated calculations of mineral reserves and resources at our properties including changes in those estimated calculations, anticipated results and timing of exploration activities, timing of studies for advancing or developing our properties, 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 or other offerings of our securities.

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.

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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;

our mineral projects are all at the exploration stage and are subject to the significant risks and uncertainties associated with mineral exploration;

we have no mineral reserves, other than at the San Matias project;

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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;

actual capital costs, operating costs, production and economic returns at any future mine 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;

we have claims and legal proceedings against one 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;

we may fail to identify attractive acquisition candidates or joint ventures with strategic partners or be unable to successfully integrate acquired mineral properties;

we may fail to successfully manage joint ventures and are reliant on our joint venture partners to comply with their obligations;

our business is extensively regulated by the United States and foreign governments as well as local governments;

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operations are subject to additional political, economic and other uncertainties not generally associated with domestic operations;

our activities may be hindered, delayed or have to cease as a result of climate change effects, including increased and excessive heating and the potential for forest fires at many of our properties;

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.

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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.

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.

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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:

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 Typhoon TM 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”.

We are a United States domiciled company that combines advanced mineral exploration technologies with electric metals exploration projects predominantly located in the United States.

We use our accurate and powerful Typhoon™ geophysical surveying system, together with advanced data analytics provided by our subsidiary, Computational Geosciences Inc.

(“CGI”), to accelerate and de-risk the mineral exploration process as we seek to discover new deposits of critical metals that may otherwise be undetectable by traditional exploration technologies.

We believe the United States is significantly underexplored and has the potential to yield major new discoveries of critical metals.

Our mineral exploration efforts focus on copper as well as other metals including nickel, vanadium, cobalt, platinum group elements, gold and silver.

Through the advancement of our portfolio of electric metals exploration projects, headlined by the Santa Cruz Copper Project in Arizona and the Tintic Copper-Gold Project in Utah, as well as other exploration projects in the United States, we intend to support United States supply chain independence by finding and delivering the critical metals necessary for the electrification of the economy.

We also operate a 50/50 joint venture with Saudi Arabian Mining Company Ma’aden to explore for minerals on ~48,500 km2 of underexplored Arabian Shield in the Kingdom of Saudi Arabia.

Finally, in addition to our mineral projects, we also own a controlling interest in VRB Energy Inc.

("VRB") which is primarily engaged in the design, manufacture, installation, and operation of vanadium redux flow energy storage systems.

At our Santa Cruz Copper Project in Arizona, we are evaluating the potential for a high-grade modern underground copper mining operation.

We are advancing economic studies for an underground copper mining operation with a focus on minimizing the surface footprint of the mine while at the same time incorporating leading technologies to improve efficiencies and costs.

We are designing a technologically advanced mine that we expect to result in low carbon dioxide emissions per pound of copper produced and be a leading example of responsibly produced domestic copper.

Key considerations that will influence our decision making include, but are not limited to, using clean and renewable energy in our future mining operations, optimizing and minimizing our water utilization, minimizing our environmental footprint, ensuring workforce diversity and hiring from local communities, health, safety and environmental performance, support of local cultural heritage and biodiversity protection.

"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 project

Our shares are listed on the NYSE American and the TSX under the ticker symbol “IE”.

Reverse Stock Split

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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.

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.

Business Developments in the Quarter

On May 15, 2023, we signed a Common Stock Subscription Agreement ("the Subscription Agreement") with Saudi Arabian Mining Company Ma’aden (“Ma’aden”) pursuant to the Heads of Terms previously disclosed in the Company’s Form 8-K filed on January 11, 2023.

On July 6, 2023, the Company completed the closing of the transactions contemplated by the Subscription Agreement (the “Ma’aden Transactions”) and entered into an Investor Rights Agreement, a Shareholders’ Agreement and the other instruments contemplated thereby.

The Ma'aden Transactions include the establishment of a 50/50 exploration joint venture between Ma’aden and Ivanhoe Electric to explore for minerals on ~48,500 km2 of underexplored Arabian Shield in the Kingdom of Saudi Arabia, and a strategic investment by Ma'aden in Ivanhoe Electric common stock.

On July 6, 2023, we issued to Ma’aden an aggregate of 10,269,604 shares of common stock of the Company, constituting 9.9% of the total outstanding number of

shares of common stock immediately following closing of the Ma'aden Transactions, for gross proceeds of approximately $127.1 million, representing an aggregate purchase price of $12.38 per share.

Of the $127.1 million total proceeds from the private placement, $66.0 million has been contributed to the joint venture to fund its exploration activities, including the purchase of three new-generation Typhoon TM machines from I-Pulse Inc.

The remaining $61.1 million has been retained by Ivanhoe Electric to advance our portfolio of US mineral projects, and for working capital and general corporate purposes.

On May 23, 2023, we completed the acquisition of 5,975 acres of surface title and associated water rights at the Santa Cruz Project for aggregate consideration of $116.86 million to be paid in installments over a 4.5-year period.

On May 23, 2023, we paid the vendor $34.3 million of the purchase price (inclusive of a previously paid $0.1 million exclusivity payment and a $5.0 million earnest money escrow deposit upon signing the Agreement) and issued a secured promissory note to the vendor in the principal amount of $82.6 million with an interest rate of prime plus 1%.

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 2024.

At that time, we will have a unified land and mineral package encompassing the entire Santa Cruz Project.

On May 8, 2023, our subsidiary, Cordoba Mineral Corp.

("Cordoba"), announced that it and JCHX Mining Management Co., Ltd.

("JCHX") had satisfied all necessary conditions to close the $100 million strategic arrangement for the joint-development of Cordoba's 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, a company existing under the laws of Colombia, 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.

At the closing of the transaction, $40 million was paid as a first installment.

A second installment of $40 million is payable in cash upon the board of 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.

On July 10, 2023, we filed an automatic shelf registration statement on Form S-3 to permits us to publicly offer and sell securities from time to time, including common stock, preferred stock, debt securities, warrants, subscription rights and units.

We may offer and sell securities under the Form S-3 from time to time.

We account for our business in three business segments – (i) critical metals, (ii) data processing and software licensing services and (iii) energy storage systems.

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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.

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.

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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.

In particular, we are incurring 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

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In 2023, we have commenced design and development activities for our next generation of Typhoon TM 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.

Three Months Ended June 30, 2023 Compared to the Three Months Ended June 30, 2022

For the three months ended June 30, 2023 we recorded a net loss attributable to common stockholders of $38.3 million ($0.41 per share), compared to $54.4 million ($0.85 per share) for the three months ended June 30, 2022, which was a decrease of $16.1 million.

A significant contributor to this decrease for the three months ended June 30, 2023 was that the three months ended June 30, 2022 included an amount of $16.1 million in relation to a non-cash loss on the revaluation of the convertible notes that were automatically converted into shares of our common stock upon the completion of the IPO on June 30, 2022 and there was no similar expense in 2023.

This decrease was offset by an increase of $8.7 million in exploration expenditures and an increase of $8.0 million in general and administrative expenses compared to the three months ended June 30, 2022.

Exploration expenses were $32.6 million for the three months ended June 30, 2023, an increase of $8.7 million from $23.9 million for the three months ended June 30, 2022.

Exploration expenses consisted of the following:

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Tintic, USA 1,954 407

Carolina, USA 790 514

Hog Heaven, USA 416 308

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Lincoln, USA 182 326

Carolina, USA 238 —

Pinaya, Peru 493 1,465

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Total $ 32,551 $ 23,863

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;

• 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;

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.

During the three months ended June 30, 2023, exploration expenditures largely focused on activities at:

• the Santa Cruz Project where $15.0 million of exploration expenditure was incurred in the three months ended June 30, 2023 compared to $14.8 million incurred in the three months ended June 30, 2022.

Activities during the three months ended June 30, 2023 at Santa Cruz were focused on a program of exploration and infill resource, geotechnical, hydrological and metallurgical drilling, advancing technical studies, and continued work on the Initial Assessment Study for the Santa Cruz Copper Project which we plan to complete by the end of the third quarter of 2023.

• Cordoba's San Matias Project where $10.1 million of exploration expenditure was incurred by Cordoba for the three months ended June 30, 2023 focused on continuing work on the feasibility study on the Alacran deposit.

Activities during the three months ended June 30, 2023 included ongoing infill geotechnical, metallurgical, hydrological and infill drilling to advance the feasibility study.

During the three months ended June 30, 2023, a total of 12,739.3 meters of infill diamond drilling was completed.

The final program total was 44,889.75 meters in 233 diamond drill holes completed;

• the Tintic Project where $2.0 million of exploration expenditure was incurred in the three months ended June 30, 2023 compared to $0.4 million incurred in the three months ended June 30, 2022.

Activities during the three months ended June 30, 2023 at Tintic included commencing a two drill rig exploration program that is testing new areas of the historic Main Tintic Mining District.

General and administrative expenses were $12.7 million for the three months ended June 30, 2023, an increase of $8.0 million from $4.7 million in three months ended June 30, 2022.

Several items contributed to the increase, including:

• 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;

• 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.

• a $4.2 million increase in stock-based compensation expense from $0.2 million for the three months ended June 30, 2022 compared to $4.4 million for the three months ended June 30, 2023.

This increase was due to the impact of the additional non-cash stock-based compensation expense in relation to the Ivanhoe Electric stock option and RSU grants that occurred in November 2022, January 2023 and February 2023;

• a $1.3 million increase in directors and officers insurance expenses from $0.2 million for the three months ended June 30, 2022 to $1.5 million for the three months ended June 30, 2023.

This increase was due to the three months ended June 30, 2023 including an entire quarter of director and officers insurance expense compared to the three months ended June 30, 2022 as we entered into the insurance policy in late June 2022 immediately before our IPO;

• a $0.8 million increase in salary and wages compared to the three months ended June 30, 2022 due to adding more people to our management and administrative teams following our IPO.

Revenue for the three months ended June 30, 2023 was $1.3 million, an increase of $0.2 million from the three months ended June 30, 2022.

Three Months Ended

March 31, 2023 Three Months Ended

March 31, 2022 Percentage Change

(In thousands)

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Gross profit $ 21 115

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.

Energy storage systems:

Revenue $ 1,272 —

Cost of sales (1,235) —

Gross profit $ 37 —

Revenue $ 1,314 230

Cost of sales (1,256) (115)

Gross profit $ 58 115

VRB's revenue represented 96.8% of our revenue for the three months ended June 30, 2023 ($1.3 million) and 0.0% for the three months ended June 30, 2022 ($0.0 million).

During the second quarter of 2023, VRB delivered, installed and commissioned a 1MW/2MWh energy storage system to a customer in China, which resulted in $1.3 million of revenue being recognized.

CGI’s software licensing and data processing services to the mining and oil and gas industries represented 3.2% of our revenue for the three months ended June 30, 2023 ($0.0 million) and 100.0% for the three months ended June 30, 2022 ($0.2 million).

Revenue decreased at CGI as a result of less data processing projects occurring during the second quarter of 2023.

CGI continues to focus on generating new business.

Research and development expenses for the three months ended June 30, 2023 were $2.1 million, an increase of $0.9 million from the same period in 2022 primarily attributable to incurring $0.8 million of expenditure in the second quarter of 2023 on research and development activities for our next generation of Typhoon TM equipment.

Six Months Ended June 30, 2023 Compared to the Six Months Ended June 30, 2022

For the six months ended June 30, 2023 we recorded a net loss attributable to common stockholders of $74.3 million ($0.80 per share), compared to $69.8 million ($1.09 per share) for the six months ended June 30, 2022, which was an increase of $4.5 million.

Significant contributors to this increase for the six months ended June 30, 2023 included an increase of $17.9 million in exploration expenditures and an increase of $13.4 million compared to the six months ended June 30, 2022.

These increases for the six months ended June 30, 2023 were offset by a decrease of $19.0 million due to the six months ended June 30, 2022 including an amount of $19.0 million in relation to a non-cash loss on the revaluation of the convertible notes that were automatically converted into shares of our common stock upon the completion of the IPO on June 30, 2022 and there was no similar expense in 2023.

Exploration expenses were $59.1 million for the six months ended June 30, 2023, an increase of $17.9 million from $41.2 million for the six months ended June 30, 2022.

Exploration expenses consisted of the following:

Six Months Ended June 30,

(In thousands) 2023 2022

Exploration Expenses:

Santa Cruz, USA $ 29,725 $ 24,561

San Matias, Colombia 14,767 5,773

Tintic, USA 3,075 696

Hog Heaven, USA 1,054 868

Carolina, USA 1,028 514

White Hill, USA 750 —

Pinaya, Peru 650 2,151

Lincoln, USA 477 339

Generative exploration and other 7,584 6,284

Total $ 59,110 $ 41,186

During the six months ended June 30, 2023, exploration expenditures largely focused on activities at:

• the Santa Cruz Project where $29.7 million of exploration expenditure was incurred in the six months ended June 30, 2023 compared to $24.6 million incurred in the six months ended June 30, 2022.

Activities during the six months ended June 30, 2023 at Santa Cruz were focused on a program of exploration and infill resource, geotechnical, hydrological and metallurgical drilling, advancing technical studies, completing the updated mineral resource estimate released in February 2023 and working on the Initial Assessment Study for the Santa Cruz Copper Project which we plan to complete by the end of third quarter of 2023.

• Cordoba's San Matias Project where $14.8 million of exploration expenditure was incurred by Cordoba for the six months ended June 30, 2023 focused on continuing work on the feasibility study on the Alacran deposit.

Activities during the six months ended June 30, 2023 included ongoing infill geotechnical, metallurgical, hydrological and infill resource drilling to advance the feasibility study.

During the six months ended June 30, 2023 a total of 16,685

meters of infill diamond drilling was completed.

The final program total was 44,889.75 meters in 233 diamond drill holes completed;

• the Tintic Project where $3.1 million of exploration expenditure was incurred in the six months ended June 30, 2023 compared to $0.7 million incurred in the six months ended June 30, 2022.

Activities during the six months ended June 30, 2023 at Tintic were focused on completing an initial diamond drill hole and commencing a two drill rig exploration program that is testing new areas of the historic Main Tintic Mining District.

General and administrative expenses were $23.3 million for the six months ended June 30, 2023, an increase of $13.4 million from $9.9 million in six months ended June 30, 2022.

Several items contributed to the increase, including:

• a $8.0 million increase in stock-based compensation expense from $0.5 million for the six months ended June 30, 2022 compared to $8.5 million for the six months ended June 30, 2023.

This increase was due to additional non-cash stock-based compensation expense in relation to Ivanhoe Electric stock option and RSU grants that occurred in November 2022, January 2023 and February 2023;

• a $2.9 million increase in directors and officers insurance expenses from $0.2 million for the six months ended June 30, 2022 compared to $3.1 million for the six months ended June 30, 2023.

This increase was due to the six months ended June 30, 2023 including six months of director and officers insurance expense compared to six months ended June 30, 2022 as we entered into the insurance policy in late June 2022 immediately before our IPO;

• a $1.2 million increase in salary and wages compared to the six months ended June 30, 2022 due to adding more people to our management and administrative teams following our IPO.

Revenue for the six months ended June 30, 2023 was $2.0 million, a decrease of $5.0 million from $7.0 million for the six months ended June 30, 2022.

Six Months Ended

(In thousands)

Software licensing and data processing services:

Revenue $ 721 6,991

Cost of sales (205) (167)

Gross profit $ 516 6,824

Energy storage systems:

Revenue $ 1,272 —

Cost of sales (1,235) —

Gross profit $ 37 —

Revenue $ 1,993 6,991

Cost of sales (1,440) (167)

Gross profit $ 553 6,824

VRB's revenue presented 63.8% of our revenue for the six months ended June 30, 2023 ($1.3 million) and 0.0% for the six months ended June 30, 2022 ($0.0 million).

During the second quarter of 2023, VRB delivered, installed and commissioned a 1MW/2MWh energy storage system to a customer in China, which resulted in $1.3 million of revenue being recognized.

CGI’s software licensing and data processing services to the mining and oil and gas industries represented 36.2% of our revenue for the six months ended June 30, 2023 ($0.7 million) and 100.0% for the six months ended June 30, 2022 ($7.0 million).

CGI’s revenue for the six months ended June 30, 2023 was $0.7 million a decrease of $6.3 million from $7.0 million for the six months ended June 30, 2022.

The decrease in CGI’s revenue was a result of revenue for the six months ended June 30, 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 Typhoon TM equipment.

CGI’s revenue for the six months ended June 30, 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 six months ended June 30, 2023 was $0.5 million, a decrease of $6.3 million from $6.8 million for the six months ended June 30, 2022.

The licensing of certain software for a one-time fee of $6.5 million had a direct impact on gross profit for the six months ended June 30, 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 six months ended June 30, 2023 were $4.0 million, an increase of $1.4 million from the same period in 2022 primarily attributable to incurring $1.5 million of expenditure in the first half of 2023 on commencing research and development activities for our next generation of Typhoon TM equipment.

Stock-Based Compensation

During the three months ended March 31, 2023, we granted stock options to certain new employees of the Company.

During the six months ended June 30, 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.

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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

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.

At June 30, 2023 and December 31, 2022, we had cash and cash equivalents of $63.8 million and $139.7 million, respectively, and a working capital of $14.0 million and $133.6 million, respectively.

Of the total cash and cash equivalents at June 30, 2023 and December 31, 2022, $13.1 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.

In addition, on July 6, 2023, we completed the closing of the Ma'aden transactions where we issued to Ma’aden an aggregate of 10,269,604 shares of common stock of the Company for gross proceeds of approximately $127.1 million.

Of these proceeds approximately $61.1 million is available to be used to advance our portfolio of US mineral projects, and for working capital and general corporate purposes.

As at August 14, 2023, 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.

Cash Balances as of June 30, 2023

The table below discloses the amounts of cash disaggregated by currency denomination as of June 30, 2023 in each jurisdiction that our affiliated entities are domiciled.

Currency by Denomination (in USD Equivalents)

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Colombia — — — 6,091 — 6,091

Cayman Islands 5,843 4 — — — $ 5,847

Canada 2,484 1,086 — — — 3,570

Cayman Islands 2,774 2 — — — 2,776

China — — 692 — — 692

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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.

There were no cash transfers to or from our PRC subsidiaries in the form of intercompany loans during the three months ended June 30, 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.

In May 2023, as part of the consideration for the acquisition of 5,975 acres of surface title and associated water rights at the Santa Cruz Project we issued to the vendor a secured promissory note in the principal amount of $82.6 million.

The promissory note includes an annual interest rate of prime plus 1% and is to be paid in installments, as follows:

• $34.3 million, plus accrued interest, payable on or before November 23, 2023;

• four equal principal payments of $12.1 million on the first, second, third and fourth anniversaries of the closing, plus applicable accrued interest.

Convertible Bond — VRB

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If no equity financing or sale event occurs, VRB must repay the outstanding principal and interest on maturity.

Bridge Loan — Cordoba Minerals.

Bridge Loan — Cordoba

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.

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The following table presents our sources and uses of cash for the periods indicated:

Three Months Ended

Six Months Ended June 30,

Net cash (used in) provided by:

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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.

Net cash used in operating activities for the six months ended June 30, 2023 was $65.8 million, an increase of $21.6 million from the $44.2 million of net cash used for the six months ended June 30, 2022.

Investing activities.

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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.

Net cash used in investing activities for the six months ended June 30, 2023 of $40.9 million was mainly attributable to $39.2 million related to payments for mineral interests and $1.2 million for the purchase of investments that are subject to significant influence.

The $39.2 million payments for mineral interests included $35.4 million paid to acquire land at the Santa Cruz Project and $3.5 million of option payments at our Tintic Project.

The $1.2 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.

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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.

During the six months ended June 30, 2023, there were no significant corporate Ivanhoe Electric financing activities as we continued to fund our operations with proceeds from our IPO.

We did receive $1.2 million of proceeds from the exercise of employee stock options during the six months ended June 30, 2023.

Our subsidiary, Cordoba, raised $29.5 million during six months ended June 30, 2023 in relation to financing its Alacran project through its strategic arrangement with JCHX.

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.

As of June 30, 2023, there were no material changes in our contractual obligations since December 31, 2022 other than those discussed above under "Note Payable".

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.

As of June 30, 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.

See Note 12 of our Condensed Interim Consolidated Financial Statements for the three and six months ended June 30, 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.

The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of

assets, liabilities, revenues and expenses, as well as the disclosure of contingent assets and liabilities as of the date of our financial statements.

The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of 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.

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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.

We had no uncertain tax positions as of June 30, 2023.

Emerging Growth Company Status

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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.

We expect to lose our emerging growth company status at the end of the fiscal year ended December 31, 2023, when we expect to qualify as a large accelerated filer based on the worldwide market value of our common equity held by non-affiliates as at June 30, 2023.

Quantitative and Qualitative Disclosures about Market Risk.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis