Ivanhoe Electric Inc. 10-K

Item 8. Financial Statements and Supplementary Data REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of Ivanhoe Electric Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Ivanhoe Electric Inc. and subsidiaries (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of loss and comprehensive loss, changes in equity, and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 26, 2024, expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Ma’aden Joint Venture — Refer to Notes 6 to the financial statements Critical Audit Matter Description On July 6, 2023, the Company closed an agreement with Saudi Arabian Mining Company Ma’aden (“Ma’aden”) and entered into an Investor Rights Agreement, a Shareholders’ Agreement, and other instruments contemplated thereby. This included the establishment of a 50/50 exploration joint venture between Ma’aden and the Company to explore prospective land in Saudi Arabia, for which the Company contributed funds and Ma’aden contributed access to land to be used for conducting the exploration activities of the joint venture. To determine the accounting treatment of the joint venture management was required to make judgments and as such, auditing the accounting treatment required complex analysis and consideration which resulted in an increased extent of audit effort, including the need to involve technical accounting specialists. 117 Table of Contents How the Critical Audit Matter Was Addressed in the Audit With the assistance of technical accounting specialists, our audit procedures related to management’s determination of the accounting treatment of the joint venture included the following, among others: • Evaluated the effectiveness of controls over management’s determination of accounting treatment of the joint venture; • Assessed the information in the agreements to evaluate that all relevant factors were analyzed; • Evaluated management’s determination of the accounting treatment of the joint venture by analyzing specific facts and circumstances against relevant accounting guidance. JCHX Transaction- Refer to Notes 16 to the financial statements Critical Audit Matter Description On May 8, 2023, the Company through its subsidiary Cordoba Minerals Corp (“Cordoba”) closed with JCHX Mining Management Co., Ltd (“JCHX") a $100 million strategic arrangement (the “JCHX Transaction”) for the joint-development of the Alacran Project in Colombia. Upon closing, JCHX funded the initial installment towards its 50% ownership interest in CMH Colombia S.A.S. (“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. To determine the accounting treatment of the JCHX Transaction, management was required to make judgments and as such, auditing the accounting treatment required complex analysis and consideration which resulted in an increased extent of audit effort, including the need to involve technical accounting specialists. How the Critical Audit Matter Was Addressed in the Audit With the assistance of technical accounting specialists, our audit procedures related to management’s determination of the accounting treatment of the JCHX Transaction included the following, among others: • Evaluated the effectiveness of controls over management’s determination of accounting treatment of the JCHX Transaction; • Assessed the information in the JCHX Transaction agreements to evaluate that all relevant matters in the agreement have been considered; • Evaluated management’s determination of the accounting treatment of the JCHX Transaction by analyzing specific facts and circumstances against relevant accounting guidanc e . /s/ Deloitte LLP Chartered Professional Accountants Vancouver, Canada February 26, 2024 We have served as the Company's auditor since 2021 F-1 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of Ivanhoe Electric Inc. Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Ivanhoe Electric Inc. and subsidiaries (the “Company”) as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2023, of the Company and our report dated February 26, 2024, expressed an unqualified opinion on those financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Deloitte LLP Chartered Professional Accountants Vancouver, Canada February 26, 2024 F-2 Table of Contents IVANHOE ELECTRIC INC. CONSOLIDATED BALANCE SHEETS (Expressed in thousands of U.S. dollars) At December 31, 2023 and 2022 2023 2022 Assets Current assets: Cash and cash equivalents $ 205,043 $ 139,660 Accounts and other receivables 3,326 1,497 Inventory 5,013 5,648 Prepaid expenses and deposits 3,104 4,226 216,486 151,031 Non-current assets: Investments subject to significant influence 39,130 5,998 Other investments 2,989 2,220 Exploration properties 216,290 86,758 Property, plant and equipment 6,645 3,934 Intangible assets 123 1,249 Other non-current assets 5,563 9,296 Total assets $ 487,226 $ 260,486 Liabilities and Equity Current liabilities: Accounts payable and accrued liabilities $ 19,948 $ 13,943 Note payable, current 12,672 — Due to related party 4,000 — Lease liabilities, current 699 706 Contract liability 2,404 2,783 39,723 17,432 Non-current liabilities: Note payable 36,244 — Convertible debt 28,372 25,918 Deferred income taxes 4,845 3,888 Due to related party — 10,010 Lease liabilities, net of current portion 1,199 403 Other non-current liabilities 562 388 Total liabilities 110,945 58,039 Commitments and contingencies (Note 24) Equity: Common stock, par value $ 0.0001 ; 700,000,000 shares authorized; 120.0 million shares issued and outstanding as of December 31, 2023 (December 31, 2022 - 700,000,000 authorized; 93.0 million issued and outstanding) 12 9 Additional paid-in capital 777,816 409,683 Accumulated deficit ( 401,504 ) ( 202,128 ) Accumulated other comprehensive income ( 2,073 ) ( 1,189 ) Equity attributable to the Company 374,251 206,375 Non-controlling interests 2,030 ( 3,928 ) Total equity 376,281 202,447 Total liabilities and equity $ 487,226 $ 260,486 F-3 Table of Contents IVANHOE ELECTRIC INC. CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS (Expressed in thousands of U.S. dollars, except for share and per share amounts) Years ended December 31, 2023 and 2022 2023 2022 Revenue $ 3,903 $ 8,440 Cost of sales ( 2,986 ) ( 3,135 ) Gross profit 917 5,305 Operating expenses: Exploration expenses 126,719 105,286 General and administrative expenses 48,204 26,971 Research and development expenses 6,120 5,040 Selling and marketing expenses 276 173 Loss from operations 180,402 132,165 Other expenses (income): Interest expense, net 2,960 972 Foreign exchange (gain) loss ( 1,274 ) 1,327 Share of losses from significant influence investments 35,952 3,711 Loss on revaluation of investments 963 1,450 Loss on revaluation of convertible debt — 18,965 Other (income) expenses , net ( 2,344 ) 1,013 Loss before income taxes 216,659 159,603 Income taxes (recovery) ( 584 ) 618 Net loss 216,075 160,221 Less loss attributable to non-controlling interests ( 16,698 ) ( 10,408 ) Net loss attributable to common stockholders or parent 199,377 149,813 Net loss 216,075 160,221 Other comprehensive income, net of tax: Foreign currency translation adjustments 1,359 ( 560 ) Other comprehensive income 1,359 ( 560 ) Comprehensive loss $ 217,434 $ 159,661 Comprehensive loss attributable to: Common stockholders or parent 200,261 149,501 Non-controlling interests 17,173 10,160 $ 217,434 $ 159,661 Net loss per share attributable to common stockholders or parent Basic and diluted $ 1.95 $ 1.91 Weighted-average common shares outstanding Basic and diluted 102,491,529 78,527,539 F-4 Table of Contents IVANHOE ELECTRIC INC. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Expressed in thousands of U.S. dollars, except for share amounts) Years ended December 31, 2023 and 2022 Common Stock Additional paid-in capital Accumulated deficit Accumulated other comprehensive income (loss) Non- controlling interest Total Shares Amount Balance at January 1, 2022 63,925,334 6 75,743 ( 52,314 ) ( 1,502 ) 5,881 27,814 Net loss — — — ( 149,814 ) — ( 10,407 ) ( 160,221 ) Other comprehensive loss — — — — 313 247 560 Issuance of common stock, net of issuance costs 14,388,000 2 158,048 — — — 158,050 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 Stock options exercised 72,666 — 181 — — — 181 Stock-based compensation — — 4,548 — — 285 4,833 Other changes in non-controlling interests — — ( 87 ) — — 66 ( 21 ) Balance at December 31, 2022 92,960,584 9 409,683 ( 202,128 ) ( 1,189 ) ( 3,928 ) 202,447 Net loss — — — ( 199,377 ) — ( 16,698 ) ( 216,075 ) Other comprehensive loss — — — — ( 884 ) ( 475 ) ( 1,359 ) Issuance of common stock; public offering and subscription agreement, net of issuance costs 15,143,279 2 195,949 — — — 195,951 Issuance of common stock; strategic investment, net of issuance costs 10,269,604 1 123,670 — — — 123,671 Issuance of common stock; earn-in payment 10,281 — 150 — — — 150 Stock options exercised 1,379,526 — 3,422 — — — 3,422 Settlement of restricted share units 250,000 — — — — — — Settlement of deferred share units 11,990 — — — — — — Stock-based compensation — — 20,738 — — 225 20,963 Non-controlling interests investment in subsidiary — — 24,258 — — 22,896 47,154 Other changes in non-controlling interests — — ( 54 ) — — 11 ( 43 ) Balance at December 31, 2023 120,025,264 $ 12 $ 777,816 $ ( 401,505 ) $ ( 2,073 ) $ 2,031 $ 376,281 F-5 Table of Contents IVANHOE ELECTRIC INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Expressed in thousands of U.S. dollars) Years ended December 31, 2023 and 2022 2023 2022 Operating activities Net loss $ ( 216,075 ) $ ( 160,221 ) Adjustments to reconcile net loss to cash provided by (used in) operating activities: Depreciation and amortization 2,640 4,211 Stock-based compensation 20,963 4,833 Non-cash exploration expense 2,340 1,273 Non-cash research and development expense 941 — Loss on de-recognition of mineral interest — 5,700 Interest expense 3,707 2,071 Unrealized foreign exchange (gain) loss ( 1,293 ) 1,332 Share of losses from significant influence investments 35,952 3,711 Loss on revaluation of investments 963 1,450 Loss on revaluation of convertible debt — 18,965 Income taxes ( 583 ) 618 Other ( 1,330 ) 2,808 Changes in other operating assets and liabilities: Trade accounts receivable ( 1,829 ) ( 112 ) Inventory 542 ( 2,083 ) Operating lease liabilities ( 966 ) ( 873 ) Accounts payable and accrued liabilities 1,879 2,727 Other operating assets and liabilities 1,634 ( 2,144 ) Net cash used in operating activities ( 150,515 ) ( 115,734 ) Investing activities Purchase of exploration properties ( 80,507 ) ( 35,905 ) Purchase of property, plant and equipment and intangible assets ( 1,578 ) ( 8,506 ) Purchase of investments subject to significant influence ( 68,681 ) ( 3,973 ) Net cash used in investing activities ( 150,766 ) ( 48,384 ) Financing activities Net proceeds from issuance of common stock 319,622 158,050 Proceeds from related party loan 4,000 10,000 Proceeds from convertible notes — 86,200 Non-controlling interests investment in subsidiary 39,454 — Proceeds from exercise of stock options 3,422 181 Other ( 44 ) ( 21 ) Net cash provided by financing activities 366,454 254,410 Effect of foreign exchange rate changes on cash and cash equivalents 210 ( 482 ) Increase in cash and cash equivalents 65,383 89,810 Cash and cash equivalents, beginning of the year 139,660 49,850 Cash and cash equivalents, end of the year $ 205,043 $ 139,660 Supplemental cash flow information Cash paid for income taxes 1,203 666 Supplemental disclosure of non-cash investing and financing activities Note payable issued as consideration for land purchase $ 82,590 $ — Non-controlling interests investment in subsidiary 10,546 — Settlement of loan upon issuance of shares of subsidiary ( 10,546 ) — Issuance of common stock upon conversion of debt $ — $ 160,140 Issuance of common stock upon settlement of liability — 11,111 F-6 Table of Contents IVANHOE ELECTRIC INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (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”) is a US domiciled company that combines advanced mineral exploration technologies with electric metals exploration projects predominantly located in the United States. The Company’s mineral exploration efforts focus on copper as well as other metals including nickel, vanadium, cobalt, platinum group elements, gold and silver. The Company’s portfolio of electric metals exploration projects include the Santa Cruz Project in Arizona and the Tintic Project in Utah, as well as other exploration projects 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 holds a 50 % interest in a joint venture with Saudi Arabian Mining Company Ma’aden (“Ma’aden”) to explore prospective land in Saudi Arabia. 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 December 31, 2023 (December 31, 2022 —  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 December 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 62.8 % as at December 31, 2023 (December 31, 2022 —  63.2 %). • 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 December 31, 2023 (December 31, 2022 —  82.7 %). On February 6, 2024, Ivanhoe Electric acquired all of the issued and outstanding common shares of Kaizen that were not already beneficially owned by Ivanhoe Electric (Note 25). Basis of preparation: These consolidated financial statements have been prepared under U.S. Generally Accepted Accounting Principles (“U.S. GAAP”). 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 values 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 financial statements have been retrospectively adjusted to reflect the effect of the Reverse Stock Split. The 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. F-7 Table of Contents IVANHOE ELECTRIC INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated) 2. Significant accounting policies: (a) Basis of measurement: These consolidated financial statements have been prepared on the historical cost basis except as disclosed in these accounting policies. (b) Principles of consolidation: The consolidated financial statements of the Company include the accounts those subsidiaries where it directly or indirectly has more than 50% of the voting rights and/or has control over the subsidiary. For entities controlled through less than a 100% ownership interest, a non-controlling interest is recorded to reflect the non-controlling interest’s share of the net loss and net assets of the entity. The Company consolidates entities in which it has a controlling financial interest based on either the variable interest entity (“VIE”) or the voting interest model. An entity is considered to be a VIE if any of the following conditions exist: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support, (b) the holders of the equity investment at risk, as a group, lack either the direct or indirect ability through voting rights or similar rights to make decisions that have a significant effect on the success of the entity or the obligation to absorb the entity’s expected losses or the right to receive the entity’s expected residual returns, or (c) the voting rights of some equity investors are disproportionate to their obligation to absorb losses of the entity, their rights to receive returns from an entity, or both, and substantially all of the entity’s activities either involve or are conducted on behalf of an investor with disproportionately few voting rights. The Company consolidates entities that are VIEs when the Company determines it is the primary beneficiary. Generally, the primary beneficiary of a VIE is a reporting entity that has (a) the power to direct the activities that most significantly affect the VIE’s economic performance, and (b) the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE. The Company’s VIE’s are discussed in Note 15 (Earn-in Options) and Note 17 (Non-controlling Interests). (c) Foreign currency: The functional currency and reporting currency of Ivanhoe Electric is the U.S. dollar. Each subsidiary determines its own functional currency based on the primary economic environment in which it operates. (i) Foreign currency translation: Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at the rates of exchange in effect on the balance sheet date. Transactions in currencies other than the functional currency are measured and recorded in the functional currency at the exchange rate prevailing on the transaction date, and exchange differences arising on remeasurement are recognized in net loss. (ii) Foreign operations: The assets and liabilities of foreign operations whose functional currency is other than the reporting currency are translated into U.S. dollars at the exchange rates in effect on the balance sheet date. Revenues, expenses, gains and losses are translated using the average rates for the year. Translation adjustments are shown as a component of other comprehensive income. (d) Cash and cash equivalents: Cash and cash equivalents comprise deposits held with banks and other short-term highly liquid investments with original maturities of three months or less that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value. F-8 Table of Contents IVANHOE ELECTRIC INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated) (e) Trade accounts receivable: Trade accounts receivable are recorded at cost and do not bear interest. Management evaluates all accounts periodically and an allowance is established based on the best facts available. Management considers historical realization data, accounts receivable aging trends, other operational trends and reasonable forecasts to estimate the collectability of receivables. After all reasonable attempts to collect a receivable have been exhausted, the receivable is written off against the allowance for doubtful accounts. (f) Inventory: Inventories are stated at the lower of cost and net realizable value. Cost comprises direct materials and where applicable, direct labor costs and overheads that have been incurred in bringing the inventory to its present location and condition. Cost is calculated using the weighted average cost method. Net realizable value represents the estimated selling price less all estimated costs of completion and costs necessary to make the sale. Where cost exceeds net realizable value, the recorded value of inventory is written down to its net realizable value, and such impairment losses are not reversed in future periods. (g) Investments subject to significant influence: The Company accounts for its investments over which it has significant influence or joint control, but not a controlling financial interest, using the equity method of accounting unless it has elected to account for an investment subject to significant influence at fair value. Interests in equity-accounted investees are recognized initially at cost. Subsequently, the Company adjusts the carrying amount of the investments to fair value where the fair value option has been elected or recognizes its share of earnings or losses of the investees where applying the equity method. Where investee’s financial information is not produced in a sufficiently timely manner for the Company to apply the equity method of accounting in its consolidated financial statements, the Company records its share of earnings and losses on a lag, not to exceed three months. When a lag period is applied, the Company discloses all material intervening events. The Company evaluates its equity method investments for potential impairment whenever events or changes in circumstances indicate that there is an other-than-temporary decline in the value of the investment. Declines in fair value that are deemed to be other-than-temporary are charged to other expenses. (h) Other investments Changes in the fair value for equity securities with a readily determinable fair value are reported in the consolidated statement of loss. The Company records equity securities without readily determinable fair values (such as investment in common stock, warrants and options of privately held companies) at cost, less impairment, and makes subsequent adjustments to the carrying values for observable price changes for the identical or a similar investment of the same issuer. Equity securities without readily determinable fair values are written down to their fair value if a qualitative assessment indicates that the investment is impaired and the fair value of the investment is less than its carrying amount. (i) Derivatives Derivative instruments and embedded derivatives on the balance sheet are carried at fair value with changes in fair value recorded in earnings unless hedge accounting applies. The Company has not applied hedge accounting to any derivatives. (j) Mineral interests and exploration expense Direct costs for the acquisition of mineral exploration rights, including option payments, are capitalized and recorded initially at cost as mineral interests. Exploration and evaluation costs are expensed in the period incurred until such time as it has been determined that a mineral property is commercially feasible, in which case subsequent exploration and evaluation costs incurred to develop a mineral property are capitalized. Commercial feasibility is F-9 Table of Contents IVANHOE ELECTRIC INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated) generally established when a mineral property has proven and probable reserves, permits or rights to extract the resources and reserves have been obtained and financing to develop the property has been approved. Mineral interests are not amortized until the underlying property is converted to the production stage, at which point the mineral interests are amortized over the estimated recoverable proven and probable reserves. Exploration and evaluation costs include topographical, geological, geochemical and geophysical studies, exploratory drilling, trenching, sampling, and activities in relation to evaluating the technical feasibility and commercial viability of extracting a mineral resource, as well as value-added taxes in relation to these direct exploration and evaluation costs incurred in foreign jurisdictions when recoverability of those taxes is uncertain. Exploration and evaluation costs include funding exploration and evaluation costs pursuant to earn-in arrangements through which the Company has the right to fund exploration and evaluation activities on assets owned by a third party and the opportunity to earn into a partial ownership position directly or indirectly in the underlying assets upon reaching specified funding thresholds. Earn-in arrangements generally provide no commitment by the Company for future funding and the Company is not entitled to any economic returns associated with the underlying mineral interests unless the Company chooses to fund to certain levels. (k) Property, plant and equipment: Items of property, plant and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses. Major expenditures for replacements and significant improvements that increase asset values and extend useful lives are capitalized. The cost of property, plant and equipment, less its estimated residual value, is depreciated over its estimated useful lives using the straight-line method on the following bases: Asset Basis Equipment and vehicles 3 to 10 years Computer equipment 3 to 5 years Leasehold improvements Shorter of useful life and remaining lease term The useful lives, residual values and depreciation method are reviewed annually, with the effect of any changes in estimate accounted for on a prospective basis. (l) Leases: The Company assesses whether a contract is or contains a lease, at the inception of a contract. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Company assesses whether the contract involves the use of an identified asset, whether the Company has the right to obtain substantially all of the economic benefits from use of the asset during the term of the arrangement and if the Company has the right to direct the use of the asset. The Company recognizes a right-of-use asset (“ROU asset”) and a corresponding lease liability at the commencement of the lease, except the company has elected not to recognize ROU assets and liabilities for leases where the total lease term is less than or equal to 12 months. The Company has elected to treat the lease and non-lease components of office leases as a single lease component. Lease liabilities are initially measured at the present value of the unpaid lease payments at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Company uses its incremental borrowing rate. Lease liabilities are subsequently measured by increasing the carrying amount to reflect interest on the lease liability and by reducing the carrying amount to reflect the lease payments made. Operating Leases F-10 Table of Contents IVANHOE ELECTRIC INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated) The ROU asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for lease payments made at or before the lease commencement date, plus any initial direct costs incurred less any lease incentives received. For operating leases, the Company records the amortization of the ROU assets and the accretion of the lease liabilities as a single lease cost on a straight-line basis over the lease term. Finance Leases For finance leases, the ROU asset is subsequently amortized using the straight-line method from the lease commencement date to the earlier of the end of its useful life or the end of the lease term unless the lease transfers ownership of the underlying asset to the Company or the Company is reasonably certain to exercise an option to purchase the underlying asset. In those cases, the ROU asset is amortized over the useful life of the underlying asset. Amortization of the ROU asset is included in depreciation and interest expense on the lease liability is included in interest expense. (m) Intangible assets: Intangible assets with finite useful lives are carried at cost less accumulated amortization and accumulated impairment losses. Amortization is recognized on a straight-line basis over the asset estimated useful lives. The estimated useful life and amortization method are reviewed at the end of each reporting period, with the effect of any changes in the estimate being accounted for on a prospective basis. The estimated useful lives of intangibles are: Asset Basis Patents and licenses 5 to 20 years Software 1 to 5 years Artificial Intelligence intellectual property 5 years (n) Impairment of long-lived assets: Long-lived assets, such as property, plant, and equipment and intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds its fair value. Fair value is determined through various valuation techniques, including discounted cash flow models, quoted market values or third-party independent appraisals. (o) Revenue recognition: The Company recognizes revenue from the following major sources: • Data processing services; • Sale of software licenses; and • Sale of renewable energy storage systems. (i) Data processing services: The Company sells data processing services to customers in the mineral, oil & gas and water exploration industries. The Company enters into contracts with customers with single and multiple deliverables or performance obligations. General payment terms are net 15 days. A performance obligation is a promise in a contract with a customer to transfer products or services that are distinct. Determining whether products or services are distinct performance obligations that should be accounted for separately, or combined as one unit of F-11 Table of Contents IVANHOE ELECTRIC INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated) accounting and the allocation of the transaction price to each distinct performance obligation may require significant judgment. For short term contracts with a single deliverable, the Company recognizes revenue at the point in time when it transfers control of a distinct performance obligation to a customer. Control transfers on the agreed upon deliverable being delivered to the customer, the customer accepting the deliverable and when the Company has not retained any significant risk of future obligations with respect to the service being provided. The Company enters into arrangements for the provision of long-term data processing services. Such services are recognized as a performance obligation satisfied over time. Revenue is recognized for these services based on the stage of completion of the contract using the most appropriate measure of progress towards complete satisfaction of the performance obligations. Payment for these services is in accordance with an agreed billing schedule and therefore either (i) a contract asset is recognized over the period in which the services are performed, representing the Company’s right to consideration for the services performed to date, or (ii) a contract liability is recognized until the corresponding services have been provided. (ii) Sale of software licenses: The Company enters into software license agreements where it provides the use of software to the customer. The Company recognizes revenue at the point in time that it satisfies its performance obligation by making the software available for download, meeting customer specific acceptance criteria, where applicable, and having reasonable certainty that the consideration will be received. Revenue is measured based on the consideration specified in a contract with a customer. (iii) Sale of energy storage systems: The Company designs, develops, and manufactures energy storage systems as products as well as energy storage solutions and operations & maintenance (“O&M”) services. Revenue is measured based on the consideration specified in a contract with a customer. The Company recognizes revenue when it satisfies a performance obligation by transferring a promised good or service to a customer. Energy storage systems as products are transferred at a point in time when the customer obtains control of the product, which is typically upon shipment, delivery, installation and commissioning, depending on the contract terms. Revenue is recognized for sales of battery storage solutions over time based on the estimated progress to completion using a cost-based input method. In applying the cost-based input method of revenue recognition, we use the actual costs incurred relative to the total estimated costs to determine progress towards contract completion and to calculate the corresponding amount of revenue and gross profit to recognize. The cost based input method of revenue recognition is considered a faithful depiction of efforts to satisfy energy storage solutions and therefore reflect the transfer of goods or services to a customer under such contracts. Costs incurred towards contract completion may include costs associated with direct materials, labor, subcontractors, and other indirect costs related to contract performance. The cost-based input method of revenue recognition requires the Company to make estimates of net contract revenues and costs to complete projects. O&M services are transferred over time when customers receive and consume the benefits provided by the Company’s performance under the terms of service arrangements. (p) Contingent liabilities: (i) Warranties: The Company provides maintenance on energy storage products during the warranty period, typically a fixed number of months agreed upon with the customer. Costs of warranty include the cost of labor, material and related overhead necessary to repair a product during the warranty period. The Company accrues for the estimated cost of the warranty on products shipped upon recognition of the sale of the product. The costs are estimated based on actual historical expenses incurred and on estimated future expenses related to current sales, and are updated each reporting period. F-12 Table of Contents IVANHOE ELECTRIC INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated) (ii) Asset retirement obligations: The Company recognizes asset retirement obligations arising from regulatory, contractual or other legal requirements to perform certain property and asset reclamation activities at the end of the respective asset life. Asset retirement obligations are recorded when environmental disturbance occurs, accompanied by a legal obligation to remediate. Asset retirement obligations, or increases therein, are initially measured at fair value and subsequently adjusted for accretion expense and changes in the amount or timing of the estimated cash flows. (q) Research and development costs: Expenditure on research and development activities is recognized as an expense in the period in which it is incurred. (r) Stock-based compensation: The Company recognizes employee stock-based compensation as an expense in the consolidated financial statements. Equity-classified awards are measured at the grant date fair value of the award. The fair value of stock options is determined using the Black-Scholes option valuation model using the grant date stock price, dividend yield, estimated amounts for volatility of the Company’s stock, the expected life of the awards and the risk-free interest rate. Compensation expense is recognized over the requisite service period for each separate tranche of the award. Forfeitures are accounted for as they occur. The fair value of stock-settled restricted stock units (“RSU’s”) and deferred share units (“DSU’s”) is based on the Company’s stock price on the date of grant. Shares of common stock are issued at the vesting date for stock-settled RSU’s and DSU’s. The fair value of stock-settled RSU’s and DSU’s is amortized over the vesting period and recognized as an expense in the consolidated financial statements. (s) Income taxes: Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company recognizes the effect of uncertain income tax positions if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest related to unrecognized tax benefits in interest expense and penalties, if any, in general and administrative expenses. Each reporting period, the Company reviews its deferred tax assets for the possibility they will not be realized. A valuation allowance will be recorded if it is more likely than not that a deferred tax asset will not be realized. (t) Fair value measurements: The Company uses valuation approaches that maximize the use of observable inputs and minimize the use of unobservable inputs, to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels (Note 21): • Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities accessible at the measurement date. • Level 2: Quoted prices in markets that are not active, quoted prices for similar assets or liabilities in active markets, quoted prices or inputs that are observable, either directly or indirectly, for substantially the full F-13 Table of Contents IVANHOE ELECTRIC INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated) term of the asset or liability, and model-based valuation techniques (e.g. the Black-Scholes model) for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities. • Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity). (u) Net loss per share: Basic and diluted loss per share attributable to common stockholders are computed by dividing the net loss available to common stockholders by the weighted-average number of common shares outstanding for the respective period presented. The diluted net loss per share attributable to common stockholders is computed by giving effect to all potential dilutive common stock equivalents outstanding for the period, except to the extent they are antidilutive. (v) Convertible debt: Upon the issuance of convertible debt, the Company evaluates embedded conversion features within convertible debt to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in the statement of consolidated and combined loss. If the conversion feature does not require derivative treatment, the instrument is evaluated for consideration of any beneficial conversion features or cash conversion features. The equity component, if any, is treated as a discount on the liability component of the convertible debt, which is amortized over the term of the convertible debt using the effective interest rate method. When it has been determined an instrument does not have an equity component, the Company may elect to account for the instrument at fair value with changes in fair value recorded in the statement of consolidated and combined loss, except with respect to changes in value caused by changes in the Company’s own credit risk. (w) Debt and equity issuance costs: Debt issuance costs directly related to a debt liability, including fees, commissions and legal expenses, are deferred and presented as a direct reduction from the carrying amount of the debt and amortized on an effective interest rate method over the term of the liability. Amortization of debt issuance costs is included in interest expense in the Company’s consolidated statement of loss. For debt where the Company has elected fair value accounting under ASC 825, debt issuance costs are expensed on recognition in the Company’s consolidated statement of net loss. Costs directly attributable to the issuance of equity in the Company are netted against the gross proceeds of the equity. F-14 Table of Contents IVANHOE ELECTRIC INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated) 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 estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Significant areas requiring the use of estimates are as follows (i) Useful lives of property, plant and equipment and finite life intangible assets: Changes in technology or the Company’s intended use of these assets, as well as changes in business prospects or economic and industry factors, may cause the estimated useful lives of these assets to change. (ii) Impairment indicators in equity securities: The recoverability of the carrying value of the Company’s investments in private equity securities, including those subject to significant influence, is dependent on the Company’s ability to sell the assets privately or the investees’ ability to publicly list the shares or generate profitable operations and pay dividends in the future, in each case in amounts that exceed the carrying value. Changes in the investees’ plans and value or the Company’s expectations related to the manner and timing of realizing the value of its equity investments, may result in changes in the recoverability of recorded amounts. (iii) Recoverability of deferred income tax assets: The Company has recognized significant valuation allowances against its deferred tax assets. The necessity for valuation allowances could be affected by changes in the Company’s estimates of future taxable income. In addition to the generation of future taxable income through the establishment of economic feasibility, development and operation of mines on the Company’s exploration assets, opportunities for future taxable income could arise through disposal of assets, or 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. (iv) Fair value of convertible notes: Certain convertible notes are carried in the statements of financial position at fair value, with changes in fair value reflected in the statement of loss and comprehensive loss. Fair values are estimated by reference to valuation techniques that may include inputs that are not based on observable market data. (v) Valuation of stock options: The fair value of stock options granted by the Company is estimated using the Black-Scholes pricing model. Inputs to the model that require management judgment include the options expected life and volatility . 4. Recently adopted accounting standards and recent accounting pronouncements: 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 was issued 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 on January 1, 2024 and currently does not expect any 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 was issued to clarify the guidance in Topic 820, F-15 Table of Contents IVANHOE ELECTRIC INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated) 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 currently does not expect any impact on the consolidated financial statements. In August 2023, the FASB issued ASU 2023-05 Business Combinations—Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement. The update was issued to address the accounting for contributions made to a joint venture, upon formation, in a joint venture’s separate financial statements. Upon formation, a joint venture will recognize and initially measure its assets and liabilities at fair value (with exceptions to fair value measurement that are consistent with the business combinations guidance). This update is effective prospectively for all joint venture formations with a formation date on or after January 1, 2025. In November 2023, the FASB issued ASU 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This update was issued to improve the disclosures about a public entity’s reportable segments by requiring disclosure of incremental segment information on an annual and interim basis. The Company is required to adopt ASU 2023-07 on January 1, 2024 and is currently evaluating the expected impact on the consolidated financial statements. In December 2023, the FASB issued ASU 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This update was issued to enhance the transparency and decision usefulness of income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The Company is required to adopt ASU 2023-09 on January 1, 2025 and is currently evaluating the expected impact on the consolidated financial statements. 5. Cash and cash equivalents: Of the total cash and cash equivalents at December 31, 2023 and 2022, $ 15.0 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 (Note 17). At December 31, 2023, the Company does no t have any cash equivalents in the form of redeemable short-term investments (December 31, 2022 - $ 2.3 million). 6. Investments subject to significant influence: The Company’s principal investment subject to significant influence is its investment in Ma'aden Ivanhoe Electric Exploration and Development Limited Company ("Ma'aden Joint Venture"). Others include its investments in Sama Resources Inc. (“Sama”), Sama Nickel Corporation (“SNC”), and Go2Lithium Inc. ("Go2Lithium"). The Company has elected to carry its investments in common shares of the publicly-traded companies subject to significant influence at fair value. F-16 Table of Contents IVANHOE ELECTRIC INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated) Equity Method Carried at fair value Ma'aden Joint Venture (Note a) SNC (Note c) Go2Lithium (Note d) Sama (Note b) SRQ Fjordland Total Balance at December 31, 2021 — 657 — 5,719 — 1,325 7,701 Investment — 3,973 — — — — 3,973 Change in fair value — — — ( 920 ) — ( 980 ) ( 1,900 ) Share of loss — ( 3,711 ) — — — — ( 3,711 ) Impairment — — — — — — — Foreign currency translation — ( 29 ) — — — ( 36 ) ( 65 ) Balance at December 31, 2022 — 890 — 4,799 — 309 5,998 Investment 66,013 2,668 1,310 — — — 69,991 Share of income (losses) ( 34,407 ) ( 2,665 ) 1,120 — — — ( 35,952 ) Receipt of shares upon spin-out — — — — 555 — 555 Change in fair value — — — ( 640 ) 739 — 99 Reclassification to other investments — — — — ( 1,294 ) ( 309 ) ( 1,603 ) Foreign currency translation — 3 39 — — — 42 Balance at December 31, 2023 $ 31,606 $ 896 $ 2,469 $ 4,159 $ — $ — $ 39,130 (a) Exploration Joint Venture with Ma'aden: On May 15, 2023, Ivanhoe Electric signed a Common Stock Subscription Agreement (the “Subscription Agreement”) with Ma’aden pursuant to the Heads of Terms entered on January 11, 2023. On July 6, 2023, the Company completed the closing of the Ma’aden Transactions and entered into an Investor Rights Agreement, a Shareholders’ Agreement and other instruments contemplated thereby. The Ma'aden Transactions included the establishment of a 50/50 exploration joint venture between Ma’aden and Ivanhoe Electric to explore approximately 48,500 km 2 of prospective land (“Ma’aden land”) in Saudi Arabia and a $ 127.1 million strategic investment by Ma'aden in Ivanhoe Electric common stock. Refer to Note 12 for further information with respect to the Ma’aden investment in Ivanhoe Electric common stock. In July 2023, Ivanhoe Electric contributed $ 66.0 million in cash into the Ma'aden Joint Venture. Ma’aden contributed access to Ma’aden land for the purpose of conducting exploration activities as a contribution for its 50 % shareholding in the joint venture. In addition, Ivanhoe Electric and the Ma'aden Joint Venture entered into a separate Typhoon™ equipment purchase agreement with I-Pulse Inc. ("I-Pulse") under which three Typhoon™ units shall be delivered in 2024 to the Joint Venture for an aggregate contract price of approximately $ 12.0 million. The exploration phase of the Ma'aden Joint Venture has an initial term of five years that may be extended for up to an additional five years subject to confirmation by both shareholders. The Shareholder’s Agreement shall terminate at the end of the exploration term if no land area with an economically viable resource has been identified (“Designated Project”). F-17 Table of Contents IVANHOE ELECTRIC INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated) In the event of termination of the shareholder’s agreement or upon conclusion of the exploration phase, the legal and beneficial title to each Typhoon™ unit shall immediately revert to Ivanhoe Electric and Ma’aden shall be entitled to withdraw the land access rights to the Ma’aden land (except concerning Designated Projects). The Ma'aden Joint Venture is managed by the Board of Directors of the joint venture with Ivanhoe Electric and Ma’aden each having the right to appoint three directors. Management has determined that the Ma'aden Joint Venture is subject to joint control and will account for the investment using the equity method of accounting. The Ma'aden Joint Venture has expensed the value of the land access rights of $ 66.0 million, in accordance with Ivanhoe Electric’s accounting policy for exploration and evaluation costs. Ivanhoe Electric has recognized its 50 % share of loss in the joint venture. At December 31, 2023 the Ma’aden Joint Venture owes the Company $ 1.3 million for costs that the Company incurred on behalf of the Ma’aden Joint Venture. (b) Sama: Sama is a mineral exploration company, listed on the TSX Venture Exchange, focused on exploring nickel — copper projects in Ivory Coast, West Africa. As at December 31, 2023, the Company owned 22.7 % (December 31, 2022 —  22.8 %) of the issued and outstanding common shares in Sama. (c) SNC: The Company has an earn-in agreement with Sama (Note 15), whereby the Company can earn up to a 60 % interest in SNC, a subsidiary of Sama that owns the Ivory Coast Project. As at December 31, 2023, the Company owned 30 % (December 31, 2022 - 30 %) of the issued and outstanding common shares in SNC. The Company accounts for its 30 % interest in SNC using the equity method. (d) Go2Lithium: On April 6, 2023, CGI and Clean TeQ Water Limited, entered into a shareholders agreement whereby both parties became founding and equal 50 % shareholders in Go2Lithium. Go2Lithium was formed for the purpose of financing, acquiring and/or joint venturing a portfolio of technologies to produce battery grade lithium salts from aqueous sources and to build extraction plants based on proprietary continuous ion-exchange direct lithium extraction technology. 7. Exploration properties: Santa Cruz (Note a) Tintic (Note b) San Matias (Note c) Pinaya (Note d) Other Total Balance at January 1, 2021 35,075 19,588 15,315 2,511 550 73,039 Acquisition costs 11,505 7,550 — — 350 19,405 De-recognition ( 5,700 ) — — — — ( 5,700 ) Foreign currency translation — — — 14 — 14 Balance at December 31, 2022 40,880 27,138 15,315 2,525 900 86,758 Acquisition costs 125,612 3,525 — — 400 129,537 Foreign currency translation — — — ( 5 ) — ( 5 ) Balance at December 31, 2023 $ 166,492 $ 30,663 $ 15,315 $ 2,520 $ 1,300 $ 216,290 (a) The Santa Cruz Project is a copper project near the city of Casa Grande in Arizona, USA. (i) Land acquisition: On May 10, 2023, Ivanhoe Electric signed a binding purchase and sale agreement for the acquisition of land at its Santa Cruz Project in Arizona. The acquisition closed on May 23, 2023 and totals 5,975 acres of surface title and associated water rights. F-18 Table of Contents IVANHOE ELECTRIC INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated) The total purchase price was $ 116.9 million, of which the Company paid a total of $ 34.3 million to the seller as of closing. The Company also issued a secured promissory note to the seller in the amount of $ 82.6 million (Note 10). The Company reports land and water rights associated with its exploration projects in exploration properties. Directly attributable acquisition costs of $ 2.2 million were capitalized on acquisition. (ii) Assignment agreement: On October 27, 2021, the Company entered into an agreement with Central Arizona Resources Ltd. (“CAR”), a private company, which included the acquisition of the option agreement CAR held over the Santa Cruz mineral title owned by DRH Energy Inc. (“DRHE”). The total consideration paid to CAR for the assignment of the option and surface access agreements to the Company was as follows: • $ 2.5 million paid in October 2021; • $ 2.5 million paid in April 2022; • $ 15.0 million and issuance of 945,626 shares of common stock of the Company upon completion of the Company’s IPO on June 30, 2022. (iii) Option agreement: The option agreement provides the Company with the right, but not the obligation, to acquire 100 % of the mineral title of the Santa Cruz Project by paying $ 27.9 million to DRHE over three years . As at December 31, 2023, $ 17.9 million in cash payments have been made, $ 17.4 million of which were capitalized as exploration mineral interests. The deadline to exercise the option is August 16, 2024, at which time the final $ 10.0 million payment becomes due. The payments are payable in cash or common stock of the Company at the discretion of DRHE. (iv) Terminated land purchase: In September 2022, the Company elected to terminate a transaction to acquire additional land adjacent to the Santa Cruz project and the associated mineral rights. Prior to termination of the agreement the Company had capitalized $ 5.7 million in non-refundable payments. These payments have been de-recognized and recorded as exploration expenses in the consolidated statement of loss (Note 14). (b) The Tintic project is a copper-gold-silver project in the Tintic District of Utah, USA. Pursuant to agreements entered into in 2017 and 2018, the Company obtained the right to explore the underlying assets and to acquire or optionally acquire specified mineral rights of the underlying assets by making scheduled payments. Payments under these agreements are capitalized as acquisition costs while costs associated with exploring the properties are expensed as exploration costs. In 2023, the Company made option payments of $ 3.5 million, which completed its purchase of 100 % of the assets included in the agreements. (c) The San Matias Project is Cordoba’s project in Colombia, which includes 100 % of the Alacran Deposit and satellite deposits at Montiel East, Montiel West and Costa Azul. On May 8, 2023, Cordoba closed a strategic arrangement with JCHX Mining Management Co., Ltd (“JCHX") to advance the Alacran Project in Colombia. Refer to Note 16 for further details regarding the strategic arrangement. (d) The Pinaya Project is 100 % indirectly owned by Kaizen and covers 101 square kilometers of granted title, 28 square kilometers under application and includes 10 kilometers of underexplored strike length in southeastern Peru. F-19 Table of Contents IVANHOE ELECTRIC INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated) 8. Other non-current assets: December 31, 2023 December 31, 2022 Deposit (Note a) $ 4,233 $ 7,128 Related party advances (Note 19) 1,169 1,987 Other 161 181 $ 5,563 $ 9,296 (a) The Company has a deposit relating to a contract to purchase additional Typhoon™ transmitters (Note 19). 9. Accounts payable and accrued liabilities: December 31, 2023 December 31, 2022 Trade accounts payable $ 12,859 $ 4,578 Accrued liabilities 3,481 6,666 Due to related parties 1,645 1,564 Other payables 1,963 1,135 $ 19,948 $ 13,943 10. Note payable: Note payable Balance at December 31, 2022 $ — Issuance 82,590 Finance expense 4,314 Payment ( 37,988 ) Balance at December 31, 2023 $ 48,916 Current portion 12,672 Non-current portion 36,244 Balance at December 31, 2023 $ 48,916 In connection with the land acquisition described in Note 7, the Company issued a secured promissory note in the 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, paid in November 2023; • four equal principal payments of $ 12.1 million on the first, second, third and fourth anniversaries of the November 2023 payment, plus applicable accrued interest. F-20 Table of Contents IVANHOE ELECTRIC INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated) 11. Convertible debt: Series 1 Convertible Notes (Note a) Series 2 Convertible Notes (Note a) VRB Convertible bond (Note b) Total Balance at December 31, 2021 $ 54,975 $ — $ 23,857 $ 78,832 Debt issuance — 86,200 — 86,200 Finance expense — — 2,061 2,061 Change in fair value 8,709 10,256 — 18,965 Conversion to common stock ( 63,684 ) ( 96,456 ) — ( 160,140 ) Balance at December 31, 2022 — — 25,918 25,918 Finance expense — — 2,454 2,454 Balance at December 31, 2023 $ — $ — $ 28,372 $ 28,372 (a) Ivanhoe Electric Convertible Notes: (i) 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 12). (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”). 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 12). 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. 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. F-21 Table of Contents IVANHOE ELECTRIC INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated) 12. Equity: (a) Common stock transactions: (i) Ma'aden Strategic Investment: On July 6, 2023 Ivanhoe Electric completed the closing of the Ma'aden transactions which included the issuance of 10.3 million shares of common stock, representing 9.9 % of common shares on completion of the Ma'aden transactions, at a purchase price of $ 12.38 per share for gross proceeds of $ 127.1 million. Directly attributable issuance costs of $ 3.5 million were incurred in conjunction with the strategic investment were recorded as a reduction in paid in capital. Ivanhoe Electric granted Ma’aden a top-up right allowing Ma’aden to maintain its 9.9 % ownership for up to eight years through the purchase of additional shares at a price per share paid in a recent equity financing. Ma’aden has agreed to a five-year standstill limiting its shareholding to a maximum of 19.9 %, subject to certain exceptions. Ma’aden was granted the right to appoint a nominee to the Ivanhoe Electric board of directors. (ii) Public offering and subscription agreement: On September 18, 2023, Ivanhoe Electric completed a public offering and issued 13.6 million shares of common stock at a price of $ 13.50 per share for gross proceeds of $ 184.0 million. Directly attributable issuance costs of $ 8.5 million were incurred in conjunction with the public offering were recorded as a reduction in paid in capital. On October 23, 2023 Ma’aden signed a subscription agreement, exercising their right to maintain 9.9 % ownership in the Company following the public offering. The Company issued 1.5 million shares of common stock to Ma’aden at a price of $ 13.50 per share for gross proceeds of $ 20.4 million. (iii) 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 $ 11.0 million incurred in conjunction with the IPO were recorded as a reduction in paid in capital. (iv) 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 were automatically converted to 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 note conversions was recorded at fair value based on the IPO price of $ 11.75 per share. (v) 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. At December 31, 2023, the Company is authorized to issue 700,000,000 shares of common stock, at $ 0.0001 par value. F-22 Table of Contents IVANHOE ELECTRIC INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated) (b) Stock-based compensation: Ivanhoe Electric, Kaizen, Cordoba, VRB and CGI have equity incentive plans and the stock-based compensation charged to operations was incurred by the Company as follows: Year ended December 31, 2023 2022 Ivanhoe Electric $ 20,028 $ 3,407 Kaizen 267 462 Cordoba 469 708 VRB 177 89 CGI 22 167 $ 20,963 $ 4,833 Option exercises at the subsidiary level, should they occur, will impact the Company’s non-controlling interest in the applicable subsidiary, not the Company’s share capital. Stock-based payment compensation was allocated to operations as follows: Year ended December 31, 2023 2022 Cost of sales $ 5 $ 161 Exploration expenses 3,277 1,643 Research and development expenses 11 — General and administrative expenses 17,670 3,029 $ 20,963 $ 4,833 The Company adopted a Long Term Incentive Plan (“LTIP”) on June 30, 2022. The LTIP provides for grants of stock options, stock awards, stock unit awards, and deferred stock unit awards. The Company’s employees, including employees who are directors, consultants and non-employee directors are eligible to receive awards under the LTIP. Stock options may not be granted with an exercise price less than the closing price of our common stock on the grant date. As of December 31, 2023, 4,563,142 shares were available for grant under the LTIP and no shares were available under other plans. (i) Stock options: Ivanhoe Electric granted stock options to certain officers and employees as follows: Grant Date Options granted Exercise price February 1, 2023 500,000 $ 13.23 March 1, 2023 100,000 $ 15.46 July 1, 2023 100,000 $ 13.04 August 9, 2023 200,000 $ 16.03 December 1, 2023 50,000 $ 11.75 November 21 - 29, 2022 2,760,509 $ 11.75 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. A summary of stock options outstanding and activity is presented below. F-23 Table of Contents IVANHOE ELECTRIC INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated) Number of options Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term (years) Aggregate Intrinsic Value Outstanding at January 1, 2022 4,483,322 $ 2.49 Granted 2,760,509 $ 11.75 Exercised ( 72,666 ) $ 2.49 Forfeited/expired ( 100,001 ) $ 2.49 Outstanding at December 31, 2022 7,071,164 $ 6.11 4.8 $ 42,745 Granted 950,000 $ 13.96 Exercised ( 1,379,526 ) $ 2.49 Forfeited/expired ( 442,701 ) $ 6.13 Outstanding at December 31, 2023 6,198,937 $ 8.11 4.5 $ 20,207 Vested and exercisable at December 31, 2022 2,164,812 $ 2.49 3.5 $ 20,912 Vested and exercisable at December 31, 2023 2,766,116 $ 5.51 3.6 $ 14,151 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 years ended December 31, 2023 and 2022 is presented below. 2023 2022 Weighted average assumptions used to value stock option awards: Fair value of common stock  $ 13.94 $ 9.98 Expected volatility 68.2 % 69.5 % Expected life of options (in years) 4 4 Expected dividend rate 0 % 0 % Risk-free interest rate 4.04 % 4.24 % Weighted average grant-date fair value (per option) $ 7.53 $ 5.08 At December 31, 2023 the Company had $ 9.1 million of total unrecognized compensation cost to be recognized in 2024 through 2026 in relation to stock options. (ii) Stock-settled RSU’s: On January 1, 2023, Ivanhoe Electric granted 750,000 stock-settled RSUs to an 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. On November 21, 2022 Ivanhoe Electric granted 750,000 stock-settled RSU’s to an executive of the Company. The RSU’s comprise three equal tranches vesting in one-third annual increments beginning one year from the grant date. The fair value of the stock-settled RSU’s is amortized over the vesting period. The total fair value of the November 21, 2022 RSU grant was $ 7.5 million. F-24 Table of Contents IVANHOE ELECTRIC INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated) A summary of outstanding stock-settled RSU’s as of December 31, 2023 and activity during the year then ended is presented below. Number of awards Weighted-Average Grant Date Fair Value Per Award Aggregate Intrinsic Value Outstanding at January 1, 2022 — $ — Granted 750,000 $ 9.98 Vested — $ — Forfeited — $ — Outstanding at December 31, 2022 750,000 $ 9.98 $ 9,113 Granted 750,000 $ 12.15 Vested ( 250,000 ) $ 9.98 Forfeited — $ — Outstanding at December 31, 2023 1,250,000 $ 9.98 $ 12,600 For the year ended December 31, 2023 the Company recognized $ 8.4 million in stock based compensation expense relating to the vesting of RSU’s. At December 31, 2023 the Company had $ 7.6 million of total unrecognized compensation cost to be recognized in 2024 through 2027 in relation to stock-settled RSU’s. 13. Revenue: The Company recognized revenue from the following sources: Year ended December 31, Revenue type 2023 2022 Software licensing (Note a) $ — $ 6,882 Data processing services 1,300 847 Energy storage systems (Note b) 2,603 711 Total $ 3,903 $ 8,440 (a) In January 2022, the Company received a one-time fee of $ 6.5 million with respect to a software licensing agreement whereby the Company provided software that can be used by the licensee in perpetuity. Upon receipt of payment, the performance obligations were met and the license fee revenue was recognized in accordance with the Company’s accounting policy. Software licensing revenue includes associated services included in the software license agreement. This revenue is included in the data processing segment. (b) At December 31, 2023, the Company had a contract liability of $ 2.4 million (2022 — $ 2.8 million) relating to the sale of energy storage systems. The Company has a significant customer that accounted for 10 % and 82 % of total sales for the years ended December 31, 2023 and 2022. F-25 Table of Contents IVANHOE ELECTRIC INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated) 14. Exploration expense: Year ended December 31, Project 2023 2022 Santa Cruz, USA (Note 7(a)) $ 57,203 $ 61,172 San Matias, Colombia (Cordoba) (Note 7(d)) 28,068 18,454 Tintic, USA (Note 7(b)) 13,131 2,282 Hog Heaven, USA (Note 15) 7,812 2,216 Lincoln, USA 3,684 1,312 White Hill, USA (Note 15) 1,451 — Carolina, USA (Note 15) 1,337 1,307 Pinaya, Peru (Kaizen) (Note 7(c)) 958 2,616 Project Generation and other 13,075 15,927 Total $ 126,719 $ 105,286 Exploration expense at the Santa Cruz Project for the year ended December 31, 2022 includes $ 5.7 million recorded upon the de-recognition of certain non-refundable payments made under a terminated land purchase agreement at the Santa Cruz Project (Note 7(a)). 15. Earn-in option agreements: The Company has entered into various joint venture earn-in agreements whereby it has an option to obtain ownership interests in project entities through a combination of payments to the owner and funding exploration and evaluation expenditures on the underlying exploration assets according to a specified timeframe, while determining whether it wishes to continue to invest to obtain a minority or majority interest. Under these agreements, the Company may obtain ownership rights to the underlying mineral interests through acquisition of the underlying rights or through obtaining control of the entity holding such rights. Project entities are generally considered variable interest entities prior to the Company acquiring an equity interest in the project entity (and thereafter in cases where the entity is financed through additional subordinated financial support such as shareholder debt). The Company has exercised judgment in determining that the activities that most significantly affect the project entity’s performance during the early exploration stage of the Company including the Company’s determination that its decision-making rights, which are practically limited to short-term discretionary exploration activity, are not the activities that most significantly affect the economic results of the project entities. The Company has determined that decisions that most significantly affect the economic results of a non-operating entity holding a single or primary exploration property without reserves include granting or amending exploration concessions and options as well as decisions related to the retention or abandonment of the associated mineral rights, none of which can be undertaken unilaterally by the Company. The table below shows the net carrying value of the Company’s assets in these entities, being the investment in the equity of the ultimate owner of the project (“Project Sponsor”) and the investment in the equity of the underlying project entity, respectively, as of December 31, 2023, which together represent the Company’s maximum exposure to loss on the underlying project as of December 31, 2023 as a result of the earn-in agreement and associated agreements. The Company has no liabilities on the balance sheet with respect to these entities. The Company has no minimum commitment to future expenditures in relation to these arrangements and has not issued guarantees on behalf of these entities. The table also presents certain information with respect to the earn-in option (cumulative expenditures to date, expenditures necessary to obtain an initial minority ownership right and expenditures required to achieve the maximum ownership interest available under the agreement). Exploration expenditures made in respect of these earn-in arrangements, which are at the discretion of the Company and therefore exceed contractual obligations, are presented in Note 14. The Company funds exploration expenditures in excess of contractual requirements for the purpose of evaluating and investing in option agreements. F-26 Table of Contents IVANHOE ELECTRIC INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated) Project Investment in Project Sponsor Net Carrying Value of Project Entity Cumulative Earn-In Expenditures and payments as of December 31, 2023 Ownership percentage of project entity at December 31, 2023 Expenditures Required to Achieve Maximum Ownership Interest Maximum Potential Ownership Ivory Coast Project $ 4,159 (1) $ — Cdn $ 24.4 million 30 % Cdn $ 25 million 60 % Hog Heaven $ 1,885 (2) $ — $ 12.0 million 0 % (3) $ 44.5 million 75 % Perseverance $ 274 (2) $ — Cdn $ 6.1 million 25 % Cdn $ 17.5 million 80 % Carolina $ — $ — $ 2.6 million 0 % (4) $ 26.0 million 85 % White Hill $ — $ — $ 1.4 million 0 % (5) $ 15.0 million 80 % _______________ (1) Included in investments subject to significant influence (Note 6). (2) Included in other investments. (3) The Company must incur $ 15.0 million in earn-in expenditures and make payments to the counterparty totalling $ 4.5 million to earn an initial 51 % interest in the Hog Heaven project. (4) The Company must incur $ 6.0 million in earn-in expenditures to earn an initial 51 % interest in the Carolina project. (5) The Company must incur $ 10.0 million in earn-in expenditures and make payments to the counterparty totalling $ 5.0 million to earn a 80 % interest in the White Hill project. The $ 5.0 million in payments due are $ 3.6 million in cash and $ 1.4 million in common stock of the Company. 16. Non-controlling interests investment in subsidiary: On May 8, 2023, Cordoba closed the $ 100 million strategic arrangement with JCHX Mining Management Co., Ltd (“JCHX") to advance the Alacran Project in Colombia. Upon closing, JCHX received a 50 % ownership interest in CMH Colombia S.A.S. (“CMH”), a Colombian company that 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. As of the closing of the transaction, $ 40 million was paid as a first installment. On January 4, 2024, Cordoba announced receipt of the second installment of $ 40 million that was 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, with $ 10 million of this amount paid in late December 2023 and the remaining $ 30 million settled in January 2024. A third and final installment of $ 20 million is receivable in cash upon the approval of the EIA, 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. In the event JCHX does not pay the third installment, JCHX’s and Cordoba’s ownership of CMH shares will be adjusted to 40 % and 60 %, respectively. The Company currently retains control over the relevant activities of CMH therefore continues to consolidate the entity. The Company measures its non-controlling interest and loss attributable to non-controlling shareholders on the basis of a hypothetical liquidation at book value. Upon closing, the Company recorded the difference between the consideration received and the carrying value of the interest given up of $ 18.0 million in additional paid in capital. F-27 Table of Contents IVANHOE ELECTRIC INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated) 17. Non-controlling interests: The Company held a controlling interest in several entities that are not wholly-owned. The associated non-controlling interests and portion of assets and liabilities represented by these subsidiaries are shown below. The assets and liabilities of these entities are not readily accessible by the Company for general corporate purposes as distribution may require the consent of other shareholders. Kaizen VRB Cordoba CGI Total Balance at January 1, 2022 1,072 ( 1,123 ) 6,004 ( 72 ) 5,881 Non-controlling interests share of (loss) income ( 617 ) ( 1,376 ) ( 8,536 ) 121 ( 10,408 ) Changes in non-controlling interests arising from changes in ownership interest — — 69 — 69 Other changes in non-controlling interests 68 28 437 ( 3 ) 530 Balance at December 31, 2022 523 ( 2,471 ) ( 2,026 ) 46 ( 3,928 ) Non-controlling interests share of (loss) income ( 259 ) ( 1,323 ) ( 15,196 ) 80 ( 16,698 ) Changes in non-controlling interests arising from changes in ownership interest — — 22,896 — 22,896 Other changes in non-controlling interests 52 11 ( 308 ) 5 ( 240 ) Balance at December 31, 2023 $ 316 $ ( 3,783 ) $ 5,366 $ 131 $ 2,030 Assets and liabilities belonging to the Company’s principal non-wholly owned subsidiaries as of December 31, 2023 are as follows: Kaizen VRB Cordoba CGI Total Ownership percentage at December 31, 2023: 82.5 % 90.0 % 62.8 % 94.3 % Total assets 3,875 16,612 20,970 5,460 46,917 Total liabilities 2,067 54,528 10,796 2,981 70,372 Net assets 1,808 ( 37,915 ) 10,174 2,478 ( 23,455 ) VRB’s liabilities as at December 31, 2023 include a loan payable to Ivanhoe Electric of $ 21.5 million. Each of the non-wholly owned subsidiaries do not have retained earnings as they carry an accumulated deficit. Net assets of non-wholly owned subsidiaries are restricted from being transferred to Ivanhoe Electric without the other shareholders’ consent. The Company and its wholly-owned subsidiaries do not guarantee the obligations of the non-wholly owned subsidiaries and, as such, the creditors of the non-wholly owned subsidiaries do not have recourse against the Company or its wholly owned subsidiaries. In addition, the Company is restricted from paying dividends from non-wholly owned subsidiaries without the other shareholders’ consent. During 2021, VRB raised capital through the issuance of convertible debt (Note 11(b)) resulting in VRB becoming a VIE. Except as disclosed above, the Company has not provided additional subordinated financial support to VRB as at December 31, 2023, although the Company is not precluded from doing so in the future. Ivanhoe Electric does not provide any guarantees or have any commitments to fund VRB. Other creditors of VRB do not have recourse against Ivanhoe Electric. Further information about VRB, including its impact on the Company’s loss from operations, is presented as the Energy Storage segment in Note 23. F-28 Table of Contents IVANHOE ELECTRIC INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated) 18. Income taxes: Total income tax provision / (benefit) for the years ended December 31, 2023 and 2022 are allocated as follows: Year ended December 31, 2023 2022 Income from continuing operations $ ( 584 ) $ 618 Equity, non-controlling interests investment in subsidiary 2,846 — Total income tax provision / (benefit) $ 2,262 $ 618 Major components of the Company’s income tax provision / (benefit) from continuing operations for the years ended December 31, 2023 and 2022 are as follows: Year ended December 31, 2023 2022 Current: U.S. Operations $ — $ — Foreign ( 380 ) 1,393 Total current income tax provision / (benefit) ( 380 ) 1,393 Deferred: U.S. Operations — — Foreign ( 204 ) ( 775 ) Total deferred income tax provision / (benefit) ( 204 ) ( 775 ) Total income tax provision / (benefit) $ ( 584 ) $ 618 Income (loss) from continuing operations before income taxes for the years ended December 31, 2023 and 2022 consists of the following: Year ended December 31, 2023 2022 U.S. Operations $ ( 124,083 ) $ ( 108,909 ) Foreign ( 92,576 ) ( 50,694 ) Total $ ( 216,659 ) $ ( 159,603 ) The annual income tax expense (benefit) attributable to income from continuing operations is different from the amount that would be provided by applying the statutory federal income tax rate to the Company’s pretax (loss) income. The reasons for the difference are: Year ended December 31, 2023 2022 U.S. Federal tax rate 21 % 21 % Expected income tax expense (benefit) at U.S. Federal tax rate $ ( 45,498 ) $ ( 33,517 ) Reconciling items: Difference between statutory and foreign tax rate ( 3,513 ) ( 763 ) Permanent differences 6,464 10,403 Change in valuation allowance 42,849 24,905 Other ( 886 ) ( 410 ) Income tax (recovery) expense $ ( 584 ) $ 618 F-29 Table of Contents IVANHOE ELECTRIC INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated) The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2023 and 2022 are presented below. As at December 31, 2023 2022 Deferred tax assets: Exploration mineral interest 41,572 27,840 Net operating losses 59,324 37,730 Equity method investment in joint venture 8,602 — Foreign capital losses 5,470 4,012 Capital loss carry-forward 1,282 1,282 Other 1,341 319 Total gross deferred tax assets 117,591 71,183 Less: valuation allowance ( 117,154 ) ( 71,063 ) Net deferred tax assets 437 120 Deferred tax liabilities: Exploration mineral interest ( 4,671 ) ( 3,686 ) Other ( 611 ) ( 322 ) Total gross deferred tax liabilities ( 5,282 ) ( 4,008 ) Net deferred tax liability $ ( 4,845 ) $ ( 3,888 ) The Company evaluated the positive and negative evidence available to determine the amount of valuation allowance required on its deferred tax assets. Due to the early stage of exploration, the Company has recognized a valuation allowance against deferred income tax assets in excess of those supported by the reversal of taxable temporary differences. As of December 31, 2023, a $ 117.2 million valuation allowance has been provided. The changes in the valuation allowance for the years ended December 31, 2023 and 2022 are as follows: As at December 31, 2023 2022 Balance, beginning of year $ ( 71,063 ) $ ( 45,619 ) (Increase) due to foreign currency translation ( 5,704 ) ( 614 ) (Increase) related to non-utilization of deferred tax assets due to uncertainty of recovery and (increase) related to non-utilization of net operating loss carryforwards ( 42,485 ) ( 24,905 ) Decrease related to utilization and expiration of deferred tax assets, other 2,098 75 Balance, end of year $ ( 117,154 ) $ ( 71,063 ) As of December 31, 2023, the Company has the following net operating loss carryforwards for income tax purposes: Country Losses Expiry U.S.A. $ 173,675 2036 to 2043 Canada 48,179 2029 to 2043 China 31,825 2026 to 2033 Colombia 6,030 2029 to 2034 Peru 123 Indefinite Singapore 4,222 Indefinite The Company’s utilization of U.S. net operating loss carryforwards may be subject to annual limitations if there is a change in control as defined under Internal Revenue Code Section 382. As of December 31, 2023, no change in control has occurred in the Ivanhoe Electric group. F-30 Table of Contents IVANHOE ELECTRIC INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated) The Company file’s income tax returns in the U.S. federal jurisdiction, various U.S. state and foreign jurisdictions. The Company had no unrecognized income tax benefits as of December 31, 2023 or 2022. Due to the net operating loss carryover position coupled with the lack of any unrecognized tax benefits, the Company has not provided for any interest or penalties associated with any uncertain tax positions. If interest and penalties were to be assessed, the Company would charge interest to interest expense, and penalties to general and administrative expense. It is not anticipated that there will be any significant changes to unrecognized tax benefits within the next 12 months. The Company has not recognized a deferred tax liability related to its investments in foreign subsidiaries that are essentially permanent in duration. It is not practicable to estimate the amount of deferred tax liability related to investments in these foreign subsidiaries. 19. 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 certain significant related parties. Balance outstanding as at December 31, Transactions for the year ended December 31, 2023 2022 2023 2022 Total Expenses Global Mining (Note a) 224 1,383 13,471 13,372 Ivanhoe Capital Aviation (Note b) — 83 1,000 1,000 I-Pulse (Note c) 1,395 — 3,107 213 Total 1,619 1,466 17,578 14,585 Advances Global Mining (Note a) 1,169 1,987 — — Ma'aden Joint Venture (Note 6(a)) 1,254 — — — Deposit I-Pulse (Note c) 4,233 7,128 — — Loan JCHX Mining Management Co., Ltd (Note d) 4,000 10,010 — — Transactions for the year ended December 31, 2023 2022 Expense classification General and administrative expenses 7,469 6,232 Exploration expenses 8,231 8,353 Research and development expenses 1,878 — 17,578 14,585 (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 December 31, 2023. F-31 Table of Contents IVANHOE ELECTRIC INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated) (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 is a 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 maintenance costs of $ 1.7 million. The Company is recognizing the research and development costs and annual maintenance costs on a straight line basis in the consolidated statement of loss over the applicable term. 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. In December 2023, the Company received the first Typhoon™ transmitter that was deliverable under the agreement. (d) JCHX held 19.8 % of Cordoba’s issued and outstanding common stock as at December 31, 2023 (December 31, 2022 - 19.9 %). In November 2023, $ 4 million was advanced to Cordoba by JCHX. The loan bears simple interest at 12 % per annum and is payable on its maturity date, which is the earlier of twelve months after the date of the loan agreement, and the date the second installment of $ 40 million becomes payable by JCHX under the strategic arrangement described in Note 16. In January 2024, the $ 4 million loan was settled in full by applying it towards the second installment as a payment in kind. In December 2022, JCHX advanced a bridge loan of $ 10 million to Cordoba. The bridge loan was for an 18 -month term and bore 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 strategic arrangement described in Note 16 all of the principal and interest outstanding on the bridge loan was applied towards that transaction’s first installment as a payment in kind. 20. Net loss per share: Basic and diluted net loss per share attributable to common stockholders was calculated as follows: Year ended December 31, 2023 2022 Net loss attributable to common stockholders or parent $ 199,377 $ 149,813 Weighted-average number of shares outstanding Basic and diluted 102,491,529 78,527,539 Basic and diluted net loss per share $ 1.95 $ 1.91 For purposes of this calculation, convertible debt, and options to purchase common stock are considered common stock equivalents but have been excluded from the calculation of diluted net loss per share attributable to common stockholders as their effect is antidilutive. The amount of antidilutive shares excluded from the calculation as at December 31, 2023 was $ 7.5 million (December 31, 2022 - $ 7.9 million). F-32 Table of Contents IVANHOE ELECTRIC INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated) 21. 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: December 31, 2023 December 31, 2022 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Financial assets: Investments subject to significant influence 4,159 — — 5,108 — — Other investments 2,239 750 — 2,220 — — Total financial assets $ 6,398 $ 750 $ — $ 7,328 $ — $ — Financial liabilities: Total financial liabilities $ — $ — $ — $ — $ — $ — On June 30, 2022 the Ivanhoe Electric Series 1 and Series 2 Convertible Notes were converted into common stock of the Company (Note 11(a)) and the deferred consideration payable was settled (Note 7). The following table provides a summary of the changes of the Company’s Level 3 assets and liabilities that are not disclosed elsewhere. Deferred consideration payable Balance at December 31, 2021 $ 26,562 Changes in fair value 2,049 Settlement ( 28,611 ) Balance at December 31, 2022 — Changes in fair value — Settlement — Balance at December 31, 2023 $ — 22. Financial risk management: The Company is exposed in varying degrees to credit risk through its use of financial instruments. The Company’s principal financial assets are cash and cash equivalents and accounts receivable. The Company’s credit risk is primarily attributable to its accounts receivable. The Company’s maximum exposure to credit risk is approximately $ 3.3 million. The Company regularly reviews its receivables and the economic conditions to determine whether an allowance for expected losses is necessary. Cash at bank is held with credit worthy financial institutions. The Company has no significant concentration of credit risk other than its accounts receivable and the Company’s credit risk has not changed significantly during the years ended December 31, 2023 and 2022. 23. Segment reporting: The Company’s President & Chief Executive Officer 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. F-33 Table of Contents IVANHOE ELECTRIC INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated) The data processing segment provides data analytics, geophysical modeling 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: As at and for the year ended December 31, 2023 Critical Metals Data Processing Energy Storage Total Revenue $ — $ 1,300 $ 2,603 $ 3,903 Intersegment revenues — 100 — 100 Loss from operations 169,467 1,363 9,572 180,402 Depreciation and amortization 1,062 995 583 2,640 Segment assets 465,154 5,460 16,612 487,226 Expenditures for segment assets 81,954 — 131 82,085 Investments subject to significant influence 36,661 2,469 — 39,130 As at and for the year ended December 31, 2022 Critical Metals Data Processing Energy Storage Total Revenue $ — $ 7,729 $ 711 $ 8,440 Intersegment revenues — 323 — 323 Loss (income) from operations 124,932 ( 3,090 ) 10,323 132,165 Depreciation and amortization 814 2,868 529 4,211 Segment Assets 238,521 5,322 16,643 260,486 Expenditures for segment assets 43,721 6 684 44,411 Investments subject to significant influence 5,998 — — 5,998 The following tables illustrate the geographic makeup of the Company’s revenues and long-lived assets. Year ended December 31, Revenue 2023 2022 Canada $ 1,300 $ 7,729 China 2,603 711 Total $ 3,903 $ 8,440 Revenues are attributed to countries based on the location in which the sale originated. As at December 31, Long-lived assets 2023 2022 U.S.A $ 196,767 $ 69,655 Colombia 19,456 15,022 Peru 2,555 2,571 China 983 1,545 Other 1,467 191 Total $ 221,228 $ 88,984 Long-lived assets comprise the Company’s exploration mineral interests (excluding a mineral royalty) and property, plant and equipment. F-34 Table of Contents IVANHOE ELECTRIC INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated) Long-lived assets reconcile to segment assets and the balance sheet as follows: As at December 31, 2023 2022 Total long-lived assets $ 221,228 $ 88,984 Total current assets 216,486 151,031 Mineral royalty 1,707 1,708 Investments subject to significant influence 39,130 5,998 Other investments 2,989 2,220 Intangible assets 123 1,249 Other non-current assets 5,563 9,296 Total assets and segment assets $ 487,226 $ 260,486 24. Commitments and contingencies: The Company has entered into a contractual arrangement to purchase six Typhoon™ transmitters from I-Pulse (Note 19). 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 the Company, are believed to, either individually or taken together, have a material adverse effect on the Company’s business, financial condition or results of operations. 25. Subsequent events: On February 6, 2024, Ivanhoe Electric acquired all of the issued and outstanding common shares of Kaizen not already beneficially owned by Ivanhoe Electric pursuant to a plan of arrangement under the Business Corporations Act (British Columbia) (the “Arrangement”). Immediately prior to the closing of the Arrangement, Ivanhoe Electric beneficially owned 54,428,971 common shares of Kaizen, representing 82.54 % of the issued and outstanding common shares on a non-diluted basis. Following the closing of the Arrangement, Ivanhoe Electric beneficially owns 69,229,659 Common Shares, representing 100 % of the issued and outstanding common shares on a fully diluted basis. Ivanhoe Electric acquired the common shares in consideration for the issuance of one share of common stock of Ivanhoe Electric for every 127 Common Shares issued and outstanding immediately prior to the closing of the Arrangement. A total of 116,413 shares of Ivanhoe Electric were issued. Kaizen was delisted from the TSX Venture Exchange on February 7, 2024. F-35 Table of Contents Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosures None