Ivanhoe Electric Inc. 10-Q

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations You should read the following discussion and analysis of our financial condition and results of operations together with the condensed interim consolidated financial statements and related notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q (this “Quarterly Report”) and with our audited consolidated financial statements and the related notes for the fiscal year ended December 31, 2024 included in Part II of our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the Securities and Exchange Commission (the “SEC”) on February 27, 2025 (the “2024 Form 10-K”). S pecial Note Regarding Forward-Looking Statements This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended, (the "Exchange Act"), that involve risks and uncertainties, including statements based on our current expectations, assumptions, estimates and projections about future events, our business, our financial condition, results of operations and prospects, our industry and the regulatory environment in which we operate. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. Those statements include, but are not limited to, statements with respect to: estimated calculations of mineral reserves and resources at our properties including changes in those estimated calculations, anticipated results and timing of exploration activities, timing of studies for advancing or developing our properties, plans and objectives, industry trends, our requirements for additional capital, treatment under applicable government regimes for permitting or attaining approvals, government regulation, environmental risks, title disputes or claims, synergies of potential future acquisitions, the projected, forecast or anticipated economic parameters of our mineral projects (including capital cost, operating cost, net present value, internal rate of return and other parameters), and our anticipated uses of the net proceeds from offerings of our securities or other fundraising activities. In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “could,” “should,” “would,” “achieve,” “budget,” “scheduled,” “forecasts,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue,” the negative of these terms and other comparable terminology. These forward-looking statements may include projections of our future financial performance, the development of our mineral properties, our anticipated growth strategies and anticipated trends in our industry. All forward-looking statements speak only as of the date on which they are made. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions concerning future events that are difficult to predict. Therefore, actual future events or results may differ materially from these statements. We believe that the factors that could cause our actual results to differ materially from those expressed or implied by forward-looking statements include the following: most of our mineral projects are at the exploration stage and are subject to the significant risks and uncertainties associated with mineral exploration; our Santa Cruz Copper Project, is subject to significant risks associated with mine construction and commissioning, including possible delays, cost overruns, and unanticipated technical problems in addition to the need to obtain all required permits and necessary funding; the Preliminary Feasibility Study (the "PFS") for our Santa Cruz Copper Project includes estimates and assumptions to project potential economic viability and actual economic outcomes may vary greatly from those set forth in the PFS; other than at the Santa Cruz Copper Project and at the Alacrán Project which our subsidiary has agreed to sell; we have a limited operating history on which to base an evaluation of our business and prospects; we depend on our material projects for our future operations; our mineral resource and reserve calculations and economic projections relating to our properties are only estimates; actual capital costs, operating costs, production and economic returns at any future mine may differ significantly from those we have anticipated or projected; the title to some of the mineral properties may be uncertain or defective; our business is subject to changes in the prices of copper, gold, silver, nickel, cobalt, vanadium and platinum group metals; we have claims and legal proceedings against one of our subsidiaries; our business is subject to significant risk and hazards associated with future mining operations; we may fail to identify attractive acquisition candidates or joint ventures with strategic partners or be unable to successfully integrate acquired mineral properties; we may fail to successfully manage joint ventures and are reliant on our joint venture partners to comply with their obligations; our business is extensively regulated by the United States and foreign governments as well as local governments; the requirements that we obtain, maintain and renew environmental, construction and mining permits are often a costly and time-consuming process; changes in U.S. tariff policy including any tariff on copper imports and other goods used in our operations, may adversely affect the costs that we incur; our non-U.S. operations are subject to additional political, economic and other uncertainties not generally associated with domestic operations; and our activities may be hindered, delayed or have to cease as a result of climate change effects, including increased and excessive heating, the potential for forest fires at many of our properties; our ability to establish a United States-based vanadium redox battery business and the satisfaction of closing conditions for Cordoba Minerals Corp's ("Cordoba") disposition of its interest in the Alacrán Project. 16 You should carefully consider these risks, as well as the additional risks described in other documents we file with the SEC. We also operate in a very competitive and rapidly changing industry. New risks emerge from time to time and it is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in, or implied by, any forward-looking statements. These factors should not be construed as exhaustive and should be read in conjunction with the risks described under the heading “Risk Factors” in our 2024 Form 10-K. Important factors that could cause actual results to differ materially from our expectations, or cautionary statements, are disclosed under “Risk Factors” in the 2024 Form 10-K. These risks and uncertainties, as well as other risks of which we are not aware or which we currently do not believe to be material, may cause our actual future results to be materially different than those expressed in our forward-looking statements. We caution you not to place undue reliance on these forward-looking statements. We do not undertake any obligation to make any revisions to these forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events, except as required by law. Business Overview We are a United States domiciled minerals exploration company with a focus on developing mines from mineral deposits principally located in the United States. We seek to support American supply chain independence by finding and delivering copper and other critical metals vital to advanced manufacturing, infrastructure development, technology, and national security. We use our powerful Typhoon™ geophysical surveying system, together with advanced data analytics provided by our 94.3% owned subsidiary, Computational Geosciences Inc. (“CGI”), to accelerate and de-risk the mineral exploration process as we seek to discover new deposits of critical metals that may otherwise be undetectable by traditional exploration technologies. We believe the United States is significantly underexplored and has the potential to yield major new discoveries of critical metals. Our mineral exploration efforts focus on copper as well as other metals including nickel, cobalt, platinum group elements, gold and silver. Through the advancement of our portfolio of critical metals exploration projects, headlined by the Santa Cruz Copper Project in Arizona we intend to contribute to domestic supply by developing resources that support industrial and strategic sectors. We also operate a 50/50 joint venture with Saudi Arabian Mining Company ("Maaden") to explore for minerals on ~48,500 km 2 of underexplored Arabian Shield in Saudi Arabia. Finally, in 2024, we established an exploration alliance with BHP Mineral Resources Inc. (“BHP”), a subsidiary of BHP Group Limited, to search for critical minerals in the United States. In addition to our mineral projects, we also own a 90.0% controlling interest in VRB Energy Inc. (“VRB”) which itself owns 100% of VRB Energy USA Inc. ("VRB USA"), an Arizona-based developer of advanced grid-scale energy storage systems utilizing vanadium redox flow batteries for integration with renewable power sources. VRB also has a 49% interest in VRB China which is a joint venture with a subsidiary of privately held Shanxi Red Sun Co., Ltd. VRB China manufactures, develops and sells vanadium redox flow batteries for Asian, African and Middle Eastern markets. Our other mineral projects in the United States include the Tintic Project, located in Utah, and the Hog Heaven Copper-Silver-Gold Project, located in Montana. We also hold a portfolio of exploration projects in the western United States, including projects in Arizona, Nevada, New Mexico and Montana. References to our mineral projects refers to our interests in such projects which may be a direct ownership interest in mineral titles (including through subsidiary entities), a right to acquire mineral titles through an earn-in or option agreement, or, in the case of our investments in publicly listed companies in Canada, through our ownership of the equity of those companies that have an interest in such mineral projects. Our shares of common stock are listed on the NYSE American and the TSX under the ticker symbol “IE”. Business Developments in the Quarter Santa Cruz Copper Project On June 23, 2025, we announced the completion of the Preliminary Feasibility Study (the "PFS") for the Santa Cruz Copper Project in Arizona. The PFS confirmed the economic viability of an underground copper mining operation combined with a heap leach processing facility utilizing modern technologies and designed to produce copper cathode for delivery to U.S. customers. Situated entirely on private land in Arizona, the Santa Cruz Copper Project integrates underground mining with chloride-assisted heap leaching to produce copper cathode on site, eliminating the need for smelting, tailings storage, and 17 transportation and refining of concentrates. This integrated approach significantly reduces the project's overall carbon intensity. The project has been designed as a phased approach to responsibly meet the growing demand for copper in the United States. The Santa Cruz Copper Project features a compact site layout, advanced water management tailored for arid conditions, and plans to use paste backfill made from spent ore to minimize waste and enhance ground stability. The findings of the PFS include that the Santa Cruz Copper Project is projected to produce 1.4 million tonnes of copper cathode over a 23-year mine life. With a base case copper price of $4.25/lb, the Santa Cruz Copper Project has an after-tax Net Present Value of $1.4 billion at an 8% discount rate and an Internal Rate of Return (IRR) of 20%. The initial project capital is estimated at $1.24 billion. The PFS, prepared in accordance with United States securities laws, provides key engineering analyses to support long-term project financing. Efforts to secure financing are already underway, and we are exploring multiple funding avenues, including support from United States government agencies, commercial lending institutions, and potential strategic partners at the asset level. Cordoba Minerals Corp. ("Cordoba") On May 8, 2025, our subsidiary, Cordoba entered into an agreement with JCHX Mining Management Co., Ltd. ("JCHX") to sell Cordoba's remaining 50% interest in the Alacrán Copper Project, related exploration properties, and certain intercompany receivables, for consideration of up to $128 million, consisting of: • $88 million in cash on closing; • $12 million in a deferred payment, to be paid within fifteen business days after the earlier of the commencement of commercial production as defined in the Agreement, or the third anniversary of the closing date; and • a contingent payment if the average daily London Metal Exchange spot copper price during the first twelve months of commercial production is greater than $12,000 per tonne, consisting of $8 million if the price is between $12,000 and $13,000 per tonne, and $28 million if the price is over $13,000 per tonne. JCHX acquired its first 50% of the Alacrán Copper Project in May 2023. The closing of the sale is subject to the Environmental Impact Assessment for the Alacrán Copper Project being approved by the Autoridad Nacional de Licencias Ambientales (the environmental regulator in Colombia), as well as customary conditions, including, without limitation, the entering into of certain ancillary agreements, conditional approval of the TSX Venture Exchange (“TSXV”), which has been received, and Cordoba shareholder approval by 2/3rds of those shareholders that vote at a special meeting of shareholders. Segments We account for our business in four business segments – (i) Santa Cruz Copper Project (ii) critical metals, (iii) data processing services and (iv) energy storage. Significant Components of Results of Operations Revenue, Cost of Sales and Gross Profit We have not generated any revenue from our mineral projects because they are in the exploration stage. We generate some revenue from our technology business, CGI, which is included in the data processing business segment. CGI generates revenue from the sale of data processing services to the mining and oil and gas industries. In prior years, CGI has also generated revenue from software licensing. Exploration Expenses Exploration expenses include topographical, geological, geochemical and geophysical studies, exploratory drilling, trenching, sampling and activities in relation to identifying a Mineral Resource and then evaluating the technical feasibility and commercial viability of extracting the Mineral Resource, as well as value-added taxes in relation to these direct exploration and evaluation costs incurred in foreign jurisdictions where recoverability of those taxes is uncertain. Exploration expenses also include salaries, benefits and non-cash stock-based compensation expenses of the employees performing these activities. 18 Exploration expenses also include payments under earn-in and option agreements where the option right is with respect to ownership interests in legal entities owning the underlying mineral project in the exploration project phase. Through our earn-in and option agreements, we have the right (and in some cases, the obligation) to fund and conduct exploration on the underlying mineral project prior to determining whether to acquire a minority or majority ownership interest through further funding the costs of such exploration and, in some cases, through direct payments to the owners of the project. In the event we cease making expenditures on an exploration mineral project or fail to incur the agreed level of exploration expenditures, we will not obtain an ownership right beyond any that may have been acquired as of the date of termination. Included in exploration expenses are early stage projects and exploration costs that we incur in relation to generating new projects that may or may not proceed to earn-in agreements depending on our evaluation. These are categorized as “Project generation and other”. General and Administrative Expenses Our general and administrative expenses consist of salaries and benefits, stock-based compensation, professional and consultant fees, insurance and other general administration costs. Three Months Ended June 30, 2025 Compared to the Three Months Ended June 30, 2024 For the three months ended June 30, 2025 we recorded a net loss attributable to common stockholders of $23.9 million ($0.18 per share), compared to $46.8 million ($0.39 per share) for the three months ended June 30, 2024, which was a decrease of $22.9 million. Significant contributors to this decrease for the three months ended June 30, 2025 included a decrease of $23.2 million in exploration expenditures, a decrease of $1.0 million in general and administrative expenses offset by an increase of $0.8 million in interest expense and an increase in impairment expense of a non-core exploration property of $2.6 million compared to the three months ended June 30, 2024. Exploration expenses were $14.1 million for the three months ended June 30, 2025, a decrease of $23.2 million from $37.3 million for the three months ended June 30, 2024. Exploration expenses consisted of the following: Three months ended June 30, (In thousands) 2025 2024 Exploration Expenses: Santa Cruz, USA $ 5,425 $ 20,478 Alacrán Project (Cordoba) 4,355 3,236 Hog Heaven, USA 394 2,530 Tintic, USA 474 3,681 Project generation and other 3,430 7,329 Total $ 14,078 $ 37,254 During the three months ended June 30, 2025, exploration expenditures largely focused on activities at: • the Santa Cruz Copper Project where $5.4 million of expenditure was incurred in the three months ended June 30, 2025 compared to $20.5 million incurred in the three months ended June 30, 2024. Activities during the three months ended June 30, 2025 at the Santa Cruz Copper Project were focused on the technical engineering studies required to support the PFS that was released on June 23, 2025. The exploration expenditures incurred in the three months ended June 30, 2024 were significantly higher due to the activities being focused on infill resource drilling, geotechnical, hydrological, and metallurgical drilling to obtain data for the technical studies; and • the Alacrán Project where $4.4 million of expenditure was incurred by Cordoba for the three months ended June 30, 2025 focused on consultation associated with the Environmental Impact Assessment process. General and administrative expenses were $9.7 million for the three months ended June 30, 2025, a decrease of $1.0 million from $10.7 million for the three months ended June 30, 2024. Contributing to the decrease was a $0.6 million decrease in administration expenditures at VRB for the three months ended June 30, 2025 compared to the three months ended June 30, 2024 as a result of 2024 including general and administration costs related to VRB China which was deconsolidated in October 2024 and therefore there is no similar amount for three months ended June 30, 2025. We also had a $0.2 million decrease in directors and officers insurance expenses from $1.0 million for the three months ended June 30, 2024 compared to $0.8 million for three months ended June 30, 2025 due to a decrease in premiums. Also contributing 19 to this decrease was that the three months ended June 30, 2024 included $0.2 million related to corporate administration costs for Kaizen Discovery that was acquired by us in 2024 and there were no similar expenditures in 2025. Net interest expense was $1.2 million for the three months ended June 30, 2025, an increase of $0.8 million from $0.4 million for the three months ended June 30, 2024. The increase in net interest expense was largely due to $0.8 million less interest income received as the average cash balances in the three months ended June 30, 2025 were lower than the same period in 2024. CGI’s software licensing and data processing services to the mining and oil and gas industries represented 100% of our revenue for the three months ended June 30, 2025 ($1.1 million) and 100% for the three months ended June 30, 2024 ($0.5 million). VRB did not generate revenue during these periods. Three Months Ended June 30, 2025 Three Months Ended June 30, 2024 Percentage Change (In thousands) Software licensing and data processing services: Revenue $ 1,068 $ 538 98 % Cost of sales (294) (192) 53 % Gross profit $ 774 $ 346 123 % CGI’s revenue for the three months ended June 30, 2025 was $1.1 million, an increase of $0.5 million from $0.5 million for the three months ended June 30, 2024. The increase in CGI’s revenue was a result of more data processing services being performed. CGI’s gross profit for the three months ended June 30, 2025 was $0.8 million, an increase of $0.4 million from $0.3 million for the three months ended June 30, 2024. The percentage increase in CGI's gross profit was consistent with the increase in revenue. Six Months Ended June 30, 2025 Compared to the Six Months Ended June 30, 2024 For the six months ended June 30, 2025 we recorded a net loss attributable to common stockholders of $54.4 million ($0.42 per share), compared to $102.3 million ($0.85 per share) for the six months ended June 30, 2024, which was a decrease of $47.9 million. Significant contributors to this decrease for the six months ended June 30, 2025 included a decrease of $51.0 million in exploration expenditures, a decrease of $2.0 million in general and administrative expenses offset by an increase of $2.8 million in the share of loss of equity method investees, an increase of $2.4 million in interest expense and increase in impairment expense of a non-core exploration property of $2.6 million compared to the six months ended June 30, 2024. Exploration expenses were $29.9 million for the six months ended June 30, 2025, a decrease of $51.0 million from $80.9 million for the six months ended June 30, 2024. Exploration expenses consisted of the following: Six months ended June 30, (In thousands) 2025 2024 Exploration Expenses: Santa Cruz, USA $ 11,929 $ 48,315 Alacrán Project (Cordoba) 7,691 6,754 Hog Heaven, USA 1,267 5,837 Tintic, USA 1,185 7,201 Project generation and other 7,791 12,790 Total $ 29,863 $ 80,897 During the six months ended June 30, 2025, exploration expenditures largely focused on activities at: • the Santa Cruz Copper Project where $11.9 million of expenditure was incurred in the six months ended June 30, 2025 compared to $48.3 million incurred in the six months ended June 30, 2024. Activities during the six months ended June 30, 2025 at the Santa Cruz Copper Project were focused on the technical engineering studies required to support the PFS that was released on June 23, 2025. The exploration expenditures incurred in the six months 20 ended June 30, 2024 were significantly higher due to the activities being focused on infill resource drilling, geotechnical, hydrological, and metallurgical drilling to obtain data for the technical studies; and • the Alacrán Project where $7.7 million of expenditure was incurred by Cordoba for the six months ended June 30, 2025 focused on consultation associated with the Environmental Impact Assessment process. General and administrative expenses were $21.3 million for the six months ended June 30, 2025, a decrease of $2.0 million from $23.3 million for the six months ended June 30, 2024. Contributing to the decrease was a $1.0 million decrease in administration expenditures at VRB for the six months ended June 30, 2025 compared to the six months ended June 30, 2024 as a result of 2024 including general and administration costs related to VRB China which was deconsolidated in October 2024 and therefore there is no similar amount for six months ended June 30, 2025. We also had a $0.4 million decrease in directors and officers' insurance expenses from $2.1 million for the six months ended June 30, 2024 compared to $1.6 million for six months ended June 30, 2025 due to a decrease in premiums. Also contributing to this decrease was that the six months ended June 30, 2024 included $0.5 million related to corporate administration costs for Kaizen Discovery that was acquired by us in 2024 and there were no similar expenditures in 2025. Share of loss of equity method investees was $7.2 million for the six months ended June 30, 2025, an increase of $2.8 million from $4.5 million for the six months ended June 30, 2024. The increase in loss was largely due to a $3.4 million increase in our share of the loss from the Maaden Joint Venture which was $6.6 million for the six months ended June 30, 2025 compared to our $3.2 million for the six months ended June 30, 2024. In addition, for the six months ended June 30, 2025 we incurred a $0.7 million share of loss from the VRB China Joint Venture which was formed in October 2024. Net interest expense was $2.7 million for the six months ended June 30, 2025, an increase of $2.4 million from $0.4 million for the six months ended June 30, 2024. The increase in net interest expense was largely due to $2.4 million less interest income received as the average cash balances in the six months ended June 30, 2025 were lower than the same period in 2024. CGI’s software licensing and data processing services to the mining and oil and gas industries represented 100% of our revenue for the six months ended June 30, 2025 ($1.8 million) and 100% for the six months ended June 30, 2024 ($0.9 million). VRB did not generate revenue during these periods. Six Months Ended June 30, 2025 Six Months Ended June 30, 2024 Percentage Change (In thousands) Software licensing and data processing services: Revenue $ 1,803 $ 898 101 % Cost of sales (587) (292) 101 % Gross profit $ 1,216 $ 606 101 % CGI’s revenue for the six months ended June 30, 2025 was $1.8 million, an increase of $0.9 million from $0.9 million for the six months ended June 30, 2024. The increase in CGI’s revenue was a result of more data processing services being performed. CGI’s gross profit for the six months ended June 30, 2025 was $1.2 million, an increase of $0.6 million from $0.6 million for the six months ended June 30, 2024. The percentage increase in CGI's gross profit was consistent with the increase in revenue. Stock-Based Compensation On March 6, 2025, as part of our long-term incentive plan the following equity incentives were granted to certain of our officers and employees: • 776,557 stock-settled restricted stock units ("RSU's") that vest in three equal tranches 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 March 6, 2025 RSU grant was $4.5 million. • Performance share units ("PSU's") that vest on December 31, 2027, with the number of units to vest determined by our share price performance against constituents from a Base Metals Index. The number of units to vest ranges between zero times to two times the target number of PSU's. The total target number of PSU's is 714,822. The total fair value of the March 6, 2025 PSU grant was $5.1 million. 21 Liquidity, Capital Resources and Capital Requirements Cash Resources We have recurring net losses and negative operating cash flows and we expect that we will continue to operate at a loss for the foreseeable future. We generate revenue from our technology businesses. We have not generated any revenue from our mining projects and do not expect to generate any revenue from our mining projects for the foreseeable future. We have funded our operations primarily through the sale of our equity securities. At June 30, 2025 and December 31, 2024, we had cash and cash equivalents of $88.0 million and $41.0 million, respectively, and a working capital of $77.1 million and $35.9 million, respectively. Of the total cash and cash equivalents at June 30, 2025 and December 31, 2024, $22.7 million and $11.2 million, respectively, was not available for the general corporate purposes of the Company as these amounts were held by non-wholly-owned subsidiaries. As at August 5, 2025, we believe that we have sufficient cash resources to carry out our business plans for at least the next 12 months, after which we expect to need additional financing to further advance our projects and conduct our business; provided, however, that if we make a development decision at the Santa Cruz Copper Project within the next 12 months, our need for additional financing will be accelerated. We have based these estimates on our current assumptions, which may require future adjustments based on our ongoing business and development decisions. Accordingly, we may require additional cash resources earlier than we currently expect or we may need to curtail currently planned activities. At June 30, 2025, we had outstanding 11,769,872 Warrants that were issued in our February 2025 public offering, each exercisable until February 17, 2026 to purchase one share of our common stock at a price of $7.00 per share. Our cash resources may be improved, and our need for additional financing may be delayed or reduced, if Warrants are exercised. Our significant operational expenses include the payments that we anticipate making under the various earn-in and option agreements to which we are a party. These agreements are structured to provide us with flexibility whereby our ability to continue to explore on a mineral project is contingent on funding agreed specified levels over specified time intervals. We may seek additional financing at any time through debt, equity, project specific debt, and/or other means, including asset sales. Our continued operations are dependent on our ability to obtain additional financing or to generate future cash flows. However, there can be no assurance that we will be successful in our efforts to raise additional capital on terms favorable to us, or at all. Consolidated Cash Balances as of June 30, 2025 The table below discloses the amounts of cash disaggregated by currency denomination as of June 30, 2025 in each jurisdiction that our affiliated entities are domiciled. Currency by Denomination (in USD Equivalents) US dollars Canadian Dollars Colombian Pesos Other Total (In thousands) Jurisdiction of Entity: USA $ 61,319 $ 1,804 $ — $ — $ 63,123 Colombia 13,342 — 1,324 — 14,666 Singapore 6,253 — — — 6,253 Canada 723 1,443 — — 2,166 Other 1,413 352 — 77 1,841 Total $ 83,050 $ 3,599 $ 1,324 $ 77 $ 88,050 Refer to Note 19 of our consolidated financial statements in our 2024 Form 10-K which outlines other restrictions on transfers of net assets from our consolidated subsidiaries to the Company. 22 Note Payable In May 2023, as part of the consideration for the acquisition of 5,975 acres of surface title and associated water rights at the Santa Cruz Copper Project we issued to the vendor a secured promissory note in the principal amount of $82.6 million. The promissory note included an annual interest rate of prime plus 1% and is to be paid in installments. In November 2023, we repaid $34.3 million, plus accrued interest of the promissory note and in November 2024, we repaid $12.1 million, plus accrued interest of the promissory note. Three principal payments of $12.1 million remain to be paid on the second, third and fourth anniversaries of the November 2023 payment, plus applicable accrued interest. Convertible Bond — VRB. In 2021, VRB issued a convertible bond for gross proceeds of $24.0 million. The bond has a five-year term and interest accrues at a rate of 8% per annum. Prior to the maturity date, the convertible bond will be automatically converted into equity of VRB upon an equity financing or sale event, at a price per share equal to the lower of (A) the transaction price of the equity financing or sale event, and (B) the valuation cap price of $158.0 million divided by the total shares outstanding at the time of the event. If no equity financing or sale event occurs, VRB must repay the outstanding principal and interest on maturity in July 2026. At June 30, 2025, the balance of principal and interest on the bond was $32.3 million. Bridge Loan — Cordoba. In December 2024, Cordoba obtained a $10.0 million bridge loan from JCHX, of which $5.0 million was received in December 2024 and $5.0 million in January 2025. The loan bears simple interest at 10% per annum for the first six months of the agreement, and 12% per annum thereafter. The loan was repaid in June 2025. Cash Flows The following table presents our sources and uses of cash for the periods indicated: Six Months Ended June 30, 2025 2025 2024 Net cash (used in) provided by: Operating activities $ (35,773) $ (94,501) Investing activities (1,989) (2,716) Financing activities 80,916 27,074 Effect of foreign exchange on cash 827 (1,089) Total change in cash $ 43,981 $ (71,232) Operating activities. Net cash used in operating activities for all periods presented largely was spent on our exploration expenses and our general and administrative costs. We do not generate adequate cash from operations to cover our operating expenses and therefore rely on our financing activities to provide the cash resources to fund our operating and investing activities. The net cash used in operating activities during the six months ended June 30, 2025 of $35.8 million primarily was the result of $28.7 million of cash exploration expenditures and $16.1 million of cash general and administrative costs offset by a $6.2 million change in operating assets and liabilities. The $6.2 million change in operating assets and liabilities was mainly a result of VRB receiving in February 2025 the first $10.0 million tranche of the $20.0 million receivable that it recorded upon selling 51% of VRB China in October 2024. Investing activities. Our investing activities generally relate to acquisitions of mineral property interests, purchases of public company shares in companies that we may partner with and capital expenditures at our projects. To date, due to our mining projects being in the exploration stage we have not incurred material capital expenditures. There were no significant investing activities during the six months ended June 30, 2025. 23 Financing activities. The net cash used in financing activities during the six months ended June 30, 2025 of $80.9 million was primarily a result of the public offering we completed in February 2025 where we issued 11,794,872 units (the “Units”) at a price of $5.85 per Unit for net proceeds of approximately $65.8 million. Each Unit consists of (i) one share of our common stock and (ii) one accompanying warrant. Also during the six months ended June 30, 2025, our subsidiary, Cordoba received a $5.0 million bridge loan from JCHX which was in addition to $5.0 million which was previously received in December 2024. On June 25, 2025, JCHX paid Cordoba $20.0 million which was the third installment under the strategic arrangement signed in 2023 whereby JCHX acquired its 50% ownership of the Alacrán Project. On June 26, 2025, Cordoba repaid the $10.0 million bridge loan using the proceeds from the third installment. Contractual Obligations As of June 30, 2025, there have been no material changes, outside the ordinary course of business, in our contractual obligations since December 31, 2024. Refer to Part II, Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our 2024 Form 10-K for information regarding our contractual obligations. Off Balance Sheet Arrangements As of June 30, 2025, we were not involved in any off-balance sheet arrangements that have or are reasonably likely to have a material effect on our financial condition, results of operations, or liquidity. Related Party Transactions See Note 13 of our consolidated financial statements for the three and six months ended June 30, 2025. Critical Accounting Estimates Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements that have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as well as the disclosure of contingent assets and liabilities as of the date of our financial statements. Below are the accounting matters that we believe are critical to our financial statements due to the degree of uncertainty regarding the estimates or assumptions involved and the magnitude of the asset, liability, revenue, expense, gain or loss being reported. Actual results may vary from our estimates in amounts that may be material to the financial statements. An accounting estimate is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact our financial statements. We base our assumptions and estimates on historical experience and various other sources that we believe to be reasonable under the circumstances. Actual results may differ from the estimates we calculate due to changes in circumstances, global economics and politics and general business conditions. A summary of our significant accounting policies are detailed in Note 2 to our consolidated financial statements included in our 2024 Form 10-K. We have outlined below those policies identified as being critical to the understanding of our business and results of operations and that require the application of significant management judgment in developing estimates. Recoverable value of exploration mineral interests We review and evaluate exploration mineral interests for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The recoverability of our exploration mineral interests and intangible assets did not involve significant estimation in the periods presented as circumstances did not indicate the carrying amount of our assets may not be recoverable. However, the recoverability of our recorded mineral interests is subject to market factors that could significantly affect the recoverability of our assets, such as commodity prices, results of exploration activities that may affect our intentions to continue under option or earn-in agreements and geopolitical circumstances, particularly in Colombia. By nature, significant changes in these factors are reasonably possible to occur periodically, which could materially impact our financial statements. 24 Stock-based compensation Compensation expense for PSU's granted to certain of our officers and employees is determined based on estimated fair values of the PSU's at the time of grant using a Monte Carlo valuation model, which requires the input of the following subjective assumptions: Grant date: March 6, 2025 Expected volatility 63.4 % Expected life of PSU's (in years) 2.75 USA risk-free interest rate 4.0 % Canada risk-free interest rate 2.6 % Expected dividend rate 0 % Weighted average grant-date fair value (per unit) $ 7.07 The expected volatility is based on the historical volatility of our stock on the NYSE American over a term commensurate with the expected life of the PSU's. The USA risk-free interest rate was based on the yield observed on the US Dollar treasury curve as at the grant date, while the Canadian risk-free interest rate was based on the yield observed on the Canadian dollar government bond curve as at the grant date. Income taxes We make estimates and judgments in determining the provision for income tax expense, deferred tax assets and liabilities and liabilities for unrecognized tax benefits, including interest and penalties. We are subject to income tax laws in many jurisdictions, including the United States, Colombia, Canada, Australia, the Ivory Coast and Peru. We report income tax in accordance with U.S. GAAP, which requires the establishment of deferred tax accounts for all temporary differences between the financial reporting and tax bases of assets and liabilities, using currently enacted tax rates. In addition, deferred tax accounts must be adjusted to reflect new rates if enacted into law. Realization of deferred tax assets is contingent on the generation of future taxable income. As a result, we consider whether it is more likely than not that all or a portion of such assets will be realized during periods when they are available, and if not, we provide a valuation allowance for amounts not likely to be recognized. In determining our valuation allowance, we have not assumed future taxable income from sources other than the reversal of existing temporary differences. The extent to which a valuation allowance is warranted may vary as a result of changes in our estimates of future taxable income. In addition to the potential generation of future taxable income through the establishment of economic feasibility, development and operation of mines on our exploration assets, estimates of future taxable income could change in the event of disposal of assets, the identification of tax-planning strategies or changes in tax laws that would allow the benefits of future deductible temporary differences in certain entities or jurisdictions to be offset against future taxable temporary differences in other entities or jurisdictions. We recognize the effect of uncertain income tax positions if those positions are more likely than not of being sustained. The amount recognized is subject to estimates and our judgment with respect to the likely outcome of each uncertain tax position. The amount that is ultimately incurred for an individual uncertain tax position or for all uncertain tax positions in the aggregate could differ from the amount recognized. We had no uncertain tax positions as of June 30, 2025.