Ivanhoe Electric (IE) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Condensed Interim Consolidated Financial Statements This section presents Ivanhoe Electric Inc.'s unaudited condensed interim consolidated financial statements, detailing financial position, performance, and cash flows under U.S. GAAP Condensed Interim Consolidated Balance Sheets | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | | Assets | | | | Cash and cash equivalents | $88,050 | $40,971 | | Total current assets | $104,287 | $69,286 | | Total assets | $400,471 | $374,932 | | Liabilities and Equity | | | | Total current liabilities | $27,147 | $33,416 | | Total liabilities | $89,694 | $94,501 | | Total equity | $310,777 | $280,431 | | Total liabilities and equity | $400,471 | $374,932 | - Total assets increased by $25.5 million from $374.9 million at December 31, 2024, to $400.5 million at June 30, 2025. Cash and cash equivalents significantly increased by $47.1 million[10] - Total liabilities decreased by $4.8 million from $94.5 million at December 31, 2024, to $89.7 million at June 30, 2025[10] Condensed Interim Consolidated Statements of Loss and Comprehensive Loss | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $1,068 | $538 | $1,803 | $898 | | Gross profit | $774 | $346 | $1,216 | $606 | | Exploration expenses | $14,078 | $37,254 | $29,863 | $80,897 | | General and administrative expenses | $9,721 | $10,694 | $21,307 | $23,295 | | Impairment | $2,555 | $— | $2,555 | $— | | Loss from operations | $25,635 | $48,546 | $52,639 | $105,427 | | Net loss attributable to common stockholders | $23,851 | $46,783 | $54,366 | $102,294 | | Basic and diluted net loss per share | $0.18 | $0.39 | $0.42 | $0.85 | - Net loss attributable to common stockholders decreased by $22.9 million for the three months ended June 30, 2025, compared to the same period in 2024, primarily due to a significant reduction in exploration expenses[11][89] - Net loss attributable to common stockholders decreased by $47.9 million for the six months ended June 30, 2025, compared to the same period in 2024, driven by lower exploration and general and administrative expenses[11][98] Condensed Interim Consolidated Statements of Changes in Equity | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Balance at January 1, 2025 | $280,431 | $376,281 (Jan 1, 2024) | | Net loss | $(63,113) | $(111,616) | | Issuance of common stock; public offering, net | $53,372 | $— | | Issuance of warrants, public offering | $12,470 | $— | | Share-based compensation | $6,348 | $7,414 | | Non-controlling interests investment in subsidiary | $20,163 | $30,379 | | Balance at June 30, 2025 | $310,777 | $303,124 (June 30, 2024) | - Total equity increased from $280.4 million at January 1, 2025, to $310.8 million at June 30, 2025, primarily due to net proceeds from a public offering ($53.4 million from common stock and $12.5 million from warrants) and non-controlling interests investment[12] Condensed Interim Consolidated Statements of Cash Flows | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(35,773) | $(94,501) | | Net cash used in investing activities | $(1,989) | $(2,716) | | Net cash provided by financing activities | $80,916 | $27,074 | | Effect of foreign exchange on cash | $827 | $(1,089) | | Total change in cash | $43,981 | $(71,232) | | Cash, cash equivalents and restricted cash, end of period | $89,290 | $133,811 | - Net cash used in operating activities significantly decreased from $94.5 million in H1 2024 to $35.8 million in H1 2025, mainly due to lower exploration expenditures and a $10.0 million tranche payment received from VRB China sale[15][119][120] - Net cash provided by financing activities increased substantially from $27.1 million in H1 2024 to $80.9 million in H1 2025, driven by $65.8 million net proceeds from a public offering in February 2025[15][118][122] Notes to Condensed Interim Consolidated Financial Statements - Ivanhoe Electric is a U.S. mineral exploration company focused on critical metals like copper, nickel, cobalt, platinum group elements, gold, and silver, utilizing advanced geophysical surveying (Typhoon™) and data analytics (CGI)[18][71] - The company holds a 50% interest in a joint venture with Saudi Arabian Mining Company (Maaden) for exploration in Saudi Arabia and an exploration alliance with BHP Mineral Resources Inc. for critical minerals in the U.S[19][71] - Key subsidiaries include VRB Energy Inc. (90.0% ownership) for vanadium redox flow battery manufacturing, Computational Geosciences Inc. (94.3% ownership) for data analytics and AI services, and Cordoba Minerals Corp. (61.8% ownership) which holds interest in the Alacrán copper-gold-silver deposit[24] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Ivanhoe Electric Inc.'s financial condition and results of operations for Q2 and H1 2025, including business, segments, and liquidity Special Note Regarding Forward-Looking Statements This section outlines forward-looking statements regarding mineral reserves, exploration, capital, and regulatory approvals, subject to various risks - The report contains forward-looking statements regarding mineral reserves, exploration timing, capital requirements, regulatory approvals, economic parameters of projects, and uses of funds, which are subject to risks and uncertainties[68] - Key risks include the early stage of most mineral projects, risks associated with mine construction at Santa Cruz, reliance on estimates for resource calculations, commodity price volatility, regulatory changes, and geopolitical uncertainties[68] Business Overview Ivanhoe Electric is a U.S. mineral exploration company focused on critical metals, leveraging proprietary geophysical technology and strategic partnerships - Ivanhoe Electric is a U.S.-based minerals exploration company focused on critical metals (copper, nickel, cobalt, platinum group elements, gold, silver) to support American supply chain independence[71] - The company leverages its proprietary Typhoon™ geophysical surveying system and advanced data analytics from its subsidiary, Computational Geosciences Inc. (CGI), to de-risk mineral exploration[71] - Key projects include the Santa Cruz Copper Project in Arizona, a 50/50 joint venture with Maaden in Saudi Arabia, and an exploration alliance with BHP Mineral Resources Inc. in the U.S[71] - Ivanhoe Electric also holds a 90.0% controlling interest in VRB Energy Inc., a developer of grid-scale vanadium redox flow batteries, and a 49% interest in VRB China for Asian, African, and Middle Eastern markets[71] Business Developments in the Quarter Key developments include the Santa Cruz Copper Project PFS completion and Cordoba Minerals' agreement to sell its remaining Alacrán interest - The Preliminary Feasibility Study (PFS) for the Santa Cruz Copper Project was completed on June 23, 2025, confirming economic viability for an underground copper mining operation with heap leach processing[75] - The Santa Cruz Copper Project is projected to produce 1.4 million tonnes of copper cathode over a 23-year mine life, with an after-tax Net Present Value of $1.4 billion (8% discount rate) and an Internal Rate of Return (IRR) of 20% at a base case copper price of $4.25/lb. Initial capital is estimated at $1.24 billion[78] - Cordoba Minerals Corp. (a subsidiary) entered an agreement on May 8, 2025, to sell its remaining 50% interest in the Alacrán Copper Project to JCHX Mining Management Co., Ltd. for up to $128 million, including $88 million cash on closing, a $12 million deferred payment, and a contingent payment of $8-28 million based on copper prices[80] Segments The company operates in four reportable segments: Santa Cruz Copper Project, critical metals, data processing services, and energy storage - The company operates in four reportable segments: Santa Cruz Copper Project, critical metals, data processing services, and energy storage[83] Significant Components of Results of Operations Revenue is solely from data processing, while exploration and general and administrative expenses are key cost components - Revenue is generated solely from the data processing business segment (CGI), as mineral projects are in the exploration stage and do not generate revenue[84] - Exploration expenses include geological studies, drilling, sampling, and costs related to identifying and evaluating mineral resources, as well as payments under earn-in and option agreements[85][86] - General and administrative expenses comprise salaries, benefits, stock-based compensation, professional fees, insurance, and other administrative costs[88] Three Months Ended June 30, 2025 Compared to the Three Months Ended June 30, 2024 Net loss decreased in Q2 2025 due to lower exploration and general and administrative expenses, while revenue increased - Net loss attributable to common stockholders decreased by $22.9 million to $23.9 million ($0.18 per share) in Q2 2025 from $46.8 million ($0.39 per share) in Q2 2024[89] Exploration Expenses (Q2 YoY Change) | Project (in thousands) | Q2 2025 | Q2 2024 | Change | | :--------------------- | :------ | :------ | :----- | | Santa Cruz, USA | $5,425 | $20,478 | $(15,053) | | Alacrán Project (Cordoba) | $4,355 | $3,236 | $1,119 | | Hog Heaven, USA | $394 | $2,530 | $(2,136) | | Tintic, USA | $474 | $3,681 | $(3,207) | | Project generation and other | $3,430 | $7,329 | $(3,899) | | Total | $14,078 | $37,254 | $(23,176) | - General and administrative expenses decreased by $1.0 million to $9.7 million in Q2 2025, mainly due to a $0.6 million decrease in VRB administration costs (due to VRB China deconsolidation) and lower directors and officers insurance expenses[89][91] - Revenue from data processing services increased by 98% to $1.1 million in Q2 2025 from $0.5 million in Q2 2024, driven by more data processing services[95][96] Six Months Ended June 30, 2025 Compared to the Six Months Ended June 30, 2024 Net loss decreased in H1 2025 due to lower exploration and general and administrative expenses, despite increased equity method losses - Net loss attributable to common stockholders decreased by $47.9 million to $54.4 million ($0.42 per share) in H1 2025 from $102.3 million ($0.85 per share) in H1 2024[98] Exploration Expenses (H1 YoY Change) | Project (in thousands) | H1 2025 | H1 2024 | Change | | :--------------------- | :------ | :------ | :----- | | Santa Cruz, USA | $11,929 | $48,315 | $(36,386) | | Alacrán Project (Cordoba) | $7,691 | $6,754 | $937 | | Hog Heaven, USA | $1,267 | $5,837 | $(4,570) | | Tintic, USA | $1,185 | $7,201 | $(6,016) | | Project generation and other | $7,791 | $12,790 | $(4,999) | | Total | $29,863 | $80,897 | $(51,034) | - General and administrative expenses decreased by $2.0 million to $21.3 million in H1 2025, primarily due to a $1.0 million decrease in VRB administration costs and lower insurance expenses[98][100] - Share of loss of equity method investees increased by $2.8 million to $7.2 million in H1 2025, mainly due to a $3.4 million increase in loss from the Maaden Joint Venture and a $0.7 million loss from the VRB China Joint Venture[98][101] - Revenue from data processing services increased by 101% to $1.8 million in H1 2025 from $0.9 million in H1 2024, consistent with increased services[103][104] Stock-Based Compensation The company granted stock-settled Restricted Stock Units and Performance Share Units in March 2025, with specific vesting and valuation details - On March 6, 2025, the company granted 776,557 stock-settled Restricted Stock Units (RSUs) with a total fair value of $4.5 million, vesting in three equal tranches over one year[106] - Performance Share Units (PSUs) were also granted on March 6, 2025, with a target of 714,822 units and a total fair value of $5.1 million, vesting on December 31, 2027, based on share price performance against a Base Metals Index[106] Liquidity, Capital Resources and Capital Requirements The company expects recurring losses and negative operating cash flows, requiring additional financing to advance projects despite current cash sufficiency - The company has recurring net losses and negative operating cash flows, expecting to operate at a loss for the foreseeable future, with no revenue from mining projects[107] Cash Resources and Working Capital | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Cash and cash equivalents | $88,050 | $40,971 | | Working capital | $77,100 | $35,900 | - As of August 5, 2025, the company believes it has sufficient cash for at least the next 12 months, but additional financing will be needed to advance projects, especially if a development decision is made for the Santa Cruz Copper Project[109] - A public offering in February 2025 generated net proceeds of approximately $65.8 million from the issuance of 11,794,872 units, each consisting of one common stock share and one warrant[122] - Cordoba repaid a $10.0 million bridge loan from JCHX in June 2025 using proceeds from JCHX's third installment payment for the Alacrán Project acquisition[123] Contractual Obligations No material changes to contractual obligations occurred in Q2 2025 outside the ordinary course of business since December 31, 2024 - No material changes to contractual obligations occurred in Q2 2025, outside the ordinary course of business, since December 31, 2024[124] Off Balance Sheet Arrangements As of June 30, 2025, the company had no off-balance sheet arrangements likely to materially affect its financial condition or results - As of June 30, 2025, the company was not involved in any off-balance sheet arrangements likely to have a material effect on its financial condition, results of operations, or liquidity[125] Related Party Transactions Related party transactions are detailed in Note 13 of the consolidated financial statements - Related party transactions are detailed in Note 13 of the consolidated financial statements[126] Critical Accounting Estimates Critical accounting estimates include mineral interest recoverability, stock-based compensation, and income taxes, involving significant management judgment - Critical accounting estimates include the recoverable value of exploration mineral interests, stock-based compensation, and income taxes, which involve significant management judgment and assumptions[128][129] - The recoverability of mineral interests is subject to market factors (commodity prices), exploration results, and geopolitical circumstances, which could materially impact financial statements[130] - Stock-based compensation for PSUs is valued using a Monte Carlo model, requiring subjective assumptions like expected volatility (63.4%), expected life (2.75 years), and risk-free interest rates (USA 4.0%, Canada 2.6%)[131] - Income tax estimates involve determining deferred tax assets and liabilities and unrecognized tax benefits across multiple jurisdictions, with realization of deferred tax assets contingent on future taxable income[132][134] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section outlines the company's exposure to market risks, specifically interest rate risk and foreign currency risk, and their potential financial impact - The company has both fixed-rate debt (convertible bond at 8.0% per annum) and variable-rate debt (secured promissory note at U.S. prime plus 1% for Santa Cruz land acquisition)[136][137] - A hypothetical 100 basis points adverse movement in the prime rate would increase interest expense and net loss by approximately $0.1 million for Q2 2025 and $0.2 million for H1 2025[139] - The company is exposed to foreign currency risk, particularly for operating expenditures in Colombia (Colombian Pesos) and Canada (Canadian dollars)[140] - A 10% depreciation or appreciation of Colombian Pesos or Canadian dollars against the U.S. dollar would result in an approximate $0.1 million decrease or increase in the company's net loss for the six months ended June 30, 2025[142] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting - Management, including the principal executive and financial officers, evaluated the effectiveness of disclosure controls and procedures as of June 30, 2025[145] - It was concluded that the disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025[145] - There were no changes in internal control over financial reporting during the quarter ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[146] PART II. OTHER INFORMATION Item 1. Legal Proceedings This section discloses ongoing legal proceedings, including a criminal lawsuit and a class action claim involving Cordoba Minerals Corp - Cordoba is involved in a criminal lawsuit filed in late 2018/early 2019 against nine former Colombian management members for alleged breach of fiduciary obligations, abuse of trust, theft, and fraud[150] - Cordoba is also a defendant in a class action claim by the Alacrán Community seeking an injunction against Cordoba's operations and against authorities' declaration of illegal mining activities[150] - The outcome of the class action is uncertain, and a resolution against Cordoba could have a material adverse effect on its business, results of operations, financial condition, and prospects[150] Item 1A. Risk Factors This section updates risk factors, noting no material changes except for new risks related to tariffs, trade restrictions, and international trade policies - No material changes to risk factors were reported, except for the addition of risks related to tariffs, trade restrictions, and changes in international trade policies and regulations[151][152] - New tariffs, trade restrictions, and changes in trade policies since February 2025 may adversely impact the company's operations, financial performance, and outlook[152] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section confirms that there were no unregistered sales of equity securities during the three months ended June 30, 2025 - There were no unregistered sales of equity securities during the three months ended June 30, 2025[153] Item 5. Other Information No director or officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025 - No director or officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[154] Item 6. Exhibits This section lists the exhibits filed as part of the Form 10-Q, including corporate governance documents, commercial agreements, and certifications - Exhibits include the Amended and Restated Certificate of Incorporation, a Commercial Sale Offer and Purchase Order, certifications from the Principal Executive and Financial Officers (pursuant to Sections 302 and 906 of Sarbanes-Oxley Act), and Inline XBRL documents[155] Signatures