UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2022
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 001-41436
Ivanhoe Electric Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware | 32-0633823 |
(State or other jurisdiction of | (I.R.S. Employer |
606 – 999 Canada Place | V6C 3E1 |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (604) 689-8765
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
Common Stock, par value $0.0001 per share | IE | NYSE American, Toronto Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
Emerging growth company | ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of November 14, 2022, the registrant had 92,887,918 shares of common stock, $0.0001 par value per share, outstanding.
Table of Contents
IVANHOE ELECTRIC INC. Form 10-Q
For the Quarter Ended September 30, 2022
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
IVANHOE ELECTRIC INC.
Condensed Interim Consolidated Balance Sheets (Unaudited)
(Expressed in thousands of U.S. dollars)
| September 30, |
| December 31, | |||
2022 | 2021 | |||||
Assets | ||||||
Current assets: |
|
|
| |||
Cash and cash equivalents | $ | 177,666 | $ | 49,850 | ||
Accounts receivable | 1,500 |
| 1,385 | |||
Inventory | 6,141 |
| 5,878 | |||
Prepaid expenses and deposits | 7,109 |
| 1,152 | |||
192,416 |
| 58,265 | ||||
Non-current assets: |
|
|
| |||
Investments subject to significant influence |
| 6,999 |
| 7,701 | ||
Other investments |
| 1,621 |
| 1,802 | ||
Exploration mineral interests |
| 84,744 |
| 73,039 | ||
Property, plant and equipment |
| 3,670 |
| 2,523 | ||
Intangible assets |
| 1,942 |
| 4,340 | ||
Other non-current assets |
| 3,410 |
| 5,861 | ||
Total assets | $ | 294,802 | $ | 153,531 | ||
Liabilities and Equity |
|
|
|
| ||
Current liabilities: |
|
|
|
| ||
Accounts payable and accrued liabilities | $ | 17,256 | $ | 10,195 | ||
Deferred consideration payable | — |
| 26,562 | |||
Lease liabilities, current | 289 |
| 342 | |||
Contract liability | 2,751 |
| 3,484 | |||
20,296 |
| 40,583 | ||||
Non-current liabilities: |
|
|
| |||
Deferred income taxes |
| 4,329 |
| 5,382 | ||
Convertible debt |
| 25,398 |
| 78,832 | ||
Lease liabilities, net of current portion |
| 928 |
| 55 | ||
Other non-current liabilities |
| 363 |
| 865 | ||
Total liabilities |
| 51,314 |
| 125,717 | ||
Commitments and contingencies (Note 15) |
|
|
|
| ||
Equity: |
|
|
|
| ||
Preferred stock, par value $0.0001; 50,000,000 shares authorized; none issued and outstanding | ||||||
Common stock, par value $0.0001; 700,000,000 shares authorized; 92.9 million shares and as of September 30, 2022 (December 31, 2021 - 63.9 million) |
| 9 |
| 6 | ||
Additional paid-in capital |
| 407,203 |
| 75,743 | ||
Accumulated deficit |
| (162,520) |
| (52,314) | ||
Accumulated other comprehensive income |
| (852) |
| (1,502) | ||
Equity attributable to common stockholders |
| 243,840 |
| 21,933 | ||
Non-controlling interests |
| (352) |
| 5,881 | ||
Total equity |
| 243,488 |
| 27,814 | ||
Total liabilities and equity | $ | 294,802 | $ | 153,531 | ||
3
IVANHOE ELECTRIC INC.
Condensed Interim Consolidated and Combined Carve-out Statements of Loss and Comprehensive Loss (Unaudited)
(Expressed in thousands of U.S. dollars, except for share and per share amounts)
Three Months Ended | Nine Months Ended | |||||||||||
September 30, | September 30, | |||||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 | |||||
Revenue | $ | 1,181 | $ | 1,045 | $ | 8,172 | $ | 4,099 | ||||
Cost of sales |
| (875) |
| (531) | (1,042) |
| (1,172) | |||||
Gross profit |
| 306 |
| 514 | 7,130 |
| 2,927 | |||||
Operating expenses: |
|
|
| |||||||||
Exploration expenses | 33,971 | 9,954 | 75,157 |
| 24,563 | |||||||
General and administrative expenses |
| 6,853 |
| 7,888 |
| 16,738 |
| 14,108 | ||||
Research and development expenses |
| 1,140 |
| 1,007 |
| 3,728 |
| 2,719 | ||||
Selling and marketing expenses |
| 51 |
| 28 |
| 108 |
| 73 | ||||
|
|
|
| |||||||||
Loss from operations |
| 41,709 |
| 18,363 |
| 88,601 |
| 38,536 | ||||
Other expenses (income): |
|
|
| |||||||||
Interest expense, net | 164 | 468 | 1,199 |
| 583 | |||||||
Foreign exchange loss (gain) |
| 972 |
| 199 |
| 1,403 |
| (155) | ||||
Loss (gain) on revaluation of investments |
| (171) |
| (17) |
| 1,272 |
| 241 | ||||
Loss on revaluation of convertible debt |
| — |
| 200 |
| 18,965 |
| 200 | ||||
Share of loss of equity method investees | 1,527 | — | 3,077 | — | ||||||||
Other expenses (income), net |
| (181) |
| 983 |
| 1,401 |
| 561 | ||||
Loss before income taxes |
| 44,020 |
| 20,196 |
| 115,918 |
| 39,966 | ||||
Income taxes |
| (167) |
| (48) |
| 1,084 |
| (232) | ||||
|
|
|
| |||||||||
Net loss |
| 43,853 |
| 20,148 |
| 117,002 |
| 39,734 | ||||
Less loss attributable to non-controlling interests |
| (3,465) |
| (2,503) |
| (6,796) |
| (6,700) | ||||
Net loss attributable to common stockholders or parent |
| 40,388 |
| 17,645 |
| 110,206 |
| 33,034 | ||||
Net loss |
| 43,853 |
| 20,148 |
| 117,002 |
| 39,734 | ||||
Other comprehensive income, net of tax: | ||||||||||||
Foreign currency translation adjustments |
| (990) |
| (204) |
| (949) |
| (6) | ||||
Other comprehensive income |
| (990) |
| (204) |
| (949) |
| (6) | ||||
Comprehensive loss | $ | 42,863 | $ | 19,944 | $ | 116,053 | $ | 39,728 | ||||
Comprehensive loss attributable to: | ||||||||||||
Common stockholders or parent |
| 39,673 |
| 17,509 |
| 109,556 |
| 33,060 | ||||
Non-controlling interests |
| 3,190 | $ | 2,435 | 6,497 | $ | 6,668 | |||||
$ | 42,863 | $ | 19,944 | $ | 116,053 | $ | 39,728 | |||||
Net loss per share attributable to common stockholders | ||||||||||||
Basic and diluted | 0.43 | 0.28 | 1.50 | 0.54 | ||||||||
Weighted-average common shares outstanding | ||||||||||||
Basic and diluted |
| 92,887,918 |
| 62,270,157 |
| 73,685,619 |
| 60,704,929 | ||||
4
IVANHOE ELECTRIC INC.
Condensed Interim Consolidated and Combined Carve-out Statements of Changes in Equity (Unaudited)
(Expressed in thousands of U.S. dollars, except share amounts)
Nine months ended September 30, 2022 and 2021
|
|
|
|
|
| Accumulated |
|
| |||||||||||||||
Additional | other | ||||||||||||||||||||||
Common Stock | paid-in | Net parent | Accumulated | comprehensive | Non-controlling | ||||||||||||||||||
Shares | Amount | capital | investment | deficit | Income (loss) | interest | Total | ||||||||||||||||
Balance at January 1, 2021 |
| — |
| $ | — |
| $ | — |
| $ | 43,520 |
| $ | — |
| $ | (1,538) |
| $ | 6,710 |
| $ | 48,692 |
Net loss | — | — | — | (4,653) | — | — | (1,911) | (6,564) | |||||||||||||||
Other comprehensive income (loss) | — | — | — | — | — | 13 | (5) | 8 | |||||||||||||||
Net transfer from parent | — | — | — | 5,606 | — | — | — | 5,606 | |||||||||||||||
Other changes in non-controlling interests | — | — | — | — | — | — | 398 | 398 | |||||||||||||||
Balance at March 31, 2021 | — | $ | — | $ | — | $ | 44,473 | $ | — | $ | (1,525) | $ | 5,192 | $ | 48,140 | ||||||||
Net loss |
| — |
| — |
| — |
| (2,353) |
| (8,383) |
| — |
| (2,286) |
| (13,022) | |||||||
Other comprehensive loss |
| — |
| — |
| — |
| — |
| — |
| (175) |
| (31) |
| (206) | |||||||
Net transfer from parent |
| — |
| — |
| — |
| 23,534 |
| — |
| — |
| — |
| 23,534 | |||||||
Restructuring upon spin off (Note 1) | 59,909,344 | 6 | 65,648 | (65,654) | — | — | — | — | |||||||||||||||
Share based compensation | — | — | 236 | — | — | — | 80 | 316 | |||||||||||||||
Other changes in non-controlling interests |
| — |
| — |
| (28) |
| — |
| — |
| — |
| 1,567 |
| 1,539 | |||||||
Balance at June 30, 2021 |
| 59,909,344 | $ | 6 | $ | 65,856 | $ | — | $ | (8,383) | $ | (1,700) | $ | 4,522 | $ | 60,301 | |||||||
Net loss | — | — | — | — | (17,645) | — | (2,503) | (20,148) | |||||||||||||||
Other comprehensive loss | — | — | — | — | — | 136 | 68 | 204 | |||||||||||||||
Issuance of common stock, net of issuance costs | 3,905,324 | — | 9,410 | — | — | — | — | 9,410 | |||||||||||||||
Share based compensation | — | — | 1,877 | — | — | — | 104 | 1,981 | |||||||||||||||
Other changes in non-controlling interests | — | — | (2,846) | — | — | — | 6,614 | 3,768 | |||||||||||||||
Balance at September 30, 2021 |
| 63,814,668 | $ | 6 | $ | 74,297 | $ | — | $ | (26,028) | $ | (1,564) | $ | 8,805 | $ | 55,516 | |||||||
Balance at January 1, 2022 | 63,925,334 | $ | 6 | $ | 75,743 | $ | — | $ | (52,314) | $ | (1,502) | $ | 5,881 | $ | 27,814 | ||||||||
Net loss | — | — | — | — | (15,452) | — | (2,222) | (17,674) | |||||||||||||||
Other comprehensive income | — | — | — | — | — | 102 | 4 | 106 | |||||||||||||||
Share-based compensation | — | — | 882 | — | — | — | 73 | 955 | |||||||||||||||
Balance at March 31, 2022 | 63,925,334 | $ | 6 | $ | 76,625 | $ | — | $ | (67,766) | $ | (1,400) | $ | 3,736 | $ | 11,201 | ||||||||
Net loss |
| — |
| — |
| — |
| — |
| (54,366) |
| — |
| (1,109) |
| (55,475) | |||||||
Other comprehensive loss |
| — | — |
| — |
| — |
| — |
| (167) |
| 20 |
| (147) | ||||||||
Issuance of common stock, net of issuance costs | 14,388,000 | 2 | 158,200 | — | — | — | — | 158,202 | |||||||||||||||
Issuance of common stock upon conversion of debt | 13,628,958 | 1 | 160,139 | — | — | — | — | 160,140 | |||||||||||||||
Issuance of common stock upon settlement of liability | 945,626 | — | 11,111 | — | — | — | — | 11,111 | |||||||||||||||
Share-based compensation |
| — |
| — |
| 784 |
| — |
| — |
| — |
| 54 |
| 838 | |||||||
Other changes in non-controlling interests | — | — | (8) | — | — | — | (4) | (12) | |||||||||||||||
Balance at June 30, 2022 | 92,887,918 | $ | 9 | $ | 406,851 | $ | — | $ | (122,132) | $ | (1,567) | $ | 2,697 | $ | 285,858 | ||||||||
Net loss | — | — | — | — | (40,388) | — | (3,465) | (43,853) | |||||||||||||||
Other comprehensive income | — | — | — | — | — | 715 | 275 | 990 | |||||||||||||||
Share issuance costs | — | — | (229) | — | — | — | — | (229) | |||||||||||||||
Share-based compensation |
| — |
| — |
| 581 |
| — |
| — |
| — |
| 141 |
| 722 | |||||||
Other changes in non-controlling interests | — | — | — | — | — | — | — | — | |||||||||||||||
Balance at September 30, 2022 |
| 92,887,918 | $ | 9 | $ | 407,203 | $ | — | $ | (162,520) | $ | (852) | $ | (352) | $ | 243,488 | |||||||
5
IVANHOE ELECTRIC INC.
Condensed Interim Consolidated and Combined Carve-out Statements of Cash Flows (Unaudited)
(Expressed in thousands of U.S. dollars)
Nine months ended September 30, 2022 and 2021
| 2022 |
| 2021 | |||
Operating activities |
|
| ||||
Net loss |
| $ | (117,002) | $ | (39,734) | |
Adjustments to reconcile net loss to cash provided by (used in) operating activities: |
|
| ||||
Depreciation of property, plant and equipment |
| 493 |
| 265 | ||
Amortization of intangible assets |
| 2,240 |
| 2,381 | ||
Amortization of operating lease right-of-use-assets |
| 454 |
| 509 | ||
Share-based compensation |
| 2,515 |
| 2,919 | ||
Unrealized foreign exchange loss (gain) |
| 1,384 |
| (241) | ||
Interest expense |
| 1,542 |
| 613 | ||
Income taxes |
| 1,084 |
| (232) | ||
Loss on revaluation of convertible debt |
| 18,965 |
| 200 | ||
Loss on de-recognition of mineral interest | 5,700 | — | ||||
Loss on revaluation of investments |
| 1,272 |
| 241 | ||
Share of loss of equity method investees | 3,077 |
| — | |||
Other |
| 1,353 | 186 | |||
Changes in other operating assets and liabilities: |
|
| ||||
Trade accounts receivable |
| (115) |
| 1,074 | ||
Inventory |
| (263) |
| (1,013) | ||
Operating lease liabilities |
| (615) |
| (548) | ||
Accounts payable and accrued liabilities |
| 4,019 |
| 4,061 | ||
Other operating assets and liabilities |
| (4,880) |
| (204) | ||
Net cash used in operating activities |
| (78,777) |
| (29,523) | ||
Investing activities | ||||||
Purchase of mineral interests |
| (33,889) |
| (4,275) | ||
Purchase of property, plant and equipment and intangible assets |
| (853) |
| (3,008) | ||
Purchase of investments subject to significant influence |
| (3,601) |
| (870) | ||
Other |
| — |
| (650) | ||
Net cash used in investing activities |
| (38,343) |
| (8,803) | ||
Financing activities | ||||||
Net proceeds from issuance of common stock | 159,320 | 9,408 | ||||
Proceeds from Ivanhoe Electric convertible notes | 86,200 | 48,621 | ||||
Proceeds from VRB convertible bond, net of issuance costs | — | 22,857 | ||||
Net transfer from parent |
| — |
| 23,152 | ||
Proceeds from subsidiary financings |
| — |
| 5,317 | ||
Other | (12) | — | ||||
Net cash provided by financing activities |
| 245,508 |
| 109,355 | ||
Effect of foreign exchange rate changes on cash and cash equivalents |
| (572) |
| (183) | ||
Increase in cash and cash equivalents |
| 128,388 |
| 71,029 | ||
Cash and cash equivalents, beginning of the year |
| 49,850 |
| 9,341 | ||
Cash and cash equivalents, end of the period | $ | 177,666 | $ | 80,187 | ||
Supplemental cash flow information | ||||||
Cash paid for income taxes | $ | 558 | $ | 498 | ||
Supplemental disclosure of non-cash investing and financing activities | ||||||
Issuance of common stock upon conversion of debt | $ | 160,140 | $ | — | ||
Issuance of common stock upon settlement of liability | 11,111 | — | ||||
Settlement of loan from parent | — | 5,886 | ||||
Issuance of common stock in exchange for assets (Note 1) | — | 65,654 | ||||
6
IVANHOE ELECTRIC INC.
Notes to the Condensed Interim Consolidated and Combined Carve-Out Financial Statements
(Unaudited - 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”) was incorporated in the State of Delaware, USA, on July 14, 2020, as a wholly-owned subsidiary of High Power Exploration Inc. (“the Parent” or “HPX”). On April 30, 2021, HPX completed a restructuring whereby HPX contributed (i) all of the issued and outstanding shares of HPX’s subsidiaries, other than those holding direct or indirect interests in its Nimba Iron Ore Project (“Nimba Project”); (ii) certain property, plant and equipment; and (iii) certain financial assets (collectively the “Contributed Assets”) in exchange for common stock of Ivanhoe Electric. HPX then distributed 59,909,344 shares of common stock of Ivanhoe Electric to HPX stockholders by way of an in-kind dividend, with each HPX stockholder receiving one share of common stock of Ivanhoe Electric for each HPX share held by the stockholder.
As HPX continued to hold its interest in Ivanhoe Electric immediately following the transfer of the Contributed Assets, there was no resultant change of control in either Ivanhoe Electric or the Contributed Assets. As such, the acquisition by Ivanhoe Electric of the Contributed Assets has been accounted for at historical cost as a transaction between entities under common control.
On June 30, 2022, Ivanhoe Electric completed an initial public offering (“IPO”) of 14,388,000 shares of the Company’s common stock at a price of $11.75 per share, resulting in gross proceeds from the offering of $169.1 million. The Company’s shares were listed on the NYSE American and the Toronto Stock Exchange under the ticker symbol “IE”.
Ivanhoe Electric is a mineral project exploration and development company with a focus on identifying and developing mineral projects, and ultimately mines, associated with the metals necessary for electrification, in particular, copper, nickel, cobalt, vanadium, gold, silver, and the platinum group metals.
The Company’s current mineral projects are located predominantly 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 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 September 30, 2022 (December 31, 2021 — 90.0%). |
| ● | Computational Geosciences Inc. (“CGI”), provides data analytics, geophysical modeling, 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 September 30, 2022 (December 31, 2021 — 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 63.3% as at September 30, 2022 (December 31, 2021 — 63.3%). |
| ● | Kaizen Discovery Inc. (“Kaizen”) holds the Pinaya copper-gold exploration project in Peru. Ivanhoe Electric had an ownership interest in Kaizen of 82.7% as at September 30, 2022 (December 31, 2021 — 82.7%). |
Basis of preparation:
These condensed interim consolidated and combined carve-out financial statements have been prepared under U.S. Generally Accepted Accounting Principles (“U.S. GAAP”).
Basis of preparation — Prior to the restructuring:
These condensed interim consolidated and combined carve-out financial statements include results of the Company for periods prior to the restructuring on April 30, 2021. Up to the date of restructuring, these financial statements have been prepared on a combined basis and the Parent’s net investment in the Company’s operations is shown in lieu of stockholders’ equity. All intercompany balances and transactions have been eliminated in the condensed interim consolidated and combined carve-out financial statements.
7
IVANHOE ELECTRIC INC.
Notes to the Condensed Interim Consolidated and Combined Carve-Out Financial Statements
(Unaudited - Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated)
Prior to the restructuring, the financing of operations was historically managed by the Parent. Net parent investment represents the Parent’s historical investment in the Company and includes accumulated net earnings or losses attributable to the Parent, intercompany balances that were capitalized at the time of the restructuring and direct capital contributions and expense allocations from the Parent to the Company. Assets contributed to Ivanhoe Electric at the time of restructuring have been recorded by the Company during the periods the assets were under the control of the Parent, except for certain loan receivables and advances that have not been allocated to the Company prior to the restructuring completion date (Note 12). A description of the costs allocated to the Company is included in Note 12.
Management believes the assumptions underlying the condensed interim consolidated and combined carve-out financial statements, including the assumptions regarding allocation of expenses, are systematic, rational and reasonable. Nevertheless, the condensed interim consolidated and combined carve-out financial statements may not include all of the actual expenses that would have been incurred by the Company on a stand-alone basis, and may not accurately reflect the Company’s historical financial position, results of operations and cash flows that would have been reported if the Company had been a stand-alone entity during the periods prior to the restructuring. The amounts that would have been or will be incurred on a stand-alone basis could differ from the amounts allocated due to economies of scale, management judgment, cash management and financing obtained as a stand-alone company, or other factors.
Basis of preparation — Subsequent to the restructuring:
The Company’s financial statements for the periods subsequent to April 30, 2021 are consolidated financial statements based on the reported results of Ivanhoe Electric as a stand-alone company.
Reverse stock split:
In June 2022, the Company’s stockholders approved an amendment to the Company’s certificate of incorporation to effect a reverse stock split of the Company’s outstanding common stock at a ratio of 3-for-1 (the “Reverse Stock Split”) effective as of June 16, 2022. The number of authorized shares and the par value of the common stock were not adjusted as a result of the Reverse Stock Split. For periods before June 16, 2022, all references to common stock, options to purchase common stock, per share data, and related information contained in the condensed interim consolidated and combined carve-out financial statements have been retrospectively adjusted to reflect the effect of the Reverse Stock Split.
The condensed consolidated and combined carve-out financial statements have been prepared on a going concern basis, which presumes the realization of assets and satisfaction of liabilities in the normal course of business.
References to “$” refer to United States dollars and “Cdn$” to Canadian dollars.
2. | Significant accounting policies: |
The accompanying condensed interim consolidated and combined carve-out financial statements are unaudited and include all adjustments, consisting of normal recurring entries, which management believes to be necessary for a fair presentation for the dates and periods presented. Interim results are not necessarily indicative of results for a full year. The condensed interim consolidated and combined carve-out financial statements have been prepared in accordance with U.S. GAAP for interim financial information. Accordingly, they do not include all financial information and disclosures required by U.S. GAAP for complete financial statements and should be read in conjunction with the Company’s audited consolidated and combined carve-out financial statements for the year ended December 31, 2021.
The Company discloses in its consolidated and combined carve-out financial statements for the year ended December 31, 2021, those accounting policies that it considers significant in determining its results of operations and financial position. There have been no material changes to, or in the application of, the accounting policies previously identified and described in the Company’s consolidated and combined carve-out financial statements for the year ended December 31, 2021.
8
IVANHOE ELECTRIC INC.
Notes to the Condensed Interim Consolidated and Combined Carve-Out Financial Statements
(Unaudited - Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated)
The Company adopted ASU 2019-12 effective January 1, 2022. The new guidance which simplifies the accounting for income taxes, eliminates certain exceptions with ASC 740 and clarifies certain aspects of the current guidance to promote consistency among reporting entities. The adoption of ASU 2019-12 did not have a material impact on the Company’s condensed interim consolidated and combined carve-out financial statements.
In August 2020, the FASB issued ASU 2020-06 Debt — Debt with Conversion and Other Options (Topic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Topic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The update is to address issues identified as a result of the complexity associated with applying generally accepted accounting principles for certain financial instruments with both liability and equity characteristics. Non-public entities and emerging growth companies applying extended transition periods for new or revised accounting standards are required to adopt the update effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years with early adoption permitted. The Company is currently evaluating the expected impact on the financial statements.
3. | Use of estimates: |
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management of the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities, the related disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. Actual results may differ from these estimates.
The significant judgments made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated and combined carve-out financial statements for the year ended December 31, 2021.
4. | Cash and cash equivalents: |
Of the total cash and cash equivalents at September 30, 2022 and December 31, 2021, $16.7 million and $28.5 million, respectively, was not available for the general corporate purposes of the Company as it was held by non-wholly-owned subsidiaries.
5. | Investments subject to significant influence: |
The Company’s principal investment subject to significant influence is Sama Resources Inc. (“Sama”). Others include its investments in Fjordland Exploration Inc. (“Fjordland”) and Sama Nickel Corporation (“SNC”).
9
IVANHOE ELECTRIC INC.
Notes to the Condensed Interim Consolidated and Combined Carve-Out Financial Statements
(Unaudited - Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated)
6. | Exploration mineral interests: |
| Santa |
| Tintic |
| Pinaya |
| San |
| Mineral |
| Other |
| Total | ||||||||
Balance at December 31, 2021 | $ | 35,075 | $ | 19,588 | $ | 2,511 | $ | 13,607 | $ | 1,708 | $ | 550 | $ | 73,039 | |||||||
Acquisition costs |
| 11,252 |
| 5,788 |
| — |
| — |
| — |
| 350 |
| 17,390 | |||||||
De-recognition (Note a) | (5,700) | — | — | — | — | — | (5,700) | ||||||||||||||
Foreign currency translation |
| — |
| — |
| 15 |
| — |
| — |
| — |
| 15 | |||||||
Balance at September 30, 2022 | $ | 40,627 | $ | 25,376 | $ | 2,526 | $ | 13,607 | $ | 1,708 | $ | 900 | $ | 84,744 | |||||||
a) | Terminated land purchase: |
On November 24, 2021, the Company entered into an agreement to acquire additional land adjacent to the Santa Cruz project and the associated mineral rights. In June 2022, the Company entered into an agreement to extend the closing date of the original agreement to September 20, 2022. The Company elected not to proceed with the transaction and terminated the purchase and sale agreement. 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 condensed interim consolidated and combined carve-out statement of loss (Note 11).
7. | Deferred consideration payable: |
Upon completion of the Company’s IPO on June 30, 2022, the deferred consideration payable was settled with Central Arizona Resources Ltd. (“CAR”). The Company paid CAR $15.0 million in cash and issued 945,626 shares of common stock to CAR in accordance with the original terms of the agreement.
8. | Convertible debt: |
| (a) | Ivanhoe Electric convertible notes: |
| (i) | Series 1 Convertible Notes: |
Between August 3, 2021 and November 17, 2021, the Company completed a financing which included the issuance of $50.0 million aggregate principal amount of unsecured convertible promissory notes (“Series 1 Convertible Notes”). Upon completion of the Company’s IPO on June 30, 2022, the Series 1 Convertible Notes, including accrued interest of $0.9 million, were automatically converted into 5,419,923 shares of common stock of the Company at a conversion price of $9.39 per share (Note 9).
10
IVANHOE ELECTRIC INC.
Notes to the Condensed Interim Consolidated and Combined Carve-Out Financial Statements
(Unaudited - Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated)
| (ii) | Series 2 Convertible Notes: |
On April 5, 2022, the Company completed a financing in which it issued $86.2 million aggregate principal amount of unsecured convertible promissory notes (“Series 2 Convertible Notes”).
The Series 2 Convertible Notes were unsecured and bore interest at 3% per annum, in arrears and payable on the maturity date of July 31, 2023.
Upon completion of the Company’s IPO on June 30, 2022, the Series 2 Convertible Notes, including accrued interest of $0.6 million, were automatically converted into 8,209,035 shares of common stock of the Company at a conversion price of $10.58 per share being a 10% discount to the gross price per share at which common stock was sold in the IPO (Note 9).
The convertible notes along with their embedded features did not contain any equity components, and therefore were recognized as a liability on issuance. The Company elected to measure the convertible notes at fair value, with subsequent changes in fair value recorded in net loss.
(b) | VRB Convertible bond: |
On July 8, 2021, VRB issued a convertible bond for gross proceeds of $24.0 million. The bond has a five-year term and interest accrues at a rate of 8% per annum.
The Company has accounted for the convertible bond as a debt instrument accounted at amortized cost.
9. | Equity: |
Common stock transactions
(a) | IPO: |
On June 30, 2022, the Company completed an IPO of 14,388,000 shares of common stock which were issued at a price of $11.75 per share for gross proceeds of $169.1 million. Directly attributable issuance costs of $11.1 million incurred in conjunction with the IPO were recorded as a reduction in paid in capital.
(b) | Debt conversions: |
On June 30, 2022, $50.9 million of Series 1 Convertible Notes including accrued interest were automatically converted into 5,419,923 shares of common stock of the Company at a conversion price of $9.39 per share.
On June 30, 2022, $86.8 million of Series 2 Convertible Notes including accrued interest were automatically converted 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 debt conversions was recorded at fair value based on the IPO price of $11.75 per share.
(c) | Stock issuance to CAR: |
On June 30, 2022, the Company issued 945,626 shares of common stock to CAR (Note 7). The stock issuance was recorded at fair value based on the IPO price of $11.75 per share.
11
IVANHOE ELECTRIC INC.
Notes to the Condensed Interim Consolidated and Combined Carve-Out Financial Statements
(Unaudited - Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated)
10. | Revenue: |
The Company recognized revenue from the following sources:
Three months ended |
| Nine months ended | ||||||||||
September 30: | September 30: | |||||||||||
Revenue type |
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
Software licensing (Note a) | $ | 2 | $ | — | $ | 6,713 | $ | — | ||||
Data processing services |
| 552 |
| 1,043 |
| 832 |
| 3,993 | ||||
Renewable energy storage systems (Note b) |
| 627 |
| 2 |
| 627 |
| 106 | ||||
Total | $ | 1,181 | $ | 1,045 | $ | 8,172 | $ | 4,099 | ||||
| (a) | On October 15, 2021, the Company entered into a software license agreement whereby the Company provided software that can be used by the licensee in perpetuity for a one-time fee of $6.5 million, which was received in January 2022 and at which time its performance obligation with respect to the license was met. As such, in accordance with the Company’s accounting policy for the sale of software licenses, the license fee revenue was recognized in 2022. Software licensing revenue includes associated services included in the software license agreement. This revenue is included in the data processing segment. |
| (b) | At September 30, 2022, the Company had a contract liability of million (December 31, 2021 — $3.5 million) relating to the sale of renewable energy storage systems. |
11. | Exploration expenses: |
(a) | Exploration expense at the Santa Cruz Project for the three and nine months ended September 30, 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 6(a)). |
12. | Related party transactions: |
Related parties include entities with common direct or indirect shareholders and/or directors. Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions.
The Parent
The nature of the Company’s related party relationship with the Parent is disclosed in Note 1.
12
IVANHOE ELECTRIC INC.
Notes to the Condensed Interim Consolidated and Combined Carve-Out Financial Statements
(Unaudited - Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated)
Cost allocations
Prior to completing the restructuring described in Note 1, the Parent incurred corporate and technical costs attributable to the Company and the Nimba Project. Accordingly, the condensed interim consolidated and combined carve-out financial statements include costs allocations from the Parent, including executive oversight, occupancy, office overhead, accounting, tax, treasury, legal, information technology, human resources and mineral exploration. These allocations were made on the basis of direct usage. All such amounts were deemed incurred and settled by the Company in the period in which the costs were recorded and are included in net parent investment.
Allocated costs for the four months ended April 30, 2021 totaled $1.3 million and are solely from the period prior to the restructuring. The allocated costs are primarily included in general and administrative expenses and exploration expenses in the consolidated and combined statements of loss.
Other related parties
The following table summarizes transactions between the Company and significant related parties.
| Transactions for the |
| Transactions for the nine | |||||
three months ended | months ended | |||||||
September 30, | September 30, | |||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 | |
Expense classification |
|
|
|
|
|
| ||
General and administrative expenses |
| 1,626 |
| 2,052 | 4,678 |
| 3,987 | |
Exploration expenses |
| 2,395 |
| 994 | 5,925 |
| 2,796 | |
| 4,021 |
| 3,046 | 10,603 |
| 6,783 | ||
| (a) | Global Mining Management Corp. (“Global Mining”) is a private company based in Vancouver, Canada, that provides administration, accounting, and other office services to the Parent and the Company on a cost-recovery basis. The Company held 7.1% of Global Mining’s outstanding common shares at September 30, 2022 (December 31, 2021 — 7.1%). |
Transactions incurred with Global Mining include cost allocations from the Parent totaling $645,000 from the period January 1, 2021 to April 30, 2021.
| (b) | Ivanhoe Capital Aviation (“ICA”) is an entity beneficially owned by the Company’s Chief Executive Officer and Chairman. ICA provides use of its aircraft to the Company. |
| (c) | I-Pulse Inc. (“I-Pulse”) is a significant shareholder of the Company. The Company has reimbursed I-Pulse certain consulting expenses paid by I-Pulse on the Company’s behalf. |
13
IVANHOE ELECTRIC INC.
Notes to the Condensed Interim Consolidated and Combined Carve-Out Financial Statements
(Unaudited - Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated)
| (d) | HPX was the parent of the Company prior to the restructuring on April 30, 2021 (Note 1). Post restructuring there was reimbursement to HPX for certain costs paid by HPX on the Company’s behalf. |
13. | Fair value measurement: |
The following table provides the valuation hierarchy classification of assets and liabilities that are recorded at fair value and measured on a recurring basis in the combined balance sheets:
The Ivanhoe Electric Series 1 and Series 2 Convertible Notes were converted into common stock of the Company on June 30, 2022 (Note 8(a)).
14. | Segment reporting: |
The Company’s Chief Executive Officer and Chairman is the Chief Operating Decision Maker (“CODM”) of the Company. The CODM evaluates how the Company allocates resources, assesses performance and makes strategic and operational decisions. Based upon such evaluation, the Company has determined that it has three reportable segments. The Company’s reportable segments are critical metals, data processing and energy storage.
Critical metals is focused on mineral project exploration and development with a focus on identifying and developing mineral projects, and ultimately mines, associated with the metals necessary for electrification.
The data processing segment provides data analytics, geophysical modeling, software licensing and artificial intelligence services for the mineral, oil & gas and water exploration industries.
The energy storage segment develops, manufactures and installs vanadium flow batteries for grid-scale energy storage.
14
IVANHOE ELECTRIC INC.
Notes to the Condensed Interim Consolidated and Combined Carve-Out Financial Statements
(Unaudited - Tabular amounts expressed in thousands of U.S. dollars, unless otherwise indicated)
Segment information for the periods presented is as follows:
| Three months ended September 30, 2022 |
| Nine months ended September 30, 2022 | |||||||||||||||||||||
Critical |
| Data |
| Energy |
| Critical |
| Data |
| Energy |
| |||||||||||||
Metals |
| Processing |
| Storage |
| Total |
| Metals |
| Processing |
| Storage |
| Total | ||||||||||
Revenue | $ | — | $ | 554 | $ | 627 | $ | 1,181 | $ | — | $ | 7,545 | $ | 627 | $ | 8,172 | ||||||||
Intersegment revenues |
| — |
| 89 |
| — |
| 89 |
| — |
| 228 |
| — |
| 228 | ||||||||
Loss (income) from operations |
| 38,669 |
| 640 |
| 2,400 |
| 41,709 |
| 86,552 |
| (3,956) |
| 6,005 |
| 88,601 | ||||||||
Segment Assets |
| 267,548 |
| 6,542 |
| 20,712 |
| 294,802 |
| 267,548 |
| 6,542 |
| 20,712 |
| 294,802 | ||||||||
| Three months ended September 30, 2021 |
| Nine months ended September 30, 2021 | |||||||||||||||||||||
Critical |
| Data |
| Energy |
| Critical |
| Data |
| Energy |
| |||||||||||||
Metals |
| Processing |
| Storage |
| Total |
| Metals |
| Processing |
| Storage |
| Total | ||||||||||
Revenue | $ | — | $ | 1,043 | $ | 2 | $ | 1,045 | $ | — | $ | 3,993 | $ | 106 | $ | 4,099 | ||||||||
Intersegment revenues |
| — |
| 56 |
| — |
| 56 |
| — |
| 100 |
| — |
| 100 | ||||||||
Loss (income) from operations |
| 15,630 |
| 185 |
| 2,548 |
| 18,363 |
| 33,770 |
| (97) |
| 4,863 |
| 38,536 | ||||||||
Segment Assets |
| 106,723 |
| 8,008 |
| 30,126 |
| 144,857 |
| 106,723 |
| 8,008 |
| 30,126 |
| 144,857 | ||||||||
15. | Commitments and contingencies: |
In the ordinary course of business, the Company may be involved in various legal proceedings and subject to claims that arise. Although the results of litigation and claims are inherently unpredictable and uncertain, the Company is not currently a party to any legal proceedings the outcome of which, if determined adversely to it, are believed to, either individually or taken together, have a material adverse effect on the Company’s business, financial condition or results of operations.
16. | Subsequent events: |
On October 24, 2022 the Company entered into an agreement with I-Pulse, a related party of the company, to purchase six Typhoon™ transmitters to be delivered in stages over the course of the next thirty-nine months. The Company uses Typhoon™ to conduct geophysical electrical surveys on exploration targets.
The total purchase price for the six Typhoon™ transmitters is $12.4 million (12.6 million Euros). The agreement also includes annual maintenance costs of $1.7 million (1.7 million Euros) per year. In October 2022, the Company made upfront payments totaling $7.1 million (7.1 million Euros). The remaining payments will be made as each Typhoon™ transmitter system is delivered.
15
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 and combined carve-out 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 and combined carve-out financial statements and the related notes for the fiscal year ended December 31, 2021 included in our final prospectus (the “Final Prospectus”) filed with the Securities and Exchange Commission (the “SEC”) on June 29, 2022 pursuant to Rule 424(b)(4)of the Securities Act of 1933, as amended (the “Securities Act”).
Special Note Regarding Forward-Looking Statements
This Quarterly Report contains forward-looking statements. Those statements include, but are not limited to, statements with respect to: estimated calculations of mineral reserves and resources at our properties including changes in those estimated calculations, anticipated results of exploration activities, plans and objectives, industry trends, our requirements for additional capital, treatment under applicable government regimes for permitting or attaining approvals, government regulation, environmental risks, title disputes or claims, synergies of potential future acquisitions, and our anticipated uses of the net proceeds from our initial public offering. 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, 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: our mineral projects are all at the exploration stage; we have no mineral reserves, other than at the San Matias project; 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 calculations at the Santa Cruz Project are only estimates; actual capital costs, operating costs, production and economic returns may differ significantly from those we have anticipated; the title to some of the mineral properties may be uncertain or defective; our business is subject to changes in the prices of copper, gold, silver, nickel, cobalt, vanadium and platinum group metals; we have claims and legal proceedings against two of our subsidiaries; our business is subject to significant risk and hazards associated with future mining operations; we may fail to identify attractive acquisition candidates or joint ventures with strategic partners or be unable to successfully integrate acquired mineral properties or successfully manage joint ventures; 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; our non-U.S. operations are subject to additional political, economic and other uncertainties not generally associated with domestic operations; and our operations may be impacted by the COVID-19 pandemic, including impacts to the availability of our workforce, government orders that may require temporary suspension of operations, and the global economy.
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 Final Prospectus. Important factors that could cause actual results to differ materially from our expectations, or cautionary statements, are disclosed under “Risk Factors” in the Final Prospectus. 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.
Overview
We are a United States domiciled minerals exploration and development company with a focus on developing mines from mineral deposits principally located in the United States in order to support American supply chain independence and to deliver the critical metals necessary for electrification of the economy. We believe the United States is significantly underexplored and will yield major new discoveries of these metals. Our mineral projects focus on copper, nickel, cobalt, vanadium, gold, silver, and the platinum group metals.
16
“Our” mineral projects refers to our interests in such projects which may be a direct ownership interest in mineral titles (including through subsidiary entities), a right to acquire mineral titles through an earn-in or option agreement, or, in the case of our investments in publicly listed companies in Canada, through our ownership of the equity of those companies, that have an interest in such mineral projects.
Our two main mineral projects are located in the United States and are known as the Santa Cruz Copper Project (“Santa Cruz” or the “Santa Cruz Project”) in Arizona and the Tintic Copper-Gold Project (“Tintic” or the “Tintic Project”) in Utah. We have the option to acquire 100% of the mineral rights constituting the Santa Cruz Project, and we currently own an 84.3% ownership interest in the mineral rights to the Tintic Project by acreage with the balance of the mineral rights controlled by leases.
Our other key mineral projects are the Hog Heaven Project, located in Montana (the “Hog Heaven Project”), and the Ivory Coast Project, which is held through our 23% equity interest in Sama Resources Inc. (“Sama”) and our 30% direct interest in the Sama Nickel Corporation Inc. joint venture.
We also have investments in publicly traded companies in Canada, and through our ownership of equity in those companies, we have an indirect interest in mineral projects in the United States, Canada, Colombia, Ivory Coast and Peru.
In addition to our mineral projects, we also own controlling interests in two technology companies: VRB Energy Inc. (“VRB”) and Computational Geosciences Inc. (“CGI”). As of September 30, 2022, we owned 90.0% of the outstanding shares of VRB. VRB and its subsidiary companies are primarily engaged in the design, manufacture, installation, and operation of energy storage systems. As of September 30, 2022, we owned 94.3% of CGI’s outstanding shares. CGI has developed technology that consists of sophisticated codes to process geophysical data and build 3D subsurface images that could indicate the presence of various natural resources, including metallic minerals and water. CGI offers mineral prospectivity and drill target identification services, data analytic tools and optimization of operational processes. CGI provides fee-for-service and licensing agreements for one-off technology applications to customers in the area of critical minerals, energy and water exploration.
Initial Public Offering
On June 30, 2022, we completed an initial public offering (“IPO”) of 14,388,000 shares of our common stock at a price of $11.75 per share, resulting in gross proceeds from the offering of $169.1 million. The Company’s shares were listed on the NYSE American and the Toronto Stock Exchange under the ticker symbol “IE”.
Reverse Stock Split
On June 16, 2022, we effected a reverse stock split of our outstanding common stock at a ratio of 3-for-1 (the “Reverse Stock Split”). The number of authorized shares and the par value of the common stock were not adjusted as a result of the Reverse Stock Split. In this Quarterly Report, all references to common stock, options to purchase common stock, per share data and related information have been retrospectively adjusted to reflect the effect of the Reverse Stock Split for all periods presented.
Impact of the COVID-19 Pandemic
The COVID-19 global pandemic has caused governments worldwide to implement measures to slow the spread of the outbreak through quarantines, travel restrictions, business shutdowns, and other measures. The COVID-19 pandemic has negatively affected the global economy, disrupted financial markets and international trade, resulted in increased unemployment levels and significantly affected global supply chains, all of which have and are expected to continue to affect our future exploration activities and business. To the extent the COVID-19 pandemic adversely affects our business prospects, financial condition, and results of operation, it may also have the effect of exacerbating many of the other risks described under the heading “Risk Factors” in our Final Prospectus.
Segments
We account for our business in three business segments – (i) critical metals; (ii) data processing services and (iii) energy storage systems.
17
Significant Components of Results of Operations
Revenue, Cost of Sales and Gross Profit
We generate revenue from our technology businesses CGI and VRB, which are included in the data processing and energy storage systems business segments, respectively. We have not generated any revenue from our mining projects because they are in the exploration stage. We do not expect to generate any revenue from our mining projects for the foreseeable future.
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 stock compensation expenses of the employees performing these activities.
Exploration expenses also include payments under earn-in and option agreements where the option right is with respect to entities owning the underlying mineral project in the exploration 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 which may have been acquired as of the date of termination.
General and Administrative Expenses
Our general and administrative expenses consist of salaries and benefits, stock compensation, professional and consultant fees, insurance and other general administration costs. Our general and administrative expenses have increased significantly now that we are operating as a public company and have commenced strengthening our management team. We expect higher costs related to salaries, benefits, stock compensation, legal fees, compliance and corporate governance, accounting and audit expenses, stock exchange listing fees, transfer agent and other shareholder-related fees, directors’ and officers’ and other insurance costs and other administrative costs.
Research and Development Expenses
Expenditures on research and development activities are recognized as an expense in the period in which they are incurred. Since 2018, the majority of our research and development expenses came from CGI’s data processing business, which includes amortization expenses related to its artificial intelligence intellectual property, which it acquired in 2018. VRB also conducts research and development activities to continue to advance its energy storage system technology. We expect research and development expenses to increase as our technology-based businesses continue to grow.
Results of Operations
Three Months Ended September 30, 2022 Compared to Three Months Ended September 30, 2021
For the three months ended September 30, 2022, we recorded a net loss attributable to common stockholders of $40.4 million ($0.43 per share), compared to $17.6 million ($0.28 per share) for the three months ended September 30, 2021, which was an increase of $22.7 million primarily due to a $24.0 million increase in exploration expenses.
18
Exploration expenses of $34.0 million for the three months ended September 30, 2022, increased by $24.0 million from $10.0 million for the three months ended September 30, 2021. This increase is largely attributable to exploration expenditures at the Santa Cruz Project which was acquired in August 2021. During the three months ended September 30, 2022, expenditures mainly focused on exploration activities at:
| ● | the Santa Cruz Project where $21.8 million of exploration expenditure was incurred in the quarter as compared to $2.2 million in the third quarter of 2021. Activities at Santa Cruz were focused on the ongoing large-scale drilling program. As of September 30, 2022, up to seven drill rigs were in operation and a total of 19,398 meters of drilling had been completed during the quarter. As of September 30, 2022, a total of 52,720 meters had been drilled which included 23,106 meters of exploration drilling and 29,614 meters of drilling that is being used to collect resource in-fill, geotechnical, hydrological and metallurgical information required to assess potential mine development options. In addition, in July 2022, we completed a 26.5-km2 (6,500-acre), 3D induced polarization (“IP”) and resistivity geophysical survey using our proprietary high-power Typhoon™ transmitter system. Included in the $21.8 million of exploration expenditure was a $5.7 million expense related to amounts that had been previously capitalized as part of an agreement to purchase certain land adjacent to the Santa Cruz Project. In September 2022, we elected to not proceed with the transaction and terminated the agreement and as a result the mineral interest asset was de-recognized; and |
| ● | the San Matias Project where $6.0 million of expenditure was incurred in the quarter. Activities at San Matias were focused on continuing the 25,000-meter initial phase drill program in support of the Feasibility Study. |
General and administrative expenses of $6.9 million for the three months ended September 30, 2022 decreased by $1.0 million from $7.9 million in the three months ended September 30, 2021. Several items contributed to the decrease, including:
| ● | the three months ended September 30, 2021 included $1.4 million of financing fees relating to the 2021 Series 1 Convertible Notes and common stock private placement. There was no similar expense in the three months ended September 30, 2022; |
| ● | a $0.9 million decrease in aviation expenditures in the three months ended September 30, 2022 to $0.2 million as compared to $1.1 million in the three months ended September 30, 2021. |
| ● | a $0.4 million decrease in administration expenses at Kaizen Discovery largely due to lower legal expenses in the quarter as compared to the three months ended September 30, 2021, which included significant costs related to the AM Gold litigation. |
| ● | The above decreases were offset by $1.6 million expense in relation to the new directors and officers’ insurance policy we entered into when we became a public company in June 2022. There was no similar expense in 2021. |
Revenue for the three months ended September 30, 2022 was $1.2 million, an increase of $0.1 million from $1.0 million for the three months ended September 30, 2021. Although total revenue was relatively consistent with the similar period in 2021, the mix of revenue changed.
19
CGI’s software licensing and data processing services to the mining and oil and gas industries represented 46.9% of our revenue for the three months ended September 30, 2022 ($0.6 million) and 99.8% for the three months ended September 30, 2021 ($1.0 million). The decrease in CGI’s revenue was a result of a new contract that CGI entered into with one of its customers upon the expiration in 2021 of a previous three-year contract. Under the new agreement with this customer, CGI agreed to license certain software for a one-time fee of $6.5 million, which was received and recognized in the first quarter of 2022. As at September 30, 2022, there only remains a final payment of $250,000 under this agreement due in 2023. We cannot provide any assurance that we will enter into any additional contracts with this customer in the future.
VRB’s energy storage system revenue represented 53.1% of our revenue for the three months ended September 30, 2022 ($0.6 million) and 0.02% for the three months ended September 30, 2021 ($0.0 million). During the three months ended September 30, 2022, VRB delivered, installed and commissioned a 125kW/500kWh energy storage system to a customer which resulted in $0.3 million of revenue being recognized. In addition, VRB also recognized $0.3 million in revenue from the sale of vanadium electrolyte.
Research and development expenses for the three months ended September 30, 2022 were $1.1 million, consistent with the $1.0 million incurred in the same period in 2021.
Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021
For the nine months ended September 30, 2022, we recorded a net loss attributable to common stockholders of $110.2 million ($1.50 per share), compared to $33.0 million ($0.54 per share) for the nine months ended September 30, 2021, which was an increase of $77.2 million. Significant contributors to this increase in the nine months ended September 30, 2022 were a $50.6 million increase in exploration expenditures, a $18.8 million increase in non-cash loss on revaluation of convertible debt and a $2.6 million increase in general and administrative expenses, offset by an increase in revenue of $4.1 million compared to the nine months ended September 30, 2021.
Exploration expenses of $75.2 million for the nine months ended September 30, 2022, increased by $50.6 million from $24.6 million for the nine months ended September 30, 2021. This increase is largely attributed to exploration expenditures at the Santa Cruz Project. During the nine months ended September 30, 2022, expenditures largely focused on exploration activities at:
| ● | the Santa Cruz Project where $46.4 million of exploration expenditure was incurred in the nine months ended September 30, 2022 compared to $2.6 million incurred in the nine months ended September 30, 2021. Activities during the nine months ended September 30, 2022 at Santa Cruz were focused on a program of resource in-fill, geotechnical, hydrological and metallurgical drilling, in addition to a 26.5 km2 (6,500 acre) Typhoon™ 3D IP survey that was completed in July 2022. Included in the $46.4 million of exploration expenditure was a $5.7 million expense related to amounts that had been previously capitalized as part of an agreement to purchase certain land adjacent to the Santa Cruz Project. In September 2022, the agreement was terminated by the Company. |
| ● | the San Matias Project where $11.8 million of exploration expenditure was incurred in the nine months ended September 30, 2022, focused on the commencing of a Feasibility Study on the Alacran deposit in May 2022 which included starting the 25,000-metre initial phase drill program; and |
| ● | the Pinaya Project where $2.4 million of exploration expenditure was incurred in the nine months ended September 30, 2022. Activities included a 3,046-meter drill program that began in November 2021 and that was completed in January 2022 as well as expenditures related to the IP survey which began in March 2022 and that was completed on June 30, 2022. |
General and administrative expenses of $16.7 million for the nine months ended September 30, 2022 increased by $2.6 million from $14.1 million in the nine months ended September 30, 2021. Several items contributed to the increase, including:
| ● | a $1.1 million increase in accounting and audit fees largely related to the requirements of our filings and IPO; |
| ● | a $1.7 million increase in directors and officers insurance expenses during the nine months ended September 30, 2022 in relation to the new directors and officers’ insurance policy we entered into when we became a public company in June 2022. There was no similar expense in prior years; |
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| ● | a $0.7 million increase in administration expenses at VRB primarily due to an increase in professional fees in relation to certain technical studies that it was conducting; |
| ● | The above increases were offset by $1.4 million of financing fees relating to 2021 Series 1 Convertible Notes and common stock private placement in the nine month period ended September 30, 2021. There was no similar expense in the nine months ended September 30, 2022. |
During the nine months ended September 30, 2022, we recorded a non-cash $19.0 million loss on revaluation of convertible debt which related to the conversion of the Notes that were automatically converted into shares of common stock upon the completion of the IPO on June 30, 2022.
Revenue for the nine months ended September 30, 2022 was $8.2 million, an increase of $4.1 million from $4.1 million for the nine months ended September 30, 2021.
CGI’s software licensing and data processing services to the mining and oil and gas industries represented 92.3% of our revenue for the nine months ended September 30, 2022 ($7.5 million) and 97.4% for the nine months ended September 30, 2021 ($4.0 million). The increase in CGI’s revenue was a result of a new contract that CGI entered into with one of its customers upon the expiration in 2021 of a previous three-year contract. Under the new agreement with this customer, CGI agreed to license certain software for a one-time fee of $6.5 million, which was received and recognized in the first quarter of 2022. As at September 30, 2022, there only remains a final payment of $250,000 under this agreement due in 2023. We cannot provide any assurance that we will enter into any additional contracts with this customer in the future.
VRB’s energy storage system revenue represented 7.7% of our revenue for the nine months ended September 30, 2022 ($0.6 million) and 2.6% for the nine months ended September 30, 2021 ($0.1 million). During the nine months ended September 30, 2022, VRB delivered, installed and commissioned a 125kW/500kWh energy storage system to a customer which resulted in $0.3 million of revenue being recognized. In addition, VRB also recognized $0.3 million in revenue from the sale of electrolyte.
Research and development expenses for the nine months ended September 30, 2022 were $3.7 million, an increase of $1.0 million from the same period in 2021 attributable to a $0.6 million increase in research and development activity at CGI and a $0.4 million increase at VRB. Research and development activities increased in 2022 at CGI as CGI has been focused on developing its services to generate new business after completing the $6.5 million software licensing agreement.
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.
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We generate revenue only 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 and convertible securities.
On April 5, 2022, we raised funds by selling Series 2 Convertible Notes for gross proceeds of $86.2 million. These funds were raised to finance our activities through the completion of our IPO.
On June 30, 2022, we closed our IPO of 14,388,000 shares of our common stock at a price of $11.75 per share. The gross proceeds from the offering were approximately $169.1 million, before deducting underwriting discounts and commissions and estimated offering expenses payable by us.
At September 30, 2022, and December 31, 2021, we had cash and cash equivalents of $177.7 million and $49.9 million, respectively, and a working capital balance of $172.1 million and $17.7 million, respectively. Of the total cash and cash equivalents at September 30, 2022 and December 31, 2021, $16.7 million and $28.5 million, respectively, was not available for the general corporate purposes of the Company as these amounts were held by non-wholly-owned subsidiaries.
We believe that we will have sufficient cash resources to carry out our business plans, including our currently planned exploration activities at our mineral projects, for at least the next 12 months. We have based these estimates on our current assumptions which may require future adjustments based on our ongoing business decisions as well as, in particular, exploration success at our mineral projects. Accordingly, we may require additional cash resources earlier than we currently expect or we may need to curtail currently planned exploration activities.
Our significant operational expenses include the payments that we anticipate making under the various earn-in and option agreements to which we are a party. These agreements are structured to provide us with flexibility whereby our ability to continue to explore on a mineral project is contingent on funding agreed specified levels over specified time intervals. A summary of our mineral obligations and payments as at September 30, 2022 are as follows:
Mineral Project Obligation and Payments as at September 30, 2022 (in $ thousands)
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Cash Balances as of September 30, 2022
The table below discloses the amounts of cash disaggregated by currency denomination as of September 30, 2022 in each jurisdiction that our affiliated entities are domiciled.
Currency by Denomination (in USD Equivalents) | |||||||||||||||
Canadian | Chinese | ||||||||||||||
| US dollars |
| dollars |
| Renminbi |
| Other |
| Total | ||||||
(In $ thousands) |
|
|
|
|
| ||||||||||
Jurisdiction of Entity: |
|
|
|
|
|
|
|
|
|
| |||||
USA | $ | 159,733 | $ | 582 | $ | — | $ | — | $ | 160,315 | |||||
Cayman Islands |
| 9,398 |
| 9 |
| — |
| — |
| 9,407 | |||||
Canada |
| 3,046 |
| 2,654 |
| — |
| — |
| 5,700 | |||||
China |
| — |
| — |
| 1,607 |
| — |
| 1,607 | |||||
British Virgin Islands |
| 451 |
| 2 |
| — |
| — |
| 453 | |||||
Other |
| 62 |
| 1 |
| — |
| 121 |
| 184 | |||||
Total | $ | 172,690 | $ | 3,248 | $ | 1,607 | $ | 121 | $ | 177,666 | |||||
Our subsidiary VRB, domiciled in the Cayman Islands, is subject to certain foreign exchange restrictions with respect to its PRC subsidiaries. There are foreign exchange policies in the PRC that limit the amount of capital that can be directly transmitted offshore from VRB’s PRC subsidiaries to VRB. Since their incorporation, these PRC subsidiaries have had accumulated losses and have not declared or paid any dividends or made any distribution of earnings.
There were no cash transfers to or from our PRC subsidiaries in the form of intercompany loans during the three and nine month periods ended September 30, 2022 and 2021.
Refer to Note 22 of our audited consolidated and combined carve out financial statements for the year ended December 31, 2021 included in the Final Prospectus, which outlines other restrictions on transfers of net assets from our consolidated subsidiaries to the Company.
Cash Flows
The following table presents our sources and uses of cash for the periods indicated:
| Nine months ended September 30, | |||||
| 2022 |
| 2021 | |||
(In thousands) |
|
|
| |||
Net cash (used in) provided by: |
|
|
| |||
Operating activities | $ | (78,777) | $ | (29,523) | ||
Investing activities |
| (38,343) |
| (8,803) | ||
Financing activities |
| 245,508 |
| 109,355 | ||
Effect of foreign exchange on cash |
| (572) |
| (183) | ||
Total change in cash | $ | 127,816 | $ | 70,846 | ||
Operating activities.
Net cash used in operating activities for the nine months ended September 30, 2022 was $78.8 million, an increase of $49.3 million from the $29.5 million of net cash used for the nine months ended September 30, 2021.
Net cash used in operating activities for all periods presented was largely 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.
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Investing activities.
Our investing activities generally relate to acquisitions of mineral property interests and purchases of shares in companies that we may partner with. To date, because our mining projects are in the exploration stage, we have not incurred material capital expenditures.
Net cash used in investing activities for the nine months ended September 30, 2022 of $38.3 million was mainly attributable to $33.9 million for payments for mineral interests of which $28.8 million were for the Santa Cruz Project and $5.8 million were for the Tintic Project.
Financing activities.
During the nine months ended September 30, 2022, there was $246.5 million of net cash provided by financing activities representing the $159.3 million of net cash raised upon the closing of our IPO on September 30, 2022, and $86.2 million raised from the sale of the Series 2 Convertible Notes.
Contractual Obligations and Commitments
As of September 30, 2022, we had the following material contractual obligations in addition to our mineral project payments described above.
Payments due by period (in thousands) | |||||||||||||||
|
| Less than |
|
|
| More than | |||||||||
| Total |
| 1 year |
| 1-3 years |
| 4-5 years |
| 5 years | ||||||
Long-term debt obligations (a) | $ | 24,000 | $ | — | $ | — | $ | 24,000 | $ | — | |||||
Leases |
| 1,347 |
| 353 |
| 991 |
| 2 |
| — | |||||
Other long-term contractual liabilities (b) |
| 363 |
| — |
| 363 |
| — |
| — | |||||
Total contractual obligations | $ | 25,710 | $ | 353 | $ | 1,354 | $ | 24,002 | $ | — | |||||
| (a) | Long-term obligations include the $24.0 million convertible bond issued by VRB that matures in 2026 if not converted to common shares of VRB prior such date. At September 30, 2022, the value of the convertible bond including accrued interest was $26.4 million. |
| (b) | Includes all other long-term financial liabilities reflected on our balance sheet that are contractually fixed as to timing and amount. |
Off-Balance Sheet Arrangements
As of September 30, 2022, 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.
Critical Accounting Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated and combined carve-out financial statements which have been prepared in accordance with U.S. 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.
24
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 is described in Note 3 to our audited consolidated and combined carve-out financial statements for the year ended December 31, 2021 included in the Final Prospectus. 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 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.
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, Canada, Colombia, Peru, the Ivory Coast and the PRC.
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 September 30, 2022.
Recently adopted accounting standards and recent accounting pronouncements
There were no significant updates to previously reported accounting standards. See Note 2 of the condensed interim consolidated and combined carve-out financial statements included in this Quarterly Report.
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Emerging Growth Company Status
We are an “emerging growth company”, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). The JOBS Act exempts emerging growth companies from being required to comply with new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. We have elected not to opt out of this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our condensed interim consolidated and combined carve-out financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.
The accounting policies applied in our condensed interim consolidated and combined carve-out financial statements financial statements included elsewhere in this Quarterly Report reflect the early adoption of certain accounting standards as the JOBS Act does not preclude an emerging growth company from early adopting a new or revised accounting standard to the extent early adoption is allowed by the accounting standard.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Not Applicable.
Item 4. Controls and Procedures.
Management’s Evaluation of our Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”) is (1) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.
As of September 30, 2022, our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our principal executive officer and principal financial officer have concluded based upon the evaluation described above that, as of September 30, 2022, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
During the quarter ended September 30, 2022, there were no changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15(d)-15(f) promulgated under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time, we may become subject to various legal proceedings that are incidental to the ordinary conduct of our business. Although we cannot accurately predict the amount of any liability that may ultimately arise with respect to any of these matters, we make a provision for potential liabilities when we deem them probable and reasonably estimable. These provisions are based on current information and legal advice and may be adjusted from time to time according to developments. We believe that none of the litigation in which we are currently involved, or have been involved in since the beginning of our most recently completed fiscal year, individually or in the aggregate, is material to our financial condition, cash flows or results of operations.
Two of our subsidiaries are involved in legal proceedings described below.
Our subsidiary Kaizen is currently involved in litigation in British Columbia, Canada which commenced in 2017. The proceedings relate to a claim by AM Gold Inc. (“AMG”) against Kaizen in respect of its acquisition of the Pinaya Project. On September 2, 2022, the Supreme Court of Canada dismissed the application of AMG seeking leave to appeal the January 21, 2022 decision of the British Columbia Court of Appeal. The British Columbia Court of Appeal decision upheld the March 23, 2021 decision of the trial judge which dismissed all of AMG’s claims against Kaizen. There is no further avenue of appeal or review available to AMG from the Supreme Court of Canada’s judgment. In a separate decision by the trial judge, Kaizen was awarded the costs of the trial on an enhanced, substantial-indemnity basis against AMG and its principal John Fiorino. AMG and Mr. Fiorino appealed the costs award and on August 22, 2022, the Court of Appeal partially allowed the appeal, reversing the substantial-indemnity costs order. The Court of Appeal upheld the order that Mr. Fiorino be liable to pay the costs along with AMG and directed that such costs are payable at 1.5 times the rates provided in the BC Supreme Court Rules Tariff of Costs. Kaizen is also entitled to recover the costs of the merits appeal and the application for leave to the Supreme Court of Canada. Kaizen will have to pay AMG’s cost with respect to the costs appeal.
Our subsidiary Cordoba is currently involved in two legal proceedings. The first is a criminal lawsuit filed by Cordoba in late 2018 and in January 2019 with the Colombian prosecutors against nine members of former Colombian management alleging breach of fiduciary obligations, abuse of trust, theft and fraud. This proceeding is ongoing. In the second proceeding, Cordoba (along with the National Mining Agency, Ministry of Mines and Energy, the local environmental authority, the Municipality of Puerto Libertador and the State of Cordoba) were served with a class action claim by the Alacran Community. This class action seeks (i) an injunction against Cordoba´s operations in the Alacrán area and (ii) an injunction against the prior declaration by the authorities that the Alacran Community´s mining activities were illegal. The claim was initially filed with the Administrative Court of Medellín, which remanded the case to the Administrative Court of Montería, which contested it and submitted the case to the Council of State. The Council of State determined the Administrative Court of Montería as the competent tribunal, where the process is currently being conducted. The Administrative Court of Montería admitted the commencement of the class action on September 2021. The decision was challenged by Cordoba and other defendants and, accordingly, the Court is required to adopt a decision, which is still pending. While the court matters proceed, Cordoba will incur additional costs that will negatively impact its financial position. As well, the litigation process is uncertain and it is possible that the second proceeding is resolved against Cordoba, which could have a material adverse effect on its business, results of operations, financial condition and prospects.
Item 1A. Risk Factors.
There have been no material changes to the Risk Factors previously disclosed in the Final Prospectus. The risks described in the Final Prospectus are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and operating results.
27
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Unregistered Sales of Equity Securities for the Three Months Ended September 30, 2022
There were no unregistered sales of equity securities during the three months ended September 30, 2022.
Use of Proceeds from our IPO
On June 27, 2022, our Registration Statement on Form S-1 (File No. 333-265175) relating to our IPO of our common stock was declared effective by the SEC.
On June 30, 2022, we completed our IPO and issued and sold 14,388,000 shares of our common stock at a price to the public of $11.75 per share for aggregate gross proceeds of $169.1 million. BMO Capital Markets Corp. and Jefferies LLC acted as joint book-running managers for the IPO and as representatives of the underwriters.
The net proceeds from the IPO to us, after deducting underwriting discounts and commissions and offering expenses of $11.1 million, were $158.0 million. No IPO expenses were paid directly or indirectly to any of our directors or officers (or their associates) or persons owning 10.0% or more of any class of our equity securities or to any other affiliates. There has been no material change in our planned use of the net proceeds from our IPO described in the Final Prospectus.
28
Item 6. Exhibits.
Exhibit |
| Description |
3.1 |
| |
3.2 |
| |
10.1* | Employment Agreement dated October 21, 2022 between the Company and Taylor Melvin. | |
31.1* |
| |
31.2* |
| |
32.1* |
| |
32.2* |
| |
101.INS |
| Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
101.SCH |
| Inline XBRL Taxonomy Extension Schema Document |
101.CAL |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF |
| Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB |
| Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104 |
| Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* | Filed herewith. |
29
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: November 14, 2022 | By: | /s/ Robert Friedland |
Robert Friedland | ||
Chief Executive Officer | ||
(Principal Executive Officer) | ||
Date: November 14, 2022 | By: | /s/ Catherine Barone |
Catherine Barone | ||
Interim Chief Financial Officer | ||
(Principal Financial Officer) |
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EXHIBIT 10.1
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 21st day of October 2022.
BETWEEN:
IVANHOE ELECTRIC INC., a Delaware corporation, having an office at Suite 606-999 Canada Place, Vancouver, British Columbia, Canada, V6C 3E1
| (the "Company") |
AND:
TAYLOR MELVIN, residing at 6101 E. Montecito Avenue, Scottsdale, AZ 85251
| (the "Employee") |
WHEREAS:
(A) Ivanhoe Electric Inc. is a technology led mineral exploration company with corporate offices located in Vancouver, British Columbia, Canada and to be established in the United States. Through subsidiaries and investment, the Company funds and manages exploration programs in several jurisdictions globally but with a focus in the United States;
(B) the Company wishes to engage the Employee as President and Chief Executive Officer of the Company (the “Position”);
(C) during the Term of this Agreement, the Employee will also serve as a member of the Company’s Board of Directors (the “Board”);
(D) the Employee’s payroll and benefit plans and other related employee costs provided hereunder may be administered by Global Mining Management Corporation (“Global”), and if so administered all related costs will be paid by the Company in accordance with the Global Mining Management Corporation Shareholders’ Corporate Management and Cost Sharing Agreement dated December 4, 2013 as amended January 1, 2016;
(E) the Parties hereto wish to enter into this Agreement for the purpose of fixing the compensation and terms applicable to the employment of the Employee during the period hereinafter set forth; and
(F) all references in this Agreement to dollars are United States Dollars.
NOW THEREFORE THIS AGREEMENT WITNESSES that the Company and Employee (collectively the “Parties”), as Parties hereto, in consideration of the respective covenants and agreements on the part of each of them herein contained, and each intending to be legally bound hereby, do hereby covenant and agree as follows:
Section 1 Employment
1.1 The Company hereby engages the Employee, and the Employee acknowledges and agrees, to perform the function of President and Chief Executive Officer for the Company, initially based in Phoenix, Arizona, reporting to the Board. You will have the mandate, in consultation with the Board, to develop a corporate head office in or outside Arizona.
1.2 In fulfilment of the Position, the Employee will carry out such duties and responsibilities as are customarily performed by persons in such role within the industry, which shall include without limitation responsibility for all aspects of the advancement of the business of the Company, including oversight of the Company’s mineral project exploration and development activities; developing the strategic direction of the Company; funding and capital raising initiatives; maintaining relationships with the Company’s shareholders and strategic partners; maintaining and developing the Company’s relationship with local communities; hiring and termination of employees of the Company other than those reporting to the Board; as well as being the public face of the Company, and such other duties as the Company may assign from time to time.
1
1.3 The Employee may be expected to travel outside of the work location where based to the Company's offices, project sites and other locations as required.
Section 2 Term
This Agreement will be effective from November 21, 2022 and will remain in full force and effect until terminated as hereinafter provided (the “Term”).
Section 3 Responsibility
Subject to the approval and/or ratification of the Board in accordance with Company policies regarding delegation of authorities, the Employee will have the authority and duty to perform and carry out such duties and responsibilities as are set out in Section 1.2 and related duties as may from time to time be assigned, delegated, limited or determined by the Board.
Section 4 Other Activities
4.1 The Employee's employment hereunder shall be substantially full-time and exclusively for the benefit of the Company, except as permitted herein.
4.2 The Employee agrees not to undertake, or be engaged in the performance of, any work, services or other business activity (which does not include charitable or philanthropic endeavors that do not materially interfere with the Employee’s employment hereunder), directly or indirectly, for any other person, firm, company, other legal entity or governmental agency or organization, with the exception of the Employee’s employment with the Company and directorships with the Company unless it is determined by prior written approval of the Board or the Chairman of the Board that such activities will not interfere with, or impede, in any significant manner the performance of Employee’s duties in the Position, and further provided that:
(a) before the Employee can engage in any work, services or other business activity which involves the Employee owning or acquiring any interest in excess of five percent, directly or indirectly, in any mining or technology company or the rendering of any advice or service to another person, partnership or other legal entity or a joint venture engaged in the business of exploring for and/or mining minerals, the Employee must disclose full particulars thereof in writing to the Board and within 15 days after the date of such disclosure, the Employee must receive from the Board or its Chairman a decision that such activities by the Employee will not, in the opinion of the Board, interfere or be in conflict with the Employee's performance of his duties to the Company hereunder. If a decision is not received from the Board or its Chairman within such 15-day period, the activities will be deemed to interfere or be in conflict with the Employee’s performance of his duties to the Company hereunder unless and until a contrary decision is received from the Board or its Chairman,
(b) before engaging in any work, services or business activity other than the kind described in sub-paragraph (a) of this Section 4.2, the Employee shall have disclosed same in writing to the Board, and
(c) notwithstanding the foregoing, the Employee may engage in work for an affiliate of the Company, including serving on the board of directors of any affiliate, consistent with his responsibilities for the Company to the extent agreed by the Board or its Chairman.
4.3 The Employee shall refer to the Board any and all facts, matters and transactions that may adversely affect the Employee's relationship with the Company or the Employee’s ability to perform his duties, or in respect of which an actual or potential conflict of interest between the Employee and the Company has arisen or may arise, and the Employee shall not proceed with any such matter or transaction until the Board’s approval therefor is obtained. For purposes of clarification, this provision is not intended to limit in any way the Employee's other fiduciary obligations to the Company that may arise in law or in equity.
4.4 Without limiting the generality of the foregoing, the Employee acknowledges, covenants and agrees that under no circumstances will his provision of services in the Position involve or include, nor will the Employee be asked by any director or officer of the Company to engage in, any activities contrary to the Corruption of Foreign Public Officials Act (Canada) or the United States Foreign Corrupt Practices Act and any other similar legislation in the jurisdiction in which the Employee is employed or to whose laws the Employee may be subject.
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4.5 The Employee shall adhere to the Company's policies in effect from time to time.
Section 5 Compensation
5.1 In consideration of the performance by the Employee of his responsibilities and duties in the Position hereunder:
(a) The Company shall pay the Employee the sum of five hundred thousand dollars ($500,000.00) (the "Base Salary") per year. The Base Salary and all other forms of compensation payable hereunder are subject to deduction for all applicable taxes, payroll deductions and withholdings required by law and otherwise in accordance with the payroll practices of the Company for similarly situated employees of the Company.
(b) The Base Salary will be reviewed annually and, if increased or decreased, such increased or decreased amount shall be the Base Salary hereunder provided however that the Base Salary may only be decreased as part of a general executive or company-wide reduction for cost savings or similar requirements;
(c) The Employee will be eligible to participate in the compensation plans of the Company in effect from time to time, subject to the terms of the applicable plans;
(d) The Employee will be eligible on an annual basis to receive short term and long term incentive awards, with a short-term bonus target of 100% of Base Salary (“Short Term Bonus”) and a long-term bonus target of 200% of Base Salary for 2023, based on the terms and conditions of the Company's then effective annual incentive and equity-based incentive plans or programs as adopted by the Company’s Board upon recommendation by its Compensation Committee and contingent upon the degree of achievement of any applicable performance goals. Equity plans (“Equity Plans”) shall include but not be limited to the 2022 Long Term Incentive Plan and associated award agreements, including but not limited to the Restricted Stock Unit Award Agreement and the Stock Option Agreement, and any similar agreements entered by the Parties hereafter. Targets for short term and long term incentive awards will be reviewed and established by the Board and the Compensation Committee on an annual basis; provided that the Short Term Bonus target will not be less than 100% of Base Salary in any future year during the Term.
(i) The amount of the Short Term Bonus that will be earned shall be determined based upon performance criteria and targets established by the Board and the Compensation Committee, and the achievement and/or satisfaction of such criteria and targets during the time employed. For example, if Employee is employed for a partial year, Employee shall receive the Short Term Bonus on a pro rata basis that considers the degree of achievement and/or satisfaction of performance criteria and targets prior to Employee’s separation from service and the number of months worked divided by the total number of months in the reporting year, subject to (ii) below.
(ii) Employee shall be entitled to receive the Short Term Bonus regardless of employment status on the date the Short Term Bonus is calculated or paid provided, however, that no Short Term Bonus will be earned if the Employee’s employment is terminated for Cause or by reason of voluntary termination.
(e) The Company will make an initial grant of stock options (“Options”) and restricted stock units (“RSUs”) under its equity incentive plan and in accordance therewith, such number of Options to equal 500,000 with a strike price of not less than $11.75 per share or at least equal to the fair market value per share on the date of grant if the market value is greater than $11.75 per share on the date of grant, designated to the extent permissible in the award agreement as Incentive Stock Options with the remainder as Nonqualified Stock Options, and 750,000 RSUs pursuant to the terms and conditions of award agreements attached hereto. Options and RSUs will vest in accordance with the terms of the applicable Equity Plans.
(f) The Employee will be eligible to participate in employee benefit plans (including health, medical, dental, and other insurance benefits) from time to time in effect for similarly situated employees of the Company, except to the extent such plans are duplicative of benefits otherwise provided to the Employee. The Employee's participation will be subject to the terms of the applicable plan documents and generally applicable policies of the Company.
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Section 6 Expenses
The Company will reimburse the Employee for any and all reasonable and documented expenses actually and necessarily incurred by the Employee in connection with the performance of his duties under this Agreement in accordance with the policies of the Company in effect from time to time. The Employee will furnish the Company with an itemized account of his expenses in such form or forms as may reasonably be required by the Company and at such times or intervals as may be required by the Company. To the extent that any reimbursements payable to Employee are subject to the provisions of Section 409A of the Code: (a) any such reimbursements will be paid no later than December 31 of the year following the year in which the expense was incurred, (b) the amount of expenses reimbursed in one year will not affect the amount eligible for reimbursement in any subsequent year, and (c) the right to reimbursement under this Agreement will not be subject to liquidation or exchange for another benefit.
Section 7 Vacation
7.1 The Employee will be entitled to a paid vacation of twenty-five (25) days within each calendar year period, pro-rated for partial calendar years, during the Term of this Agreement, to be calculated from the date of commencement of employment set forth in Section 2 herein. This vacation must be taken at such times that do not adversely compromise the Employee's performance of his duties under this Agreement.
7.2 The Employee may carry forward a maximum of ten (10) days’ vacation from one entitlement year to the next. Any such vacation carried forward must be taken by 15 March in the subsequent entitlement year. Any unused vacation in excess of ten (10) days will be forfeited.
7.3 All other responsibilities and rights (if any) of Employee relating to accrual of vacation benefits, requesting and using vacation benefits, and receipt of payment for accrued, unused vacation benefits upon separation from employment shall be governed by the terms and conditions of the Company’s applicable policies, practices, and procedures.
Section 8 Indemnity
The Company shall defend, indemnify and hold harmless the Employee from any and all claims, damages, losses or costs, to the extent provided by applicable law and the Company’s organizational documents, including but not limited to, those relating to loss or damage to property, or injury to, or death of any person or persons arising from or out of the Employee's performance of his obligations under this Agreement.
Section 9 Consent to Use Personal Information
9.1 The Employee acknowledges and agrees that the Company has the right to collect, use and disclose the terms and conditions of his employment and any other identifying personal information required to be disclosed for reporting or business purposes or otherwise by law, including:
(a) ensuring that he is paid for his services to the Company;
(b) administering any benefits to which he is or may become entitled to, including bonuses, medical, dental, disability and life insurance benefits, and/or annual bonuses and long-term incentive securities. This shall include the disclosure of his personal information to any insurance company and/or broker or to any entity that manages or administers the Company’s benefits on behalf of the Company, subject to applicable laws;
(c) compliance with any regulatory reporting and withholding requirements relating to his employment; and
(d) in the event of a sale or transfer of all or part of the shares or assets of the Company, disclosing to any potential acquiring organization solely for the purposes of determining the value of the Company and its assets and liabilities and to evaluate the Employee’s position in the Company. If the Employee’s information is disclosed to any potential acquiring organization, the Company will require the potential acquiring organization to agree to use the information solely for the purpose of evaluating the Company and to protect the privacy of Employee’s information in a manner that is consistent with any policy of the Company dealing with privacy that may be in effect from time to time and/or any applicable law that may be in effect from time to time.
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9.2 The Employee may withdraw his consent provided herein at any time. The Employee acknowledges that if he withdraws his consent, his entitlement to certain employment benefits provided by the Company may be negatively affected and in the event of a sale of business, the acquiring organization may not be in a position to offer continued employment due to a lack of personal information on the Employee.
Section 10 Termination
10.1 This Agreement may be terminated as follows:
(a) By Employee on Voluntary Resignation: Upon receipt by the Company of the Employee's resignation, in writing, which shall be provided not less than six (6) months prior to the effective date of resignation. In these circumstances, during the 6-month notice period, the Employee shall receive as full and sole compensation: (i) Base Salary at the then current rate of pay; and (ii) reimbursements that are due and owing Employee or that were earned or accrued on or before the effective date of termination, (collectively the “Accrued Obligations”) together with any rights under the Company’s employee benefit plans, including equity or equity-based compensation plans, which shall be governed solely by the terms of the Equity Plans. Employee agrees to faithfully perform and discharge all of his duties and responsibilities under this Agreement throughout the notice period until the effective date of his employment termination. At any time after receiving notice of Employee’s resignation, the Company shall have the sole option to relieve Employee of his duties and/or to restrict Employee from accessing Company facilities or systems, communicating with Company employees or third parties about work-related matters, attending work-related events, or otherwise conducting business on Company’s behalf. In all cases, the Employee will continue to be an employee throughout the notice period until the effective date of termination and will receive from the Company all Accrued Obligations through the effective date of resignation;
(b) By Company on Death or Disability of Employee: Forthwith on the death of the Employee or termination of service by reason of Disability. Company shall have the right to terminate Employee by reason of “Disability” if Employee is unable to perform the essential functions of Employee’s Position, with or without a reasonable accommodation, for either ninety (90) consecutive calendar days, or one hundred twenty (120) aggregate calendar days in a twenty-four (24) month period, by reason of any mental or physical illness, condition, impairment or incapacity. In these circumstances, the Employee (or his estate) shall be entitled to receive as full and sole compensation in discharge of the Company's obligations to the Employee under this Agreement, the Accrued Obligations, the Short Term Bonus, if any, determined pursuant to Section 5.1(d)(i) and (ii), together with any rights under the Company’s employee benefit plans, including the Equity Plans;
(c) By the Company without Cause: By the Company at any time, and for any reason whatsoever upon written notice of six (6) months. Employee agrees to faithfully perform and discharge all of his duties and responsibilities under this Agreement throughout the notice period until the effective date of his employment termination. At any time after delivering written notice of termination, the Company shall have the sole option to relieve Employee of his duties and/or to restrict Employee from accessing Company facilities or systems, communicating with Company employees or third parties about work-related matters, attending work-related events, or otherwise conducting business on Company’s behalf. In all cases, the Employee will continue to be an employee throughout the notice period until the effective date of termination. Contingent upon the Employee’s execution and non-revocation of a general mutual release of claims within twenty-one (21) days of termination in the form mutually agreed to by the Parties, or such other time period agreed to by the Parties, except for the Accrued Obligations which will be paid without regard to such release, on such a termination, the Employee will receive the following, as full and sole compensation in discharge of the Company's obligations to the Employee under this Agreement:
(i) the Accrued Obligations together with any obligations accrued and then owing under the Company’s employee benefit plans;
(ii) a lump sum cash payment, less applicable withholdings, equal to 1.5 times Employee’s annual Base Salary and 1.5 times the target annual bonuses for the year in which termination of employment occurs, which the Parties agree shall fully satisfy any Short Term Bonus payment owed pursuant to Section 5.1(d)(i) and (ii) hereof, payable on the forty-fifth (45th) day, or next succeeding business day if the 45th day is not a business day, following Employee’s separation from service;
(iii) continued medical coverage for a period of eighteen (18) months following Employee’s separation from service at the same level as available to executive level employees of Company, provided that Employee elects continuation coverage under a policy, plan program or arrangement of the Company pursuant to COBRA; and
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(iv) the Employee’s equity incentive awards will be governed in accordance with the terms of the applicable Equity Plans; or
For greater certainty, this Section 10.1(c) shall not apply to a termination following a Change in Control under the circumstances provided for in Section 10.3.
(d) By the Company with Cause: The Company may terminate this Agreement, and Employee’s employment hereunder, for Cause immediately upon written notice to Employee. In these circumstances, the Employee (or his estate) will be entitled to receive as full and sole compensation in discharge of the Company's obligations to the Employee under this Agreement, the Accrued Obligations together with any rights under the Company’s employee benefit plans, including equity or equity-based compensation plans, which will be governed solely by the terms of such plans.
(e) For purposes of this Agreement, “Cause” shall be deemed to exist if any of the following circumstances exist, as determined by the Board, regardless of the timing of the precipitating events:
(i) Employee’s willful failure to substantially perform his or her duties and responsibilities to the Company;
(ii) Employee’s violation of a Company policy, after receiving thirty (30) days written notice from the Company of the precise policy and the Employee’s conduct alleged to violate the policy, and Employee has failed to cure the violation within the 30-day notice period;
(iii) Employee’s commission of any act of fraud, embezzlement, misappropriation, breach of fiduciary duty or duty of loyalty, dishonesty or any other intentional act of misconduct that has caused or is reasonably expected to result in material injury to the Company;
(iv) Employee has been convicted of or pled guilty or nolo contendere to a crime that constitutes a felony (or state law equivalent) or a crime that constitutes a misdemeanor involving moral turpitude, if such felony or other crime is (A) work-related, (B) impairs Employee’s ability to perform services for the Company, or (C) results in reputational or financial harm to the Company;
(v) the unauthorized use or disclosure by Employee of any proprietary information or trade secrets of the Company or any other party to whom Employee owes an obligation of nondisclosure as a result of his Employment with the Company; or
(vi) Employee’s breach of any of his or her obligations under any written agreement or covenant with the Company; or
(vii) the Employee has committed any act which results in either loss or damage to the Company or prejudice to its business standing or reputation, including any social media post or public comment made on the Internet or otherwise, or through the making of any disparaging comment or remark in any public forum or setting, provided, nothing herein prohibits Employee from making truthful statements protected by any State or Federal law.
(f) Notwithstanding the foregoing, the Employee's rights and entitlements with respect to any stock options and RSUs or any other equity incentive award or incentive bonus amount shall be in accordance with the relevant incentive plan(s).
10.2 Notwithstanding Section 10.1(a) and (c), on or following the service of notice by either party for any reason to terminate this Agreement, the Company may at its sole and absolute discretion terminate the Employee’s employment at any time and with immediate effect by providing the Employee all payments due in lieu of the notice period (or, if applicable, the remainder of the notice period) equivalent to the Base Salary at the date of termination for such period, in addition to the other Accrued Obligations required of the Company as set forth in Sections 10.1(a) and 10.1(c).
10.3 (a) If a Change in Control occurs and, at any time during the twelve (12) month period following such Change in Control, either (i) there occurs a termination of the Employee's employment by the Company, other than for Cause, or (ii) the Employee resigns employment for Good Reason, contingent upon the Employee’s execution and non-revocation of a mutual general release of claims within twenty-one (21) days of termination in the form mutually agreed upon by the Parties, or such other time period agreed to by the Parties, except for the Accrued Obligations which will be paid without regard to such release, the Employee shall be entitled to receive:
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(i) the Accrued Obligations together with any rights under the Company’s employee benefit plans;
(ii) a lump sum cash payment, less applicable withholdings, equal to eighteen (18) months of Employee’s annual Base Salary plus one (1) additional month for each full year of service after the third (3rd) full year of service up a maximum of twenty (24) months annual Base Salary together with 150% of the Short Term Bonus for the year in which termination of employment occurs, payable on the forty-fifth (45th) day, or next succeeding business day if the 45th day is not a business day, following Employee’s separation from service; and
(iii) continued medical coverage for a period of eighteen (18) months following Employee’s separation from service at the same level as available to executive level employees of Company, provided that Employee elects continuation coverage under a policy, plan program or arrangement of the Company pursuant to COBRA; and
(iv) Employee's equity incentive awards shall be governed in accordance with the terms of the applicable Equity Plans.
(b) For purposes of this Section 10.3, "Good Reason" means any of the following events, unless the Employee gives his express written consent thereto:
(i) a material adverse change in the Employee's Position as in effect immediately prior to a Change in Control. Such material adverse change shall mean a material diminution in the Employee's duties or authority or the assignment to the Employee of any duties or responsibilities which are materially inconsistent with such Position. Notwithstanding the foregoing, Good Reason shall not be deemed to occur upon a change in the Employee's duties or responsibilities that is solely a result of the Company no longer being publicly traded;
(ii) a material reduction by the Company in the Employee's annual Base Salary as in effect immediately prior to a Change in Control;
(iii) a material failure by the Company to continue in effect any employee benefit program in which the Employee is participating at the time of a Change in Control other than as a result of the normal expiration of any such employee benefit program in accordance with its terms as in effect at the time of a Change in Control or replacement of such benefit program with a comparable program, or the taking of any action, or the failure to act, by the Company which would materially and adversely affect the Employee's continued participation in any such employee benefit program on at least as favorable a basis to the Employee as on the date of a Change in Control;
(iv) the Company requiring the Employee to be based in a location more than 50 miles from where the Employee is based at the time of a Change in Control, except for required travel on the Company's business to an extent substantially consistent with the Employee's business travel obligations in the ordinary course of business immediately prior to the Change in Control;
(v) the Company repudiating or breaching any of its material obligations under this Agreement; or
(vi) the Company requiring the Employee to report to a person of lesser authority or standing than that set forth in Section 1.1; provided that a general change in overall reporting structure bona fide entered into by the Company in the interests of improved management of its business and not limited to the individual Employee, shall not be a change in reporting responsibilities as contemplated by this clause.
(c) Notwithstanding the foregoing, to constitute Good Reason hereunder, the Employee must give notice to the Company within 30 days following the Employee's knowledge of an event constituting Good Reason describing the alleged failure or action by the Company in respect of the events set out in clauses (i) to (vi) above and advising the Company of the Employee's intention to terminate the Employee's employment for Good Reason. If the Employee fails to provide such notice within 30 days, such event shall not constitute Good Reason under this Agreement. Following receipt of such notice from the Employee, the Company shall then have 30 business days to take any required corrective action to rectify or rescind such event (and if such event is so rectified or rescinded, such event shall not constitute Good Reason) and to notify the Employee in writing that it has completed such rectification or rescindment, or to notify the Employee that it denies the occurrence of such event.
(d) A notice of resignation for Good Reason in accordance with the foregoing will be deemed to have occurred within the twelve (12) month period following a Change in Control provided the Employee gives the required notice to the Company prior to the end of such twelve (12) month period.
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(e) The payments provided for in paragraph (a) under this Section 10.3 shall be inclusive of the Employee's entitlement to notice and severance pay at common law or by statute. The Company shall not be obligated to make any further payments under this Agreement, except for the payment of any reasonable expenses due and owing pursuant to Section 6.
(f) For the purposes of this Agreement, "Change in Control" means any of the following events occurring after the date hereof:
(i) a transaction or series of transactions whereby any “person” or related “group” of “persons” (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) directly or indirectly acquires beneficial ownership (within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act) of securities of the Company possessing more than 50% of the total combined voting power of the Company’s securities outstanding immediately after such acquisition; provided, however, that the following acquisitions shall not constitute a Change in Control: (i) any acquisition by the Company or any of its Subsidiaries; (ii) any acquisition by an employee benefit plan maintained by the Company or any of its Subsidiaries, (iii) any acquisition which complies with Sections 10.3(f)(iii)(I), 10.3(f)(iii)(II) and 10.3(f)(iii)(III); or (iv) in respect of an Award (as defined in the Company’s Long Term Incentive Plan) held by a particular Holder, any acquisition by the Holder or any group of persons including the Holder (or any entity controlled by the Holder or any group of persons including the Holder);
(ii) the Incumbent Directors, as defined in the Company’s Long Term Incentive Plan, or successor plan, cease for any reason to constitute a majority of the Board;
(iii) the consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination, (y) a sale or other disposition of all or substantially all of the Company’s assets in any single transaction or series of related transactions or (z) the acquisition of assets or stock of another entity, in each case other than a transaction:
(I) which results in the Company’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to the business of the Company (the Company or such person, the “Successor Entity”)) directly or indirectly, at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction, and
(II) after which no person or group beneficially owns voting securities representing 50% or more of the combined voting power of the Successor Entity; provided, however, that no person or group shall be treated for purposes of this Section as beneficially owning 50% or more of the combined voting power of the Successor Entity solely as a result of the voting power held in the Company prior to the consummation of the transaction; and
(III) after which at least a majority of the board of directors (or the analogous governing body) of the Successor Entity were Board members at the time of the Board’s approval of the execution of the initial agreement providing for such transaction; or
(iv) the date which is 10 business days prior to the completion of a liquidation or dissolution of the Company.
Notwithstanding the foregoing, if a Change in Control constitutes a payment event with respect to any amount that provides for the deferral of compensation that is subject to Section 409A of the Code, to the extent required to avoid the imposition of additional taxes under Section 409A, the transaction or event described in subsection (i), (ii), (iii) or (iv) with respect to such payment (or portion thereof) shall only constitute a Change in Control for purposes of the payment if such transaction also constitutes a “change in control event,” as defined in Treasury Regulation Section 1.409A-3(i)(5).
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(g) Notwithstanding any other provision of this Agreement or any other plan, arrangement or agreement to the contrary, if any of the payments or benefits provided or to be provided by the Company to Employee or for Employee’s benefit pursuant to the terms of this Agreement or otherwise (“Covered Payments”) constitute parachute payments (“Parachute Payments”) within the meaning of Section 280G of the Code and would, but for this Section 10.3 be subject to the excise tax imposed under Section 4999 of the Code (or any successor provision thereto) or any similar tax imposed by state or local law or any interest or penalties with respect to such taxes (collectively, the “Excise Tax”), then prior to making the Covered Payments, a calculation shall be made comparing (i) the Net Benefit (as defined below) to Employee of the Covered Payments after payment of the Excise Tax to (ii) the Net Benefit to Employee if the Covered Payments are limited to the extent necessary to avoid being subject to the Excise Tax. Only if the amount calculated under (i) above is less than the amount under (ii) above will the Covered Payments be reduced to the minimum extent necessary to ensure that no portion of the Covered Payments is subject to the Excise Tax (that amount, the “Reduced Amount”). “Net Benefit” shall mean the present value of the Covered Payments net of all federal, state, local, foreign income, employment and excise taxes. Any such reduction shall be made by the Company in its sole discretion consistent with the requirements of Section 409A of the Code. In the event that Executive receives reduced payments and benefits, the order in which they shall be reduced is the following: (i) cash payments under Section 10.3 that do not constitute deferred compensation within the meaning of Section 409A of the Code; (ii) cash payments under Section 10.3 that do constitute deferred compensation, in each case, beginning with the payment or benefits that are to be paid or provided the farthest in time from the effective date of Executive’s termination of employment; and (iii) the rights to any acceleration of equity awards; in each case only to the extent that such reduction would eliminate or reduce the Excise Tax.
10.4 If this Agreement is terminated by either party while the Employee is on site at any work location other than where the Employee is otherwise based, regardless of the circumstances or the reason for termination, the Company will reimburse the Employee for his return flight home and any change fees that are incurred by the Employee.
Section 11 Directorships and Other Offices
11.1 The Company may from time to time in its discretion require the Employee to be nominated and appointed as a director or other officer or manager of the Company or of any of its subsidiary companies, and the Employee agrees to comply with each such request.
11.2 If the Employee is a director or other officer or manager of the Company or of any of its subsidiary companies, the Company is not obliged to ensure that the Employee remains a director or other officer or manager of the Company or any subsidiary. The removal of the Employee as a director of the Company by reason of election by the Company’s shareholders, or removal of the Employee as a director of a subsidiary, or removal from that other office or management position will not amount to a breach of this Agreement or constitute Good Reason or constitute grounds for termination with Cause.
11.3 If the Employee is at any time not a director of the Company or of any of its subsidiary companies then the Employee shall not be entitled to and shall not hold himself out as a director and the removal of the term "Director" from his job title will not constitute a breach by the Company of this Agreement.
11.4 Upon the termination of the Employee's employment by the Company for any reason (unless the Company in writing requires the Employee not to do so) the Employee hereby agrees to resign from and vacate each and every office as director of the Company or of any of its subsidiary companies and every other office or management position which he may hold in the Company or a subsidiary company to which he may have been appointed or elected, and for purposes hereof the Employee hereby irrevocably and unconditionally appoints any director of the Company or the company secretary of the Company as his agent or attorney to effect each such resignation.
11.5 Notwithstanding the provisions of Section 11.4, the Company may request the Employee to retain his office as a director of the Company or a subsidiary notwithstanding the termination of his employment, in which case the Employee shall become a non-executive director of the Company or of its subsidiary companies and shall be entitled to receive compensation as a non-employee director of the Company or such subsidiary.
11.6 The Employee hereby indemnifies the Company (and their respective officers, managers and employees) in respect of any claims, losses, costs or expenses whatsoever (including indirect and consequential damages) which may be suffered or incurred by any of them arising out of or in connection with the Employee refusing for any reason whatsoever to resign from and/or vacate any office as a director or other position contemplated in Section 11.4 for purposes of having to have the Employee removed as a director of the Company or a subsidiary company.
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Section 12 Confidential Information
12.1 The Employee agrees to keep the affairs and Confidential Information (as defined below) of the Company strictly confidential and shall not disclose the same to any person, company or firm, directly or indirectly, during or after his employment by the Company except as authorized in writing by the Board. "Confidential Information" includes, without limitation, the following types of information or material, both existing and contemplated, regarding the Company and which is not in the public domain or publicly available: corporate information, including contractual licensing arrangements, plans, strategies, tactics, policies, resolutions, patent, trade-mark and trade name applications; any litigation or negotiations; information concerning suppliers; marketing information, including sales, investment and product plans, customer lists, strategies, methods, customers, prospects and market research data; financial information, including cost and performance data, debt arrangements, equity structure, investors and holdings; operational and scientific information, including trade secrets; technical information, including technical drawings and designs; any information relating to any mineral projects in which the Company has an actual or potential interest; and personnel information, including personnel lists, resumes, personnel data, organizational structure and performance evaluations. The Employee agrees not to use such information, directly or indirectly, for his own interests, or any interests other than those of the Company, whether or not those interests conflict with the interests of the Company during or after his employment by the Company. The Employee expressly acknowledges and agrees that all information relating to the Company, whether financial, technical or otherwise shall, upon execution of this Agreement and thereafter, as the case may be, be the sole property of the Company, whether arising before or after the execution of this Agreement. The Employee expressly agrees not to divulge any of the foregoing information to any person, partnership, company or other legal entity or to assist in the disclosure or divulging of any such information, directly or indirectly, except as required by law or as otherwise authorized in writing by the Board. The provisions of Section 12 shall survive the termination of this Agreement.
12.2 The Employee agrees that all documents of any nature pertaining to the activities of the Company, including Confidential Information, in the Employee's possession now or at any time during the Employee's period of employment, are and shall be the property of the Company and that all such documents and copies of them shall be surrendered to the Company when requested by the Company. The Employee shall be permitted to retain Information that pertains to himself including his contacts.
Section 13 Non-Solicitation
13.1 The Employee covenants and agrees that during his employment and for a period of twelve (12) months following the date of termination of his employment, however caused, the Employee will not on his own behalf or on behalf of any person, whether directly or indirectly, in any capacity whatsoever, alone, through or in connection with any person, employ, engage, offer employment or engagement to or solicit the employment or engagement of or otherwise entice away an employee or officer of the Company, whether or not such person would commit any breach of their contract of employment by reason of leaving their service.
13.2 Employee agrees that the restrictions, including the duration, scope and geographic area for each, established under the covenants contained in this Section 13 are fair, reasonable and necessary in order to protect the legitimate interests of the Company, that Employee is receiving adequate consideration under this Agreement for such obligations, and that such obligations will not prevent Employee from earning a livelihood during the time periods covered by the restrictive covenants.
13.3 In the event Employee has violated any of the covenants contained in this Section 13, the time period covered by the restrictive covenant shall be tolled during the period in which the violation was occurring.
13.4 The Employee agrees that a breach by him or her of any of the covenants contained in this Section 13 would result in damages that could not adequately be compensated by monetary award. Accordingly, the Employee agrees that in the event of any such breach or threatened breach, in addition to all other remedies available at law, the Company will be entitled as a matter of right to seek a temporary or permanent injunction or other equitable relief against such breach or threatened breach from any court of competent jurisdiction, without the necessity of showing any actual damages or that money damages would not afford an adequate remedy, and without the necessity of posting any bond or other security.
13.5 The Employee further agrees that a breach by him or her of any of the covenants contained in this Section 13 constitutes Cause to terminate the Employee’s employment.
Section 14 Representations and Warranties
The Employee represents and warrants to the Company that the execution and performance of this Agreement will not result in or constitute a default, breach or violation or an event that, with notice or lapse of time or both, would be a default, breach or violation of any understanding, agreement or commitment, written or oral, express or implied, to which the Employee is currently a party or by which the Employee or Employee's property is currently bound.
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Section 15 Arbitration
The Parties agree to attempt to resolve all claims, causes of action, controversies, and disputes arising out of or in connection with this Agreement by structured negotiation with the assistance of a mediator agreed to by the Parties. If the dispute cannot be settled within a period of thirty (30) days after the mediator has been appointed, or such longer period agreed to in writing by the Parties, the Parties agree to submit their Dispute to binding arbitration, with a hearing to take place in Phoenix, Arizona unless the Dispute is earlier dismissed or resolved, in accordance with the American Arbitration Association’s (“AAA”) Rules regarding Employment Disputes, subject to any conflicting provisions of this Agreement which shall control, and pursuant to the Federal Arbitration Act, by the Parties. If the Parties are unable to agree to the appointment of an arbitrator within fifteen (15) days of delivery of a request for arbitration by either party to the other, the Parties shall select the arbitrator from a panel of at least nine (9) arbitrators who have at least ten (10) years’ of experience as an arbitrator primarily handling employment law cases pursuant to AAA’s arbitrator selection procedures. Each party shall bear its own costs of legal representation and assistance. All other costs, including the fees and expenses of the mediator, the arbitrator and administrative fees and charges, shall be as awarded by the arbitrator. The arbitrator shall apply the substantive federal or state law applicable to the claims and the defenses asserted in arbitration, including applicable statute of limitations and any prerequisites to civil action recognized under applicable federal or state law (e.g., exhaustion of administrative remedies). The arbitrator, and not any court, shall have exclusive authority to resolve any dispute relating to the validity, enforceability, formation, and interpretation of this Agreement and the arbitrability of the Parties’ dispute. Each party shall have the right to file dispositive motions, and the arbitrator shall have the authority to adjudicate and dispose of any or all Disputes submitted for arbitration based on such dispositive motions and applicable substantive law. In the event an arbitration hearing is conducted, the arbitration hearing shall not last longer than five (5) business days unless otherwise mutually agreed upon by the Parties. Each party shall have the right to file post-hearing briefs according to a briefing schedule to be established by the arbitrator. The arbitrators will render a decision within a reasonably prompt period after the completion of the hearing, which decision may include any award or remedy available under any applicable law, and may include an award of legal fees, expert witness costs, costs of arbitration, and interest as permissible under the controlling statute or law. The decision of the arbitrator will be final, binding, and conclusive upon the Parties. Each party will have the right to have the decision enforced by any court of competent jurisdiction. Notwithstanding anything to the contrary, any Dispute in which a party seeks equitable relief may be brought in any court of competent jurisdiction; provided that any portion of such Dispute in which the party seeks monetary or other non-equitable relief must be submitted for arbitration as provided hereunder.
Section 16 Governing Law
This Agreement shall be construed and enforced in accordance with the laws of the State of Arizona, without reference to principles of conflicts of laws. Subject to Section 15 any action or proceeding brought by a party arising out of or in connection with this Agreement shall be brought solely in a court of competent jurisdiction located in the State of Arizona. To the extent permitted by law, the Parties agree not to contest such exclusive jurisdiction or seek the transfer of any action relating to such dispute to any other jurisdiction. Each of the Parties hereby submits to personal jurisdiction and waives any objection as to venue in the State of Arizona but Subject to Section 15 .
Section 17 Entire Agreement
This Agreement constitutes the entire agreement between the Parties hereto with respect to the relationship between the Company and the Employee and supersedes all prior arrangements and agreements, whether oral or in writing between the Parties hereto with respect to the subject matter hereof.
Section 18 Amendments
No amendment to or variation of the terms of this Agreement will be effective or binding upon the Parties hereto unless made in writing and signed by both of the Parties hereto.
Section 19 Assignment
This Agreement is not assignable by the Employee. This Agreement is assignable by the Company to any other company that controls, is controlled by, or is under common control with the Company. This Agreement shall inure to the benefit of and be binding upon the Company and its successors and permitted assigns and the Employee and his heirs, executors and administrators.
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Section 20 Severability
Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of the prohibition or unenforceability and shall be severed from the balance of this Agreement, all without affecting the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction.
Section 21 Headings
The division of this Agreement into Sections and the insertion of headings are for convenience or reference only and shall not affect the construction or interpretation of this Agreement.
Section 22 Time of Essence
Time shall be of the essence in all respects of this Agreement.
Section 23 Independent Legal Advice
The Employee agrees that he has had, or has had the opportunity to obtain, independent legal advice in connection with the execution of this Agreement and has read this Agreement in its entirety, understands its contents and is signing this Agreement freely and voluntarily, without duress or undue influence from any party.
Section 24 Notice
24.1 Any notice required or permitted to be made or given under this Agreement to either party shall be in writing and shall be sufficiently given if delivered personally, by electronic transmission, or if sent by prepaid registered mail to the intended recipient of such notice at their respective addresses set forth below or to such other address as may, from time to time, be designated by notice given in the manner provided in this Section:
(a) in the case of the Company:
Ivanhoe Electric Inc.
#606 – 999 Canada Place
Vancouver, BC Canada V6C 3E1
Attention: Human Resources
Email: hrservices@ivancorp.com
(b) in the case of the Employee, at the address set forth on the first page hereof or tmelvin3@hotmail.com
24.2 Any notice hand-delivered to the party to whom it is addressed shall be deemed to have been given and received on the day it is so delivered or, if such day is not a business day, then on the next business day following any such day. Any notice delivered by registered mail shall be deemed to have been given and received on the 10th business day following the date of mailing. In the case of facsimile transmission, notice is deemed to have been given or served on the party to whom it was sent at the time of dispatch if, following transmission, the sender receives a transmission confirmation report or, if the sender's facsimile machine is not equipped to issue a transmission confirmation report, the recipient confirms in writing that the notice has been received. In the case of e-mail transmission, notice is deemed to have been given or served on the party to whom it was sent at the time of dispatch if, following transmission, the recipient confirms by e-mail or telephone call that the notice has been received. Notwithstanding the above, no notice will be deemed to have been given to the Employee while on site, or traveling to and from a site unless such notice is hand-delivered to the Employee or the Employee confirms that he has received delivery of the notice by another method.
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Section 25 Counterparts
This Agreement may be executed in counterparts and shall become operative when each party has executed and delivered at least one counterpart.
IN WITNESS WHEREOF the Parties hereto have executed this Agreement as of the day and year first above written.
IVANHOE ELECTRIC INC.
/s/ Robert Friedland | |
| |
Authorized Signatory | |
| |
Title: Chairman and Chief Executive Officer | |
| |
SIGNED by the Employee in the presence of: | |
| |
/s/ Taylor Melvin | |
| |
Taylor Melvin | |
| |
/s/ Charles A. Cooley | |
| |
Witness | |
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Exhibit 31.1
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF
1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT
OF 2002
I, Robert Friedland, certify that:
1. | I have reviewed this quarterly report on Form 10-Q for the Quarter ended September 30, 2022 of Ivanhoe Electric Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
c. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 14, 2022 | | |
| By: | /s/ Robert Friedland |
| | Robert Friedland |
| | Chief Executive Officer |
Exhibit 31.2
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF
1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT
OF 2002
I, Catherine Barone, certify that:
1. | I have reviewed this quarterly report on Form 10-Q for the Quarter ended September 30, 2022 of Ivanhoe Electric Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
c. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 14, 2022 | | |
| By: | /s/ Catherine Barone |
| | Catherine Barone |
| | Interim Chief Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Ivanhoe Electric Inc. (the “Company”) for the quarterly period ended September 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Robert Friedland, as Chief Executive Officer of the Company, hereby certifies, pursuant to and solely for the purpose of 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, to the best of his knowledge and belief, that:
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: November 14, 2022 | | |
| By: | /s/ Robert Friedland |
| | Robert Friedland |
| | Chief Executive Officer |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Ivanhoe Electric Inc. (the “Company”) for the quarterly period ended September 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Catherine Barone, as Interim Chief Financial Officer of the Company, hereby certifies, pursuant to and solely for the purpose of 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, to the best of her knowledge and belief, that:
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: November 14, 2022 | | |
| By: | /s/ Catherine Barone |
| | Catherine Barone |
| | Interim Chief Executive Officer |