Ivanhoe Electric Inc. — 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; filed March 14, 2023. The 2021 comparison includes pre-April 30, 2021 carve-out financial information from former parent HPX, so it may not be directly comparable to standalone results. The company is an exploration-stage minerals business, with additional geoscience-data and vanadium-flow-battery businesses. It operated no mines and generated no mining revenue.
Financial results and position
| Metric | 2022 | 2021 |
|---|---|---|
| Revenue | $8.44 million | $4.65 million |
| Gross profit / gross margin | $5.31 million / 62.9% | $3.13 million / 67.3% |
| Exploration expense | $105.29 million | $39.51 million |
| General and administrative expense | $26.97 million | $20.40 million |
| Research and development expense | $5.04 million | $3.83 million |
| Loss from operations | $132.17 million | $60.75 million |
| Net loss | $160.22 million | $68.51 million |
| Net loss attributable to common stockholders or parent | $149.81 million; $1.91 per share | $59.32 million; $0.96 per share |
| Net cash used in operating activities | $115.73 million | $47.83 million |
| Cash used in investing activities | $48.38 million | $22.63 million |
| Cash provided by financing activities | $254.41 million | $110.98 million |
Revenue came from CGI data-processing/software licensing ($7.73 million) and VRB energy-storage systems ($0.71 million). One customer generated 82% of 2022 revenue; a $6.5 million one-time software license fee was recognized in 2022. CGI gross profit was $7.15 million; VRB recorded a $1.85 million gross loss, principally due to a $1.9 million inventory impairment after a tolling agreement ended.
At year-end, cash and cash equivalents were $139.66 million, including $20.7 million held by non-wholly-owned subsidiaries and not available for general corporate purposes. Working capital was $133.6 million; total assets were $260.49 million and total liabilities $58.04 million. Balance-sheet debt included the VRB convertible bond of $25.92 million and a $10.01 million related-party loan payable by Cordoba. The VRB bond carries 8% interest and matures in 2026 if not converted; Cordoba’s JCHX bridge loan carried 12% interest for its first 12 months and 14% for the remaining six months. Management said available cash was expected to fund planned activities for at least 12 months, subject to assumptions and possible changes in exploration plans.
Material changes and operating developments
- Revenue increased 81%, but the company’s net loss more than doubled. Exploration expense rose by $65.8 million, largely as Santa Cruz spending increased to $61.2 million from $10.0 million.
- A $19.0 million non-cash loss from revaluing Ivanhoe Electric convertible notes was recorded before those notes converted into shares at the June 2022 IPO. The IPO raised $169.1 million gross and $158.2 million net; Series 1 and Series 2 notes also converted into equity.
- Santa Cruz’s December 2022 estimate reported 226.7 million tonnes of indicated resources grading 1.24% copper, containing 2.807 million tonnes of copper, and 149.0 million tonnes of inferred resources grading 1.24%, containing 1.847 million tonnes. These are resources, not reserves, and do not establish economic viability. The company reported project-wide indicated contained copper up 11% versus its prior estimate at the higher cut-off grades used; indicated contained copper excluding primary sulfides was up 86%.
- Tintic drilling began in late November 2022 to test exploration targets; the project had no reported mineral resource or reserve. The company had paid $27.275 million toward the $30.8 million purchase price for mineral titles, with $3.525 million due by the end of 2023.
- San Matias, held through Cordoba, was the company’s only project with mineral reserves: 102.1 million tonnes of probable reserves. Cordoba’s 2021 pre-feasibility study estimated a 13-year mine life and $415 million after-tax NPV, based on stated study assumptions; this is not Ivanhoe Electric operating guidance.
Outlook, risks and unusual items
Management expects continued operating losses and negative operating cash flow until businesses generate sufficient revenue. It plans continued exploration, including work at Santa Cruz and Tintic, but provided no consolidated revenue, earnings, production or mine-development guidance. The filing states that exploration projects may not yield economically mineable deposits and that mineral resources may never convert to reserves.
- Funding and liquidity: Continuing exploration and potential mine development require substantial capital; the company expects to rely on equity or other financing. Cash held in subsidiaries may be restricted, and VRB’s PRC operations face foreign-exchange and funding-transfer restrictions.
- Project, title and permitting risks: The company had not acquired all underlying rights at Santa Cruz and Tintic; missed payments could jeopardize interests. Santa Cruz surface access does not itself permit mine development. Water access, environmental approvals, reclamation costs and permitting timelines remain material uncertainties.
- Geographic and legal risks: Cordoba’s Colombian project faces security, community and litigation risks; Cordoba’s Alacran Community class action seeks operational injunctive relief. Peru had political instability affecting access risks for Kaizen’s Pinaya project. Historical exploration data, especially at Tintic, has limitations.
- Commodity and execution risks: Metal-price volatility, exploration uncertainty, cost inflation, equipment and labor constraints, climate and water availability could delay or impair projects. VRB also faces technology, competition, supply-chain, manufacturing-scale and PRC regulatory risks.
- Subsequent events: In January 2023, Ivanhoe Electric signed binding heads of terms for a proposed $126.4 million Ma’aden investment and a 50/50 Saudi exploration JV; definitive agreements, regulatory approvals and closing remained outstanding. In December 2022, Cordoba agreed to a proposed $100 million JCHX purchase of 50% of the Alacran project vehicle, subject to conditions and expected to close in 2023. These transactions were not completed as of the filing date.
- Other unusual items: A $5.7 million previously capitalized Santa Cruz land-purchase payment was expensed after the agreement was terminated. The auditor issued an unqualified opinion on the financial statements. Management reported effective disclosure controls, but the filing did not include management’s assessment or the auditor’s attestation on internal control over financial reporting because of applicable transition-period and emerging-growth-company exemptions.
Important facts for investors to verify
- Whether the proposed Ma’aden investment and Saudi JV reached definitive agreements, obtained required approvals and closed, and how proceeds and dilution compare with the stated terms.
- Whether Cordoba’s JCHX transaction closed and whether the staged consideration, EIA conditions and ownership changes followed the disclosed terms.
- Current cash available for corporate use, future cash burn, funding needs and any changes to management’s 12-month liquidity expectation.
- Santa Cruz and Tintic title payments, surface-access rights, permitting status and exploration results; distinguish resource estimates from economically demonstrated reserves.
- CGI customer concentration and repeat business after the one-time license, and VRB’s inventory, supply, manufacturing and commercial progress.
- Developments in Cordoba’s community litigation, San Matias security and permitting, and any resulting effect on the company’s financial position.