IVANHOE MINES LTD. | ||||
Date: April 4, 2006
|
By: | /s Beverly A. Bartlett | ||
BEVERLY A. BARTLETT | ||||
Corporate Secretary |
March 31, 2006 | ||
To:
|
Alberta Securities Commission | |
British Columbia Securities Commission | ||
Manitoba Securities Commission | ||
Securities Registry, Government of the Northwest Territories | ||
Securities Registry, Government of Nunavut | ||
Ontario Securities Commission | ||
Commission des valeurs mobilières du Québec | ||
Saskatchewan Securities Commission | ||
Registrar of Securities, Government of the Yukon Territory | ||
Office of the Administrator of Securities, New Brunswick | ||
Nova Scotia Securities Commission | ||
Registrar of Securities, P.E.I. | ||
Securities Division, Department of Justice, Newfoundland | ||
Toronto Stock Exchange | ||
Dear Sir or Madam : | ||
Re:
|
March 31, 2005 first quarter financial statements, Managements Discussion and Analysis and Certificates |
ITEM 1.
|
Financial Statements | |
Unaudited Consolidated Balance Sheets at March 31, 2005 and December 31, 2004 | ||
Unaudited Consolidated Statements of Operations for the Three Month Periods ended March 31, 2005 and 2004 | ||
Unaudited Consolidated Statement of Shareholders Equity for the Three Month Period ended March 31, 2005 | ||
Unaudited Consolidated Statements of Cash Flows for the Three Month Periods ended March 31, 2005 and 2004 | ||
Notes to the Unaudited Consolidated Financial Statements | ||
ITEM 2.
|
Managements Discussion and Analysis of Financial Condition and Results of Operations. |
March 31, | December 31, | |||||||
2005 | 2004 | |||||||
(Unaudited) | ||||||||
ASSETS |
||||||||
CURRENT |
||||||||
Cash and cash equivalents (Note 3) |
$ | 91,766 | $ | 112,478 | ||||
Accounts receivable (Note 2) |
12,195 | 6,552 | ||||||
Inventories |
1,840 | 2,192 | ||||||
Prepaid expenses |
1,694 | 1,196 | ||||||
Other current assets |
3,023 | 3,000 | ||||||
Current assets of discontinued operations (Note 2) |
| 36,636 | ||||||
TOTAL CURRENT ASSETS |
110,518 | 162,054 | ||||||
INVESTMENT IN JOINT VENTURE |
134,601 | 126,911 | ||||||
LONG-TERM INVESTMENTS (Note 4) |
15,669 | 19,160 | ||||||
PROPERTY, PLANT AND EQUIPMENT |
57,513 | 54,434 | ||||||
DEFERRED INCOME TAXES |
281 | 318 | ||||||
OTHER ASSETS |
3,601 | 3,764 | ||||||
NON-CURRENT ASSETS OF DISCONTINUED OPERATIONS (Note 2) |
| 9,627 | ||||||
TOTAL ASSETS |
$ | 322,183 | $ | 376,268 | ||||
LIABILITIES |
||||||||
CURRENT |
||||||||
Accounts payable and accrued liabilities |
$ | 8,665 | $ | 14,412 | ||||
Current liabilities of discontinued operations (Note 2) |
| 14,082 | ||||||
TOTAL CURRENT LIABILITIES |
8,665 | 28,494 | ||||||
LOANS PAYABLE TO RELATED PARTIES (Note 5) |
5,088 | 5,088 | ||||||
DEFERRED INCOME TAXES |
435 | 476 | ||||||
ASSET RETIREMENT OBLIGATIONS |
5,340 | 5,267 | ||||||
NON-CURRENT LIABILITIES OF DISCONTINUED OPERATIONS (Note 2) |
| 26,380 | ||||||
TOTAL LIABILITIES |
19,528 | 65,705 | ||||||
MINORITY INTERESTS |
3,287 | 3,713 | ||||||
SHAREHOLDERS EQUITY |
||||||||
SHARE CAPITAL (Note 6) |
||||||||
Authorized |
||||||||
Unlimited number of preferred shares without par value
|
||||||||
Unlimited number of common shares without par value
|
||||||||
Issued and
outstanding 293,767,721 (2004 - 292,870,998) common shares |
870,408 | 868,606 | ||||||
ADDITIONAL PAID-IN CAPITAL |
17,294 | 16,283 | ||||||
ACCUMULATED OTHER COMPREHENSIVE INCOME |
1,065 | 2,879 | ||||||
DEFICIT |
(589,399 | ) | (580,918 | ) | ||||
TOTAL SHAREHOLDERS EQUITY |
299,368 | 306,850 | ||||||
TOTAL LIABILITIES, MINORITY INTERESTS AND SHAREHOLDERS EQUITY |
$ | 322,183 | $ | 376,268 | ||||
APPROVED BY THE BOARD: |
||
Director
|
Director |
Three months ended March 31, | ||||||||
2005 | 2004 | |||||||
(Unaudited) | ||||||||
OPERATING EXPENSES |
||||||||
Exploration |
$ | (24,405 | ) | $ | (20,735 | ) | ||
General and administrative |
(4,787 | ) | (5,174 | ) | ||||
Interest |
(89 | ) | (72 | ) | ||||
Depreciation |
(413 | ) | (462 | ) | ||||
Mining property care and maintenance costs |
(852 | ) | (1,046 | ) | ||||
OPERATING LOSS |
(30,546 | ) | (27,489 | ) | ||||
OTHER INCOME (EXPENSES) |
||||||||
Share of income from joint venture |
7,673 | 4,215 | ||||||
Interest income |
595 | 411 | ||||||
Foreign exchange losses |
(569 | ) | (1,743 | ) | ||||
Share of loss of significantly influenced investees |
(239 | ) | (398 | ) | ||||
Gain on sale of long-term investments (Note 4) |
| 1,248 | ||||||
Write-down of carrying value of long-term investments (Note 4) |
(1,438 | ) | | |||||
LOSS BEFORE TAXES AND OTHER ITEMS |
(24,524 | ) | (23,756 | ) | ||||
Provision for income and capital taxes |
(56 | ) | (154 | ) | ||||
Minority interests |
426 | 119 | ||||||
NET LOSS FROM CONTINUING OPERATIONS |
(24,154 | ) | (23,791 | ) | ||||
NET INCOME (LOSS) AND GAIN ON SALE FROM DISCONTINUED OPERATIONS
(Note 2) |
15,673 | (7,857 | ) | |||||
NET LOSS |
$ | (8,481 | ) | $ | (31,648 | ) | ||
BASIC AND DILUTED (LOSS) EARNINGS PER SHARE FROM |
||||||||
CONTINUING OPERATIONS |
$ | (0.08 | ) | $ | (0.09 | ) | ||
DISCONTINUED OPERATIONS |
0.05 | (0.03 | ) | |||||
$ | (0.03 | ) | $ | (0.12 | ) | |||
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING (000s) |
293,313 | 271,370 | ||||||
Accumulated | ||||||||||||||||||||||||
Share Capital | Additional | Other | ||||||||||||||||||||||
Number | Paid-In | Comprehensive | ||||||||||||||||||||||
of Shares | Amount | Capital | Income | Deficit | Total | |||||||||||||||||||
Balances, December 31, 2004 |
292,870,998 | $ | 868,606 | $ | 16,283 | $ | 2,879 | $ | (580,918 | ) | $ | 306,850 | ||||||||||||
Net loss |
| | | | (8,481 | ) | (8,481 | ) | ||||||||||||||||
Other comprehensive income |
| | | (1,814 | ) | | (1,814 | ) | ||||||||||||||||
Comprehensive loss |
(10,295 | ) | ||||||||||||||||||||||
Shares issued for: |
||||||||||||||||||||||||
Exercise of stock options |
842,534 | 1,413 | (505 | ) | | | 908 | |||||||||||||||||
Other capital assets purchased (Note 8 (a)) |
50,000 | 362 | | | | 362 | ||||||||||||||||||
Share purchase plan |
4,189 | 27 | | | | 27 | ||||||||||||||||||
Stock compensation charged to operations |
| | 1,516 | | | 1,516 | ||||||||||||||||||
Balances, March 31, 2005 |
293,767,721 | $ | 870,408 | $ | 17,294 | $ | 1,065 | $ | (589,399 | ) | $ | 299,368 | ||||||||||||
Three Months Ended March 31, | ||||||||
2005 | 2004 | |||||||
(Unaudited) | ||||||||
OPERATING ACTIVITIES |
||||||||
Net loss from continuing operations |
$ | (24,154 | ) | $ | (23,791 | ) | ||
Items not involving use of cash
|
||||||||
Depreciation |
413 | 462 | ||||||
Stock-based compensation |
1,516 | 2,187 | ||||||
Accretion expense |
89 | 73 | ||||||
Unrealized foreign exchange losses |
513 | 339 | ||||||
Share of income from joint venture |
(7,673 | ) | (4,215 | ) | ||||
Share of loss of significantly influenced investees |
239 | 398 | ||||||
Gain on sale of long-term investments (Note 4) |
| (1,248 | ) | |||||
Write-down of carrying value of long-term investments (Note 4) |
1,438 | | ||||||
Deferred income taxes |
(4 | ) | 119 | |||||
Minority interests |
(426 | ) | (119 | ) | ||||
Net change in non-cash operating working capital items (Note 8 (c)) |
(5,058 | ) | 183 | |||||
Cash used in operating activities of continuing operations |
(33,107 | ) | (25,612 | ) | ||||
Cash provided by (used in) operating activities of discontinued operations |
2,592 | (932 | ) | |||||
Cash used in operating activities |
(30,515 | ) | (26,544 | ) | ||||
INVESTING ACTIVITIES |
||||||||
Proceeds from sale of discontinued operations |
15,000 | | ||||||
Proceeds from sale of long-term investments |
| 2,461 | ||||||
Expenditures on property, plant and equipment |
(3,132 | ) | (21,914 | ) | ||||
Proceeds from other assets |
124 | | ||||||
Other |
(2,077 | ) | (846 | ) | ||||
Cash provided by (used in) investing activities of continuing operations |
9,915 | (20,299 | ) | |||||
Cash used in investing activities of discontinued operations |
(502 | ) | (793 | ) | ||||
Cash provided by (used in) investing activities |
9,413 | (21,092 | ) | |||||
FINANCING ACTIVITIES |
||||||||
Issue of share capital |
935 | 183 | ||||||
Cash provided by financing activities of continuing operations |
935 | 183 | ||||||
Cash used in financing activities of discontinued operations |
(37 | ) | (14 | ) | ||||
Cash provided by financing activities |
898 | 169 | ||||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH |
(508 | ) | (394 | ) | ||||
NET CASH OUTFLOW |
(20,712 | ) | (47,861 | ) | ||||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
112,478 | 105,516 | ||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ | 91,766 | $ | 57,655 | ||||
CASH AND CASH EQUIVALENTS IS COMPRISED OF: |
||||||||
Cash on hand and demand deposits |
$ | 21,121 | $ | 32,424 | ||||
Short-term money market instruments |
70,645 | 25,231 | ||||||
$ | 91,766 | $ | 57,655 | |||||
1. | SIGNIFICANT ACCOUNTING POLICIES | |
These consolidated financial statements have been prepared in accordance with United States of America generally accepted accounting principles (U.S. GAAP). In the case of Ivanhoe Mines Ltd. (the Company), U.S. GAAP differs in certain respects from accounting principles generally accepted in the Canada (Canadian GAAP) as explained in Note 9. | ||
In the opinion of management, all adjustments (including reclassifications and normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at March 31, 2005 and for all periods presented, have been made. The interim results are not necessarily indicative of results for a full year. For purposes of these financial statements, the Company and its subsidiaries and joint venture are collectively referred to as Ivanhoe Mines. | ||
The significant accounting policies used in these consolidated financial statements are as follows: |
(a) | Principles of consolidation | ||
These consolidated financial statements include the accounts of the Company and all of its subsidiaries. The principal subsidiaries of the Company are Ivanhoe Mines Mongolia Inc. (B.V.I.), Ivanhoe Mines China (B.V.I.), Ivanhoe Cloncurry Mines Pty Ltd (Australia), and their respective subsidiaries, and Bakyrchik Mining Venture (Kazakhstan) (70% owned) (BMV). | |||
Ivanhoe Mines investment in Myanmar Ivanhoe Copper Company Limited (JVCo) (Myanmar) (50% owned), which is subject to joint control, is accounted for using the equity method. | |||
All intercompany transactions and balances have been eliminated, where appropriate. | |||
Variable Interest Entities (VIEs), which include, but are not limited to, special purpose entities, trusts, partnerships, and other legal structures, as defined by Financial Accounting Standards Board (FASB) Interpretation No. 46 (Revised 2003) (FIN 46R) Consolidation of Variable Interest Entities an Interpretation of ARB No. 51, are entities in which equity investors do not have the characteristics of a controlling financial interest or there is not sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. VIEs are subject to consolidation by the primary beneficiary who will absorb the majority of the entities expected losses and/or expected residual returns. |
1. | SIGNIFICANT ACCOUNTING POLICIES (Continued) |
(b) | Measurement uncertainties | ||
Generally accepted accounting principles require management to make assumptions and estimates that affect the reported amounts and other disclosures in these consolidated financial statements. Actual results may differ from those estimates. | |||
Significant estimates used in the preparation of these consolidated financial statements include, among other things, the recoverability of accounts receivable and investments, the proven and probable ore reserves, the estimated recoverable tonnes of ore from each mine area, the estimated net realizable value of inventories, the provision for income taxes and composition of deferred income tax assets and deferred income tax liabilities, the expected economic lives of and the estimated future operating results and net cash flows from property, plant and equipment, and the anticipated costs and timing of asset retirement obligations. | |||
(c) | Foreign currencies | ||
The Company considers the U.S. dollar to be its functional currency as it is the currency of the primary economic environment in which the Company and its subsidiaries operate. Accordingly, monetary assets and liabilities denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect at the balance sheet date and non-monetary assets and liabilities are translated at the exchange rates in effect at the time of acquisition or issue. Revenues and expenses are translated at rates approximating the exchange rates in effect at the time of the transactions. All exchange gains and losses are included in operations. | |||
(d) | Cash and cash equivalents | ||
Cash and cash equivalents include short-term money market instruments with terms to maturity, at the date of acquisition, not exceeding 90 days. | |||
(e) | Inventories | ||
Mine stores and supplies are valued at the lower of the weighted average cost, less allowances for obsolescence, and replacement cost. | |||
(f) | Long-term investments | ||
Long-term investments in companies in which Ivanhoe Mines has voting interests of 20% to 50%, or where Ivanhoe Mines has the ability to exercise significant influence, are accounted for using the equity method. Under this method, Ivanhoe Mines share of the investees earnings and losses is included in operations and its investments therein are adjusted by a like amount. Dividends received are credited to the investment accounts. | |||
The other long-term investments are classified as available-for-sale investments. Unrealized gains and losses on these investments are recorded in accumulated other comprehensive income as a separate component of shareholders equity, unless the declines in market value are judged to be other than temporary, in which case the losses are recognized in income in the period. Realized gains and losses from the sale of these investments are included in income in the period. |
1. | SIGNIFICANT ACCOUNTING POLICIES (Continued) |
(g) | Exploration and development | ||
All direct costs related to the acquisition of mineral property interests are capitalized in the period incurred. | |||
Exploration costs are charged to operations in the period incurred until such time as it has been determined that a property has economically recoverable reserves, in which case subsequent exploration costs and the costs incurred to develop a property are capitalized. Exploration costs include value-added taxes incurred in foreign jurisdictions when recoverability of those taxes is uncertain. | |||
(h) | Property, plant and equipment | ||
Property, plant and equipment are carried at cost (including development and preproduction costs, capitalized interest, other financing costs and all direct administrative support costs incurred during the construction period, net of cost recoveries and incidental revenues), less accumulated depletion and depreciation including write-downs. Following the construction period, interest, other financing costs and administrative costs are expensed as incurred. | |||
On the commencement of commercial production, depletion of each mining property is provided on the unit-of-production basis, using estimated proven and probable reserves as the depletion basis. | |||
Property, plant and equipment are depreciated, following the commencement of commercial production, over their expected economic lives using either the unit-of-production method or the straight-line method (over one to twenty years). | |||
Capital works in progress are not depreciated until the capital asset has been put into operation. | |||
Ivanhoe Mines reviews the carrying values of its property, plant and equipment whenever events or changes in circumstances indicate that their carrying values may not be recoverable. An impairment is considered to exist if total estimated future cash flows, or probability-weighted cash flows on an undiscounted basis, are less than the carrying value of the assets. An impairment loss is measured and recorded based on discounted estimated future cash flows associated with values beyond proven and probable reserves. In estimating future cash flows, assets are grouped at the lowest level for which there is identifiable future cash flows that are largely independent of cash flows from other asset groups. Generally, in estimating future cash flows, all assets are grouped at a particular mine for which there is identifiable cash flows. |
1. | SIGNIFICANT ACCOUNTING POLICIES (Continued) |
(i) | Stripping costs | ||
On March 30, 2005, the FASB ratified the consensus of the Emerging Issues Task Force (EITF) Issue 04-6 that stripping costs incurred during the production phase of a mine are variable production costs that should be included in the costs of the inventory produced during the period that the stripping costs are incurred. Commencing in the first quarter of 2005, Ivanhoe Mines changed its accounting policy with respect to stripping costs to comply with the consensus reached by the EITF. This change has been applied retrospectively by restating prior period financial statements. In 2004 and prior years, Ivanhoe Mines deferred or accrued stripping costs incurred during production, as appropriate, and charged these costs to operations on the basis of the estimated average stripping ratio for each mine area. The effect of this change was to increase the deficit at January 1, 2004 by $7,628,000, to increase the net loss for the year ended December 31, 2004 by $7,889,000 ($0.03 per share) and to decrease assets of discontinued operations and investment in joint venture at December 31, 2004 by $13,973,000 and $1,544,000 respectively. The net loss for the three months ended March 31, 2004 was also increased by $4,521,000 ($0.02 per share) as a result of this change. | |||
(j) | Asset retirement obligations | ||
Ivanhoe Mines recognizes liabilities for statutory, contractual or legal obligations associated with the retirement of property, plant and equipment, when those obligations result from the acquisition, construction, development or normal operation of the assets. Initially, a liability for an asset retirement obligation is recognized at its fair value in the period in which it is incurred. Upon initial recognition of the liability, the corresponding asset retirement cost is added to the carrying amount of that asset and the cost is amortized as an expense over the economic life of the related asset. Following the initial recognition of the asset retirement obligation, the carrying amount of the liability is increased for the passage of time and adjusted for changes to the amount or timing of the underlying cash flows needed to settle the obligation. | |||
(k) | Revenue recognition | ||
Revenue at JVCo from the sale of metals is recognized, net of related royalties and sales commissions, when: (i) persuasive evidence of an arrangement exists; (ii) the risks and rewards of ownership pass to the purchaser including delivery of the product; (iii) the selling price is fixed or determinable; and (iv) collectibility is reasonably assured. Revenue from copper cathode includes provisional pricing arrangements accounted for as embedded derivative instruments under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended. | |||
(l) | Stock-based compensation | ||
The Company has an Employees and Directors Equity Incentive Plan. The Company records compensation expense using the fair value based method in accordance with SFAS No. 123, Accounting for Stock-Based Compensation. Accordingly, the fair value of stock options at the date of grant is amortized to operations, with an offsetting credit to additional paid-in capital, on a straight-line basis over the vesting period. If and when the stock options are ultimately exercised, the applicable amounts of additional paid-in capital are transferred to share capital. |
1. | SIGNIFICANT ACCOUNTING POLICIES (Continued) |
(m) | Deferred income taxes | ||
The Company computes income taxes in accordance with SFAS No. 109, Accounting for Income Taxes. SFAS 109 requires that the provision for deferred income taxes be based on the liability method. Deferred taxes arise from the recognition of the tax consequences of temporary differences by applying statutory tax rates applicable to future years to differences between the financial statements carrying amounts and the tax bases of certain assets and liabilities. The Company records a valuation allowance against any portion of those deferred income tax assets that management believes will, more likely than not, fail to be realized. | |||
(n) | Loss per share | ||
The Company follows SFAS No. 128, Earnings Per Share, which requires the presentation of basic and diluted earnings per share. The basic loss per share is computed by dividing the net loss attributable to common stock by the weighted average number of common shares and Special Warrants outstanding during the year. All stock options and share purchase warrants outstanding at each period end have been excluded from the weighted average share calculation. The effect of potentially dilutive stock options and share purchase warrants was antidilutive in the periods ending March 31, 2005 and 2004. |
Two months ended February 28, | Three months ended March 31, | |||||||
2005 | 2004 | |||||||
REVENUE |
$ | 18,031 | $ | 18,366 | ||||
COST OF OPERATIONS |
(11,965 | ) | (25,632 | ) | ||||
DEPRECIATION AND DEPLETION |
| (258 | ) | |||||
OPERATING PROFIT (LOSS) |
6,066 | (7,524 | ) | |||||
EXPENSES |
||||||||
General and administrative |
(4 | ) | (10 | ) | ||||
Interest expense |
(203 | ) | (237 | ) | ||||
INCOME (LOSS) BEFORE THE FOLLOWING |
5,859 | (7,771 | ) | |||||
Interest income |
16 | 53 | ||||||
Foreign exchange loss |
(285 | ) | (118 | ) | ||||
Other expense |
(191 | ) | (53 | ) | ||||
INCOME (LOSS) BEFORE INCOME TAXES |
5,399 | (7,889 | ) | |||||
Recovery of income taxes |
7 | 32 | ||||||
NET INCOME |
5,406 | (7,857 | ) | |||||
Contingent Income |
| | ||||||
Gain on sale of ABM |
10,267 | | ||||||
NET INCOME AND GAIN ON SALE
FROM DISCONTINUED OPERATIONS |
$ | 15,673 | $ | (7,857 | ) | |||
Exploration | Corporate | Consolidated | ||||||||||
Operating expenses |
||||||||||||
Exploration |
$ | (24,405 | ) | $ | | $ | (24,405 | ) | ||||
General and administrative |
| (4,787 | ) | (4,787 | ) | |||||||
Interest expense |
(31 | ) | (58 | ) | (89 | ) | ||||||
Depreciation |
(413 | ) | | (413 | ) | |||||||
Mining property care and maintenance costs |
| (852 | ) | (852 | ) | |||||||
Operating loss |
(24,849 | ) | (5,697 | ) | (30,546 | ) | ||||||
Other income (expenses) |
||||||||||||
Share of income from joint venture |
| 7,673 | 7,673 | |||||||||
Interest income |
46 | 549 | 595 | |||||||||
Foreign exchange losses |
(88 | ) | (481 | ) | (569 | ) | ||||||
Share of loss of significantly influenced investees |
| (239 | ) | (239 | ) | |||||||
Write-down of carrying value of long-term investment |
| (1,438 | ) | (1,438 | ) | |||||||
Loss before taxes and other items |
(24,891 | ) | 367 | (24,524 | ) | |||||||
Provision for income and capital taxes |
(27 | ) | (29 | ) | (56 | ) | ||||||
Minority interests |
426 | | 426 | |||||||||
Net loss from continuing operations |
$ | (24,492 | ) | $ | 338 | $ | (24,154 | ) | ||||
Expenditures on property, plant and equipment |
$ | 2,333 | $ | 1,161 | $ | 3,494 | ||||||
Total assets |
||||||||||||
Continuing operations |
$ | 81,929 | $ | 240,254 | $ | 322,183 | ||||||
Discontinued operations |
| $ | | $ | | |||||||
$ | 81,929 | $ | 240,254 | $ | 322,183 | |||||||
Exploration | Corporate | Consolidated | ||||||||||
Operating expenses |
||||||||||||
Exploration |
$ | (20,735 | ) | $ | | $ | (20,735 | ) | ||||
General and administrative |
| (5,174 | ) | (5,174 | ) | |||||||
Interest expense |
(29 | ) | (43 | ) | (72 | ) | ||||||
Depreciation |
(462 | ) | | (462 | ) | |||||||
Mining property care and maintenance costs |
| (1,046 | ) | (1,046 | ) | |||||||
Operating loss |
(21,226 | ) | (6,263 | ) | (27,489 | ) | ||||||
Other income (expenses) |
||||||||||||
Share of income from joint venture |
| 4,215 | 4,215 | |||||||||
Interest income |
41 | 370 | 411 | |||||||||
Foreign exchange losses |
(206 | ) | (1,537 | ) | (1,743 | ) | ||||||
Share of loss of significantly influenced investees |
| (398 | ) | (398 | ) | |||||||
Gain on sale of investment |
| 1,248 | 1,248 | |||||||||
Loss before taxes and other items |
(21,391 | ) | (2,365 | ) | (23,756 | ) | ||||||
Provision for income and capital taxes |
(15 | ) | (139 | ) | (154 | ) | ||||||
Minority interests |
119 | | 119 | |||||||||
Net loss from continuing operations |
$ | (21,287 | ) | $ | (2,504 | ) | $ | (23,791 | ) | |||
Expenditures on property, plant and equipment |
$ | 1,747 | $ | 167 | $ | 1,914 | ||||||
Total assets |
||||||||||||
Continuing operations |
$ | 73,907 | $ | 220,712 | $ | 294,619 | ||||||
Discontinued operations |
| 26,059 | 26,059 | |||||||||
$ | 73,907 | $ | 246,771 | $ | 320,678 | |||||||
(a) | During the three months ended March 31, 2005, 50,000 common shares of the Company were issued as consideration for the purchase of certain exploration equipment valued at $362,000. |
Three Months Ended March 31, | ||||||||
2005 | 2004 | |||||||
Interest paid |
$ | | $ | | ||||
Income and capital taxes paid |
24 | 71 |
(c) | Net change in non-cash operating working capital items: |
Three Months Ended | ||||||||
March 31, | ||||||||
2005 | 2004 | |||||||
(Increase) decrease in: |
||||||||
Accounts receivable |
$ | 857 | $ | (944 | ) | |||
Inventories |
352 | (99 | ) | |||||
Prepaid expenses |
(498 | ) | (323 | ) | ||||
Other current assets |
(23 | ) | 1,999 | |||||
Increase in: |
||||||||
Accounts payable and accrued liabilities |
(5,746 | ) | (450 | ) | ||||
$ | (5,058 | ) | $ | 183 | ||||
March 31, | March 31, | December 31, | December 31, | |||||||||||||
2005 | 2005 | 2004 | 2004 | |||||||||||||
(As previously | (As previously | |||||||||||||||
reported under | reported under | |||||||||||||||
(U.S. GAAP) | Canadian GAAP) | (U.S. GAAP) | Canadian GAAP) | |||||||||||||
(a) | (a) | (a) | (a) | |||||||||||||
ASSETS |
||||||||||||||||
CURRENT |
||||||||||||||||
Cash and cash equivalents |
$ | 91,766 | $ | 105,560 | $ | 112,478 | $ | 122,577 | ||||||||
Accounts receivable |
12,195 | 15,251 | 6,552 | 10,286 | ||||||||||||
Broken ore on leach pads |
| 10,408 | | 9,929 | ||||||||||||
Inventories |
1,840 | 5,212 | 2,192 | 5,575 | ||||||||||||
Prepaid expenses |
1,694 | 4,934 | 1,196 | 2,996 | ||||||||||||
Other current assets |
3,023 | 3,141 | 3,000 | 3,117 | ||||||||||||
Current assets of discontinued operations |
| | 36,636 | 36,636 | ||||||||||||
TOTAL CURRENT ASSETS |
110,518 | 144,506 | 162,054 | 191,116 | ||||||||||||
INVESTMENT IN JOINT VENTURE (a) |
134,601 | | 126,911 | | ||||||||||||
LONG-TERM INVESTMENTS (e) |
15,669 | 14,604 | 19,160 | 16,281 | ||||||||||||
PROPERTY, PLANT AND EQUIPMENT (d) |
57,513 | 194,067 | 54,434 | 191,824 | ||||||||||||
DEFERRED INCOME TAXES |
281 | 671 | 318 | 782 | ||||||||||||
OTHER ASSETS |
3,601 | 5,192 | 3,764 | 5,333 | ||||||||||||
DEFERRED RECOVERABLE AMOUNT ON SALE OF ASSETS |
| 8,557 | | | ||||||||||||
NON-CURRENT ASSETS OF DISCONTINUED OPERATIONS
(b) and (c) |
| | 9,627 | 29,320 | ||||||||||||
TOTAL ASSETS |
$ | 322,183 | $ | 367,597 | $ | 376,268 | $ | 434,656 | ||||||||
LIABILITIES |
||||||||||||||||
CURRENT |
||||||||||||||||
Accounts payable and accrued liabilities |
$ | 8,665 | $ | 19,191 | $ | 14,412 | $ | 24,764 | ||||||||
Current portion of long-term debt |
| 3,750 | | 7,500 | ||||||||||||
Current liabilities of discontinued operations |
| | 14,082 | 14,082 | ||||||||||||
TOTAL CURRENT LIABILITIES |
8,665 | 22,941 | 28,494 | 46,346 | ||||||||||||
LOANS PAYABLE TO RELATED PARTIES |
5,088 | 5,088 | 5,088 | 5,088 | ||||||||||||
DEFERRED INCOME TAXES (c) |
435 | 12,709 | 476 | 12,788 | ||||||||||||
ASSET RETIREMENT OBLIGATIONS |
5,340 | 9,778 | 5,267 | 9,636 | ||||||||||||
OTHER LIABILITIES |
| 1,296 | | 1,404 | ||||||||||||
NON-CURRENT LIABILITIES OF DISCONTINUED
OPERATIONS |
| | 26,380 | 26,380 | ||||||||||||
TOTAL LIABILITIES |
19,528 | 51,812 | 65,705 | 101,642 | ||||||||||||
MINORITY INTERESTS |
3,287 | 3,287 | 3,713 | 3,713 | ||||||||||||
SHAREHOLDERS EQUITY |
||||||||||||||||
SHARE CAPITAL (b) |
870,408 | 875,338 | 868,606 | 873,536 | ||||||||||||
ADDITIONAL PAID-IN CAPITAL |
17,294 | 13,084 | 16,283 | 12,073 | ||||||||||||
ACCUMULATED OTHER COMPREHENSIVE INCOME (f) |
1,065 | | 2,879 | | ||||||||||||
DEFICIT |
(589,399 | ) | (575,924 | ) | (580,918 | ) | (556,308 | ) | ||||||||
TOTAL SHAREHOLDERS EQUITY |
299,368 | 312,498 | 306,850 | 329,301 | ||||||||||||
TOTAL LIABILITIES, MINORITY INTERESTS AND
SHAREHOLDERS EQUITY |
$ | 322,183 | $ | 367,597 | $ | 376,268 | $ | 434,656 | ||||||||
9. | DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued) |
Three months ended March 31, | Three months ended March 31, | |||||||||||||||
2005 | 2005 | 2004 | 2004 | |||||||||||||
(As previously | (As previously | |||||||||||||||
reported under | reported under | |||||||||||||||
Canadian | Canadian | |||||||||||||||
(U.S. GAAP) | GAAP) | (U.S. GAAP) | GAAP) | |||||||||||||
(a) | (a) | (a) | (a) | |||||||||||||
REVENUE |
$ | | $ | 15,144 | $ | | $ | 9,386 | ||||||||
COST OF OPERATIONS |
| (4,057 | ) | | (2,541 | ) | ||||||||||
DEPRECIATION |
| (1,631 | ) | | (1,285 | ) | ||||||||||
OPERATING PROFIT |
| 9,456 | | 5,560 | ||||||||||||
OPERATING EXPENSES |
||||||||||||||||
Exploration |
(24,405 | ) | (24,405 | ) | (20,735 | ) | (20,735 | ) | ||||||||
General and administrative |
(4,787 | ) | (4,916 | ) | (5,174 | ) | (5,342 | ) | ||||||||
Interest |
(89 | ) | (251 | ) | (72 | ) | (299 | ) | ||||||||
Depreciation |
(413 | ) | (413 | ) | (462 | ) | (462 | ) | ||||||||
Mining property care and maintenance costs |
(852 | ) | (852 | ) | (1,046 | ) | (1,046 | ) | ||||||||
OPERATING LOSS |
(30,546 | ) | (21,381 | ) | (27,489 | ) | (22,324 | ) | ||||||||
OTHER INCOME (EXPENSES) |
||||||||||||||||
Share of income from joint venture |
7,673 | | 4,215 | | ||||||||||||
Interest income |
595 | 661 | 411 | 411 | ||||||||||||
Foreign exchange losses |
(569 | ) | (682 | ) | (1,743 | ) | (1,803 | ) | ||||||||
Dilution gain on investment in subsidiary (i) |
| | | | ||||||||||||
Share of loss of significantly influenced investees |
(239 | ) | (239 | ) | (398 | ) | (398 | ) | ||||||||
Gain on sale of long-term investments |
| | 1,248 | 1,248 | ||||||||||||
Write-down of carrying value of long-term investments |
(1,438 | ) | (1,438 | ) | | | ||||||||||
LOSS BEFORE TAXES AND OTHER ITEMS |
(24,524 | ) | (23,079 | ) | (23,756 | ) | (22,866 | ) | ||||||||
Provision for income and capital taxes |
(56 | ) | (1,501 | ) | (154 | ) | (1,044 | ) | ||||||||
Minority interests |
426 | 426 | 119 | 119 | ||||||||||||
NET LOSS FROM CONTINUING OPERATIONS |
(24,154 | ) | (24,154 | ) | (23,791 | ) | (23,791 | ) | ||||||||
NET INCOME AND GAIN ON SALE FROM DISCONTINUED
OPERATIONS (c) and (h) |
15,673 | 4,538 | (7,857 | ) | (8,602 | ) | ||||||||||
NET LOSS |
$ | (8,481 | ) | $ | (19,616 | ) | $ | (31,648 | ) | $ | (32,393 | ) | ||||
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE FROM |
||||||||||||||||
CONTINUING OPERATIONS |
$ | (0.08 | ) | $ | (0.08 | ) | $ | (0.09 | ) | $ | (0.09 | ) | ||||
DISCONTINUED OPERATIONS |
0.05 | 0.01 | (0.03 | ) | (0.03 | ) | ||||||||||
$ | (0.03 | ) | $ | (0.07 | ) | $ | (0.12 | ) | $ | (0.12 | ) | |||||
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING (000s) |
293,313 | 293,313 | 271,370 | 271,370 | ||||||||||||
9. | DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued) |
Three Months Ended March 31, | Three Months Ended March 31, | |||||||||||||||
2005 | 2005 | 2004 | 2004 | |||||||||||||
(As previously | (As previously | |||||||||||||||
reported under | reported under | |||||||||||||||
(U.S. GAAP) | Canadian GAAP) | (U.S. GAAP) | Canadian GAAP) | |||||||||||||
(a) | (a) | (a) | (a) | |||||||||||||
OPERATING ACTIVITIES |
||||||||||||||||
Net loss |
$ | (24,154 | ) | $ | (24,154 | ) | $ | (23,791 | ) | $ | (23,791 | ) | ||||
Items not involving use of cash |
||||||||||||||||
Depreciation |
413 | 2,044 | 462 | 1,747 | ||||||||||||
Stock-based compensation |
1,516 | 1,516 | 2,187 | 2,187 | ||||||||||||
Accretion expense |
89 | 157 | 73 | 131 | ||||||||||||
Unrealized foreign exchange gains (losses) |
513 | (499 | ) | 339 | 270 | |||||||||||
Share of income from joint venture |
(7,673 | ) | | (4,215 | ) | | ||||||||||
Share of loss of significantly influenced investees |
239 | 239 | 398 | 398 | ||||||||||||
Gain on sale of long-term investments |
| | (1,248 | ) | (1,248 | ) | ||||||||||
Write-down of carrying value of long-term
investments |
1,438 | 1,438 | | | ||||||||||||
Deferred income taxes |
(4 | ) | 32 | 119 | 102 | |||||||||||
Minority interests |
(426 | ) | (426 | ) | (119 | ) | (119 | ) | ||||||||
Decrease in non-current portion of royalty payable |
| (108 | ) | | (431 | ) | ||||||||||
Net change in non-cash operating working capital
items |
(5,058 | ) | (5,992 | ) | 183 | (120 | ) | |||||||||
Cash used in operating activities of continuing
operations |
(33,107 | ) | (25,753 | ) | (25,612 | ) | (20,874 | ) | ||||||||
Cash provided by (used in) operating activities of
discontinued operations |
2,592 | 2,592 | (932 | ) | (992 | ) | ||||||||||
Cash used in operating activities |
(30,515 | ) | (23,161 | ) | (26,544 | ) | (21,866 | ) | ||||||||
INVESTING ACTIVITIES |
||||||||||||||||
Proceeds from sale of discontinued operations |
15,000 | 15,000 | | | ||||||||||||
Proceeds from sale of long-term investments |
| | 2,461 | 2,461 | ||||||||||||
Expenditures on property, plant and equipment |
(3,132 | ) | (3,925 | ) | (21,914 | ) | (23,003 | ) | ||||||||
Proceeds from (expenditures on) other assets |
124 | (8 | ) | | (11 | ) | ||||||||||
Other |
(2,077 | ) | (2,079 | ) | (846 | ) | (845 | ) | ||||||||
Cash provided by (used in) investing activities of
continuing operations |
9,915 | 8,988 | (20,299 | ) | (21,398 | ) | ||||||||||
Cash used in investing activities of discontinued
operations |
(502 | ) | (502 | ) | (793 | ) | (668 | ) | ||||||||
Cash provided by (used in) investing activities |
9,413 | 8,486 | (21,092 | ) | (22,066 | ) | ||||||||||
FINANCING ACTIVITIES |
||||||||||||||||
Issue of share capital |
935 | 935 | 183 | 183 | ||||||||||||
Repayment of long-term debt |
| (3,750 | ) | | (3,750 | ) | ||||||||||
Cash provided by financing activities of continuing
operations |
935 | (2,815 | ) | 183 | (3,567 | ) | ||||||||||
Cash used in financing activities of discontinued
operations |
(37 | ) | (37 | ) | (14 | ) | (14 | ) | ||||||||
Cash provided by (used in) financing activities |
898 | (2,852 | ) | 169 | (3,581 | ) | ||||||||||
EFFECT EXCHANGE RATE CHANGES ON CASH |
(508 | ) | 510 | (394 | ) | (394 | ) | |||||||||
NET CASH OUTFLOW |
(20,712 | ) | (17,017 | ) | (47,861 | ) | (47,907 | ) | ||||||||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
112,478 | 122,577 | 105,516 | 106,994 | ||||||||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ | 91,766 | $ | 105,560 | $ | 57,655 | $ | 59,087 | ||||||||
CASH AND CASH EQUIVALENTS IS COMPRISED OF: |
||||||||||||||||
Cash on hand and demand deposits |
$ | 21,121 | $ | 34,915 | $ | 32,424 | $ | 33,856 | ||||||||
Short-term money market instruments |
70,645 | 70,645 | 25,231 | 25,231 | ||||||||||||
$ | 91,766 | $ | 105,560 | $ | 57,655 | $ | 59,087 | |||||||||
9. | DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued) |
(a) | Joint venture | ||
Under U.S. GAAP the Companys joint venture interest in JVCo was accounted for using the equity method. Under Canadian GAAP, this joint venture interest would have been accounted for on a proportionate consolidation basis. | |||
Under Canadian GAAP, the carrying amount of the Companys investment and its share of equity of JVCo is eliminated. The Companys proportionate share of each line item of JVCos assets, liabilities, revenue and expenses is included in the corresponding line items of the Companys financial statements. All intercompany balances and transactions would be eliminated. | |||
(b) | Acquisition of ABM | ||
Under U.S. GAAP, the fair value of the shares issued in 2000 to effect the acquisition of ABM were measured at the date the acquisition was announced and the terms agreed to, whereas, under Canadian GAAP, the shares issued would have been measured at the transaction date. This difference would have resulted in the cost of the acquisition under Canadian GAAP being $4,930,000 higher than under U.S. GAAP. | |||
Under U.S. GAAP, the Company included in the cost of the acquisition of ABM the intrinsic value of the unvested options granted by the Company in 2000 as consideration for the acquisition of all of the outstanding stock options of ABM. Under U.S. GAAP, the deferred stock compensation was recognized as a compensation cost over the remaining future vesting period of the options. Under Canadian GAAP, the Company would have included in the cost of acquisition of ABM the $1,750,000 fair value of the stock options. This difference would have resulted in the cost of the acquisition in 2000 under Canadian GAAP being $704,000 higher than under U.S. GAAP. | |||
ABM was sold in February 2005 (Note 2). | |||
(c) | Impairment of long-lived assets | ||
Under U.S. GAAP, impairment charges are recorded based on the discounted, estimated future net cash flows, whereas, under Canadian GAAP, impairment charges on long-lived assets in 2002 and prior years were recorded as the excess of their carrying amount over their recoverable amount, which was determined based on the undiscounted estimated future net cash flows. |
9. | DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued) |
Under U.S. GAAP, the Savage River Project was fully written off as at December 31, 2002. However, under Canadian GAAP only an $18 million write-down would have been taken. In 2003, additional amounts capitalized under U.S. GAAP were written off; however, these would have been capitalized under Canadian GAAP. As a result, under Canadian GAAP, these assets would need to be depreciated and depleted. During the three months ended March 31, 2005 additional depreciation recorded under Canadian GAAP was $nil (2004: $744,000), | |||
(d) | Other mineral property interests | ||
Under U.S. GAAP, where the mineral property interests are, at the date of acquisition, without economically recoverable reserves, these costs are generally considered to be exploration costs that are expensed as incurred. Under Canadian GAAP, the costs of the acquisition of mineral property interests are capitalized. | |||
In accordance with EITF 04-02, Whether Mining Rights are Tangible or Intangible Assets, the Company classifies its mineral exploration licenses as tangible assets and there is no difference between Canadian and U.S. GAAP. Prior to January 2004, the costs of acquisition of Ivanhoe Mines mineral exploration licenses were classified as intangible assets under U.S. GAAP and amortized over the term of the licenses. As a result, for Canadian GAAP purposes, the $6,521,000, net of deferred income taxes of $882,000, in amortization or write-offs of other mineral property interests under U.S. GAAP needs to be reversed. | |||
(e) | Long-term investments | ||
Under U.S. GAAP, portfolio investments are classified as available-for-sale securities, which are carried at market value. The resulting unrealized gains or losses are included in the determination of comprehensive income, net of income taxes where applicable. Under Canadian GAAP, these investments would be carried at their original cost less provisions for impairment. | |||
(f) | Other comprehensive income | ||
U.S. GAAP requires that a statement of comprehensive income be displayed with the same prominence as other financial statements and that the aggregate amount of comprehensive income, excluding the deficit, be disclosed separately in shareholders equity. Comprehensive income, which incorporates the net loss, includes all changes in shareholders equity during a period except those resulting from investments by, and distributions to, owners. Under Canadian GAAP, companies do not report comprehensive income or loss. |
9. | DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued) |
(g) | Income taxes | ||
Under U.S. GAAP, deferred income taxes are calculated based on enacted tax rates applicable to future years. Under Canadian GAAP, future income taxes are calculated based on enacted or substantively enacted tax rates applicable to future years. This difference in GAAP did not have any effect on the financial position of the Company as at March 31, 2005 and December 31, 2004 nor the results of operations of the Company for the three months ended March 31, 2005 and 2004. | |||
(h) | Gain on sale of ABM | ||
Under U.S. GAAP, the net book value of ABM when it was sold in February 2005 was $11.2 million, whereas under Canadian GAAP the carrying value was $30.9 million. During the three months ended March 31, 2005, total proceeds from the sale were $21.5 million, representing cash instalments of $21.5 million. |
Share Information | Investor Information | |||||
1 |
Interim Report For the three months ended March 31, 2005 |
Common shares of Ivanhoe Mines Ltd. are listed for trading under the symbol IVN on the New York Stock Exchange and the Toronto Stock Exchange. | All financial reports, news releases and corporate information can be accessed on our web site at www.ivanhoe-mines.com | |||
At May 12, 2005 the Company had 293.9 million common shares issued and outstanding and warrants and stock options exercisable for 9.1million additional common shares. |
Transfer Agents and
Registrars CIBC Mellon Trust Company 320 Bay Street Toronto, Ontario, Canada M5H 4A6 Toll free in North America: 1-800-387-0825 |
Contact Information Investors: Bill Trenaman Media : Bob Williamson Suite 654-999 Canada Place Vancouver, BC, Canada V6C 3E1 E-mail : info@ivanhoemines.com Tel : (604) 688-5755 |
Page 1 of 17
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Quarter ended March 31, | ||||||||
2005 | 2004 (1) | |||||||
Exploration expenses |
(24.4 | ) | (20.7 | ) | ||||
General and administrative costs |
(4.8 | ) | (5.2 | ) | ||||
Share of income from joint venture |
7.7 | 4.2 | ||||||
Foreign exchange loss |
(0.6 | ) | (1.7 | ) | ||||
Net loss from continuing operations |
(24.2 | ) | (23.8 | ) | ||||
Net income (loss) from discontinued operations |
15.7 | (7.9 | ) | |||||
Net (loss) |
(8.5 | ) | (31.6 | ) | ||||
Net income (loss) per share |
||||||||
Continuing operations |
($ | 0.08 | ) | ($ | 0.09 | ) | ||
Discontinued operations |
$ | 0.05 | ($ | 0.03 | ) | |||
Total assets |
322.2 | 320.7 | ||||||
Continuing operations
|
||||||||
Capital expenditures |
3.5 | 1.9 | ||||||
Joint venture operations
|
||||||||
Copper cathode 50% share |
||||||||
Units sold tonnes |
4,670 | 3,734 | ||||||
Units produced tonnes |
4,802 | 3,836 | ||||||
Average sale price Copper |
||||||||
Copper cathode US$/pound |
$ | 1.56 | $ | 1.20 | ||||
(1) | Certain numbers have been restated due to the adoption of new accounting standards. Refer to Note 1 of the financial statements. |
Page 6 of 17
Quarter ended | ||||||||||||||||
Mar 31 | Dec 31 | Sept 30 | Jun 30 | |||||||||||||
(Expressed in millions of U.S. dollars, except per share amounts) | 2005 | 2004 (2) | 2004 (2) | 2004 (2) | ||||||||||||
Revenue |
0.0 | 0.0 | 0.0 | 0.0 | ||||||||||||
Operating profit (loss) |
0.0 | 0.0 | 0.0 | 0.0 | ||||||||||||
Total exploration |
(24.4 | ) | (24.2 | ) | (28.5 | ) | (24.8 | ) | ||||||||
Gain (loss) on exchange |
(0.6 | ) | 3.5 | 4.2 | (1.4 | ) | ||||||||||
Net (loss) from continuing operations |
(24.2 | ) | (26.6 | ) | (25.5 | ) | (23.1 | ) | ||||||||
Gain (loss) from discontinued operations |
15.7 | 9.4 | 0.7 | 2.2 | ||||||||||||
Net (loss) |
(8.5 | ) | (17.1 | ) | (24.8 | ) | (21.0 | ) | ||||||||
Net profit (loss) per share
|
||||||||||||||||
Continuing operation |
(0.08 | ) | (0.08 | ) | (0.09 | ) | (0.09 | ) | ||||||||
Discontinued operations |
0.05 | 0.03 | 0.00 | 0.01 | ||||||||||||
Total |
(0.03 | ) | (0.05 | ) | (0.09 | ) | (0.08 | ) | ||||||||
Mar 31 | Dec 31 | Sept 30 | Jun 30 | |||||||||||||
2004 (2) | 2003 (1) | 2003 (1) | 2003 (1) | |||||||||||||
Revenue |
0.0 | 6.8 | 6.0 | 5.5 | ||||||||||||
Operating profit (loss) |
0.0 | 1.0 | 1.8 | (3.9 | ) | |||||||||||
Total exploration |
(20.7 | ) | (21.2 | ) | (20.8 | ) | (15.2 | ) | ||||||||
Gain (loss) on exchange |
(1.7 | ) | 5.1 | (1.2 | ) | 5.9 | ||||||||||
Net (loss) from continuing operations |
(23.8 | ) | (13.0 | ) | (27.5 | ) | (17.8 | ) | ||||||||
Gain (loss) from discontinued operations |
(7.9 | ) | (1.8 | ) | (0.5 | ) | (6.0 | ) | ||||||||
Net (loss) from continuing operations |
(31.6 | ) | (14.8 | ) | (28.0 | ) | (23.8 | ) | ||||||||
Net profit (loss) per share
|
||||||||||||||||
Continuing operation |
(0.09 | ) | (0.05 | ) | (0.11 | ) | (0.07 | ) | ||||||||
Discontinued operations |
(0.03 | ) | (0.01 | ) | 0.00 | (0.03 | ) | |||||||||
Total |
(0.12 | ) | (0.06 | ) | (0.11 | ) | (0.10 | ) | ||||||||
(1) | As previously reported under Canadian GAAP. | |
(2) | Certain numbers have been restated due to the adoption of new accounting standards. |
Page 7 of 17
Metres | ||||
Resource delineation |
||||
Hugo North |
15,052 | |||
South West Oyu |
8,951 | |||
Geotechnical drilling |
880 | |||
Sterilization drilling |
795 | |||
Total drilling |
25,778 | |||
Exploration drilling |
||||
Hugo North |
1,581 | |||
Entrée property |
3,629 | |||
Other |
2,552 | |||
Total drilling |
7,762 |
Page 8 of 17
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Page 12 of 17
Three month period ended March 31, | ||||||||||||||
Total Operation | Companys 50% net share | |||||||||||||
% Increase | % Increase | |||||||||||||
2005 | 2004 | (decrease) | 2005 | 2004 | (decrease) | |||||||||
Total tonnes moved
(1) |
Tonnes (000s) | 3,616 | 2,634 | 37% | ||||||||||
Tonnes of ore to heap |
Tonnes (000s) | 2,444 | 1,417 | 72% | ||||||||||
Ore grade |
CuCN % | 0.62 | % | 0.76 | % | (19%) | ||||||||
Strip ratio |
Waste/Ore | 0.40 | 0.76 | (48%) | ||||||||||
Cathode production |
Tonnes | 9,603 | 7,672 | 25% | 4,802 | 3,836 | 25% | |||||||
Tonnage sold |
Tonnes | 9,339 | 7,468 | 25% | 4,670 | 3,734 | 25% | |||||||
Average sale price
received |
US$/pound | $ 1.56 | $ 1.20 | 29% | ||||||||||
Sales |
US$(000) | 15,144 | 9,386 | 61% | ||||||||||
Cost of operations |
US$(000) | 4,057 | 2,542 | 60% | ||||||||||
Operating profit |
US$(000) | 9,456 | 5,559 | 70% | ||||||||||
Cost of operations |
US$/pound | $ 0.39 | $ 0.31 | 28% |
Page 13 of 17
Page 14 of 17
Share purchase | Total number of | |||||
warrants outstanding | Maturity date | Exercise price | shares to be issued | |||
7.125 million(1) 5.76 million (2)(3) |
December 19, 2005 February 15, 2006 |
Cdn$12.50 per share $8.68 per share |
7.125 million 0.576 million |
(1) | Each warrant entitles the holder to acquire one common share. | |
(2) | Each 10 warrants entitle the holder to acquire one common share. | |
(3) | In 2005, the expiry date was extended from February, 2005 to February, 2006. |
Page 15 of 17
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1. | I have reviewed the interim filings (as this term is defined in Multilateral Instrument 52-109 Certification of Disclosure in Issuers Annual and Interim Filings) of Ivanhoe Mines Ltd., (the issuer) for the interim period ended March 31, 2005; | ||
2. | Based on my knowledge, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings; | ||
3. | Based on my knowledge, the interim financial statements together with the other financial information included in the interim filings fairly present in all material respects the financial condition, results of operations and cash flows of the issuer, as of the date and for the periods presented in the interim filings; and | ||
4. | The issuers other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures for the issuer, and we have designed such disclosure controls and procedures, or caused them to be designed under our supervision, to provide reasonable assurance that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which the interim filings are being prepared. |
/s/ Robert M. Friedland
|
||
Chief Executive Officer |
||
Ivanhoe Mines Ltd. |
1. | I have reviewed the interim filings (as this term is defined in Multilateral Instrument 52-109 Certification of Disclosure in Issuers Annual and Interim Filings) of Ivanhoe Mines Ltd., (the issuer) for the interim period ended March 31, 2005; | ||
2. | Based on my knowledge, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings; | ||
3. | Based on my knowledge, the interim financial statements together with the other financial information included in the interim filings fairly present in all material respects the financial condition, results of operations and cash flows of the issuer, as of the date and for the periods presented in the interim filings; and | ||
4. | The issuers other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures for the issuer, and we have designed such disclosure controls and procedures, or caused them to be designed under our supervision, to provide reasonable assurance that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which the interim filings are being prepared. |
/s/ Peter Meredith
|
||
Chief Financial Officer |
||
Ivanhoe Mines Ltd. |
To:
|
Alberta Securities Commission | |
British Columbia Securities Commission | ||
Manitoba Securities Commission | ||
Securities Registry, Government of the Northwest Territories | ||
Securities Registry, Government of Nunavut | ||
Ontario Securities Commission | ||
Commission des valeurs mobilières du Québec | ||
Saskatchewan Securities Commission | ||
Registrar of Securities, Government of the Yukon Territory | ||
Office of the Administrator of Securities, New Brunswick | ||
Nova Scotia Securities Commission | ||
Registrar of Securities, P.E.I. | ||
Securities Division, Department of Justice, Newfoundland | ||
Toronto Stock Exchange |
Re:
|
June 30, 2005 second quarter financial statements, Managements Discussion and Analysis and Certificates |
ITEM 1.
|
Financial Statements | |
Unaudited Consolidated Balance Sheets at June 30, 2005 and December 31, 2004 | ||
Unaudited Consolidated Statements of Operations for the Three and Six Month Periods ended June 30, 2005 and 2004 | ||
Unaudited Consolidated Statement of Shareholders Equity for the Six Month Period ended June 30, 2005 | ||
Unaudited Consolidated Statements of Cash Flows for the Three and Six Month Periods ended June 30, 2005 and 2004 | ||
Notes to the Unaudited Consolidated Financial Statements | ||
ITEM 2.
|
Managements Discussion and Analysis of Financial Condition and Results of Operations. |
June 30, | December 31, | |||||||
2005 | 2004 | |||||||
(Unaudited) |
||||||||
ASSETS |
||||||||
CURRENT |
||||||||
Cash and cash equivalents (Note 3) |
$ | 183,773 | $ | 112,478 | ||||
Accounts receivable (Note 2) |
19,520 | 6,552 | ||||||
Inventories |
2,245 | 2,192 | ||||||
Prepaid expenses |
1,602 | 1,196 | ||||||
Other current assets |
3,000 | 3,000 | ||||||
Current assets of discontinued operations (Note 2) |
| 36,636 | ||||||
TOTAL CURRENT ASSETS |
210,140 | 162,054 | ||||||
INVESTMENT IN JOINT VENTURE |
132,414 | 126,911 | ||||||
LONG-TERM INVESTMENTS (Note 4) |
25,663 | 19,160 | ||||||
PROPERTY, PLANT AND EQUIPMENT |
62,437 | 54,434 | ||||||
DEFERRED INCOME TAXES |
245 | 318 | ||||||
OTHER ASSETS |
4,930 | 3,764 | ||||||
NON-CURRENT ASSETS OF DISCONTINUED OPERATIONS (Note 2) |
| 9,627 | ||||||
TOTAL ASSETS |
$ | 435,829 | $ | 376,268 | ||||
LIABILITIES |
||||||||
CURRENT |
||||||||
Accounts payable and accrued liabilities |
$ | 14,832 | $ | 14,412 | ||||
Current liabilities of discontinued operations (Note 2) |
| 14,082 | ||||||
TOTAL CURRENT LIABILITIES |
14,832 | 28,494 | ||||||
LOANS PAYABLE TO RELATED PARTIES (Note 5) |
5,088 | 5,088 | ||||||
DEFERRED INCOME TAXES |
394 | 476 | ||||||
ASSET RETIREMENT OBLIGATIONS |
5,402 | 5,267 | ||||||
NON-CURRENT LIABILITIES OF DISCONTINUED OPERATIONS (Note 2) |
| 26,380 | ||||||
TOTAL LIABILITIES |
25,716 | 65,705 | ||||||
MINORITY INTERESTS |
2,712 | 3,713 | ||||||
SHAREHOLDERS EQUITY |
||||||||
SHARE CAPITAL (Note 6) |
||||||||
Authorized |
||||||||
Unlimited number of preferred shares without par value |
||||||||
Unlimited number of common shares without par value |
||||||||
Issued and outstanding |
||||||||
313,906,653 (2004 292,870,998) common shares |
991,081 | 868,606 | ||||||
ADDITIONAL PAID-IN CAPITAL |
19,140 | 16,283 | ||||||
ACCUMULATED OTHER COMPREHENSIVE INCOME |
11,753 | 2,879 | ||||||
DEFICIT |
(614,573 | ) | (580,918 | ) | ||||
TOTAL SHAREHOLDERS EQUITY |
407,401 | 306,850 | ||||||
TOTAL LIABILITIES, MINORITY INTERESTS AND SHAREHOLDERS EQUITY |
$ | 435,829 | $ | 376,268 | ||||
APPROVED BY THE BOARD: |
||||
Director
|
Director |
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
(Unaudited) |
||||||||||||||||
OPERATING EXPENSES |
||||||||||||||||
Exploration |
$ | (33,829 | ) | $ | (24,811 | ) | $ | (58,235 | ) | $ | (45,547 | ) | ||||
General and administrative |
(5,927 | ) | (4,783 | ) | (10,712 | ) | (9,956 | ) | ||||||||
Interest |
(88 | ) | (71 | ) | (177 | ) | (143 | ) | ||||||||
Depreciation |
(806 | ) | (535 | ) | (1,219 | ) | (997 | ) | ||||||||
Mining property care and maintenance costs |
(899 | ) | (829 | ) | (1,751 | ) | (1,875 | ) | ||||||||
OPERATING LOSS |
(41,549 | ) | (31,029 | ) | (72,094 | ) | (58,518 | ) | ||||||||
OTHER INCOME (EXPENSES) |
||||||||||||||||
Share of income from joint venture |
7,839 | 6,084 | 15,512 | 10,299 | ||||||||||||
Interest income |
668 | 211 | 1,263 | 621 | ||||||||||||
Foreign exchange gains (losses) |
1,692 | (1,365 | ) | 1,123 | (3,108 | ) | ||||||||||
Share of loss of significantly influenced investees |
(382 | ) | (856 | ) | (621 | ) | (1,254 | ) | ||||||||
Gain on sale of long-term investments (Note 4 (a)) |
115 | 3,275 | 115 | 4,523 | ||||||||||||
Write-down of carrying value of long-term investments (Note 4 (a)) |
| | (1,438 | ) | | |||||||||||
LOSS BEFORE TAXES AND OTHER ITEMS |
(31,617 | ) | (23,680 | ) | (56,140 | ) | (47,437 | ) | ||||||||
Provision for income and capital taxes |
(74 | ) | (90 | ) | (130 | ) | (244 | ) | ||||||||
Minority interests |
575 | 637 | 1,001 | 756 | ||||||||||||
NET LOSS FROM CONTINUING OPERATIONS |
(31,116 | ) | (23,133 | ) | (55,269 | ) | (46,925 | ) | ||||||||
NET INCOME AND GAIN ON SALE FROM DISCONTINUED OPERATIONS (Note 2) |
5,941 | 2,165 | 21,614 | (5,692 | ) | |||||||||||
NET LOSS |
$ | (25,175 | ) | $ | (20,968 | ) | $ | (33,655 | ) | $ | (52,617 | ) | ||||
BASIC AND DILUTED (LOSS) EARNINGS PER SHARE FROM |
||||||||||||||||
CONTINUING OPERATIONS |
$ | (0.10 | ) | $ | (0.09 | ) | $ | (0.18 | ) | $ | (0.17 | ) | ||||
DISCONTINUED OPERATIONS |
0.02 | 0.01 | 0.07 | (0.02 | ) | |||||||||||
$ | (0.08 | ) | $ | (0.08 | ) | $ | (0.11 | ) | $ | (0.19 | ) | |||||
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING (000s) |
298,467 | 271,805 | 295,905 | 271,588 | ||||||||||||
Accumulated | ||||||||||||||||||||||||
Share Capital | Additional | Other | ||||||||||||||||||||||
Number | Paid-In | Comprehensive | ||||||||||||||||||||||
of Shares | Amount | Capital | Income | Deficit | Total | |||||||||||||||||||
Balances, December 31, 2004 |
292,870,998 | $ | 868,606 | $ | 16,283 | $ | 2,879 | $ | (580,918 | ) | $ | 306,850 | ||||||||||||
Net loss |
| | | | (33,655 | ) | (33,655 | ) | ||||||||||||||||
Other comprehensive income |
| | | 8,874 | | 8,874 | ||||||||||||||||||
Comprehensive loss |
(24,781 | ) | ||||||||||||||||||||||
Shares issued for: |
||||||||||||||||||||||||
Private placement, net of issue costs of $6,084 |
19,750,000 | 119,812 | | | | 119,812 | ||||||||||||||||||
Exercise of stock options |
1,227,672 | 2,246 | (832 | ) | | | 1,414 | |||||||||||||||||
Other capital assets purchased (Note 8 (a)) |
50,000 | 362 | | | | 362 | ||||||||||||||||||
Share purchase plan |
7,983 | 55 | | | | 55 | ||||||||||||||||||
Stock compensation charged to operations |
| | 3,689 | | | 3,689 | ||||||||||||||||||
Balances, June 30, 2005 |
313,906,653 | $ | 991,081 | $ | 19,140 | $ | 11,753 | $ | (614,573 | ) | $ | 407,401 | ||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
(Unaudited) |
||||||||||||||||
OPERATING ACTIVITIES |
||||||||||||||||
Net loss from continuing operations |
$ | (31,116 | ) | $ | (23,133 | ) | $ | (55,269 | ) | $ | (46,925 | ) | ||||
Items not involving use of cash |
||||||||||||||||
Depreciation |
806 | 535 | 1,219 | 997 | ||||||||||||
Stock-based compensation |
2,173 | 1,445 | 3,689 | 3,632 | ||||||||||||
Accretion expense |
89 | (14 | ) | 178 | 59 | |||||||||||
Non-cash exploration expense recovery |
| (3,248 | ) | | (3,248 | ) | ||||||||||
Unrealized foreign exchange gains |
(1,773 | ) | 372 | (1,260 | ) | 711 | ||||||||||
Share of income from joint venture, net of cash distribution |
2,161 | (6,084 | ) | (5,512 | ) | (10,299 | ) | |||||||||
Share of loss of significantly influenced investees |
382 | 856 | 621 | 1,254 | ||||||||||||
Gain on sale of long-term investments (Note 4 (a)) |
(115 | ) | (3,275 | ) | (115 | ) | (4,523 | ) | ||||||||
Write-down of carrying value of long-term investments (Note 4 (a)) |
| | 1,438 | | ||||||||||||
Deferred income taxes |
(5 | ) | (2 | ) | (9 | ) | 117 | |||||||||
Minority interests |
(575 | ) | (637 | ) | (1,001 | ) | (756 | ) | ||||||||
Net change in non-cash operating working capital items (Note 8 (c)) |
4,494 | 4,793 | (564 | ) | 4,976 | |||||||||||
Cash used in operating activities of continuing operations |
(23,479 | ) | (28,392 | ) | (56,585 | ) | (54,005 | ) | ||||||||
Cash provided by operating activities of discontinued operations |
| 4,248 | 2,592 | 3,316 | ||||||||||||
Cash used in operating activities |
(23,479 | ) | (24,144 | ) | (53,993 | ) | (50,689 | ) | ||||||||
INVESTING ACTIVITIES |
||||||||||||||||
Proceeds from sale of discontinued operations |
| | 15,000 | | ||||||||||||
Purchase of long-term investments (Note 4 (b)) |
(4,110 | ) | | (4,110 | ) | | ||||||||||
Proceeds from sale of long-term investments |
4,539 | | 4,539 | 2,461 | ||||||||||||
Proceeds from sale of property, plant and equipment |
| 460 | | 460 | ||||||||||||
Expenditures on property, plant and equipment |
(5,728 | ) | (1,059 | ) | (8,860 | ) | (22,973 | ) | ||||||||
(Expenditures on) proceeds from other assets |
(1,361 | ) | 60 | (1,238 | ) | 60 | ||||||||||
Other |
(1 | ) | (3,020 | ) | (2,078 | ) | (3,865 | ) | ||||||||
Cash (used in) provided by investing activities of continuing operations |
(6,661 | ) | (3,559 | ) | 3,253 | (23,857 | ) | |||||||||
Cash used in investing activities of discontinued operations |
| (853 | ) | (502 | ) | (1,646 | ) | |||||||||
Cash (used in) provided by investing activities |
(6,661 | ) | (4,412 | ) | 2,751 | (25,503 | ) | |||||||||
FINANCING ACTIVITIES |
||||||||||||||||
Issue of share capital |
120,346 | 248 | 121,281 | 431 | ||||||||||||
Cash provided by financing activities of continuing operations |
120,346 | 248 | 121,281 | 431 | ||||||||||||
Cash used in financing activities of discontinued operations |
| (46 | ) | (37 | ) | (60 | ) | |||||||||
Cash provided by financing activities |
120,346 | 202 | 121,244 | 371 | ||||||||||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH |
1,801 | (556 | ) | 1,293 | (950 | ) | ||||||||||
NET CASH INFLOW (OUTFLOW) |
92,007 | (28,910 | ) | 71,295 | (76,771 | ) | ||||||||||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
91,766 | 57,655 | 112,478 | 105,516 | ||||||||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ | 183,773 | $ | 28,745 | $ | 183,773 | $ | 28,745 | ||||||||
CASH AND CASH EQUIVALENTS IS COMPRISED OF: |
||||||||||||||||
Cash on hand and demand deposits |
$ | 28,324 | $ | 19,577 | $ | 28,324 | $ | 19,577 | ||||||||
Short-term money market instruments |
155,449 | 9,168 | 155,449 | 9,168 | ||||||||||||
$ | 183,773 | $ | 28,745 | $ | 183,773 | $ | 28,745 | |||||||||
1. | SIGNIFICANT ACCOUNTING POLICIES | |
These consolidated financial statements have been prepared in accordance with United States of America generally accepted accounting principles (U.S. GAAP). In the case of Ivanhoe Mines Ltd. (the Company), U.S. GAAP differs in certain respects from accounting principles generally accepted in the Canada (Canadian GAAP) as explained in Note 9. | ||
In the opinion of management, all adjustments (including reclassifications and normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at June 30, 2005 and for all periods presented, have been made. The interim results are not necessarily indicative of results for a full year. For purposes of these financial statements, the Company and its subsidiaries and joint venture are collectively referred to as Ivanhoe Mines. | ||
The significant accounting policies used in these consolidated financial statements are as follows: |
(a) | Principles of consolidation | ||
These consolidated financial statements include the accounts of the Company and all of its subsidiaries. The principal subsidiaries of the Company are Ivanhoe Mines Mongolia Inc. (B.V.I.), Ivanhoe Mines China (B.V.I.), Ivanhoe Cloncurry Mines Pty Ltd (Australia), and their respective subsidiaries, and Bakyrchik Mining Venture (Kazakhstan) (70% owned) (BMV). | |||
Ivanhoe Mines investment in Asia Gold Corp. (Asia Gold) (B.C., Canada) (47% owned) remains consolidated at June 30, 2005 due to Ivanhoe Mines having control over the operating, financing and strategic decisions of Asia Gold. | |||
Ivanhoe Mines investment in Myanmar Ivanhoe Copper Company Limited (JVCo) (Myanmar) (50% owned), which is subject to joint control, is accounted for using the equity method. | |||
All intercompany transactions and balances have been eliminated, where appropriate. | |||
Variable Interest Entities (VIEs), which include, but are not limited to, special purpose entities, trusts, partnerships, and other legal structures, as defined by Financial Accounting Standards Board (FASB) Interpretation No. 46 (Revised 2003) (FIN 46R) Consolidation of Variable Interest Entities an Interpretation of ARB No. 51, are entities in which equity investors do not have the characteristics of a controlling financial interest or there is not sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. VIEs are subject to consolidation by the primary beneficiary who will absorb the majority of the entities expected losses and/or expected residual returns. |
1. | SIGNIFICANT ACCOUNTING POLICIES (Continued) |
(b) | Measurement uncertainties | ||
Generally accepted accounting principles require management to make assumptions and estimates that affect the reported amounts and other disclosures in these consolidated financial statements. Actual results may differ from those estimates. | |||
Significant estimates used in the preparation of these consolidated financial statements include, among other things, the recoverability of accounts receivable and investments, the proven and probable ore reserves, the estimated recoverable tonnes of ore from each mine area, the estimated net realizable value of inventories, the provision for income taxes and composition of deferred income tax assets and deferred income tax liabilities, the expected economic lives of and the estimated future operating results and net cash flows from property, plant and equipment, and the anticipated costs and timing of asset retirement obligations. | |||
(c) | Foreign currencies | ||
The Company considers the U.S. dollar to be its functional currency as it is the currency of the primary economic environment in which the Company and its subsidiaries operate. Accordingly, monetary assets and liabilities denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect at the balance sheet date and non-monetary assets and liabilities are translated at the exchange rates in effect at the time of acquisition or issue. Revenues and expenses are translated at rates approximating the exchange rates in effect at the time of the transactions. All exchange gains and losses are included in operations. | |||
(d) | Cash and cash equivalents | ||
Cash and cash equivalents include short-term money market instruments with terms to maturity, at the date of acquisition, not exceeding 90 days. | |||
(e) | Inventories | ||
Mine stores and supplies are valued at the lower of the weighted average cost, less allowances for obsolescence, and replacement cost. | |||
(f) | Long-term investments | ||
Long-term investments in companies in which Ivanhoe Mines has voting interests of 20% to 50%, or where Ivanhoe Mines has the ability to exercise significant influence, are accounted for using the equity method. Under this method, Ivanhoe Mines share of the investees earnings and losses is included in operations and its investments therein are adjusted by a like amount. Dividends received are credited to the investment accounts. | |||
The other long-term investments are classified as available-for-sale investments. Unrealized gains and losses on these investments are recorded in accumulated other comprehensive income as a separate component of shareholders equity, unless the declines in market value are judged to be other than temporary, in which case the losses are recognized in income in the period. Realized gains and losses from the sale of these investments are included in income in the period. |
1. | SIGNIFICANT ACCOUNTING POLICIES (Continued) |
(g) | Exploration and development | ||
All direct costs related to the acquisition of mineral property interests are capitalized in the period incurred. | |||
Exploration costs are charged to operations in the period incurred until such time as it has been determined that a property has economically recoverable reserves, in which case subsequent exploration costs and the costs incurred to develop a property are capitalized. Exploration costs include value-added taxes incurred in foreign jurisdictions when recoverability of those taxes is uncertain. | |||
(h) | Property, plant and equipment | ||
Property, plant and equipment are carried at cost (including development and preproduction costs, capitalized interest, other financing costs and all direct administrative support costs incurred during the construction period, net of cost recoveries and incidental revenues), less accumulated depletion and depreciation including write-downs. Following the construction period, interest, other financing costs and administrative costs are expensed as incurred. | |||
On the commencement of commercial production, depletion of each mining property is provided on the unit-of-production basis, using estimated proven and probable reserves as the depletion basis. | |||
Property, plant and equipment are depreciated, following the commencement of commercial production, over their expected economic lives using either the unit-of-production method or the straight-line method (over one to twenty years). | |||
Capital works in progress are not depreciated until the capital asset has been put into operation. | |||
Ivanhoe Mines reviews the carrying values of its property, plant and equipment whenever events or changes in circumstances indicate that their carrying values may not be recoverable. An impairment is considered to exist if total estimated future cash flows, or probability-weighted cash flows on an undiscounted basis, are less than the carrying value of the assets. An impairment loss is measured and recorded based on discounted estimated future cash flows associated with values beyond proven and probable reserves. In estimating future cash flows, assets are grouped at the lowest level for which there is identifiable future cash flows that are largely independent of cash flows from other asset groups. Generally, in estimating future cash flows, all assets are grouped at a particular mine for which there is identifiable cash flows. |
1. | SIGNIFICANT ACCOUNTING POLICIES (Continued) |
(i) | Stripping costs | ||
On March 30, 2005, the FASB ratified the consensus of the Emerging Issues Task Force (EITF) Issue 04-6 that stripping costs incurred during the production phase of a mine are variable production costs that should be included in the costs of the inventory produced during the period that the stripping costs are incurred. Commencing in the first quarter of 2005, Ivanhoe Mines changed its accounting policy with respect to stripping costs to comply with the consensus reached by the EITF. This change has been applied retrospectively by restating prior period financial statements. In 2004 and prior years, Ivanhoe Mines deferred or accrued stripping costs incurred during production, as appropriate, and charged these costs to operations on the basis of the estimated average stripping ratio for each mine area. The effect of this change was to increase the deficit at January 1, 2004 by $7,628,000, to increase the net loss for the year ended December 31, 2004 by $7,889,000 ($0.03 per share) and to decrease assets of discontinued operations and investment in joint venture at December 31, 2004 by $13,973,000 and $1,544,000 respectively. The net loss for the three and six month periods ended June 30, 2004 were also increased by $1,544,000 ($0.01 per share) and $6,065,000 ($0.02 per share), respectively, as a result of this change. | |||
(j) | Asset retirement obligations | ||
Ivanhoe Mines recognizes liabilities for statutory, contractual or legal obligations associated with the retirement of property, plant and equipment, when those obligations result from the acquisition, construction, development or normal operation of the assets. Initially, a liability for an asset retirement obligation is recognized at its fair value in the period in which it is incurred. Upon initial recognition of the liability, the corresponding asset retirement cost is added to the carrying amount of that asset and the cost is amortized as an expense over the economic life of the related asset. Following the initial recognition of the asset retirement obligation, the carrying amount of the liability is increased for the passage of time and adjusted for changes to the amount or timing of the underlying cash flows needed to settle the obligation. | |||
(k) | Revenue recognition | ||
Revenue at JVCo from the sale of metals is recognized, net of related royalties and sales commissions, when: (i) persuasive evidence of an arrangement exists; (ii) the risks and rewards of ownership pass to the purchaser including delivery of the product; (iii) the selling price is fixed or determinable; and (iv) collectibility is reasonably assured. Revenue from copper cathode includes provisional pricing arrangements accounted for as embedded derivative instruments under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended. | |||
(l) | Stock-based compensation | ||
The Company has an Employees and Directors Equity Incentive Plan. The Company records compensation expense using the fair value based method in accordance with SFAS No. 123, Accounting for Stock-Based Compensation. Accordingly, the fair value of stock options at the date of grant is amortized to operations, with an offsetting credit to additional paid-in capital, on a straight-line basis over the vesting period. If and when the stock options are ultimately exercised, the applicable amounts of additional paid-in capital are transferred to share capital. |
1. | SIGNIFICANT ACCOUNTING POLICIES (Continued) |
(m) | Deferred income taxes | ||
The Company computes income taxes in accordance with SFAS No. 109, Accounting for Income Taxes. SFAS 109 requires that the provision for deferred income taxes be based on the liability method. Deferred taxes arise from the recognition of the tax consequences of temporary differences by applying statutory tax rates applicable to future years to differences between the financial statements carrying amounts and the tax bases of certain assets and liabilities. The Company records a valuation allowance against any portion of those deferred income tax assets that management believes will, more likely than not, fail to be realized. | |||
(n) | Loss per share | ||
The Company follows SFAS No. 128, Earnings Per Share, which requires the presentation of basic and diluted earnings per share. The basic loss per share is computed by dividing the net loss attributable to common stock by the weighted average number of common shares and Special Warrants outstanding during the year. All stock options and share purchase warrants outstanding at each period end have been excluded from the weighted average share calculation. The effect of potentially dilutive stock options and share purchase warrants was antidilutive in the periods ending June 30, 2005 and 2004. |
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
REVENUE |
$ | | $ | 21,079 | $ | 18,031 | $ | 39,445 | ||||||||
COST OF OPERATIONS |
| (18,189 | ) | (11,965 | ) | (43,821 | ) | |||||||||
DEPRECIATION AND DEPLETION |
| (376 | ) | | (634 | ) | ||||||||||
OPERATING PROFIT (LOSS) |
| 2,514 | 6,066 | (5,010 | ) | |||||||||||
EXPENSES |
||||||||||||||||
General and administrative |
| (14 | ) | (4 | ) | (24 | ) | |||||||||
Interest expense |
| (260 | ) | (203 | ) | (497 | ) | |||||||||
INCOME (LOSS) BEFORE THE FOLLOWING |
| 2,240 | 5,859 | (5,531 | ) | |||||||||||
Interest income |
| 62 | 16 | 115 | ||||||||||||
Foreign exchange gain (loss) |
| 278 | (285 | ) | 160 | |||||||||||
Other expense |
| (438 | ) | (191 | ) | (491 | ) | |||||||||
INCOME (LOSS) BEFORE INCOME TAXES |
| 2,142 | 5,399 | (5,747 | ) | |||||||||||
Recovery of income taxes |
| 23 | 7 | 55 | ||||||||||||
NET INCOME |
| 2,165 | 5,406 | (5,692 | ) | |||||||||||
Contingent Income |
5,941 | | 5,941 | | ||||||||||||
Gain on sale of ABM |
| | 10,267 | | ||||||||||||
NET INCOME AND GAIN ON SALE
FROM DISCONTINUED OPERATIONS |
$ | 5,941 | $ | 2,165 | $ | 21,614 | $ | (5,692 | ) | |||||||
(a) | During the three months ended March 31, 2005, the share price of Olympus Pacific Minerals Inc. (Olympus) deteriorated with the result that the market value of Ivanhoe Mines investment in Olympus decreased significantly below carrying value. Accordingly, the Company recorded an impairment provision of $1,438,000 reducing the carrying value of this investment to $4,424,000. | |
In May 2005, Ivanhoe Mines sold its investment in Olympus, generating proceeds of $4,539,000. This transaction resulted in a gain on sale of $115,000. | ||
(b) | During the three months ended June 30, 2005, Ivanhoe Mines exercised its 4.6 million share purchase warrants of Entrée Gold Inc. (Entrée) to acquire 4.6 million common shares at a cost of $4,111,000 (Cdn$5,060,000). | |
In July 2005, Ivanhoe Mines acquired an additional 1.2 million units in Entrée at a cost of $2,199,000 (Cdn$2,718,000). Each unit consists of one Entrée common share and two share purchase warrants. As a result of these transactions, Ivanhoe Mines now owns 16.4% of Entrées issued and outstanding share capital. |
Exploration | Corporate | Consolidated | ||||||||||
Operating Expenses |
||||||||||||
Exploration |
$ | (33,829 | ) | | $ | (33,829 | ) | |||||
General and administrative |
| (5,927 | ) | (5,927 | ) | |||||||
Interest |
(31 | ) | (57 | ) | (88 | ) | ||||||
Depreciation |
(794 | ) | (12 | ) | (806 | ) | ||||||
Mining property care and maintenance costs |
| (899 | ) | (899 | ) | |||||||
Operating loss |
(34,654 | ) | (6,895 | ) | (41,549 | ) | ||||||
Other income (expenses) |
||||||||||||
Share of income from joint venture |
| 7,839 | 7,839 | |||||||||
Interest income |
61 | 607 | 668 | |||||||||
Foreign exchange (losses) gains |
(79 | ) | 1,771 | 1,692 | ||||||||
Share of loss of significantly influenced
investees |
| (382 | ) | (382 | ) | |||||||
Gain on sale of long-term investments |
| 115 | 115 | |||||||||
Loss before taxes and other items |
(34,672 | ) | 3,055 | (31,617 | ) | |||||||
Provision for income and capital taxes |
(45 | ) | (29 | ) | (74 | ) | ||||||
Minority interests |
575 | | 575 | |||||||||
Net loss from continuing operations |
$ | (34,142 | ) | $ | 3,026 | $ | (31,116 | ) | ||||
Expenditures on property, plant and equipment |
$ | 4,941 | $ | 787 | $ | 5,728 | ||||||
Total assets |
||||||||||||
Continuing operations |
$ | 92,711 | $ | 343,118 | $ | 435,829 | ||||||
Discontinued operations |
| | | |||||||||
$ | 92,711 | $ | 343,118 | $ | 435,829 | |||||||
Exploration | Corporate | Consolidated | ||||||||||
Operating expenses |
||||||||||||
Exploration |
$ | (24,811 | ) | | $ | (24,811 | ) | |||||
General and administrative |
| (4,783 | ) | (4,783 | ) | |||||||
Interest |
(27 | ) | (44 | ) | (71 | ) | ||||||
Depreciation |
(523 | ) | (12 | ) | (535 | ) | ||||||
Mining property care and maintenance costs |
| (829 | ) | (829 | ) | |||||||
Operating loss |
(25,361 | ) | (5,668 | ) | (31,029 | ) | ||||||
Other income (expenses) |
||||||||||||
Share of income from joint venture |
| 6,084 | 6,084 | |||||||||
Interest income |
90 | 121 | 211 | |||||||||
Foreign exchange losses |
(654 | ) | (711 | ) | (1,365 | ) | ||||||
Share of loss of significantly influenced
investees |
| (856 | ) | (856 | ) | |||||||
Gain on sale of long-term investments |
| 3,275 | 3,275 | |||||||||
Loss before taxes and other items |
(25,925 | ) | 2,245 | (23,680 | ) | |||||||
Provision for income and capital taxes |
(30 | ) | (60 | ) | (90 | ) | ||||||
Minority interests |
637 | | 637 | |||||||||
Net loss from continuing operations |
$ | (25,318 | ) | $ | 2,185 | $ | (23,133 | ) | ||||
Expenditures on property, plant and equipment |
$ | 826 | $ | 233 | $ | 1,059 | ||||||
Total assets |
||||||||||||
Continuing operations |
$ | 73,782 | $ | 204,547 | $ | 278,329 | ||||||
Discontinued operations |
| 30,121 | 30,121 | |||||||||
$ | 73,782 | $ | 234,668 | $ | 308,450 | |||||||
Exploration | Corporate | Consolidated | ||||||||||
Operating expenses |
||||||||||||
Exploration |
$ | (58,235 | ) | | $ | (58,235 | ) | |||||
General and administrative |
| (10,712 | ) | (10,712 | ) | |||||||
Interest |
(62 | ) | (115 | ) | (177 | ) | ||||||
Depreciation |
(1,207 | ) | (12 | ) | (1,219 | ) | ||||||
Mining property care and maintenance costs |
| (1,751 | ) | (1,751 | ) | |||||||
Operating loss |
(59,504 | ) | (12,590 | ) | (72,094 | ) | ||||||
Other income (expenses) |
||||||||||||
Share of income from joint venture |
| 15,512 | 15,512 | |||||||||
Interest income |
107 | 1,156 | 1,263 | |||||||||
Foreign exchange gain (loss) |
(167 | ) | 1,290 | 1,123 | ||||||||
Share of loss of significantly influenced
investees |
| (621 | ) | (621 | ) | |||||||
Gain on sale of long-term investments |
| 115 | 115 | |||||||||
Write-down of carrying value of long-term
investment |
| (1,438 | ) | (1,438 | ) | |||||||
Loss before taxes and other items |
(59,564 | ) | 3,424 | (56,140 | ) | |||||||
Provision for income and capital taxes |
(72 | ) | (58 | ) | (130 | ) | ||||||
Minority interests |
1,001 | | 1,001 | |||||||||
Net loss from continuing operations |
$ | (58,635 | ) | $ | 3,366 | $ | (55,269 | ) | ||||
Expenditures on property, plant and equipment |
$ | 7,274 | $ | 1,948 | $ | 9,222 | ||||||
Total assets |
||||||||||||
Continuing operations |
$ | 92,711 | $ | 343,118 | $ | 435,829 | ||||||
Discontinued operations |
| | | |||||||||
$ | 92,711 | $ | 343,118 | $ | 435,829 | |||||||
Exploration | Corporate | Consolidated | ||||||||||
Operating expenses |
||||||||||||
Exploration |
$ | (45,547 | ) | $ | | $ | (45,547 | ) | ||||
General and administrative |
| (9,956 | ) | (9,956 | ) | |||||||
Interest |
(56 | ) | (87 | ) | (143 | ) | ||||||
Depreciation |
(985 | ) | (12 | ) | (997 | ) | ||||||
Mining property care and maintenance costs |
| (1,875 | ) | (1,875 | ) | |||||||
Operating loss |
(46,588 | ) | (11,930 | ) | (58,518 | ) | ||||||
Other income (expenses) |
||||||||||||
Share of income from joint venture |
| 10,299 | 10,299 | |||||||||
Interest income |
131 | 490 | 621 | |||||||||
Foreign exchange losses |
(860 | ) | (2,248 | ) | (3,108 | ) | ||||||
Share of loss of significantly influenced
investees |
| (1,254 | ) | (1,254 | ) | |||||||
Gain on sale of long-term investments |
| 4,523 | 4,523 | |||||||||
Loss before taxes and other items |
(47,317 | ) | (120 | ) | (47,437 | ) | ||||||
Provision for income and capital taxes |
(45 | ) | (199 | ) | (244 | ) | ||||||
Minority interests |
756 | | 756 | |||||||||
Net loss from continuing operations |
$ | (46,606 | ) | $ | (319 | ) | $ | (46,925 | ) | |||
Expenditures on property, plant and equipment |
$ | 2,573 | $ | 400 | $ | 2,973 | ||||||
Total assets |
||||||||||||
Continuing operations |
$ | 73,782 | $ | 204,547 | $ | 278,329 | ||||||
Discontinued operations |
| 30,121 | 30,121 | |||||||||
$ | 73,782 | $ | 234,668 | $ | 308,450 | |||||||
(a) | During the six months ended June 30, 2005, 50,000 common shares of the Company were issued as consideration for the purchase of certain exploration equipment valued at $362,000. | |
(b) |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
Interest paid |
$ | | $ | | $ | | $ | | ||||||||
Income and capital taxes paid |
253 | 98 | 277 | 169 |
(c) | Net change in non-cash operating working capital items: |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
(Increase) decrease in: |
||||||||||||||||
Accounts receivable |
$ | (1,383 | ) | $ | (2,575 | ) | $ | (526 | ) | $ | (3,519 | ) | ||||
Inventories |
(405 | ) | 194 | (53 | ) | 95 | ||||||||||
Prepaid expenses |
92 | 62 | (406 | ) | (261 | ) | ||||||||||
Other current assets |
23 | 108 | | 2,107 | ||||||||||||
Increase in: |
||||||||||||||||
Accounts payable and accrued liabilities |
6,167 | 7,004 | 421 | 6,554 | ||||||||||||
$ | 4,494 | $ | 4,793 | $ | (564 | ) | $ | 4,976 | ||||||||
9. | DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES |
June 30, | June 30, | December 31, | December 31, | |||||||||||||
2005 | 2005 | 2004 | 2004 | |||||||||||||
(As previously | (As previously | |||||||||||||||
reported under | reported under | |||||||||||||||
(U.S. GAAP) | Canadian GAAP) | (U.S. GAAP) | Canadian GAAP) | |||||||||||||
(a) | (a) | (a) | (a) | |||||||||||||
ASSETS |
||||||||||||||||
CURRENT |
||||||||||||||||
Cash and cash equivalents |
$ | 183,773 | $ | 197,134 | $ | 112,478 | $ | 122,577 | ||||||||
Accounts receivable |
19,520 | 21,420 | 6,552 | 10,286 | ||||||||||||
Broken ore on leach pads |
| 10,852 | | 9,929 | ||||||||||||
Inventories |
2,245 | 6,174 | 2,192 | 5,575 | ||||||||||||
Prepaid expenses |
1,602 | 4,668 | 1,196 | 2,996 | ||||||||||||
Other current assets |
3,000 | 3,118 | 3,000 | 3,117 | ||||||||||||
Current assets of discontinued operations |
| | 36,636 | 36,636 | ||||||||||||
TOTAL CURRENT ASSETS |
210,140 | 243,366 | 162,054 | 191,116 | ||||||||||||
INVESTMENT IN JOINT VENTURE (a) |
132,414 | | 126,911 | | ||||||||||||
LONG-TERM INVESTMENTS (e) |
25,663 | 13,910 | 19,160 | 16,281 | ||||||||||||
PROPERTY, PLANT AND EQUIPMENT (d) |
62,437 | 198,646 | 54,434 | 191,824 | ||||||||||||
DEFERRED INCOME TAXES |
245 | 607 | 318 | 782 | ||||||||||||
OTHER ASSETS |
4,930 | 6,519 | 3,764 | 5,333 | ||||||||||||
DEFERRED RECOVERABLE AMOUNT ON SALE OF ASSETS |
| 2,616 | | | ||||||||||||
NON-CURRENT ASSETS OF DISCONTINUED OPERATIONS (b) and (c) |
| | 9,627 | 29,320 | ||||||||||||
TOTAL ASSETS |
$ | 435,829 | $ | 465,664 | $ | 376,268 | $ | 434,656 | ||||||||
LIABILITIES |
||||||||||||||||
CURRENT |
||||||||||||||||
Accounts payable and accrued liabilities |
$ | 14,832 | $ | 26,476 | $ | 14,412 | $ | 24,764 | ||||||||
Current portion of long-term debt |
| 3,750 | | 7,500 | ||||||||||||
Current liabilities of discontinued operations |
| | 14,082 | 14,082 | ||||||||||||
TOTAL CURRENT LIABILITIES |
14,832 | 30,226 | 28,494 | 46,346 | ||||||||||||
LOANS PAYABLE TO RELATED PARTIES |
5,088 | 5,088 | 5,088 | 5,088 | ||||||||||||
DEFERRED INCOME TAXES (c) |
394 | 12,639 | 476 | 12,788 | ||||||||||||
ASSET RETIREMENT OBLIGATIONS |
5,402 | 9,909 | 5,267 | 9,636 | ||||||||||||
OTHER LIABILITIES |
| 1,188 | | 1,404 | ||||||||||||
NON-CURRENT LIABILITIES OF DISCONTINUED OPERATIONS |
| | 26,380 | 26,380 | ||||||||||||
TOTAL LIABILITIES |
25,716 | 59,050 | 65,705 | 101,642 | ||||||||||||
MINORITY INTERESTS |
2,712 | 2,712 | 3,713 | 3,713 | ||||||||||||
SHAREHOLDERS EQUITY |
||||||||||||||||
SHARE CAPITAL (b) |
991,081 | 996,011 | 868,606 | 873,536 | ||||||||||||
ADDITIONAL PAID-IN CAPITAL |
19,140 | 14,930 | 16,283 | 12,073 | ||||||||||||
ACCUMULATED OTHER COMPREHENSIVE INCOME (f) |
11,753 | | 2,879 | | ||||||||||||
DEFICIT |
(614,573 | ) | (607,039 | ) | (580,918 | ) | (556,308 | ) | ||||||||
TOTAL SHAREHOLDERS EQUITY |
407,401 | 403,902 | 306,850 | 329,301 | ||||||||||||
TOTAL LIABILITIES, MINORITY INTERESTS AND SHAREHOLDERS EQUITY |
$ | 435,829 | $ | 465,664 | $ | 376,268 | $ | 434,656 | ||||||||
9. | DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued) |
Three months ended June 30, | Three months ended June 30, | |||||||||||||||
2005 | 2005 | 2004 | 2004 | |||||||||||||
(As previously | (As previously | |||||||||||||||
reported under | reported under | |||||||||||||||
Canadian | Canadian | |||||||||||||||
(U.S. GAAP) | GAAP) | (U.S. GAAP) | GAAP) | |||||||||||||
(a) | (a) | (a) | (a) | |||||||||||||
REVENUE |
$ | | $ | 15,614 | $ | | $ | 10,808 | ||||||||
COST OF OPERATIONS |
| (4,026 | ) | | (2,792 | ) | ||||||||||
DEPRECIATION |
| (1,325 | ) | | (1,276 | ) | ||||||||||
OPERATING PROFIT |
| 10,263 | | 6,740 | ||||||||||||
OPERATING EXPENSES |
||||||||||||||||
Exploration |
(33,829 | ) | (33,828 | ) | (24,811 | ) | (24,810 | ) | ||||||||
General and administrative |
(5,927 | ) | (6,013 | ) | (4,783 | ) | (4,892 | ) | ||||||||
Interest |
(88 | ) | (214 | ) | (71 | ) | (275 | ) | ||||||||
Depreciation |
(806 | ) | (806 | ) | (535 | ) | (535 | ) | ||||||||
Mining property care and maintenance costs |
(899 | ) | (899 | ) | (829 | ) | (829 | ) | ||||||||
OPERATING LOSS |
(41,549 | ) | (31,497 | ) | (31,029 | ) | (24,601 | ) | ||||||||
OTHER INCOME (EXPENSES) |
||||||||||||||||
Share of income from joint venture |
7,839 | | 6,084 | | ||||||||||||
Interest income |
668 | 766 | 211 | 213 | ||||||||||||
Foreign exchange gains |
1,692 | 1,670 | (1,365 | ) | (1,365 | ) | ||||||||||
Share of loss of significantly influenced investees |
(382 | ) | (382 | ) | (856 | ) | (856 | ) | ||||||||
Gain on sale of long-term investments |
115 | 115 | 3,275 | 3,275 | ||||||||||||
LOSS BEFORE TAXES AND OTHER ITEMS |
(31,617 | ) | (29,328 | ) | (23,680 | ) | (23,334 | ) | ||||||||
Provision for income and capital taxes |
(74 | ) | (2,362 | ) | (90 | ) | (438 | ) | ||||||||
Minority interests |
575 | 575 | 637 | 637 | ||||||||||||
NET LOSS FROM CONTINUING OPERATIONS |
(31,116 | ) | (31,115 | ) | (23,133 | ) | (23,135 | ) | ||||||||
NET INCOME AND GAIN ON SALE FROM DISCONTINUED OPERATIONS (c) and (h) |
5,941 | | 2,165 | 1,421 | ||||||||||||
NET LOSS |
$ | (25,175 | ) | $ | (31,115 | ) | $ | (20,968 | ) | $ | (21,714 | ) | ||||
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE FROM |
||||||||||||||||
CONTINUING OPERATIONS |
$ | (0.10 | ) | $ | (0.10 | ) | $ | (0.09 | ) | $ | (0.09 | ) | ||||
DISCONTINUED OPERATIONS |
0.02 | | 0.01 | 0.01 | ||||||||||||
$ | (0.08 | ) | $ | (0.10 | ) | $ | (0.08 | ) | $ | (0.08 | ) | |||||
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING (000s) |
298,467 | 298,467 | 271,805 | 271,805 | ||||||||||||
9. | DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued) |
Six months ended June 30, | Six months ended June 30, | |||||||||||||||
2005 | 2005 | 2004 | 2004 | |||||||||||||
(As previously | (As previously | |||||||||||||||
reported under | reported under | |||||||||||||||
Canadian | Canadian | |||||||||||||||
(U.S. GAAP) | GAAP) | (U.S. GAAP) | GAAP) | |||||||||||||
(a) | (a) | (a) | ( a ) | |||||||||||||
REVENUE |
$ | | $ | 30,758 | $ | | $ | 20,194 | ||||||||
COST OF OPERATIONS |
| (8,083 | ) | | (5,333 | ) | ||||||||||
DEPRECIATION |
| (2,956 | ) | | (2,561 | ) | ||||||||||
OPERATING PROFIT |
| 19,719 | | 12,300 | ||||||||||||
OPERATING EXPENSES |
||||||||||||||||
Exploration |
(58,235 | ) | (58,233 | ) | (45,547 | ) | (45,545 | ) | ||||||||
General and administrative |
(10,712 | ) | (10,929 | ) | (9,956 | ) | (10,234 | ) | ||||||||
Interest |
(177 | ) | (465 | ) | (143 | ) | (574 | ) | ||||||||
Depreciation |
(1,219 | ) | (1,219 | ) | (997 | ) | (997 | ) | ||||||||
Mining property care and maintenance costs |
(1,751 | ) | (1,751 | ) | (1,875 | ) | (1,875 | ) | ||||||||
OPERATING LOSS |
(72,094 | ) | (52,878 | ) | (58,518 | ) | (46,925 | ) | ||||||||
OTHER INCOME (EXPENSES) |
||||||||||||||||
Share of income from joint venture |
15,512 | | 10,299 | | ||||||||||||
Interest income |
1,263 | 1,427 | 621 | 624 | ||||||||||||
Foreign exchange gains |
1,123 | 988 | (3,108 | ) | (3,168 | ) | ||||||||||
Share of loss of significantly influenced investees |
(621 | ) | (621 | ) | (1,254 | ) | (1,254 | ) | ||||||||
Gain on sale of long-term investments |
115 | 115 | 4,523 | 4,523 | ||||||||||||
Write-down of carrying value of long-term investments |
(1,438 | ) | (1,438 | ) | | | ||||||||||
LOSS BEFORE TAXES AND OTHER ITEMS |
(56,140 | ) | (52,407 | ) | (47,437 | ) | (46,200 | ) | ||||||||
Provision for income and capital taxes |
(130 | ) | (3,863 | ) | (244 | ) | (1,482 | ) | ||||||||
Minority interests |
1,001 | 1,001 | 756 | 756 | ||||||||||||
NET LOSS FROM CONTINUING OPERATIONS |
(55,269 | ) | (55,269 | ) | (46,925 | ) | (46,926 | ) | ||||||||
NET INCOME AND GAIN ON SALE FROM DISCONTINUED OPERATIONS (c) and (h) |
21,614 | 4,538 | (5,692 | ) | (7,181 | ) | ||||||||||
NET LOSS |
$ | (33,655 | ) | $ | (50,731 | ) | $ | (52,617 | ) | $ | (54,107 | ) | ||||
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE FROM |
||||||||||||||||
CONTINUING OPERATIONS |
$ | (0.18 | ) | $ | (0.19 | ) | $ | (0.17 | ) | $ | (0.17 | ) | ||||
DISCONTINUED OPERATIONS |
0.07 | 0.02 | (0.02 | ) | (0.03 | ) | ||||||||||
$ | (0.11 | ) | $ | (0.17 | ) | $ | (0.19 | ) | $ | (0.20 | ) | |||||
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING (000s) |
295,905 | 295,905 | 271,588 | 271,588 | ||||||||||||
9. | DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued) |
Three Months Ended June 30, | Three Months Ended June 30, | |||||||||||||||
2005 | 2005 | 2004 | 2004 | |||||||||||||
(As previously | (As previously | |||||||||||||||
reported under | reported under | |||||||||||||||
(U.S. GAAP) | Canadian GAAP) | (U.S. GAAP) | Canadian GAAP) | |||||||||||||
(a) | (a) | (a) | (a) | |||||||||||||
OPERATING ACTIVITIES |
||||||||||||||||
Net loss |
$ | (31,116 | ) | $ | (31,115 | ) | $ | (23,133 | ) | $ | (23,135 | ) | ||||
Items not involving use of cash |
||||||||||||||||
Depreciation |
806 | 2,131 | 535 | 1,811 | ||||||||||||
Stock-based compensation |
2,173 | 2,175 | 1,445 | 1,445 | ||||||||||||
Accretion expense |
89 | 158 | (14 | ) | 673 | |||||||||||
Non-cash exploration expense recovery |
| | (3,248 | ) | (3,248 | ) | ||||||||||
Unrealized foreign exchange gains |
(1,773 | ) | (756 | ) | 372 | (10 | ) | |||||||||
Share of earnings from joint venture, net of cash distribution |
2,161 | | (6,084 | ) | | |||||||||||
Share of loss of significantly influenced investees |
382 | 382 | 856 | 856 | ||||||||||||
Gain on sale of long-term investments |
(115 | ) | (115 | ) | (3,275 | ) | (3,275 | ) | ||||||||
Deferred income taxes |
(5 | ) | (6 | ) | (2 | ) | (120 | ) | ||||||||
Minority interests |
(575 | ) | (575 | ) | (637 | ) | (637 | ) | ||||||||
Decrease in non-current portion of royalty payable |
| (108 | ) | | (123 | ) | ||||||||||
Net change in non-cash operating working capital items |
4,494 | 5,986 | 4,793 | 337 | ||||||||||||
Cash used in operating activities of continuing operations |
(23,479 | ) | (21,843 | ) | (28,392 | ) | (25,426 | ) | ||||||||
Cash provided by operating activities of discontinued operations |
| | 4,248 | 4,024 | ||||||||||||
Cash used in operating activities |
(23,479 | ) | (21,843 | ) | (24,144 | ) | (21,402 | ) | ||||||||
INVESTING ACTIVITIES |
||||||||||||||||
Purchase of long-term investments |
(4,110 | ) | (4,111 | ) | | | ||||||||||
Proceeds from sale of long-term investments |
4,539 | 4,539 | | | ||||||||||||
Proceeds from sale of property, plant and equipment |
| | 460 | 460 | ||||||||||||
Expenditures on property, plant and equipment |
(5,728 | ) | (6,710 | ) | (1,059 | ) | (2,173 | ) | ||||||||
(Expenditures on) proceeds from other assets |
(1,361 | ) | (1,428 | ) | 60 | 48 | ||||||||||
Other |
(1 | ) | | (3,020 | ) | (3,020 | ) | |||||||||
Cash used in investing activities on continuing operations |
(6,661 | ) | (7,710 | ) | (3,559 | ) | (4,685 | ) | ||||||||
Cash used in investing activities of discontinued operations |
| | (853 | ) | (731 | ) | ||||||||||
Cash used in investing activities |
(6,661 | ) | (7,710 | ) | (4,412 | ) | (5,416 | ) | ||||||||
FINANCING ACTIVITIES |
||||||||||||||||
Issue of share capital |
120,346 | 120,344 | 248 | 248 | ||||||||||||
Cash provided by financing activities of continuing operations |
120,346 | 120,344 | 248 | 248 | ||||||||||||
Cash used in financing activities of discontinued operations |
| | (46 | ) | (46 | ) | ||||||||||
Cash provided by financing activities |
120,346 | 120,344 | 202 | 202 | ||||||||||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH |
1,801 | 783 | (556 | ) | (556 | ) | ||||||||||
NET CASH INFLOW (OUTFLOW) |
92,007 | 91,574 | (28,910 | ) | (27,172 | ) | ||||||||||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
91,766 | 105,560 | 57,655 | 59,087 | ||||||||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ | 183,773 | $ | 197,134 | $ | 28,745 | $ | 31,915 | ||||||||
CASH AND CASH EQUIVALENTS IS COMPRISED OF: |
||||||||||||||||
Cash on hand and demand deposits |
$ | 28,324 | $ | 41,685 | $ | 19,577 | $ | 22,747 | ||||||||
Short-term money market instruments |
155,449 | 155,449 | 9,168 | 9,168 | ||||||||||||
$ | 183,773 | $ | 197,134 | $ | 28,745 | $ | 31,915 | |||||||||
9. | DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued) |
Six Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2005 | 2005 | 2004 | 2004 | |||||||||||||
(As previously | (As previously | |||||||||||||||
reported under | reported under | |||||||||||||||
(U.S. GAAP) | Canadian GAAP) | (U.S. GAAP) | Canadian GAAP) | |||||||||||||
(a) | (a) | (a) | (a) | |||||||||||||
OPERATING ACTIVITIES |
||||||||||||||||
Net loss |
$ | (55,269 | ) | $ | (55,269 | ) | $ | (46,925 | ) | $ | (46,926 | ) | ||||
Items not involving use of cash |
||||||||||||||||
Depreciation |
1,219 | 4,175 | 997 | 3,558 | ||||||||||||
Stock-based compensation |
3,689 | 3,691 | 3,632 | 3,632 | ||||||||||||
Accretion expense |
178 | 315 | 59 | 804 | ||||||||||||
Non-cash exploration expense recovery |
| | (3,248 | ) | (3,248 | ) | ||||||||||
Unrealized foreign exchange gains |
(1,260 | ) | (1,255 | ) | 711 | 260 | ||||||||||
Share of income from joint venture, net of cash distribution |
(5,512 | ) | | (10,299 | ) | | ||||||||||
Share of loss of significantly influenced investees |
621 | 621 | 1,254 | 1,254 | ||||||||||||
Gain on sale of long-term investments |
(115 | ) | (115 | ) | (4,523 | ) | (4,523 | ) | ||||||||
Write-down of carrying value of long-term investments |
1,438 | 1,438 | | | ||||||||||||
Deferred income taxes |
(9 | ) | 26 | 117 | (18 | ) | ||||||||||
Minority interests |
(1,001 | ) | (1,001 | ) | (756 | ) | (756 | ) | ||||||||
Decrease in non-current portion of royalty payable |
| (216 | ) | | (554 | ) | ||||||||||
Net change in non-cash operating working capital items |
(564 | ) | (6 | ) | 4,976 | 217 | ||||||||||
Cash used in operating activities of continuing operations |
(56,585 | ) | (47,596 | ) | (54,005 | ) | (46,300 | ) | ||||||||
Cash provided by operating activities of discontinued operations |
2,592 | 2,592 | 3,316 | 3,032 | ||||||||||||
Cash used in operating activities |
(53,993 | ) | (45,004 | ) | (50,689 | ) | (43,268 | ) | ||||||||
INVESTING ACTIVITIES |
||||||||||||||||
Proceeds from sale of discontinued operations |
15,000 | 15,000 | | | ||||||||||||
Purchase of long-term investments |
(4,110 | ) | (4,111 | ) | | | ||||||||||
Proceeds from sale of long-term investments |
4,539 | 4,539 | 2,461 | 2,461 | ||||||||||||
Proceeds from sale of property, plant and equipment |
| | 460 | 460 | ||||||||||||
Expenditures on property, plant and equipment |
(8,860 | ) | (10,635 | ) | (22,973 | ) | (25,176 | ) | ||||||||
(Expenditures on) proceeds from other assets |
(1,238 | ) | (1,436 | ) | 60 | 37 | ||||||||||
Other |
(2,078 | ) | (2,079 | ) | (3,865 | ) | (3,865 | ) | ||||||||
Cash provided by (used in) investing activities on continuing operations |
3,253 | 1,278 | (23,857 | ) | (26,083 | ) | ||||||||||
Cash used in investing activities of discontinued operations |
(502 | ) | (502 | ) | (1,646 | ) | (1,399 | ) | ||||||||
Cash provided by (used in) investing activities |
2,751 | 776 | (25,503 | ) | (27,482 | ) | ||||||||||
FINANCING ACTIVITIES |
||||||||||||||||
Issue of share capital |
121,281 | 121,279 | 431 | 431 | ||||||||||||
Repayment of long-term debt |
| (3,750 | ) | | (3,750 | ) | ||||||||||
Cash provided by (used in) financing activities of continuing operations |
121,281 | 117,529 | 431 | (3,319 | ) | |||||||||||
Cash used in financing activities of discontinued operations |
(37 | ) | (37 | ) | (60 | ) | (60 | ) | ||||||||
Cash provided by (used in) financing activities |
121,244 | 117,492 | 371 | (3,379 | ) | |||||||||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH |
1,293 | 1,293 | (950 | ) | (950 | ) | ||||||||||
NET CASH INFLOW (OUTFLOW) |
71,295 | 74,557 | (76,771 | ) | (75,079 | ) | ||||||||||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
112,478 | 122,577 | 105,516 | 106,994 | ||||||||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ | 183,773 | $ | 197,134 | $ | 28,745 | $ | 31,915 | ||||||||
CASH AND CASH EQUIVALENTS IS COMPRISED OF: |
||||||||||||||||
Cash on hand and demand deposits |
$ | 28,324 | $ | 41,685 | $ | 19,577 | $ | 22,747 | ||||||||
Short-term money market instruments |
155,449 | 155,449 | 9,168 | 9,168 | ||||||||||||
$ | 183,773 | $ | 197,134 | $ | 28,745 | $ | 31,915 | |||||||||
9. | DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued) |
(a) | Joint venture | ||
Under U.S. GAAP the Companys joint venture interest in JVCo was accounted for using the equity method. Under Canadian GAAP, this joint venture interest would have been accounted for on a proportionate consolidation basis. | |||
Under Canadian GAAP, the carrying amount of the Companys investment and its share of equity of JVCo is eliminated. The Companys proportionate share of each line item of JVCos assets, liabilities, revenue and expenses is included in the corresponding line items of the Companys financial statements. All intercompany balances and transactions would be eliminated. | |||
(b) | Acquisition of ABM | ||
Under U.S. GAAP, the fair value of the shares issued in 2000 to effect the acquisition of ABM were measured at the date the acquisition was announced and the terms agreed to, whereas, under Canadian GAAP, the shares issued would have been measured at the transaction date. This difference would have resulted in the cost of the acquisition under Canadian GAAP being $4,930,000 higher than under U.S. GAAP. | |||
Under U.S. GAAP, the Company included in the cost of the acquisition of ABM the intrinsic value of the unvested options granted by the Company in 2000 as consideration for the acquisition of all of the outstanding stock options of ABM. Under U.S. GAAP, the deferred stock compensation was recognized as a compensation cost over the remaining future vesting period of the options. Under Canadian GAAP, the Company would have included in the cost of acquisition of ABM the $1,750,000 fair value of the stock options. This difference would have resulted in the cost of the acquisition in 2000 under Canadian GAAP being $704,000 higher than under U.S. GAAP. | |||
ABM was sold in February 2005 (Note 2). | |||
(c) | Impairment of long-lived assets | ||
Under U.S. GAAP, impairment charges are recorded based on the discounted, estimated future net cash flows, whereas, under Canadian GAAP, impairment charges on long-lived assets in 2002 and prior years were recorded as the excess of their carrying amount over their recoverable amount, which was determined based on the undiscounted estimated future net cash flows. |
9. | DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued) |
Under U.S. GAAP, the Savage River Project was fully written off as at December 31, 2002. However, under Canadian GAAP only an $18 million write-down would have been taken. In 2003, additional amounts capitalized under U.S. GAAP were written off; however, these would have been capitalized under Canadian GAAP. As a result, under Canadian GAAP, these assets would need to be depreciated and depleted. During the six months ended June 30, 2005 additional depreciation recorded under Canadian GAAP was $nil (2004: $1,488,000). | |||
(d) | Other mineral property interests | ||
Under U.S. GAAP, where the mineral property interests are, at the date of acquisition, without economically recoverable reserves, these costs are generally considered to be exploration costs that are expensed as incurred. Under Canadian GAAP, the costs of the acquisition of mineral property interests are capitalized. | |||
In accordance with EITF 04-02, Whether Mining Rights are Tangible or Intangible Assets, the Company classifies its mineral exploration licenses as tangible assets and there is no difference between Canadian and U.S. GAAP. Prior to January 2004, the costs of acquisition of Ivanhoe Mines mineral exploration licenses were classified as intangible assets under U.S. GAAP and amortized over the term of the licenses. As a result, for Canadian GAAP purposes, the $6,521,000, net of deferred income taxes of $882,000, in amortization or write-offs of other mineral property interests under U.S. GAAP needs to be reversed. | |||
(e) | Long-term investments | ||
Under U.S. GAAP, portfolio investments are classified as available-for-sale securities, which are carried at market value. The resulting unrealized gains or losses are included in the determination of comprehensive income, net of income taxes where applicable. Under Canadian GAAP, these investments would be carried at their original cost less provisions for impairment. | |||
(f) | Other comprehensive income | ||
U.S. GAAP requires that a statement of comprehensive income be displayed with the same prominence as other financial statements and that the aggregate amount of comprehensive income, excluding the deficit, be disclosed separately in shareholders equity. Comprehensive income, which incorporates the net loss, includes all changes in shareholders equity during a period except those resulting from investments by, and distributions to, owners. Under Canadian GAAP, companies do not report comprehensive income or loss. |
9. | DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued) |
(g) | Income taxes | ||
Under U.S. GAAP, deferred income taxes are calculated based on enacted tax rates applicable to future years. Under Canadian GAAP, future income taxes are calculated based on enacted or substantively enacted tax rates applicable to future years. This difference in GAAP did not have any effect on the financial position of the Company as at June 30, 2005 and December 31, 2004 nor the results of operations of the Company for the six months ended June 30, 2005 and 2004. | |||
(h) | Gain on sale of ABM | ||
Under U.S. GAAP, the net book value of ABM when it was sold in February 2005 was $11.2 million, whereas under Canadian GAAP the carrying value was $30.9 million. During the six months ended June 30, 2005, total proceeds from the sale were $27.4 million, representing cash instalments of $21.5 million, plus escalating payments of $5.9 million. |
Share Information | Investor Information | |||||
2 |
Interim Report For the three and six months ended June 30, 2005 |
Common shares of Ivanhoe Mines Ltd. are listed for trading under the symbol IVN on the New York Stock Exchange and the Toronto Stock Exchange. | All financial reports, news releases and corporate information can be accessed on our web site at www.ivanhoe-mines.com | |||
At August 5, 2005 the Company had 314.0 million common shares issued and outstanding and warrants and stock options exercisable for 9.1 million additional common shares. |
Transfer Agents and
Registrars CIBC Mellon Trust Company 320 Bay Street Toronto, Ontario, Canada M5H 4A6 Toll free in North America: 1-800-387-0825 |
Contact Information Investors: Bill Trenaman Media : Bob Williamson Suite 654-999 Canada Place Vancouver, BC, Canada V6C 3E1 E-mail : info@ivanhoemines.com Tel : (604) 688-5755 |
Quarter ended June 30, | Six months ended June 30, | |||||||||||||||
2005 | 2004(1) | 2005 | 2004(1) | |||||||||||||
Exploration expenses |
(33.8 | ) | (24.8 | ) | (58.2 | ) | (45.5 | ) | ||||||||
General and administrative costs |
(6.0 | ) | (4.8 | ) | (10.7 | ) | (10.0 | ) | ||||||||
Write-down of long-term
investments |
| | (1.4 | ) | | |||||||||||
Gain on sale of long-term
investments |
0.1 | 3.3 | 0.1 | 4.5 | ||||||||||||
Foreign exchange gain (loss) |
1.7 | (1.4 | ) | 1.1 | (3.1 | ) | ||||||||||
Net (loss) from continuing
operations |
(31.1 | ) | (23.1 | ) | (55.3 | ) | (46.9 | ) | ||||||||
Net income (loss) from
discontinued operations |
5.9 | 2.2 | 21.6 | (5.7 | ) | |||||||||||
Net (loss) |
(25.2 | ) | (21.0 | ) | (33.7 | ) | (52.6 | ) | ||||||||
Net income (loss) per share |
||||||||||||||||
Continuing operations |
($ | 0.10 | ) | ($ | 0.09 | ) | ($ | 0.18 | ) | ($ | 0.17 | ) | ||||
Discontinued operations |
$ | 0.02 | $ | 0.01 | $ | 0.07 | ($ | 0.02 | ) | |||||||
Total assets |
435.8 | 308.5 | 435.8 | 308.5 | ||||||||||||
Continuing operations |
||||||||||||||||
Capital expenditures |
5.7 | 1.1 | 9.2 | 3.0 | ||||||||||||
Joint venture operations |
||||||||||||||||
Copper
cathode 50% share |
||||||||||||||||
Units sold tonnes |
4,543 | 3,893 | 9,213 | 7,627 | ||||||||||||
Units produced tonnes |
4,559 | 3,765 | 9,361 | 7,601 | ||||||||||||
Average sale price |
||||||||||||||||
Copper
cathode
US$/pound |
$ | 1.59 | $ | 1.33 | $ | 1.60 | $ | 1.27 |
(1) | Certain numbers have been restated due to a change in accounting policy. | |
Refer to Note 1 of the financial statements. |
Page 7 of 21
Quarter ended | ||||||||||||||||
Jun 30 | Mar 31 | Dec 31 | Sept 30 | |||||||||||||
2005 | 2005 | 2004(2) | 2004(2) | |||||||||||||
Revenue |
0.0 | 0.0 | 0.0 | 0.0 | ||||||||||||
Operating profit |
0.0 | 0.0 | 0.0 | 0.0 | ||||||||||||
Total exploration |
(33.8 | ) | (24.4 | ) | (24.2 | ) | (28.5 | ) | ||||||||
Foreign exchange gain (loss) |
1.7 | (0.6 | ) | 3.5 | 4.2 | |||||||||||
Net (loss) from continuing operations |
(31.1 | ) | (24.2 | ) | (26.6 | ) | (25.5 | ) | ||||||||
Gain (loss) from discontinued operations |
5.9 | 15.7 | 9.4 | 0.7 | ||||||||||||
Net (loss) |
(25.2 | ) | (8.5 | ) | (17.1 | ) | (24.8 | ) | ||||||||
Net profit (loss) per share |
||||||||||||||||
Continuing operation |
(0.10 | ) | (0.08 | ) | (0.08 | ) | (0.09 | ) | ||||||||
Discontinued operations |
0.02 | 0.05 | 0.03 | 0.00 | ||||||||||||
Total |
(0.08 | ) | (0.03 | ) | (0.05 | ) | (0.09 | ) | ||||||||
Jun 30 | Mar 31 | Dec 31 | Sept 30 | |||||||||||||
2004(2) | 2004(2) | 2003(1) | 2003(1) | |||||||||||||
Revenue |
0.0 | 0.0 | 6.8 | 6.0 | ||||||||||||
Operating profit |
0.0 | 0.0 | 1.0 | 1.8 | ||||||||||||
Total exploration |
(24.8 | ) | (20.7 | ) | (21.2 | ) | (20.8 | ) | ||||||||
Foreign exchange gain (loss) |
(1.4 | ) | (1.7 | ) | 5.1 | (1.2 | ) | |||||||||
Net (loss) from continuing operations |
(23.1 | ) | (23.8 | ) | (13.0 | ) | (27.5 | ) | ||||||||
Gain (loss) from discontinued operations |
2.2 | (7.9 | ) | (1.8 | ) | (0.5 | ) | |||||||||
Net (loss) from continuing operations |
(21.0 | ) | (31.6 | ) | (14.8 | ) | (28.0 | ) | ||||||||
Net profit (loss) per share |
||||||||||||||||
Continuing operation |
(0.09 | ) | (0.09 | ) | (0.05 | ) | (0.11 | ) | ||||||||
Discontinued operations |
0.01 | (0.03 | ) | (0.01 | ) | 0.00 | ||||||||||
Total |
(0.08 | ) | (0.12 | ) | (0.06 | ) | (0.11 | ) | ||||||||
(1) | As previously reported under Canadian GAAP. | |
(2) | Certain numbers have been restated due to a change in accounting policy. Refer to Note 1 of the financial statements. |
Page 8 of 21
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Three month period ended June 30, | ||||||||||||||||||||||||||||
Total Operation | Companys 50% net share | |||||||||||||||||||||||||||
% Increase | % Increase | |||||||||||||||||||||||||||
2005 | 2004 | (decrease) | 2005 | 2004 | (decrease) | |||||||||||||||||||||||
Total tonnes moved (1) |
Tonnes (000s) | 3,283 | 2,609 | 26 | % | |||||||||||||||||||||||
Tonnes of ore to heap |
Tonnes (000s) | 2,085 | 1,565 | 33 | % | |||||||||||||||||||||||
Ore grade |
CuCN % | 0.44 | % | 0.78 | % | (44 | %) | |||||||||||||||||||||
Strip ratio |
Waste/Ore | 0.54 | 0.58 | (7 | %) | |||||||||||||||||||||||
Cathode production |
Tonnes | 9,118 | 7,530 | 21 | % | 4,559 | 3,765 | 21 | % | |||||||||||||||||||
Tonnage sold |
Tonnes | 9,086 | 7,785 | 17 | % | 4,543 | 3,893 | 17 | % | |||||||||||||||||||
Average sale price received |
US$/pound | $ | 1.59 | $ | 1.33 | 20 | % | |||||||||||||||||||||
Sales |
US$ | (000 | ) | 15,614 | 10,808 | 44 | % | |||||||||||||||||||||
Cost of operations |
US$ | (000 | ) | 4,026 | 2,792 | 44 | % | |||||||||||||||||||||
Operating profit |
US$ | (000 | ) | 10,263 | 6,740 | 52 | % | |||||||||||||||||||||
Cost of operations |
US$/pound | $ | 0.40 | $ | 0.33 | 24 | % |
Six month period ended June 30, | ||||||||||||||||||||||||||||
Total Operation | Companys 50% net share | |||||||||||||||||||||||||||
% Increase | % Increase | |||||||||||||||||||||||||||
2005 | 2004 | (decrease) | 2005 | 2004 | (decrease) | |||||||||||||||||||||||
Total tonnes moved (1) |
Tonnes (000s) | 6,898 | 5,243 | 32 | % | |||||||||||||||||||||||
Tonnes of ore to heap |
Tonnes (000s) | 4,529 | 2,983 | 52 | % | |||||||||||||||||||||||
Ore grade |
CuCN % | 0.53 | % | 0.77 | % | (31 | %) | |||||||||||||||||||||
Strip ratio |
Waste/Ore | 0.46 | 0.66 | (30 | %) | |||||||||||||||||||||||
Cathode production |
Tonnes | 18,721 | 15,202 | 23 | % | 9,361 | 7,601 | 23 | % | |||||||||||||||||||
Tonnage sold |
Tonnes | 18,425 | 15,253 | 21 | % | 9,213 | 7,627 | 21 | % | |||||||||||||||||||
Average sale price received |
$/pound | $ | 1.60 | $ | 1.27 | 26 | % | |||||||||||||||||||||
Sales |
$ | (000 | ) | 30,758 | 20,194 | 52 | % | |||||||||||||||||||||
Cost of operations |
$ | (000 | ) | 8,083 | 5,333 | 52 | % | |||||||||||||||||||||
Operating profit |
$ | (000 | ) | 19,719 | 12,300 | 60 | % | |||||||||||||||||||||
Cost of operations |
US$/pound | $ | 0.40 | $ | 0.32 | 25 | % |
(1) | Includes ore and waste material |
Page 16 of 21
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Share purchase warrants | Total number of | |||||
outstanding | Maturity date | Exercise price | shares to be issued | |||
7.125 million(1)
|
December 19, 2005 | Cdn$12.50 per share | 7.125 million | |||
5.76 million (2)(3)
|
February 15, 2006 | $8.68 per share | 0.576 million |
(1) | Each warrant entitles the holder to acquire one common share. | |
(2) | Each 10 warrants entitle the holder to acquire one common share. | |
(3) | In 2005, the expiry date was extended from February, 2005 to February, 2006. |
Page 18 of 21
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1. | I have reviewed the interim filings (as this term is defined in Multilateral Instrument 52-109 Certification of Disclosure in Issuers Annual and Interim Filings) of Ivanhoe Mines Ltd., (the issuer) for the interim period ended June 30, 2005; | ||
2. | Based on my knowledge, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings; | ||
3. | Based on my knowledge, the interim financial statements together with the other financial information included in the interim filings fairly present in all material respects the financial condition, results of operations and cash flows of the issuer, as of the date and for the periods presented in the interim filings; and | ||
4. | The issuers other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures for the issuer, and we have designed such disclosure controls and procedures, or caused them to be designed under our supervision, to provide reasonable assurance that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which the interim filings are being prepared. |
/s/ Robert M. Friedland
|
||
Robert M. Friedland |
||
Chief Executive Officer |
||
Ivanhoe Mines Ltd. |
1. | I have reviewed the interim filings (as this term is defined in Multilateral Instrument 52-109 Certification of Disclosure in Issuers Annual and Interim Filings) of Ivanhoe Mines Ltd., (the issuer) for the interim period ended June 30, 2005; | ||
2. | Based on my knowledge, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings; | ||
3. | Based on my knowledge, the interim financial statements together with the other financial information included in the interim filings fairly present in all material respects the financial condition, results of operations and cash flows of the issuer, as of the date and for the periods presented in the interim filings; and | ||
4. | The issuers other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures for the issuer, and we have designed such disclosure controls and procedures, or caused them to be designed under our supervision, to provide reasonable assurance that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which the interim filings are being prepared. |
/s/ Peter Meredith |
||
Peter Meredith |
||
Chief Financial Officer |
||
Ivanhoe Mines Ltd. |
To:
|
Alberta Securities Commission | |
British Columbia Securities Commission | ||
Manitoba Securities Commission | ||
Securities Registry, Government of the Northwest Territories | ||
Securities Registry, Government of Nunavut | ||
Ontario Securities Commission | ||
Commission des valeurs mobilières du Québec | ||
Saskatchewan Securities Commission | ||
Registrar of Securities, Government of the Yukon Territory | ||
Office of the Administrator of Securities, New Brunswick | ||
Nova Scotia Securities Commission | ||
Registrar of Securities, P.E.I. | ||
Securities Division, Department of Justice, Newfoundland | ||
Toronto Stock Exchange |
Re:
|
September 30, 2005 third quarter financial statements, Managements Discussion and Analysis and Certificates |
ITEM 1.
|
Financial Statements | |
Unaudited Consolidated Balance Sheets at September 30, 2005 and December 31, 2004 | ||
Unaudited Consolidated Statements of Operations for the Three and Nine Month Periods ended September 30, 2005 and 2004 | ||
Unaudited Consolidated Statement of Shareholders Equity for the Nine Month Period ended September 30, 2005 | ||
Unaudited Consolidated Statements of Cash Flows for the Three and Nine Month Periods ended September 30, 2005 and 2004 | ||
Notes to the Unaudited Consolidated Financial Statements | ||
ITEM 2.
|
Managements Discussion and Analysis of Financial Condition and Results of Operations. |
September 30, | December 31, | |||||||
2005 | 2004 | |||||||
(Unaudited) | ||||||||
ASSETS |
||||||||
CURRENT |
||||||||
Cash and cash equivalents (Note 3) |
$ | 133,542 | $ | 112,478 | ||||
Accounts receivable (Note 2) |
27,300 | 6,552 | ||||||
Inventories |
1,565 | 2,192 | ||||||
Prepaid expenses |
2,492 | 1,196 | ||||||
Other current assets |
3,000 | 3,000 | ||||||
Current assets of discontinued operations (Note 2) |
| 36,636 | ||||||
TOTAL CURRENT ASSETS |
167,899 | 162,054 | ||||||
INVESTMENT IN JOINT VENTURE |
140,331 | 126,911 | ||||||
LONG-TERM INVESTMENTS (Note 4) |
24,514 | 19,160 | ||||||
PROPERTY, PLANT AND EQUIPMENT |
75,170 | 54,434 | ||||||
DEFERRED INCOME TAXES |
208 | 318 | ||||||
OTHER ASSETS |
5,656 | 3,764 | ||||||
NON-CURRENT ASSETS OF DISCONTINUED OPERATIONS (Note 2) |
| 9,627 | ||||||
TOTAL ASSETS |
$ | 413,778 | $ | 376,268 | ||||
LIABILITIES |
||||||||
CURRENT |
||||||||
Accounts payable and accrued liabilities |
$ | 7,244 | $ | 14,412 | ||||
Current liabilities of discontinued operations (Note 2) |
| 14,082 | ||||||
TOTAL CURRENT LIABILITIES |
7,244 | 28,494 | ||||||
LOANS PAYABLE TO RELATED PARTIES (Note 5) |
5,088 | 5,088 | ||||||
DEFERRED INCOME TAXES |
349 | 476 | ||||||
ASSET RETIREMENT OBLIGATIONS |
5,492 | 5,267 | ||||||
NON-CURRENT LIABILITIES OF DISCONTINUED OPERATIONS (Note 2) |
| 26,380 | ||||||
TOTAL LIABILITIES |
18,173 | 65,705 | ||||||
MINORITY INTERESTS |
2,581 | 3,713 | ||||||
SHAREHOLDERS EQUITY |
||||||||
SHARE CAPITAL (Note 6) |
||||||||
Authorized |
||||||||
Unlimited number of preferred shares without par value |
||||||||
Unlimited number of common shares without par value |
||||||||
Issued and
outstanding 314,052,972 (2004 - 292,870,998) common shares |
991,541 | 868,606 | ||||||
ADDITIONAL PAID-IN CAPITAL |
21,531 | 16,283 | ||||||
ACCUMULATED OTHER COMPREHENSIVE INCOME |
8,788 | 2,879 | ||||||
DEFICIT |
(628,836 | ) | (580,918 | ) | ||||
TOTAL SHAREHOLDERS EQUITY |
393,024 | 306,850 | ||||||
TOTAL LIABILITIES, MINORITY INTERESTS AND SHAREHOLDERS EQUITY |
$ | 413,778 | $ | 376,268 | ||||
Director
|
Director |
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
(Unaudited) | ||||||||||||||||
OPERATING EXPENSES |
||||||||||||||||
Exploration |
$ | (28,884 | ) | $ | (28,526 | ) | $ | (87,119 | ) | $ | (74,073 | ) | ||||
General and administrative |
(7,263 | ) | (5,959 | ) | (17,975 | ) | (15,915 | ) | ||||||||
Interest |
(89 | ) | (70 | ) | (266 | ) | (213 | ) | ||||||||
Depreciation |
(485 | ) | (462 | ) | (1,704 | ) | (1,459 | ) | ||||||||
Mining property care and maintenance costs |
(481 | ) | (827 | ) | (2,232 | ) | (2,702 | ) | ||||||||
OPERATING LOSS |
(37,202 | ) | (35,844 | ) | (109,296 | ) | (94,362 | ) | ||||||||
OTHER INCOME (EXPENSES) |
||||||||||||||||
Share of income from joint venture |
7,965 | 4,558 | 23,477 | 14,857 | ||||||||||||
Interest income |
1,293 | 1,646 | 2,556 | 2,267 | ||||||||||||
Foreign exchange gains |
7,111 | 4,222 | 8,234 | 1,114 | ||||||||||||
Share of loss of significantly influenced investees |
(383 | ) | (558 | ) | (1,004 | ) | (1,812 | ) | ||||||||
Gain on sale of long-term investments (Note 4 (a)) |
| | 115 | 4,523 | ||||||||||||
Write-down of carrying value of long-term investments (Note 4 (a)) |
| | (1,438 | ) | | |||||||||||
LOSS BEFORE TAXES AND OTHER ITEMS |
(21,216 | ) | (25,976 | ) | (77,356 | ) | (73,413 | ) | ||||||||
Provision for income and capital taxes |
(82 | ) | (137 | ) | (212 | ) | (381 | ) | ||||||||
Minority interests |
657 | 637 | 1,658 | 1,393 | ||||||||||||
NET LOSS FROM CONTINUING OPERATIONS |
(20,641 | ) | (25,476 | ) | (75,910 | ) | (72,401 | ) | ||||||||
NET INCOME AND GAIN ON SALE FROM DISCONTINUED OPERATIONS (Note 2) |
6,378 | 653 | 27,992 | (5,039 | ) | |||||||||||
NET LOSS |
$ | (14,263 | ) | $ | (24,823 | ) | $ | (47,918 | ) | $ | (77,440 | ) | ||||
BASIC AND DILUTED (LOSS) EARNINGS PER SHARE FROM |
||||||||||||||||
CONTINUING OPERATIONS |
$ | (0.07 | ) | $ | (0.09 | ) | $ | (0.25 | ) | $ | (0.26 | ) | ||||
DISCONTINUED OPERATIONS |
0.02 | 0.00 | 0.09 | (0.02 | ) | |||||||||||
$ | (0.05 | ) | $ | (0.09 | ) | $ | (0.16 | ) | $ | (0.28 | ) | |||||
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING (000s) |
314,011 | 290,582 | 302,006 | 277,965 | ||||||||||||
Accumulated | ||||||||||||||||||||||||
Share Capital | Additional | Other | ||||||||||||||||||||||
Number | Paid-In | Comprehensive | ||||||||||||||||||||||
of Shares | Amount | Capital | Income | Deficit | Total | |||||||||||||||||||
Balances, December 31, 2004 |
292,870,998 | $ | 868,606 | $ | 16,283 | $ | 2,879 | $ | (580,918 | ) | $ | 306,850 | ||||||||||||
Net loss |
| | | | (47,918 | ) | (47,918 | ) | ||||||||||||||||
Other comprehensive income |
| | | 5,909 | | 5,909 | ||||||||||||||||||
Comprehensive loss |
(42,009 | ) | ||||||||||||||||||||||
Shares issued for: |
||||||||||||||||||||||||
Private placement, net of issue costs of $6,095 |
19,750,000 | 119,801 | | | | 119,801 | ||||||||||||||||||
Exercise of stock options |
1,369,672 | 2,686 | (964 | ) | | | 1,722 | |||||||||||||||||
Other capital assets purchased (Note 8 (a)) |
50,000 | 362 | | | | 362 | ||||||||||||||||||
Share purchase plan |
12,302 | 86 | | | | 86 | ||||||||||||||||||
Dilution gain on issuance of shares by a subsidiary |
| | 473 | | | 473 | ||||||||||||||||||
Stock compensation charged to operations |
| | 5,739 | | | 5,739 | ||||||||||||||||||
Balances, September 30, 2005 |
314,052,972 | $ | 991,541 | $ | 21,531 | $ | 8,788 | $ | (628,836 | ) | $ | 393,024 | ||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
(Unaudited) | ||||||||||||||||
OPERATING ACTIVITIES |
||||||||||||||||
Net loss from continuing operations |
$ | (20,641 | ) | $ | (25,476 | ) | $ | (75,910 | ) | $ | (72,401 | ) | ||||
Items not involving use of cash |
||||||||||||||||
Depreciation |
485 | 462 | 1,704 | 1,459 | ||||||||||||
Stock-based compensation |
2,050 | 1,277 | 5,739 | 4,909 | ||||||||||||
Accretion expense |
87 | 79 | 265 | 138 | ||||||||||||
Non-cash exploration expense recovery |
| | | (3,248 | ) | |||||||||||
Unrealized foreign exchange gains |
(7,001 | ) | (2,842 | ) | (8,261 | ) | (2,131 | ) | ||||||||
Share of income from joint venture, net of cash distribution |
(7,965 | ) | (4,558 | ) | (13,477 | ) | (14,857 | ) | ||||||||
Share of loss of significantly influenced investees |
383 | 558 | 1,004 | 1,812 | ||||||||||||
Gain on sale of long-term investments (Note 4 (a)) |
| | (115 | ) | (4,523 | ) | ||||||||||
Write-down of carrying value of long-term investments (Note 4 (a)) |
| | 1,438 | | ||||||||||||
Deferred income taxes |
(8 | ) | (4 | ) | (17 | ) | 113 | |||||||||
Minority interests |
(657 | ) | (637 | ) | (1,658 | ) | (1,393 | ) | ||||||||
Loss on sale of property, plant, and equipment |
| 197 | | 197 | ||||||||||||
Net change in non-cash operating working capital items (Note 8 (c)) |
(9,280 | ) | (2,591 | ) | (9,844 | ) | 2,385 | |||||||||
Cash used in operating activities of continuing operations |
(42,547 | ) | (33,535 | ) | (99,132 | ) | (87,540 | ) | ||||||||
Cash (used in) provided by operating activities of discontinued operations |
| (5,116 | ) | 2,592 | (1,800 | ) | ||||||||||
Cash used in operating activities |
(42,547 | ) | (38,651 | ) | (96,540 | ) | (89,340 | ) | ||||||||
INVESTING ACTIVITIES |
||||||||||||||||
Proceeds from sale of discontinued operations |
| | 15,000 | | ||||||||||||
Purchase of long-term investments (Note 4 (b) and (c)) |
(2,199 | ) | | (6,309 | ) | | ||||||||||
Proceeds from sale of long-term investments (Note 4 (a)) |
| | 4,539 | 2,461 | ||||||||||||
Proceeds from sale of property, plant and equipment |
| 2,260 | | 2,720 | ||||||||||||
Expenditures on property, plant and equipment |
(13,140 | ) | (2,396 | ) | (22,000 | ) | (25,369 | ) | ||||||||
Expenditures on other assets |
(660 | ) | (66 | ) | (1,898 | ) | (6 | ) | ||||||||
Other |
| 173 | (2,078 | ) | (3,693 | ) | ||||||||||
Cash used in investing activities of continuing operations |
(15,999 | ) | (29 | ) | (12,746 | ) | (23,887 | ) | ||||||||
Cash used in investing activities of discontinued operations |
| (941 | ) | (502 | ) | (2,587 | ) | |||||||||
Cash used in investing activities |
(15,999 | ) | (970 | ) | (13,248 | ) | (26,474 | ) | ||||||||
FINANCING ACTIVITIES |
||||||||||||||||
Issue of share capital |
328 | 100,861 | 121,609 | 101,292 | ||||||||||||
Minority interests investment in subsidiary |
1,000 | | 1,000 | | ||||||||||||
Cash provided by financing activities of continuing operations |
1,328 | 100,861 | 122,609 | 101,292 | ||||||||||||
Cash provided by (used in) financing activities of discontinued operations |
| 5,552 | (37 | ) | 5,492 | |||||||||||
Cash provided by financing activities |
1,328 | 106,413 | 122,572 | 106,784 | ||||||||||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH |
6,987 | 3,023 | 8,280 | 2,074 | ||||||||||||
NET CASH (OUTFLOW) INFLOW |
(50,231 | ) | 69,815 | 21,064 | (6,956 | ) | ||||||||||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
183,773 | 28,745 | 112,478 | 105,516 | ||||||||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ | 133,542 | $ | 98,560 | $ | 133,542 | $ | 98,560 | ||||||||
CASH AND CASH EQUIVALENTS IS COMPRISED OF: |
||||||||||||||||
Cash on hand and demand deposits |
$ | 21,374 | $ | 30,421 | $ | 21,374 | $ | 30,421 | ||||||||
Short-term money market instruments |
112,168 | 68,139 | 112,168 | 68,139 | ||||||||||||
$ | 133,542 | $ | 98,560 | $ | 133,542 | $ | 98,560 | |||||||||
1. | SIGNIFICANT ACCOUNTING POLICIES | |
These consolidated financial statements have been prepared in accordance with United States of America generally accepted accounting principles (U.S. GAAP). In the case of Ivanhoe Mines Ltd. ( the Company), U.S. GAAP differs in certain respects from accounting principles generally accepted in the Canada (Canadian GAAP) as explained in Note 9. | ||
In the opinion of management, all adjustments (including reclassifications and normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at September 30, 2005 and for all periods presented, have been made. The interim results are not necessarily indicative of results for a full year. For purposes of these financial statements, the Company and its subsidiaries and joint venture are collectively referred to as Ivanhoe Mines. | ||
The significant accounting policies used in these consolidated financial statements are as follows: |
(a) | Principles of consolidation | ||
These consolidated financial statements include the accounts of the Company and all of its subsidiaries. The principal subsidiaries of the Company are Ivanhoe Mines Mongolia Inc. (B.V.I.), Ivanhoe Mines China (B.V.I.), Ivanhoe Cloncurry Mines Pty Ltd (Australia), and their respective subsidiaries, and Bakyrchik Mining Venture (Kazakhstan) (70% owned) (BMV). | |||
Ivanhoe Mines investment in Asia Gold Corp. (Asia Gold) (B.C., Canada) (47% owned) remains consolidated at September 30, 2005 due to Ivanhoe Mines having control over the operating, financing and strategic decisions of Asia Gold. | |||
Ivanhoe Mines investment in Myanmar Ivanhoe Copper Company Limited (JVCo) (Myanmar) (50% owned), which is subject to joint control, is accounted for using the equity method. | |||
All intercompany transactions and balances have been eliminated, where appropriate. | |||
Variable Interest Entities (VIEs), which include, but are not limited to, special purpose entities, trusts, partnerships, and other legal structures, as defined by Financial Accounting Standards Board (FASB) Interpretation No. 46 (Revised 2003) (FIN 46R) Consolidation of Variable Interest Entities an Interpretation of ARB No. 51, are entities in which equity investors do not have the characteristics of a controlling financial interest or there is not sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. VIEs are subject to consolidation by the primary beneficiary who will absorb the majority of the entities expected losses and/or expected residual returns. |
1. | SIGNIFICANT ACCOUNTING POLICIES (Continued) |
(b) | Measurement uncertainties | ||
Generally accepted accounting principles require management to make assumptions and estimates that affect the reported amounts and other disclosures in these consolidated financial statements. Actual results may differ from those estimates. | |||
Significant estimates used in the preparation of these consolidated financial statements include, among other things, the recoverability of accounts receivable and investments, the proven and probable ore reserves, the estimated recoverable tonnes of ore from each mine area, the estimated net realizable value of inventories, the provision for income taxes and composition of deferred income tax assets and deferred income tax liabilities, the expected economic lives of and the estimated future operating results and net cash flows from property, plant and equipment, and the anticipated costs and timing of asset retirement obligations. | |||
(c) | Foreign currencies | ||
The Company considers the U.S. dollar to be its functional currency as it is the currency of the primary economic environment in which the Company and its subsidiaries operate. Accordingly, monetary assets and liabilities denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect at the balance sheet date and non-monetary assets and liabilities are translated at the exchange rates in effect at the time of acquisition or issue. Revenues and expenses are translated at rates approximating the exchange rates in effect at the time of the transactions. All exchange gains and losses are included in operations. | |||
(d) | Cash and cash equivalents | ||
Cash and cash equivalents include short-term money market instruments with terms to maturity, at the date of acquisition, not exceeding 90 days. | |||
(e) | Inventories | ||
Mine stores and supplies are valued at the lower of the weighted average cost, less allowances for obsolescence, and replacement cost. | |||
(f) | Long-term investments | ||
Long-term investments in companies in which Ivanhoe Mines has voting interests of 20% to 50%, or where Ivanhoe Mines has the ability to exercise significant influence, are accounted for using the equity method. Under this method, Ivanhoe Mines share of the investees earnings and losses is included in operations and its investments therein are adjusted by a like amount. Dividends received are credited to the investment accounts. | |||
The other long-term investments are classified as available -for-sale investments. Unrealized gains and losses on these investments are recorded in accumulated other comprehensive income as a separate component of shareholders equity, unless the declines in market value are judged to be other than temporary, in which case the losses are recognized in income in the period. Realized gains and losses from the sale of these investments are included in income in the period. |
1. | SIGNIFICANT ACCOUNTING POLICIES (Continued) |
(g) | Exploration and development | ||
All direct costs related to the acquisition of mineral property interests are capitalized in the period incurred. | |||
Exploration costs are charged to operations in the period incurred until such time as it has been determined that a property has economically recoverable reserves, in which case subsequent exploration costs and the costs incurred to develop a property are capitalized. Exploration costs include value-added taxes incurred in foreign jurisdictions when recoverability of those taxes is uncertain. | |||
(h) | Property, plant and equipment | ||
Property, plant and equipment are carried at cost (including development and preproduction costs, capitalized interest, other financing costs and all direct administrative support costs incurred during the construction period, net of cost recoveries and incidental revenues), less accumulated depletion and depreciation including write-downs. Following the construction period, interest, other financing costs and administrative costs are expensed as incurred. | |||
On the commencement of commercial production, depletion of each mining property is provided on the unit-of-production basis, using estimated proven and probable reserves as the depletion basis. | |||
Property, plant and equipment are depreciated, following the commencement of commercial production, over their expected economic lives using either the unit-of-production method or the straight-line method (over one to twenty years). | |||
Capital works in progress are not depreciated until the capital asset has been put into operation. | |||
Ivanhoe Mines reviews the carrying values of its property, plant and equipment whenever events or changes in circumstances indicate that their carrying values may not be recoverable. An impairment is considered to exist if total estimated future cash flows, or probability-weighted cash flows on an undiscounted basis, are less than the carrying value of the assets. An impairment loss is measured and recorded based on discounted estimated future cash flows associated with values beyond proven and probable reserves. In estimating future cash flows, assets are grouped at the lowest level for which there is identifiable future cash flows that are largely independent of cash flows from other asset groups. Generally, in estimating future cash flows, all assets are grouped at a particular mine for which there is identifiable cash flows. |
1. | SIGNIFICANT ACCOUNTING POLICIES (Continued) |
(i) | Stripping costs | ||
On March 30, 2005, the FASB ratified the consensus of the Emerging Issues Task Force (EITF) Issue 04-6 that stripping costs incurred during the production phase of a mine are variable production costs that should be included in the costs of the inventory produced during the period that the stripping costs are incurred. Commencing in the first quarter of 2005, Ivanhoe Mines changed its accounting policy with respect to stripping costs to comply with the consensus reached by the EITF. This change has been applied retrospectively by restating prior period financial statements. In 2004 and prior years, Ivanhoe Mines deferred or accrued stripping costs incurred during production, as appropriate, and charged these costs to operations on the basis of the estimated average stripping ratio for each mine area. The effect of this change was to increase the deficit at January 1, 2004 by $7,628,000, to increase the net loss for the year ended December 31, 2004 by $7,889,000 ($0.03 per share) and to decrease assets of discontinued operations and investment in joint venture at December 31, 2004 by $13,973,000 and $1,544,000 respectively. The net loss for the three and nine month periods ended September 30, 2004 were also increased by $762,000 ($0.00 per share) and $6,827,000 ($0.03 per share), respectively, as a result of this change. | |||
(j) | Asset retirement obligations | ||
Ivanhoe Mines recognizes liabilities for statutory, contractual or legal obligations associated with the retirement of property, plant and equipment, when those obligations result from the acquisition, construction, development or normal operation of the assets. Initially, a liability for an asset retirement obligation is recognized at its fair value in the period in which it is incurred. Upon initial recognition of the liability, the corresponding asset retirement cost is added to the carrying amount of that asset and the cost is amortized as an expense over the economic life of the related asset. Following the initial recognition of the asset retirement obligation, the carrying amount of the liability is increased for the passage of time and adjusted for changes to the amount or timing of the underlying cash flows needed to settle the obligation. | |||
(k) | Revenue recognition | ||
Revenue at JVCo from the sale of metals is recognized, net of related royalties and sales commissions, when: (i) persuasive evidence of an arrangement exists; (ii) the risks and rewards of ownership pass to the purchaser including delivery of the product; (iii) the selling price is fixed or determinable; and (iv) collectibility is reasonably assured. Revenue from copper cathode includes provisional pricing arrangements accounted for as embedded derivative instruments under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended. | |||
(l) | Stock-based compensation | ||
The Company has an Employees and Directors Equity Incentive Plan. The Company records compensation expense using the fair value based method in accordance with SFAS No. 123, Accounting for Stock-Based Compensation. Accordingly, the fair value of stock options at the date of grant is amortized to operations, with an offsetting credit to additional paid-in capital, on a straight-line basis over the vesting period. If and when the stock options are ultimately exercised, the applicable amounts of additional paid-in capital are transferred to share capital. |
1. | SIGNIFICANT ACCOUNTING POLICIES (Continued) |
(m) | Deferred income taxes | ||
The Company computes income taxes in accordance with SFAS No. 109, Accounting for Income Taxes. SFAS 109 requires that the provision for deferred income taxes be based on the liability method. Deferred taxes arise from the recognition of the tax consequences of temporary differences by applying statutory tax rates applicable to future years to differences between the financial statements carrying amounts and the tax bases of certain assets and liabilities. The Company records a valuation allowance against any portion of those deferred income tax assets that management believes will, more likely than not, fail to be realized. | |||
(n) | Loss per share | ||
The Company follows SFAS No. 128, Earnings Per Share, which requires the presentation of basic and diluted earnings per share. The basic loss per share is computed by dividing the net loss attributable to common stock by the weighted average number of common shares and Special Warrants outstanding during the year. All stock options and share purchase warrants outstanding at each period end have been excluded from the weighted average share calculation. The effect of potentially dilutive stock options and share purchase warrants was antidilutive in the periods ending September 30, 2005 and 2004. |
2. | DISCONTINUED OPERATIONS |
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
REVENUE |
$ | | $ | 19,372 | $ | 18,031 | $ | 58,817 | ||||||||
COST OF OPERATIONS |
| (17,370 | ) | (11,965 | ) | (61,191 | ) | |||||||||
DEPRECIATION AND DEPLETION |
| (358 | ) | | (992 | ) | ||||||||||
OPERATING PROFIT (LOSS) |
| 1,644 | 6,066 | (3,366 | ) | |||||||||||
EXPENSES |
||||||||||||||||
General and administrative |
| (4 | ) | (4 | ) | (28 | ) | |||||||||
Interest expense |
| (262 | ) | (203 | ) | (759 | ) | |||||||||
INCOME (LOSS) BEFORE THE FOLLOWING |
| 1,378 | 5,859 | (4,153 | ) | |||||||||||
Interest income |
| 103 | 16 | 218 | ||||||||||||
Foreign exchange gain (loss) |
| (28 | ) | (285 | ) | 132 | ||||||||||
Other expense |
| (836 | ) | (191 | ) | (1,327 | ) | |||||||||
INCOME (LOSS) BEFORE INCOME TAXES |
| 617 | 5,399 | (5,130 | ) | |||||||||||
Recovery of income taxes |
| 36 | 7 | 91 | ||||||||||||
NET INCOME |
| 653 | 5,406 | (5,039 | ) | |||||||||||
Contingent Income |
6,378 | | 12,319 | | ||||||||||||
Gain on sale of ABM |
| | 10,267 | | ||||||||||||
NET INCOME AND GAIN ON SALE
FROM DISCONTINUED OPERATIONS |
$ | 6,378 | $ | 653 | $ | 27,992 | $ | (5,039 | ) | |||||||
3. | CASH AND CASH EQUIVALENTS |
4. | LONG-TERM INVESTMENTS |
(a) | During the three months ended March 31, 2005, the share price of Olympus Pacific Minerals Inc. (Olympus) deteriorated with the result that the market value of Ivanhoe Mines investment in Olympus decreased significantly below carrying value. Accordingly, the Company recorded an impairment provision of $1,438,000 reducing the carrying value of this investment to $4,424,000. | |
In May 2005, Ivanhoe Mines sold its investment in Olympus, generating proceeds of $4,539,000. This transaction resulted in a gain on sale of $115,000. | ||
(b) | During the three months ended June 30, 2005, Ivanhoe Mines exercised its 4.6 million share purchase warrants of Entrée Gold Inc. (Entrée) to acquire 4.6 million common shares at a cost of $4,111,000 (Cdn$5,060,000). | |
(c) | During the three months ended September 30, 2005, Ivanhoe Mines acquired 1.2 million units in Entrée at a cost of $2,199,000 (Cdn$2,718,000). Each unit consists of one Entrée common share and two share purchase warrants. At September 30, 2005, Ivanhoe Mines owned 15.8% of Entrées issued and outstanding share capital. | |
5. | LOANS PAYABLE TO RELATED PARTIES |
6. | SHARE CAPITAL |
7. | SEGMENTED INFORMATION |
THREE MONTHS ENDED SEPTEMBER 30, 2005 | ||||||||||||
Exploration | Corporate | Consolidated | ||||||||||
Operating expenses |
||||||||||||
Exploration |
$ | (28,884 | ) | $ | | $ | (28,884 | ) | ||||
General and administrative |
| (7,263 | ) | (7,263 | ) | |||||||
Interest |
(31 | ) | (58 | ) | (89 | ) | ||||||
Depreciation |
(471 | ) | (14 | ) | (485 | ) | ||||||
Mining property care and maintenance costs |
| (481 | ) | (481 | ) | |||||||
Operating loss |
(29,386 | ) | (7,816 | ) | (37,202 | ) | ||||||
Other income (expenses) |
||||||||||||
Share of income from joint venture |
| 7,965 | 7,965 | |||||||||
Interest income |
101 | 1,192 | 1,293 | |||||||||
Foreign exchange gain |
49 | 7,062 | 7,111 | |||||||||
Share of loss of significantly influenced investees |
| (383 | ) | (383 | ) | |||||||
Loss before taxes and other items |
(29,236 | ) | 8,020 | (21,216 | ) | |||||||
Provision for income and capital taxes |
(66 | ) | (16 | ) | (82 | ) | ||||||
Minority interests |
657 | | 657 | |||||||||
Net loss from continuing operations |
$ | (28,645 | ) | $ | 8,004 | $ | (20,641 | ) | ||||
Expenditures on property, plant and equipment |
$ | 12,297 | $ | 843 | $ | 13,140 | ||||||
Total assets |
||||||||||||
Continuing operations |
$ | 97,253 | $ | 316,525 | $ | 413,778 | ||||||
Discontinued operations |
| | | |||||||||
$ | 97,253 | $ | 316,525 | $ | 413,778 | |||||||
THREE MONTHS ENDED SEPTEMBER 30, 2004 | ||||||||||||
Exploration | Corporate | Consolidated | ||||||||||
Operating Expenses |
||||||||||||
Exploration |
$ | (28,526 | ) | $ | | $ | (28,526 | ) | ||||
General and administrative |
| (5,959 | ) | (5,959 | ) | |||||||
Interest |
(26 | ) | (44 | ) | (70 | ) | ||||||
Depreciation |
(462 | ) | | (462 | ) | |||||||
Mining property care and maintenance costs |
| (827 | ) | (827 | ) | |||||||
Operating Loss |
(29,014 | ) | (6,830 | ) | (35,844 | ) | ||||||
Other income (expeneses) |
||||||||||||
Share of income from joint venture |
| 4,558 | 4,558 | |||||||||
Interest income |
19 | 1,627 | 1,646 | |||||||||
Foreign exchange gain |
620 | 3,602 | 4,222 | |||||||||
Share of loss of significantly influenced investees |
| (558 | ) | (558 | ) | |||||||
Loss before taxes and other items |
(28,375 | ) | 2,399 | (25,976 | ) | |||||||
Provision for income and capital taxes |
(97 | ) | (40 | ) | (137 | ) | ||||||
Minority interests |
637 | | 637 | |||||||||
Net loss from continuing operations |
$ | (27,835 | ) | $ | 2,359 | $ | (25,476 | ) | ||||
Expenditures on property, plant and equipment |
$ | 1,281 | $ | 1,115 | $ | 2,396 | ||||||
Total assets |
||||||||||||
Continuing operations |
$ | 81,101 | $ | 274,093 | $ | 355,194 | ||||||
Discontinued operations |
| 33,100 | 33,100 | |||||||||
$ | 81,101 | $ | 307,193 | $ | 388,294 | |||||||
7. | SEGMENTED INFORMATION (Continued) |
NINE MONTHS ENDED SEPTEMBER 30, 2005 | ||||||||||||
Exploration | Corporate | Consolidated | ||||||||||
Operating expenses |
||||||||||||
Exploration |
$ | (87,119 | ) | $ | | $ | (87,119 | ) | ||||
General and administrative |
| (17,975 | ) | (17,975 | ) | |||||||
Interest |
(93 | ) | (173 | ) | (266 | ) | ||||||
Depreciation |
(1,678 | ) | (26 | ) | (1,704 | ) | ||||||
Mining property care and maintenance costs |
| (2,232 | ) | (2,232 | ) | |||||||
Operating loss |
(88,890 | ) | (20,406 | ) | (109,296 | ) | ||||||
Other income (expenses) |
||||||||||||
Share of income from joint venture |
| 23,477 | 23,477 | |||||||||
Interest income |
208 | 2,348 | 2,556 | |||||||||
Foreign exchange gain (loss) |
(118 | ) | 8,352 | 8,234 | ||||||||
Share of loss of significantly influenced investees |
| (1,004 | ) | (1,004 | ) | |||||||
Gain on sale of long-term investments |
| 115 | 115 | |||||||||
Write-down of carrying value of long-term investment |
| (1,438 | ) | (1,438 | ) | |||||||
Loss before taxes and other items |
(88,800 | ) | 11,444 | (77,356 | ) | |||||||
Provision for income and capital taxes |
(138 | ) | (74 | ) | (212 | ) | ||||||
Minority interests |
1,658 | | 1,658 | |||||||||
Net loss from continuing operations |
$ | (87,280 | ) | $ | 11,370 | $ | (75,910 | ) | ||||
Expenditures on property, plant and equipment |
$ | 19,571 | $ | 2,791 | $ | 22,362 | ||||||
Total assets |
||||||||||||
Continuing operations |
$ | 97,253 | $ | 316,525 | $ | 413,778 | ||||||
Discontinued operations |
| | | |||||||||
$ | 97,253 | $ | 316,525 | $ | 413,778 | |||||||
NINE MONTHS ENDED SEPTEMBER 30, 2004 | ||||||||||||
Exploration | Corporate | Consolidated | ||||||||||
Operating expenses |
||||||||||||
Exploration |
$ | (74,073 | ) | $ | | $ | (74,073 | ) | ||||
General and administrative |
| (15,915 | ) | (15,915 | ) | |||||||
Interest |
(82 | ) | (131 | ) | (213 | ) | ||||||
Depreciation |
(1,447 | ) | (12 | ) | (1,459 | ) | ||||||
Mining property care and maintenance costs |
| (2,702 | ) | (2,702 | ) | |||||||
Operating loss |
(75,602 | ) | (18,760 | ) | (94,362 | ) | ||||||
Other income (expenses) |
||||||||||||
Share of income from joint venture |
| 14,857 | 14,857 | |||||||||
Interest income |
150 | 2,117 | 2,267 | |||||||||
Foreign exchange gain (loss) |
(240 | ) | 1,354 | 1,114 | ||||||||
Share of loss of significantly influenced investees |
| (1,812 | ) | (1,812 | ) | |||||||
Gain on sale of long-term investments |
| 4,523 | 4,523 | |||||||||
Loss before taxes and other items |
(75,692 | ) | 2,279 | (73,413 | ) | |||||||
Provision for income and capital taxes |
(142 | ) | (239 | ) | (381 | ) | ||||||
Minority interests |
1,393 | | 1,393 | |||||||||
Net loss from continuing operations |
$ | (74,441 | ) | $ | 2,040 | $ | (72,401 | ) | ||||
Expenditures on property, plant and equipment |
$ | 3,854 | $ | 1,515 | $ | 5,369 | ||||||
Total assets |
||||||||||||
Continuing operations |
$ | 81,101 | $ | 274,093 | $ | 355,194 | ||||||
Discontinued operations |
| 33,100 | 33,100 | |||||||||
$ | 81,101 | $ | 307,193 | $ | 388,294 | |||||||
8. | SUPPLEMENTARY CASH FLOW INFORMATION | |
(a) | During the nine months ended September 30, 2005, 50,000 common shares of the Company were issued as consideration for the purchase of certain exploration equipment valued at $362,000. | |
(b) |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
Interest paid |
$ | | $ | | $ | | $ | | ||||||||
Income and capital taxes paid |
| 129 | 277 | 298 |
(c) | Net change in non-cash operating working capital items: |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
(Increase) decrease in: |
||||||||||||||||
Accounts receivable |
$ | (1,403 | ) | $ | (2,197 | ) | $ | (1,929 | ) | $ | (5,716 | ) | ||||
Inventories |
680 | 19 | 627 | 114 | ||||||||||||
Prepaid expenses |
(890 | ) | (231 | ) | (1,296 | ) | (492 | ) | ||||||||
Other current assets |
| (118 | ) | | 1,989 | |||||||||||
Increase in: |
||||||||||||||||
Accounts payable and accrued liabilities |
(7,667 | ) | (64 | ) | (7,246 | ) | 6,490 | |||||||||
$ | (9,280 | ) | $ | (2,591 | ) | $ | (9,844 | ) | $ | 2,385 | ||||||
9. | DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES |
September 30, | September 30 | December 31, | December 31, | |||||||||||||
2005 | 2005 | 2004 | 2004 | |||||||||||||
(As previously | (As previously | |||||||||||||||
reported under | reported under | |||||||||||||||
(U.S. GAAP) | Canadian GAAP) | (U.S. GAAP) | Canadian GAAP) | |||||||||||||
(a) | (a) | (a) | (a) | |||||||||||||
ASSETS |
||||||||||||||||
CURRENT |
||||||||||||||||
Cash and cash equivalents |
$ | 133,542 | $ | 150,850 | $ | 112,478 | $ | 122,577 | ||||||||
Accounts receivable |
27,300 | 28,870 | 6,552 | 10,286 | ||||||||||||
Broken ore on leach pads |
| 11,243 | | 9,929 | ||||||||||||
Inventories |
1,565 | 5,922 | 2,192 | 5,575 | ||||||||||||
Prepaid expenses |
2,492 | 5,069 | 1,196 | 2,996 | ||||||||||||
Other current assets |
3,000 | 3,000 | 3,000 | 3,117 | ||||||||||||
Current assets of discontinued operations |
| | 36,636 | 36,636 | ||||||||||||
TOTAL CURRENT ASSETS |
167,899 | 204,954 | 162,054 | 191,116 | ||||||||||||
INVESTMENT IN JOINT VENTURE (a) |
140,331 | | 126,911 | | ||||||||||||
LONG-TERM INVESTMENTS (e) |
24,514 | 15,726 | 19,160 | 16,281 | ||||||||||||
PROPERTY, PLANT AND EQUIPMENT (d) |
75,170 | 211,223 | 54,434 | 191,824 | ||||||||||||
DEFERRED INCOME TAXES |
208 | 621 | 318 | 782 | ||||||||||||
OTHER ASSETS |
5,656 | 7,235 | 3,764 | 5,333 | ||||||||||||
NON-CURRENT ASSETS OF DISCONTINUED OPERATIONS (b) and (c) |
| | 9,627 | 29,320 | ||||||||||||
TOTAL ASSETS |
$ | 413,778 | $ | 439,759 | $ | 376,268 | $ | 434,656 | ||||||||
LIABILITIES |
||||||||||||||||
CURRENT |
||||||||||||||||
Accounts payable and accrued liabilities |
$ | 7,244 | $ | 18,506 | $ | 14,412 | $ | 24,764 | ||||||||
Current portion of long-term debt |
| | | 7,500 | ||||||||||||
Current liabilities of discontinued operations |
| | 14,082 | 14,082 | ||||||||||||
TOTAL CURRENT LIABILITIES |
7,244 | 18,506 | 28,494 | 46,346 | ||||||||||||
LOANS PAYABLE TO RELATED PARTIES |
5,088 | 5,088 | 5,088 | 5,088 | ||||||||||||
DEFERRED INCOME TAXES (c) |
349 | 12,562 | 476 | 12,788 | ||||||||||||
ASSET RETIREMENT OBLIGATIONS |
5,492 | 10,067 | 5,267 | 9,636 | ||||||||||||
OTHER LIABILITIES |
| 1,080 | | 1,404 | ||||||||||||
NON-CURRENT LIABILITIES OF DISCONTINUED OPERATIONS |
| | 26,380 | 26,380 | ||||||||||||
TOTAL LIABILITIES |
18,173 | 47,303 | 65,705 | 101,642 | ||||||||||||
MINORITY INTERESTS |
2,581 | 2,581 | 3,713 | 3,713 | ||||||||||||
SHAREHOLDERS EQUITY |
||||||||||||||||
SHARE CAPITAL (b) |
991,541 | 996,471 | 868,606 | 873,536 | ||||||||||||
ADDITIONAL PAID-IN CAPITAL |
21,531 | 16,848 | 16,283 | 12,073 | ||||||||||||
ACCUMULATED OTHER COMPREHENSIVE INCOME (f) |
8,788 | | 2,879 | | ||||||||||||
DEFICIT |
(628,836 | ) | (623,444 | ) | (580,918 | ) | (556,308 | ) | ||||||||
TOTAL SHAREHOLDERS EQUITY |
393,024 | 389,875 | 306,850 | 329,301 | ||||||||||||
TOTAL LIABILITIES, MINORITY INTERESTS AND SHAREHOLDERS EQUITY |
$ | 413,778 | $ | 439,759 | $ | 376,268 | $ | 434,656 | ||||||||
9. | DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued) |
Three months ended September 30, | Three months ended September 30, | |||||||||||||||
2005 | 2005 | 2004 | 2004 | |||||||||||||
(As previously | (As previously | |||||||||||||||
reported under | reported under | |||||||||||||||
Canadian | Canadian | |||||||||||||||
(U.S. GAAP) | GAAP) | (U.S. GAAP) | GAAP) | |||||||||||||
(a) | (a) | (a) | (a) | |||||||||||||
REVENUE |
$ | | $ | 15,439 | $ | | $ | 9,783 | ||||||||
COST OF OPERATIONS |
| (4,633 | ) | | (2,952 | ) | ||||||||||
DEPRECIATION |
| (1,401 | ) | | (1,117 | ) | ||||||||||
OPERATING PROFIT |
| 9,405 | | 5,714 | ||||||||||||
OPERATING EXPENSES |
||||||||||||||||
Exploration |
(28,884 | ) | (28,879 | ) | (28,526 | ) | (28,525 | ) | ||||||||
General and administrative |
(7,263 | ) | (7,373 | ) | (5,959 | ) | (5,920 | ) | ||||||||
Interest |
(89 | ) | (222 | ) | (70 | ) | (255 | ) | ||||||||
Depreciation |
(485 | ) | (485 | ) | (462 | ) | (462 | ) | ||||||||
Mining property care and maintenance costs |
(481 | ) | (481 | ) | (827 | ) | (827 | ) | ||||||||
OPERATING LOSS |
(37,202 | ) | (28,035 | ) | (35,844 | ) | (30,275 | ) | ||||||||
OTHER INCOME (EXPENSES) |
||||||||||||||||
Share of income from joint venture |
7,965 | | 4,558 | | ||||||||||||
Interest income |
1,293 | 1,163 | 1,646 | 1,664 | ||||||||||||
Foreign exchange gains |
7,111 | 7,208 | 4,222 | 4,180 | ||||||||||||
Dilution gain on investment in subsidiary (i) |
| 473 | | | ||||||||||||
Share of loss of significantly influenced investees |
(383 | ) | (383 | ) | (558 | ) | (558 | ) | ||||||||
Loss on sale of other capital asset |
| | | (197 | ) | |||||||||||
LOSS BEFORE TAXES AND OTHER ITEMS |
(21,216 | ) | (19,574 | ) | (25,976 | ) | (25,186 | ) | ||||||||
Provision for income and capital taxes |
(82 | ) | (1,445 | ) | (137 | ) | (925 | ) | ||||||||
Minority interests |
657 | 657 | 637 | 637 | ||||||||||||
NET LOSS FROM CONTINUING OPERATIONS |
(20,641 | ) | (20,362 | ) | (25,476 | ) | (25,474 | ) | ||||||||
NET INCOME AND GAIN ON SALE FROM DISCONTINUED OPERATIONS (c) and (h) |
6,378 | 3,957 | 653 | (88 | ) | |||||||||||
NET LOSS |
$ | (14,263 | ) | $ | (16,405 | ) | $ | (24,823 | ) | $ | (25,562 | ) | ||||
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE FROM |
||||||||||||||||
CONTINUING OPERATIONS |
$ | (0.07 | ) | $ | (0.06 | ) | $ | (0.09 | ) | $ | (0.09 | ) | ||||
DISCONTINUED OPERATIONS |
0.02 | 0.01 | 0.00 | (0.00 | ) | |||||||||||
$ | (0.05 | ) | $ | (0.05 | ) | $ | (0.09 | ) | $ | (0.09 | ) | |||||
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING (000s) |
314,011 | 314,011 | 290,582 | 290,582 | ||||||||||||
9. | DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued) |
Nine months ended September 30, | Nine months ended September 30, | |||||||||||||||
2005 | 2005 | 2004 | 2004 | |||||||||||||
(As previously | (As previously | |||||||||||||||
reported under | reported under | |||||||||||||||
Canadian | Canadian | |||||||||||||||
(U.S. GAAP) | GAAP) | (U.S. GAAP) | GAAP) | |||||||||||||
(a) | (a) | (a) | (a) | |||||||||||||
REVENUE |
$ | | $ | 46,197 | $ | | $ | 29,977 | ||||||||
COST OF OPERATIONS |
| (12,716 | ) | | (8,285 | ) | ||||||||||
DEPRECIATION |
| (4,357 | ) | | (3,678 | ) | ||||||||||
OPERATING PROFIT |
| 29,124 | | 18,014 | ||||||||||||
OPERATING EXPENSES |
||||||||||||||||
Exploration |
(87,119 | ) | (87,112 | ) | (74,073 | ) | (74,070 | ) | ||||||||
General and administrative |
(17,975 | ) | (18,302 | ) | (15,915 | ) | (16,154 | ) | ||||||||
Interest |
(266 | ) | (687 | ) | (213 | ) | (829 | ) | ||||||||
Depreciation |
(1,704 | ) | (1,704 | ) | (1,459 | ) | (1,459 | ) | ||||||||
Mining property care and maintenance costs |
(2,232 | ) | (2,232 | ) | (2,702 | ) | (2,702 | ) | ||||||||
OPERATING LOSS |
(109,296 | ) | (80,913 | ) | (94,362 | ) | (77,200 | ) | ||||||||
OTHER INCOME (EXPENSES) |
||||||||||||||||
Share of income from joint venture |
23,477 | | 14,857 | | ||||||||||||
Interest income |
2,556 | 2,590 | 2,267 | 2,288 | ||||||||||||
Foreign exchange gains |
8,234 | 8,196 | 1,114 | 1,012 | ||||||||||||
Dilution gain on investment in subsidiary (i) |
| 473 | | | ||||||||||||
Share of loss of significantly influenced investees |
(1,004 | ) | (1,004 | ) | (1,812 | ) | (1,812 | ) | ||||||||
Gain on sale of long-term investments |
115 | 115 | 4,523 | 4,523 | ||||||||||||
Loss on sale of other capital asset |
| | | (197 | ) | |||||||||||
Write-down of carrying value of long-term investments |
(1,438 | ) | (1,438 | ) | | | ||||||||||
LOSS BEFORE TAXES AND OTHER ITEMS |
(77,356 | ) | (71,981 | ) | (73,413 | ) | (71,386 | ) | ||||||||
Provision for income and capital taxes |
(212 | ) | (5,308 | ) | (381 | ) | (2,407 | ) | ||||||||
Minority interests |
1,658 | 1,658 | 1,393 | 1,393 | ||||||||||||
NET LOSS FROM CONTINUING OPERATIONS |
(75,910 | ) | (75,631 | ) | (72,401 | ) | (72,400 | ) | ||||||||
NET INCOME AND GAIN ON SALE FROM DISCONTINUED OPERATIONS (c) and (h) |
27,992 | 8,495 | (5,039 | ) | (7,269 | ) | ||||||||||
NET LOSS |
$ | (47,918 | ) | $ | (67,136 | ) | $ | (77,440 | ) | $ | (79,669 | ) | ||||
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE FROM |
||||||||||||||||
CONTINUING OPERATIONS |
$ | (0.25 | ) | $ | (0.25 | ) | $ | (0.26 | ) | $ | (0.26 | ) | ||||
DISCONTINUED OPERATIONS |
0.09 | 0.03 | (0.02 | ) | (0.03 | ) | ||||||||||
$ | (0.16 | ) | $ | (0.22 | ) | $ | (0.28 | ) | $ | (0.29 | ) | |||||
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING (000s) |
302,006 | 302,006 | 277,965 | 277,965 | ||||||||||||
9. | DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued) |
Three Months Ended September 30, | Three Months Ended September 30, | |||||||||||||||
2005 | 2005 | 2004 | 2004 | |||||||||||||
(As previously | (As previously | |||||||||||||||
reported under | reported under | |||||||||||||||
(U.S. GAAP) | Canadian GAAP) | (U.S. GAAP) | Canadian GAAP) | |||||||||||||
(a) | (a) | (a) | (a) | |||||||||||||
OPERATING ACTIVITIES |
||||||||||||||||
Net loss |
$ | (20,641 | ) | $ | (20,362 | ) | $ | (25,476 | ) | $ | (25,474 | ) | ||||
Items not involving use of cash |
||||||||||||||||
Depreciation |
485 | 1,886 | 462 | 1,579 | ||||||||||||
Stock-based compensation |
2,050 | 2,048 | 1,277 | 1,277 | ||||||||||||
Accretion expense |
87 | 156 | 79 | 129 | ||||||||||||
Unrealized foreign exchange gains |
(7,001 | ) | (7,005 | ) | (2,842 | ) | (2,938 | ) | ||||||||
Share of earnings from joint venture, net of cash distribution |
(7,965 | ) | | (4,558 | ) | | ||||||||||
Share of loss of significantly influenced investees |
383 | 383 | 558 | 558 | ||||||||||||
Deferred income taxes |
(8 | ) | (91 | ) | (4 | ) | 42 | |||||||||
Minority interests |
(657 | ) | (657 | ) | (637 | ) | (637 | ) | ||||||||
Dilution gain on investment in subsidiary |
| (473 | ) | | | |||||||||||
Loss on sale of property, plant, and equipment |
| | 197 | 197 | ||||||||||||
(Decrease) increase in non-current portion of royalty payable |
| (107 | ) | | 15 | |||||||||||
Net change in non-cash operating working capital items |
(9,280 | ) | (9,517 | ) | (2,591 | ) | 1,074 | |||||||||
Cash used in operating activities of continuing operations |
(42,547 | ) | (33,739 | ) | (33,535 | ) | (24,178 | ) | ||||||||
Cash used in operating activities of discontinued operations |
| | (5,116 | ) | (4,832 | ) | ||||||||||
Cash used in operating activities |
(42,547 | ) | (33,739 | ) | (38,651 | ) | (29,010 | ) | ||||||||
INVESTING ACTIVITIES |
||||||||||||||||
Purchase of long-term investments |
(2,199 | ) | (2,198 | ) | | | ||||||||||
Proceeds from sale of property, plant and equipment |
| | 2,260 | 2,260 | ||||||||||||
Expenditures on property, plant and equipment |
(13,140 | ) | (14,385 | ) | (2,396 | ) | (4,451 | ) | ||||||||
Expenditures on other assets |
(660 | ) | (529 | ) | (66 | ) | (72 | ) | ||||||||
Other |
| | 173 | 54 | ||||||||||||
Cash used in investing activities of continuing operations |
(15,999 | ) | (17,112 | ) | (29 | ) | (2,209 | ) | ||||||||
Cash used in investing activities of discontinued operations |
| | (941 | ) | (1,188 | ) | ||||||||||
Cash used in investing activities |
(15,999 | ) | (17,112 | ) | (970 | ) | (3,397 | ) | ||||||||
FINANCING ACTIVITIES |
||||||||||||||||
Issue of share capital |
328 | 330 | 100,861 | 100,861 | ||||||||||||
Minority interests investment in subsidiary |
1,000 | 1,000 | | | ||||||||||||
Repayment of long-term debt |
| (3,750 | ) | | (3,750 | ) | ||||||||||
Cash provided by (used in) financing activities of continuing operations |
1,328 | (2,420 | ) | 100,861 | 97,111 | |||||||||||
Cash provided by financing activities of discontinued operations |
| | 5,552 | 5,552 | ||||||||||||
Cash provided by financing activities |
1,328 | (2,420 | ) | 106,413 | 102,663 | |||||||||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH |
6,987 | 6,987 | 3,023 | 3,023 | ||||||||||||
NET CASH (OUTFLOW) INFLOW |
(50,231 | ) | (46,284 | ) | 69,815 | 73,279 | ||||||||||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
183,773 | 197,134 | 28,745 | 31,915 | ||||||||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ | 133,542 | $ | 150,850 | $ | 98,560 | $ | 105,194 | ||||||||
CASH AND CASH EQUIVALENTS IS COMPRISED OF: |
||||||||||||||||
Cash on hand and demand deposits |
$ | 21,374 | $ | 38,682 | $ | 30,421 | $ | 37,055 | ||||||||
Short-term money market instruments |
112,168 | 112,168 | 68,139 | 68,139 | ||||||||||||
$ | 133,542 | $ | 150,850 | $ | 98,560 | $ | 105,194 | |||||||||
9. | DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued) |
Nine Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2005 | 2005 | 2004 | 2004 | |||||||||||||
(As previously | (As previously | |||||||||||||||
reported under | reported under | |||||||||||||||
(U.S. GAAP) | Canadian GAAP) | (U.S. GAAP) | Canadian GAAP) | |||||||||||||
(a) | (a) | (a) | (a) | |||||||||||||
OPERATING ACTIVITIES |
||||||||||||||||
Net loss |
$ | (75,910 | ) | $ | (75,631 | ) | $ | (72,401 | ) | $ | (72,400 | ) | ||||
Items not involving use of cash |
||||||||||||||||
Depreciation |
1,704 | 6,061 | 1,459 | 5,137 | ||||||||||||
Stock-based compensation |
5,739 | 5,739 | 4,909 | 4,909 | ||||||||||||
Accretion expense |
265 | 471 | 138 | 389 | ||||||||||||
Non-cash exploration expense recovery |
| | (3,248 | ) | (3,248 | ) | ||||||||||
Unrealized foreign exchange gains |
(8,261 | ) | (8,260 | ) | (2,131 | ) | (2,134 | ) | ||||||||
Share of earnings from joint venture, net of cash distribution |
(13,477 | ) | | (14,857 | ) | | ||||||||||
Share of loss of significantly influenced investees |
1,004 | 1,004 | 1,812 | 1,812 | ||||||||||||
Gain on sale of long-term investments |
(115 | ) | (115 | ) | (4,523 | ) | (4,523 | ) | ||||||||
Write-down of carrying value of long-term investments |
1,438 | 1,438 | | | ||||||||||||
Deferred income taxes |
(17 | ) | (65 | ) | 113 | 24 | ||||||||||
Minority interests |
(1,658 | ) | (1,658 | ) | (1,393 | ) | (1,393 | ) | ||||||||
Dilution gain on investment in subsidiary |
| (473 | ) | | | |||||||||||
Loss on sale of property, plant, and equipment |
| | 197 | 197 | ||||||||||||
(Decrease) increase in non-current portion of royalty payable |
| (323 | ) | | (539 | ) | ||||||||||
Net change in non-cash operating working capital items |
(9,844 | ) | (9,523 | ) | 2,385 | 1,291 | ||||||||||
Cash used in operating activities of continuing operations |
(99,132 | ) | (81,335 | ) | (87,540 | ) | (70,478 | ) | ||||||||
Cash provided by (used in) operating activities of continuing operations |
2,592 | 2,592 | (1,800 | ) | (1,800 | ) | ||||||||||
Cash used in operating activities |
(96,540 | ) | (78,743 | ) | (89,340 | ) | (72,278 | ) | ||||||||
INVESTING ACTIVITIES |
||||||||||||||||
Proceeds from sale of discontinued operations |
15,000 | 15,000 | | | ||||||||||||
Purchase of long-term investments |
(6,309 | ) | (6,309 | ) | | | ||||||||||
Proceeds from sale of long-term investments |
4,539 | 4,539 | 2,461 | 2,461 | ||||||||||||
Proceeds from sale of property, plant and equipment |
| | 2,720 | 2,720 | ||||||||||||
Expenditures on property, plant and equipment |
(22,000 | ) | (25,020 | ) | (25,369 | ) | (29,627 | ) | ||||||||
Expenditures on other assets |
(1,898 | ) | (1,965 | ) | (6 | ) | (35 | ) | ||||||||
Other |
(2,078 | ) | (2,079 | ) | (3,693 | ) | (3,812 | ) | ||||||||
Cash used in investing activities of continuing operations |
(12,746 | ) | (15,834 | ) | (23,887 | ) | (28,293 | ) | ||||||||
Cash used in activities of discontinued operations |
(502 | ) | (502 | ) | (2,587 | ) | (2,587 | ) | ||||||||
Cash used in investing activities |
(13,248 | ) | (16,336 | ) | (26,474 | ) | (30,880 | ) | ||||||||
FINANCING ACTIVITIES |
||||||||||||||||
Issue of share capital |
121,609 | 121,609 | 101,292 | 101,292 | ||||||||||||
Minority interests investment in subsidiary |
1,000 | 1,000 | | | ||||||||||||
Repayment of long-term debt |
| (7,500 | ) | | (7,500 | ) | ||||||||||
Cash provided by financing activities of continuing operations |
122,609 | 115,109 | 101,292 | 93,792 | ||||||||||||
Cash (used in) provided by financing activities of discontinued operations |
(37 | ) | (37 | ) | 5,492 | 5,492 | ||||||||||
Cash provided by financing activities |
122,572 | 115,072 | 106,784 | 99,284 | ||||||||||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH |
8,280 | 8,280 | 2,074 | 2,074 | ||||||||||||
NET CASH (OUTFLOW) INFLOW |
21,064 | 28,273 | (6,956 | ) | (1,800 | ) | ||||||||||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
112,478 | 122,577 | 105,516 | 106,994 | ||||||||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ | 133,542 | $ | 150,850 | $ | 98,560 | $ | 105,194 | ||||||||
CASH AND CASH EQUIVALENTS IS COMPRISED OF: |
||||||||||||||||
Cash on hand and demand deposits |
$ | 21,374 | $ | 38,682 | $ | 30,421 | $ | 37,055 | ||||||||
Short-term money market instruments |
112,168 | 112,168 | 68,139 | 68,139 | ||||||||||||
$ | 133,542 | $ | 150,850 | $ | 98,560 | $ | 105,194 | |||||||||
9. | DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued) |
(a) | Joint venture | ||
Under U.S. GAAP the Companys joint venture interest in JVCo was accounted for using the equity method. Under Canadian GAAP, this joint venture interest would have been accounted for on a proportionate consolidation basis. | |||
Under Canadian GAAP, the carrying amount of the Companys investment and its share of equity of JVCo is eliminated. The Companys proportionate share of each line item of JVCos assets, liabilities, revenue and expenses is included in the corresponding line items of the Companys financial statements. All intercompany balances and transactions would be eliminated. |
(b) | Acquisition of ABM | ||
Under U.S. GAAP, the fair value of the shares issued in 2000 to effect the acquisition of ABM were measured at the date the acquisition was announced and the terms agreed to, whereas, under Canadian GAAP, the shares issued would have been measured at the transaction date. This difference would have resulted in the cost of the acquisition under Canadian GAAP being $4,930,000 higher than under U.S. GAAP. | |||
Under U.S. GAAP, the Company included in the cost of the acquisition of ABM the intrinsic value of the unvested options granted by the Company in 2000 as consideration for the acquisition of all of the outstanding stock options of ABM. Under U.S. GAAP, the deferred stock compensation was recognized as a compensation cost over the remaining future vesting period of the options. Under Canadian GAAP, the Company would have included in the cost of acquisition of ABM the $1,750,000 fair value of the stock options. This difference would have resulted in the cost of the acquisition in 2000 under Canadian GAAP being $704,000 higher than under U.S. GAAP. | |||
ABM was sold in February 2005 (Note 2). | |||
(c) | Impairment of long-lived assets | ||
Under U.S. GAAP, impairment charges are recorded based on the discounted, estimated future net cash flows, whereas, under Canadian GAAP, impairment charges on long-lived assets in 2002 and prior years were recorded as the excess of their carrying amount over their recoverable amount, which was determined based on the undiscounted estimated future net cash flows. |
9. | DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued) |
(d) | Other mineral property interests | ||
Under U.S. GAAP, where the mineral property interests are, at the date of acquisition, without economically recoverable reserves, these costs are generally considered to be exploration costs that are expensed as incurred. Under Canadian GAAP, the costs of the acquisition of mineral property interests are capitalized. | |||
In accordance with EITF 04-02, Whether Mining Rights are Tangible or Intangible Assets, the Company classifies its mineral exploration licenses as tangible assets and there is no difference between Canadian and U.S. GAAP. Prior to January 2004, the costs of acquisition of Ivanhoe Mines mineral exploration licenses were classified as intangible assets under U.S. GAAP and amortized over the term of the licenses. As a result, for Canadian GAAP purposes, the $6,521,000, net of deferred income taxes of $882,000, in amortization or write-offs of other mineral property interests under U.S. GAAP needs to be reversed. | |||
(e) | Long-term investments | ||
Under U.S. GAAP, portfolio investments are classified as available-for-sale securities, which are carried at market value. The resulting unrealized gains or losses are included in the determination of comprehensive income, net of income taxes where applicable. Under Canadian GAAP, these investments would be carried at their original cost less provisions for impairment. | |||
(f) | Other comprehensive income | ||
U.S. GAAP requires that a statement of comprehensive income be displayed with the same prominence as other financial statements and that the aggregate amount of comprehensive income, excluding the deficit, be disclosed separately in shareholders equity. Comprehensive income, which incorporates the net loss, includes all changes in shareholders equity during a period except those resulting from investments by, and distributions to, owners. Under Canadian GAAP, companies do not report comprehensive income or loss. |
9. | DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued) |
(g) | Income taxes | ||
Under U.S. GAAP, deferred income taxes are calculated based on enacted tax rates applicable to future years. Under Canadian GAAP, future income taxes are calculated based on enacted or substantively enacted tax rates applicable to future years. This difference in GAAP did not have any effect on the financial position of the Company as at September 30, 2005 and September 31, 2004 nor the results of operations of the Company for the nine months ended September 30, 2005 and 2004. | |||
(h) | Gain on sale of ABM | ||
Under U.S. GAAP, the net book value of ABM when it was sold in February 2005 was $11.2 million, whereas under Canadian GAAP the carrying value was $30.9 million. During the nine months ended September 30, 2005, total proceeds from the sale were $33.8 million, representing cash instalments of $21.5 million. plus escalating payments of $12.3 million. Therefore, under Canadian GAAP the gain on sale was $19.7 million less than under U.S. GAAP. | |||
(i) | Dilution gain on investment in subsidiary | ||
Under U.S. GAAP the $473,000 dilution gain on investment in a subsidiary was accounted for as part of additional paid in capital. Under Canadian GAAP, the dilution gain would have been included in the net loss for 2005. |
Share Information | Investor Information | |||||
3 |
Interim Report For the three and nine months ended September 30, 2005 |
Common shares of Ivanhoe Mines Ltd. are listed for trading under the symbol IVN on the New York Stock Exchange and the Toronto Stock Exchange. | All financial reports, news releases and corporate information can be accessed on our web site at www.ivanhoe-mines.com | |||
At November 8, 2005 the Company had 314.1 million common shares issued and outstanding and warrants and stock options exercisable for 9.3 million additional common shares. |
Transfer Agents and
Registrars CIBC Mellon Trust Company 320 Bay Street Toronto, Ontario, Canada M5H 4A6 Toll free in North America: 1-800-387-0825 |
Contact Information Investors: Bill Trenaman Media : Bob Williamson Suite 654-999 Canada Place Vancouver, BC, Canada V6C 3E1 E-mail : info@ivanhoemines.com Tel : (604) 688-5755 |
Quarter ended September 30, | Nine months ended September 30, | |||||||||||||||
2005 | 2004(1) | 2005 | 2004(1) | |||||||||||||
Exploration expenses |
(28.9 | ) | (28.5 | ) | (87.1 | ) | (74.0 | ) | ||||||||
General and administrative costs |
(7.3 | ) | (6.0 | ) | (18.0 | ) | (15.9 | ) | ||||||||
Write-down of long-term
investments |
| | (1.4 | ) | | |||||||||||
Gain on sale of long-term
investments |
| | 0.1 | 4.5 | ||||||||||||
Foreign exchange gain |
7.1 | 4.2 | 8.2 | 1.1 | ||||||||||||
Net (loss) from continuing
operations |
(20.6 | ) | (25.5 | ) | (75.9 | ) | (72.4 | ) | ||||||||
Net income (loss) from
discontinued operations |
6.4 | 0.7 | 28.0 | (5.0 | ) | |||||||||||
Net (loss) |
(14.3 | ) | (24.8 | ) | (47.9 | ) | (77.4 | ) | ||||||||
Net income (loss) per share |
||||||||||||||||
Continuing operations |
($ | 0.07 | ) | $ | 0.09 | ($ | 0.25 | ) | ($ | 0.26 | ) | |||||
Discontinued operations |
$ | 0.02 | $ | 0.00 | $ | 0.09 | ($ | 0.02 | ) | |||||||
Total assets |
413.8 | 390.2 | 413.8 | 390.2 | ||||||||||||
Continuing operations |
||||||||||||||||
Capital expenditures |
13.1 | 2.4 | 22.4 | 5.4 | ||||||||||||
Joint venture operations |
||||||||||||||||
Copper
cathode 50% share |
||||||||||||||||
Units sold tonnes |
4,111 | 3,676 | 13,324 | 11,302 | ||||||||||||
Units produced tonnes |
4,249 | 3,925 | 13,609 | 11,526 | ||||||||||||
Average sale price |
||||||||||||||||
Copper cathode US$/pound |
$ | 1.80 | $ | 1.27 | $ | 1.66 | $ | 1.27 |
(1) | Certain numbers have been restated due to a change in accounting policy. Refer to Note 1 of the financial statements. |
Quarter ended | ||||||||||||||||
Sept 30 | Jun 30 | Mar 31 | Dec 31 | |||||||||||||
2005 | 2005 | 2005 | 2004(2) | |||||||||||||
Revenue |
0.0 | 0.0 | 0.0 | 0.0 | ||||||||||||
Operating profit |
0.0 | 0.0 | 0.0 | 0.0 | ||||||||||||
Total exploration |
(28.9 | ) | (33.8 | ) | (24.4 | ) | (24.2 | ) | ||||||||
Foreign exchange gain (loss) |
7.1 | 1.7 | (0.6 | ) | 3.5 | |||||||||||
Net (loss) from continuing operations |
(20.6 | ) | (31.1 | ) | (24.2 | ) | (26.6 | ) | ||||||||
Gain from discontinued operations |
6.4 | 5.9 | 15.7 | 9.4 | ||||||||||||
Net (loss) |
(14.3 | ) | (25.2 | ) | (8.5 | ) | (17.1 | ) | ||||||||
Net profit (loss) per share |
||||||||||||||||
Continuing operation |
(0.07 | ) | (0.10 | ) | (0.08 | ) | (0.08 | ) | ||||||||
Discontinued operations |
0.02 | 0.02 | 0.05 | 0.03 | ||||||||||||
Total |
(0.05 | ) | (0.08 | ) | (0.03 | ) | (0.05 | ) | ||||||||
Sept 30 | Jun 30 | Mar 31 | Dec 31 | |||||||||||||
2004(2) | 2004(2) | 2004(2) | 2003(1) | |||||||||||||
Revenue |
0.0 | 0.0 | 0.0 | 6.8 | ||||||||||||
Operating profit |
0.0 | 0.0 | 0.0 | 1.0 | ||||||||||||
Total exploration |
(28.5 | ) | (24.8 | ) | (20.7 | ) | (21.2 | ) | ||||||||
Foreign exchange gain (loss) |
4.2 | (1.4 | ) | (1.7 | ) | 5.1 | ||||||||||
Net (loss) from continuing operations |
(25.5 | ) | (23.1 | ) | (23.8 | ) | (13.0 | ) | ||||||||
Gain (loss) from discontinued operations |
0.7 | 2.2 | (7.9 | ) | (1.8 | ) | ||||||||||
Net (loss) from continuing operations |
(24.8 | ) | (21.0 | ) | (31.6 | ) | (14.8 | ) | ||||||||
Net profit (loss) per share |
||||||||||||||||
Continuing operation |
(0.09 | ) | (0.09 | ) | (0.09 | ) | (0.05 | ) | ||||||||
Discontinued operations |
0.00 | 0.01 | (0.03 | ) | (0.01 | ) | ||||||||||
Total |
(0.09 | ) | (0.08 | ) | (0.12 | ) | (0.06 | ) | ||||||||
(1) | As previously reported under Canadian GAAP. | |
(2) | Certain numbers have been restated due to a change in accounting policy. Refer to Note 1 of the financial statements. |
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Three month period ended September 30, | ||||||||||||||||||||||||||||
Total Operation | Companys 50% net share | |||||||||||||||||||||||||||
% Increase | % Increase | |||||||||||||||||||||||||||
2005 | 2004 | (decrease) | 2005 | 2004 | (decrease) | |||||||||||||||||||||||
Total tonnes moved (1) |
Tonnes (000s) |
3,357 | 2,350 | 43 | % | |||||||||||||||||||||||
Tonnes of ore to heap |
Tonnes (000s) |
2,151 | 1,695 | 27 | % | |||||||||||||||||||||||
Ore grade |
CuCN % |
0.51 | % | 0.54 | % | (6 | %) | |||||||||||||||||||||
Strip ratio |
Waste/Ore |
0.56 | 0.28 | 100 | % | |||||||||||||||||||||||
Cathode production |
Tonnes |
8,497 | 7,850 | 8 | % | 4,249 | 3,925 | 8 | % | |||||||||||||||||||
Tonnage sold |
Tonnes |
8,222 | 7,351 | 12 | % | 4,111 | 3,676 | 12 | % | |||||||||||||||||||
Average sale price received |
US$/pound |
$ | 1.80 | $ | 1.27 | 41 | % | |||||||||||||||||||||
Sales |
US$ | (000) | 15,439 | 9,783 | 58 | % | ||||||||||||||||||||||
Cost of operations |
US$ | (000) | 4,633 | 2,952 | 57 | % | ||||||||||||||||||||||
Operating profit |
US$ | (000) | 9,405 | 5,714 | 65 | % | ||||||||||||||||||||||
Cost of operations |
US$/pound |
$ | 0.51 | $ | 0.36 | 40 | % |
Nine month period ended September 30, | ||||||||||||||||||||||||||||
Total Operation | Companys 50% net share | |||||||||||||||||||||||||||
% Increase | % Increase | |||||||||||||||||||||||||||
2005 | 2004 | (decrease) | 2005 | 2004 | (decrease) | |||||||||||||||||||||||
Total tonnes moved (1) |
Tonnes (000s) |
10,256 | 7,594 | 35 | % | |||||||||||||||||||||||
Tonnes of ore to heap |
Tonnes (000s) |
6,679 | 4,678 | 43 | % | |||||||||||||||||||||||
Ore grade |
CuCN % |
0.53 | % | 0.69 | % | (23 | %) | |||||||||||||||||||||
Strip ratio |
Waste/Ore |
0.49 | 0.52 | (6 | %) | |||||||||||||||||||||||
Cathode production |
Tonnes |
27,218 | 23,052 | 18 | % | 13,609 | 11,526 | 18 | % | |||||||||||||||||||
Tonnage sold |
Tonnes |
26,647 | 22,604 | 18 | % | 13,324 | 11,302 | 18 | % | |||||||||||||||||||
Average sale price received |
$/pound |
$ | 1.66 | $ | 1.27 | 31 | % | |||||||||||||||||||||
Sales |
$ | (000) | 46,197 | 29,977 | 54 | % | ||||||||||||||||||||||
Cost of operations |
$ | (000) | 12,716 | 8,285 | 53 | % | ||||||||||||||||||||||
Operating profit |
$ | (000) | 29,124 | 18,014 | 62 | % | ||||||||||||||||||||||
Cost of operations |
US$/pound |
$ | 0.43 | $ | 0.33 | 30 | % |
(1) | Includes ore and waste material |
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Share purchase | Total number of | |||||
warrants outstanding | Maturity date | Exercise price | shares to be issued | |||
7.125 million(1)
|
December 19, 2005 | Cdn$12.50 per share | 7.125 million | |||
5.76 million (2)(3)
|
February 15, 2006 | $8.68 per share | 0.576 million |
(1) | Each warrant entitles the holder to acquire one common share. | |
(2) | Each 10 warrants entitle the holder to acquire one common share. | |
(3) | In 2005, the expiry date was extended from February, 2005 to February, 2006. |
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1. | I have reviewed the interim filings (as this term is defined in Multilateral Instrument 52-109 Certification of Disclosure in Issuers Annual and Interim Filings) of Ivanhoe Mines Ltd., (the issuer) for the interim period ended September 30, 2005; | ||
2. | Based on my knowledge, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings; | ||
3. | Based on my knowledge, the interim financial statements together with the other financial information included in the interim filings fairly present in all material respects the financial condition, results of operations and cash flows of the issuer, as of the date and for the periods presented in the interim filings; and | ||
4. | The issuers other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures for the issuer, and we have designed such disclosure controls and procedures, or caused them to be designed under our supervision, to provide reasonable assurance that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which the interim filings are being prepared. |
/s/ Robert M. Friedland
|
||
Chief Executive Officer |
||
Ivanhoe Mines Ltd. |
1. | I have reviewed the interim filings (as this term is defined in Multilateral Instrument 52-109 Certification of Disclosure in Issuers Annual and Interim Filings) of Ivanhoe Mines Ltd., (the issuer) for the interim period ended September 30, 2005; | ||
2. | Based on my knowledge, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings; | ||
3. | Based on my knowledge, the interim financial statements together with the other financial information included in the interim filings fairly present in all material respects the financial condition, results of operations and cash flows of the issuer, as of the date and for the periods presented in the interim filings; and | ||
4. | The issuers other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures for the issuer, and we have designed such disclosure controls and procedures, or caused them to be designed under our supervision, to provide reasonable assurance that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which the interim filings are being prepared. |
/s/ Peter Meredith |
||
Chief Financial Officer |
||
Ivanhoe Mines Ltd. |