2
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
ASSETS |
||||||||
CURRENT |
||||||||
Cash and cash equivalents (Note 4) |
$ | 1,575,079 | $ | 1,264,031 | ||||
Short-term investments (Note 5) |
15,003 | 98,373 | ||||||
Accounts receivable |
100,267 | 65,741 | ||||||
Inventories (Note 6) |
70,354 | 40,564 | ||||||
Prepaid expenses |
42,973 | 23,338 | ||||||
TOTAL CURRENT ASSETS |
1,803,676 | 1,492,047 | ||||||
LONG-TERM INVESTMENTS (Note 7) |
191,903 | 151,191 | ||||||
OTHER LONG-TERM INVESTMENTS (Note 8) |
306,121 | 191,816 | ||||||
PROPERTY, PLANT AND EQUIPMENT (Note 9) |
2,622,091 | 1,332,648 | ||||||
DEFERRED INCOME TAXES |
30,324 | 16,889 | ||||||
OTHER ASSETS |
42,261 | 33,883 | ||||||
TOTAL ASSETS |
$ | 4,996,376 | $ | 3,218,474 | ||||
LIABILITIES |
||||||||
CURRENT |
||||||||
Accounts payable and accrued liabilities |
$ | 393,274 | $ | 260,528 | ||||
Amounts due under credit facilities (Note 10) |
16,316 | 14,615 | ||||||
Interest payable on long-term debt (Note 11) |
4,285 | 6,312 | ||||||
Rights offering derivative liability (Note 12 (c)) |
| 766,238 | ||||||
TOTAL CURRENT LIABILITIES |
413,875 | 1,047,693 | ||||||
CONVERTIBLE CREDIT FACILITY (Note 11) |
214,670 | 248,284 | ||||||
AMOUNTS DUE UNDER CREDIT FACILITIES (Note 10) |
41,520 | 40,080 | ||||||
PAYABLE TO RELATED PARTY |
31,724 | 14,013 | ||||||
DEFERRED INCOME TAXES |
10,985 | 11,123 | ||||||
ASSET RETIREMENT OBLIGATIONS |
43,296 | 40,838 | ||||||
TOTAL LIABILITIES |
756,070 | 1,402,031 | ||||||
CONTINGENCIES (Note 19) |
||||||||
EQUITY |
||||||||
SHARE CAPITAL (Note 12) |
||||||||
Authorized |
||||||||
Unlimited number of preferred shares without par value |
||||||||
Unlimited number of common shares without par value |
||||||||
Issued and outstanding |
||||||||
710,279,903 (2010 - 568,560,669) common shares |
6,261,950 | 3,378,921 | ||||||
SHARE PURCHASE WARRANTS (Note 12 (b)) |
| 11,832 | ||||||
ADDITIONAL PAID-IN CAPITAL |
1,357,839 | 1,303,581 | ||||||
ACCUMULATED OTHER COMPREHENSIVE INCOME (Note 13) |
23,923 | 33,075 | ||||||
DEFICIT |
(3,405,472 | ) | (2,913,576 | ) | ||||
TOTAL IVANHOE MINES LTD. SHAREHOLDERS EQUITY |
4,238,240 | 1,813,833 | ||||||
NONCONTROLLING INTERESTS (Note 14) |
2,066 | 2,610 | ||||||
TOTAL EQUITY |
4,240,306 | 1,816,443 | ||||||
TOTAL LIABILITIES AND EQUITY |
$ | 4,996,376 | $ | 3,218,474 | ||||
APPROVED BY THE BOARD: |
||||
/s/ D. Korbin
|
/s/ L. Mahler
|
3
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
REVENUE |
$ | 47,336 | $ | 17,668 | $ | 67,494 | $ | 31,585 | ||||||||
COST OF SALES |
||||||||||||||||
Production and delivery |
(31,416 | ) | (10,901 | ) | (43,574 | ) | (22,098 | ) | ||||||||
Depreciation and depletion |
(7,731 | ) | (2,304 | ) | (10,530 | ) | (4,827 | ) | ||||||||
Write-down of carrying value of inventory |
(10,557 | ) | | (15,875 | ) | (6,535 | ) | |||||||||
COST OF SALES |
(49,704 | ) | (13,205 | ) | (69,979 | ) | (33,460 | ) | ||||||||
EXPENSES |
||||||||||||||||
Exploration (Note 2 and 12 (a)) |
(68,579 | ) | (39,483 | ) | (114,802 | ) | (110,906 | ) | ||||||||
General and administrative (Note 12 (a)) |
(19,483 | ) | (14,730 | ) | (44,761 | ) | (23,047 | ) | ||||||||
Depreciation |
(703 | ) | (354 | ) | (1,215 | ) | (1,270 | ) | ||||||||
Accretion of asset retirement obligations |
(172 | ) | (48 | ) | (334 | ) | (91 | ) | ||||||||
TOTAL EXPENSES |
(138,641 | ) | (67,820 | ) | (231,091 | ) | (168,774 | ) | ||||||||
OPERATING LOSS |
(91,305 | ) | (50,152 | ) | (163,597 | ) | (137,189 | ) | ||||||||
OTHER INCOME (EXPENSES) |
||||||||||||||||
Interest income |
4,913 | 2,538 | 10,051 | 7,167 | ||||||||||||
Interest expense |
(3,336 | ) | (8,278 | ) | (7,683 | ) | (21,677 | ) | ||||||||
Accretion of convertible credit facilities (Note 11) |
(14 | ) | (4,535 | ) | (28 | ) | (8,662 | ) | ||||||||
Foreign exchange gains (losses) |
2,254 | (4,859 | ) | 5,403 | (3,189 | ) | ||||||||||
Unrealized gains (losses) on long-term investments (Note 7 (d)) |
3,453 | (4,509 | ) | (309 | ) | (5,212 | ) | |||||||||
Unrealized gains on other long-term investments |
1,007 | 789 | 1,395 | 1,509 | ||||||||||||
Realized gain on redemption of other long-term investments (Note 8 (a)) |
65 | 26 | 98 | 87 | ||||||||||||
Change in fair value of derivative (Note 12 (c)) |
| | (432,536 | ) | | |||||||||||
Change in fair value of embedded derivatives (Note 11) |
70,422 | 72,233 | 33,641 | 70,861 | ||||||||||||
Loss on conversion of convertible credit facility (Note 11) |
| | | (154,316 | ) | |||||||||||
Write-down of carrying value of long-term investments |
| (161 | ) | | (417 | ) | ||||||||||
Gain on sale of long-term investment (Note 7 (e)) |
| | 10,628 | | ||||||||||||
(LOSS) INCOME BEFORE INCOME TAXES AND OTHER ITEMS |
(12,541 | ) | 3,092 | (542,937 | ) | (251,038 | ) | |||||||||
(Provision) recovery of income taxes |
(4,283 | ) | (1,308 | ) | 8,615 | 2,174 | ||||||||||
Share of income (loss) of significantly influenced investees (Note 7) |
44,844 | (13,151 | ) | 41,130 | (23,210 | ) | ||||||||||
NET INCOME (LOSS) FROM CONTINUING OPERATIONS |
28,020 | (11,367 | ) | (493,192 | ) | (272,074 | ) | |||||||||
INCOME FROM DISCONTINUED OPERATIONS (Note 3) |
| | | 6,585 | ||||||||||||
NET INCOME (LOSS) |
28,020 | (11,367 | ) | (493,192 | ) | (265,489 | ) | |||||||||
NET (INCOME) LOSS ATTRIBUTABLE TO
NONCONTROLLING INTERESTS (Note 14) |
(27,416 | ) | (18,664 | ) | 1,296 | 41,593 | ||||||||||
NET INCOME (LOSS) ATTRIBUTABLE TO IVANHOE MINES LTD. |
$ | 604 | $ | (30,031 | ) | $ | (491,896 | ) | $ | (223,896 | ) | |||||
BASIC EARNINGS (LOSS) PER SHARE ATTRIBUTABLE
TO IVANHOE MINES LTD. FROM CONTINUING OPERATIONS |
$ | | $ | (0.06 | ) | $ | (0.77 | ) | $ | (0.50 | ) | |||||
DISCONTINUED OPERATIONS |
| | | 0.01 | ||||||||||||
$ | | $ | (0.06 | ) | $ | (0.77 | ) | $ | (0.49 | ) | ||||||
DILUTED EARNINGS (LOSS) PER SHARE ATTRIBUTABLE
TO IVANHOE MINES LTD. FROM CONTINUING OPERATIONS |
$ | | $ | (0.06 | ) | $ | (0.77 | ) | $ | (0.50 | ) | |||||
DISCONTINUED OPERATIONS |
| | | 0.01 | ||||||||||||
$ | | $ | (0.06 | ) | $ | (0.77 | ) | $ | (0.49 | ) | ||||||
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING (000s) (Note 1 (f)) |
||||||||||||||||
BASIC |
660,414 | 466,451 | 640,588 | 459,107 | ||||||||||||
DILUTED |
700,650 | 466,451 | 640,588 | 459,107 | ||||||||||||
4
Accumulated | ||||||||||||||||||||||||||||||||
Share Capital | Additional | Other | ||||||||||||||||||||||||||||||
Number | Share Purchase | Paid-In | Comprehensive | Noncontrolling | ||||||||||||||||||||||||||||
of Shares | Amount | Warrants | Capital | Income | Deficit | Interests | Total | |||||||||||||||||||||||||
Balances, December 31, 2010 |
568,560,669 | $ | 3,378,921 | $ | 11,832 | $ | 1,303,581 | $ | 33,075 | $ | (2,913,576 | ) | $ | 2,610 | $ | 1,816,443 | ||||||||||||||||
Net loss |
| | | | | (491,896 | ) | (1,296 | ) | (493,192 | ) | |||||||||||||||||||||
Other comprehensive income (Note 13) |
| | | | (9,152 | ) | | 5,731 | (3,421 | ) | ||||||||||||||||||||||
Comprehensive loss |
(496,613 | ) | ||||||||||||||||||||||||||||||
Shares issued for: |
||||||||||||||||||||||||||||||||
Exercise of stock options |
1,712,740 | 23,979 | | (9,855 | ) | | | | 14,124 | |||||||||||||||||||||||
Rights Offering (Note 12 (c)), net of issue costs
of $27,311 |
84,867,671 | 2,346,277 | | 5,711 | | | | 2,351,988 | ||||||||||||||||||||||||
Exercise of share purchase warrants (Note 12
(b)), net of issue costs of $1,065 |
55,122,253 | 512,347 | (11,832 | ) | | | | | 500,515 | |||||||||||||||||||||||
Bonus shares |
4,527 | 120 | | 4,090 | | | | 4,210 | ||||||||||||||||||||||||
Share purchase plan |
12,043 | 306 | | | | | | 306 | ||||||||||||||||||||||||
Other increase in noncontrolling interests (Note 14) |
| | | | | | (4,979 | ) | (4,979 | ) | ||||||||||||||||||||||
Dilution losses |
| | | (4,555 | ) | | | | (4,555 | ) | ||||||||||||||||||||||
Stock-based compensation |
| | | 58,867 | | | | 58,867 | ||||||||||||||||||||||||
Balances, June 30, 2011 |
710,279,903 | $ | 6,261,950 | $ | | $ | 1,357,839 | $ | 23,923 | $ | (3,405,472 | ) | $ | 2,066 | $ | 4,240,306 | ||||||||||||||||
5
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
OPERATING ACTIVITIES |
||||||||||||||||
Cash used in operating activities (Note 15) |
$ | (119,356 | ) | $ | (39,052 | ) | $ | (186,045 | ) | $ | (99,135 | ) | ||||
INVESTING ACTIVITIES |
||||||||||||||||
Proceeds from sale of discontinued operations |
| 6,442 | | 6,442 | ||||||||||||
Purchase of short-term investments |
| | (20,657 | ) | | |||||||||||
Purchase of long-term investments |
| (7,322 | ) | (8,537 | ) | (13,025 | ) | |||||||||
Purchase of other long-term investments |
(100,000 | ) | (50,000 | ) | (145,000 | ) | (80,000 | ) | ||||||||
Proceeds from redemption of short-term investments |
23,148 | | 103,991 | 15,000 | ||||||||||||
Proceeds from sale of long-term investments |
| | 14,000 | 1,800 | ||||||||||||
Proceeds from redemption of other long-term investments |
121 | 42 | 30,181 | 144 | ||||||||||||
Expenditures on property, plant and equipment |
(601,565 | ) | (168,407 | ) | (1,130,269 | ) | (207,855 | ) | ||||||||
Expenditures on (proceeds from) other assets |
(1,452 | ) | 38 | (12,695 | ) | (47 | ) | |||||||||
Cash used in investing activities |
(679,748 | ) | (219,207 | ) | (1,168,986 | ) | (277,541 | ) | ||||||||
FINANCING ACTIVITIES |
||||||||||||||||
Issue of share capital |
512,042 | 394,599 | 1,668,160 | 446,138 | ||||||||||||
Proceeds from (repayment of) credit facilities |
(3,061 | ) | (349 | ) | 1,547 | (431 | ) | |||||||||
Noncontrolling interests reduction of investment in subsidiaries |
(9,449 | ) | | (18,233 | ) | | ||||||||||
Noncontrolling interests investment in subsidiaries |
709 | 929 | 4,689 | 421,141 | ||||||||||||
Cash provided by financing activities |
500,241 | 395,179 | 1,656,163 | 866,848 | ||||||||||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH |
6,130 | (6,090 | ) | 9,916 | (1,520 | ) | ||||||||||
NET CASH (OUTFLOW) INFLOW |
(292,733 | ) | 130,830 | 311,048 | 488,652 | |||||||||||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
1,867,812 | 1,323,645 | 1,264,031 | 965,823 | ||||||||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ | 1,575,079 | $ | 1,454,475 | $ | 1,575,079 | $ | 1,454,475 | ||||||||
CASH AND CASH EQUIVALENTS IS COMPRISED OF: |
||||||||||||||||
Cash on hand and demand deposits |
$ | 521,463 | $ | 726,510 | $ | 521,463 | $ | 726,510 | ||||||||
Short-term money market instruments |
1,053,616 | 727,965 | 1,053,616 | 727,965 | ||||||||||||
$ | 1,575,079 | $ | 1,454,475 | $ | 1,575,079 | $ | 1,454,475 | |||||||||
6
1. | SIGNIFICANT ACCOUNTING POLICIES |
(a) | Basis of preparation |
(b) | Basis of presentation |
||
For purposes of these consolidated financial statements, the Company, subsidiaries of
the Company, and variable interest entities for which the Company is the primary
beneficiary, are collectively referred to as Ivanhoe Mines. |
|||
(c) | Comparative figures |
||
In February 2011, the Company completed a rights offering which was open to all
shareholders on a dilution free, equal participation bases at a subscription price less
than the fair value of a common share of the Company (Note 12 (c)). In accordance with
the Financial Accounting Standards Board Accounting Standards Codification (ASC)
guidance for earnings per share, basic and diluted loss per share for all periods prior
to the rights offering have been adjusted retroactively for a bonus element contained
in the rights offering. Specifically, the weighted average number of common shares
outstanding used to compute basic and diluted loss per share for the three and six
months ended June 30, 2010 has been multiplied by a factor of 1.06. |
7
1. | SIGNIFICANT ACCOUNTING POLICIES (Continued) |
(d) | Accounting changes |
| In January 2010, the ASC guidance for fair value measurements and disclosures
was updated to require additional disclosures related to transfers in and out of
level 1 and 2 fair value measurements and enhanced detail in the level 3
reconciliation. The updated guidance clarified the level of disaggregation
required for assets and liabilities and the disclosures required for inputs and
valuation techniques to be used to measure the fair value of assets and
liabilities that fall in either level 2 or level 3. The updated guidance was
effective for the Companys fiscal year beginning January 1, 2010, except for the
level 3 disaggregation which is effective for the Companys fiscal year beginning
January 1, 2011. The adoption of the updated guidance had no impact on the
Companys consolidated financial position, results of operations or cash flows. |
| In December 2010, the ASC guidance for business combinations was updated to
clarify existing guidance requiring a public entity to disclose pro forma revenue
and earnings of the combined entity as though the business combination(s) that
occurred during the current year had occurred as of the beginning of the
comparable prior annual period only. The update also expands the supplemental pro
forma disclosures required to include a description of the nature and amount of
material, nonrecurring pro forma adjustments directly attributable to the business
combination included in the reported pro forma revenue and earnings. The updated
guidance was effective for the Companys fiscal year beginning January 1, 2011.
The adoption of the updated guidance had no impact on the Companys consolidated
financial position, results of operations or cash flows. |
(e) | Recent Accounting Pronouncements |
| In May 2011, the ASC guidance for fair value measurement and disclosure was
updated to clarify the Financial Accounting Standards Boards intent on current
guidance, modify and change certain guidance and principles, and expand
disclosures concerning Level 3 fair value measurements in the fair value hierarchy
(including quantitative information about significant unobservable inputs within
Level 3 of the fair value hierarchy). In addition, the updated guidance requires
disclosure of the fair value hierarchy for assets and liabilities not measured at
fair value in the statement of financial position, but whose fair value is
required to be disclosed. The updated guidance is effective for the Companys
fiscal year beginning January 1, 2012. The Company does not expect the updated
guidance to have a material impact on its financial position or results of
operations. |
8
1. | SIGNIFICANT ACCOUNTING POLICIES (Continued) |
(e) | Recent Accounting Pronouncements (continued) |
| In June 2011, the ASC guidance on presentation of comprehensive income was
updated to improve the comparability, consistency and transparency of financial
reporting and to increase the prominence of items reported in other comprehensive
income. The updated guidance requires an entity to present the components of net
income and other comprehensive income either in a single continuous statement of
comprehensive income or in two separate but consecutive statements. This update
eliminates the option to present the components of other comprehensive income as
part of the statement of equity, but does not change the items that must be
reported in other comprehensive income. The updated guidance is effective for the
Companys fiscal year beginning January 1, 2012. The Company is in the process of
assessing which presentation choice it will adopt. |
(f) | Earnings (loss) per share |
||
The following table reconciles the numerators and the denominators of the basic and
diluted earnings (loss) per share computations for net income from continuing
operations: |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Net income (loss) attributable to Ivanhoe
Mines Ltd. from continuing operations |
$ | 604 | $ | (30,031 | ) | $ | (497,896 | ) | $ | (230,481 | ) | |||||
Effect of dilutive securities |
||||||||||||||||
None |
| | | | ||||||||||||
Adjusted net income (loss) attributable to Ivanhoe
Mines Ltd. From continuing operations |
$ | 604 | $ | (30,031 | ) | $ | (497,896 | ) | $ | (230,481 | ) | |||||
Basic weighted average number of shares
outstanding |
660,414 | 466,451 | 640,588 | 459,107 | ||||||||||||
Effect of dilutive securities |
||||||||||||||||
Share purchase warrants |
31,586 | | | | ||||||||||||
Stock options |
8,473 | | | | ||||||||||||
Bonus shares |
177 | | | | ||||||||||||
700,650 | 466,451 | 640,588 | 459,107 | |||||||||||||
9
1. | SIGNIFICANT ACCOUNTING POLICIES (Continued) |
(f) | Earnings (loss) per share (continued) |
||
The following table lists securities that could potentially dilute basic earnings
(loss) per share in the future that were not included in the computation of diluted
earnings (loss) per share because to do so would have been antidilutive for the periods
presented: |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Convertible credit facility |
| 39,774 | | 39,774 | ||||||||||||
Share purchase warrants |
| 82,467 | | 82,467 | ||||||||||||
Stock options |
2,460 | 20,943 | 19,996 | 20,943 | ||||||||||||
Bonus shares |
| | 623 | | ||||||||||||
2,460 | 143,184 | 20,619 | 143,184 | |||||||||||||
2. | EXPLORATION EXPENSES |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Mongolia |
||||||||||||||||
Oyu Tolgoi (1) |
$ | 6,009 | $ | 7,887 | $ | 11,097 | $ | 60,010 | ||||||||
Coal Division |
14,136 | 14,307 | 22,620 | 20,871 | ||||||||||||
Other Mongolia Exploration |
2,617 | 982 | 2,495 | 1,534 | ||||||||||||
22,762 | 23,176 | 36,212 | 82,415 | |||||||||||||
Australia |
43,021 | 14,868 | 73,384 | 25,686 | ||||||||||||
Indonesia |
1,389 | 732 | 2,497 | 1,279 | ||||||||||||
Other |
1,407 | 707 | 2,709 | 1,526 | ||||||||||||
68,579 | 39,483 | 114,802 | 110,906 | |||||||||||||
(1) | Until March 31, 2010, exploration costs charged to operations included
development costs associated with the Oyu Tolgoi Project in Mongolia. On April 1, 2010,
Ivanhoe Mines commenced capitalizing Oyu Tolgoi Project development costs. As of this
date, reserve estimates for the Oyu Tolgoi Project had been announced and the procedural
and administrative conditions contained in the Investment Agreement were satisfied.
During the six months ended June 30, 2011, additions to property, plant and equipment
for the Oyu Tolgoi Project totalled $1,179.5 million, which included development costs. |
10
3. | DISCONTINUED OPERATIONS |
4. | CASH AND CASH EQUIVALENTS |
5. | SHORT-TERM INVESTMENTS |
6. | INVENTORIES |
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
Stockpiles |
$ | 12,477 | $ | 3,637 | ||||
Materials and supplies |
57,877 | 36,927 | ||||||
$ | 70,354 | $ | 40,564 | |||||
11
7. | LONG-TERM INVESTMENTS |
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
Investments in companies subject to significant influence: |
||||||||
Altynalmas Gold Ltd. (a) |
$ | | $ | | ||||
Exco Resources N.L. (b) |
68,922 | 16,991 | ||||||
Available-for-sale equity securities (c) |
95,893 | 103,431 | ||||||
Held-for-trading equity securities (d) |
9,926 | 10,235 | ||||||
Other equity securities, cost method (e) |
17,162 | 20,534 | ||||||
$ | 191,903 | $ | 151,191 | |||||
(a) | The Company holds a 50.0% interest in Altynalmas Gold Ltd. (Altynalmas), which
owns the Kyzyl Gold Project that hosts the Bakyrchik and Bolshevik gold deposits in
Kazakhstan. |
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
Amount due from Altynalmas |
$ | 110,336 | $ | 100,545 | ||||
Share of equity method losses in excess of
common share investment |
(110,336 | ) | (100,545 | ) | ||||
Net investment in Altynalmas |
$ | | $ | | ||||
(b) | During the six month period ended June 30, 2011, Ivanhoe Mines recorded a $50.9
million equity method gain (2010 $0.6 million loss) on its investment in Exco
Resources N.L. (Exco). |
||
At June 30, 2011, the market value of Ivanhoe Mines 22.8% investment in Exco was $54.8
million (Aud$51.1 million). |
12
7. | LONG-TERM INVESTMENTS (Continued) |
(c) | Available-for-sale equity securities |
June 30, 2011 | December 31, 2010 | |||||||||||||||||||||||||||||||
Equity | Cost | Unrealized | Fair | Equity | Cost | Unrealized | Fair | |||||||||||||||||||||||||
Interest | Basis | Gain (Loss) | Value | Interest | Basis | Gain (Loss) | Value | |||||||||||||||||||||||||
Entrée Gold Inc. |
12.0 | % | $ | 19,957 | $ | 7,401 | $ | 27,358 | 12.1 | % | $ | 19,957 | $ | 27,746 | $ | 47,703 | ||||||||||||||||
Aspire Mining Limited (i) |
19.8 | % | 20,741 | 44,498 | 65,239 | 19.8 | % | 20,280 | 31,727 | 52,007 | ||||||||||||||||||||||
Emmerson Resources Limited |
10.0 | % | 3,323 | (414 | ) | 2,909 | 10.0 | % | 3,636 | (304 | ) | 3,332 | ||||||||||||||||||||
Intec Ltd. |
1.9 | % | 36 | 39 | 75 | 1.9 | % | 36 | 91 | 127 | ||||||||||||||||||||||
Other |
| 60 | 252 | 312 | | 60 | 202 | 262 | ||||||||||||||||||||||||
$ | 44,117 | $ | 51,776 | $ | 95,893 | $ | 43,969 | $ | 59,462 | $ | 103,431 | |||||||||||||||||||||
(i) | During the three month period ended March 31, 2011, Ivanhoe Mines acquired
798,139 common shares of Aspire Mining Limited at a cost of $461,000. |
(d) | Held-for-trading equity securities |
||
As at June 30, 2011, the market value of Ivanhoe Mines 1.5% investment in Kangaroo
Resources Limited was $9.9 million, resulting in an unrealized loss of $0.3 million
during the six month period ended June 30, 2011. |
|||
(e) | Other equity securities, cost method |
June 30, 2011 | December 31, 2010 | |||||||||||||||
Equity | Cost | Equity | Cost | |||||||||||||
Interest | Basis | Interest | Basis | |||||||||||||
Ivanplats Limited (i) |
8.8 | % | $ | 16,119 | 7.9 | % | $ | 19,491 | ||||||||
GoviEx Gold Inc. |
2.0 | % | 1,043 | 1.5 | % | 1,043 | ||||||||||
$ | 17,162 | $ | 20,534 | |||||||||||||
(i) | In January 2011, Ivanhoe Mines sold 1.4 million shares of Ivanplats Limited
(formerly Ivanhoe Nickel and Platinum Ltd.) (Ivanplats), a private company, for
$14.0 million. This transaction resulted in a gain on sale of $10.6 million. |
13
8. | OTHER LONG-TERM INVESTMENTS |
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
Long-Term Notes (a) |
$ | 32,121 | $ | 29,763 | ||||
Government of Mongolia Treasury Bill (b) |
84,264 | 80,394 | ||||||
Government of Mongolia Prepayments (b) |
129,705 | 36,486 | ||||||
Money Market investments (c) |
60,031 | 45,173 | ||||||
$ | 306,121 | $ | 191,816 | |||||
(a) | Long-Term Notes |
||
As at June 30, 2011, the Company held $65.6 million (December 31, 2010 $65.0 million)
principal amount of Long-Term Notes (received in 2009 upon completion of the
Asset-Backed Commercial Paper restructuring) which was recorded at a fair value of
$32.1 million. The increase from December 2010 in principal of $0.6 million was due to
the strengthening of the Canadian dollar ($1.9 million), offset by principal
redemptions ($1.3 million). The Company has designated the Long-Term Notes as
held-for-trading. Accordingly, the Long-Term Notes are recorded at fair value with
unrealized holding gains and losses included in earnings. |
|||
There is a significant amount of uncertainty in estimating the amount and timing of
cash flows associated with the Long-Term Notes. The Company has estimated the fair
value of the Long-Term Notes considering information provided on the restructuring, the
best available public information regarding market conditions and other factors that a
market participant would consider for such investments. |
|||
The Company is aware of a limited number of trades in the Long-Term Notes that occurred
prior to June 30, 2011, but does not consider them to be of sufficient volume or value
to constitute an active market. Accordingly, the Company has not used these trades to
determine the fair value of its notes. |
|||
The Company has used a discounted cash flow approach to value the Long-Term Notes at
June 30, 2011 incorporating the following assumptions: |
Bankers Acceptance Rate: |
1.12 | % | ||
Discount Rates: |
9% to 25 | % | ||
Maturity Dates: |
5.5 years | |||
Expected Return of Principal: |
||||
A-1 Notes |
100 | % | ||
A-2 Notes |
100 | % | ||
B Notes |
10 | % | ||
C Notes |
0 | % | ||
IA Notes |
0 | % | ||
TA Notes |
100 | % |
14
8. | OTHER LONG-TERM INVESTMENTS (Continued) |
(a) | Long-Term Notes (continued) |
||
Based on the discounted cash flow model as at June 30, 2011, the fair value of the
Long-Term Notes was estimated at $32.1 million. As a result of this valuation, the
Company recorded an unrealized trading gain of $1.6 million for the six month period
ended June 30, 2011. |
|||
Continuing uncertainties regarding the value of the assets that underlie the Long-Term
Notes, the amount and timing of cash flows and changes in general economic conditions
could give rise to a further change in the fair value of the Companys investment in
the Long-Term Notes, which would impact the Companys results from operations. A 1.0%
increase, representing 100 basis points, in the discount rate will decrease the fair
value of the Long-Term Notes by approximately $1.5 million. |
|||
(b) | Government of Mongolia Treasury Bill and Tax Prepayments |
||
On October 6, 2009, Ivanhoe Mines agreed to purchase three Treasury Bills (T-Bills)
from the Mongolian Government, having an aggregate face value of $287.5 million, for
the aggregate sum of $250.0 million. The annual rate of interest on the T-Bills was set
at 3.0%. The initial T-Bill, with a face-value of $115.0 million, was purchased by
Ivanhoe Mines on October 20, 2009 for $100.0 million and will mature on October 20,
2014. |
|||
However, on March 31, 2010 Ivanhoe Mines agreed to an alternative arrangement for the
advancement of funds that would not involve the purchase of the remaining two T-Bills.
Specifically, rather than purchasing the second and third remaining T-Bills, with face
values of $57.5 million and $115.0 million respectively, Ivanhoe Mines agreed to make
two tax prepayments. Tax prepayments of $50.0 million and $100.0 million were made on
April 7, 2010 and June 7, 2011 respectively. |
|||
The after tax rate of interest on the tax prepayments is 1.59% compounding annually.
Unless already off-set fully against Mongolian taxes, the Mongolian Government must
repay any remaining tax prepayment balance, including accrued interest, on the fifth
anniversary of the date the tax prepayment was made. |
|||
The Company has designated the T-Bill and tax prepayments as available-for-sale
investments because they were not purchased with the intent of selling them in the near
term and the Companys intention to hold them to maturity is uncertain. The fair
values of the T-Bill and tax prepayments are estimated based on available public
information regarding what market participants would consider for such investments.
Changes in the fair value of available-for-sale investments are recognized in
accumulated other comprehensive income. |
15
8. | OTHER LONG-TERM INVESTMENTS (Continued) |
(b) | Government of Mongolia Treasury Bill and Tax Prepayments (continued) |
||
The Company has used a discounted cash flow approach to value the T-Bill and tax
prepayments at June 30, 2011 incorporating the following weighted average assumptions: |
T-Bill | Tax Prepayments | |||||||
Purchased Amount |
$ | 100,000,000 | $ | 150,000,000 | ||||
Discount Rate |
9.9 | % | 9.9 | % | ||||
Term |
3.3 years | 2.0 years |
(c) | Money Market Investments |
||
As at June 30, 2011, Ivanhoe Mines held $60.0 million of money market investments with
remaining maturities in excess of one year. |
9. | PROPERTY, PLANT AND EQUIPMENT |
June 30, | December 31, | |||||||||||||||||||||||
2011 | 2010 | |||||||||||||||||||||||
Accumulated | Accumulated | |||||||||||||||||||||||
Depletion and | Depletion and | |||||||||||||||||||||||
Depreciation, | Depreciation, | |||||||||||||||||||||||
Including | Net Book | Including | Net Book | |||||||||||||||||||||
Cost | Write-downs | Value | Cost | Write-downs | Value | |||||||||||||||||||
Mining plant and equipment |
||||||||||||||||||||||||
Ovoot Tolgoi, Mongolia |
$ | 11,082 | $ | (2,029 | ) | $ | 9,053 | $ | 10,647 | $ | (1,428 | ) | $ | 9,219 | ||||||||||
Other mineral property interests |
||||||||||||||||||||||||
Oyu Tolgoi, Mongolia |
$ | 48,120 | $ | (6,402 | ) | $ | 41,718 | $ | 48,120 | $ | (6,316 | ) | $ | 41,804 | ||||||||||
Ovoot Tolgoi, Mongolia |
36,786 | (1,169 | ) | 35,617 | 26,831 | (766 | ) | 26,065 | ||||||||||||||||
Australia |
25,885 | (126 | ) | 25,759 | 25,470 | (126 | ) | 25,344 | ||||||||||||||||
Other exploration projects |
1,252 | (1,244 | ) | 8 | 1,252 | (1,244 | ) | 8 | ||||||||||||||||
$ | 112,043 | $ | (8,941 | ) | $ | 103,102 | $ | 101,673 | $ | (8,452 | ) | $ | 93,221 | |||||||||||
Other capital assets |
||||||||||||||||||||||||
Oyu Tolgoi, Mongolia |
$ | 33,201 | $ | (16,168 | ) | $ | 17,033 | $ | 24,203 | $ | (14,471 | ) | $ | 9,732 | ||||||||||
Ovoot Tolgoi, Mongolia |
303,074 | (36,431 | ) | 266,643 | 228,241 | (24,154 | ) | 204,087 | ||||||||||||||||
Australia |
53,320 | (3,544 | ) | 49,776 | 46,785 | (2,723 | ) | 44,062 | ||||||||||||||||
Other exploration projects |
4,304 | (3,138 | ) | 1,166 | 3,351 | (2,573 | ) | 778 | ||||||||||||||||
$ | 393,899 | $ | (59,281 | ) | $ | 334,618 | $ | 302,580 | $ | (43,921 | ) | $ | 258,659 | |||||||||||
Capital works in progress |
||||||||||||||||||||||||
Oyu Tolgoi, Mongolia |
$ | 2,124,090 | $ | | $ | 2,124,090 | $ | 953,581 | $ | | $ | 953,581 | ||||||||||||
Ovoot Tolgoi, Mongolia |
49,746 | | 49,746 | 16,364 | | 16,364 | ||||||||||||||||||
Australia |
1,482 | | 1,482 | 1,604 | | 1,604 | ||||||||||||||||||
$ | 2,175,318 | $ | | $ | 2,175,318 | $ | 971,549 | $ | | $ | 971,549 | |||||||||||||
$ | 2,692,342 | $ | (70,251 | ) | $ | 2,622,091 | $ | 1,386,449 | $ | (53,801 | ) | $ | 1,332,648 | |||||||||||
16
10. | AMOUNTS DUE UNDER CREDIT FACILITIES |
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
Current |
||||||||
Non-revolving bank loans (a) |
$ | 14,650 | $ | 14,615 | ||||
Revolving line of credit facility (b) |
1,666 | | ||||||
$ | 16,316 | $ | 14,615 | |||||
Non-Current |
||||||||
Two-year extendible loan facility (c) |
$ | 41,520 | $ | 40,080 | ||||
(a) | In October 2007, Ivanhoe Mines obtained non-revolving bank loans which are due on
demand and secured against certain securities and other investments. |
||
(b) | In January 2011, Ivanhoe Mines obtained a one year revolving line of credit
facility, which is secured against certain equipment in Mongolia. |
||
(c) | In April 2009, Ivanhoe Mines obtained a non-revolving, two-year extendible loan
facility. Upon the loan facilitys original maturity in October 2010, Ivanhoe Mines
elected to utilize the first one-year extension. The loan facility is secured against
certain securities and other investments. |
11. | CONVERTIBLE CREDIT FACILITY |
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
Principal amount of convertible debenture |
$ | 500,000 | $ | 500,000 | ||||
(Deduct) add: |
||||||||
Bifurcation of embedded derivative liability |
(313,292 | ) | (313,292 | ) | ||||
Accretion of discount |
96 | 69 | ||||||
Reduction of carrying amount upon
partial conversion |
(93,370 | ) | (93,370 | ) | ||||
Carrying amount of debt host contract |
93,434 | 93,407 | ||||||
Embedded derivative liability |
121,236 | 154,877 | ||||||
Convertible credit facility |
214,670 | 248,284 | ||||||
Accrued interest |
4,285 | 6,312 | ||||||
Transaction costs allocated to deferred charges |
(2,799 | ) | (2,800 | ) | ||||
Net carrying amount of convertible debenture |
$ | 216,156 | $ | 251,796 | ||||
17
11. | CONVERTIBLE CREDIT FACILITY (Continued) |
|
On November 19, 2009, SouthGobi issued a convertible debenture to a wholly-owned subsidiary
of China Investment Corporation (CIC) for $500.0 million. The convertible debenture is
secured, bears interest at 8.0% (6.4% payable semi-annually in cash and 1.6% payable annually
in shares of SouthGobi) and has a term of 30 years. The financing primarily will support an
accelerated investment program in Mongolia and up to $120.0 million of the financing may also
be used for working capital, repayment of debt due on funding, general and administrative
expense and other general corporate purposes. |
||
Pursuant to the convertible debentures terms, SouthGobi had the right to call for the
conversion of up to $250.0 million of the convertible debenture upon SouthGobi achieving a
public float of 25.0% of its common shares under certain agreed circumstances. On March 29,
2010, SouthGobi exercised this right and completed the conversion of $250.0 million of the
convertible debenture into 21.5 million shares at a conversion price of $11.64 (Cdn$11.88).
Also on March 29, 2010, SouthGobi settled the $1.4 million accrued interest payable in shares
on the $250.0 million converted by issuing 0.1 million shares at the 50-day VWAP conversion
price of $15.97 (Cdn$16.29). On April 1, 2010, SouthGobi settled the outstanding accrued
interest payable in cash on the $250.0 million converted with a cash payment of $5.7 million. |
||
As at March 29, 2010, the fair value of the embedded derivative liability associated with the
$250.0 million converted was $102.8 million, a decrease of $9.4 million compared to its fair
value at December 31, 2009. The $347.6 million fair value of the SouthGobi shares issued
upon conversion exceeded the $193.3 million aggregate carrying value of the debt host
contract, embedded derivative liability and deferred charges. The difference of $154.3
million was recorded as a loss on conversion of the convertible debenture. |
||
As at June 30, 2011, the fair value of the embedded derivative liability associated with the
remaining $250.0 million principal outstanding was determined to be $121.2 million. |
||
The embedded derivative liability was valued using a Monte Carlo simulation valuation model.
A Monte Carlo simulation model is a valuation model that relies on random sampling and is
often used when modeling systems with a large number of inputs and where there is significant
uncertainty in the future value of inputs and where the movement in the inputs can be
independent of each other. Some of the key inputs used by the Monte Carlo simulation
include: floor and ceiling conversion prices, risk-free rate of return, expected volatility
of SouthGobis share price, forward Cdn$ exchange rate curves and spot Cdn$ exchange rates. |
18
11. | CONVERTIBLE CREDIT FACILITY (Continued) |
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
Floor conversion price |
Cdn$8.88 | Cdn$8.88 | ||||||
Ceiling conversion price |
Cdn$11.88 | Cdn$11.88 | ||||||
Expected volatility |
72 | % | 73 | % | ||||
Risk-free rate of return |
3.49 | % | 3.48 | % | ||||
Spot Cdn$ exchange rate |
1.04 | 1.01 | ||||||
Forward Cdn$ exchange rate curve |
1.00 - 1.13 | 0.97 - 1.14 |
During the three and six months ended June 30, 2011, Ivanhoe Mines capitalized $2.1 million
and $3.3 million, respectively, of interest expense incurred on the convertible credit
facility. |
12. | SHARE CAPITAL |
(a) | Equity Incentive Plan |
||
Stock-based compensation charged to operations was allocated between exploration
expenses and general and administrative expenses as follows: |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Exploration (i) |
$ | 9,303 | $ | 5,466 | $ | 18,625 | $ | 12,254 | ||||||||
General and administrative |
8,214 | 2,537 | 22,311 | 4,777 | ||||||||||||
$ | 17,517 | $ | 8,003 | $ | 40,936 | $ | 17,031 | |||||||||
(i) | During the six months ended June 30, 2011, stock-based compensation of $22.0 million (2010 -
$1.6 million), relating to the development of the Oyu Tolgoi Project was capitalized as
property, plant and equipment (Note 2). |
19
12. | SHARE CAPITAL (Continued) |
(a) | Equity Incentive Plan (Continued) |
||
Stock-based compensation charged to operations was incurred by Ivanhoe Mines as follows: |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Ivanhoe Mines Ltd. (i) |
$ | 10,295 | $ | 3,543 | $ | 26,939 | $ | 7,649 | ||||||||
SouthGobi Resources Ltd. |
3,205 | 2,344 | 6,292 | 4,693 | ||||||||||||
Ivanhoe Australia Ltd. |
4,017 | 2,116 | 7,705 | 4,689 | ||||||||||||
$ | 17,517 | $ | 8,003 | $ | 40,936 | $ | 17,031 | |||||||||
(i) | During the six months ended June 30, 2011, 1,793,805 options were
exercised, 148,253 options were cancelled and 5,225,923 options were granted.
These granted options have a weighted average exercise price of Cdn$18.83, lives of
seven years, and vest over periods ranging from grant date to four years. The
weighted average grant-date fair value of stock options granted during the six
months ended June 30, 2011 was Cdn$17.30. The fair value of these options was
determined using the Black-Scholes option pricing model. The option valuation was
based on a weighted average expected life of 3.0 years, risk-free interest rate of
2.09%, expected volatility of 66%, and dividend yield of nil%. |
||
During the six months ended June 30, 2011, stock-based compensation of $22.0
million (2010 $1.6 million), relating to the development of the Oyu Tolgoi
Project was capitalized as property, plant and equipment (Note 2). |
(b) | Rio Tinto Placements |
||
In 2006, the Company and Rio Tinto formed a strategic partnership and entered into a
private placement agreement whereby Rio Tinto would invest in Ivanhoe Mines. Since 2006
the parties have entered into a series of agreements pursuant to which Rio Tinto has
provided equity and debt financing to Ivanhoe Mines. As a result of these transactions,
Rio Tinto holds a significant investment interest in Ivanhoe Mines. These transactions
are set out below: |
20
12. | SHARE CAPITAL (Continued) |
(b) | Rio Tinto Placements (Continued) |
||
(Stated in thousands of U.S. dollars, except for share amounts) |
Number of | Proceeds/ | |||||||||||
Shares | Transaction | |||||||||||
Nature of Investment by Rio Tinto | Period | Acquired (1) | Value | |||||||||
Private Placement Tranche 1 |
2006 | 37,089,883 | $ | 303,395 | ||||||||
Anti Dilution Shares |
2008 | 243,772 | 612 | |||||||||
Private Placement Tranche 2 |
2009 | 46,304,473 | 388,031 | |||||||||
March 2010 Private Placement |
2010 | 15,000,000 | 240,916 | |||||||||
Exercise of Series A Warrants |
2010 | 46,026,522 | 393,066 | |||||||||
Conversion of Convertible Credity Facility |
2010 | 40,083,206 | 400,832 | |||||||||
Exercise of Anti Dilution Warrants |
2010 | 720,203 | 2,229 | |||||||||
Partial exercise of Series B Warrants |
2010 | 33,783,784 | 300,000 | |||||||||
Balance at December 31, 2010 |
219,251,843 | $ | 2,029,081 | |||||||||
Rights Offering |
February 2011 | 34,387,776 | 477,302 | |||||||||
Exercise of remaining Series B Warrants (2) |
June 2011 | 14,070,182 | 119,737 | |||||||||
Exercise of Anti Dilution Warrants (2) |
June 2011 | 827,706 | 2,527 | |||||||||
Exercise of Series C Warrants (2) |
June 2011 | 40,224,365 | 379,316 | |||||||||
Balance at June 30, 2011 |
308,761,872 | $ | 3,007,963 | |||||||||
(1) | Shares acquired excludes other purchases made by Rio Tinto from third
parties. |
|
(2) | In June 2011, Ivanhoe Mines received $501.6 million from Rio Tinto
following Rio Tintos decision to exercise all remaining share-purchase warrants that
it holds in Ivanhoe Mines. Rio Tinto exercised all the remaining Series B and Series C
warrants that it was granted as part of the 2006 and 2007 financing agreements
associated with Rio Tintos original investment in Ivanhoe Mines. Rio Tinto previously
had committed to convert all the warrants to shares by January 2012. The additional
shares increased Rio Tintos ownership stake in Ivanhoe Mines from 42.0% to 46.5%. |
|
As at June 30, 2011, Rio Tintos equity ownership in the Company was 46.5% (December
31, 2010 40.3%). |
(c) | Rights Offering |
||
In December 2010, the Company filed a final short form prospectus for a rights offering
open to all shareholders on a dilution-free, equal participation basis. In accordance
with the terms of the rights offering, each shareholder of record as at December 31,
2010 received one right for each common share held. Every 100 rights held entitled the
holder thereof to purchase 15 common shares of the Company at $13.88 per share or
Cdn$13.93 per share, at the election of the holder. The rights traded on the TSX, NYSE
and NASDAQ and expired on January 26, 2011. |
21
12. | SHARE CAPITAL (Continued) |
(c) | Rights Offering (continued) |
||
Upon the closing of the rights offering, the Company issued a total of 84,867,671
common shares for gross proceeds of $1.18 billion. Expenses and fees relating to the
rights offering totalled approximately $27.3 million. |
|||
Under the terms of the rights offering, the monetary amount to be received by the
Company upon the exercise of rights was not fixed. Each holder of rights could elect
either the $13.88 or Cdn$13.93 subscription price. Furthermore, the Cdn$13.93
subscription price is not denominated in the Companys U.S. dollar functional currency.
Therefore, the pro rata distribution of rights to the Companys shareholders was
accounted for as a derivative financial liability measured at fair value. |
|||
On December 23, 2010, rights to be issued under the rights offering began trading on a
when issued basis. On this date, the Company recognized a derivative financial
liability of $901.9 million associated with the Companys legal obligation to carry out
the rights offering. Deficit was adjusted by a corresponding amount. Each reporting
period the derivative financial liability was remeasured at fair value with changes
being recognized in earnings. During the three month period ended March 31, 2011,
Ivanhoe Mines recognized a derivative loss of $432.5 million. |
|||
During the three months ended March 31, 2011, the derivative financial liability was
settled as rights were exercised or expired unexercised. A total of $1.19 billion was
reclassified from the derivative financial liability to share capital, representing the
fair value of rights exercised. At expiry, a total of $5.7 million was reclassified
from derivative financial liability to additional paid-in capital, representing the
fair value of rights which expired unexercised. |
|||
The fair value of the derivative financial liability was determined by reference to
published market quotations for the rights. |
22
13. | ACCUMULATED OTHER COMPREHENSIVE INCOME |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Accumulated OCI at beginning of period: |
||||||||||||||||
Long-term investments, net of tax of $12,682, $1,653, $6,224, $1,896 |
$ | 99,789 | $ | 21,905 | $ | 53,239 | $ | 17,763 | ||||||||
Other long-term investments, net of tax of $nil, $nil, $nil, $nil |
(35,360 | ) | (26,363 | ) | (37,180 | ) | (27,448 | ) | ||||||||
Currency translation adjustment, net of tax of $nil, $nil, $nil, $nil |
24,533 | (5,305 | ) | 23,039 | (6,015 | ) | ||||||||||
Noncontrolling interests |
(28,705 | ) | 1,880 | (6,023 | ) | 1,122 | ||||||||||
$ | 60,257 | $ | (7,883 | ) | $ | 33,075 | $ | (14,578 | ) | |||||||
Other comprehensive income (loss) for the period: |
||||||||||||||||
Changes in fair value of long-term investments |
$ | (61,149 | ) | $ | (16,335 | ) | $ | (8,141 | ) | $ | (12,439 | ) | ||||
Changes in fair value of other long-term investments |
(6,738 | ) | (14,327 | ) | (4,918 | ) | (13,242 | ) | ||||||||
Currency translation adjustments |
7,454 | (2,893 | ) | 8,948 | (2,183 | ) | ||||||||||
Noncontrolling interests |
16,951 | 13,657 | (5,731 | ) | 14,415 | |||||||||||
Less: reclassification adjustments for gains/losses recorded in earnings: |
||||||||||||||||
Investments: |
||||||||||||||||
Other than temporary impairment charges |
| | | 3 | ||||||||||||
Other comprehensive income, before tax |
(43,482 | ) | (19,898 | ) | (9,842 | ) | (13,446 | ) | ||||||||
Income tax expense related to OCI |
7,148 | 1,653 | 690 | 1,896 | ||||||||||||
Other comprehensive income, net of tax |
$ | (36,334 | ) | $ | (18,245 | ) | $ | (9,152 | ) | $ | (11,550 | ) | ||||
Accumulated OCI at end of period: |
||||||||||||||||
Long-term investments, net of tax of $5,534, $nil, $5,534, $nil |
$ | 45,788 | $ | 7,223 | $ | 45,788 | $ | 7,223 | ||||||||
Other long-term investments, net of tax of $nil, $nil, $nil, $nil |
(42,098 | ) | (40,690 | ) | (42,098 | ) | (40,690 | ) | ||||||||
Currency translation adjustment, net of tax of $nil, $nil, $nil, $nil |
31,987 | (8,198 | ) | 31,987 | (8,198 | ) | ||||||||||
Noncontrolling interests |
(11,754 | ) | 15,537 | (11,754 | ) | 15,537 | ||||||||||
$ | 23,923 | $ | (26,128 | ) | $ | 23,923 | $ | (26,128 | ) | |||||||
23
14. | NONCONTROLLING INTERESTS |
Noncontrolling Interests | ||||||||||||||||
Ivanhoe | ||||||||||||||||
SouthGobi | Australia | Oyu Tolgoi | Total | |||||||||||||
Balance, December 31, 2010 |
$ | 286,919 | $ | 69,092 | $ | (353,401 | ) | $ | 2,610 | |||||||
Noncontrolling interests share of loss |
8,292 | (4,556 | ) | (5,032 | ) | (1,296 | ) | |||||||||
Noncontrolling interests share of other
comprehensive income |
4,772 | 2,631 | (1,672 | ) | 5,731 | |||||||||||
Changes in noncontrolling interests arising
from changes in ownership interests |
(5,066 | ) | 87 | | (4,979 | ) | ||||||||||
Balance, June 30, 2011 |
$ | 294,917 | $ | 67,254 | $ | (360,105 | ) | $ | 2,066 | |||||||
15. | CASH FLOW INFORMATION |
(a) | Reconciliation of net loss to net cash flow used in operating activities |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Net income (loss) |
$ | 28,020 | $ | (11,367 | ) | $ | (493,192 | ) | $ | (265,489 | ) | |||||
Income from discontinued operations |
| | | (6,585 | ) | |||||||||||
Items not involving use of cash
|
||||||||||||||||
Stock-based compensation |
16,354 | 8,003 | 38,622 | 17,031 | ||||||||||||
Accretion expense |
186 | 4,583 | 362 | 8,753 | ||||||||||||
General and administrative expenses |
| 3,421 | | 3,421 | ||||||||||||
Depreciation |
8,434 | 2,658 | 11,745 | 6,097 | ||||||||||||
Accrued interest income |
(3,078 | ) | (1,529 | ) | (6,105 | ) | (5,120 | ) | ||||||||
Interest expense |
(2,182 | ) | 2,981 | 742 | 7,741 | |||||||||||
Unrealized (gains) losses on long-term investments |
(3,453 | ) | 4,508 | 309 | 5,211 | |||||||||||
Unrealized gains on other long-term investments |
(1,007 | ) | (789 | ) | (1,395 | ) | (1,509 | ) | ||||||||
Realized gain on redemption of other long-term investments |
(65 | ) | (26 | ) | (98 | ) | (87 | ) | ||||||||
Change in fair value of derivative |
| | 432,536 | | ||||||||||||
Change in fair value of embedded derivatives |
(70,422 | ) | (72,233 | ) | (33,641 | ) | (70,861 | ) | ||||||||
Loss on conversion of convertible debenture |
| | | 154,316 | ||||||||||||
Unrealized foreign exchange (gains) losses |
(430 | ) | 3,347 | (3,505 | ) | (113 | ) | |||||||||
Share of (income) loss of significantly influenced investees |
(44,844 | ) | 13,151 | (41,130 | ) | 23,210 | ||||||||||
Write-down of carrying value of inventory |
10,557 | | 15,875 | 6,535 | ||||||||||||
Gain on sale of long-term investments |
| | (10,628 | ) | | |||||||||||
Write-down of carrying value of long-term investments |
| 161 | | 417 | ||||||||||||
Deferred income taxes |
1,909 | 850 | (12,883 | ) | (2,773 | ) | ||||||||||
Bonus shares |
1,163 | | 2,314 | | ||||||||||||
Net change in non-cash operating working capital items: |
||||||||||||||||
Increase in: |
||||||||||||||||
Accounts receivable |
(39,936 | ) | (1,720 | ) | (32,187 | ) | (6,337 | ) | ||||||||
Inventories |
(12,943 | ) | (14,425 | ) | (45,354 | ) | (14,980 | ) | ||||||||
Prepaid expenses |
(15,082 | ) | (704 | ) | (19,451 | ) | (1,698 | ) | ||||||||
Increase (decrease) in: |
||||||||||||||||
Accounts payable and accrued liabilities |
10,411 | 28,812 | 13,046 | 44,101 | ||||||||||||
Interest payable on long-term debt |
(2,948 | ) | (8,734 | ) | (2,027 | ) | (416 | ) | ||||||||
Cash used in operating activities |
$ | (119,356 | ) | $ | (39,052 | ) | $ | (186,045 | ) | $ | (99,135 | ) | ||||
24
15. | CASH FLOW INFORMATION (Continued) |
(b) | Supplementary information regarding other non-cash transactions |
||
The non-cash investing and financing activities relating to continuing operations
not already disclosed in the Consolidated Statements of Cash Flows were as follows: |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Investing activities: |
||||||||||||||||
Acquisition of property, plant
and equipment (i) |
$ | | $ | | $ | | $ | (195,357 | ) | |||||||
Financing activites: |
||||||||||||||||
Partial conversion of convertible
debenture (Note 11) |
| | | (349,079 | ) | |||||||||||
$ | | $ | | $ | | $ | (544,436 | ) | ||||||||
(i) | In March 2010, the Company and Rio Tinto completed an agreement
whereby the Company issued 15.0 million common shares to Rio Tinto for net
proceeds of $241.1 million (Cdn$244.7 million) (Note 12 (b)). The Company used
$195.4 million of the proceeds to purchase from Rio Tinto key mining and milling
equipment to be installed during the construction of the Oyu Tolgoi Project. |
25
16. | SEGMENT DISCLOSURES |
Six Months Ended June 30, 2011 | ||||||||||||||||||||
Development | Exploration | Coal | Corporate | Consolidated | ||||||||||||||||
REVENUE |
$ | | $ | | $ | 67,494 | $ | | $ | 67,494 | ||||||||||
COST OF SALES |
||||||||||||||||||||
Production and delivery |
| | (43,574 | ) | | (43,574 | ) | |||||||||||||
Depreciation and depletion |
| | (10,530 | ) | | (10,530 | ) | |||||||||||||
Write-down of carrying value of inventory |
| | (15,875 | ) | | (15,875 | ) | |||||||||||||
COST OF SALES |
| | (69,979 | ) | | (69,979 | ) | |||||||||||||
EXPENSES |
||||||||||||||||||||
Exploration |
(11,097 | ) | (81,085 | ) | (22,620 | ) | | (114,802 | ) | |||||||||||
General and administrative |
| | | (44,761 | ) | (44,761 | ) | |||||||||||||
Depreciation |
(86 | ) | (907 | ) | (141 | ) | (81 | ) | (1,215 | ) | ||||||||||
Accretion of asset retirement obligations |
(207 | ) | | (127 | ) | | (334 | ) | ||||||||||||
TOTAL EXPENSES |
(11,390 | ) | (81,992 | ) | (92,867 | ) | (44,842 | ) | (231,091 | ) | ||||||||||
OPERATING LOSS |
(11,390 | ) | (81,992 | ) | (25,373 | ) | (44,842 | ) | (163,597 | ) | ||||||||||
OTHER INCOME (EXPENSES) |
||||||||||||||||||||
Interest income |
2,196 | 4,179 | 782 | 2,894 | 10,051 | |||||||||||||||
Interest expense |
| | (6,935 | ) | (748 | ) | (7,683 | ) | ||||||||||||
Accretion of convertible credit facilities |
| | (28 | ) | | (28 | ) | |||||||||||||
Foreign exchange gains |
2,140 | 9 | 12 | 3,242 | 5,403 | |||||||||||||||
Unrealized losses on long-term investments |
| | (309 | ) | | (309 | ) | |||||||||||||
Unrealized (losses) gains on other long-term investments |
| | (179 | ) | 1,574 | 1,395 | ||||||||||||||
Realized gain on redemption of other long-term investments |
| | | 98 | 98 | |||||||||||||||
Change in fair value of derivative |
| | | (432,536 | ) | (432,536 | ) | |||||||||||||
Change in fair value of embedded derivatives |
| | 33,641 | | 33,641 | |||||||||||||||
Loss on conversion of convertible credit facility |
| | | | | |||||||||||||||
Write-down of carrying value of long-term investments |
| | | | | |||||||||||||||
Gain on sale of long-term investment |
| | | 10,628 | 10,628 | |||||||||||||||
(LOSS) INCOME
BEFORE INCOME TAXES AND OTHER ITEMS |
(7,054 | ) | (77,804 | ) | 1,611 | (459,690 | ) | (542,937 | ) | |||||||||||
(Provision) recovery for income taxes |
(5 | ) | (631 | ) | 11,333 | (2,082 | ) | 8,615 | ||||||||||||
Share of income (loss) of significantly influenced investees |
| 50,921 | | (9,791 | ) | 41,130 | ||||||||||||||
NET (LOSS) INCOME FROM CONTINUING OPERATIONS |
(7,059 | ) | (27,514 | ) | 12,944 | (471,563 | ) | (493,192 | ) | |||||||||||
INCOME FROM DISCONTINUED OPERATIONS |
| | | | | |||||||||||||||
NET (LOSS) INCOME |
(7,059 | ) | (27,514 | ) | 12,944 | (471,563 | ) | (493,192 | ) | |||||||||||
NET LOSS (INCOME) ATTRIBUTABLE TO NONCONTROLLING
INTERESTS |
5,032 | 4,556 | (8,292 | ) | | 1,296 | ||||||||||||||
NET
(LOSS) INCOME ATTRIBUTABLE TO IVANHOE MINES LTD. |
$ | (2,027 | ) | $ | (22,958 | ) | $ | 4,652 | $ | (471,563 | ) | $ | (491,896 | ) | ||||||
CAPITAL EXPENDITURES |
$ | 1,014,136 | $ | 3,934 | $ | 112,158 | $ | 41 | $ | 1,130,269 | ||||||||||
TOTAL ASSETS |
$ | 2,675,550 | $ | 295,247 | $ | 955,722 | $ | 1,069,857 | $ | 4,996,376 | ||||||||||
26
16. | SEGMENT DISCLOSURES (Continued) |
Three Months Ended June 30, 2011 | ||||||||||||||||||||
Development | Exploration | Coal | Corporate | Consolidated | ||||||||||||||||
REVENUE |
$ | | $ | | $ | 47,336 | $ | | $ | 47,336 | ||||||||||
COST OF SALES |
||||||||||||||||||||
Production and delivery |
| | (31,416 | ) | | (31,416 | ) | |||||||||||||
Depreciation and depletion |
| | (7,731 | ) | | (7,731 | ) | |||||||||||||
Write-down of carrying value of inventory |
| | (10,557 | ) | | (10,557 | ) | |||||||||||||
COST OF SALES |
| | (49,704 | ) | | (49,704 | ) | |||||||||||||
EXPENSES |
||||||||||||||||||||
Exploration |
(6,009 | ) | (48,434 | ) | (14,136 | ) | | (68,579 | ) | |||||||||||
General and administrative |
| | | (19,483 | ) | (19,483 | ) | |||||||||||||
Depreciation |
(43 | ) | (530 | ) | (54 | ) | (76 | ) | (703 | ) | ||||||||||
Accretion of asset retirement obligations |
(104 | ) | | (68 | ) | | (172 | ) | ||||||||||||
TOTAL EXPENSES |
(6,156 | ) | (48,964 | ) | (63,962 | ) | (19,559 | ) | (138,641 | ) | ||||||||||
OPERATING LOSS |
(6,156 | ) | (48,964 | ) | (16,626 | ) | (19,559 | ) | (91,305 | ) | ||||||||||
OTHER INCOME (EXPENSES) |
||||||||||||||||||||
Interest income |
1,193 | 1,930 | 355 | 1,435 | 4,913 | |||||||||||||||
Interest expense |
| | (2,959 | ) | (377 | ) | (3,336 | ) | ||||||||||||
Accretion of convertible credit facilities |
| | (14 | ) | | (14 | ) | |||||||||||||
Foreign exchange gains (losses) |
1,028 | (47 | ) | 324 | 949 | 2,254 | ||||||||||||||
Unrealized gains on long-term investments |
| | 3,453 | | 3,453 | |||||||||||||||
Unrealized gains on other long-term investments |
| | 175 | 832 | 1,007 | |||||||||||||||
Realized gain on redemption of other long-term investments |
| | | 65 | 65 | |||||||||||||||
Change in fair value of derivative |
| | | | | |||||||||||||||
Change in fair value of embedded derivatives |
| | 70,422 | | 70,422 | |||||||||||||||
Loss on conversion of convertible credit facility |
| | | | | |||||||||||||||
Write-down of carrying value of long-term investments |
| | | | | |||||||||||||||
Gain on sale of long-term investment |
| | | | | |||||||||||||||
(LOSS) INCOME
BEFORE INCOME TAXES AND OTHER ITEMS |
(3,935 | ) | (47,081 | ) | 55,130 | (16,655 | ) | (12,541 | ) | |||||||||||
Provision for income taxes |
(5 | ) | (517 | ) | (2,365 | ) | (1,396 | ) | (4,283 | ) | ||||||||||
Share of income (loss) of significantly influenced investees |
| 45,721 | | (877 | ) | 44,844 | ||||||||||||||
NET (LOSS) INCOME FROM CONTINUING OPERATIONS |
(3,940 | ) | (1,877 | ) | 52,765 | (18,928 | ) | 28,020 | ||||||||||||
INCOME FROM DISCONTINUED OPERATIONS |
| | | | | |||||||||||||||
NET (LOSS) INCOME |
(3,940 | ) | (1,877 | ) | 52,765 | (18,928 | ) | 28,020 | ||||||||||||
NET INCOME ATTRIBUTABLE TO NONCONTROLLING
INTERESTS |
(731 | ) | (2,640 | ) | (24,045 | ) | | (27,416 | ) | |||||||||||
NET
(LOSS) INCOME ATTRIBUTABLE TO IVANHOE MINES LTD. |
$ | (4,671 | ) | $ | (4,517 | ) | $ | 28,720 | $ | (18,928 | ) | $ | 604 | |||||||
CAPITAL EXPENDITURES |
$ | 519,910 | $ | 2,102 | $ | 79,519 | $ | 34 | $ | 601,565 | ||||||||||
TOTAL ASSETS |
$ | 2,675,550 | $ | 295,247 | $ | 955,722 | $ | 1,069,857 | $ | 4,996,376 | ||||||||||
27
16. | SEGMENT DISCLOSURES (Continued) |
Six Months Ended June 30, 2010 | ||||||||||||||||||||
Development | Exploration | Coal | Corporate | Consolidated | ||||||||||||||||
REVENUE |
$ | | $ | | $ | 31,585 | $ | | $ | 31,585 | ||||||||||
COST OF SALES |
||||||||||||||||||||
Production and delivery |
| | (22,098 | ) | | (22,098 | ) | |||||||||||||
Depreciation and depletion |
| | (4,827 | ) | | (4,827 | ) | |||||||||||||
Write-down of carrying value of inventory |
| | (6,535 | ) | | (6,535 | ) | |||||||||||||
COST OF SALES |
| | (33,460 | ) | | (33,460 | ) | |||||||||||||
EXPENSES |
||||||||||||||||||||
Exploration |
(60,010 | ) | (30,025 | ) | (20,871 | ) | | (110,906 | ) | |||||||||||
General and administrative |
| | | (23,047 | ) | (23,047 | ) | |||||||||||||
Depreciation |
(636 | ) | (478 | ) | (89 | ) | (67 | ) | (1,270 | ) | ||||||||||
Accretion of asset retirement obligations |
(44 | ) | | (47 | ) | | (91 | ) | ||||||||||||
TOTAL EXPENSES |
(60,690 | ) | (30,503 | ) | (54,467 | ) | (23,114 | ) | (168,774 | ) | ||||||||||
OPERATING LOSS |
(60,690 | ) | (30,503 | ) | (22,882 | ) | (23,114 | ) | (137,189 | ) | ||||||||||
OTHER INCOME (EXPENSES) |
||||||||||||||||||||
Interest income |
1,648 | 120 | 1,224 | 4,175 | 7,167 | |||||||||||||||
Interest expense |
| | (14,733 | ) | (6,944 | ) | (21,677 | ) | ||||||||||||
Accretion of convertible credit facilities |
| | (33 | ) | (8,629 | ) | (8,662 | ) | ||||||||||||
Foreign exchange (losses) gains |
(203 | ) | 15 | (601 | ) | (2,400 | ) | (3,189 | ) | |||||||||||
Unrealized losses on long-term investments |
| | (5,212 | ) | | (5,212 | ) | |||||||||||||
Unrealized (losses) gains on other long-term investments |
| | (30 | ) | 1,539 | 1,509 | ||||||||||||||
Realized gain on redemption of other long-term investments |
| | | 87 | 87 | |||||||||||||||
Change in fair value of derivative |
| | | | | |||||||||||||||
Change in fair value of embedded derivatives |
| | 70,861 | | 70,861 | |||||||||||||||
Loss on conversion of convertible credit facility |
| | (154,316 | ) | | (154,316 | ) | |||||||||||||
Write-down of carrying value of long-term investments |
| | | (417 | ) | (417 | ) | |||||||||||||
Gain on sale of long-term investment |
| | | | | |||||||||||||||
LOSS BEFORE INCOME TAXES AND OTHER ITEMS |
(59,245 | ) | (30,368 | ) | (125,722 | ) | (35,703 | ) | (251,038 | ) | ||||||||||
(Provision) recovery for income taxes |
(16 | ) | (1,299 | ) | 3,141 | 348 | 2,174 | |||||||||||||
Share of loss of significantly influenced investees |
| (618 | ) | | (22,592 | ) | (23,210 | ) | ||||||||||||
NET LOSS FROM CONTINUING OPERATIONS |
(59,261 | ) | (32,285 | ) | (122,581 | ) | (57,947 | ) | (272,074 | ) | ||||||||||
INCOME FROM DISCONTINUED OPERATIONS |
| | | 6,585 | 6,585 | |||||||||||||||
NET LOSS |
(59,261 | ) | (32,285 | ) | (122,581 | ) | (51,362 | ) | (265,489 | ) | ||||||||||
NET LOSS ATTRIBUTABLE TO NONCONTROLLING
INTERESTS |
2,159 | 4,456 | 34,978 | | 41,593 | |||||||||||||||
NET LOSS ATTRIBUTABLE TO IVANHOE MINES LTD. |
$ | (57,102 | ) | $ | (27,829 | ) | $ | (87,603 | ) | $ | (51,362 | ) | $ | (223,896 | ) | |||||
CAPITAL EXPENDITURES |
$ | 153,392 | $ | 1,085 | $ | 53,334 | $ | 44 | $ | 207,855 | ||||||||||
TOTAL ASSETS |
$ | 647,889 | $ | 66,810 | $ | 958,710 | $ | 799,619 | $ | 2,473,028 | ||||||||||
28
16. | SEGMENT DISCLOSURES (Continued) |
Three Months Ended June 30, 2010 | ||||||||||||||||||||
Development | Exploration | Coal | Corporate | Consolidated | ||||||||||||||||
REVENUE |
$ | | $ | | $ | 17,668 | $ | | $ | 17,668 | ||||||||||
COST OF SALES |
||||||||||||||||||||
Production and delivery |
| | (10,901 | ) | | (10,901 | ) | |||||||||||||
Depreciation and depletion |
| | (2,304 | ) | | (2,304 | ) | |||||||||||||
Write-down of carrying value of inventory |
| | | | | |||||||||||||||
COST OF SALES |
| | (13,205 | ) | | (13,205 | ) | |||||||||||||
EXPENSES |
||||||||||||||||||||
Exploration |
(7,887 | ) | (17,289 | ) | (14,307 | ) | | (39,483 | ) | |||||||||||
General and administrative |
| | | (14,730 | ) | (14,730 | ) | |||||||||||||
Depreciation |
(6 | ) | (262 | ) | (25 | ) | (61 | ) | (354 | ) | ||||||||||
Accretion of asset retirement obligations |
(22 | ) | | (26 | ) | | (48 | ) | ||||||||||||
TOTAL EXPENSES |
(7,915 | ) | (17,551 | ) | (27,563 | ) | (14,791 | ) | (67,820 | ) | ||||||||||
OPERATING LOSS |
(7,915 | ) | (17,551 | ) | (9,895 | ) | (14,791 | ) | (50,152 | ) | ||||||||||
OTHER INCOME (EXPENSES) |
||||||||||||||||||||
Interest income |
882 | 54 | 649 | 953 | 2,538 | |||||||||||||||
Interest expense |
| | (4,974 | ) | (3,304 | ) | (8,278 | ) | ||||||||||||
Accretion of convertible credit facilities |
| | (11 | ) | (4,524 | ) | (4,535 | ) | ||||||||||||
Foreign exchange gains (losses) |
31 | (8 | ) | (187 | ) | (4,695 | ) | (4,859 | ) | |||||||||||
Unrealized losses on long-term investments |
| | (4,509 | ) | | (4,509 | ) | |||||||||||||
Unrealized (losses) gains on other long-term investments |
| | (48 | ) | 837 | 789 | ||||||||||||||
Realized gain on redemption of other long-term investments |
| | | 26 | 26 | |||||||||||||||
Change in fair value of derivative |
| | | | | |||||||||||||||
Change in fair value of embedded derivatives |
| | 72,233 | | 72,233 | |||||||||||||||
Loss on conversion of convertible credit facility |
| | | | | |||||||||||||||
Write-down of carrying value of long-term investments |
| | | (161 | ) | (161 | ) | |||||||||||||
Gain on sale of long-term investment |
| | | | | |||||||||||||||
(LOSS) INCOME
BEFORE INCOME TAXES AND OTHER ITEMS |
(7,002 | ) | (17,505 | ) | 53,258 | (25,659 | ) | 3,092 | ||||||||||||
(Provision) recovery for income taxes |
(2 | ) | (378 | ) | 618 | (1,546 | ) | (1,308 | ) | |||||||||||
Share of loss of significantly influenced investees |
| (217 | ) | | (12,934 | ) | (13,151 | ) | ||||||||||||
NET (LOSS) INCOME FROM CONTINUING OPERATIONS |
(7,004 | ) | (18,100 | ) | 53,876 | (40,139 | ) | (11,367 | ) | |||||||||||
INCOME FROM DISCONTINUED OPERATIONS |
| | | | | |||||||||||||||
NET (LOSS) INCOME |
(7,004 | ) | (18,100 | ) | 53,876 | (40,139 | ) | (11,367 | ) | |||||||||||
NET LOSS (INCOME) ATTRIBUTABLE TO NONCONTROLLING
INTERESTS |
2,159 | 2,862 | (23,685 | ) | | (18,664 | ) | |||||||||||||
NET
(LOSS) INCOME ATTRIBUTABLE TO IVANHOE MINES LTD. |
$ | (4,845 | ) | $ | (15,238 | ) | $ | 30,191 | $ | (40,139 | ) | $ | (30,031 | ) | ||||||
CAPITAL EXPENDITURES |
$ | 147,440 | $ | 560 | $ | 20,385 | $ | 22 | $ | 168,407 | ||||||||||
TOTAL ASSETS |
$ | 647,889 | $ | 66,810 | $ | 958,710 | $ | 799,619 | $ | 2,473,028 | ||||||||||
29
17. | FAIR VALUE ACCOUNTING |
Level 1: | Quoted prices in active markets for identical assets or
liabilities that the reporting entity has the ability to access at the measurement
date. |
||
Level 2: | Quoted prices in markets that are not active, or inputs that are
observable, either directly or indirectly, for substantially the full term of the
asset or liability. |
||
Level 3: | Prices or valuation techniques that require inputs that are both
significant to the fair value measurement and unobservable. |
Fair Value at June 30, 2011 | ||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets: |
||||||||||||||||
Short-term investments |
$ | 15,003 | $ | 15,003 | $ | | $ | | ||||||||
Long-term investments |
105,819 | 105,819 | | | ||||||||||||
Other long-term investments |
306,121 | 60,031 | | 246,090 | ||||||||||||
$ | 426,943 | $ | 180,853 | $ | | $ | 246,090 | |||||||||
Liabilities: |
||||||||||||||||
Embedded derivative liability |
121,236 | | 121,236 | | ||||||||||||
$ | 121,236 | $ | | $ | 121,236 | $ | | |||||||||
Fair Value at December 31, 2010 | ||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets: |
||||||||||||||||
Short-term investments |
$ | 98,373 | $ | 98,373 | $ | | $ | | ||||||||
Long-term investments |
113,666 | 113,458 | 208 | | ||||||||||||
Other long-term investments |
191,816 | 45,173 | | 146,643 | ||||||||||||
$ | 403,855 | $ | 257,004 | $ | 208 | $ | 146,643 | |||||||||
Liabilities: |
||||||||||||||||
Rights offering derivative liability |
$ | 766,238 | $ | 766,238 | $ | | $ | | ||||||||
Embedded derivative liability |
154,877 | | 154,877 | | ||||||||||||
$ | 921,115 | $ | 766,238 | $ | 154,877 | $ | | |||||||||
30
17. | FAIR VALUE ACCOUNTING (Continued) |
Long-Term | Tax | |||||||||||||||
Notes | T-Bills | Prepayments | Totals | |||||||||||||
Balance, December 31, 2010 |
$ | 29,763 | $ | 80,394 | $ | 36,486 | $ | 146,643 | ||||||||
Additions |
| | 100,000 | 100,000 | ||||||||||||
Accrued interest |
| 1,445 | 562 | 2,007 | ||||||||||||
Foreign exchange gains |
867 | | | 867 | ||||||||||||
Fair value redeemed |
(83 | ) | | | (83 | ) | ||||||||||
Unrealized gains (losses) included in
other comprehensive income |
| 2,425 | (7,343 | ) | (4,918 | ) | ||||||||||
Unrealized gains included in
earnings |
1,574 | | | 1,574 | ||||||||||||
Balance, June 30, 2011 |
$ | 32,121 | $ | 84,264 | $ | 129,705 | $ | 246,090 | ||||||||
31
18. | DISCLOSURES REGARDING FINANCIAL INSTRUMENTS |
(a) | The estimated fair value of Ivanhoe Mines financial instruments was as follows: |
June 30, | December 31, | |||||||||||||||
2011 | 2010 | |||||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||||
Amount | Value | Amount | Value | |||||||||||||
Cash and cash equivalents |
$ | 1,575,079 | $ | 1,575,079 | $ | 1,264,031 | $ | 1,264,031 | ||||||||
Short-term investments |
15,003 | 15,003 | 98,373 | 98,373 | ||||||||||||
Accounts receivable |
100,267 | 100,267 | 65,741 | 65,741 | ||||||||||||
Long-term investments |
191,903 | 288,151 | 151,191 | 280,181 | ||||||||||||
Other long-term investments |
306,121 | 306,121 | 191,816 | 191,816 | ||||||||||||
Accounts payable and
accrued liabilities |
393,274 | 393,274 | 260,528 | 260,528 | ||||||||||||
Amounts due under credit facilities |
57,836 | 57,836 | 54,695 | 54,695 | ||||||||||||
Rights offering derivative liability |
| | 766,238 | 766,238 | ||||||||||||
Convertible credit facility |
218,955 | 218,955 | 254,596 | 254,596 |
(b) | Ivanhoe Mines is exposed to credit risk with respect to its accounts receivable.
The significant concentrations of credit risk are situated in Mongolia and Australia.
Ivanhoe Mines does not mitigate the balance of this risk in light of the credit
worthiness of its major debtors. |
||
(c) | Ivanhoe Mines is exposed to interest rate risk with respect to the variable rates
of interest incurred on the amounts due under credit facilities (Note 10). Interest
rate risk is concentrated in Canada. Ivanhoe Mines does not mitigate the balance of
this risk. |
32
19. | CONTINGENCIES |
33
Share Information |
Investor
Information |
|||||
Interim Report for the three and six month periods ended June 30, 2011. | Common shares of Ivanhoe Mines Ltd. are listed for trading under the symbol IVN on the New York Stock Exchange, NASDAQ 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 12, 2011, the Company had 710.6 million common shares issued and outstanding and stock options outstanding for 19.7 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, B.C., Canada V6C 3E1 Email: info@ivanhoemines.com Tel: (604) 688-5755 |
| Overall construction at Oyu Tolgoi continues to advance on schedule and on budget, and
reached a 30.8% level of completion at the end of Q211. Key elements of the project,
including the concentrator complex, primary crusher and tailings-thickening ponds, remain
ahead of schedule. Commercial production is expected to commence in the first half of 2013. |
| Pre-stripping for the phase-one, open-pit mine on the gold-rich Southern Oyu deposits at
Oyu Tolgoi began in August 2011. A ground-breaking ceremony for the open pit was held to
officially mark the commencement of pre-stripping operations. |
| The development of the first lift of the phase-two, underground block-cave mine at the
Hugo North Deposit continued successfully during Q211. Lateral mine development 1,300
metres below surface at Hugo North is on schedule, achieving an advance during Q211 of 1,190
metres, for a total of 7,939 metres completed since tunneling started in 2008. |
| Official approvals were received in early May 2011 that enabled the Oyu Tolgoi Project to
begin construction of a 95-kilometre, high-voltage power transmission line to deliver
electricity expected to be imported from China to supply the initial mining operation. The
erection of towers for the 220-kilovolt transmission line in Mongolia is expected to be
completed later this year and the line stringing is planned for spring 2012 to coincide with
anticipated stringing on the Chinese side of the border. |
| Contract negotiations for the supply and sale of copper-gold-silver concentrate to be
produced at Oyu Tolgoi are expected to be finalized in Q411. Most of the concentrate
initially is expected to be delivered to smelters in China. |
| Oyu Tolgois site-based construction workforce totalled approximately 14,200 at the end
of July 2011, with approximately 11,200 working on site each day and the balance on leave.
Approximately 7,320 Mongolians were employed at the Oyu Tolgoi site, with an additional
3,500 Mongolians participating in offsite training. |
| On July 12, 2011, Ivanhoe Mines and BHP Billiton Ltd. began a new exploration drilling
program on their copper-molybdenum-gold discovery at the Ulaan Khud North joint-venture
licence, approximately 10 kilometres north of Oyu Tolgoi. The first drill hole, UKD056, is
planned to test its target to a depth of 1,100 metres. |
| During Q211, Ivanhoe Mines 57%-owned subsidiary, SouthGobi Resources (SGQ: TSX; 1878:
HK), reported coal sales of $47.3 million from its Ovoot Tolgoi mine in southern Mongolia,
representing approximately 1.05 million tonnes of coal sold to customers in China at an
average realized price of approximately $54 per tonne. |
| Ivanhoe Mines 62%-owned subsidiary, Ivanhoe Australia (IVA: ASX &TSX), continued to focus
on the development of its Merlin high-grade molybdenum and rhenium project in the Cloncurry
region of Queensland. Construction of the decline to access the Merlin and Little Wizard
deposits had progressed to 1,097 metres by the end of Q211. |
| Altynalmas Gold, 50%-owned by Ivanhoe Mines, is continuing its drilling program designed
to further delineate resources and reserves to NI 43-101 standards at the Kyzyl Gold Project
in Kazakhstan. |
2
1. Selected Quarterly Data |
||||
2. Review of Operations |
||||
A. Core Interests and Activities |
||||
i. Mongolia |
||||
ii. Australia |
||||
iii. Kazakhstan |
||||
iv. Other Exploration |
||||
v. Other Developments |
||||
B. Discontinued Operations |
||||
C. Administrative and Other |
||||
3. Liquidity and Capital Resources |
||||
4. Share Capital |
||||
5. Outlook |
||||
6. Off-Balance-Sheet Arrangements |
||||
7. Contractual Obligations |
||||
8. Changes in Accounting Policies |
||||
9. Critical Accounting Estimates |
||||
10. Recent Accounting Pronouncements |
||||
11. International Financial Reporting Standards |
||||
12. Risks and Uncertainties |
||||
13. Related-Party Transactions |
||||
14. Changes in Internal Control over Financial Reporting |
||||
15. Qualified Person |
||||
16. Cautionary Statements |
||||
17. Forward-Looking Statements |
3
Quarter Ended | ||||||||||||||||
Jun-30 | Mar-31 | Dec-31 | Sep-30 | |||||||||||||
2011 | 2011 | 2010 | 2010 | |||||||||||||
Revenue |
$ | 47.3 | $ | 20.2 | $ | 41.6 | $ | 6.6 | ||||||||
Cost of sales |
(49.7 | ) | (20.3 | ) | (46.4 | ) | (14.9 | ) | ||||||||
Exploration expenses |
(68.6 | ) | (46.2 | ) | (59.6 | ) | (48.1 | ) | ||||||||
General and administrative |
(19.5 | ) | (25.3 | ) | (46.4 | ) | (15.0 | ) | ||||||||
Foreign exchange gains (losses) |
2.3 | 3.2 | 6.6 | 5.3 | ||||||||||||
Change in fair value of derivative |
| (432.5 | ) | 135.7 | | |||||||||||
Change in fair value of embedded derivatives |
70.4 | (36.8 | ) | (20.0 | ) | 49.8 | ||||||||||
Net income (loss) from continuing operations |
0.6 | (492.5 | ) | 37.3 | (24.9 | ) | ||||||||||
Income (loss) from discontinued operations |
| | | | ||||||||||||
Net income (loss) |
0.6 | (492.5 | ) | 37.3 | (24.9 | ) | ||||||||||
Net income (loss) per share basic |
||||||||||||||||
Continuing operations |
$ | 0.00 | $ | (0.79 | ) | $ | 0.07 | $ | (0.05 | ) | ||||||
Discontinued operations |
$ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | ||||||||
Total |
$ | 0.00 | $ | (0.79 | ) | $ | 0.07 | $ | (0.05 | ) | ||||||
Net income (loss) per share diluted |
||||||||||||||||
Continuing operations |
$ | 0.00 | $ | (0.79 | ) | $ | 0.06 | $ | (0.05 | ) | ||||||
Discontinued operations |
$ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | ||||||||
Total |
$ | 0.00 | $ | (0.79 | ) | $ | 0.06 | $ | (0.05 | ) |
Quarter Ended | ||||||||||||||||
Jun-30 | Mar-31 | Dec-31 | Sep-30 | |||||||||||||
2010 | 2010 | 2009 | 2009 | |||||||||||||
Revenue |
$ | 17.7 | $ | 13.9 | $ | 9.9 | $ | 11.9 | ||||||||
Cost of sales |
(13.2 | ) | (20.3 | ) | (8.5 | ) | (8.6 | ) | ||||||||
Exploration expenses |
(39.5 | ) | (71.4 | ) | (67.2 | ) | (40.9 | ) | ||||||||
General and administrative |
(14.7 | ) | (8.3 | ) | (15.0 | ) | (12.5 | ) | ||||||||
Foreign exchange gains (losses) |
(4.9 | ) | 1.7 | 2.2 | 19.5 | |||||||||||
Change in fair value of embedded derivatives |
72.2 | (1.4 | ) | (45.0 | ) | | ||||||||||
Loss on conversion of convertible credit facility |
| (154.3 | ) | | | |||||||||||
Net income (loss) from continuing operations |
(30.0 | ) | (200.5 | ) | (138.7 | ) | (47.8 | ) | ||||||||
Income (loss) from discontinued operations |
| 6.6 | 9.2 | (21.9 | ) | |||||||||||
Net income (loss) |
(30.0 | ) | (193.9 | ) | (129.5 | ) | (69.8 | ) | ||||||||
Net income (loss) per share basic |
||||||||||||||||
Continuing operations |
$ | (0.06 | ) | $ | (0.44 | ) | $ | (0.32 | ) | $ | (0.12 | ) | ||||
Discontinued operations |
$ | 0.00 | $ | 0.01 | $ | 0.02 | $ | (0.05 | ) | |||||||
Total |
$ | (0.06 | ) | $ | (0.43 | ) | $ | (0.30 | ) | $ | (0.17 | ) | ||||
Net income (loss) per share diluted |
||||||||||||||||
Continuing operations |
$ | (0.06 | ) | $ | (0.44 | ) | $ | (0.32 | ) | $ | (0.12 | ) | ||||
Discontinued operations |
$ | 0.00 | $ | 0.01 | $ | 0.02 | $ | (0.05 | ) | |||||||
Total |
$ | (0.06 | ) | $ | (0.43 | ) | $ | (0.30 | ) | $ | (0.17 | ) |
4
| A 100% interest in Oyu Tolgoi Netherlands BV that, together with a related company, holds
a 66% interest in Oyu Tolgoi LLC, whose principal asset is the Oyu Tolgoi copper-gold-silver
project now under construction in southern Mongolia. |
| A 57% interest in SouthGobi Resources, which is selling coal produced at its Ovoot Tolgoi
mine in southern Mongolia to customers in China and is conducting ongoing exploration and
development programs at several other Mongolian coal prospects. |
| A 62% interest in Ivanhoe Australia, which is developing its copper-gold discoveries in
the Cloncurry region of Queensland, Australia, and also is planning the development of its
wholly-owned Merlin Project, a high-grade molybdenum and rhenium deposit. |
| A 50% interest in Altynalmas Gold, which owns the Kyzyl Gold Project that hosts the
Bakyrchik and Bolshevik gold deposits in Kazakhstan. |
5
Quarter Ended | ||||||||
June 30, | ||||||||
(Stated in $000s of dollars) | 2011 | 2010 | ||||||
Mongolia |
||||||||
Oyu Tolgoi |
$ | 6,009 | $ | 7,887 | ||||
Coal Division |
14,136 | 14,307 | ||||||
Other Mongolia Exploration |
2,617 | 982 | ||||||
22,762 | 23,176 | |||||||
Australia |
43,021 | 14,868 | ||||||
Indonesia |
1,389 | 732 | ||||||
Other |
1,407 | 707 | ||||||
$ | 68,579 | $ | 39,483 | |||||
6
7
| Pre-stripping, as part of the construction of the phase-one open-pit mine to recover ore
from the Southern Oyu deposits, began in early August 2011. |
| The development of the first lift of the phase two, underground block-cave mine at the
Hugo North Deposit continued successfully during Q211. Lateral mine development 1,300
metres below surface at Hugo North is on schedule, achieving an advance during Q211 of
1,190 metres, for a total of 7,939 metres completed since tunneling started in 2008. |
| Oyu Tolgois site-based construction workforce totalled approximately 14,200 at the end
of July 2011, with approximately 11,200 working on site each day and the balance on leave.
Approximately 7,320 Mongolians were employed at the Oyu Tolgoi site, with an additional
3,500 Mongolians participating in offsite training. These Mongolian employees will form the
bulk of the eventual production workforce, particularly in the open-pit operations. |
8
| Construction progress on the concentrator and primary crusher is continuing ahead of
schedule. The concentrator was 37.8% complete at the end of Q211, ahead of the plan of
35.8%. The primary crusher achieved its final lift for the foundation and work on the
coarse-ore storage facility, conveyors and tailings thickeners also is making good
progress. Work has begun on the tailings storage facility and exterior cladding of the
concentrator shell is well advanced. |
| Overall infrastructure progress at end of Q211 was 24.4% slightly behind the plan of
27.1%. Late delivery of materials and equipment impacted progress. Refractory material is
being expedited to site to allow lining of the central heating plant to start early in
Q311. The phase-one raw-water supply also is slightly behind forecast and recovering from
delays in permitting and land-use approvals. Recovery plans are in place and some of the
lost time is expected to be recovered in Q311. |
| Construction of the headframe at Shaft #2 resumed in early August and sinking is
expected to start in Q411. Works are progressing to schedule on the ancillary facilities
associated with the sinking and construction of the shaft. Planning now being completed
will allow shaft sinking to begin with the use of a partially completed headframe, which
will permit postponement of the headframe construction until spring 2012 and eliminate
special measures that otherwise would be required to pour concrete during the coming
winter. |
| Safety performance continues to remain a primary focus, especially in light of the large
number of new employees on site during the peak construction period. |
| A Russian ban on exports of diesel fuel, including those to Mongolia, was in place
during May and early June 2011. Russia provides more than 90% of Mongolias diesel fuel.
Oyu Tolgoi successfully managed this supply shortage through rationing and securing a
nine-million-litre offsite storage facility. A study will begin in Q311 to review options
to further expand onsite diesel storage to increase security of diesel supply. |
| A wide range of technical, social, environmental and commercial reviews were conducted
in Mongolia in support of project financing activities. |
| Conclusion of the competitive bidding process for the main infrastructure works is
expected in Q311, which include on-site infrastructure required to support mine
operations. |
| Contract negotiations are close to finalization for the supply and sale of
copper-gold-silver concentrate to be produced from the project. Most of the concentrate
initially is expected to be sold to smelters in China. Final term sheets with smelters are
expected to be finalized in Q411. |
| Discussions are continuing with relevant government agencies on the outbound copper
concentrate logistics. Oyu Tolgoi is investigating the ability to use large trailer-train
trucks to increase efficiencies across the Mongolia-China border. |
9
10
11
| Upgrades began of facilities and curriculums at five government technical training
colleges across Mongolia. |
| Initial construction of facilities and dormitories for Dalanzadgad technical training
school in the South Gobi Region. |
| Continued development of training materials for operations at the concentrator, the
open-pit and the underground mine. |
| Continued selection process for overseas university scholarships. |
| English-language training began for all trades trainees. |
| The signing of community agreements with neighbouring communities in the South Gobi
Region. These agreements establish the terms of Oyu Tolgois long-term relationships with
the local communities. |
| More than $300,000 dollars in low-interest, micro-credit loans have been provided to
South Gobi businesses and entrepreneurs in the past six months as part of the $1.0 million
funding facility financed by Oyu Tolgoi with a leading Mongolian micro-credit bank. |
| Oyu Tolgoi has engaged with local communities on a wide range of cultural heritage and
environmental protection programs. |
| Oyu Tolgoi launched a local herder procurement support program aimed at providing
financial assistance and mandated procurement of goods and services from herders in
communities surrounding the mine area. As part of this program, two water wells were
drilled for households located close to the Gunii Khooloi deep underground aquifer. |
| An opening ceremony was held at the Dalanzadgad supplier training, evaluation and
development centre that Oyu Tolgoi has funded to provide business incubation services for
South Gobi entrepreneurs. More than 150 South Gobi suppliers and entrepreneurs are
supplying goods and services to Oyu Tolgoi, which is an increase of 300% in just 12 months. |
12
13
14
15
16
17
18
19
20
Investment | % interest | |||||||
Item | (US$ billions) | in IVN | ||||||
Total of Rio Tinto investments at June 30, 2011 (1)(2) |
$3.5 | 46.5 | % | |||||
Subscription right (3) |
Up to approx. $0.7 | 48.5 | % | |||||
3.7 million shares purchased in open market (4) |
$0.1 | 49.0 | % | |||||
Total potential Rio Tinto investment |
Up to approx. $4.3 | 49.0 | % | |||||
(before Interim Funding Facility) |
1. | Includes $0.5 billion paid by Rio Tinto to Robert Friedland and Citibank. Rio Tinto
purchased 10.0 million shares from Mr. Friedland at $25.34 per share and 10.0 million shares
from Citibank at $25.34 per share and 1.5 million shares at $13.88 per share. Ivanhoe Mines
did not receive any proceeds from the transactions. |
|
2. | Based on 710.3 million shares outstanding as of June 30, 2011. |
|
3. | Rio Tinto is not required to exercise its subscription right, in which case there may be
no proceeds from the subscription right. The exercise price of the subscription right will
be based on the prevailing market price at the time of exercise. For example, up to
approximately $0.7 billion of proceeds assumes a $25.00 per share exercise price on all
shares issuable under the subscription right. |
|
4. | If acquired, the per-share purchase price will be based on the prevailing market price at
the time of acquisition. For example, $0.1 billion assumes a $25.00 per share purchase price
on all 3.7 million shares. Ivanhoe Mines will not receive any proceeds from the
transactions. |
21
22
23
24
25
June 30, | December 31, | |||||||||||||||
2011 | 2010 | |||||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||||
(Stated in $000s of dollars) | Amount | Value | Amount | Value | ||||||||||||
Financial Assets |
||||||||||||||||
Held-for-trading |
||||||||||||||||
Short-term investments |
15,003 | 15,003 | 98,373 | 98,373 | ||||||||||||
Long-term investments |
9,926 | 9,926 | 10,235 | 10,235 | ||||||||||||
Other long-term investments |
92,152 | 92,152 | 74,936 | 74,936 | ||||||||||||
Available-for-sale |
||||||||||||||||
Long-term investments |
95,893 | 95,893 | 103,431 | 103,431 | ||||||||||||
Other long-term investments |
213,969 | 213,969 | 116,880 | 116,880 | ||||||||||||
Cost method |
||||||||||||||||
Long-term investments |
17,162 | 17,162 | 20,534 | 20,534 | ||||||||||||
Loans and receivables |
||||||||||||||||
Accounts receivable |
100,267 | 100,267 | 65,741 | 65,741 | ||||||||||||
Investments in companies subject to
significant influence |
||||||||||||||||
Long-term investments |
68,922 | 165,170 | 16,991 | 145,981 | ||||||||||||
Financial Liabilities |
||||||||||||||||
Accounts payable and accrued liabilities |
393,274 | 393,274 | 260,528 | 260,528 | ||||||||||||
Amounts due under credit facilities |
57,836 | 57,836 | 54,695 | 54,695 | ||||||||||||
CIC convertible credit facility
debt host contract and interest payable |
97,719 | 97,719 | 99,719 | 99,719 | ||||||||||||
Derivatives |
||||||||||||||||
Rights offering derivative liability |
| | 766,238 | 766,238 | ||||||||||||
CIC convertible credit facility
embedded derivative liability |
121,236 | 121,236 | 154,877 | 154,877 |
26
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
(Stated in $000s of dollars) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Unrealized gains (losses) on long-term investments |
$ | 3,453 | $ | (4,509 | ) | $ | (309 | ) | $ | (5,212 | ) | |||||
Unrealized gains on other long-term investments |
1,007 | 789 | 1,395 | 1,509 | ||||||||||||
Change in fair value of derivative |
| | (432,536 | ) | | |||||||||||
Change in fair value of embedded derivatives |
70,422 | 72,233 | 33,641 | 70,861 |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
(Stated in $000s of dollars) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Changes in fair value of long-term investments |
$ | (61,149 | ) | $ | (16,335 | ) | $ | (8,141 | ) | $ | (12,439 | ) | ||||
Changes in fair value of other long-term investments |
(6,738 | ) | (14,327 | ) | (4,918 | ) | (13,242 | ) |
27
| 710.6 million common shares outstanding. |
| 19.7 million incentive stock options outstanding, with a weighted average exercise price
of C$12.00 per share. Each option is exercisable to purchase a common share of the Company
at prices ranging from C$2.82 to C$27.83 per share. |
28
29
30
31
Three Months Ended June 30, | Six Month Ended June 30, | |||||||||||||||
(Stated in $000s of U.S. dollars) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Rio Tinto plc (a) |
$ | 16,742 | $ | 2,558 | $ | 27,797 | $ | 4,931 | ||||||||
Global Mining Management Corporation (b) |
2,648 | 2,306 | 5,307 | 5,065 | ||||||||||||
Ivanhoe Capital Aviation LLC (c) |
1,710 | 1,934 | 3,446 | 3,194 | ||||||||||||
Fognani & Faught, PLLC (d) |
418 | 119 | 421 | 119 | ||||||||||||
Ivanhoe Capital Corporation (e) |
86 | 42 | 150 | 116 | ||||||||||||
Ivanhoe Capital Services Ltd. (f) |
249 | 172 | 507 | 318 | ||||||||||||
$ | 21,853 | $ | 7,131 | $ | 37,628 | $ | 13,743 | |||||||||
32
Three Months Ended June 30, | Six Month Ended June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Development and exploration |
$ | 16,742 | $ | 2,558 | $ | 27,797 | $ | 4,931 | ||||||||
Salaries and benefits |
2,023 | 1,783 | 4,226 | 4,028 | ||||||||||||
Travel (including aircraft rental) |
1,710 | 1,934 | 3,446 | 3,194 | ||||||||||||
Office and administrative |
960 | 737 | 1,738 | 1,471 | ||||||||||||
Legal |
418 | 119 | 421 | 119 | ||||||||||||
$ | 21,853 | $ | 7,131 | $ | 37,628 | $ | 13,743 | |||||||||
(a) | Rio Tinto owns 46.5% of Ivanhoe Mines. Rio Tinto provides services for the Oyu Tolgoi Project
on a cost-recovery basis. At as June 30, 2011, $31.7 million (December 31, 2010 $14.0
million) in payables to Rio Tinto have been classified as non-current. Payments of these
amounts have been deferred until Ivanhoe Mines reaches certain production milestones at the
Oyu Tolgoi Project. |
In addition, Rio Tinto exercised its remaining Ivanhoe Mines warrants in Q211. This is
detailed in the Other Developments section. |
(b) | Global Mining Management Corporation (Global) is a private company based in Vancouver owned
equally by seven companies, one of which is Ivanhoe Mines. Global has a director in common
with the Company. Global provides administration, accounting and other office services to the
Company on a cost-recovery basis. |
(c) | Ivanhoe Capital Aviation LLC (Aviation) is a private company 100%-owned by the Companys
Founder and Chief Executive Officer. Aviation operates aircraft which are rented by the
Company on a cost-recovery basis. |
(d) | An officer of a subsidiary of the Company is associated with Fognani & Faught, PLLC, a legal
firm that provides legal services to Ivanhoe Mines. |
(e) | Ivanhoe Capital Corporation (ICC) is a private company 100%-owned by the Companys Founder
and Chief Executive Officer. ICC provides administration and other office services out of
London, England on a cost-recovery basis. |
33
(f) | Ivanhoe Capital Services Ltd. (ICS) is a private company 100%-owned by the Companys Founder
and Chief Executive Officer. ICS provides management services out of Singapore on a
cost-recovery basis. |
34
35
36
37
1. | Review: I have reviewed the interim financial statements and interim MD&A (together, the
interim filings) of Ivanhoe Mines Ltd. (the issuer) for the interim period ended June 30,
2011. |
2. | No misrepresentations: Based on my knowledge, having exercised reasonable diligence, 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. | Fair presentation: Based on my knowledge, having exercised reasonable diligence, 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 of and for the periods presented in the interim
filings. |
4. | Responsibility: The issuers other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (DC&P) and internal control
over financial reporting (ICFR), as those terms are defined in National Instrument 52-109
Certification of Disclosure in Issuers Annual and Interim Filings, for the issuer. |
5. | Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the
issuers other certifying officer(s) and I have, as at the end of the period covered by the
interim filings |
(a) | designed DC&P, or caused it to be designed under our supervision, to provide
reasonable assurance that |
(i) | material information relating to the issuer is made known to us by
others, particularly during the period in which the interim filings are being
prepared; and |
(ii) | information required to be disclosed by the issuer in its annual
filings, interim filings or other reports filed or submitted by it under
securities legislation is recorded, processed, summarized and reported within the
time periods specified in securities legislation; and |
(b) | designed ICFR, or caused it to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with the issuers GAAP. |
5.1 | Control framework: The control framework the issuers other certifying officer(s) and I used
to design the issuers ICFR is the Internal Control Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). |
||
5.2 | ICFR material weakness relating to design: N/A |
||
5.3 | Limitation on scope of design: N/A |
6. | Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the
issuers ICFR that occurred during the period beginning on April 1, 2011 and ended on June 30,
2011 that has materially affected, or is reasonably likely to materially affect, the issuers
ICFR. |
/s/ R. Friedland
|
||
Chief Executive Officer |
||
Ivanhoe Mines Ltd. |
1. | Review: I have reviewed the interim financial statements and interim MD&A (together, the
interim filings) of Ivanhoe Mines Ltd. (the issuer) for the interim period ended June 30,
2011. |
2. | No misrepresentations: Based on my knowledge, having exercised reasonable diligence, 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. | Fair presentation: Based on my knowledge, having exercised reasonable diligence, 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 of and for the periods presented in the interim
filings. |
4. | Responsibility: The issuers other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (DC&P) and internal control
over financial reporting (ICFR), as those terms are defined in National Instrument 52-109
Certification of Disclosure in Issuers Annual and Interim Filings, for the issuer. |
5. | Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the
issuers other certifying officer(s) and I have, as at the end of the period covered by the
interim filings |
(a) | designed DC&P, or caused it to be designed under our supervision, to provide
reasonable assurance that |
(i) | material information relating to the issuer is made known to us by
others, particularly during the period in which the interim filings are being
prepared; and |
(ii) | information required to be disclosed by the issuer in its annual
filings, interim filings or other reports filed or submitted by it under
securities legislation is recorded, processed, summarized and reported within the
time periods specified in securities legislation; and |
(b) | designed ICFR, or caused it to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with the issuers GAAP. |
5.1 | Control framework: The control framework the issuers other certifying officer(s) and I used
to design the issuers ICFR is the Internal Control Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). |
||
5.2 | ICFR material weakness relating to design: N/A |
||
5.3 | Limitation on scope of design: N/A |
6. | Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the
issuers ICFR that occurred during the period beginning on April 1, 2011 and ended on June 30,
2011 that has materially affected, or is reasonably likely to materially affect, the issuers
ICFR. |
/s/ T. Giardini
|
||
Chief Financial Officer |
||
Ivanhoe Mines Ltd. |
IVANHOE MINES LTD. |
||||
Date: August 12, 2011 | By: | /s/ Beverly A. Bartlett | ||
BEVERLY A. BARTLETT | ||||
Vice President & Corporate Secretary | ||||
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