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A Quick Take On Ivanhoe Electric
Ivanhoe Electric Inc. (IE) has filed to raise an estimated $200 million in an IPO of its common stock, according to an S-1 registration statement.
The firm operates as a minerals exploration, development and technology company in the United States and elsewhere.
IE is still at a relatively small size in terms of revenue and is generating significant operating losses.
When we learn more IPO details, I'll provide a final opinion.
Ivanhoe Overview
Vancouver, Canada-based Ivanhoe was founded to explore and mine various metals critical to the electrification industries and applications.
Management is headed by Chairman and CEO, Robert Friedland, who has been with the firm since July 2020 and has more than 25 years' experience in international finance and minerals exploration, co-founded Ivanhoe Capital and has been Chairman of Energy Capital Group.
The company's primary offerings include:
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Mineral exploration - copper, gold, silver
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Typhoon - geophysical exploration technologies
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VRB Energy - large scale energy storage systems
Ivanhoe has booked fair market value investment of $158.8 million in equity and convertible debt as of March 31, 2022 from investors including I-Pulse, Century Vision Holdings, Fidelity Contrafund and others.
Ivanhoe - Project Acquisition
The firm's current U.S. mineral projects are shown on the map below:
U.S. Company Operations (SEC EDGAR)
IE believes it is strategically important for the U.S. to develop its own resources to a greater degree to reduce its reliance on foreign sources of critical minerals and increase its supply chain resilience.
General & Administrative expenses as a percentage of total revenue have fluctuated as revenues have increased, as the figures below indicate:
| General & Administrative | Expenses vs. Revenue |
| Period | Percentage |
| Three Mos. Ended March 31, 2022 | 77.3% |
| 2021 | 438.6% |
| 2020 | 251.5% |
The General & Administrative efficiency multiple, defined as how many dollars of additional new revenue are generated by each dollar of General & Administrative spend, rose to 1.0x in the most recent reporting period, as shown in the table below:
| General & Administrative | Efficiency Rate |
| Period | Multiple |
| Three Mos. Ended March 31, 2022 | 1.0 |
| 2021 | 0.0 |
Ivanhoe's Market & Competition
According to a 2021 market research report by the U.S. Geological Survey, the U.S. mining industry produced an estimated $82.3 billion worth of minerals in 2020.
This represented about a $1.5 billion drop from 2019's total of $83.7 billion.
The U.S. continued to rely on foreign suppliers for many types of raw and processed materials, with imports accounting for more than 50% of U.S. consumption of various nonfuel minerals.
Also, the U.S. relied solely on imported minerals for 17 mineral commodities out of the 46 minerals it consumed.
Major competitive or other industry participants include:
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Freeport-McMoRan (FCX);
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Alcoa (AA);
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Newmont Mining;
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Southern Copper (SCCO);
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Peabody Energy (BTU);
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Others.
Ivanhoe Electric's Financial Performance
The company's recent financial results can be summarized as follows:
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Growing topline revenue from a small base;
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Increasing gross profit and gross margin;
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Growing operating losses (annualized);
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Higher cash used in operations.
Below are relevant financial results derived from the firm's registration statement:
| Total Revenue | | |
| Period | Total Revenue | % Variance vs. Prior |
| Three Mos. Ended March 31, 2022 | $ 6,762,000 | 333.7% |
| 2021 | $ 4,652,000 | 0.4% |
| 2020 | $ 4,633,000 | |
| | | |
| Gross Profit (Loss) | | |
| Period | Gross Profit (Loss) | % Variance vs. Prior |
| Three Mos. Ended March 31, 2022 | $ 6,710,000 | 440.3% |
| 2021 | $ 3,132,000 | 10.0% |
| 2020 | $ 2,848,000 | |
| | | |
| Gross Margin | | |
| Period | Gross Margin | |
| Three Mos. Ended March 31, 2022 | 99.23% | |
| 2021 | 67.33% | |
| 2020 | 61.47% | |
| | | |
| Operating Profit (Loss) | | |
| Period | Operating Profit (Loss) | Operating Margin |
| Three Mos. Ended March 31, 2022 | $ (17,206,000) | -254.5% |
| 2021 | $ (60,749,000) | -1305.9% |
| 2020 | $ (26,601,000) | -574.2% |
| | | |
| Net Income (Loss) | | |
| Period | Net Income (Loss) | Net Margin |
| Three Mos. Ended March 31, 2022 | $ (17,674,000) | -261.4% |
| 2021 | $ (59,320,000) | -877.3% |
| 2020 | $ (25,234,000) | -373.2% |
| | | |
| Cash Flow From Operations | | |
| Period | Cash Flow From Operations | |
| Three Mos. Ended March 31, 2022 | $ (14,619,000) | |
| 2021 | $ (47,832,000) | |
| 2020 | $ (22,984,000) | |
| | | |
| | | |
As of March 31, 2022, Ivanhoe had $29.8 million in cash and $130.5 million in total liabilities.
Free cash flow during the twelve months ended March 31, 2022, was negative ($57.3 million).
Ivanhoe Electric's IPO Details
Ivanhoe intends to raise estimated $200 million in gross proceeds from an IPO of its common stock, although the final figure may vary.
The company plans to effect a dual listing on the NYSE American and Toronto Stock Exchange.
No existing shareholders have indicated an interest to purchase shares at the IPO price.
Management says it will use the net proceeds from the IPO as follows:
Our goal is to explore mineral projects in order to find commercial Ore Bodies that can be developed into operating mines. Our near and medium term business objectives in furtherance of that goal (each of which also constitute the significant event that must occur for the business objectives to be accomplished) using the proceeds of this offering are to: exercise option and other rights that we have at the Santa Cruz Project in order to acquire ownership of those mineral titles and surface rights, [ii] complete the Santa Cruz Project in the second half of 2022, [iii] build additional Typhoon™ sets in order to expand the number of projects on which we can deploy this technology, and [iv] continue exploration activities at all of our projects.
Management's presentation of the company roadshow is not available.
Regarding outstanding legal proceedings, two of the firm's subsidiaries are involved in legal proceedings, but management believes that:
none of the litigation in which we are currently involved, or have been involved since the beginning of our most recently completed fiscal year, individually or in the aggregate, is material to our combined carve-out financial condition, cash flows or results of operations.
The listed bookrunners of the IPO are BMO Capital Markets and Jefferies.
Commentary About Ivanhoe's IPO
IE is seeking public market investment to continue its exploration activities and further develop its technology offerings.
Its Typhoon technology has been deployed worldwide by both the firm and 3rd parties in various major mineral deposit locations.
The company's financials have produced increasing topline revenue, higher gross profit and gross margin but increased operating loss run rate and growing cash used in operations.
Free cash flow for the twelve months ended March 31, 2022, was negative ($57.3 million).
General & Administrative expenses as a percentage of total revenue have varied as revenue has increased; its General & Administrative efficiency multiple rose to 1.0x in the most recent reporting period.
The firm currently plans to pay no dividends on its shares and anticipates that it will use any earnings to reinvest back into the business and its growth initiatives.
The market opportunity for mining minerals in the United States is large but highly competitive. The U.S. imports a large percentage of its mineral requirements, so the need for domestic sources of production is significant.
BMO Capital Markets is the lead underwriter and there is no data on IPOs led by the firm over the last 12-month.
When we learn more information about management's proposed IPO pricing and valuation assumptions, I'll provide a final opinion.
Expected IPO Pricing Date: To be announced.
https://seekingalpha.com/article/4514730-ivanhoe-electric-begins-ipo-plans