##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 Form 10-Q
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2011
 Commission file number: 000-30586
 
 
 Ivanhoe Energy Inc.
  Yukon, Canada
(State or other jurisdiction of 
incorporation or organization)
    
    98-0372413
(IRS Employer
Identification No.)
 654-999 Canada Place
Vancouver, BC, Canada V6C 3E1
(604) 688-8323
(Address and telephone number of the registrants principal executive offices)
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o
 o Yes þ No




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##### 



TABLE OF CONTENTS
 PART IITEM 1: Financial StatementsUnaudited Condensed Consolidated Statements of Financial Position
    
    
    3Unaudited Condensed Consolidated Statements of Loss and Comprehensive Loss
    
    
    4Unaudited Condensed Consolidated Statements of Changes in Equity
    
    
    5Unaudited Condensed Consolidated Statements of Cash Flows
    
    
    6Notes to the Unaudited Condensed Consolidated Financial Statements
    
    
    7ITEM 2: Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    25ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    34ITEM 4: Controls and Procedures
    
    
    34PART IIITEM 1: Legal Proceedings
    
    
    35ITEM 6: Exhibits
    
    
    36Exhibit 1.1Exhibit 4.1Exhibit 10.1Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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##### Table of Contents



PART I FINANCIAL INFORMATION
 
 ITEM 1.
    
    FINANCIAL STATEMENTS
 IVANHOE ENERGY INC.
 
 Condensed Consolidated Statements of Financial Position
 (Unaudited)
 June 30,
    
    
    December 31,
    
    
    January 1,(US$000s)
    
    Notes
    
    2011
    
    
    2010
    
    
    2010AssetsCurrent AssetsCash and cash equivalents
    
    3
    
    
    133,308
    
    
    
    68,317
    
    
    
    24,362Accounts receivable
    
    
    
    
    8,453
    
    
    
    6,359
    
    
    
    5,021Note receivable
    
    
    
    
    231
    
    
    
    264
    
    
    
    225Prepaid and other
    
    
    
    
    766
    
    
    
    2,859
    
    
    
    771142,758
    
    
    
    77,799
    
    
    
    30,379Intangible
    
    4
    
    
    299,061
    
    
    
    273,568
    
    
    
    207,750Property, plant and equipment
    
    5
    
    
    44,401
    
    
    
    40,618
    
    
    
    41,983Long term receivables
    
    
    
    
    2,899
    
    
    
    2,433
    
    
    
    839489,119
    
    
    
    394,418
    
    
    
    280,951Liabilities and Shareholders EquityCurrent LiabilitiesAccounts payable and accrued
liabilities
    
    
    
    
    28,555
    
    
    
    21,482
    
    
    
    10,779Debt
    
    6
    
    
    41,441
    
    
    
    39,832
    
    
    
    Derivative instruments
    
    7
    
    
    316
    
    
    
    8,447
    
    
    
    13,023Income taxes
    
    
    
    
    475
    
    
    
    
    
    
    
    530Decommissioning costs
    
    
    
    
    
    
    
    
    
    
    
    
    75370,787
    
    
    
    69,761
    
    
    
    25,085Long term debt
    
    6
    
    
    64,322
    
    
    
    
    
    
    
    36,934Long term derivative instruments
    
    7
    
    
    7,595
    
    
    
    
    
    
    
    Long term provisions
    
    
    
    
    3,081
    
    
    
    3,008
    
    
    
    2,187Deferred income taxes
    
    
    
    
    21,872
    
    
    
    21,165
    
    
    
    22,336167,657
    
    
    
    93,934
    
    
    
    86,542Shareholders EquityShare capital
    
    10
    
    
    585,773
    
    
    
    550,562
    
    
    
    422,322Contributed surplus
    
    11
    
    
    24,145
    
    
    
    23,141
    
    
    
    18,724Accumulated deficit
    
    
    
    
    (288,456
    )
    
    
    (273,219
    )
    
    
    (246,637
    )321,462
    
    
    
    300,484
    
    
    
    194,409489,119
    
    
    
    394,418
    
    
    
    280,951Nature of operations and going concern
    
    1
   3




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##### Table of Contents



IVANHOE ENERGY INC.
 
 Condensed Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income
 (Unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,(US$000s, except share and per share amounts)
    
    Note
    
    2011
    
    
    2010
    
    
    2011
    
    
    2010RevenueOil
    
    
    
    
    9,389
    
    
    
    6,047
    
    
    
    17,508
    
    
    
    11,377Interest
    
    
    
    
    143
    
    
    
    23
    
    
    
    210
    
    
    
    429,532
    
    
    
    6,070
    
    
    
    17,718
    
    
    
    11,419ExpensesOperating
    
    13
    
    
    5,339
    
    
    
    3,252
    
    
    
    9,862
    
    
    
    6,706Exploration and evaluation
    
    4
    
    
    
    
    
    
    984
    
    
    
    
    
    
    
    1,590General and administrative
    
    
    
    
    11,744
    
    
    
    9,093
    
    
    
    25,161
    
    
    
    17,525Depletion and depreciation
    
    5
    
    
    1,891
    
    
    
    1,921
    
    
    
    3,722
    
    
    
    3,458Foreign currency exchange (gain) loss
    
    
    
    
    (238
    )
    
    
    3,086
    
    
    
    (463
    )
    
    
    (1,101
    )Derivative instruments gain
    
    7
    
    
    (6,071
    )
    
    
    (21,840
    )
    
    
    (7,200
    )
    
    
    (19,783
    )Interest
    
    
    
    
    359
    
    
    
    4
    
    
    
    367
    
    
    
    813,024
    
    
    
    (3,500
    )
    
    
    31,449
    
    
    
    8,403(Loss) income before income taxes
    
    
    
    
    (3,492
    )
    
    
    9,570
    
    
    
    (13,731
    )
    
    
    3,016Provision for income taxesCurrent
    
    
    
    
    (477
    )
    
    
    (36
    )
    
    
    (799
    )
    
    
    (115
    )Deferred
    
    
    
    
    (142
    )
    
    
    (275
    )
    
    
    (707
    )
    
    
    (447
    )(619
    )
    
    
    (311
    )
    
    
    (1,506
    )
    
    
    (562
    )Net (loss) income and comprehensive
(loss) income
    
    
    
    
    (4,111
    )
    
    
    9,259
    
    
    
    (15,237
    )
    
    
    2,454Net (loss) income per common shareBasic
    
    14
    
    
    (0.01
    )
    
    
    0.03
    
    
    
    (0.04
    )
    
    
    0.01Diluted
    
    14
    
    
    (0.01
    )
    
    
    0.01
    
    
    
    (0.04
    )
    
    
    (0.05
    )Weighted average number of common
shares (000s)Basic
    
    14
    
    
    338,432
    
    
    
    333,922
    
    
    
    341,197
    
    
    
    320,651Diluted
    
    14
    
    
    338,432
    
    
    
    349,705
    
    
    
    341,197
    
    
    
    339,072
   4




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##### Table of Contents



IVANHOE ENERGY INC.
 
 Condensed Consolidated Statements of Changes in Equity
 (Unaudited)
 Share CapitalShares
    
    
    
    
    
    
    Contributed
    
    
    Accumulated(US$000s, except share amounts)
    
    Note
    
    (000s)
    
    
    Amount
    
    
    Surplus
    
    
    Deficit
    
    
    TotalBalance January 1, 2010
    
    
    
    
    282,559
    
    
    
    422,322
    
    
    
    18,724
    
    
    
    (246,637
    )
    
    
    194,409Net income and comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,454
    
    
    
    2,454Shares issued for cash, net of
share issue costs
    
    
    
    
    50,000
    
    
    
    121,766
    
    
    
    
    
    
    
    
    
    
    
    121,766Shares issued for services
    
    
    
    
    280
    
    
    
    799
    
    
    
    
    
    
    
    
    
    
    
    799Exercise of stock options
    
    11
    
    
    1,171
    
    
    
    4,315
    
    
    
    (2,225
    )
    
    
    
    
    
    
    2,090Exercise of purchase warrants
    
    
    
    
    2
    
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    9Share-based compensation expense
    
    11
    
    
    
    
    
    
    
    
    
    
    2,432
    
    
    
    
    
    
    
    2,432Balance June 30, 2010
    
    
    
    
    334,012
    
    
    
    549,211
    
    
    
    18,931
    
    
    
    (244,183
    )
    
    
    323,959
 Share CapitalShares
    
    
    
    
    
    
    Contributed
    
    
    Accumulated(US$000s, except share amounts)
    
    Note
    
    (000s)
    
    
    Amount
    
    
    Surplus
    
    
    Deficit
    
    
    TotalBalance January 1, 2011
    
    
    
    
    334,365
    
    
    
    550,562
    
    
    
    23,141
    
    
    
    (273,219
    )
    
    
    300,484Net loss and comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,237
    )
    
    
    (15,237
    )Exercise of stock options
    
    11
    
    
    984
    
    
    
    4,164
    
    
    
    (2,231
    )
    
    
    
    
    
    
    1,933Exercise of purchase warrants
    
    
    
    
    8,621
    
    
    
    31,047
    
    
    
    
    
    
    
    
    
    
    
    31,047Share-based compensation
expense
    
    11
    
    
    
    
    
    
    
    
    
    
    3,235
    
    
    
    
    
    
    
    3,235Balance June 30, 2011
    
    
    
    
    343,970
    
    
    
    585,773
    
    
    
    24,145
    
    
    
    (288,456
    )
    
    
    321,462
   5




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##### Table of Contents



IVANHOE ENERGY INC.
 
 Condensed Consolidated Statements of Cash Flows
 (Unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,(US$000s)
    
    Note
    
    2011
    
    
    2010
    
    
    2011
    
    
    2010Operating ActivitiesNet (loss) income
    
    
    
    
    (4,111
    )
    
    
    9,259
    
    
    
    (15,237
    )
    
    
    2,454Adjustments to reconcile net loss to cash from operating activitiesDepletion and depreciation
    
    5
    
    
    1,891
    
    
    
    1,921
    
    
    
    3,722
    
    
    
    3,458Share-based compensation expense
    
    11
    
    
    1,471
    
    
    
    1,209
    
    
    
    3,247
    
    
    
    2,432Unrealized foreign currency exchange (gain) loss
    
    
    
    
    (1,553
    )
    
    
    3,035
    
    
    
    (1,780
    )
    
    
    (1,338
    )Unrealized gain on derivative instruments
    
    7
    
    
    (6,071
    )
    
    
    (21,840
    )
    
    
    (7,200
    )
    
    
    (19,783
    )Current income tax expense
    
    
    
    
    477
    
    
    
    36
    
    
    
    799
    
    
    
    115Deferred income tax expense
    
    
    
    
    142
    
    
    
    275
    
    
    
    707
    
    
    
    447Exploration and evaluation expense
    
    4
    
    
    
    
    
    
    984
    
    
    
    
    
    
    
    1,590Interest expense
    
    
    
    
    359
    
    
    
    4
    
    
    
    367
    
    
    
    8Finance costs
    
    
    
    
    269
    
    
    
    
    
    
    
    269
    
    
    
    Other
    
    
    
    
    (106
    )
    
    
    (186
    )
    
    
    (12
    )
    
    
    2Current income tax paid
    
    
    
    
    (267
    )
    
    
    (210
    )
    
    
    (324
    )
    
    
    (638
    )Decommissioning costs settled
    
    
    
    
    
    
    
    
    (124
    )
    
    
    
    
    
    
    (182
    )Changes in non-cash working capital items
    
    15
    
    
    1,044
    
    
    
    (639
    )
    
    
    1,978
    
    
    
    (272
    )Net cash used in operating activities
    
    
    
    
    (6,455
    )
    
    
    (6,276
    )
    
    
    (13,464
    )
    
    
    (11,707
    )Investing ActivitiesIntangible expenditures
    
    
    
    
    (13,906
    )
    
    
    (11,460
    )
    
    
    (23,772
    )
    
    
    (34,140
    )Property, plant and equipment expenditures
    
    
    
    
    (3,514
    )
    
    
    (1,417
    )
    
    
    (7,463
    )
    
    
    (2,235
    )Long term receivables
    
    
    
    
    (316
    )
    
    
    (498
    )
    
    
    (463
    )
    
    
    (846
    )Interest paid
    
    
    
    
    15
    
    
    
    
    
    
    
    (1,003
    )
    
    
    (844
    )Changes in non-cash working capital items
    
    15
    
    
    1,082
    
    
    
    1,533
    
    
    
    4,578
    
    
    
    2,855Net cash used in investing activities
    
    
    
    
    (16,639
    )
    
    
    (11,842
    )
    
    
    (28,123
    )
    
    
    (35,210
    )Financing ActivitiesShares and warrants issued on private placements, net of share issue costs
    
    
    
    
    
    
    
    
    (556
    )
    
    
    
    
    
    
    135,765Convertible debentures issued, net of issue costs
    
    6
    
    
    72,914
    
    
    
    
    
    
    
    72,914
    
    
    
    Proceeds from exercise of options and warrants
    
    7,11
    
    
    59
    
    
    
    458
    
    
    
    29,873
    
    
    
    2,094Changes in non-cash working capital items
    
    15
    
    
    (28
    )
    
    
    39
    
    
    
    (47
    )
    
    
    39Net cash provided by (used in) financing activities
    
    
    
    
    72,945
    
    
    
    (59
    )
    
    
    102,740
    
    
    
    137,898Foreign exchange gain (loss) on cash and cash equivalents held in a
foreign currency
    
    
    
    
    2,659
    
    
    
    (4,391
    )
    
    
    3,838
    
    
    
    1,324Increase in cash and cash equivalents, for the period
    
    
    
    
    52,510
    
    
    
    (22,568
    )
    
    
    64,991
    
    
    
    92,305Cash and cash equivalents, beginning of period
    
    
    
    
    80,798
    
    
    
    139,235
    
    
    
    68,317
    
    
    
    24,362Cash and cash equivalents, end of period
    
    
    
    
    133,308
    
    
    
    116,667
    
    
    
    133,308
    
    
    
    116,667
   6




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IVANHOE ENERGY INC.
 
 Notes to the Unaudited Condensed Consolidated Financial Statements
  1. NATURE OF OPERATIONS AND GOING CONCERN
  TM
      7




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##### Table of Contents



2. BASIS OF PRESENTATION
 2.1 Statement of Compliance
  2.2 Basis of Presentation
    IFRS 9 Financial Instruments (IFRS 9)
  IFRS 10 Consolidated Financial Statements (IFRS 10)
  IFRS 11 Joint Arrangements (IFRS 11)
  IFRS 12 Disclosure of Interests in Other Entities (IFRS 12)
  IFRS 13 Fair Value Measurements (IFRS 13)
   8




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IAS 12 Income Taxes (IAS 12)
  IAS 28 Investments in Associates and Joint Ventures (IAS 28)
   3. CASH AND CASH EQUIVALENTS
 June 30,
    
    
    December 31,
    
    
    January 1,2011
    
    
    2010
    
    
    2010Cash at banks and on hand
    
    
    132,285
    
    
    
    10,147
    
    
    
    6,797Term deposits
    
    
    
    
    
    
    57,670
    
    
    
    Money market accounts
    
    
    
    
    
    
    
    
    
    
    14,715Restricted cash
    
    
    1,023
    
    
    
    500
    
    
    
    2,850133,308
    
    
    
    68,317
    
    
    
    24,362
  4. INTANGIBLE ASSETS
 Exploration and Evaluation AssetsLatin
    
    
    
    
    
    
    HTLTM
    
    
    Total IntangibleAsia
    
    
    Canada
    
    
    America
    
    
    Total
    
    
    Technology
    
    
    AssetsCostBalance January 1, 2010
    
    
    14,411
    
    
    
    94,431
    
    
    
    6,755
    
    
    
    115,597
    
    
    
    92,153
    
    
    
    207,750Additions during the period
    
    
    27,261
    
    
    
    29,324
    
    
    
    17,704
    
    
    
    74,289
    
    
    
    
    
    
    
    74,289Exploration and evaluation expense
    
    
    (3,537
    )
    
    
    
    
    
    
    (4,934
    )
    
    
    (8,471
    )
    
    
    
    
    
    
    (8,471
    )Balance December 31, 2010
    
    
    38,135
    
    
    
    123,755
    
    
    
    19,525
    
    
    
    181,415
    
    
    
    92,153
    
    
    
    273,568Additions during the period
    
    
    14,106
    
    
    
    5,233
    
    
    
    6,154
    
    
    
    25,493
    
    
    
    
    
    
    
    25,493Balance June 30, 2011
    
    
    52,241
    
    
    
    128,988
    
    
    
    25,679
    
    
    
    206,908
    
    
    
    92,153
    
    
    
    299,061
 TM
   9




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##### Table of Contents



5. PROPERTY, PLANT AND EQUIPMENT
 Oil and Gas Property and EquipmentLatin
    
    
    
    
    
    
    Other
    
    
    TotalAsia
    
    
    Canada
    
    
    America
    
    
    Total
    
    
    Assets
    
    
    PP&ECostBalance January 1, 2010
    
    
    31,816
    
    
    
    
    
    
    
    
    
    
    
    31,816
    
    
    
    11,373
    
    
    
    43,189Additions during the period
    
    
    4,123
    
    
    
    
    
    
    
    
    
    
    
    4,123
    
    
    
    1,648
    
    
    
    5,771Disposals
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12
    )
    
    
    (12
    )Balance December 31, 2010
    
    
    35,939
    
    
    
    
    
    
    
    
    
    
    
    35,939
    
    
    
    13,009
    
    
    
    48,948Additions during the period
    
    
    6,279
    
    
    
    
    
    
    
    
    
    
    
    6,279
    
    
    
    1,234
    
    
    
    7,513Disposals
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5
    )
    
    
    (5
    )Balance June 30, 2011
    
    
    42,218
    
    
    
    
    
    
    
    
    
    
    
    42,218
    
    
    
    14,238
    
    
    
    56,456Accumulated DepreciationBalance January 1, 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,206
    
    
    
    1,206Depletion and depreciation
for the period
    
    
    6,196
    
    
    
    
    
    
    
    
    
    
    
    6,196
    
    
    
    934
    
    
    
    7,130Disposals
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6
    )
    
    
    (6
    )Balance December 31, 2010
    
    
    6,196
    
    
    
    
    
    
    
    
    
    
    
    6,196
    
    
    
    2,134
    
    
    
    8,330Depletion and depreciation
for the period
    
    
    3,176
    
    
    
    
    
    
    
    
    
    
    
    3,176
    
    
    
    550
    
    
    
    3,726Disposals
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    (1
    )Balance June 30, 2011
    
    
    9,372
    
    
    
    
    
    
    
    
    
    
    
    9,372
    
    
    
    2,683
    
    
    
    12,055Net Book ValueAs at January 1, 2010
    
    
    31,816
    
    
    
    
    
    
    
    
    
    
    
    31,816
    
    
    
    10,167
    
    
    
    41,983As at December 31, 2010
    
    
    29,743
    
    
    
    
    
    
    
    
    
    
    
    29,743
    
    
    
    10,875
    
    
    
    40,618As at June 30, 2011
    
    
    32,846
    
    
    
    
    
    
    
    
    
    
    
    32,846
    
    
    
    11,555
    
    
    
    44,401
 Oil and Gas Property and Equipment
  Other Assets
  6. DEBT
  6.1 Convertible Note
 June 30,
    
    
    December 31,
    
    
    January 1,2011
    
    
    2010
    
    
    2010Convertible note
    
    
    41,472
    
    
    
    40,217
    
    
    
    38,005Unamortized discount
    
    
    (31
    )
    
    
    (385
    )
    
    
    (1,071
    )Carrying amount
    
    
    41,441
    
    
    
    39,832
    
    
    
    36,934
    10




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##### Table of Contents



6.2 Convertible Debentures
 June 30,
    
    
    December 31,
    
    
    January 1,2011
    
    
    2010
    
    
    2010Convertible debentures
    
    
    76,008
    
    
    
    
    
    
    
    Unamortized financing costs and derivative instrument
    
    
    (11,686
    )
    
    
    
    
    
    
    Carrying amount
    
    
    64,322
    
    
    
    
    
    
    
    
     7. FINANCIAL INSTRUMENTS
  Level 1
    
    
    Level 2
    
    
    Level 32008
    
    
    20112006
    
    
    2009 & 2010
    
    
    Convertible
    
    
    Convertible
    
    
    
    
    
    TotalPurchase
    
    
    Purchase
    
    
    Component
    
    
    Component
    
    
    Subsidiary
    
    
    FairWarrants
    
    
    Warrants
    
    
    of Debt
    
    
    of Debentures
    
    
    Option
    
    
    ValueBalance January 1, 2010
    
    
    7,582
    
    
    
    667
    
    
    
    4,774
    
    
    
    
    
    
    
    
    
    
    
    13,023Issuance of purchase warrants
    
    
    
    
    
    
    13,999
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,999Exercise of purchase warrants
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3
    )Derivative gains through profit and loss
    
    
    (1,964
    )
    
    
    (13,050
    )
    
    
    (3,558
    )
    
    
    
    
    
    
    
    
    
    
    (18,572
    )Balance December 31, 2010
    
    
    5,615
    
    
    
    1,616
    
    
    
    1,216
    
    
    
    
    
    
    
    
    
    
    
    8,447Issuance of convertible debentures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,771
    
    
    
    
    
    
    
    9,771Exercise of options
    
    
    (2
    )
    
    
    (3,107
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,109
    )Expiration of purchase warrants through profit
and loss
    
    
    (2,346
    )
    
    
    (1,477
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,823
    )Derivative (gains) losses through profit and loss
    
    
    (3,267
    )
    
    
    2,968
    
    
    
    (1,216
    )
    
    
    (2,176
    )
    
    
    316
    
    
    
    (3,375
    )Balance June 30, 2011
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,595
    
    
    
    316
    
    
    
    7,911
   11




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##### Table of Contents



8. DERIVATIVE INSTRUMENTS
  8.1 Purchase Warrants
  Purchase
    
    
    Shares(000s)
    
    Warrants
    
    
    IssuableBalance January 1, 2010
    
    
    12,135
    
    
    
    12,135Private placements
    
    
    12,500
    
    
    
    12,500Exercised
    
    
    (2
    )
    
    
    (2
    )Balance December 31, 2010
    
    
    24,633
    
    
    
    24,633Exercised
    
    
    (8,620
    )
    
    
    (8,620
    )Expired
    
    
    (16,013
    )
    
    
    (16,013
    )Balance June 30, 2011
    
    
    
    
    
    
    
   Price Per
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercise
    
    
    Cash Value onSpecial
    
    
    Outstanding(1)
    
    
    Fair Value
    
    
    
    
    
    
    Price Per
    
    
    Exercise
    
    
    ValuationYear of Issue
    
    Warrant
    
    
    (000s)
    
    
    ($US000s)
    
    
    Expiry Date
    
    
    Share
    
    
    ($US000s)
    
    
    Method2006
    
    
    US$2.23
    
    
    
    11,398
    
    
    
    5,615
    
    
    May 2011
    
    
    Cdn$2.93
    (2)
    
    
    33,577
    
    
    Quoted Market Price2009
    
    
    N/A
    
    
    
    735
    
    
    
    11
    
    
    Feb 2011
    
    
    Cdn$4.05
    
    
    
    2,993
    
    
    Black-Scholes2010
    
    
    Cdn$3.00
    
    
    
    10,417
    
    
    
    1,326
    
    
    Feb 2011
    
    
    Cdn$3.16
    
    
    
    33,095
    
    
    Black-Scholes2010
    
    
    Cdn$3.00
    
    
    
    2,083
    
    
    
    279
    
    
    Feb 2011
    
    
    Cdn$3.16
    
    
    
    6,619
    
    
    Black-Scholes24,633
    
    
    
    7,231
    
    
    
    
    
    
    
    
    
    
    
    76,284
 (1)
    
    One common share is issuable for each purchase warrant upon exercise.(2)
    
    Each common share purchase warrant originally entitled the holder to purchase one
common share at a price of $2.63 per share until the fifth anniversary date of the closing.
In September 2006, these warrants were listed on the Toronto Stock Exchange and the
exercise price was changed to Cdn$2.93.  8.2 Convertible Note
    12




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##### Table of Contents



8.3 Convertible Debentures
   8.4 Subsidiary Option
    9. COMMITMENTS AND CONTINGENCIES
 9.1 Income Taxes
    9.2 Operating Lease Arrangements
   Remainder of 2011
    
    
    9062012-2013
    
    
    1,1522,058
  13




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##### Table of Contents



9.3 Other
    10. SHARE CAPITAL
 Authorized
    
    Unlimited common shares with no par value
Unlimited preferred shares with no par valueIssued and Outstanding
    
    343,970,158 common shares (December 31, 2010  334,365,482)
Nil preferred shares (December 31, 2010  nil)
  11. SHARE-BASED PAYMENTS
  Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2011
    
    
    2010
    
    
    2011
    
    
    2010Share-based expense related toEquity settled transactions
    
    
    1,459
    
    
    
    1,021
    
    
    
    3,235
    
    
    
    1,558Cash settled transactions
    
    
    12
    
    
    
    
    
    
    
    12
    
    
    
    Total share-based expense
    
    
    1,471
    
    
    
    1,021
    
    
    
    3,247
    
    
    
    1,558Share-based payments capitalized as E&E assets
    
    
    335
    
    
    
    799
    
    
    
    335
    
    
    
    799
 11.1 Stock Option Plan
  June 30, 2011
    
    
    December 31, 2010Number of
    
    
    Weighted Average
    
    
    Number of
    
    
    Weighted AverageStock Options
    
    
    Exercise Price
    
    
    Stock Options
    
    
    Exercise Price(000s)
    
    
    (Cdn$)
    
    
    (000s)
    
    
    (Cdn$)Outstanding, beginning of period
    
    
    16,927
    
    
    
    2.24
    
    
    
    15,013
    
    
    
    2.27Granted
    
    
    1,884
    
    
    
    2.67
    
    
    
    6,041
    
    
    
    2.56Exercised
    
    
    (1,518
    )
    
    
    2.38
    
    
    
    (2,743
    )
    
    
    2.28Expired
    
    
    (596
    )
    
    
    2.76
    
    
    
    (635
    )
    
    
    2.60Forfeited
    
    
    (471
    )
    
    
    2.46
    
    
    
    (749
    )
    
    
    2.64Outstanding, end of period
    
    
    16,226
    
    
    
    2.24
    
    
    
    16,927
    
    
    
    2.24Exercisable, end of period
    
    
    6,845
    
    
    
    2.11
    
    
    
    7,324
    
    
    
    2.19
   14




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##### Table of Contents



Six months ended June 30,
    
    2011
    
    
    2010Expected life (in years)
    
    
    6.3
    
    
    
    6.0Volatility (1)
    
    
    74.5
    %
    
    
    76.3
    %Dividend yield
    
    
    
    
    
    
    Risk-free rate
    
    
    2.7
    %
    
    
    3.1
    %Estimated forfeiture rate
    
    
    6.0
    %
    
    
    5.2
    %
 (1)
    
    Expected volatility factor based on historical volatility of the Companys publicly
traded common shares.  Weighted AverageRemaining
    
    
    Weighted AverageOutstanding
    
    
    Contractual Life
    
    
    Exercise PriceRange of Exercise Prices (Cdn$)
    
    (000s)
    
    
    (years)
    
    
    (Cdn$)1.51 to 2.06
    
    
    5,711
    
    
    
    2.2
    
    
    
    1.712.15 to 2.71
    
    
    8,804
    
    
    
    5.1
    
    
    
    2.392.77 to 3.44
    
    
    1,711
    
    
    
    5.2
    
    
    
    3.2116,226
    
    
    
    4.1
    
    
    
    2.24
 11.2 Restricted Share Unit Plan
   June 30, 2011Weighted AverageNumber of RSUs
    
    
    Fair Value(000s)(1)
    
    
    (Cdn$)Outstanding, beginning of period
    
    
    
    
    
    
    Granted
    
    
    1,071
    
    
    
    2.16Outstanding, end of period
    
    
    1,071
    
    
    
    2.16
 (1)
    
    Includes RSUs that will be withheld on behalf of employees to satisfy statutory tax
withholding requirements.  Six months endedJune 30, 2011Expected life (in years)
    
    
    3.0Volatility (1)
    
    
    62.7
    %Dividend yield
    
    
    Risk-free rate
    
    
    1.7
    %Estimated forfeiture rate
    
    
    6.1
    %
 (1)
    
    Expected volatility factor based on historical volatility of the Companys publicly
traded common shares.  15




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##### Table of Contents



June 30,2011Liabilities related to RSUs
    
    
    12Intrinsic value of vested RSUs
    
    
    
 12. SEGMENT INFORMATION
      16




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##### Table of Contents



Latin
    
    
    TechnologyAsia
    
    
    Canada
    
    
    America
    
    
    Development
    
    
    Corporate
    
    
    TotalSegment revenue(1)For the three months ended June 30, 2011
    
    
    9,391
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    141
    
    
    
    9,532For the three months ended June 30, 2010
    
    
    6,049
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21
    
    
    
    6,070For the six months ended June 30, 2011
    
    
    17,511
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    207
    
    
    
    17,718For the six months ended June 30, 2010
    
    
    11,382
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37
    
    
    
    11,419Segment income (loss)For the three months ended June 30, 2011
    
    
    461
    
    
    
    (979
    )
    
    
    (2,160
    )
    
    
    (2,759
    )
    
    
    1,326
    
    
    
    (4,111
    )For the three months ended June 30, 2010
    
    
    (1,087
    )
    
    
    (984
    )
    
    
    (1,984
    )
    
    
    (1,336
    )
    
    
    14,650
    
    
    
    9,259For the six months ended June 30, 2011
    
    
    (1,711
    )
    
    
    (2,286
    )
    
    
    (3,867
    )
    
    
    (5,007
    )
    
    
    (2,366
    )
    
    
    (15,237
    )For the six months ended June 30, 2010
    
    
    (1,620
    )
    
    
    (1,951
    )
    
    
    (3,666
    )
    
    
    (2,714
    )
    
    
    12,405
    
    
    
    2,454Segment assets(2)As at June 30, 2011
    
    
    97,100
    
    
    
    129,081
    
    
    
    33,261
    
    
    
    102,742
    
    
    
    126,935
    
    
    
    489,119As at December 31, 2010
    
    
    85,273
    
    
    
    123,890
    
    
    
    24,392
    
    
    
    101,899
    
    
    
    58,964
    
    
    
    394,418As at January 1, 2010
    
    
    57,528
    
    
    
    94,594
    
    
    
    7,778
    
    
    
    101,893
    
    
    
    19,158
    
    
    
    280,951Segment liabilities(3)As at June 30, 2011
    
    
    128,517
    
    
    
    138,753
    
    
    
    52,807
    
    
    
    82,598
    
    
    
    (235,018
    )
    
    
    167,657As at December 31, 2010
    
    
    114,980
    
    
    
    131,277
    
    
    
    42,162
    
    
    
    76,747
    
    
    
    (271,232
    )
    
    
    93,934As at January 1, 2010
    
    
    81,047
    
    
    
    98,262
    
    
    
    13,145
    
    
    
    56,909
    
    
    
    (162,821
    )
    
    
    86,542Capital investments  IntangibleFor the three months ended June 30, 2011
    
    
    7,607
    
    
    
    1,806
    
    
    
    4,493
    
    
    
    
    
    
    
    
    
    
    
    13,906For the three months ended June 30, 2010
    
    
    2,561
    
    
    
    4,316
    
    
    
    4,583
    
    
    
    
    
    
    
    
    
    
    
    11,460For the six months ended June 30, 2011
    
    
    14,106
    
    
    
    3,847
    
    
    
    5,819
    
    
    
    
    
    
    
    
    
    
    
    23,772For the six months ended June 30, 2010
    
    
    4,488
    
    
    
    21,342
    
    
    
    8,310
    
    
    
    
    
    
    
    
    
    
    
    34,140Capital investments  Property, plant
and equipmentFor the three months ended June 30, 2011
    
    
    2,755
    
    
    
    
    
    
    
    (5
    )
    
    
    764
    
    
    
    
    
    
    
    3,514For the three months ended June 30, 2010
    
    
    1,075
    
    
    
    
    
    
    
    76
    
    
    
    100
    
    
    
    166
    
    
    
    1,417For the six months ended June 30, 2011
    
    
    6,301
    
    
    
    
    
    
    
    58
    
    
    
    1,104
    
    
    
    
    
    
    
    7,463For the six months ended June 30, 2010
    
    
    1,451
    
    
    
    3
    
    
    
    87
    
    
    
    306
    
    
    
    388
    
    
    
    2,235
 (1)
    
    All oil revenues in Asia are generated from the sale of oil production in China to one
customer.(2)
    
    Segment assets include investments in subsidiaries that are eliminated for consolidation
under Corporate.(3)
    
    Liabilities for Corporate include intercompany receivables of $383.4 million at June 30, 2011
(December 31, 2010  $352.5 million; January 1, 2010  $216.7 million) resulting in a negative
balance.  17




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##### Table of Contents



13. OPERATING EXPENSES
  Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2011
    
    
    2010
    
    
    2011
    
    
    2010AsiaField operating
    
    
    1,692
    
    
    
    1,367
    
    
    
    3,315
    
    
    
    2,664Windfall levy
    
    
    2,182
    
    
    
    869
    
    
    
    3,759
    
    
    
    1,680Engineering support
    
    
    103
    
    
    
    112
    
    
    
    213
    
    
    
    2403,977
    
    
    
    2,348
    
    
    
    7,287
    
    
    
    4,584Technology DevelopmentFTF operating costs
    
    
    1,362
    
    
    
    904
    
    
    
    2,575
    
    
    
    2,122Total operating costs
    
    
    5,339
    
    
    
    3,252
    
    
    
    9,862
    
    
    
    6,706
  14. INCOME (LOSS) PER COMMON SHARE
  Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2011
    
    
    2010
    
    
    2011
    
    
    2010Net income (loss)
    
    
    (4,111
    )
    
    
    9,259
    
    
    
    (15,237
    )
    
    
    2,454Adjustment for derivative gains on dilutive equity instruments
    
    
    
    
    
    
    (6,376
    )
    
    
    
    
    
    
    (19,139
    )Diluted net income (loss)
    
    
    (4,111
    )
    
    
    2,883
    
    
    
    (15,237
    )
    
    
    (16,685
    )Basic weighted average common shares
    
    
    338,432
    
    
    
    333,922
    
    
    
    341,197
    
    
    
    320,651Adjustment for dilutive equity instrumentsConvertible Note
    
    
    
    
    
    
    12,780
    
    
    
    
    
    
    
    12,780Stock options
    
    
    
    
    
    
    3,003
    
    
    
    
    
    
    
    4,324Purchase warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,317Diluted weighted average common shares
    
    
    338,432
    
    
    
    349,705
    
    
    
    341,197
    
    
    
    339,072Net income (loss) per common shareBasic
    
    
    (0.01
    )
    
    
    0.03
    
    
    
    (0.04
    )
    
    
    0.01Diluted
    
    
    (0.01
    )
    
    
    0.01
    
    
    
    (0.04
    )
    
    
    (0.05
    )
  18




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15. SUPPLEMENTAL CASH FLOW INFORMATION
 Changes in Non-Cash Activities
 Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2011
    
    
    2010
    
    
    2011
    
    
    2010Operating activitiesAccounts receivable
    
    
    (2,022
    )
    
    
    (553
    )
    
    
    (2,646
    )
    
    
    (309
    )Note receivable
    
    
    2
    
    
    
    5
    
    
    
    33
    
    
    
    (31
    )Prepaid and other current assets
    
    
    (214
    )
    
    
    (801
    )
    
    
    (148
    )
    
    
    (678
    )Accounts payable and accrued liabilities
    
    
    3,278
    
    
    
    710
    
    
    
    4,739
    
    
    
    7461,044
    
    
    
    (639
    )
    
    
    1,978
    
    
    
    (272
    )Investing activitiesAccounts receivable
    
    
    80
    
    
    
    (4
    )
    
    
    556
    
    
    
    (29
    )Prepaid and other current assets
    
    
    1,509
    
    
    
    
    
    
    
    2,241
    
    
    
    83Accounts payable and accrued liabilities
    
    
    (507
    )
    
    
    1,537
    
    
    
    1,781
    
    
    
    2,8011,082
    
    
    
    1,533
    
    
    
    4,578
    
    
    
    2,855Financing activitiesAccounts payable and accrued liabilities
    
    
    (28
    )
    
    
    39
    
    
    
    (47
    )
    
    
    392,098
    
    
    
    933
    
    
    
    6,509
    
    
    
    2,622
 16. RELATED PARTY TRANSACTIONS
   Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,Related Party
    
    Nature of Transaction
    
    2011
    
    
    2010
    
    
    2011
    
    
    2010Global Mining Management Corp.
    
    Administration
    
    
    116
    
    
    
    335
    
    
    
    329
    
    
    
    641Ivanhoe Capital Aviation Ltd.
    
    Aircraft
    
    
    300
    
    
    
    300
    
    
    
    600
    
    
    
    600I2MS.Net PTE Ltd.
    
    Information systems
    
    
    50
    
    
    
    152
    
    
    
    108
    
    
    
    184Ivanhoe Capital Services Ltd.
    
    Administration
    
    
    29
    
    
    
    58
    
    
    
    121
    
    
    
    83SouthGobi Resources Ltd.
    
    Administration
    
    
    26
    
    
    
    
    
    
    
    77
    
    
    
    GoviEx Gold Inc.
    
    Business development
    
    
    
    
    
    
    9
    
    
    
    
    
    
    
    331092155 Ontario Inc.
    
    HTLTM technology
    
    
    8
    
    
    
    13
    
    
    
    20
    
    
    
    27Ensyn Technologies Inc.
    
    HTLTM technology
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7Ivanhoe Capital PTE Ltd.
    
    Administration
    
    
    46
    
    
    
    7
    
    
    
    115
    
    
    
    9Ivanhoe Mines Ltd.
    
    Administration
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    13575
    
    
    
    885
    
    
    
    1,370
    
    
    
    1,597
  June 30,
    
    
    December 31,
    
    
    January 1,Related Party
    
    Nature of Transaction
    
    2011
    
    
    2010
    
    
    2010Global Mining Management Corp.
    
    Administration
    
    
    75
    
    
    
    86
    
    
    
    40I2MS.Net PTE Ltd.
    
    Information systems
    
    
    18
    
    
    
    13
    
    
    
    17SouthGobi Resources Ltd.
    
    Administration
    
    
    13
    
    
    
    38
    
    
    
    Ivanhoe Capital Services Ltd.
    
    Management
    
    
    17
    
    
    
    70
    
    
    
    15Ivanhoe Capital PTE Ltd.
    
    Administration
    
    
    9
    
    
    
    
    
    
    
    132
    
    
    
    207
    
    
    
    72
  19




---



##### Table of Contents



17. REMUNERATION OF KEY MANAGEMENT PERSONNEL
  Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2011
    
    
    2010
    
    
    2011
    
    
    2010Base salaries or fees and other cash payments
    
    
    1,600
    
    
    
    1,483
    
    
    
    2,380
    
    
    
    2,188Employers contributions to retirement plan
    
    
    11
    
    
    
    17
    
    
    
    27
    
    
    
    34Share-based compensation expense
    
    
    818
    
    
    
    638
    
    
    
    1,536
    
    
    
    1,0342,429
    
    
    
    2,138
    
    
    
    3,943
    
    
    
    3,256
 18. SUBSEQUENT EVENT
  19. FIRST-TIME ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS
   19.1 Exemptions from Full Retrospective Application
  i. Deemed Cost
  ii. Decommissioning Provisions Included in the Cost of Property, Plant and Equipment
  iii. Share-Based Payment
  iv. Business Combinations
   20




---



##### Table of Contents



v. Leases
  19.2 Reconciliations to IFRS
    
  21




---



##### Table of Contents



Reconciliation of Consolidated Statements of Financial Position
 At January 1, 2010
    
    
    At December 31, 2010
    
    
    At June 30, 2010Canadian
    
    
    Effect of
    
    
    IFRS
    
    
    Canadian
    
    
    Effect of
    
    
    IFRS
    
    
    Canadian
    
    
    Effect of
    
    
    IFRS(US$000s)
    
    GAAP
    
    
    Transition
    
    
    Balances
    
    
    GAAP
    
    
    Transition
    
    
    Balances
    
    
    GAAP
    
    
    Transition
    
    
    BalancesAssetsCurrent AssetsCash and cash equivalents
    
    
    24,362
    
    
    
    
    
    
    
    24,362
    
    
    
    68,317
    
    
    
    
    
    
    
    68,317
    
    
    
    116,667
    
    
    
    
    
    
    
    116,667Accounts receivable
    
    
    5,021
    
    
    
    
    
    
    
    5,021
    
    
    
    6,359
    
    
    
    
    
    
    
    6,359
    
    
    
    5,355
    
    
    
    
    
    
    
    5,355Note receivable
    
    
    225
    
    
    
    
    
    
    
    225
    
    
    
    264
    
    
    
    
    
    
    
    264
    
    
    
    256
    
    
    
    
    
    
    
    256Prepaid and other current assets
    
    
    771
    
    
    
    
    
    
    
    771
    
    
    
    2,859
    
    
    
    
    
    
    
    2,859
    
    
    
    1,366
    
    
    
    
    
    
    
    1,36630,379
    
    
    
    
    
    
    
    30,379
    
    
    
    77,799
    
    
    
    
    
    
    
    77,799
    
    
    
    123,644
    
    
    
    
    
    
    
    123,644Intangible assets
    
    
    92,153
    
    
    
    115,597
    a
    
    
    207,750
    
    
    
    92,153
    
    
    
    197,193
    a
    
    
    273,568
    
    
    
    92,153
    
    
    
    154,810
    a
    
    
    242,423
    
    
    
    
    
    
    
    
    
    
    
    (7,482
    )b
    
    
    
    
    
    
    
    
    
    
    (2,950
    )b
    
    
    
    
    
    
    
    
    
    
    
    175
    c
    
    
    
    
    
    
    
    
    
    
    (1,590
    )g
    
    
    
    
    
    
    
    
    
    
    
    (8,471
    )g
    
    
    
    
    
    
    
    
    
    
    Property, plant and equipment, net
    
    
    158,392
    
    
    
    (115,597
    )a
    
    
    41,983
    
    
    
    237,200
    
    
    
    (197,193
    )a
    
    
    40,618
    
    
    
    195,060
    
    
    
    (154,810
    )a
    
    
    40,229(904
    )b
    
    
    
    
    
    
    
    
    
    
    (2,014
    )b
    
    
    
    
    
    
    
    
    
    
    (1,320
    )b92
    c
    
    
    
    
    
    
    
    
    
    
    189
    c
    
    
    
    
    
    
    
    
    
    
    92
    c
    
    
    
    
    
    
    
    
    
    
    
    2,436
    f
    
    
    
    
    
    
    
    
    
    
    1,207
    fLong term receivables
    
    
    839
    
    
    
    
    
    
    
    839
    
    
    
    2,433
    
    
    
    
    
    
    
    2,433
    
    
    
    1,682
    
    
    
    
    
    
    
    1,682281,763
    
    
    
    (812
    )
    
    
    280,951
    
    
    
    409,585
    
    
    
    (15,167
    )
    
    
    394,418
    
    
    
    412,539
    
    
    
    (4,561
    )
    
    
    407,978Liabilities and Shareholders EquityCurrent LiabilitiesAccounts payable and accrued liabilities
    
    
    10,779
    
    
    
    
    
    
    
    10,779
    
    
    
    21,482
    
    
    
    
    
    
    
    21,482
    
    
    
    14,342
    
    
    
    
    
    
    
    14,342Debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,832
    
    
    
    
    
    
    
    39,832
    
    
    
    
    
    
    
    
    
    
    
    Derivative financial instruments
    
    
    
    
    
    
    13,023
    d
    
    
    13,023
    
    
    
    
    
    
    
    8,447
    d
    
    
    8,447
    
    
    
    
    
    
    
    7,235
    d
    
    
    7,235Income tax payable
    
    
    530
    
    
    
    
    
    
    
    530
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    8Decommissioning costs
    
    
    753
    
    
    
    
    
    
    
    753
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50
    
    
    
    
    
    
    
    5012,062
    
    
    
    13,023
    
    
    
    25,085
    
    
    
    61,314
    
    
    
    8,447
    
    
    
    69,761
    
    
    
    14,400
    
    
    
    7,235
    
    
    
    21,635Long term debt
    
    
    36,934
    
    
    
    
    
    
    
    36,934
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37,255
    
    
    
    
    
    
    
    37,255Long term provisions
    
    
    2,095
    
    
    
    92
    c
    
    
    2,187
    
    
    
    2,644
    
    
    
    364
    c
    
    
    3,008
    
    
    
    2,253
    
    
    
    92
    c
    
    
    2,345Deferred income tax liability
    
    
    22,643
    
    
    
    (307
    )b
    
    
    22,336
    
    
    
    21,518
    
    
    
    (367
    )b
    
    
    21,165
    
    
    
    23,104
    
    
    
    (327
    )b
    
    
    22,784
    
    
    
    
    
    
    
    
    
    
    
    14
    f
    
    
    
    
    
    
    
    
    
    
    7
    f73,734
    
    
    
    12,808
    
    
    
    86,542
    
    
    
    85,476
    
    
    
    8,458
    
    
    
    93,934
    
    
    
    77,012
    
    
    
    7,007
    
    
    
    84,019Shareholders EquityShare capital
    
    
    422,322
    
    
    
    
    
    
    
    422,322
    
    
    
    550,562
    
    
    
    
    
    
    
    550,562
    
    
    
    549,281
    
    
    
    (70
    )e
    
    
    549,211Purchase warrants
    
    
    19,427
    
    
    
    (19,427
    )d
    
    
    
    
    
    
    33,423
    
    
    
    (33,423
    )d
    
    
    
    
    
    
    33,423
    
    
    
    (33,423
    )d
    
    
    Contributed surplus
    
    
    20,029
    
    
    
    (2,947
    )d
    
    
    18,724
    
    
    
    22,983
    
    
    
    (2,947
    )d
    
    
    23,141
    
    
    
    19,291
    
    
    
    (2,947
    )d
    
    
    18,9311,642
    e
    
    
    
    
    
    
    
    
    
    
    3,105
    e
    
    
    
    
    
    
    
    
    
    
    2,587
    eConvertible note
    
    
    2,086
    
    
    
    (2,086
    )d
    
    
    
    
    
    
    2,086
    
    
    
    (2,086
    )d
    
    
    
    
    
    
    2,086
    
    
    
    (2,086
    )d
    
    
    Accumulated deficit
    
    
    (255,835
    )
    
    
    9,198
    
    
    
    (246,637
    )
    
    
    (284,945
    )
    
    
    11,726
    
    
    
    (273,219
    )
    
    
    (268,554
    )
    
    
    24,371
    
    
    
    (244,183
    )208,029
    
    
    
    (13,620
    )
    
    
    194,409
    
    
    
    324,109
    
    
    
    (23,625
    )
    
    
    300,484
    
    
    
    335,527
    
    
    
    (11,568
    )
    
    
    323,959281,763
    
    
    
    (812
    )
    
    
    280,951
    
    
    
    409,585
    
    
    
    (15,167
    )
    
    
    394,418
    
    
    
    412,539
    
    
    
    (4,561
    )
    
    
    407,978
  22




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##### Table of Contents



Reconciliation of Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
 Three months ended June 30, 2010
    
    
    Six months ended June 30, 2010
    
    
    Year ended December 31, 2010Canadian
    
    
    Effect of
    
    
    IFRS
    
    
    Canadian
    
    
    Effect of
    
    
    IFRS
    
    
    Canadian
    
    
    Effect of
    
    
    IFRS(US$000s)
    
    GAAP
    
    
    Transition
    
    
    Balances
    
    
    GAAP
    
    
    Transition
    
    
    Balances
    
    
    GAAP
    
    
    Transition
    
    
    BalancesRevenueOil
    
    
    6,047
    
    
    
    
    
    
    
    6,047
    
    
    
    11,377
    
    
    
    
    
    
    
    11,377
    
    
    
    21,720
    
    
    
    
    
    
    
    21,720Interest
    
    
    23
    
    
    
    
    
    
    
    23
    
    
    
    42
    
    
    
    
    
    
    
    42
    
    
    
    208
    
    
    
    
    
    
    
    2086,070
    
    
    
    
    
    
    
    6,070
    
    
    
    11,419
    
    
    
    
    
    
    
    11,419
    
    
    
    21,928
    
    
    
    
    
    
    
    21,928ExpensesOperating
    
    
    3,229
    
    
    
    23
    b
    
    
    3,252
    
    
    
    6,652
    
    
    
    54
    b
    
    
    6,706
    
    
    
    13,514
    
    
    
    111
    b
    
    
    13,625Exploration and evaluation
    
    
    
    
    
    
    984
    g
    
    
    984
    
    
    
    
    
    
    
    1,590
    g
    
    
    1,590
    
    
    
    
    
    
    
    8,471
    g
    
    
    8,471General and administrative
    
    
    6,999
    
    
    
    1,906
    b
    
    
    9,093
    
    
    
    13,339
    
    
    
    3,312
    b
    
    
    17,525
    
    
    
    32,864
    
    
    
    8,481
    b
    
    
    42,807188
    e
    
    
    
    
    
    
    
    
    
    
    874
    e
    
    
    
    
    
    
    
    
    
    
    1,462
    eDepletion and depreciation
    
    
    2,582
    
    
    
    (661
    )f
    
    
    1,921
    
    
    
    4,665
    
    
    
    (1,207
    )f
    
    
    3,458
    
    
    
    8,960
    
    
    
    (2,436
    )f
    
    
    6,524Foreign currency exchange
    
    
    3,086
    
    
    
    
    
    
    
    3,086
    
    
    
    (1,101
    )
    
    
    
    
    
    
    (1,101
    )
    
    
    (3,325
    )
    
    
    
    
    
    
    (3,325
    )Derivative instruments (gain) loss
    
    
    
    
    
    
    (21,840
    )d
    
    
    (21,840
    )
    
    
    
    
    
    
    (19,783
    )d
    
    
    (19,783
    )
    
    
    
    
    
    
    (18,571
    )d
    
    
    (18,571
    )Interest
    
    
    4
    
    
    
    
    
    
    
    4
    
    
    
    8
    
    
    
    
    
    
    
    8
    
    
    
    24
    
    
    
    
    
    
    
    2415,900
    
    
    
    (19,400
    )
    
    
    (3,500
    )
    
    
    23,563
    
    
    
    (15,160
    )
    
    
    8,403
    
    
    
    52,037
    
    
    
    (2,482
    )
    
    
    49,555Income (loss) before income taxes
    
    
    (9,830
    )
    
    
    19,400
    
    
    
    9,570
    
    
    
    (12,144
    )
    
    
    15,160
    
    
    
    3,016
    
    
    
    (30,109
    )
    
    
    2,482
    
    
    
    (27,627
    )(Provision for) recovery of income taxesCurrent
    
    
    (36
    )
    
    
    
    
    
    
    (36
    )
    
    
    (115
    )
    
    
    
    
    
    
    (115
    )
    
    
    (126
    )
    
    
    
    
    
    
    (126
    )Deferred
    
    
    (286
    )
    
    
    14
    b
    
    
    (275
    )
    
    
    (460
    )
    
    
    20
    b
    
    
    (447
    )
    
    
    1,125
    
    
    
    60
    b
    
    
    1,171(3
    )f
    
    
    
    
    
    
    
    
    
    
    (7
    )f
    
    
    
    
    
    
    
    
    
    
    (14
    )f(322
    )
    
    
    11
    
    
    
    (311
    )
    
    
    (575
    )
    
    
    13
    
    
    
    (562
    )
    
    
    999
    
    
    
    46
    
    
    
    1,045Net income (loss) and comprehensive income (loss)
    
    
    (10,152
    )
    
    
    19,411
    
    
    
    9,259
    
    
    
    (12,719
    )
    
    
    15,173
    
    
    
    2,454
    
    
    
    (29,110
    )
    
    
    2,528
    
    
    
    (26,582
    )
  23




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##### Table of Contents



Notes to reconciliation
 a.
    
    Reclassification of Intangible Assets
 Under Canadian GAAP, oil and gas properties in the exploration and evaluation stage were
classified as oil and gas properties and development costs. In accordance with IFRS 6, these
properties were reclassified as intangible assets.
 b.
    
    Adjustment for Capitalized Overhead
 Under Canadian GAAP, the Company capitalized employee benefits and overhead that were directly
attributable to E&E assets and PP&E. A portion of the amounts capitalized under Canadian GAAP do
not meet the threshold for capitalization under IAS 16, Property, Plant and Equipment and
therefore have been reclassified as operating costs or general and administrative expenses, as
appropriate.
 c.
    
    Decommissioning Provisions
 Under Canadian GAAP, the present value of the Companys estimated future decommissioning costs
was calculated using a credit-adjusted risk-free discount rate. The discount rate under IFRS
does not permit company specific credit adjustments and therefore the decommissioning provision
has been recalculated using a risk-free discount rate.
 d.
    
    Derivative Financial Instruments
 Under Canadian GAAP, the equity component of the Companys Convertible Note and the purchase
warrants were classified as shareholders equity. In accordance with IAS 32, Financial
Instruments: Presentation, financial instruments with an exercise price denominated in a
currency other than the Companys functional currency are accounted for as derivatives. As a
result, the equity component and purchase warrants have been reclassified as derivative
financial instruments.
 This resulted in the reclassification of the convertible portion of the Convertible Note and
purchase from shareholders equity to liabilities under IFRS. Additionally, IFRS requires these
items to be recorded at fair value with changes in their fair value recognized in the income
statement.
 e.
    
    Share-Based Payments
 Stock options were accounted for using the fair value method under Canadian GAAP and charged to
operations on a straight-line basis. Under IFRS 2, Share-Based Payment, share-based payments
are charged to operations on a graded vesting basis thereby accelerating the compensation
expense recognized in earnings.
 f.
    
    Depletion
 Under Canadian GAAP, the Company depleted its oil and gas assets using the unit-of-production
method, based on proved reserves. For IFRS purposes, the Company is depleting its oil and gas
assets using the unit-of-production method, based on proved plus probable reserves. This has
resulted in a deferral of depletion expense.
 g.
    
    Exploration and Evaluation Expense
 Under Canadian GAAP, capitalization of unsuccessful exploration activities was permitted if the
carrying value of the Companys total capitalized oil and gas properties and development was not
impaired. Under IFRS, unsuccessful exploration and evaluation wells and impaired geological and
geophysical assets will be charged to earnings as E&E expense.
 20. COMPARATIVES
   24




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##### Table of Contents



ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Forward-Looking Statements
      Special Note to Canadian Investors
 National Instrument 51-101  Standards of
Disclosure for Oil and Gas Activities Special Note to Canadian Investors
  25




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##### Table of Contents



Advisories
   Non-IFRS Financial Measures
    bbl
    
    =
    
    barrel
    
    mcf
    
    =
    
    thousand cubic feetbbls/d
    
    =
    
    barrels per day
    
    mcf/d
    
    =
    
    thousand cubic feet per dayboe
    
    =
    
    barrel of oil equivalent
    
    mmcf
    
    =
    
    million cubic feetboe/d
    
    =
    
    barrels of oil equivalent per day
    
    mmcf/d
    
    =
    
    million cubic feet per daymbbls
    
    =
    
    thousand barrels
    
    mmbbls
    
    =
    
    million barrelsmbbls/d
    
    =
    
    thousand barrels per day
    
    mmbls/d
    
    =
    
    million barrels per daymboe
    
    =
    
    thousands of barrels of oil equivalent
    
    mmbtu
    
    =
    
    million British thermal unitsmboe/d
    
    =
    
    thousands of barrels of oil equivalent per day
    
    tcf
    
    =
    
    trillion cubic feet
  www.ivanhoeenergy.com www.sec.gov www.sedar.com www.ivanhoeenergy.com/index.php?page=mandate_of_the_boardcommittee_overview.
  26




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##### Table of Contents



INTERNATIONAL FINANCIAL REPORTING STANDARDS
   HIGHLIGHTS
 Three months
    
    
    Six monthsended June 30,
    
    
    ended June 30,($000, except as stated)
    
    2011
    
    
    2010
    
    
    2011
    
    
    2010Average daily production (bbls/d)
    
    
    940
    
    
    
    869
    
    
    
    973
    
    
    
    837Realized oil prices ($/bbl)
    
    
    109.71
    
    
    
    76.47
    
    
    
    99.38
    
    
    
    75.11Oil revenue
    
    
    9,389
    
    
    
    6,047
    
    
    
    17,508
    
    
    
    11,377Capital expenditures
    
    
    17,420
    
    
    
    12,877
    
    
    
    31,235
    
    
    
    36,375Cash flow used in operating activities
    
    
    (6,455
    )
    
    
    (6,276
    )
    
    
    (13,464
    )
    
    
    (11,707
    )Net income (loss)
    
    
    (4,111
    )
    
    
    9,259
    
    
    
    (15,237
    )
    
    
    2,454Net income (loss) per share, basic
    
    
    (0.01
    )
    
    
    0.03
    
    
    
    (0.04
    )
    
    
    0.01Net income (loss) per share, diluted
    
    
    (0.01
    )
    
    
    0.01
    
    
    
    (0.04
    )
    
    
    (0.05
    )
       27




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##### Table of Contents



RESULTS OF OPERATIONS
 Three months
    
    
    Six monthsended June 30,
    
    
    ended June 30,2011
    
    
    2010
    
    
    2011
    
    
    2010Asia(net bbls)Dagang
    
    
    81,664
    
    
    
    75,210
    
    
    
    168,529
    
    
    
    143,004Daqing
    
    
    3,917
    
    
    
    3,861
    
    
    
    7,651
    
    
    
    8,463Total production
    
    
    85,581
    
    
    
    79,071
    
    
    
    176,180
    
    
    
    151,467Average daily production (bbls/d)
    
    
    940
    
    
    
    869
    
    
    
    973
    
    
    
    837PricingAverage realized oil price ($/bbl)
    
    
    109.71
    
    
    
    76.47
    
    
    
    99.38
    
    
    
    75.11West Texas Intermediate (WTI) ($/bbl)
    
    
    102.56
    
    
    
    78.04
    
    
    
    98.27
    
    
    
    78.38
 Oil Revenue
  Net Revenue from Operations
 Three months
    
    
    Six monthsended June 30,
    
    
    ended June 30,($/bbl)
    
    2011
    
    
    2010
    
    
    2011
    
    
    2010Oil revenue(1)
    
    
    109.71
    
    
    
    76.47
    
    
    
    99.38
    
    
    
    75.11Less operating costsField operating
    
    
    (19.76
    )
    
    
    (17.29
    )
    
    
    (18.81
    )
    
    
    (17.58
    )Windfall Levy
    
    
    (25.51
    )
    
    
    (11.00
    )
    
    
    (21.34
    )
    
    
    (11.09
    )Engineering and support costs
    
    
    (1.20
    )
    
    
    (1.42
    )
    
    
    (1.21
    )
    
    
    (1.58
    )Net operating revenue(1)
    
    
    63.24
    
    
    
    46.76
    
    
    
    58.02
    
    
    
    44.86Depletion
    
    
    (18.74
    )
    
    
    (23.59
    )
    
    
    (23.62
    )
    
    
    (18.02
    )Net revenue (loss) from operations(1)
    
    
    44.50
    
    
    
    23.17
    
    
    
    34.40
    
    
    
    26.84
 (1)
    
    Oil revenue per barrel, net operating revenue per barrel and net revenue (loss) from
operations per barrel do not have standardized meanings prescribed by IFRS and therefore may
not be comparable to similar measures used by other companies. Please refer to the Non-IFRS
Financial Measures under the Advisories section in this MD&A for more details.  28




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##### Table of Contents



Operating Costs
 Three months
    
    
    Six monthsended June 30,
    
    
    ended June 30,2011
    
    
    2010
    
    
    2011
    
    
    2010AsiaField operating
    
    
    1,692
    
    
    
    1,367
    
    
    
    3,315
    
    
    
    2,664Windfall levy
    
    
    2,182
    
    
    
    869
    
    
    
    3,759
    
    
    
    1,680Engineering support
    
    
    103
    
    
    
    112
    
    
    
    213
    
    
    
    2403,977
    
    
    
    2,348
    
    
    
    7,287
    
    
    
    4,584Technology DevelopmentFTF operating costs
    
    
    1,362
    
    
    
    904
    
    
    
    2,575
    
    
    
    2,122Total operating costs
    
    
    5,339
    
    
    
    3,252
    
    
    
    9,862
    
    
    
    6,706
    Exploration and Evaluation
   General and Administrative
 TM
  Depletion and Depreciation
    29




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##### Table of Contents



Foreign Exchange
   Derivative Instruments
   Provision for Income Taxes
  LIQUIDITY AND CAPITAL RESOURCES
 Contractual Obligations
  Total
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    After 2014Debt
    
    
    41,472
    
    
    
    41,472
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Long term debt
    
    
    76,024
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    76,024Interest
    
    
    23,148
    
    
    
    3,484
    
    
    
    4,371
    
    
    
    4,371
    
    
    
    4,371
    
    
    
    6,551Decommissioning provisions(1)
    
    
    2,081
    
    
    
    
    
    
    
    
    
    
    
    344
    
    
    
    
    
    
    
    1,737Long term obligation
    
    
    1,900
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,900Lease commitments
    
    
    2,059
    
    
    
    906
    
    
    
    886
    
    
    
    267
    
    
    
    
    
    
    
    146,684
    
    
    
    45,862
    
    
    
    5,257
    
    
    
    4,982
    
    
    
    4,371
    
    
    
    86,212
 (1)
    
    Represents undiscounted asset retirement obligations after inflation. The discounted value of
these estimated obligations is provided for in the Financial Statements. Debt
   30




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##### Table of Contents



Long Term Debt and Interest
  Decommissioning Provisions
  Long Term Obligation
  Operating Leases
  Other
      31




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Sources and Uses of Cash
  Three months
    
    
    Six monthsended June 30,
    
    
    ended June 30,2011
    
    
    2010
    
    
    2011
    
    
    2010Cash used in operating activities
    
    
    (6,455
    )
    
    
    (6,276
    )
    
    
    (13,464
    )
    
    
    (11,707
    )Cash used in investing activities
    
    
    (16,639
    )
    
    
    (11,842
    )
    
    
    (28,123
    )
    
    
    (35,210
    )Cash provided by (used in) financing activities
    
    
    72,945
    
    
    
    (59
    )
    
    
    102,740
    
    
    
    137,898
  Operating Activities
  Investing Activities
 E&E Expenditures
 E&E expenditures in the first six months of 2011 totaled $23.8 million. At the Yixin-2 gas well,
a 100-ton hydraulic fracture stimulation was performed after initial pre-stimulation gas testing
of the Xu-4 formation. Subsequent to the post-fracture gas flow test, down-hole electronic
recorders were installed to gather additional pressure data during an extended shut-in period.
 Following initial gas testing operations performed on the Xu-4 and Xu-5 formations of the
Zitong-1 gas well in the first quarter, the Xu-5 formation was hydraulic fracture stimulated with
200-tons and the zone was then gas flow tested. Coil tubing and nitrogen were used to assist in
liquid unloading of the wellbore during the test period. Following the flow testing, down-hole
electronic recorders were run and the well was shut-in for an extended pressure build-up.
 In the Nyalga basin of Mongolia, mobilization activities of a drilling rig and associated
equipment for the Companys first drilling location were initiated in June 2011.
 In Canada, regulators completed their initial review of the Companys Environmental Impact
Assessment for Tamarack and, as is customary, provided the Company with an initial set of
Supplemental Information Requests in May 2011. Ivanhoe plans to submit its responses in the third
quarter of 2011. The Company is continuing to work with numerous local and aboriginal
stakeholders and identify economic and employment opportunities for residents of area
communities. Design of the surface facilities is ongoing with AMEC-BDR, with completion of the
Front-End Engineering and Design anticipated in the fall of 2011.
 In Ecuador, the Company commenced its 190-kilometre 2-D seismic survey of Block 20 during the
second quarter of 2011. The seismic data will assist in the selection of future appraisal
drilling locations. The initial phase of shooting was completed in July and processing will begin
shortly.PP&E Expenditures
 In the first six months of 2011, PP&E additions totaled $7.5 million. At Dagang, a second well
was drilled, completed and fracture stimulated in addition to the 2010 well completed in the
first quarter of 2011. The fracture stimulation program at Dagang also continued during the
quarter.
  32




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##### Table of Contents



Financing Activities
   Capital Structure
 June 30,
    
    
    December 31,As at
    
    2011
    
    
    2010Debt
    
    
    41,441
    
    
    
    39,832Long term debt
    
    
    64,322
    
    
    
    Shareholders equity
    
    
    321,462
    
    
    
    300,484
  Outlook
     TM TM
  33




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##### Table of Contents



ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4.
    
    CONTROLS AND PROCEDURES
     34




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##### Table of Contents



PART II OTHER INFORMATION
 
 ITEM 1.
    
    LEGAL PROCEEDINGS
     35




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##### Table of Contents



ITEM 6.
    
    EXHIBITS
 Exhibit Number
    
    Description1.1
    
    
    Underwriting Agreement, dated May 18, 2011, among Ivanhoe Energy Inc. and TD Securities Inc., Macquarie
Capital Markets Canada Ltd., RBC Dominion Securities Inc., UBS Securities Canada Inc., CIBC World Markets
Inc. and Byron Capital Markets Ltd.4.1
    
    
    Debenture Indenture, dated as of June 9, 2011, between Ivanhoe Energy Inc. and BNY Trust Company of
Canada, as trustee10.1
    
    
    Restricted Share Unit Plan31.1
    
    
    Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    
    Certification by the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    
    Certification by the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    
    Certification by the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 SIGNATURE
  IVANHOE ENERGY INC.By:
    /s/ Gerald D. SchiefelbeinGerald D. SchiefelbeinChief Financial Officer   36