##### 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 September 30, 2011
Commission file number: 000-30586
 
 (IVANHONE LOGO)
 Ivanhoe Energy Inc.
  Yukon, Canada
    
    98-0372413(State or other jurisdiction of
    
    (IRS Employerincorporation or organization)
    
    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 þ




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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
    
    
    24ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    33ITEM 4: Controls and Procedures
    
    
    33PART IIITEM 1: Legal Proceedings
    
    
    34ITEM 6: Exhibits
    
    
    35Exhibit 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)
 September 30,
    
    
    December 31,
    
    
    January 1,(US$000s)
    
    Notes
    
    
    2011
    
    
    2010
    
    
    2010AssetsCurrent AssetsCash and cash equivalents
    
    
    3
    
    
    
    58,168
    
    
    
    68,317
    
    
    
    24,362Accounts receivable
    
    
    
    
    
    
    8,248
    
    
    
    6,359
    
    
    
    5,021Note receivable
    
    
    
    
    
    
    222
    
    
    
    264
    
    
    
    225Prepaid and other
    
    
    
    
    
    
    690
    
    
    
    2,859
    
    
    
    77167,328
    
    
    
    77,799
    
    
    
    30,379Intangible
    
    
    4
    
    
    
    310,430
    
    
    
    273,568
    
    
    
    207,750Property, plant and equipment
    
    
    5
    
    
    
    46,966
    
    
    
    40,618
    
    
    
    41,983Long term receivables
    
    
    
    
    
    
    3,723
    
    
    
    2,433
    
    
    
    839428,447
    
    
    
    394,418
    
    
    
    280,951Liabilities and Shareholders EquityCurrent LiabilitiesAccounts payable and accrued liabilities
    
    
    
    
    
    
    23,032
    
    
    
    21,482
    
    
    
    10,779Debt
    
    
    6
    
    
    
    
    
    
    
    39,832
    
    
    
    Derivative instruments
    
    
    7
    
    
    
    286
    
    
    
    8,447
    
    
    
    13,023Income taxes
    
    
    
    
    
    
    734
    
    
    
    
    
    
    
    530Decommissioning costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    75324,052
    
    
    
    69,761
    
    
    
    25,085Long term debt
    
    
    6
    
    
    
    60,146
    
    
    
    
    
    
    
    36,934Long term derivative instruments
    
    
    7
    
    
    
    1,810
    
    
    
    
    
    
    
    Long term provisions
    
    
    
    
    
    
    1,366
    
    
    
    3,008
    
    
    
    2,187Deferred income taxes
    
    
    
    
    
    
    21,901
    
    
    
    21,165
    
    
    
    22,336109,275
    
    
    
    93,934
    
    
    
    86,542Shareholders EquityShare capital
    
    
    10
    
    
    
    586,108
    
    
    
    550,562
    
    
    
    422,322Contributed surplus
    
    
    11
    
    
    
    25,677
    
    
    
    23,141
    
    
    
    18,724Accumulated deficit
    
    
    
    
    
    
    (292,613
    )
    
    
    (273,219
    )
    
    
    (246,637
    )319,172
    
    
    
    300,484
    
    
    
    194,409428,447
    
    
    
    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 and Comprehensive Loss(Unaudited)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,(US$000s, except share and per share amounts)
    
    Note
    
    
    2011
    
    
    2010
    
    
    2011
    
    
    2010RevenueOil
    
    
    
    
    
    
    10,769
    
    
    
    4,177
    
    
    
    28,277
    
    
    
    15,554Interest
    
    
    
    
    
    
    219
    
    
    
    88
    
    
    
    429
    
    
    
    13010,988
    
    
    
    4,265
    
    
    
    28,706
    
    
    
    15,684ExpensesOperating
    
    
    13
    
    
    
    5,489
    
    
    
    2,996
    
    
    
    15,351
    
    
    
    9,702Exploration and evaluation
    
    
    4
    
    
    
    2,143
    
    
    
    788
    
    
    
    2,143
    
    
    
    2,378General and administrative
    
    
    
    
    
    
    12,239
    
    
    
    10,898
    
    
    
    37,400
    
    
    
    28,423Depletion and depreciation
    
    
    5
    
    
    
    2,131
    
    
    
    1,490
    
    
    
    5,853
    
    
    
    4,948Foreign currency exchange gain
    
    
    
    
    
    
    (670
    )
    
    
    (1,188
    )
    
    
    (1,133
    )
    
    
    (2,289
    )Derivative instruments gain
    
    
    7
    
    
    
    (5,429
    )
    
    
    (622
    )
    
    
    (12,629
    )
    
    
    (20,405
    )Interest
    
    
    
    
    
    
    431
    
    
    
    4
    
    
    
    798
    
    
    
    12Gain on derecognition of long term provision
    
    
    
    
    
    
    (1,900
    )
    
    
    
    
    
    
    (1,900
    )
    
    
    14,434
    
    
    
    14,366
    
    
    
    45,883
    
    
    
    22,769Loss before income taxes
    
    
    
    
    
    
    (3,446
    )
    
    
    (10,101
    )
    
    
    (17,177
    )
    
    
    (7,085
    )(Provision for) recovery of income taxesCurrent
    
    
    
    
    
    
    (682
    )
    
    
    
    
    
    
    (1,481
    )
    
    
    (115
    )Deferred
    
    
    
    
    
    
    (29
    )
    
    
    496
    
    
    
    (736
    )
    
    
    49(711
    )
    
    
    496
    
    
    
    (2,217
    )
    
    
    (66
    )Net loss and comprehensive loss
    
    
    
    
    
    
    (4,157
    )
    
    
    (9,605
    )
    
    
    (19,394
    )
    
    
    (7,151
    )Net loss per common shareBasic and diluted
    
    
    
    
    
    
    (0.01
    )
    
    
    (0.03
    )
    
    
    (0.06
    )
    
    
    (0.02
    )Weighted average number of common shares (000s)Basic and diluted
    
    
    
    
    
    
    338,592
    
    
    
    334,012
    
    
    
    342,173
    
    
    
    325,153
   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 loss and comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,151
    )
    
    
    (7,151
    )Shares issued for cash, net of share issue costs
    
    
    
    
    
    
    50,000
    
    
    
    121,697
    
    
    
    
    
    
    
    
    
    
    
    121,697Shares issued for services
    
    
    
    
    
    
    280
    
    
    
    799
    
    
    
    
    
    
    
    
    
    
    
    799Exercise of stock options
    
    
    11
    
    
    
    1,171
    
    
    
    4,323
    
    
    
    (2,225
    )
    
    
    
    
    
    
    2,098Exercise of purchase warrants
    
    
    
    
    
    
    2
    
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    9Share-based compensation expense
    
    
    11
    
    
    
    
    
    
    
    
    
    
    
    3,811
    
    
    
    
    
    
    
    3,811Balance September 30, 2010
    
    
    
    
    
    
    334,012
    
    
    
    549,150
    
    
    
    20,310
    
    
    
    (253,788
    )
    
    
    315,672Share 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,394
    )
    
    
    (19,394
    )Shares issued for services
    
    
    
    
    
    
    169
    
    
    
    335
    
    
    
    
    
    
    
    
    
    
    
    335Exercise of stock options
    
    
    11
    
    
    
    984
    
    
    
    4,164
    
    
    
    (2,231
    )
    
    
    
    
    
    
    1,933Exercise of purchase warrants
    
    
    
    
    
    
    8,621
    
    
    
    31,047
    
    
    
    
    
    
    
    
    
    
    
    31,047Share-based compensation expense
    
    
    11
    
    
    
    
    
    
    
    
    
    
    
    4,767
    
    
    
    
    
    
    
    4,767Balance September 30, 2011
    
    
    
    
    
    
    344,139
    
    
    
    586,108
    
    
    
    25,677
    
    
    
    (292,613
    )
    
    
    319,172
   5




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IVANHOE ENERGY INC.
 
 Condensed Consolidated Statements of Cash Flows
(Unaudited)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,(US$000s)
    
    Note
    
    
    2011
    
    
    2010
    
    
    2011
    
    
    2010Operating ActivitiesNet loss
    
    
    
    
    
    
    (4,157
    )
    
    
    (9,605
    )
    
    
    (19,394
    )
    
    
    (7,151
    )Adjustments to reconcile net loss to cash from operating activitiesDepletion and depreciation
    
    
    5
    
    
    
    2,131
    
    
    
    1,490
    
    
    
    5,853
    
    
    
    4,948Share-based compensation expense
    
    
    11
    
    
    
    1,680
    
    
    
    1,379
    
    
    
    4,927
    
    
    
    3,811Unrealized foreign currency exchange (gain) loss
    
    
    
    
    
    
    636
    
    
    
    (1,496
    )
    
    
    (1,144
    )
    
    
    (2,834
    )Unrealized gain on derivative instruments
    
    
    7
    
    
    
    (5,429
    )
    
    
    (622
    )
    
    
    (12,629
    )
    
    
    (20,405
    )Current income tax expense
    
    
    
    
    
    
    682
    
    
    
    
    
    
    
    1,481
    
    
    
    115Deferred income tax expense (recovery)
    
    
    
    
    
    
    29
    
    
    
    (496
    )
    
    
    736
    
    
    
    (49
    )Exploration and evaluation expense
    
    
    4
    
    
    
    2,143
    
    
    
    788
    
    
    
    2,143
    
    
    
    2,378Interest expense
    
    
    
    
    
    
    431
    
    
    
    4
    
    
    
    798
    
    
    
    12Finance costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    269
    
    
    
    Derecognition of long term provision
    
    
    
    
    
    
    (1,900
    )
    
    
    
    
    
    
    (1,900
    )
    
    
    Other
    
    
    
    
    
    
    25
    
    
    
    (2
    )
    
    
    13
    
    
    
    Current income tax paid
    
    
    
    
    
    
    (423
    )
    
    
    (8
    )
    
    
    (747
    )
    
    
    (646
    )Decommissioning costs settled
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    (179
    )Changes in non-cash working capital items
    
    
    14
    
    
    
    (1,062
    )
    
    
    652
    
    
    
    916
    
    
    
    380Net cash used in operating activities
    
    
    
    
    
    
    (5,214
    )
    
    
    (7,913
    )
    
    
    (18,678
    )
    
    
    (19,620
    )Investing ActivitiesIntangible expenditures
    
    
    
    
    
    
    (12,368
    )
    
    
    (16,654
    )
    
    
    (36,140
    )
    
    
    (50,794
    )Property, plant and equipment expenditures
    
    
    
    
    
    
    (4,475
    )
    
    
    (821
    )
    
    
    (11,938
    )
    
    
    (3,056
    )Long term receivables
    
    
    
    
    
    
    (845
    )
    
    
    (442
    )
    
    
    (1,308
    )
    
    
    (1,288
    )Interest paid
    
    
    
    
    
    
    (1,039
    )
    
    
    (790
    )
    
    
    (2,042
    )
    
    
    (1,634
    )Changes in non-cash working capital items
    
    
    14
    
    
    
    (4,254
    )
    
    
    854
    
    
    
    324
    
    
    
    3,709Net cash used in investing activities
    
    
    
    
    
    
    (22,981
    )
    
    
    (17,853
    )
    
    
    (51,104
    )
    
    
    (53,063
    )Financing ActivitiesShares and warrants issued on private placements, net of share issue costs
    
    
    
    
    
    
    
    
    
    
    (69
    )
    
    
    
    
    
    
    135,696Convertible debentures issued, net of issue costs
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    72,914
    
    
    
    Repayment of convertible note
    
    
    6
    
    
    
    (41,421
    )
    
    
    
    
    
    
    (41,421
    )
    
    
    Proceeds from exercise of options and warrants
    
    
    8, 11
    
    
    
    
    
    
    
    8
    
    
    
    29,873
    
    
    
    2,102Changes in non-cash working capital items
    
    
    14
    
    
    
    104
    
    
    
    (41
    )
    
    
    57
    
    
    
    (2
    )Net cash provided by (used in) financing activities
    
    
    
    
    
    
    (41,317
    )
    
    
    (102
    )
    
    
    61,423
    
    
    
    137,796Foreign exchange gain (loss) on cash and cash equivalents held in a
foreign currency
    
    
    
    
    
    
    (5,628
    )
    
    
    2,299
    
    
    
    (1,790
    )
    
    
    3,623Increase (decrease) in cash and cash equivalents, for the period
    
    
    
    
    
    
    (75,140
    )
    
    
    (23,569
    )
    
    
    (10,149
    )
    
    
    68,736Cash and cash equivalents, beginning of period
    
    
    
    
    
    
    133,308
    
    
    
    116,667
    
    
    
    68,317
    
    
    
    24,362Cash and cash equivalents, end of period
    
    
    
    
    
    
    58,168
    
    
    
    93,098
    
    
    
    58,168
    
    
    
    93,098
   6




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##### Table of Contents



IVANHOE ENERGY INC.
 
 Notes to the Unaudited Condensed Consolidated Financial Statements
  1. NATURE OF OPERATIONS AND GOING CONCERN
  TM
     2. BASIS OF PRESENTATION
 2.1 Statement of Compliance
  2.2 Basis of Presentation
     7




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##### Table of Contents



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)
  IAS 12 Income Taxes (IAS 12)
  IAS 28 Investments in Associates and Joint Ventures (IAS 28)
    8




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##### Table of Contents



3. CASH AND CASH EQUIVALENTS
 September 30,
    
    
    December 31,
    
    
    January 1,2011
    
    
    2010
    
    
    2010Cash at banks and on hand
    
    
    57,145
    
    
    
    10,147
    
    
    
    6,797Term deposits
    
    
    
    
    
    
    57,670
    
    
    
    Money market accounts
    
    
    
    
    
    
    
    
    
    
    14,715Restricted cash
    
    
    1,023
    
    
    
    500
    
    
    
    2,85058,168
    
    
    
    68,317
    
    
    
    24,362
  4. INTANGIBLE ASSETS
 Exploration and Evaluation Assets
    
    
    
    
    
    
    TotalLatin
    
    
    
    
    
    
    HTLTM
    
    
    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
    
    
    21,974
    
    
    
    7,481
    
    
    
    9,550
    
    
    
    39,005
    
    
    
    
    
    
    
    39,005Exploration and evaluation expense
    
    
    (2,143
    )
    
    
    
    
    
    
    
    
    
    
    (2,143
    )
    
    
    
    
    
    
    (2,143
    )Balance September 30, 2011
    
    
    57,966
    
    
    
    131,236
    
    
    
    29,075
    
    
    
    218,277
    
    
    
    92,153
    
    
    
    310,430
 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
    
    
    11,015
    
    
    
    
    
    
    
    
    
    
    
    11,015
    
    
    
    1,190
    
    
    
    12,205Disposals
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5
    )
    
    
    (5
    )Balance September 30, 2011
    
    
    46,954
    
    
    
    
    
    
    
    
    
    
    
    46,954
    
    
    
    14,194
    
    
    
    61,148Accumulated 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
    
    
    5,032
    
    
    
    
    
    
    
    
    
    
    
    5,032
    
    
    
    821
    
    
    
    5,853Disposals
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    (1
    )Balance September 30, 2011
    
    
    11,228
    
    
    
    
    
    
    
    
    
    
    
    11,228
    
    
    
    2,954
    
    
    
    14,182Net 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 September 30, 2011
    
    
    35,726
    
    
    
    
    
    
    
    
    
    
    
    35,726
    
    
    
    11,240
    
    
    
    46,966
 Oil and Gas Property and Equipment
  Other Assets
  6. DEBT
 6.1 Convertible Note
 September 30,
    
    
    December 31,
    
    
    January 1,2011
    
    
    2010
    
    
    2010Convertible note
    
    
    
    
    
    
    40,217
    
    
    
    38,005Unamortized discount
    
    
    
    
    
    
    (385
    )
    
    
    (1,071
    )Carrying amount
    
    
    
    
    
    
    39,832
    
    
    
    36,934
    10




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##### Table of Contents



6.2 Convertible Debentures
 September 30,
    
    
    December 31,
    
    
    January 1,2011
    
    
    2010
    
    
    2010Convertible debentures
    
    
    70,565
    
    
    
    
    
    
    
    Unamortized financing costs and derivative instrument
    
    
    (10,419
    )
    
    
    
    
    
    
    Carrying amount
    
    
    60,146
    
    
    
    
    
    
    
    
     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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,852
    
    
    
    
    
    
    
    9,852Exercise 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
    )
    
    
    (7,577
    )
    
    
    286
    
    
    
    (8,806
    )Foreign exchange gains
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (465
    )
    
    
    
    
    
    
    (465
    )Balance September 30, 2011
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,810
    
    
    
    286
    
    
    
    2,096
   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 September 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 TSX and the exercise price was changed
to Cdn$2.93.  8.2 Convertible Note
  8.3 Convertible Debentures
    12




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##### Table of Contents



8.4 Subsidiary Option
    9. COMMITMENTS AND CONTINGENCIES
 9.1 Income Taxes
    9.2 Operating Lease Arrangements
   Remainder of 2011
    
    
    4282012-2013
    
    
    1,1331,561
 9.3 Other
    13




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##### Table of Contents



10. SHARE CAPITAL
 Authorized
    
    Unlimited common shares with no par value
Unlimited preferred shares with no par valueIssued and Outstanding
    
    344,139,428 common shares (December 31, 2010  334,365,482)
Nil preferred shares (December 31, 2010  nil)
  11. SHARE-BASED PAYMENTS
  Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2011
    
    
    2010
    
    
    2011
    
    
    2010Share-based expense related toEquity settled transactions
    
    
    1,533
    
    
    
    1,379
    
    
    
    4,768
    
    
    
    3,811Cash settled transactions
    
    
    147
    
    
    
    
    
    
    
    159
    
    
    
    Total share-based expense
    
    
    1,680
    
    
    
    1,379
    
    
    
    4,927
    
    
    
    3,811Share-based payments capitalized as E&E assets
    
    
    
    
    
    
    
    
    
    
    335
    
    
    
    799
 11.1 Stock Option Plan
  September 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
    
    
    1,914
    
    
    
    2.66
    
    
    
    6,041
    
    
    
    2.56Exercised
    
    
    (1,687
    )
    
    
    2.50
    
    
    
    (2,743
    )
    
    
    2.28Expired
    
    
    (710
    )
    
    
    2.97
    
    
    
    (635
    )
    
    
    2.60Forfeited
    
    
    (1,082
    )
    
    
    2.42
    
    
    
    (749
    )
    
    
    2.64Outstanding, end of period
    
    
    15,362
    
    
    
    2.25
    
    
    
    16,927
    
    
    
    2.24Exercisable, end of period
    
    
    7,370
    
    
    
    2.12
    
    
    
    7,324
    
    
    
    2.19
   14




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##### Table of Contents



Nine months ended September 30,
    
    2011
    
    
    2010Expected life (in years)
    
    
    6.3
    
    
    
    6.1Volatility (1)
    
    
    74.4
    %
    
    
    98.5
    %Dividend yield
    
    
    
    
    
    
    Risk-free rate
    
    
    2.7
    %
    
    
    3.0
    %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
    
    
    5,223
    
    
    
    2.2
    
    
    
    1.712.15 to 2.71
    
    
    8,526
    
    
    
    4.8
    
    
    
    2.392.77 to 3.44
    
    
    1,613
    
    
    
    5.1
    
    
    
    3.2115,362
    
    
    
    3.9
    
    
    
    2.25
 11.2 Restricted Share Unit Plan
   September 30, 2011Weighted AverageNumber of RSUs
    
    
    Fair Value(000s)(1)
    
    
    (Cdn$)Outstanding, beginning of period
    
    
    
    
    
    
    Granted
    
    
    1,115
    
    
    
    1.62Forfeited
    
    
    (132
    )
    
    
    1.89Outstanding, end of period
    
    
    983
    
    
    
    1.59
 
 (1)
    
    Includes RSUs that will be withheld on behalf of employees to satisfy statutory tax
withholding requirements.  15




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##### Table of Contents



Nine months endedSeptember 30, 2011Expected life (in years)
    
    
    3.0Volatility (1)
    
    
    62.9
    %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.  September 30,2011Current liabilities related to RSUs
    
    
    90Long term liabilities related to RSUs
    
    
    69Intrinsic 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 September 30, 2011
    
    
    10,770
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    218
    
    
    
    10,988For the three months ended September 30, 2010
    
    
    4,177
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    88
    
    
    
    4,265For the nine months ended September 30, 2011
    
    
    28,281
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    425
    
    
    
    28,706For the nine months ended September 30, 2010
    
    
    15,559
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    125
    
    
    
    15,684Segment income (loss)For the three months ended September 30, 2011
    
    
    (3,485
    )
    
    
    (625
    )
    
    
    (2,070
    )
    
    
    (2,839
    )
    
    
    4,862
    
    
    
    (4,157
    )For the three months ended September 30, 2010
    
    
    (2,218
    )
    
    
    (875
    )
    
    
    (2,917
    )
    
    
    (953
    )
    
    
    (2,642
    )
    
    
    (9,605
    )For the nine months ended September 30, 2011
    
    
    (5,196
    )
    
    
    (2,911
    )
    
    
    (5,937
    )
    
    
    (7,846
    )
    
    
    2,496
    
    
    
    (19,394
    )For the nine months ended September 30, 2010
    
    
    (3,838
    )
    
    
    (2,826
    )
    
    
    (6,583
    )
    
    
    (3,667
    )
    
    
    9,763
    
    
    
    (7,151
    )Segment assets(2)As at September 30, 2011
    
    
    107,362
    
    
    
    131,692
    
    
    
    36,893
    
    
    
    102,458
    
    
    
    50,042
    
    
    
    428,447As 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 September 30, 2011
    
    
    142,265
    
    
    
    141,988
    
    
    
    58,507
    
    
    
    85,151
    
    
    
    (318,636
    )
    
    
    109,275As 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 September 30, 2011
    
    
    7,649
    
    
    
    1,451
    
    
    
    3,268
    
    
    
    
    
    
    
    
    
    
    
    12,368For the three months ended September 30, 2010
    
    
    8,907
    
    
    
    2,752
    
    
    
    4,995
    
    
    
    
    
    
    
    
    
    
    
    16,654For the nine months ended September 30, 2011
    
    
    21,755
    
    
    
    5,298
    
    
    
    9,087
    
    
    
    
    
    
    
    
    
    
    
    36,140For the nine months ended September 30, 2010
    
    
    13,395
    
    
    
    24,094
    
    
    
    13,305
    
    
    
    
    
    
    
    
    
    
    
    50,794Capital investments  Property, plant and equipmentFor the three months ended September 30, 2011
    
    
    4,713
    
    
    
    
    
    
    
    (2
    )
    
    
    (236
    )
    
    
    
    
    
    
    4,475For the three months ended September 30, 2010
    
    
    592
    
    
    
    
    
    
    
    176
    
    
    
    70
    
    
    
    (17
    )
    
    
    821For the nine months ended September 30, 2011
    
    
    11,014
    
    
    
    
    
    
    
    55
    
    
    
    869
    
    
    
    
    
    
    
    11,938For the nine months ended September 30, 2010
    
    
    2,043
    
    
    
    3
    
    
    
    263
    
    
    
    376
    
    
    
    371
    
    
    
    3,056
 
 (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 $411.6 million at
September 30, 2011 (December 31, 2010  $352.5 million; January 1, 2010  $216.7 million)
resulting in a negative balance. 13. OPERATING EXPENSES
  Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2011
    
    
    2010
    
    
    2011
    
    
    2010AsiaField operating
    
    
    1,695
    
    
    
    1,244
    
    
    
    5,010
    
    
    
    3,908Windfall levy
    
    
    2,584
    
    
    
    637
    
    
    
    6,343
    
    
    
    2,317Engineering support
    
    
    126
    
    
    
    135
    
    
    
    339
    
    
    
    3754,405
    
    
    
    2,016
    
    
    
    11,692
    
    
    
    6,600Technology Development
FTF operating costs
    
    
    1,084
    
    
    
    980
    
    
    
    3,659
    
    
    
    3,102Total operating costs
    
    
    5,489
    
    
    
    2,996
    
    
    
    15,351
    
    
    
    9,702
  17




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##### Table of Contents



14. SUPPLEMENTAL CASH FLOW INFORMATION
 Changes in Non-Cash Activities
 Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2011
    
    
    2010
    
    
    2011
    
    
    2010Operating activitiesAccounts receivable
    
    
    29
    
    
    
    1,338
    
    
    
    (2,617
    )
    
    
    1,029Note receivable
    
    
    10
    
    
    
    (4
    )
    
    
    43
    
    
    
    (35
    )Prepaid and other current assets
    
    
    54
    
    
    
    1,092
    
    
    
    (94
    )
    
    
    414Accounts payable and accrued liabilities
    
    
    (1,155
    )
    
    
    (1,774
    )
    
    
    3,584
    
    
    
    (1,028
    )(1,062
    )
    
    
    652
    
    
    
    916
    
    
    
    380Investing activitiesAccounts receivable
    
    
    177
    
    
    
    (298
    )
    
    
    733
    
    
    
    (327
    )Prepaid and other current assets
    
    
    22
    
    
    
    (1,055
    )
    
    
    2,263
    
    
    
    (972
    )Accounts payable and accrued liabilities
    
    
    (4,453
    )
    
    
    2,207
    
    
    
    (2,672
    )
    
    
    5,008(4,254
    )
    
    
    854
    
    
    
    324
    
    
    
    3,709Financing activitiesAccounts payable and accrued liabilities
    
    
    104
    
    
    
    (41
    )
    
    
    57
    
    
    
    (2
    )(5,212
    )
    
    
    1,465
    
    
    
    1,297
    
    
    
    4,087
 15. RELATED PARTY TRANSACTIONS
   Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,Related Party
    
    Nature of Transaction
    
    2011
    
    
    2010
    
    
    2011
    
    
    2010Global Mining Management Corp.
    
    Administration
    
    
    117
    
    
    
    313
    
    
    
    446
    
    
    
    954Ivanhoe Capital Aviation Ltd.
    
    Aircraft
    
    
    300
    
    
    
    300
    
    
    
    900
    
    
    
    900I2MS.Net PTE Ltd.
    
    Information systems
    
    
    51
    
    
    
    80
    
    
    
    159
    
    
    
    264Ivanhoe Capital Services Ltd.
    
    Administration
    
    
    125
    
    
    
    108
    
    
    
    246
    
    
    
    191SouthGobi Resources Ltd.
    
    Administration
    
    
    38
    
    
    
    38
    
    
    
    115
    
    
    
    38Ibex Resources Inc.
    
    Business development
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    391092155 Ontario Inc.
    
    HTLTM technology
    
    
    12
    
    
    
    15
    
    
    
    32
    
    
    
    42Ensyn Technologies Inc.
    
    HTLTM technology
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7Ivanhoe Capital PTE Ltd.
    
    Administration
    
    
    17
    
    
    
    10
    
    
    
    132
    
    
    
    19Ivanhoe Mines Ltd.
    
    Administration
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13660
    
    
    
    870
    
    
    
    2,030
    
    
    
    2,467
  18




---



##### Table of Contents



September 30,
    
    
    December 31,
    
    
    January 1,Related Party
    
    Nature of Transaction
    
    2011
    
    
    2010
    
    
    2010Global Mining Management Corp.
    
    Administration
    
    
    67
    
    
    
    86
    
    
    
    40I2MS.Net PTE Ltd.
    
    Information systems
    
    
    16
    
    
    
    13
    
    
    
    17SouthGobi Resources Ltd.
    
    Administration
    
    
    13
    
    
    
    38
    
    
    
    Ivanhoe Capital Services Ltd.
    
    Administration
    
    
    43
    
    
    
    70
    
    
    
    15Ivanhoe Capital PTE Ltd.
    
    Administration
    
    
    
    
    
    
    
    
    
    
    139
    
    
    
    207
    
    
    
    72
 16. REMUNERATION OF KEY MANAGEMENT PERSONNEL
  Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2011
    
    
    2010
    
    
    2011
    
    
    2010Base salaries or fees and other cash payments
    
    
    743
    
    
    
    737
    
    
    
    3,123
    
    
    
    2,925Employers contributions to retirement plan
    
    
    11
    
    
    
    17
    
    
    
    37
    
    
    
    50Share-based compensation expense
    
    
    753
    
    
    
    581
    
    
    
    2,289
    
    
    
    1,6151,507
    
    
    
    1,335
    
    
    
    5,449
    
    
    
    4,590
 17. FIRST-TIME ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS
   17.1 Exemptions from Full Retrospective Application
  i. Deemed Cost
  ii. Decommissioning Provisions Included in the Cost of Property, Plant and Equipment
  iii. Share-Based Payment
   19




---



##### Table of Contents



iv. Business Combinations
  v. Leases
  17.2 Reconciliations to IFRS
     20




---



##### Table of Contents



Reconciliation of Consolidated Statements of Financial Position
 At January 1, 2010
    
    
    At December 31, 2010
    
    
    At September 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
    
    
    
    93,098
    
    
    
    
    
    
    
    93,098Accounts receivable
    
    
    5,021
    
    
    
    
    
    
    
    5,021
    
    
    
    6,359
    
    
    
    
    
    
    
    6,359
    
    
    
    4,332
    
    
    
    
    
    
    
    4,332Note receivable
    
    
    225
    
    
    
    
    
    
    
    225
    
    
    
    264
    
    
    
    
    
    
    
    264
    
    
    
    260
    
    
    
    
    
    
    
    260Prepaid and other current assets
    
    
    771
    
    
    
    
    
    
    
    771
    
    
    
    2,859
    
    
    
    
    
    
    
    2,859
    
    
    
    1,329
    
    
    
    
    
    
    
    1,32930,379
    
    
    
    
    
    
    
    30,379
    
    
    
    77,799
    
    
    
    
    
    
    
    77,799
    
    
    
    99,019
    
    
    
    
    
    
    
    99,019Intangible assets
    
    
    92,153
    
    
    
    115,597
    a
    
    
    207,750
    
    
    
    92,153
    
    
    
    197,193
    a
    
    
    273,568
    
    
    
    92,153
    
    
    
    174,655
    a
    
    
    259,172
    
    
    
    
    
    
    
    
    
    
    
    (7,482
    )b
    
    
    
    
    
    
    
    
    
    
    (5,356
    )b
    
    
    
    
    
    
    
    
    
    
    
    175
    c
    
    
    
    
    
    
    
    
    
    
    98
    c
    
    
    
    
    
    
    
    
    
    
    
    (8,471
    )g
    
    
    
    
    
    
    
    
    
    
    (2,378
    )gProperty, plant and equipment, net
    
    
    158,392
    
    
    
    (115,597
    )a
    
    
    41,983
    
    
    
    237,200
    
    
    
    (197,193
    )a
    
    
    40,618
    
    
    
    213,685
    
    
    
    (174,655
    )a
    
    
    39,624(904
    )b
    
    
    
    
    
    
    
    
    
    
    (2,014
    )b
    
    
    
    
    
    
    
    
    
    
    (1,407
    )b92
    c
    
    
    
    
    
    
    
    
    
    
    189
    c
    
    
    
    
    
    
    
    
    
    
    205
    c
    
    
    
    
    
    
    
    
    
    
    
    2,436
    f
    
    
    
    
    
    
    
    
    
    
    1,796
    fLong term receivables
    
    
    839
    
    
    
    
    
    
    
    839
    
    
    
    2,433
    
    
    
    
    
    
    
    2,433
    
    
    
    2,126
    
    
    
    
    
    
    
    2,126281,763
    
    
    
    (812
    )
    
    
    280,951
    
    
    
    409,585
    
    
    
    (15,167
    )
    
    
    394,418
    
    
    
    406,983
    
    
    
    (7,042
    )
    
    
    399,941Liabilities and Shareholders EquityCurrent LiabilitiesAccounts payable and accrued liabilities
    
    
    10,779
    
    
    
    
    
    
    
    10,779
    
    
    
    21,482
    
    
    
    
    
    
    
    21,482
    
    
    
    14,394
    
    
    
    
    
    
    
    14,394Debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,832
    
    
    
    
    
    
    
    39,832
    
    
    
    38,279
    
    
    
    
    
    
    
    38,279Derivative financial instruments
    
    
    
    
    
    
    13,023
    d
    
    
    13,023
    
    
    
    
    
    
    
    8,447
    d
    
    
    8,447
    
    
    
    
    
    
    
    6,613
    d
    
    
    6,613Income tax payable
    
    
    530
    
    
    
    
    
    
    
    530
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Decommissioning costs
    
    
    753
    
    
    
    
    
    
    
    753
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,062
    
    
    
    13,023
    
    
    
    25,085
    
    
    
    61,314
    
    
    
    8,447
    
    
    
    69,761
    
    
    
    52,673
    
    
    
    6,613
    
    
    
    59,286Long term debt
    
    
    36,934
    
    
    
    
    
    
    
    36,934
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Long term provisions
    
    
    2,095
    
    
    
    92
    c
    
    
    2,187
    
    
    
    2,644
    
    
    
    364
    c
    
    
    3,008
    
    
    
    2,396
    
    
    
    301
    c
    
    
    2,697Deferred income tax liability
    
    
    22,643
    
    
    
    (307
    )b
    
    
    22,336
    
    
    
    21,518
    
    
    
    (367
    )b
    
    
    21,165
    
    
    
    22,624
    
    
    
    (349
    )b
    
    
    22,286
    
    
    
    
    
    
    
    
    
    
    
    14
    f
    
    
    
    
    
    
    
    
    
    
    11
    f73,734
    
    
    
    12,808
    
    
    
    86,542
    
    
    
    85,476
    
    
    
    8,458
    
    
    
    93,934
    
    
    
    77,693
    
    
    
    6,576
    
    
    
    84,269Shareholders EquityShare capital
    
    
    422,322
    
    
    
    
    
    
    
    422,322
    
    
    
    550,562
    
    
    
    
    
    
    
    550,562
    
    
    
    549,220
    
    
    
    (70
    )e
    
    
    549,150Purchase 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
    
    
    
    20,343
    
    
    
    (2,946
    )d
    
    
    20,3101,642
    e
    
    
    
    
    
    
    
    
    
    
    3,105
    e
    
    
    
    
    
    
    
    
    
    
    2,913
    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
    )
    
    
    (275,782
    )
    
    
    21,994
    
    
    
    (253,788
    )208,029
    
    
    
    (13,620
    )
    
    
    194,409
    
    
    
    324,109
    
    
    
    (23,625
    )
    
    
    300,484
    
    
    
    329,290
    
    
    
    (13,618
    )
    
    
    315,672281,763
    
    
    
    (812
    )
    
    
    280,951
    
    
    
    409,585
    
    
    
    (15,167
    )
    
    
    394,418
    
    
    
    406,983
    
    
    
    (7,042
    )
    
    
    399,941
  21




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##### Table of Contents



Reconciliation of Consolidated Statements of Loss and Comprehensive Loss
 Three months ended September 30, 2010
    
    
    Nine months ended September 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
    
    
    4,177
    
    
    
    
    
    
    
    4,177
    
    
    
    15,554
    
    
    
    
    
    
    
    15,554
    
    
    
    21,720
    
    
    
    
    
    
    
    21,720Interest
    
    
    88
    
    
    
    
    
    
    
    88
    
    
    
    130
    
    
    
    
    
    
    
    130
    
    
    
    208
    
    
    
    
    
    
    
    2084,265
    
    
    
    
    
    
    
    4,265
    
    
    
    15,684
    
    
    
    
    
    
    
    15,684
    
    
    
    21,928
    
    
    
    
    
    
    
    21,928ExpensesOperating
    
    
    2,955
    
    
    
    41
    b
    
    
    2,996
    
    
    
    9,607
    
    
    
    95
    b
    
    
    9,702
    
    
    
    13,514
    
    
    
    111
    b
    
    
    13,625Exploration and evaluation
    
    
    
    
    
    
    788
    g
    
    
    788
    
    
    
    
    
    
    
    2,378
    g
    
    
    2,378
    
    
    
    
    
    
    
    8,471
    g
    
    
    8,471General and administrative
    
    
    8,120
    
    
    
    2,451
    b
    
    
    10,898
    
    
    
    21,459
    
    
    
    5,763
    b
    
    
    28,423
    
    
    
    32,864
    
    
    
    8,481
    b
    
    
    42,807327
    e
    
    
    
    
    
    
    
    
    
    
    1,201
    e
    
    
    
    
    
    
    
    
    
    
    1,462
    eDepletion and depreciation
    
    
    2,079
    
    
    
    (589
    )f
    
    
    1,490
    
    
    
    6,744
    
    
    
    (1,796
    )f
    
    
    4,948
    
    
    
    8,960
    
    
    
    (2,436
    )f
    
    
    6,524Foreign currency exchange
    
    
    (1,188
    )
    
    
    
    
    
    
    (1,188
    )
    
    
    (2,289
    )
    
    
    
    
    
    
    (2,289
    )
    
    
    (3,325
    )
    
    
    
    
    
    
    (3,325
    )Derivative instruments gain
    
    
    
    
    
    
    (622
    )d
    
    
    (622
    )
    
    
    
    
    
    
    (20,405
    )d
    
    
    (20,405
    )
    
    
    
    
    
    
    (18,571
    )d
    
    
    (18,571
    )Interest
    
    
    6
    
    
    
    (2
    )
    
    
    4
    
    
    
    14
    
    
    
    (2
    )c
    
    
    12
    
    
    
    24
    
    
    
    
    
    
    
    2411,972
    
    
    
    2,394
    
    
    
    14,366
    
    
    
    35,535
    
    
    
    (12,766
    )
    
    
    22,769
    
    
    
    52,037
    
    
    
    (2,482
    )
    
    
    49,555Loss before income taxes
    
    
    (7,707
    )
    
    
    (2,394
    )
    
    
    (10,101
    )
    
    
    (19,851
    )
    
    
    12,766
    
    
    
    (7,085
    )
    
    
    (30,109
    )
    
    
    2,482
    
    
    
    (27,627
    )(Provision for) recovery of income taxesCurrent
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (115
    )
    
    
    
    
    
    
    (115
    )
    
    
    (126
    )
    
    
    
    
    
    
    (126
    )Deferred
    
    
    479
    
    
    
    21
    b
    
    
    496
    
    
    
    19
    
    
    
    41
    b
    
    
    49
    
    
    
    1,125
    
    
    
    60
    b
    
    
    1,171(4
    )f
    
    
    
    
    
    
    
    
    
    
    (11
    )f
    
    
    
    
    
    
    
    
    
    
    (14
    )f479
    
    
    
    17
    
    
    
    496
    
    
    
    (96
    )
    
    
    30
    
    
    
    (66
    )
    
    
    999
    
    
    
    46
    
    
    
    1,045Net loss and comprehensive loss
    
    
    (7,228
    )
    
    
    (2,377
    )
    
    
    (9,605
    )
    
    
    (19,947
    )
    
    
    12,796
    
    
    
    (7,151
    )
    
    
    (29,110
    )
    
    
    2,528
    
    
    
    (26,582
    )
  22




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##### Table of Contents



Notes to reconciliationa.
    
    Reclassification of Intangible AssetsUnder 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
Exploration for and evaluation of mineral resources, these properties were reclassified as
intangible assets.b.
    
    Adjustment for Capitalized OverheadUnder 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 ProvisionsUnder 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 InstrumentsUnder 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 warrants 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 PaymentsStock 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.
    
    DepletionUnder 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 ExpenseUnder 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.  23




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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
  24




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##### Table of Contents



Advisories
   Non-IFRS Financial Measures
    bbl
    
    =
    
    barrel
    
    mbbls/d
    
    =
    
    thousand barrels per daybbls/d
    
    =
    
    barrels per day
    
    mboe
    
    =
    
    thousands of barrels of oil equivalentboe
    
    =
    
    barrel of oil equivalent
    
    mboe/d
    
    =
    
    thousands of barrels of oil equivalent per dayboe/d
    
    =
    
    barrels of oil equivalent per day
    
    mmbbls
    
    =
    
    million barrelsmbbls
    
    =
    
    thousand barrels
    
    mmbls/d
    
    =
    
    million barrels per day
    25




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##### Table of Contents



INTERNATIONAL FINANCIAL REPORTING STANDARDS
   HIGHLIGHTS
 Three months
    
    
    Nine monthsended September 30,
    
    
    ended September 30,($000, except as stated)
    
    2011
    
    
    2010
    
    
    2011
    
    
    2010Average daily production (bbls/d)
    
    
    1,029
    
    
    
    610
    
    
    
    992
    
    
    
    760Realized oil prices ($/bbl)
    
    
    113.74
    
    
    
    74.41
    
    
    
    104.40
    
    
    
    74.92Oil revenue
    
    
    10,769
    
    
    
    4,177
    
    
    
    28,277
    
    
    
    15,554Capital expenditures
    
    
    16,843
    
    
    
    17,475
    
    
    
    48,078
    
    
    
    53,850Cash flow used in operating activities
    
    
    (5,214
    )
    
    
    (7,913
    )
    
    
    (18,678
    )
    
    
    (19,620
    )Net loss
    
    
    (4,157
    )
    
    
    (9,605
    )
    
    
    (19,394
    )
    
    
    (7,151
    )Net loss per share, basic and diluted
    
    
    (0.01
    )
    
    
    (0.03
    )
    
    
    (0.06
    )
    
    
    (0.02
    )
      26




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##### Table of Contents



RESULTS OF OPERATIONS
 Three months
    
    
    Nine monthsended September 30,
    
    
    ended September 30,2011
    
    
    2010
    
    
    2011
    
    
    2010Asia(net bbls)Dagang
    
    
    92,576
    
    
    
    52,420
    
    
    
    261,105
    
    
    
    195,424Daqing
    
    
    2,098
    
    
    
    3,711
    
    
    
    9,749
    
    
    
    12,173Total production
    
    
    94,674
    
    
    
    56,131
    
    
    
    270,854
    
    
    
    207,597Average daily production (bbls/d)
    
    
    1,029
    
    
    
    610
    
    
    
    992
    
    
    
    760PricingAverage realized oil price ($/bbl)
    
    
    113.74
    
    
    
    74.41
    
    
    
    104.40
    
    
    
    74.92West Texas Intermediate (WTI) ($/bbl)
    
    
    89.40
    
    
    
    76.06
    
    
    
    95.31
    
    
    
    77.54
 Oil Revenue
  Net Revenue from Operations
 Three months
    
    
    Nine monthsended September 30,
    
    
    ended September 30,($/bbl)
    
    2011
    
    
    2010
    
    
    2011
    
    
    2010Oil revenue(1)
    
    
    113.74
    
    
    
    74.41
    
    
    
    104.40
    
    
    
    74.92Less operating costsField operating
    
    
    (17.91
    )
    
    
    (22.15
    )
    
    
    (18.50
    )
    
    
    (18.82
    )Windfall Levy
    
    
    (27.30
    )
    
    
    (11.34
    )
    
    
    (23.42
    )
    
    
    (11.16
    )Engineering and support costs
    
    
    (1.34
    )
    
    
    (2.42
    )
    
    
    (1.25
    )
    
    
    (1.81
    )Net operating revenue(1)
    
    
    67.19
    
    
    
    38.50
    
    
    
    61.23
    
    
    
    43.13Depletion
    
    
    (19.53
    )
    
    
    (23.41
    )
    
    
    (18.56
    )
    
    
    (23.55
    )Net revenue from operations(1)
    
    
    47.66
    
    
    
    15.09
    
    
    
    42.67
    
    
    
    19.58
 (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.  27




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##### Table of Contents



Operating Costs
 Three months
    
    
    Nine monthsended September 30,
    
    
    ended September 30,2011
    
    
    2010
    
    
    2011
    
    
    2010AsiaField operating
    
    
    1,695
    
    
    
    1,244
    
    
    
    5,010
    
    
    
    3,908Windfall Levy
    
    
    2,584
    
    
    
    637
    
    
    
    6,343
    
    
    
    2,317Engineering support
    
    
    126
    
    
    
    135
    
    
    
    339
    
    
    
    3754,405
    
    
    
    2,016
    
    
    
    11,692
    
    
    
    6,600Technology DevelopmentFTF operating costs
    
    
    1,084
    
    
    
    980
    
    
    
    3,659
    
    
    
    3,102Total operating costs
    
    
    5,489
    
    
    
    2,996
    
    
    
    15,351
    
    
    
    9,702
    Exploration and Evaluation
   General and Administrative
 TM
 TM
  28




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##### Table of Contents



Depletion and Depreciation
    Foreign Exchange
   Derivative Instruments
    Provision for Income Taxes
   29




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
 Contractual Obligations
  Total
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    After 2014Long term debt
    
    
    69,939
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    69,939Interest
    
    
    20,349
    
    
    
    2,259
    
    
    
    4,021
    
    
    
    4,021
    
    
    
    4,021
    
    
    
    6,027Decommissioning provisions(1)
    
    
    2,111
    
    
    
    
    
    
    
    
    
    
    
    317
    
    
    
    
    
    
    
    1,794Lease commitments
    
    
    1,561
    
    
    
    428
    
    
    
    867
    
    
    
    266
    
    
    
    
    
    
    
    93,960
    
    
    
    2,687
    
    
    
    4,888
    
    
    
    4,604
    
    
    
    4,021
    
    
    
    77,760
 (1)
    
    Represents undiscounted asset retirement obligations after inflation. The discounted value of
these estimated obligations is provided for in the Financial Statements. Long Term Debt and Interest
  Decommissioning Provisions
  Operating Leases
  Other
      30




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##### Table of Contents



Sources and Uses of Cash
  Three months
    
    
    Nine monthsended September 30,
    
    
    ended September 30,2011
    
    
    2010
    
    
    2011
    
    
    2010Cash used in operating activities
    
    
    (5,214
    )
    
    
    (7,913
    )
    
    
    (18,678
    )
    
    
    (19,620
    )Cash used in investing activities
    
    
    (22,981
    )
    
    
    (17,853
    )
    
    
    (51,104
    )
    
    
    (53,063
    )Cash provided by (used in) financing activities
    
    
    (41,317
    )
    
    
    (102
    )
    
    
    61,423
    
    
    
    137,796
  Operating Activities
  Investing Activities
 E&E Expenditures
     PP&E Expenditures
  Financing Activities
    31




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##### Table of Contents



Capital Structure
 September 30,
    
    
    December 31,As at
    
    2011
    
    
    2010Debt
    
    
    
    
    
    
    39,832Long term debt
    
    
    60,146
    
    
    
    Shareholders equity
    
    
    319,172
    
    
    
    300,484
  Outlook
     TM TM
   32




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##### Table of Contents



ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4.
    
    CONTROLS AND PROCEDURES
     33




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##### Table of Contents



PART II OTHER INFORMATION
 
 ITEM 1.
    
    LEGAL PROCEEDINGS
     34




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##### Table of Contents



ITEM 6.
    
    EXHIBITS
 Exhibit Number
    
    Description31.1
    
    
    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. Schiefelbein

Gerald D. SchiefelbeinChief Financial OfficerDate:
    
    November 9, 2011
  35