UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of: February, 2024
Commission File No. 001-40381
NEW PACIFIC METALS CORP.
(Translation of registrant’s name into English)
Suite 1750 - 1066 W. Hastings Street
Vancouver BC, Canada V6E 3X1
(Address of principal executive office)
[Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F]
Form 20-F [ ] Form 40-F
[X]
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1) [ ]
Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.
Indicate by check mark if the registrant is “submitting” the Form 6-K in paper as permitted by Regulation S-T “Rule” 101(b)(7) [ ]
Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: February 13, 2024 |
NEW PACIFIC METALS CORP. |
|
|
|
|
|
“Jalen Yuan” |
|
|
Jalen Yuan |
|
|
Chief Financial Officer |
|
EXHIBIT INDEX
Exhibit
99.1
UNAUDITED
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For
the three and six months ended December 31, 2023 and 2022
(Expressed
in United States Dollars)
New Pacific
Metals Corp.
Unaudited Condensed Consolidated Interim Statements of Financial Position
(Expressed in US dollars)
| |
Notes | | |
December 31, 2023 | | |
June 30, 2023 | |
ASSETS | |
| | |
| | |
| |
Current Assets | |
| | |
| | |
| |
Cash and cash equivalents | |
| | |
$ | 25,837,156 | | |
$ | 6,296,312 | |
Short-term investments | |
| | |
| 198,010 | | |
| 198,375 | |
Receivables | |
| | |
| 336,158 | | |
| 421,860 | |
Deposits and prepayments | |
| | |
| 485,579 | | |
| 631,402 | |
| |
| | |
| 26,856,903 | | |
| 7,547,949 | |
Non-current Assets | |
| | |
| | | |
| | |
Other tax receivable | |
3 | | |
| 5,634,888 | | |
| 5,530,422 | |
Equity investments | |
| | |
| 278,126 | | |
| 283,081 | |
Plant and equipment | |
5 | | |
| 1,352,361 | | |
| 1,339,839 | |
Mineral property interests | |
6 | | |
| 106,036,909 | | |
| 103,606,250 | |
TOTAL ASSETS | |
| | |
$ | 140,159,187 | | |
$ | 118,307,541 | |
| |
| | |
| | | |
| | |
LIABILITIES AND EQUITY | |
| | |
| | | |
| | |
Current Liabilities | |
| | |
| | | |
| | |
Accounts payable and accrued liabilities | |
| | |
$ | 1,031,637 | | |
$ | 2,280,553 | |
Due to a related party | |
7 | | |
| 125,234 | | |
| 56,102 | |
| |
| | |
| 1,156,871 | | |
| 2,336,655 | |
Total Liabilities | |
| | |
| 1,156,871 | | |
| 2,336,655 | |
| |
| | |
| | | |
| | |
Equity | |
| | |
| | | |
| | |
Share capital | |
8 | | |
| 181,229,877 | | |
| 155,840,052 | |
Share-based payment reserve | |
| | |
| 19,023,207 | | |
| 18,636,297 | |
Accumulated other comprehensive income | |
| | |
| 10,794,208 | | |
| 10,227,980 | |
Deficit | |
| | |
| (71,893,430 | ) | |
| (68,623,306 | ) |
Total equity attributable to the equity holders of the Company | |
| | |
| 139,153,862 | | |
| 116,081,023 | |
Non-controlling interests | |
9 | | |
| (151,546 | ) | |
| (110,137 | ) |
Total Equity | |
| | |
| 139,002,316 | | |
| 115,970,886 | |
| |
| | |
| | | |
| | |
TOTAL LIABILITIES AND EQUITY | |
| | |
$ | 140,159,187 | | |
$ | 118,307,541 | |
Approved
on behalf of the Board:
(signed) Maria Tang |
|
Director |
|
|
|
(signed) Andrew Williams |
|
Director |
|
See
accompanying notes to the unaudited condensed consolidated interim financial statements
New
Pacific Metals Corp.
Unaudited Condensed Consolidated Interim Statements of Loss
(Expressed in US dollars)
| |
| | |
Three months ended
December 31, | | |
Six months ended
December 31, | |
| |
Notes | | |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Operating expense | |
| | |
| | |
| | |
| | |
| |
Project evaluation and corporate development | |
| | |
$ | (76,553 | ) | |
$ | (77,561 | ) | |
$ | (189,537 | ) | |
$ | (186,097 | ) |
Depreciation | |
5 | | |
| (54,345 | ) | |
| (51,181 | ) | |
| (104,958 | ) | |
| (106,192 | ) |
Filing and listing | |
| | |
| (85,109 | ) | |
| (85,108 | ) | |
| (167,031 | ) | |
| (205,226 | ) |
Investor relations | |
| | |
| (53,340 | ) | |
| (128,832 | ) | |
| (144,103 | ) | |
| (268,349 | ) |
Professional fees | |
| | |
| (106,685 | ) | |
| (61,730 | ) | |
| (193,091 | ) | |
| (170,526 | ) |
Salaries and benefits | |
| | |
| (650,973 | ) | |
| (430,404 | ) | |
| (1,101,112 | ) | |
| (759,574 | ) |
Office and administration | |
| | |
| (379,675 | ) | |
| (352,921 | ) | |
| (712,461 | ) | |
| (719,797 | ) |
Share-based compensation | |
8(b) | | |
| (412,077 | ) | |
| (739,971 | ) | |
| (1,075,099 | ) | |
| (1,570,829 | ) |
| |
| | |
| (1,818,757 | ) | |
| (1,927,708 | ) | |
| (3,687,392 | ) | |
| (3,986,590 | ) |
Other
income (expense) | |
| | |
| | | |
| | | |
| | | |
| | |
Net income from investments | |
4 | | |
$ | 275,020 | | |
$ | 83,455 | | |
$ | 295,294 | | |
$ | 41,781 | |
Gain on disposal of plant and equipment | |
5 | | |
| - | | |
| - | | |
| 51,418 | | |
| - | |
Foreign exchange gain (loss) | |
| | |
| 16,666 | | |
| (28,750 | ) | |
| 66,995 | | |
| (13,857 | ) |
| |
| | |
| 291,686 | | |
| 54,705 | | |
| 413,707 | | |
| 27,924 | |
| |
| | |
| | | |
| | | |
| | | |
| | |
Net
loss | |
| | |
$ | (1,527,071 | ) | |
$ | (1,873,003 | ) | |
$ | (3,273,685 | ) | |
$ | (3,958,666 | ) |
| |
| | |
| | | |
| | | |
| | | |
| | |
Attributable
to: | |
| | |
| | | |
| | | |
| | | |
| | |
Equity holders of the Company | |
| | |
$ | (1,524,108 | ) | |
$ | (1,870,718 | ) | |
$ | (3,270,124 | ) | |
$ | (3,955,901 | ) |
Non-controlling interests | |
9 | | |
| (2,963 | ) | |
| (2,285 | ) | |
| (3,561 | ) | |
| (2,765 | ) |
Net loss | |
| | |
$ | (1,527,071 | ) | |
$ | (1,873,003 | ) | |
$ | (3,273,685 | ) | |
$ | (3,958,666 | ) |
| |
| | |
| | | |
| | | |
| | | |
| | |
Loss
per share attributable to the equity holders of the Company | |
| | |
| | | |
| | | |
| | | |
| | |
Loss per share - basic and diluted | |
| | |
$ | (0.01 | ) | |
$ | (0.01 | ) | |
$ | (0.02 | ) | |
$ | (0.03 | ) |
Weighted average number of common shares - basic and diluted | |
| | |
| 170,936,494 | | |
| 156,864,738 | | |
| 164,334,249 | | |
| 156,774,814 | |
See
accompanying notes to the unaudited condensed consolidated interim financial statements
New
Pacific Metals Corp.
Unaudited Condensed Consolidated Interim
Statements of Comprehensive (Loss) Income
(Expressed in US dollars)
| |
| | |
Three months ended
December 31, | | |
Six months ended
December 31, | |
| |
Notes | | |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Net loss | |
| | |
$ | (1,527,071 | ) | |
$ | (1,873,003 | ) | |
$ | (3,273,685 | ) | |
$ | (3,958,666 | ) |
Other comprehensive loss, net of taxes: | |
| | |
| | | |
| | | |
| | | |
| | |
Items that may subsequently be reclassified to net income or loss: | |
| | |
| | | |
| | | |
| | | |
| | |
Currency translation adjustment, net of tax of $nil | |
| | |
| 858,251 | | |
| 422,167 | | |
| 528,380 | | |
| (1,811,328 | ) |
Other comprehensive loss, net of taxes | |
| | |
$ | 858,251 | | |
$ | 422,167 | | |
$ | 528,380 | | |
$ | (1,811,328 | ) |
| |
| | |
| | | |
| | | |
| | | |
| | |
Attributable to: | |
| | |
| | | |
| | | |
| | | |
| | |
Equity holders of the Company | |
| | |
$ | 855,030 | | |
$ | 408,240 | | |
$ | 566,228 | | |
$ | (1,797,713 | ) |
Non-controlling interests | |
9 | | |
| 3,221 | | |
| 13,927 | | |
| (37,848 | ) | |
| (13,615 | ) |
Other comprehensive loss, net of taxes | |
| | |
$ | 858,251 | | |
$ | 422,167 | | |
$ | 528,380 | | |
$ | (1,811,328 | ) |
Total comprehensive loss, net of taxes | |
| | |
$ | (668,820 | ) | |
$ | (1,450,836 | ) | |
$ | (2,745,305 | ) | |
$ | (5,769,994 | ) |
| |
| | |
| | | |
| | | |
| | | |
| | |
Attributable to: | |
| | |
| | | |
| | | |
| | | |
| | |
Equity holders of the Company | |
| | |
$ | (669,078 | ) | |
$ | (1,462,478 | ) | |
$ | (2,703,896 | ) | |
$ | (5,753,614 | ) |
Non-controlling interests | |
9 | | |
| 258 | | |
| 11,642 | | |
| (41,409 | ) | |
| (16,380 | ) |
Total comprehensive loss, net of taxes | |
| | |
$ | (668,820 | ) | |
$ | (1,450,836 | ) | |
$ | (2,745,305 | ) | |
$ | (5,769,994 | ) |
See
accompanying notes to the unaudited condensed consolidated interim financial statements
New Pacific
Metals Corp.
Unaudited Condensed Consolidated Interim Statements of Cash Flows
(Expressed in US dollars)
| |
| | |
Three months ended
December 31, | | |
Six months ended
December 31, | |
| |
Notes | | |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Operating activities | |
| | |
| | |
| | |
| | |
| |
Net loss | |
| | |
$ | (1,527,071 | ) | |
$ | (1,873,003 | ) | |
$ | (3,273,685 | ) | |
$ | (3,958,666 | ) |
Add (deduct) items not affecting cash: | |
| | |
| | | |
| | | |
| | | |
| | |
Net income from investments | |
4 | | |
| (275,020 | ) | |
| (83,455 | ) | |
| (295,294 | ) | |
| (41,781 | ) |
Depreciation | |
5 | | |
| 54,345 | | |
| 51,181 | | |
| 104,958 | | |
| 106,192 | |
Gain on disposal of plant and equipment | |
5 | | |
| - | | |
| - | | |
| (51,418 | ) | |
| - | |
Share-based compensation | |
8(b) | | |
| 358,359 | | |
| 760,520 | | |
| 1,034,498 | | |
| 1,614,858 | |
Unrealized foreign exchange (gain) loss | |
| | |
| (16,666 | ) | |
| 28,750 | | |
| (66,995 | ) | |
| 13,857 | |
Changes in non-cash operating working capital | |
13 | | |
| (886,642 | ) | |
| (552,609 | ) | |
| (287,429 | ) | |
| (1,094,264 | ) |
Interest received | |
4 | | |
| 276,590 | | |
| 116,582 | | |
| 300,721 | | |
| 250,224 | |
Net cash used in operating activities | |
| | |
| (2,016,105 | ) | |
| (1,552,034 | ) | |
| (2,534,644 | ) | |
| (3,109,580 | ) |
| |
| | |
| | | |
| | | |
| | | |
| | |
Investing activities | |
| | |
| | | |
| | | |
| | | |
| | |
Mineral property interest | |
| | |
| | | |
| | | |
| | | |
| | |
Capital expenditures | |
| | |
| (736,260 | ) | |
| (5,413,239 | ) | |
| (2,878,749 | ) | |
| (9,502,583 | ) |
Proceeds on disposals | |
| | |
| - | | |
| - | | |
| - | | |
| 2,986,188 | |
Plant and equipment | |
| | |
| | | |
| | | |
| | | |
| | |
Additions | |
5 | | |
| (1,788 | ) | |
| (60,437 | ) | |
| (135,706 | ) | |
| (80,143 | ) |
Proceeds on disposals | |
5 | | |
| - | | |
| - | | |
| 58,776 | | |
| - | |
Changes in other tax receivable | |
| | |
| (50,170 | ) | |
| (671,427 | ) | |
| (104,466 | ) | |
| (1,257,611 | ) |
Net cash used in investing activities | |
| | |
| (788,218 | ) | |
| (6,145,103 | ) | |
| (3,060,145 | ) | |
| (7,854,149 | ) |
| |
| | |
| | | |
| | | |
| | | |
| | |
Financing activities | |
| | |
| | | |
| | | |
| | | |
| | |
Proceeds from issuance of common shares | |
| | |
| 71,629 | | |
| 233,614 | | |
| 24,581,770 | | |
| 260,517 | |
Net cash provided by financing activities | |
| | |
| 71,629 | | |
| 233,614 | | |
| 24,581,770 | | |
| 260,517 | |
Effect of exchange rate changes on cash | |
| | |
| 552,164 | | |
| 274,126 | | |
| 553,863 | | |
| (1,306,409 | ) |
| |
| | |
| | | |
| | | |
| | | |
| | |
Decrease in cash | |
| | |
| (2,180,530 | ) | |
| (7,189,397 | ) | |
| 19,540,844 | | |
| (12,009,621 | ) |
Cash and cash equivalent, beginning of the period | |
| | |
| 28,017,686 | | |
| 24,502,280 | | |
| 6,296,312 | | |
| 29,322,504 | |
Cash and cash equivalent, end of the period | |
| | |
$ | 25,837,156 | | |
$ | 17,312,883 | | |
$ | 25,837,156 | | |
$ | 17,312,883 | |
Supplementary cash flow information | |
13 | | |
| | | |
| | | |
| | | |
| | |
See
accompanying notes to the unaudited condensed consolidated interim financial statements
New Pacific
Metals Corp.
Unaudited Condensed Consolidated Interim Statements of Change in Equity
(Expressed in US dollars)
|
|
|
Share
capital | | |
| | |
| | |
| | |
| | |
| | |
| |
|
Notes |
|
Number
of
common
shares
issued | | |
Amount | | |
Share-based
payment
reserve | | |
Accumulated
other
comprehensive
income | | |
Deficit | | |
Total
equity
attributable to the
equity holders of
the Company | | |
Non-
controlling
interests | | |
Total
equity | |
Balance,
July 1, 2022 |
| |
|
| 156,631,827 | | |
$ | 153,707,576 | | |
$ | 15,395,486 | | |
$ | 11,704,949 | | |
$ | (60,527,857 | ) | |
$ | 120,280,154 | | |
$ | (71,199 | ) | |
$ | 120,208,955 | |
Options exercised |
| |
|
| 230,000 | | |
| 403,961 | | |
| (143,444 | ) | |
| - | | |
| - | | |
| 260,517 | | |
| - | | |
| 260,517 | |
Restricted share units distributed |
| |
|
| 169,115 | | |
| 534,050 | | |
| (534,050 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Share-based compensation |
| |
|
| - | | |
| - | | |
| 2,294,568 | | |
| - | | |
| - | | |
| 2,294,568 | | |
| - | | |
| 2,294,568 | |
Net loss |
| |
|
| - | | |
| - | | |
| - | | |
| - | | |
| (3,955,901 | ) | |
| (3,955,901 | ) | |
| (2,765 | ) | |
| (3,958,666 | ) |
Currency translation adjustment |
| |
|
| - | | |
| - | | |
| - | | |
| (1,797,713 | ) | |
| - | | |
| (1,797,713 | ) | |
| (13,615 | ) | |
| (1,811,328 | ) |
Balance,
December 31, 2022 |
| |
|
| 157,030,942 | | |
$ | 154,645,587 | | |
$ | 17,012,560 | | |
$ | 9,907,236 | | |
$ | (64,483,758 | ) | |
$ | 117,081,625 | | |
$ | (87,579 | ) | |
$ | 116,994,046 | |
Options exercised |
| |
|
| 215,000 | | |
| 489,005 | | |
| (144,848 | ) | |
| - | | |
| - | | |
| 344,157 | | |
| - | | |
| 344,157 | |
Restricted share units distributed |
| |
|
| 155,140 | | |
| 485,018 | | |
| (485,018 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Private placement |
| |
|
| 90,090 | | |
| 220,442 | | |
| - | | |
| - | | |
| - | | |
| 220,442 | | |
| - | | |
| 220,442 | |
Share-based compensation |
| |
|
| - | | |
| - | | |
| 2,253,603 | | |
| - | | |
| - | | |
| 2,253,603 | | |
| - | | |
| 2,253,603 | |
Net loss |
| |
|
| - | | |
| - | | |
| - | | |
| - | | |
| (4,139,548 | ) | |
| (4,139,548 | ) | |
| (1,918 | ) | |
| (4,141,466 | ) |
Currency translation adjustment |
| |
|
| - | | |
| - | | |
| - | | |
| 320,744 | | |
| - | | |
| 320,744 | | |
| (20,640 | ) | |
| 300,104 | |
Balance,
June 30, 2023 |
| |
|
| 157,491,172 | | |
$ | 155,840,052 | | |
$ | 18,636,297 | | |
$ | 10,227,980 | | |
$ | (68,623,306 | ) | |
$ | 116,081,023 | | |
$ | (110,137 | ) | |
$ | 115,970,886 | |
Options exercised |
| 8(b)(i) |
|
| 85,000 | | |
| 197,213 | | |
| (61,529 | ) | |
| - | | |
| - | | |
| 135,684 | | |
| - | | |
| 135,684 | |
Restricted share units distributed |
| 8(b)(ii) |
|
| 259,210 | | |
| 746,526 | | |
| (746,526 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Common shares issued through
bought deal financing |
| 8(c) |
|
| 13,208,000 | | |
| 24,446,086 | | |
| - | | |
| - | | |
| - | | |
| 24,446,086 | | |
| - | | |
| 24,446,086 | |
Share-based compensation |
| 8(b) |
|
| - | | |
| - | | |
| 1,194,965 | | |
| - | | |
| - | | |
| 1,194,965 | | |
| - | | |
| 1,194,965 | |
Net loss |
| |
|
| - | | |
| - | | |
| - | | |
| - | | |
| (3,270,124 | ) | |
| (3,270,124 | ) | |
| (3,561 | ) | |
| (3,273,685 | ) |
Currency
translation adjustment |
| |
|
| - | | |
| - | | |
| - | | |
| 566,228 | | |
| - | | |
| 566,228 | | |
| (37,848 | ) | |
| 528,380 | |
Balance,
December 31, 2023 |
| |
|
| 171,043,382 | | |
$ | 181,229,877 | | |
$ | 19,023,207 | | |
$ | 10,794,208 | | |
$ | (71,893,430 | ) | |
$ | 139,153,862 | | |
$ | (151,546 | ) | |
$ | 139,002,316 | |
See
accompanying notes to the unaudited condensed consolidated interim financial statements
New
Pacific Metals Corp.
Notes to Unaudited Condensed Consolidated Interim Financial Statements for the three and six months ended December 31, 2023 and 2022
(Expressed in US dollars)
New
Pacific Metals Corp. along with its subsidiaries (collectively, the “Company” or “New Pacific”) is a Canadian
mining issuer engaged in exploring and developing mineral properties in Bolivia. The Company is in the stage of exploring and advancing
the development of its mineral properties and has not yet determined if they contain economically recoverable mineral reserves. The underlying
value and the recoverability of the amounts shown for mineral property interests are entirely dependent upon the existence of recoverable
mineral reserves, the ability of the Company to obtain the necessary financing to complete the exploration and development of the mineral
properties, and future profitable production or proceeds from the disposition of the mineral property interests.
The
Company is publicly listed on the Toronto Stock Exchange (“TSX”) under the symbol “NUAG” and on the NYSE American
stock exchange (“NYSE-A”) under the symbol “NEWP”. The head office, registered address and records office of
the Company are located at 1066 Hastings Street, Suite 1750, Vancouver, British Columbia, Canada, V6E 3X1.
2. | MATERIAL
ACCOUNTING POLICY INFORMATION |
(a) | Statement
of Compliance and Basis of Preparation |
These
unaudited condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard
34 – Interim Financial Reporting (“IAS 34”) as issued by the International Accounting Standards Board (“IASB”).
These unaudited condensed consolidated interim financial statements should be read in conjunction with the Company’s audited consolidated
financial statements for the year ended June 30, 2023. These unaudited condensed consolidated interim financial statements follow the
same accounting policies, estimates and judgements set out in Note 2 to the audited consolidated financial statements for the year ended
June 30, 2023, except as set out in Note 2(c) below.
These
unaudited condensed consolidated interim financial statements have been prepared on a going concern basis.
The
unaudited condensed consolidated interim financial statements of the Company as at and for the three and six months ended December 31,
2023 were approved and authorized for issuance in accordance with a resolution of the Board of Directors (the “Board”) dated
on February 12, 2024.
(b) | Basis
of Consolidation |
These
unaudited condensed consolidated interim financial statements include the accounts of the Company and its wholly or partially owned subsidiaries.
Subsidiaries
are consolidated from the date on which the Company obtains control up to the date of the disposition of control. Control is achieved
when the Company has power over the subsidiary, is exposed or has rights to variable returns from its involvement with the subsidiary;
and has the ability to use its power to affect its returns. For non-wholly-owned subsidiaries over which the Company has control, the
net assets attributable to outside equity shareholders are presented as “non-controlling interests” in the equity section
of the consolidated statements of financial position. Net income or loss for the period that is attributable to the non-controlling interests
is calculated based on the ownership of the non-controlling interest shareholders in the subsidiary.
New
Pacific Metals Corp.
Notes to Unaudited Condensed Consolidated Interim Financial Statements for the three and six months ended December 31, 2023 and 2022
(Expressed in US dollars)
Balances,
transactions, income and expenses between the Company and its subsidiaries are eliminated on consolidation.
Details
of the Company’s significant subsidiaries which are consolidated are as follows:
| |
| |
| |
Proportion of ownership interest held | | |
|
Name of subsidiaries | |
Principal activity | |
Country of
incorporation | |
December 31,
2023 | | |
June 30,
2023 | | |
Mineral
properties |
New Pacific Offshore Inc. | |
Holding company | |
BVI (i) | |
| 100 | % | |
| 100 | % | |
|
SKN Nickel & Platinum Ltd. | |
Holding company | |
BVI | |
| 100 | % | |
| 100 | % | |
|
Glory Metals Investment Corp. Limited | |
Holding company | |
Hong Kong | |
| 100 | % | |
| 100 | % | |
|
New Pacific Investment Corp. Limited | |
Holding company | |
Hong Kong | |
| 100 | % | |
| 100 | % | |
|
New Pacific Andes Corp. Limited
| |
Holding company | |
Hong Kong | |
| 100 | % | |
| 100 | % | |
|
Fortress Mining Inc. | |
Holding company | |
BVI | |
| 100 | % | |
| 100 | % | |
|
New Pacific Success Inc. | |
Holding company | |
BVI | |
| 100 | % | |
| 100 | % | |
|
New Pacific Forward Inc. | |
Holding company | |
BVI | |
| 100 | % | |
| 100 | % | |
|
Minera Alcira S.A. | |
Mining company | |
Bolivia | |
| 100 | % | |
| 100 | % | |
Silver Sand |
NPM Minerales S.A. | |
Mining company | |
Bolivia | |
| 100 | % | |
| 100 | % | |
|
Colquehuasi S.R.L. | |
Mining company | |
Bolivia | |
| 100 | % | |
| 100 | % | |
Silverstrike |
Minera Hastings S.R.L. | |
Mining company | |
Bolivia | |
| 100 | % | |
| 100 | % | |
Carangas |
Qinghai Found Mining Co., Ltd. | |
Mining company | |
China | |
| 82 | % | |
| 82 | % | |
|
(i) British Virgin Islands (“BVI”)
(c) | Changes
in Accounting Policies |
The
accounting policies applied in the preparation of these unaudited condensed consolidated interim financial statements are consistent
with those applied and disclosed in the Company’s audited consolidated financial statements for the year ended June 30, 2023 with
the exception of the mandatory adoption of certain amendments noted below:
| i. | Amendments
to IAS 1 - Presentation of Financial Statements and IFRS Practice Statement 2 - Making
Materiality Judgments - Disclosure of Accounting Policies |
The
amendments change the requirements in IAS 1 with regard to disclosure of accounting policies. The amendments replace all instances of
the term “significant accounting policies” with “material accounting policy information.” Accounting policy information
is material if, when considered together with other information included in an entity’s financial statements, it can reasonably
be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial
statements.
The
supporting paragraphs in IAS 1 are also amended to clarify that accounting policy information that relates to immaterial transactions,
other events or conditions is immaterial and need not be disclosed. Accounting policy information may be material because of the nature
of the related transactions, other events or conditions, even if the amounts are immaterial. However, not all accounting policy information
relating to material transactions, other events or conditions is itself material. The IASB has also developed guidance and examples to
explain and demonstrate the application of the ‘four-step materiality process’ described in IFRS Practice Statement 2.
The
amendments were applied effective July 1, 2023 and did not have a material impact on the Company’s unaudited condensed consolidated interim
financial statements.
New
Pacific Metals Corp.
Notes to Unaudited Condensed Consolidated Interim Financial Statements for the three and six months ended December 31, 2023 and 2022
(Expressed in US dollars)
| ii. | Amendments
to IAS 8 - Accounting Policies, Changes in Accounting Estimates and Errors— Definition
of Accounting Estimates |
The
amendments replace the definition of a change in accounting estimates with a definition of accounting estimates. Under the new definition,
accounting estimates are “monetary amounts in financial statements that are subject to measurement uncertainty.” The definition
of a change in accounting estimates was deleted. However, the IASB retained the concept of changes in accounting estimates in the Standard
with the following clarifications:
§ | A
change in accounting estimate that results from new information or new developments is not
the correction of an error; and |
| |
§ | The
effects of a change in an input or a measurement technique used to develop an accounting
estimate are changes in accounting estimates if they do not result from the correction of
prior period errors. |
The
amendments were applied effective July 1, 2023 and did not have a material impact on the Company’s unaudited condensed consolidated interim
financial statements.
Other
tax receivable is composed of value-added tax (“VAT”) imposed by the Bolivian government. The Company had VAT outputs through
its exploration costs and general expenses incurred in Bolivia. These VAT outputs are deductible against future VAT inputs that will
be generated through sales.
4. | INCOME
FROM INVESTMENTS |
Income
from investments consist of:
| |
Three Months Ended
December 31, | | |
Six Months Ended
December 31, | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Fair value change on equity investments | |
$ | (11,626 | ) | |
$ | (3,569 | ) | |
$ | (5,141 | ) | |
$ | (175,291 | ) |
Fair value change on bonds | |
| 10,056 | | |
| (29,552 | ) | |
| (286 | ) | |
| (33,152 | ) |
Interest income | |
| 276,590 | | |
| 116,576 | | |
| 300,721 | | |
| 250,224 | |
Net income from investments | |
$ | 275,020 | | |
$ | 83,455 | | |
$ | 295,294 | | |
$ | 41,781 | |
New
Pacific Metals Corp.
Notes to Unaudited Condensed Consolidated Interim Financial Statements for the three and six months ended December 31, 2023 and 2022
(Expressed in US dollars)
Cost | |
Land
and
building | | |
Machinery | | |
Motor
vehicles | | |
Office
equipment
and furniture | | |
Computer
software | | |
Total | |
Balance,
July 1, 2022 | |
$ | 630,000 | | |
$ | 408,358 | | |
$ | 579,032 | | |
$ | 266,364 | | |
$ | 193,774 | | |
$ | 2,077,528 | |
Additions | |
| - | | |
| 77,259 | | |
| - | | |
| 15,576 | | |
| - | | |
| 92,835 | |
Disposals | |
| - | | |
| - | | |
| - | | |
| (12,259 | ) | |
| (99,442 | ) | |
| (111,701 | ) |
Foreign
currency translation impact | |
| - | | |
| - | | |
| - | | |
| (2,406 | ) | |
| (817 | ) | |
| (3,223 | ) |
Balance,
June 30, 2023 | |
$ | 630,000 | | |
$ | 485,617 | | |
$ | 579,032 | | |
$ | 267,275 | | |
$ | 93,515 | | |
$ | 2,055,439 | |
Additions | |
| 115,237 | | |
| - | | |
| - | | |
| 20,469 | | |
| - | | |
| 135,706 | |
Disposals | |
| - | | |
| - | | |
| (110,838 | ) | |
| (30,709 | ) | |
| - | | |
| (141,547 | ) |
Reclassifed
among asset groups | |
| - | | |
| (18,296 | ) | |
| 18,296 | | |
| - | | |
| - | | |
| - | |
Reclassifed
to mineral property interest | |
| - | | |
| (10,685 | ) | |
| - | | |
| - | | |
| - | | |
| (10,685 | ) |
Foreign
currency translation impact | |
| - | | |
| - | | |
| - | | |
| 103 | | |
| 99 | | |
| 202 | |
Balance,
December 31, 2023 | |
$ | 745,237 | | |
$ | 456,636 | | |
$ | 486,490 | | |
$ | 257,138 | | |
$ | 93,614 | | |
$ | 2,039,115 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Accumulated
depreciation and amortization | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance,
July 1, 2022 | |
$ | - | | |
$ | (113,640 | ) | |
$ | (198,572 | ) | |
$ | (156,000 | ) | |
$ | (146,468 | ) | |
$ | (614,680 | ) |
Depreciation | |
| - | | |
| (57,272 | ) | |
| (98,338 | ) | |
| (35,170 | ) | |
| (22,751 | ) | |
| (213,531 | ) |
Disposals | |
| - | | |
| - | | |
| - | | |
| 12,259 | | |
| 99,442 | | |
| 111,701 | |
Foreign
currency translation impact | |
| - | | |
| - | | |
| - | | |
| 1,627 | | |
| (717 | ) | |
| 910 | |
Balance,
June 30, 2023 | |
$ | - | | |
$ | (170,912 | ) | |
$ | (296,910 | ) | |
$ | (177,284 | ) | |
$ | (70,494 | ) | |
$ | (715,600 | ) |
Depreciation | |
| - | | |
| (30,479 | ) | |
| (51,185 | ) | |
| (17,423 | ) | |
| (5,871 | ) | |
| (104,958 | ) |
Disposals | |
| - | | |
| - | | |
| 110,837 | | |
| 23,352 | | |
| - | | |
| 134,189 | |
Foreign
currency translation impact | |
| - | | |
| - | | |
| - | | |
| (181 | ) | |
| (204 | ) | |
| (385 | ) |
Balance,
December 31, 2023 | |
$ | - | | |
$ | (201,391 | ) | |
$ | (237,258 | ) | |
$ | (171,536 | ) | |
$ | (76,569 | ) | |
$ | (686,754 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Carrying
amount | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance,
June 30, 2023 | |
$ | 630,000 | | |
$ | 314,705 | | |
$ | 282,122 | | |
$ | 89,991 | | |
$ | 23,021 | | |
$ | 1,339,839 | |
Balance,
December 31, 2023 | |
$ | 745,237 | | |
$ | 255,245 | | |
$ | 249,232 | | |
$ | 85,602 | | |
$ | 17,045 | | |
$ | 1,352,361 | |
For the three and six months ended December 31, 2023, certain plant and equipment were disposed for proceeds of $nil and $58,776, respectively
(three and six months ended December 31, 2022 - $nil and $nil, respectively) and gain of $nil and $51,418, respectively (three and six
months ended December 31, 2022 - $nil and $nil, respectively).
New Pacific
Metals Corp.
Notes to Unaudited Condensed Consolidated Interim Financial Statements for the three and six months ended December 31, 2023 and 2022
(Expressed in US dollars)
6. | MINERAL
PROPERTY INTERESTS |
The
continuity schedule of mineral property acquisition costs and deferred exploration and development costs is summarized as follows:
Cost | |
Silver
Sand | | |
Carangas | | |
Silverstrike | | |
Total | |
Balance,
July 1, 2022 | |
| | |
| | |
| | |
| |
Capitalized
exploration expenditures | |
$ | 76,568,598 | | |
$ | 5,460,946 | | |
$ | 3,269,232 | | |
$ | 85,298,776 | |
Reporting
and assessment | |
| 1,008,174 | | |
| 88,558 | | |
| - | | |
| 1,096,732 | |
Drilling
and assaying | |
| 1,925,695 | | |
| 8,289,678 | | |
| 977,881 | | |
| 11,193,254 | |
Project
management and support | |
| 2,719,120 | | |
| 1,424,573 | | |
| 256,569 | | |
| 4,400,262 | |
Camp
service | |
| 467,690 | | |
| 1,005,158 | | |
| 174,651 | | |
| 1,647,499 | |
Permit
and license | |
| 195,821 | | |
| 9,389 | | |
| - | | |
| 205,210 | |
Foreign
currency impact | |
| (201,972 | ) | |
| (8,831 | ) | |
| (24,680 | ) | |
| (235,483 | ) |
Balance, June 30, 2023 | |
$ | 82,683,126 | | |
$ | 16,269,471 | | |
$ | 4,653,653 | | |
$ | 103,606,250 | |
Capitalized
exploration expenditures | |
| | | |
| | | |
| | | |
| | |
Reporting
and assessment | |
| 258,404 | | |
| 112,700 | | |
| - | | |
| 371,104 | |
Drilling
and assaying | |
| 47,217 | | |
| 23,894 | | |
| - | | |
| 71,111 | |
Project
management and support | |
| 821,846 | | |
| 557,248 | | |
| 51,047 | | |
| 1,430,141 | |
Camp
service | |
| 218,747 | | |
| 233,584 | | |
| 26,394 | | |
| 478,725 | |
Permit
and license | |
| 33,047 | | |
| 9,308 | | |
| - | | |
| 42,355 | |
Foreign
currency impact | |
| 23,199 | | |
| 13,053 | | |
| 971 | | |
| 37,223 | |
Balance,
December 31, 2023 | |
$ | 84,085,586 | | |
$ | 17,219,258 | | |
$ | 4,732,065 | | |
$ | 106,036,909 | |
On
July 20, 2017, the Company acquired the Silver Sand Project. The Project is located in the Colavi District of the Potosí Department,
in Southwestern Bolivia, 33 kilometres (“km”) northeast of Potosí City, the department capital. The project covers
an area of approximately 5.42 km2 at an elevation of 4,072 metres (“m”) above sea level.
For
the three and six months ended December 31, 2023, total expenditures of $413,362 and $1,379,261, respectively (three and six months ended
December 31, 2022 - $1,700,593 and $4,197,529, respectively) were capitalized under the project.
In
April 2021, the Company signed an agreement with a private Bolivian company to acquire a 98% interest in the Carangas Project. The project
is located approximately 180 km southwest of the city of Oruro and within 50 km from Bolivia’s border with Chile. The private Bolivian
company is 100% owned by Bolivian nationals and holds title to the three exploration licenses that cover an area of 40.75 km2.
Under
the agreement, the Company is required to cover 100% of the future expenditures on exploration, mining, development, and production activities
for the project.
For
the three and six months ended December 31, 2023, total expenditures of $321,877 and $936,734, respectively (three and six months ended
December 31, 2022 - $2,871,725 and $5,848,633, respectively) were capitalized under the project.
New
Pacific Metals Corp.
Notes
to Unaudited Condensed Consolidated Interim Financial Statements for the three and six months ended December 31, 2023 and
2022
(Expressed in US dollars)
In December 2019, the Company acquired
a 98% interest in the Silverstrike Project from a private Bolivian corporation. The project covers an area of approximately 13 km2
and is located approximately 140 km southwest of the city of La Paz, Bolivia.
For the three and six months ended
December 31, 2023, total expenditures of $10,125 and $77,441, respectively (three and six months ended December 31, 2022 - $702,839 and
$1,145,490, respectively) were capitalized under the project.
7. | RELATED PARTY TRANSACTIONS |
Related party transactions are made
on terms agreed upon by the related parties. The balances with related parties are unsecured, non-interest bearing, and due on demand.
Related party transactions not disclosed elsewhere in the consolidated financial statements are as follows:
Due to a related party | |
December 31,
2023 | | |
June 30,
2023 | |
Silvercorp Metals Inc. | |
$ | 125,234 | | |
$ | 56,102 | |
(a)
Silvercorp Metals Inc. (“Silvercorp”) has one director (June 30, 2023 – one director and one officer) in common
with the Company. Silvercorp and the Company share office space and Silvercorp provides various general and administrative services
to the Company. The Company expects to continue making payments to Silvercorp in the normal course of business. Office and
administrative expenses rendered and incurred by Silvercorp on behalf of the Company for the three and six months ended December 31,
2023 were $193,296 and 409,487, respectively (three and six months ended December 31, 2022 - $239,345 and
$481,598, respectively).
| (b) | Compensation of key management personnel |
The remuneration of directors and
other members of key management personnel for the three and six months ended December 31, 2023 and 2022 are as follows:
| |
Three months ended December 31, | | |
Six months ended December 31, | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Director’s cash compensation | |
$ | 26,892 | | |
$ | 14,722 | | |
$ | 42,112 | | |
$ | 30,041 | |
Director’s share-based compensation | |
| 118,698 | | |
| 196,148 | | |
$ | 258,275 | | |
| 430,760 | |
Key management’s cash compensation | |
| 289,507 | | |
| 220,847 | | |
$ | 585,871 | | |
| 350,268 | |
Key management’s share-based compensation | |
| 402,154 | | |
| 481,755 | | |
$ | 884,777 | | |
| 1,048,026 | |
| |
$ | 837,251 | | |
$ | 913,472 | | |
$ | 1,771,035 | | |
$ | 1,859,095 | |
Other than as disclosed above, the Company does not have
any ongoing contractual or other commitments resulting from transactions with related parties.
(a) | Share Capital - authorized share capital |
The Company’s authorized share capital consists of
an unlimited number of common shares without par value.
New
Pacific Metals Corp.
Notes
to Unaudited Condensed Consolidated Interim Financial Statements for the three and six months ended December 31, 2023 and
2022
(Expressed
in US dollars)
(b) | Share-based compensation |
The Company has a share-based compensation
plan (the “Plan”) under which the Company may issue stock options and restricted share units (“RSUs”). The maximum
number of common shares to be reserved for issuance on any share-based compensation under the Plan is a rolling 10% of the issued and
outstanding common shares from time to time.
For the three and six months ended
December 31, 2023, a total of $412,077 and $1,075,099, respectively (three and six months ended December 31, 2022 - $739,971 and $1,570,829,
respectively) was recorded as share-based compensation expense.
For the
three and six months ended December 31, 2023, a total reduction of $(53,718) and $(40,601) due to forfeitures of stock options and RSUs
(three and six months ended December 31, 2022 – addition of $20,549 and $44,029, respectively) were included in the project evaluation
and corporate development expense.
For the three and six months
ended December 31, 2023, a reduction of $(56,606) and an addition of $160,467, respectively (three and six months ended December 31,
2022 – addition of $315,571 and $679,710, respectively) was capitalized under mineral property interests.
The continuity schedule of stock options, as at December
31, 2023, is as follows:
| |
Number of options | | |
Weighted average exercise price (CAD$) | |
Balance, July 1, 2022 | |
| 3,662,167 | | |
| 3.18 | |
Options Granted | |
| 1,186,000 | | |
| 3.47 | |
Options exercised | |
| (445,000 | ) | |
| 1.82 | |
Options forfeited | |
| (446,000 | ) | |
| 3.66 | |
Balance, June 30, 2023 | |
| 3,957,167 | | |
| 3.37 | |
Options exercised | |
| (85,000 | ) | |
| 2.15 | |
Options forfeited | |
| (506,000 | ) | |
| 3.79 | |
Balance, December 31, 2023 | |
| 3,366,167 | | |
| 3.34 | |
New
Pacific Metals Corp.
Notes
to Unaudited Condensed Consolidated Interim Financial Statements for the three and six months ended December 31, 2023 and
2022
(Expressed
in US dollars)
The following table summarizes information
about stock options outstanding as at December 31, 2023:
Exercise | | |
Number of options outstanding as at | | |
Weighted average remaining contractual life | | |
Number of options exercisable as at | | |
Weighted average exercise price | |
prices (CAD$) | | |
2023-12-31 | | |
(years) | | |
2023-12-31 | | |
(CAD$) | |
$ | 2.15 | | |
| 689,167 | | |
| 0.15 | | |
| 689,167 | | |
$ | 2.15 | |
$ | 3.33 | | |
| 658,000 | | |
| 3.10 | | |
| 329,000 | | |
$ | 3.33 | |
$ | 3.42 | | |
| 818,000 | | |
| 4.05 | | |
| 136,335 | | |
$ | 3.42 | |
$ | 3.67 | | |
| 120,000 | | |
| 4.07 | | |
| 20,000 | | |
$ | 3.67 | |
$ | 3.89 | | |
| 10,000 | | |
| 3.15 | | |
| 5,000 | | |
$ | 3.89 | |
$ | 3.92 | | |
| 50,000 | | |
| 4.29 | | |
| 8,333 | | |
$ | 3.92 | |
$ | 4.00 | | |
| 1,021,000 | | |
| 3.43 | | |
| 510,500 | | |
$ | 4.00 | |
$ | 2.15 - $4.00 | | |
| 3,366,167 | | |
| 2.88 | | |
| 1,698,335 | | |
$ | 3.07 | |
Subsequent to December 31, 2023, a
total of 1,335,000 stock options with a life of five years were granted to directors, officers, and employees at an exercise price of
CAD$2.10 per share subject to a vesting schedule over a three-year term with 1/6 of the options vesting every 6 months after the date
of grant until fully vested.
The continuity schedule of RSUs, as
at December 31, 2023, is as follows:
| |
Number
of shares | | |
Weighted
average grant date closing price per share (CAD$) | |
Balance, July 1, 2022 | |
| 1,477,216 | | |
$ | 4.11 | |
Granted | |
| 967,000 | | |
| 3.48 | |
Forfeited | |
| (222,801 | ) | |
| 4.01 | |
Distributed | |
| (324,255 | ) | |
| 4.20 | |
Balance, June 30, 2023 | |
| 1,897,160 | | |
$ | 3.79 | |
Forfeited | |
| (203,624 | ) | |
| 3.80 | |
Distributed | |
| (259,210 | ) | |
| 3.87 | |
Balance, December 31, 2023 | |
| 1,434,326 | | |
| 3.77 | |
Subsequent to December 31, 2023, a
total of 164,003 RSUs were vested and distributed.
Subsequent to December 31, 2023, a
total of 1,024,000 RSUs were granted to directors, officers, and employees at a grant date closing price of CAD$2.10 per share subject
to a vesting schedule over a three- year term with 1/6 of the RSUs vesting every 6 months after the date of grant until fully vested.
On
September 29, 2023, the Company successfully closed a bought deal financing to issue a total of 13,208,000 common shares at a price
of $1.96 (CAD $2.65) per common share for gross proceeds of $25,888,462. The underwriter’s fee and other issuance costs for
the transaction were $1,442,376.
New
Pacific Metals Corp.
Notes
to Unaudited Condensed Consolidated Interim Financial Statements for the three and six months ended December 31, 2023 and 2022
(Expressed in US dollars)
| 9. | NON-CONTROLLING INTEREST |
| |
Qinghai
Found | |
Balance, July 1, 2022 | |
$ | (71,199 | ) |
Share of net loss | |
| (4,683 | ) |
Share of other comprehensive loss | |
| (34,255 | ) |
Balance, June 30, 2023 | |
$ | (110,137 | ) |
Share of net loss | |
| (3,561 | ) |
Share of other comprehensive loss | |
| (37,848 | ) |
Balance, December 31, 2023 | |
$ | (151,546 | ) |
As at December 31, 2023 and June 30,
2023, the non-controlling interest in the Company’s subsidiary Qinghai Found was 18%.
The Company manages its exposure to
financial risks, including liquidity risk, foreign exchange rate risk, interest rate risk, credit risk, and equity price risk in accordance
with its risk management framework. The Board of Directors has overall responsibility for the establishment and oversight of the Company’s
risk management framework and reviews the Company’s policies on an ongoing basis.
The Company classifies
its fair value measurements within a fair value hierarchy, which reflects the significance of inputs used in making the measurements as
defined in IFRS 13 – Fair Value Measurement (“IFRS 13”).
Level 1 –
Unadjusted quoted prices at the measurement date for identical assets or liabilities in active markets.
Level 2 –
Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets;
quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can
be corroborated by observable market data.
Level 3 – Unobservable inputs
which are supported by little or no market activity.
The following table sets forth the
Company’s financial assets that are measured at fair value on a recurring basis by level within the fair value hierarchy as at December
31, 2023 and June 30, 2023 that are not otherwise disclosed. As required by IFRS 13, financial assets are classified in their entirety
based on the lowest level of input that is significant to the fair value measurement.
New
Pacific Metals Corp.
Notes
to Unaudited Condensed Consolidated Interim Financial Statements for the three and six months ended December 31, 2023 and 2022
(Expressed in US dollars)
| |
Fair value as at December 31, 2023 | |
Recurring measurements | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
Financial Assets | |
| | |
| | |
| | |
| |
Cash and cash equivalent | |
$ | 25,837,156 | | |
$ | - | | |
$ | - | | |
$ | 25,837,156 | |
Short-term investments | |
| 198,010 | | |
| - | | |
| - | | |
| 198,010 | |
Equity investments | |
| 278,126 | | |
| - | | |
| - | | |
| 278,126 | |
| |
Fair value as at June 30, 2023 | |
Recurring measurements | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
Financial Assets | |
| | |
| | |
| | |
| |
Cash and cash equivalent | |
$ | 6,296,312 | | |
$ | - | | |
$ | - | | |
$ | 6,296,312 | |
Short-term investments | |
| 198,375 | | |
| - | | |
| - | | |
| 198,375 | |
Equity investments | |
| 283,081 | | |
| - | | |
| - | | |
| 283,081 | |
Fair value of other financial instruments
excluded from the table above approximates their carrying amount as of December 31, 2023, and June 30, 2023, respectively, due to the
short-term nature of these instruments.
There were no transfers into or out
of Level 1, 2, or 3 during the three and six months ended December 31, 2023.
The Company has a history of losses
and no operating revenues from its operations. Liquidity risk is the risk that the Company will not be able to meet its short term business
requirements. As at December 31, 2023, the Company had a working capital position of $25,700,032 and sufficient cash resources to meet
the Company’s short-term financial liabilities and its planned exploration and development expenditures on various projects in Bolivia
for, but not limited to, the next 12 months.
In the normal course of business,
the Company enters into contracts that give rise to commitments for future minimum payments. The following summarizes the remaining contractual
maturities of the Company’s financial liabilities:
| |
December 31, 2023 | | |
June 30,
2023 | |
| |
Due within a year | | |
Total | | |
Total | |
Accounts payable and accrued liabilities | |
$ | 1,031,637 | | |
$ | 1,031,637 | | |
$ | 2,280,553 | |
Due to a related party | |
| 125,234 | | |
| 125,234 | | |
| 56,102 | |
| |
$ | 1,156,871 | | |
$ | 1,156,871 | | |
$ | 2,336,655 | |
New
Pacific Metals Corp.
Notes
to Unaudited Condensed Consolidated Interim Financial Statements for the three and six months ended December 31, 2023 and 2022
(Expressed in US dollars)
The Company is exposed to foreign
exchange risk when it undertakes transactions and holds assets and liabilities denominated in foreign currencies other than its functional
currencies. The functional currency of the head office, Canadian subsidiaries and all intermediate holding companies is CAD. The functional
currency of all Bolivian subsidiaries is USD. The functional currency of the Chinese subsidiary is RMB. The Company currently does not
engage in foreign exchange currency hedging. The Company’s exposure to foreign exchange risk that could affect net income is summarized
as follows:
Financial assets denominated in foreign currencies other than relevant functional currency | |
December 31,
2023 | | |
June 30,
2023 | |
United States dollars | |
$ | 346,868 | | |
$ | 320,994 | |
Bolivianos | |
| 1,038,268 | | |
| 869,869 | |
Total | |
$ | 1,385,136 | | |
$ | 1,190,863 | |
| |
| | | |
| | |
Financial liabilities denominated in foreign currencies other than relevant functional currency | |
| | | |
| | |
United States dollars | |
$ | 73,995 | | |
$ | 73,970 | |
Bolivianos | |
| 484,179 | | |
| 1,543,889 | |
Total | |
$ | 558,174 | | |
$ | 1,617,859 | |
As at December 31, 2023, with other
variables unchanged, a 1% strengthening (weakening) of the USD against the CAD would have increased (decreased) net income by approximately
$2,700.
As at December 31, 2023, with other
variables unchanged, a 1% strengthening (weakening) of the Bolivianos against the USD would have increased (decreased) net income by approximately
$5,500.
Interest rate risk is the risk that
the fair value or future cash flows of a financial instrument will fluctuate due to changes in market interest rates. The Company holds
a portion of cash in bank accounts that earn variable interest rates. Due to the short-term nature of these financial instruments, fluctuations
in market rates do not have significant impact on the fair values of the financial instruments as of December 31, 2023. The Company, from
time to time, also owns cashable guaranteed investment certificates (“GICs”) and bonds that earn interest payments at fixed
rates to maturity. Fluctuation in market interest rates usually will have an impact on bond’s fair value. An increase in market
interest rates will generally reduce bond’s fair value while a decrease in market interest rates will generally increase it. The
Company monitors market interest rate fluctuations closely and adjusts the investment portfolio accordingly.
Credit risk is the risk of financial
loss to the Company if the counterparty to a financial instrument fails to meet its contractual obligations. The Company’s exposure
to credit risk is primarily associated with cash and cash equivalents, bonds, and receivables. The carrying amount of financial assets
included on the statement of financial position represents the maximum credit exposure.
The Company has deposits of cash and
cash equivalent that meet minimum requirements for quality and liquidity as stipulated by the Board. Management believes the risk of loss
to be remote, as the majority of its cash and cash equivalent is held with major financial institutions. Bonds by nature are exposed to
more credit risk than cash and cash equivalent. The Company manages its risk associated with bonds by only investing in large globally
recognized corporations from diversified industries. As at December 31, 2023, the Company had a receivables balance of $336,158 (June
30, 2023 - $421,860). There were no material amounts in receivables which were past due on December 31, 2023 (June 30, 2023 - $nil).
New
Pacific Metals Corp.
Notes
to Unaudited Condensed Consolidated Interim Financial Statements for the three and six months ended December 31, 2023 and 2022
(Expressed in US dollars)
The Company holds certain marketable
securities that will fluctuate in value as a result of trading on global financial markets. Based upon the Company’s portfolio at
December 31, 2023, a 10% increase (decrease) in the market price of the securities held, ignoring any foreign exchange effects would have
resulted in an increase (decrease) to net income of approximately $28,000.
The objectives of the capital management
policy are to safeguard the Company’s ability to support exploration and operating requirements on an ongoing basis, continue the
investment in high quality assets along with safeguarding the value of its mineral properties, and support any expansionary plans.
The capital of the Company consists
of the items included in equity less cash, cash equivalent and short term investments. Risk and capital management are primarily the responsibility
of the Company’s corporate finance function and is monitored by the Board. The Company manages the capital structure and makes adjustments
depending on economic conditions. Significant risks are monitored and actions are taken, when necessary, according to the Company’s
approved policies.
New
Pacific Metals Corp.
Notes
to Unaudited Condensed Consolidated Interim Financial Statements for the three and six months ended December 31, 2023 and 2022
(Expressed in US dollars)
As at and for the six months ended
December 31, 2023, the Company operates in four (as at and for the six months ended December 31, 2022 – four) reportable operating
segments, one being the corporate segment; the other three being the exploration and development segments based on mineral properties
in Bolivia. These reportable segments are components of the Company where separate financial information is available that is evaluated
regularly by the Company’s Chief Executive Officer, the chief operating decision maker (“CODM”).
| (a) | Segment information for assets and liabilities are as follows: |
| |
December 31, 2023 | |
| |
| | |
Exploration and Development | | |
| |
| |
Corporate | | |
Silver Sand | | |
Carangas | | |
Silverstrike | | |
Total | |
Cash | |
$ | 25,047,731 | | |
$ | 168,202 | | |
$ | 387,935 | | |
$ | 233,288 | | |
$ | 25,837,156 | |
Short-term investments | |
| 198,010 | | |
| - | | |
| - | | |
| - | | |
| 198,010 | |
Equity investments | |
| 278,126 | | |
| - | | |
| - | | |
| - | | |
| 278,126 | |
Plant and equipment | |
| 220,615 | | |
| 440,684 | | |
| 37,082 | | |
| 653,980 | | |
| 1,352,361 | |
Mineral property interests | |
| - | | |
| 84,085,586 | | |
| 17,219,258 | | |
| 4,732,065 | | |
| 106,036,909 | |
Other assets | |
| 966,956 | | |
| 3,382,786 | | |
| 1,896,088 | | |
| 210,795 | | |
| 6,456,625 | |
Total Assets | |
$ | 26,711,438 | | |
$ | 88,077,258 | | |
$ | 19,540,363 | | |
$ | 5,830,128 | | |
$ | 140,159,187 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total Liabilities | |
$ | (975,052 | ) | |
$ | (168,231 | ) | |
$ | (11,687 | ) | |
$ | (1,901 | ) | |
$ | (1,156,871 | ) |
| |
June 30, 2023 | |
| |
| | |
Exploration and Development | | |
| |
| |
Corporate | | |
Silver Sand | | |
Carangas | | |
Silverstrike | | |
Total | |
Cash | |
$ | 6,232,985 | | |
$ | 58,497 | | |
$ | 260 | | |
$ | 4,570 | | |
$ | 6,296,312 | |
Short-term investments | |
| 198,375 | | |
| - | | |
| - | | |
| - | | |
| 198,375 | |
Equity investments | |
| 283,081 | | |
| - | | |
| - | | |
| - | | |
| 283,081 | |
Plant and equipment | |
| 104,450 | | |
| 517,065 | | |
| 58,212 | | |
| 660,112 | | |
| 1,339,839 | |
Mineral property interests | |
| - | | |
| 82,683,126 | | |
| 16,269,471 | | |
| 4,653,653 | | |
| 103,606,250 | |
Other assets | |
| 908,823 | | |
| 3,563,256 | | |
| 1,888,293 | | |
| 223,312 | | |
| 6,583,684 | |
Total Assets | |
$ | 7,727,714 | | |
$ | 86,821,944 | | |
$ | 18,216,236 | | |
$ | 5,541,647 | | |
$ | 118,307,541 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total Liabilities | |
$ | (1,307,795 | ) | |
$ | (228,966 | ) | |
$ | (795,379 | ) | |
$ | (4,515 | ) | |
$ | (2,336,655 | ) |
New
Pacific Metals Corp.
Notes
to Unaudited Condensed Consolidated Interim Financial Statements for the three and six months ended December 31, 2023 and 2022
(Expressed in US dollars)
| (b) | Segment information for operating results are as follows: |
| |
Three months ended December 31, 2023 | |
| |
| | |
Exploration and Development | | |
| |
| |
Corporate | | |
Silver Sand | | |
Carangas | | |
Silverstrike | | |
Total | |
Project evaluation and corporate development | |
$ | (76,553 | ) | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | (76,553 | ) |
Salaries and benefits | |
| (650,973 | ) | |
| - | | |
| - | | |
| - | | |
| (650,973 | ) |
Share-based compensation | |
| (412,077 | ) | |
| - | | |
| - | | |
| - | | |
| (412,077 | ) |
Other operating expenses | |
| (584,179 | ) | |
| (79,330 | ) | |
| (10,376 | ) | |
| (5,269 | ) | |
| (679,154 | ) |
Total operating expense | |
| (1,723,782 | ) | |
| (79,330 | ) | |
| (10,376 | ) | |
| (5,269 | ) | |
| (1,818,757 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net income from investments | |
| 275,020 | | |
| - | | |
| - | | |
| - | | |
| 275,020 | |
Foreign exchange gain | |
| 16,666 | | |
| - | | |
| - | | |
| - | | |
| 16,666 | |
Net loss | |
$ | (1,432,096 | ) | |
$ | (79,330 | ) | |
$ | (10,376 | ) | |
$ | (5,269 | ) | |
$ | (1,527,071 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Attributed to: | |
| | | |
| | | |
| | | |
| | | |
| | |
Equity holders of the Company | |
$ | (1,429,133 | ) | |
$ | (79,330 | ) | |
$ | (10,376 | ) | |
$ | (5,269 | ) | |
$ | (1,524,108 | ) |
Non-controlling interests | |
| (2,963 | ) | |
| - | | |
| - | | |
| - | | |
| (2,963 | ) |
Net loss | |
$ | (1,432,096 | ) | |
$ | (79,330 | ) | |
$ | (10,376 | ) | |
$ | (5,269 | ) | |
$ | (1,527,071 | ) |
| |
Three months ended December 31, 2022 | |
| |
| | |
Exploration and Development | | |
| |
| |
Corporate | | |
Silver Sand | | |
Carangas | | |
Silverstrike | | |
Total | |
Project evaluation and corporate development | |
$ | (77,561 | ) | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | (77,561 | ) |
Salaries and benefits | |
| (430,404 | ) | |
| - | | |
| - | | |
| - | | |
| (430,404 | ) |
Share-based compensation | |
| (739,971 | ) | |
| - | | |
| - | | |
| - | | |
| (739,971 | ) |
Other operating expenses | |
| (576,913 | ) | |
| (66,958 | ) | |
| (28,277 | ) | |
| (7,624 | ) | |
| (679,772 | ) |
Total operating expense | |
| (1,824,849 | ) | |
| (66,958 | ) | |
| (28,277 | ) | |
| (7,624 | ) | |
| (1,927,708 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net income from investments | |
| 83,455 | | |
| - | | |
| - | | |
| - | | |
| 83,455 | |
Foreign exchange loss | |
| (28,750 | ) | |
| - | | |
| - | | |
| - | | |
| (28,750 | ) |
Net loss | |
$ | (1,770,144 | ) | |
$ | (66,958 | ) | |
$ | (28,277 | ) | |
$ | (7,624 | ) | |
$ | (1,873,003 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Attributed to: | |
| | | |
| | | |
| | | |
| | | |
| | |
Equity holders of the Company | |
$ | (1,767,859 | ) | |
$ | (66,958 | ) | |
$ | (28,277 | ) | |
$ | (7,624 | ) | |
$ | (1,870,718 | ) |
Non-controlling interests | |
| (2,285 | ) | |
| - | | |
| - | | |
| - | | |
| (2,285 | ) |
Net loss | |
$ | (1,770,144 | ) | |
$ | (66,958 | ) | |
$ | (28,277 | ) | |
$ | (7,624 | ) | |
$ | (1,873,003 | ) |
New
Pacific Metals Corp.
Notes
to Unaudited Condensed Consolidated Interim Financial Statements for the three and six months ended December 31, 2023 and 2022
(Expressed in US dollars)
| |
Six months ended December 31, 2023 | |
| |
| | |
Exploration and Development | | |
| |
| |
Corporate | | |
Silver Sand | | |
Carangas | | |
Silverstrike | | |
Total | |
Project evaluation and corporate development | |
$ | (189,537 | ) | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | (189,537 | ) |
Salaries and benefits | |
| (1,101,112 | ) | |
| - | | |
| - | | |
| - | | |
| (1,101,112 | ) |
Share-based compensation | |
| (1,075,099 | ) | |
| - | | |
| - | | |
| - | | |
| (1,075,099 | ) |
Other operating expenses | |
| (1,154,182 | ) | |
| (136,112 | ) | |
| (22,633 | ) | |
| (8,717 | ) | |
| (1,321,644 | ) |
Total operating expense | |
| (3,519,930 | ) | |
| (136,112 | ) | |
| (22,633 | ) | |
| (8,717 | ) | |
| (3,687,392 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net Income from investments | |
| 295,294 | | |
| - | | |
| - | | |
| - | | |
| 295,294 | |
(Loss) gain on disposal of plant and equipment | |
| (488 | ) | |
| 51,906 | | |
| - | | |
| - | | |
| 51,418 | |
Foreign exchange gain | |
| 56,678 | | |
| - | | |
| 10,317 | | |
| - | | |
| 66,995 | |
Net loss | |
$ | (3,168,446 | ) | |
$ | (84,206 | ) | |
$ | (12,316 | ) | |
$ | (8,717 | ) | |
$ | (3,273,685 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Attributed to: | |
| | | |
| | | |
| | | |
| | | |
| | |
Equity holders of the Company | |
$ | (3,164,885 | ) | |
$ | (84,206 | ) | |
$ | (12,316 | ) | |
$ | (8,717 | ) | |
$ | (3,270,124 | ) |
Non-controlling interests | |
| (3,561 | ) | |
| - | | |
| - | | |
| - | | |
| (3,561 | ) |
Net loss | |
$ | (3,168,446 | ) | |
$ | (84,206 | ) | |
$ | (12,316 | ) | |
$ | (8,717 | ) | |
$ | (3,273,685 | ) |
| |
Six months ended December 31, 2022 | |
| |
| | |
Exploration and Development | | |
| |
| |
Corporate | | |
Silver Sand | | |
Carangas | | |
Silverstrike | | |
Total | |
Project evaluation and corporate development | |
$ | (186,097 | ) | |
| - | | |
$ | - | | |
$ | - | | |
$ | (186,097 | ) |
Salaries and benefits | |
| (759,574 | ) | |
| - | | |
| - | | |
| - | | |
| (759,574 | ) |
Share-based compensation | |
| (1,570,829 | ) | |
| - | | |
| - | | |
| - | | |
| (1,570,829 | ) |
Other operating expenses | |
| (1,272,189 | ) | |
| (143,027 | ) | |
| (42,606 | ) | |
| (12,268 | ) | |
| (1,470,090 | ) |
Total operating expense | |
| (3,788,689 | ) | |
| (143,027 | ) | |
| (42,606 | ) | |
| (12,268 | ) | |
| (3,986,590 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net loss from investments | |
| 41,781 | | |
| - | | |
| - | | |
| - | | |
| 41,781 | |
Foreign exchange loss | |
| (13,857 | ) | |
| - | | |
| - | | |
| - | | |
| (13,857 | ) |
Net loss | |
$ | (3,760,765 | ) | |
$ | (143,027 | ) | |
$ | (42,606 | ) | |
$ | (12,268 | ) | |
$ | (3,958,666 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Attributed to: | |
| | | |
| | | |
| | | |
| | | |
| | |
Equity holders of the Company | |
$ | (3,758,000 | ) | |
$ | (143,027 | ) | |
$ | (42,606 | ) | |
$ | (12,268 | ) | |
$ | (3,955,901 | ) |
Non-controlling interests | |
| (2,765 | ) | |
| - | | |
| - | | |
| - | | |
| (2,765 | ) |
Net loss | |
$ | (3,760,765 | ) | |
$ | (143,027 | ) | |
$ | (42,606 | ) | |
$ | (12,268 | ) | |
$ | (3,958,666 | ) |
New
Pacific Metals Corp.
Notes
to Unaudited Condensed Consolidated Interim Financial Statements for the three and six months ended December 31, 2023 and 2022
(Expressed in US dollars)
| 13. | SUPPLEMENTARY CASH FLOW INFORMATION |
Changes in non-cash operating working capital: | |
Three months ended
December 31, | | |
Six months ended
December 31, | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Receivables | |
$ | 64,428 | | |
$ | 98,671 | | |
$ | 85,645 | | |
$ | (6,152 | ) |
Deposits and prepayments | |
| (14,494 | ) | |
| (323,131 | ) | |
| (33,798 | ) | |
| (394,089 | ) |
Accounts payable and accrued liabilities | |
| (844,135 | ) | |
| (357,690 | ) | |
| (406,861 | ) | |
| (424,924 | ) |
Due to a related party | |
| (92,441 | ) | |
| 29,541 | | |
| 67,585 | | |
| (269,099 | ) |
| |
$ | (886,642 | ) | |
$ | (552,609 | ) | |
$ | (287,429 | ) | |
$ | (1,094,264 | ) |
Non-cash capital transactions: | |
Three months ended
December 31, | | |
Six months ended
December 31, | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Addition (reduction) of capital expenditures of mineral property interest in accounts payable and accrued liabilities | |
$ | (117,008 | ) | |
$ | (474,469 | ) | |
$ | (839,183 | ) | |
$ | 1,009,359 | |
Addition of capital expenditures of mineral property interest from deposits and prepayments | |
| 182,718 | | |
$ | - | | |
$ | 182,718 | | |
$ | - | |
Cash and cash equivalents: | |
December 31,
2023 | | |
June 30,
2023 | |
Cash on hand and at bank | |
$ | 18,201,303 | | |
$ | 6,296,312 | |
Cash equivalents | |
| 7,635,853 | | |
| - | |
| |
$ | 25,837,156 | | |
$ | 6,296,312 | |
Exhibit 99.2
MANAGEMENT’S
DISCUSSION AND ANALYSIS
For the three and six months ended December 31,
2023
(Expressed in United States Dollars)
NEW PACIFIC METALS CORP. |
Management’s Discussion and Analysis |
For the three and six months ended December 31, 2023 |
(Expressed in United States
dollars, unless otherwise stated) |
Date
of Report: February 12, 2024
This management’s discussion and analysis
(“MD&A”) for New Pacific Metals Corp. and its subsidiaries (collectively, “New Pacific” or the “Company”)
should be read in conjunction with the Company’s unaudited condensed consolidated interim financial statements for the three and
six months ended December 31, 2023 and the related notes contained therein. The Company prepares its financial statements in accordance
with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
The Company’s significant accounting policies are set out in Note 2 of the audited consolidated financial statements for the year
ended June 30, 2023 and Note 2(c) of the unaudited condensed consolidated interim financial statements for the three and six months ended
December 31, 2023. All dollar amounts are expressed in United States dollars (“USD”) unless otherwise stated. Certain amounts
shown in this MD&A may not add exactly to total amounts due to rounding differences. This MD&A contains “forward-looking
statements” that are subject to risk factors set out in a cautionary note contained at the end of this MD&A. All information
contained in this MD&A is current and has been approved by the Board of Directors of the Company (the “Board”) as of February
12, 2024.
BUSINESS
OVERVIEW AND STRATEGY
The Company is a Canadian mining issuer engaged
in exploring and developing mineral properties in Bolivia. The Company’s precious metal projects include the flagship Silver Sand
project (the “Silver Sand Project”), the Carangas project (the “Carangas Project”) and the Silverstrike project
(the “Silverstrike Project”). With experienced management and sufficient technical and financial resources, management believes
the Company is well positioned to create shareholder value through exploration and resource development.
The Company is publicly listed on the Toronto
Stock Exchange under the symbol “NUAG” and on the NYSE American stock exchange under the symbol “NEWP”. The head
office, registered address and records office of the Company are located at 1066 West Hastings Street, Suite 1750, Vancouver, British
Columbia, Canada, V6E 3X1.
PROJECTs
overvieW
Bolivian Licence Tenure
A summary of Bolivian mining laws with respect
to the Administrative Mining Contract (“AMC”) and exploration license is presented below.
Exploration and mining rights in Bolivia are granted
by the Ministry of Mines and Metallurgy through the Autoridad Jurisdictional Administrativa Minera (“AJAM”). Under
Bolivian mining laws, tenure is granted as either an AMC or an exploration license. Tenure held under the previous legislation was converted
to Autorización Transitoria Especiales (each, an “ATE”) which are required to be consolidated into new 25-hectare
sized cuadriculas (concessions) and converted to AMCs. AMCs created by conversion recognize existing rights of exploration and/or exploitation
and development, including treatment, metal refining, and/or trading. AMCs have a fixed term of 30 years and can be extended for an additional
30 years if certain conditions are met. Each AMC requires ongoing work and the submission of plans to the AJAM.
Exploration licenses allow exploration activities
only and must be converted to AMCs to conduct exploitation and development activities. Exploration licenses are valid for a maximum of
five years and provide the holder with the preferential right to request an AMC. In specific areas, mineral tenure is owned
Management’s Discussion and Analysis | Page 2 |
NEW PACIFIC METALS CORP. |
Management’s Discussion and Analysis |
For the three and six months ended December 31, 2023 |
(Expressed in United States
dollars, unless otherwise stated) |
by the Bolivian
state mining corporation, Corporación Minera de Bolivia (“COMIBOL”). In these areas, development and production
agreements can be obtained by entering into a Mining Production Contract (“MPC”) with COMIBOL.
Silver Sand Project
The Silver Sand Project is located in the Colavi
District of Potosí Department in southwestern Bolivia at an elevation of 4,072 m above sea level, 33 kilometres (“km”)
northeast of Potosí City, the department capital.
The Silver Sand Project is comprised of two claim
blocks, the Silver Sand south and north blocks, which covers a total area of 5.42 km2. The Silver Sand south block, covering
an area of 3.17 km2 hosts the Silver Sand deposit. On August 12, 2021, the Company announced the receipt of an AMC for the
Silver Sand south block from the AJAM. The Silver Sand north block covers an area of 2.25 km2 and is comprised of two AMCs
(Jisasjardan and Bronce). The AMCs establish a clear title to the Silver Sand Project.
Since acquiring the Silver Sand Project in 2017,
the Company has carried out extensive exploration and resource definition drill programs.
In 2022, the Company conducted a resource infill
drilling and step-out drilling program at the Silver Sand south block and completed 19,323 m in 86 drill holes. Assay
results for all drill holes have been received. The resource infill drilling aimed to improve the confidence in the continuity
of mineralization in the core area of the Silver Sand Project and upgrade resources, while the step-out drilling was designed to test
the extension of the mineralized zones up and down dip as well as on strike. The infill and step-out drilling results were included in
the MRE update and incorporated into the Silver Sand PEA Technical Report (as defined below). For details on the 2022 drill program, please
refer to the Company’s news releases dated September 19, 2022, May 31, 2022, and April 6, 2022.
On November 28, 2022, the Company released the
MRE update. Based on the MRE, the Silver Sand Project has an estimated measured and indicated mineral resource of 201.77 million ounces
(“oz”) of silver at head grade of 116 g/t and an estimated inferred mineral resource of 12.95 million oz of silver at 88 g/t.
For further details, please refer to the Company’s news release dated November 28, 2022.
On February 16, 2023, the Company filed its independent
Preliminary Economic Assessment (the “PEA”) for its Silver Sand Project (the “Silver Sand PEA Technical Report”).
AMC Mining Consultants (Canada) Ltd. (mineral resource, mining, infrastructure and financial analysis) was contracted to conduct the
Silver Sand PEA Technical Report in cooperation with Halyard Inc. (metallurgy and processing), and New Fields Canada Mining & Environment
ULC (tailings, water and water management). The Silver Sand PEA Technical Report is based on the MRE, which was reported on November
28, 2022. Highlights from the Silver Sand PEA Technical Report, with a base
case silver price of $22.50/oz are as follows:
| § | pre-tax
NPV (5%) of $1.1 billion with an IRR of 52%, and a post-tax NPV (5%) of $726 million with an IRR of 39%; |
Management’s Discussion and Analysis | Page 3 |
NEW PACIFIC METALS CORP. |
Management’s Discussion and Analysis |
For the three and six months ended December 31, 2023 |
(Expressed in United States
dollars, unless otherwise stated) |
| § | using
a +/- 20% sensitivity analysis for silver price, a post-tax NPV (5%) of $1,054 million with an IRR of 50% at $27/oz silver, or a post-tax
NPV (5%) of $398 million with an IRR of 26% at $18/oz silver; |
| § | 14-year
mine life producing approximately 171 million ounces payable silver metal; |
| § | initial
capital cost of $308 million, which includes $52 million in contingency cost; |
| § | life-of-mine
(“LOM”) total sustaining capital cost of $20 million; |
| § | average
LOM operating cash cost of $8.45/oz and total all-in sustaining cost of $10.42/oz silver; and |
| § | annual
payable metal production exceeds 15 million ounces of silver in years one through four, with LOM average annual payable metal production
exceeding 12 million ounces of silver. |
Please
see “Cautionary Note Regarding Results of Preliminary Economic Assessment”. For more details on the Silver Sand PEA
Technical Report, please refer to the Company’s news releases dated February 16, 2023 and January 9, 2023.
The Preliminary Feasibility Study for the Silver
Sand project (the “Silver Sand PFS”) is progressing as planned, with an expected delivery by mid-2024. Independent consultants
AMC Mining Consultants (Canada) Ltd., NewFields Canada Mining & Environment ULC and Halyard Inc. are actively involved in completing
the Silver Sand PFS. Significant milestones achieved include the completion of mine optimization, strategic phasing, processing flowsheet
optimization, and tailings trade-off studies. Concurrently, ongoing efforts encompass strategic mine scheduling, tailings and site infrastructure
design, and processing plant layout design. We expect the technical route to remain largely consistent with the Silver Sand PEA Technical
Report.
In May 2023, the Silver Sand Project obtained
its environmental categorization as a proposed open pit operation from Bolivia’s Ministry of Environment and Water, formally commencing
the Environmental Impact Assessment Study (“EEIA”) process. The Company continues to advance its socialization process with
communities located within the Silver Sand Project’s area of influence and collect wet and dry season environmental baseline data.
In addition, the Company is establishing a development fund for sustainable development projects in partnership with local communities,
demonstrating its long-term commitment to the region. After completion of the socialization process, the Company plans to achieve the
following:
| § | obtain
surface rights through long-term land lease agreements; |
| § | finalize
a resettlement and compensation plan for impacted families; and |
| § | implement
measures to safeguard cultural and historical heritage. |
Integral
to our pathway towards obtaining the EEIA, the Company is establishing a framework to coexist with artisanal and small-scale miners
(“ASMs”) in areas of the Silver Sand Project that do not encroach on our mineral rights. The Company recognizes the importance
of ASMs to the region’s economic and political landscape and is committed to ensuring the shared benefits from a proposed modern
mining operation, including access to milling capacity, technology, infrastructure, and capital, are realized. The Company is also undertaking
measures, with the assistance of both local government authorities and external contractors, to address the presence of ASMs whose activities
do not align with the development objectives of the Silver Sand Project.
The Company is also pursuing compliance with the
International Finance Corporation’s eight performance standards for sustainable development, building on an assessment conducted with
an independent consultant last year. This aligns with the Company’s commitment to responsible mining while providing the
Management’s Discussion and Analysis | Page 4 |
NEW PACIFIC METALS CORP. |
Management’s Discussion and Analysis |
For the three and six months ended December 31, 2023 |
(Expressed in United States
dollars, unless otherwise stated) |
ancillary benefit of positioning the project
for development by the Company, or another party, upon successful completion of the EEIA process.
| (d) | Mining Production Contract |
On
January 11, 2019, New Pacific announced that its 100% owned subsidiary, Minera Alcira S.A. (“Alcira”), entered into
an MPC with COMIBOL granting Alcira the right to carry out exploration, development and mining production activities in ATEs and cuadriculas
owned by COMIBOL adjoining the Silver Sand Project. An update to the MPC was made with COMIBOL on January 19, 2022. The MPC is comprised
of two areas. The first area is located to the south and west of the Silver Sand Project. The second area includes additional geologically
prospective ground to the north, east and south of the Silver Sand Project, wherein COMIBOL is expected to apply for exploration and mining
rights with the AJAM. Upon granting of the exploration and mining rights, COMIBOL will contribute these additional properties to the MPC.
There are no known economic
mineral deposits, nor any previous drilling or exploration discoveries within the MPC area. The MPC presents an opportunity to explore
and evaluate the possible extensions and/or satellites of mineralization outside of the currently defined Silver Sand Project.
Since October 2023, the
Company continues to engage with COMIBOL to obtain the ratification and approval of the signed MPC by the Plurinational Legislative Assembly
of Bolivia. The Company and COMIBOL have refined the MPC to concentrate exclusively on claims immediately adjacent to the Silver Sand
Project boundary. This streamlined landholding, while maintaining the core value of the MPC to the Silver Sand Project, is anticipated
to facilitate progress towards ratification and approval of the MPC.
The MPC remains subject
to ratification and approval by the Plurinational Legislative Assembly of Bolivia. As of the date of this MD&A, the MPC has not been
ratified nor approved by the Plurinational Legislative Assembly of Bolivia. The Company cautions that there is no assurance that the Company
will be successful in obtaining ratification of the MPC in a timely manner or at all, or that the ratification of the MPC will be obtained
on reasonable terms. The Company cannot predict the Bolivia government’s positions on foreign investment, mining concessions, land
tenure, environmental regulation, community relations, taxation or otherwise. A change in the government’s position on these issues
could adversely affect the ratification of the MPC and the Company’s business.
For the three and six
months ended December 31, 2023, total expenditures of $413,362 and $1,379,261, respectively (three and six months ended December 31, 2022
- $1,700,593 and $4,197,529, respectively) were capitalized under the Silver Sand Project.
Carangas Project
In April 2021, the Company
signed an agreement with a private Bolivian company to acquire a 98% interest in the Carangas Project. The Carangas Project is located
approximately 180 km southwest of the city of Oruro and within 50 km from Bolivia’s border with Chile. The private Bolivian company
is 100% owned by Bolivian nationals and holds title to the three exploration licenses that cover an area of 40.75 km2.
Management’s Discussion and Analysis | Page 5 |
NEW PACIFIC METALS CORP. |
Management’s Discussion and Analysis |
For the three and six months ended December 31, 2023 |
(Expressed in United States
dollars, unless otherwise stated) |
Under the agreement, the Company is required to
cover 100% of the future expenditures on exploration, mining, development and production activities for the Carangas Project.
In 2021, the Company completed an initial discovery
drill program of 13,209 m in 35 drill holes. Results from the 2021 discovery drill program confirmed
broad silver-rich polymetallic mineralization near surface and intersected a wide zone of gold mineralization at depth. For details of
the 2021 discovery drill program, please refer to the Company’s news releases dated May 17, 2022, February 23, 2022, and February
10, 2022.
Following the success of the 2021 discovery drill
program, the Company completed a resource definition drill program in 2022 for a total of 50,368 m in 115 drill holes. For details of
the 2022 drill program, please refer to the Company’s news releases dated April 6, 2023, February 21, 2023, February 1, 2023, January
24, 2023, November 14, 2022, October 19, 2022, August 8, 2022, and July 13, 2022.
To the date of this MD&A, the Company completed
its 2023 drill program at the Carangas Project for a total of 17,623 m in 39 drill holes. For details of the 2023 drill program, please
refer to the Company’s news releases dated July 6, 2023 and May 30, 2023.
On September
18, 2023, the Company filed its inaugural independent NI 43-101 MRE for the Carangas Project (the “Carangas MRE”). RPMGlobal
(Canada) Ltd. (“RPM”) was contracted to conduct the Carangas MRE technical report. Highlights from the Carangas MRE are as
follows:
| § | Total
indicated mineral resources of 214.9 Mt containing 205.3 Mozs of silver, 1,588.2 Kozs of gold, 1,444.9 Mlbs of lead (“Pb”),
2,653.7 Mlbs of zinc, and 112.6 Mlbs of copper; or collectively 559.8 Mozs of AgEq. |
| § | Total
inferred mineral resources of 45.0 Mt containing 47.7 Mozs of silver, 217.7 Kozs of gold, 297.9 Mlbs of lead, 533.7 Mlbs of zinc,
and 16.8 Mlbs of copper; or collectively 109.8 Mozs of AgEq. |
| § | The
Carangas Project is a globally significant Ag-Au polymetallic discovery. |
| § | Mineralization
starts at or near surface, potentially allowing for open-pit mining with an average stripping ratio for the conceptual pit of approximately
1.8:1 (tonnes of waste: tonnes of mineral resource). |
| § | Below
the pit constraint, substantial gold-dominant mineralization, similar in size and grade to the reported gold domain, has the potential
for conversion to underground mineable resources pending further evaluation for reasonable prospects of eventual economic extraction. |
| § | Favorable
initial metallurgical test work indicates laboratory-based recoveries of up to 90% for silver and 98% for gold based on a combination
of flotation and cyanide leaching. |
For
more details on the Carangas MRE, please refer to the Company’s news releases dated September 5, 2023 and September 18,
2023.
The Preliminary Economic
Assessment in respect of the Carangas Project (the “Carangas PEA”) remains on schedule for completion by mid-2024. The Company
and its independent consultants led by RPM are currently undertaking trade-off studies based on the Carangas MRE. There are a variety
of open pit mining
Management’s Discussion and Analysis | Page 6 |
NEW PACIFIC METALS CORP. |
Management’s Discussion and Analysis |
For the three and six months ended December 31, 2023 |
(Expressed in United States
dollars, unless otherwise stated) |
options
under review, all focusing on the higher-grade, near-surface starter pit at the Carangas Project that can be mined at a lower strip ratio.
Additionally, the Company is undertaking a metallurgical test program to enhance the processing flowsheet and gather valuable data to
support the Carangas PEA.
For the three and six months ended December 31,
2023, total expenditures of $321,877 and $936,734, respectively (three and six months ended December 31, 2022 - $2,871,725 and $5,848,633,
respectively) were capitalized under the Carangas Project.
Silverstrike Project
The Silverstrike Project
is located approximately 140 km southwest of La Paz, Bolivia. In December 2019, the Company signed a mining association agreement
and acquired a 98% interest in the Silverstrike Project from a private Bolivian corporation. The private Bolivian corporation is owned
100% by Bolivian nationals and holds the title to the nine ATEs (covering an area of approximately 13 km2) that comprise the
Silverstrike Project.
Under the mining association
agreement, the Company is required to cover 100% of future expenditures including exploration, contingent on results of development and
subsequent mining production activities at the Silverstrike Project.
During 2020, the Company’s exploration team
completed reconnaissance and detailed mapping and sampling programs on the northern portion of the Silverstrike Project. The results to
date identified near surface broad zones of silver mineralization in altered sandstones to the north, with similarities to the Silver
Sand Project. In the Silverstrike Project’s central area, a near surface broad silver zone that occurs near the top of a 900 m diameter
volcanic dome of ignimbrite (volcaniclastic sediments) with intrusions of rhyolite dyke swarms and andesite flows. In addition, a broad
gold zone occurs halfway from the top of this dome.
In 2022, the Company completed a 3,200 m drill
program at the Silverstrike Project. Assay results for the two drill holes were released in the news releases dated November 1, 2022 and
September 12, 2022.
Further exploration activities
remain on standby as the Company focuses on the programs for the Silver Sand Project and Carangas Project, as outlined above.
For the three and six
months ended December 31, 2023, total expenditures of $10,125 and $77,441, respectively (three and six months ended December 31, 2022
- $702,839 and $1,145,490, respectively) were capitalized under the Silverstrike Project.
Frontier Area – Carangas Project and
Silverstrike Project
The Carangas
Project and the Silverstrike Project are located within 50 km of the Bolivian border with Chile. In line with many South American
countries, Bolivia does not permit foreign entities to own property within 50 km of international borders (the “Frontier
Area”). Property owners in the Frontier Area are, however,
Management’s Discussion and Analysis | Page 7 |
NEW PACIFIC METALS CORP. |
Management’s Discussion and Analysis |
For the three and six months ended December 31, 2023 |
(Expressed in United States
dollars, unless otherwise stated) |
permitted to enter into mining association agreements with
third parties, including foreign entities, for the development of mining activities under Bolivian Law No. 535 on Mining and
Metallurgy. While the Company believes the mining association agreements for the Carangas Project and the Silverstrike Project are
legally compliant with the Frontier Area requirements and Bolivian mining laws, there is no assurance that the Company’s
Bolivian partners will be successful in obtaining the approval of the AJAM to convert the exploration licenses to AMC in the case of
the Carangas Project, or that even if approved, that such relationships and structures will not be challenged by other Bolivian
organizations or communities.
Overall Expenditure Summary
The continuity schedule of mineral property acquisition
costs, deferred exploration and development costs are summarized as follows:
Cost | |
Silver Sand | | |
Carangas | | |
Silverstrike | | |
Total | |
Balance, July 1, 2022 | |
$ | 76,568,598 | | |
$ | 5,460,946 | | |
$ | 3,269,232 | | |
$ | 85,298,776 | |
Capitalized exploration expenditures | |
| | | |
| | | |
| | | |
| | |
Reporting and assessment | |
| 1,008,174 | | |
| 88,558 | | |
| - | | |
| 1,096,732 | |
Drilling and assaying | |
| 1,925,695 | | |
| 8,289,678 | | |
| 977,881 | | |
| 11,193,254 | |
Project management and support | |
| 2,719,120 | | |
| 1,424,573 | | |
| 256,569 | | |
| 4,400,262 | |
Camp service | |
| 467,690 | | |
| 1,005,158 | | |
| 174,651 | | |
| 1,647,499 | |
Permit and license | |
| 195,821 | | |
| 9,389 | | |
| - | | |
| 205,210 | |
Foreign currency impact | |
| (201,972 | ) | |
| (8,831 | ) | |
| (24,680 | ) | |
| (235,483 | ) |
Balance, June 30, 2023 | |
$ | 82,683,126 | | |
$ | 16,269,471 | | |
$ | 4,653,653 | | |
$ | 103,606,250 | |
Capitalized exploration expenditures | |
| | | |
| | | |
| | | |
| | |
Reporting and assessment | |
| 258,404 | | |
| 112,700 | | |
| - | | |
| 371,104 | |
Drilling and assaying | |
| 47,217 | | |
| 23,894 | | |
| - | | |
| 71,111 | |
Project management and support | |
| 821,846 | | |
| 557,248 | | |
| 51,047 | | |
| 1,430,141 | |
Camp service | |
| 218,747 | | |
| 233,584 | | |
| 26,394 | | |
| 478,725 | |
Permit and license | |
| 33,047 | | |
| 9,308 | | |
| - | | |
| 42,355 | |
Foreign currency impact | |
| 23,199 | | |
| 13,053 | | |
| 971 | | |
| 37,223 | |
Balance, December 31, 2023 | |
$ | 84,085,586 | | |
$ | 17,219,258 | | |
$ | 4,732,065 | | |
$ | 106,036,909 | |
Management’s Discussion and Analysis | Page 8 |
NEW PACIFIC METALS CORP. |
Management’s Discussion and Analysis |
For the three and six months ended December 31, 2023 |
(Expressed in United States
dollars, unless otherwise stated) |
FINANCIAL
RESULTS
Selected Quarterly Information
| |
For the Quarters Ended | |
| |
Dec.
31,
2023 | | |
Sep.
30,
2023 | | |
Jun.
30,
2023 | | |
Mar.
31,
2023 | |
Operating expense | |
$ | (1,818,757 | ) | |
$ | (1,868,635 | ) | |
$ | (1,892,005 | ) | |
$ | (2,377,480 | ) |
Income from Investments | |
| 275,050 | | |
| 20,274 | | |
| 16,827 | | |
| 119,438 | |
Gain on disposal of plant and equipment | |
| - | | |
| 51,418 | | |
| - | | |
| - | |
Other income (loss) | |
| 16,666 | | |
| 50,329 | | |
| 10,437 | | |
| (18,683 | ) |
Net loss | |
| (1,527,071 | ) | |
| (1,746,614 | ) | |
| (1,864,741 | ) | |
| (2,276,725 | ) |
Net loss attributable to equity holders | |
| (1,524,108 | ) | |
| (1,746,016 | ) | |
| (1,864,029 | ) | |
| (2,275,519 | ) |
Basic and diluted loss per share | |
| (0.01 | ) | |
| (0.01 | ) | |
| (0.01 | ) | |
| (0.01 | ) |
Total current assets | |
| 26,856,903 | | |
| 29,247,418 | | |
| 7,547,949 | | |
| 12,020,235 | |
Total non-current assets | |
| 113,302,284 | | |
| 112,240,163 | | |
| 110,759,592 | | |
| 107,788,104 | |
Total current liabilities | |
| 1,156,871 | | |
| 2,189,827 | | |
| 2,336,655 | | |
| 3,492,542 | |
Total non-current liabilities | |
| - | | |
| - | | |
| - | | |
| - | |
| |
For the Quarters Ended | |
| |
Dec.
31,
2022 | | |
Sep.
30,
2022 | | |
Mar.
31,
2022 | | |
Dec.
31,
2021 | |
Operating expense | |
$ | (1,927,708 | ) | |
$ | (2,058,882 | ) | |
$ | (2,291,704 | ) | |
$ | (1,524,374 | ) |
(loss) income from Investments | |
| 83,455 | | |
| (41,674 | ) | |
| 11,700 | | |
| 124,860 | |
Other income (loss) | |
| (28,750 | ) | |
| 14,893 | | |
| (78,786 | ) | |
| (36,439 | ) |
Net loss | |
| (1,873,003 | ) | |
| (2,085,663 | ) | |
| (2,358,790 | ) | |
| (1,435,953 | ) |
Net loss attributable to equity holders | |
| (1,870,718 | ) | |
| (2,085,183 | ) | |
| (2,337,826 | ) | |
| (1,408,892 | ) |
Basic and diluted loss per share | |
| (0.01 | ) | |
| (0.01 | ) | |
| (0.01 | ) | |
| (0.01 | ) |
Total current assets | |
| 18,538,490 | | |
| 25,537,824 | | |
| 33,188,094 | | |
| 37,075,018 | |
Total non-current assets | |
| 102,583,739 | | |
| 96,522,875 | | |
| 90,890,161 | | |
| 88,171,122 | |
Total current liabilities | |
| 4,128,183 | | |
| 4,925,522 | | |
| 3,869,300 | | |
| 2,353,255 | |
Total non-current liabilities | |
| - | | |
| - | | |
| - | | |
| - | |
Net loss attributable to equity holders of
the Company for the three and six months ended December 31, 2023 was $1,524,108 and 3,270,124 or $0.01 and $0.02 per share, respectively
(three and six months ended December 31, 2022 – net loss of $1,870,718 and $3,955,901 or $0.01 and 0.03 per share, respectively).
The Company’s net loss attributable to equity
holders of the Company for the three and six months ended December 31, 2023 and the respective comparative periods were mainly impacted
by its operating expenses and other income (expenses). Details of the variance analysis on operating expenses and net income from investments
are explained below.
Operating expenses for the three and six
months ended December 31, 2023 were $1,818,757 and 3,687,392, respectively (three and six months ended December 31, 2022 - $1,927,708
and $3,986,590, respectively). Items included in operating expenses were as follows:
| (i) | Project evaluation and corporate development expenses for
the three and six months ended December 31, 2023 of 76,553 and $189,537, respectively (three and six months ended December 31, 2022 -
$77,561 and $186,097, respectively). The Company is focusing on the exploration and development of its existing projects and did not
incur significant expenditures in new project evaluation in recent periods. |
Management’s Discussion and Analysis | Page 9 |
NEW PACIFIC METALS CORP. |
Management’s Discussion and Analysis |
For the three and six months ended December 31, 2023 |
(Expressed in United States
dollars, unless otherwise stated) |
| (ii) | Filing and listing fees for the three and six months
ended December 31, 2023 of $85,109 and $167,031, respectively (three and six months ended December 31, 2022 - $85,108 and $205,226, respectively).
Filing fees for the current periods were comparable to prior periods and were incurred in ordinary course of business. |
| (iii) | Investor relations expenses for the three and six months
ended December 31, 2023 of $53,340 and $144,103, respectively (three and six months ended December 31, 2022 - $128,832 and $268,349,
respectively). Investor relations expenses decreased in the current quarter as a result of reduced investor relation activities. |
| (iv) | Professional fees for the three and six months ended
December 31, 2023 of $106,685 and $193,091, respectively (three and six months ended December 31, 2022 - $61,730 and $170,526, respectively).
Professional fees increased in the current quarter as a result of increased legal services. The professional fees related to shelf-prospectus
filing and bought deal financing in the current quarter were treated as part of the issuance cost of the transaction. |
| (v) | Salaries and benefits expense for the three and six months
ended December 31, 2023 of $650,973 and $1,101,112, respectively (three and six months ended December 31, 2022 - $430,404 and $759,574,
respectively). The increase in salaries and benefits for the current period was a result of hirings of a few key management positions
in 2023 and the accrual of bonus incentives. |
| (vi) | Office and administration expenses for the three and
six months ended December 31, 2023 of $379,675 and $712,461, respectively (three and six months ended December 31, 2022 - $352,921 and
$719,797, respectively). Office and administrative expenses for the current periods were comparable to prior periods and were incurred
in ordinary course of business. |
| (vii) | Share-based compensation for the three and six months
ended December 31, 2023 of $412,077 and $1,075,099, respectively (three and six months ended December 31, 2022 - $739,971 and $1,570,829,
respectively). The decrease in share-based compensation for the current periods were a result of forfeitures of stock options and restricted
share units during the periods. |
Net income from investments for the three
and six months ended December 31, 2023 were $275,020 and $295,294, respectively (three and six months ended December 31, 2022 –
$83,455 and $41,781, respectively). The increase in net income from investments for the current periods was a result of: (i) interest
income for the three and six months ended December 31, 2023 of $276,590 and $300,721, respectively (three and six month ended December
31, 2022 - $116,576 and $250,224, respectively) earned from cash and cash equivalents; (ii) fair value change on bonds for the three and
six month ended December 31, 2023 of $10,056 and $(286), respectively (three and six months ended December 31, 2022 - $(29,552) and $(33,152),
respectively); and (iii) fair value change on equity investments for the three and six months ended December 31, 2023 of $(11,626) and
(5,141), respectively (three and six months ended December 31, 2022 - $(3,569) and $(175,291), respectively.
Gain on disposal of plant and equipment for
the three and six months ended December 31, 2023 of $nil and $51,418, respectively (three and six months ended December 31, 2022 - $nil
and $nil, respectively). The Company disposed of a small fleet of used pick-up trucks during the current periods for proceeds of $58,776,
which resulted in a gain on disposal of $51,418.
Management’s Discussion and Analysis | Page 10 |
NEW PACIFIC METALS CORP. |
Management’s Discussion and Analysis |
For the three and six months ended December 31, 2023 |
(Expressed in United States
dollars, unless otherwise stated) |
Foreign exchange gain for the three and
six months ended December 31, 2023 of $16,666 and $66,995, respectively (three and six months ended December 31, 2022 – loss of
$28,750 and $13,857, respectively). The Company holds a portion of cash and short-term investments in USD to support its operations in
Bolivia. Revaluation of these USD-denominated financial assets to their Canadian dollar (“CAD”) functional currency equivalents
resulted in unrealized foreign exchange gain or loss for the relevant reporting periods.
Liquidity
AND Capital Resources
Cash Flows
Cash used in operating activities for the
three and six months ended December 31, 2023 was $2,016,105 and $2,534,644, respectively (three and six months ended December 31, 2022
- $1,552,034 and $3,109,580, respectively). Cash flows from operating activities are mainly driven by the Company’s operating expenses
discussed in the previous sections. Additionally, the increase or decrease of net cash used in operating activities for all periods were
also impacted by the increase or decrease of outflow in non-cash operating working capital.
Cash used in investing activities for the
three months ended December 31, 2023 was $788,218 (three months ended December 31, 2022 – cash used in investing activities of $6,145,103)
and was mainly impacted by: (i) capital expenditures for mineral properties and equipment of $738,048 on the exploration projects in Bolivia
compared to $5,473,676 in the comparative period; and (ii) value-added tax of $50,170 paid in Bolivia in the current quarter compared
to $671,427 paid in the comparative period.
Cash used in investing activities for the
six months ended December 31, 2023 was $3,060,145 (six months ended December 31, 2022 – cash used in investing activities of $7,854,149)
and was mainly impacted by: (i) capital expenditures for mineral properties and equipment of $3,014,455 on the exploration projects in
Bolivia compared to $9,582,726 in the comparative period; (ii) value-added tax of $104,466 paid in Bolivia in the current period compared
to $1,257,611 paid in the comparative period; and offset by (iii) proceeds of $58,776 received from disposal of certain plant and equipment
during the current period compared to proceeds of $2,986,188 received from the RZY compensation transaction in the comparative period.
Cash provided by financing activities for
the three months ended December 31, 2023 was $71,629 (three months ended December 31, 2022 – $233,614). Cash flows from financing
activities for both periods were from stock option exercises.
Cash provided by financing activities for
the six months ended December 31, 2023 was $24,581,770 (six months ended December 31, 2022 – $260,517) comprised of (i) net proceeds
of $24,446,086 received from the bought deal financing during the current period compared to $nil from the comparative period; and (ii)
proceeds of $135,684 from stock option exercises during the current period compared to proceeds of $260,517 from the comparative period.
Liquidity and Access to Capital
As of December 31, 2023, the Company had working
capital of $25,700,032 (June 30, 2023 – $5,211,294), comprised of cash and cash equivalents of $25,837,156 (June 30, 2023 - $6,296,312),
short term investments of $198,010 (June 30, 2023 - $198,375), and other current assets of $821,737 (June 30, 2023 - $1,053,262) offset
by current liabilities of $1,156,871 (June 30, 2023 - $2,336,655). Management believes that the Company has sufficient funds to support
its normal exploration and operating requirements for at
Management’s Discussion and Analysis | Page 11 |
NEW PACIFIC METALS CORP. |
Management’s Discussion and Analysis |
For the three and six months ended December 31, 2023 |
(Expressed in United States
dollars, unless otherwise stated) |
least, but not limited to, the next twelve months.
The Company does not have unlimited resources
and its future capital requirements will depend on many factors, including, among others, cash flow from interest, dividends, and realized
gains on investments. To the extent that its existing resources and the funds generated by future income are insufficient to fund the
Company’s operations, the Company may need to raise additional funds through public or private debt or equity financing. If additional
funds are raised through the issuance of equity securities, the percentage ownership of current shareholders may be diluted and such equity
securities may have rights, preferences or privileges senior to those of the holders of the Company’s common shares. No assurance
can be given that additional financing will be available or that, if available, it can be obtained on terms favourable to the Company
and its shareholders. If adequate funds are not available, the Company may be required to delay, limit or eliminate some or all of its
proposed operations. The Company believes it has sufficient capital to meet its cash needs for the next 12 months, including the costs
of compliance with continuing reporting requirements.
Use of Proceeds of Prior Financings
On September 29, 2023, the Company successfully
closed a bought deal financings which raised net proceeds of $24,446,086. The following table sets out a comparison between the Company’s
planned and actual use of these net proceeds as of December 31, 2023.
SEPTEMBER 29, 2023
BOUGHT DEAL FINANCING | |
PLANNED
USE OF
PROCEEDS | | |
ACTUAL
USE OF
PROCEEDS
FROM
SEPTEMBER 29,
2023
TO
DECEMBER 31,
2023 | | |
VARIANCE | | |
EXPLANATION OF
VARIANCE AND IMPACT
ON BUSINESS OBJECTIVE |
Proceeds | |
| | |
| | |
| | |
|
Offering | |
$ | 25,888,000 | | |
$ | 25,888,462 | | |
$ | 462 | | |
Actual funds raised was slightly more than
planned due to lower than anticipated issuance costs. |
Underwriters’ Fee | |
| (1,087,000 | ) | |
| (1,016,702 | ) | |
| 70,298 | | |
|
Expenses of the Offering | |
| (467,000 | ) | |
| (425,674 | ) | |
| 41,326 | | |
|
Net Proceeds | |
$ | 24,334,000 | | |
$ | 24,446,086 | | |
$ | 112,086 | | |
|
USE OF PROCEEDS | |
| | |
| | |
| | |
|
Silver Sand Project | |
| | |
| | |
| | |
|
Geotechnical drilling and metallurgical testwork | |
$ | 1,294,000 | | |
$ | 64,956 | | |
$ | (1,229,044 | ) | |
Geotechnical drilling has not started yet. The timing of its commencement depends on the outcome of Silver Sand PFS results. Payment during
the period is related to metallurgical testwork. |
Advanced studies | |
| 2,330,000 | | |
| 116,007 | | |
| (2,213,993 | ) | |
The Silver Sand PFS is progressing as planned with an expected delivery by mid-2024. |
Permitting and preliminary mine development | |
| 11,908,000 | | |
| 7,143 | | |
| (11,900,857 | ) | |
No material spending in permitting since the Company is in the process of negotiation with local communities. Preliminary mine development
spending will commence once the Company obtains all necessary permits. |
Subtotal for Silver Sand Project | |
$ | 15,532,000 | | |
$ | 188,106 | | |
$ | (15,343,894 | ) | |
|
Carangas Project | |
| | |
| | |
| | |
|
Resource and exploration drilling | |
$ | 2,071,000 | | |
$ | - | | |
$ | (2,071,000 | ) | |
Further resource and exploration drilling programs are pending on the Carangas PEA results. |
Geotechnical drilling and metallurgical testwork | |
| 1,553,000 | | |
| 37,115 | | |
| (1,515,885 | ) | |
Geotechnical drilling is pending on the Carangas PEA results. Metallurgical testworks are progressing on schedule. |
Advanced studies | |
| 1,036,000 | | |
| 67,083 | | |
| (968,917 | ) | |
The Carangas PEA remains on schedule for completion by mid-2024. |
Subtotal for Carangas Project | |
$ | 4,660,000 | | |
$ | 104,198 | | |
$ | (4,555,802 | ) | |
|
Corporate | |
| | | |
| | | |
| | | |
|
Operating expense | |
$ | 4,142,000 | | |
$ | 741,963 | | |
$ | (3,400,037 | ) | |
Operating expense incurred for normal course of business during the period. |
TOTAL | |
$ | 24,334,000 | | |
$ | 1,034,267 | | |
$ | (23,299,733 | ) | |
|
Management’s Discussion and Analysis | Page 12 |
NEW PACIFIC METALS CORP. |
Management’s Discussion and Analysis |
For the three and six months ended December 31, 2023 |
(Expressed in United States
dollars, unless otherwise stated) |
FINANCIAL INSTRUMENTS
The Company manages its exposure to financial
risks, including liquidity risk, foreign exchange rate risk, interest rate risk, credit risk, and equity price risk in accordance with
its risk management framework. The Board has overall responsibility for the establishment and oversight of the Company’s risk management
framework and reviews the Company’s policies on an ongoing basis.
The Company classifies
its fair value measurements within a fair value hierarchy, which reflects the significance of inputs used in making the measurements as
defined in IFRS 13 – Fair Value Measurement (“IFRS 13”).
Level 1 –
Unadjusted quoted prices at the measurement date for identical assets or liabilities in active markets.
Level 2 –
Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets;
quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can
be corroborated by observable market data.
Level 3 –
Unobservable inputs which are supported by little or no market activity.
The following table sets forth the Company’s
financial assets that are measured at fair value on a recurring basis by level within the fair value hierarchy as at December 31, 2023
and June 30, 2023 that are not otherwise disclosed. As required by IFRS 13, financial assets are classified in their entirety based on
the lowest level of input that is significant to the fair value measurement.
| |
Fair value as at December 31, 2023 | |
Recurring measurements | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
Financial Assets | |
| | |
| | |
| | |
| |
Cash and cash equivalent | |
$ | 25,837,156 | | |
$ | - | | |
$ | - | | |
$ | 25,837,156 | |
Short-term investments | |
| 198,010 | | |
| - | | |
| - | | |
| 198,010 | |
Equity investments | |
| 278,126 | | |
| - | | |
| - | | |
| 278,126 | |
| |
Fair value as at June 30, 2023 | |
Recurring measurements | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
Financial Assets | |
| | |
| | |
| | |
| |
Cash and cash equivalent | |
$ | 6,296,312 | | |
$ | - | | |
$ | - | | |
$ | 6,296,312 | |
Short-term investments | |
| 198,375 | | |
| - | | |
| - | | |
| 198,375 | |
Equity investments | |
| 283,081 | | |
| - | | |
| - | | |
| 283,081 | |
Fair value of other financial instruments excluded
from the table above approximates their carrying amount as of December 31, 2023, and June 30, 2023, respectively, due to the short-term
nature of these instruments.
There were no transfers into or out of Level 1,
2 and 3 during the three and six months ended December 31, 2023.
Management’s Discussion and Analysis | Page 13 |
NEW PACIFIC METALS CORP. |
Management’s Discussion and Analysis |
For the three and six months ended December 31, 2023 |
(Expressed in United States
dollars, unless otherwise stated) |
The Company has a history of losses and no operating
revenues from its operations. Liquidity risk is the risk that the Company will not be able to meet its short term business requirements.
As at December 31, 2023, the Company had a working capital position of $25,700,032 and sufficient cash resources to meet the Company’s
short-term financial liabilities and its planned exploration expenditures on various projects in Bolivia for, but not limited to, the
next 12 months.
In the normal course of business, the Company
enters into contracts that give rise to commitments for future minimum payments. The following summarizes the remaining contractual maturities
of the Company’s financial liabilities:
| |
December 31, 2023 | | |
June
30,
2023 | |
| |
Due within a year | | |
Total | | |
Total | |
Accounts payable and accrued liabilities | |
$ | 1,031,637 | | |
$ | 1,031,637 | | |
$ | 2,280,553 | |
Due to a related party | |
| 125,234 | | |
| 125,234 | | |
| 56,102 | |
| |
$ | 1,156,871 | | |
$ | 1,156,871 | | |
$ | 2,336,655 | |
The Company is exposed to foreign exchange risk
when it undertakes transactions and holds assets and liabilities denominated in foreign currencies other than its functional currencies.
The functional currency of the head office, Canadian subsidiaries and all intermediate holding companies is CAD. The functional currency
of all Bolivian subsidiaries is USD. The functional currency of the Chinese subsidiary is RMB. The Company currently does not engage in
foreign exchange currency hedging. The Company’s exposure to foreign exchange risk that could affect net income is summarized as
follows:
Financial assets denominated in foreign currencies other than relevant functional currency | |
December 31,
2023 | | |
June 30,
2023 | |
United States dollars | |
$ | 346,868 | | |
$ | 320,994 | |
Bolivianos | |
| 1,038,268 | | |
| 869,869 | |
Total | |
$ | 1,385,136 | | |
$ | 1,190,863 | |
| |
| | | |
| | |
Financial liabilities denominated in foreign currencies other than relevant functional currency | |
| | |
| |
United States dollars | |
$ | 73,995 | | |
$ | 73,970 | |
Bolivianos | |
| 484,179 | | |
| 1,543,889 | |
Total | |
$ | 558,174 | | |
$ | 1,617,859 | |
As at December 31, 2023, with other variables
unchanged, a 1% strengthening (weakening) of the USD against the CAD would have increased (decreased) net income by approximately $2,700.
As at December 31, 2023, with other variables
unchanged, a 1% strengthening (weakening) of the Bolivianos against the USD would have increased (decreased) net income by approximately
$5,500.
Management’s Discussion and Analysis | Page 14 |
NEW PACIFIC METALS CORP. |
Management’s Discussion and Analysis |
For the three and six months ended December 31, 2023 |
(Expressed in United States
dollars, unless otherwise stated) |
Interest rate risk is the risk that the fair value
or future cash flows of a financial instrument will fluctuate due to changes in market interest rates. The Company holds a portion of
cash in bank accounts that earn variable interest rates. Due to the short-term nature of these financial instruments, fluctuations in
market rates do not have significant impact on the fair values of the financial instruments as of December 31, 2023. The Company, from
time to time, also owns cashable guaranteed investment certificates (“GICs”) and bonds that earn interest payments at fixed
rates to maturity. Fluctuation in market interest rates usually will have an impact on bonds’ fair value. An increase in market
interest rates will generally reduce bonds’ fair value while a decrease in market interest rates will generally increase it. The
Company monitors market interest rate fluctuations closely and adjusts the investment portfolio accordingly.
Credit risk is the risk of financial loss to the
Company if the counterparty to a financial instrument fails to meet its contractual obligations. The Company’s exposure to credit
risk is primarily associated with cash and cash equivalents, bonds, and receivables. The carrying amount of financial assets included
on the statement of financial position represents the maximum credit exposure.
The Company has deposits of cash and cash equivalents
that meet minimum requirements for quality and liquidity as stipulated by the Board. Management believes the risk of loss to be remote,
as the majority of its cash and cash equivalents are held with major financial institutions. Bonds by nature are exposed to more credit
risk than cash and cash equivalents. The Company manages its risk associated with bonds by only investing in large globally recognized
corporations from diversified industries. As at December 31, 2023, the Company had a receivables balance of $336,158 (June 30, 2023 -
$421,860). There were no material amounts in receivables which were past due on December 31, 2023 (June 30, 2023 - $nil).
The Company holds certain marketable securities
that will fluctuate in value as a result of trading on global financial markets. Based upon the Company’s portfolio at December
31, 2023, a 10% increase (decrease) in the market price of the securities held, ignoring any foreign exchange effects would have resulted
in an increase (decrease) to net income of approximately $28,000.
Related
party transactions
Related party transactions are made on terms agreed
upon by the related parties. The balances with related parties are unsecured, non-interest bearing, and due on demand. Related party transactions
not disclosed elsewhere in this MD&A are as follows:
Due to a related party | |
December 31,
2023 | | |
June 30,
2023 | |
Silvercorp Metals Inc. | |
$ | 125,234 | | |
$ | 56,102 | |
(a) Silvercorp Metals Inc. (“Silvercorp”) has one director (Paul Simpson) in common with the Company. Silvercorp and the Company share office space and Silvercorp provides various general and administrative services to the Company. The Company expects to continue making payments to Silvercorp in the normal course of business. Office and administrative expenses rendered and incurred by Silvercorp on behalf of
Management’s Discussion and Analysis | Page 15 |
NEW PACIFIC METALS CORP. |
Management’s Discussion and Analysis |
For the three and six months ended December 31, 2023 |
(Expressed in United States
dollars, unless otherwise stated) |
the Company for the three and six months ended December 31, 2023 were $193,296 and 409,487, respectively (three and six months ended December 31, 2022 - $239,345 and $481,598, respectively).
| (b) | Compensation of key management personnel |
The remuneration of directors and other members
of key management personnel for the three and six months ended December 31, 2023 and 2022 are as follows:
| |
Three months ended December 31, | | |
Six months ended December 31, | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Director’s cash compensation | |
$ | 26,892 | | |
$ | 14,722 | | |
$ | 42,112 | | |
$ | 30,041 | |
Director’s share-based compensation | |
| 118,698 | | |
| 196,148 | | |
$ | 258,275 | | |
| 430,760 | |
Key management’s cash compensation | |
| 289,507 | | |
| 220,847 | | |
$ | 585,871 | | |
| 350,268 | |
Key management’s share-based compensation | |
| 402,154 | | |
| 481,755 | | |
$ | 884,777 | | |
| 1,048,026 | |
| |
$ | 837,251 | | |
$ | 913,472 | | |
$ | 1,771,035 | | |
$ | 1,859,095 | |
Other than as disclosed above, the Company does
not have any ongoing contractual or other commitments resulting from transactions with related parties.
Off-Balance
Sheet Arrangements
The Company does not have any off-balance sheet
financial arrangements.
Proposed
Transactions
As at the date of this MD&A, there are no
proposed acquisitions or disposals of assets or business, other than those in the ordinary course of business, approved by the Board.
CRITICAL
accounting policies and estimates
The
preparation of the consolidated financial statements in accordance with IFRS as issued by the IASB requires management to make estimates
and assumptions that affect the amounts reported on the consolidated financial statements. These critical accounting estimates represent
management’s estimates that are uncertain and any changes in these estimates could materially impact the Company’s consolidated
financial statements. Management continuously reviews its estimates and assumptions using the most current information available. The
Company’s material accounting policies and estimates are described in Note 2 of the audited consolidated financial statements for
the year ended June 30, 2023.
Outstanding
Share Data
As at the date of this MD&A, the following
securities were outstanding:
| ● | Authorized
– unlimited number of common shares without par value. |
| ● | Issued
and outstanding – 171,207,385 common shares with a recorded value of $181 million. |
| ● | Shares
subject to escrow or pooling agreements – nil. |
Management’s Discussion and Analysis | Page 16 |
NEW PACIFIC METALS CORP. |
Management’s Discussion and Analysis |
For the three and six months ended December 31, 2023 |
(Expressed in United States
dollars, unless otherwise stated) |
The outstanding options as at the date of this
MD&A are summarized as follows:
Options
Outstanding | | |
Exercise Price CAD$ | | |
Expiry Date |
| 689,167 | | |
| 2.15 | | |
February 22, 2024 |
| 658,000 | | |
| 3.33 | | |
February 4, 2027 |
| 10,000 | | |
| 3.89 | | |
February 22, 2027 |
| 1,021,000 | | |
| 4.00 | | |
June 6, 2027 |
| 818,000 | | |
| 3.42 | | |
January 19, 2028 |
| 120,000 | | |
| 3.67 | | |
January 24, 2028 |
| 50,000 | | |
| 3.92 | | |
April 14, 2028 |
| 1,335,000 | | |
| 2.10 | | |
January 16, 2029 |
| 4,701,167 | | |
$ | 2.99 | | |
|
| (c) | Restricted Share Units (“RSUs”) |
The outstanding RSUs as at the date of this MD&A
are summarized as follows:
RSUs Outstanding | | |
Weighted average
grant date closing
price per share (CAD$) | |
2,294,323 | | |
$ | 2.99 | |
Risk
Factors
The Company is subject to various business, financial
and operational risks that could materially adversely affect the Company’s future business, operations and financial condition.
These risks could cause such future business, operations and financial condition to differ materially from the forward-looking statements
and information contained in this MD&A and as described in the Cautionary Note Regarding Forward-Looking Information found in this
MD&A. Certain of these risks, and additional risk and uncertainties, are described below, and are more fully described in the Company’s
most recently filed annual information form (the “AIF”) and other public filings which are available under the Company’s
profile on SEDAR+ at www.sedarplus.ca and on EDGAR at www.sec.gov. In addition, please refer to the “Financial Instruments”
section of this MD&A for an analysis of financial risk factors.
Political and Economic Risks in Bolivia
The Company’s projects
are located in Bolivia and, therefore, the Company’s current and future mineral exploration and mining activities are exposed to
various levels of political, economic, and other risks and uncertainties. There has been a significant level of political and social unrest
in Bolivia in recent years resulting from a number of factors, including Bolivia’s history of political and economic instability
under a variety of governments and high rate of unemployment.
The Company’s
exploration and development activities may be affected by changes in government, political instability, and the nature of various
government regulations relating to the mining industry. Bolivia’s fiscal
Management’s Discussion and Analysis | Page 17 |
NEW PACIFIC METALS CORP. |
Management’s Discussion and Analysis |
For the three and six months ended December 31, 2023 |
(Expressed in United States dollars, unless otherwise stated) |
regime has historically been favourable to the mining
industry, but there is a risk that this could change. The Company cannot predict the government’s positions on foreign
investment, mining concessions, land tenure, environmental regulation, or taxation. A change in government positions on these issues
could adversely affect the Company’s business and/or its holdings, assets, and operations in Bolivia. Any changes in
regulations or shifts in political conditions are beyond the control of the Company. Moreover, protestors and cooperatives have
previously targeted foreign companies in the mining sector, and as a result there is no assurance that future social unrest will not
have an adverse impact on the Company’s operations. Labour in Bolivia is customarily unionized and there are risks that labour
unrest or wage agreements may impact operations.
The Company’s operations
in Bolivia may also be adversely affected by economic uncertainty characteristic of developing countries. In addition, operations may
be affected in varying degrees by government regulations with respect to restrictions on production, price controls, export controls,
currency remittance, income taxes, expropriation of property, foreign investment, maintenance of claims, environmental legislation, land
use, land claims of local people, water use, and safety factors.
The MPC remains subject
to ratification and approval by the Plurinational Legislative Assembly of Bolivia. As of the date of this MD&A, the MPC has not been
ratified nor approved by the Plurinational Legislative Assembly of Bolivia. The Company cautions that there is no assurance that the Company
will be successful in obtaining ratification of the MPC in a timely manner or at all, or that the ratification of the MPC will be obtained
on reasonable terms. The Company cannot predict any new government’s positions on foreign investment, mining concessions, land tenure,
environmental regulations, community relations, taxation or otherwise.
Illegal, Artisanal
and Small-Scale Mining
Mining by illegal, artisanal
and small-scale miners occurs on and near some of the Company’s mineral concessions in Bolivia. These activities could cause disruptions
and damages to the Company’s operations, including road blockages, pollution, environmental damage, or personal injury, for which
the Company could potentially be held responsible. The presence of illegal, artisanal and small scale miners can lead to delays and disputes
regarding the development of the Company’s projects. Although the Company, with the assistance of both local government authorities
and external contractors, has undertaken measures that have reduced the occurrence of illegal artisanal and small scale mining, we cannot
provide assurance that these measures will be successful in reducing or eliminating illegal artisanal and small scale mining at our projects
in the future including commencing formal legal proceedings since the second half of 2023 for the permanent removal of such illegal, artisanal
and small-scale mining operators. Such operators have temporarily restricted us from accessing our properties from time to time and although
such restrictions have not had a material adverse effect on our business, results of operations and financial conditions, if we were to
be restricted from accessing our projects for a longer duration, such restriction may have a material adverse effect on our business,
results of operations and financial conditions.
Management’s Discussion and Analysis | Page 18 |
NEW PACIFIC METALS CORP. |
Management’s Discussion and Analysis |
For the three and six months ended December 31, 2023 |
(Expressed in United States dollars, unless otherwise stated) |
Community Relations
and Social Licence to Operate
Mining companies are
increasingly required to operate in a sustainable manner and to provide benefits to affected communities and there are risks associated
with the Company failing to acquire and subsequently maintain a “social licence” to operate on its mineral properties. “Social
licence” does not refer to a specific permit or licence, but rather is a broad term used to describe community acceptance of a company’s
plans and activities related to exploration, development or operations on its mineral projects.
The Company places a
high priority on, and dedicates considerable efforts and resources toward, its community relationships and responsibilities. Despite its
best efforts, there are factors that may affect the Company’s efforts to establish and maintain social licence at any of its projects,
including national or local changes in sentiment toward mining, evolving social concerns, changing economic conditions and challenges,
and the influence of third-party opposition toward mining on local support. There can be no guarantee that social licence can be earned
by the Company or if established, that social licence can be maintained in the long term, and without strong community support the ability
to secure necessary permits, obtain project financing, and/or move a project into development or operation may be compromised or precluded.
Delays in projects attributable to a lack of community support or other community-related disruptions or delays can translate directly
into a decrease in the value of a project or into an inability to bring the project to, or maintain, production. The cost of measures
and other issues relating to the sustainable development of mining operations may result in additional operating costs, higher capital
expenditures, reputational damage, active community opposition (possibly resulting in delays, disruptions and stoppages), legal suits,
regulatory intervention and investor withdrawal.
Acquisition and Maintenance of Permits and
Governmental Approvals
Exploration and development of, and production
from, any deposit at the Company’s mineral projects require permits from various government authorities. There can be no assurance
that any required permits will be obtained in a timely manner or at all, or that they will be obtained on reasonable terms. Delays or
failure to obtain, expiry of, or a failure to comply with the terms of such permits could prohibit development of the Company’s
mineral projects and have a material adverse impact on the Company.
While the Company believes the contractual relationships
and the structures it has in place with private Bolivian companies owned 100% by Bolivian nationals for the Silverstrike Project and the
Carangas Project are legally compliant with Bolivian laws related to the Frontier Areas, there is no assurance that the Company’s
Bolivian partner will be successful in obtaining approval of the AJAM to convert the exploration licenses to AMCs in the case of Carangas
Project, or that even if approved, that such contractual relationship and structure will not be challenged by other Bolivian organizations
or communities.
The Company’s current and future operations,
including development activities and commencement of production, if warranted, require permits from government authorities and such operations
are and will be governed by laws and regulations governing prospecting, development, mining, production, exports, taxes, labour standards,
occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety, and other matters. Companies engaged
in property exploration and the development or operation of mines and related facilities generally experience increased costs and delays
in production and other schedules as a result of the need to comply with applicable laws, regulations, and permits. The Company cannot
predict if all permits which it may require for continued exploration, development, or construction of mining facilities and conduct of
mining operations will be obtainable on reasonable terms, if at all. Time delays and associated costs related to applying for and obtaining
permits and licenses may be
Management’s Discussion and Analysis | Page 19 |
NEW PACIFIC METALS CORP. |
Management’s Discussion and Analysis |
For the three and six months ended December 31, 2023 |
(Expressed in United States dollars, unless otherwise stated) |
prohibitive and could delay planned exploration and development activities. Failure to comply with or any
violations of the applicable laws, regulations, and permitting requirements may result in enforcement actions, including orders issued
by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital
expenditures, installation of additional equipment, or remedial actions.
Parties engaged in mining operations may be required
to compensate those impacted by mining activities and may have civil or criminal fines or penalties imposed for violations of applicable
laws or regulations. Amendments to current laws, regulations, and permits governing operations and activities of mining companies, or
more stringent implementation thereof, could have a material adverse impact on the Company’s operations and cause increases in capital
expenditures or production costs, or reduction in levels of production at producing properties, or require abandonment or delays in the
development of new mining properties.
Disclosure
Controls and Procedures
Disclosure controls and procedures are designed
to provide reasonable assurance that material information related to the Company is gathered and reported to senior management, including
the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), as appropriate, to allow for timely
decisions about the Company’s public disclosure.
Management, including the CEO and CFO, has evaluated
the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as defined in the rules of the
United States Securities and Exchange Commission and the national instrument of the Canadian Securities Administrators. The evaluation
included documentation review, enquiries and other procedures considered by management to be appropriate in the circumstances. Based on
this evaluation, management concluded that as of December 31, 2023, the Company’s disclosure controls and procedures (as defined
in Rule 13a-15(e) under the Securities Exchange Act of 1934 and National Instrument 52-109 - Certification of Disclosure in Issuers’
Annual and Interim Filings) are effective.
MANAGEMENT’S REPORT ON INTERNAL CONTROL
OVER FINANCIAL REPORTING
| (a) | Internal Control over Financial Reporting |
Management of the Company is responsible for
establishing and maintaining an adequate system of internal control over financial reporting and used the Internal Control – Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) to evaluate, with
the participation of the CEO and CFO, the effectiveness of the Company’s
internal controls. The Company’s internal control over financial reporting includes:
| ● | maintaining
records, that in reasonable detail, accurately and fairly reflect the transactions and dispositions
of the assets of the Company; |
| ● | providing
reasonable assurance that transactions are recorded as necessary to permit preparation of
the consolidated financial statements in accordance with generally accepted accounting principles; |
Management’s Discussion and Analysis | Page 20 |
NEW PACIFIC METALS CORP. |
Management’s Discussion and Analysis |
For the three and six months ended December 31, 2023 |
(Expressed in United States dollars, unless otherwise stated) |
| ● | providing
reasonable assurance that receipts and expenditures are made in accordance with authorizations
of management and the directors of the Company; and |
| ● | providing
reasonable assurance that unauthorized acquisition, use or disposition of company assets
that could have a material effect on the Company’s consolidated financial statements
would be prevented or detected on a timely basis. |
Based
on this evaluation, management concluded that as of December 31, 2023, the Company’s internal control over financial reporting
based on the criteria set forth in Internal Control – Integrated Framework (2013) issued by COSO was effective and provided a reasonable
assurance of the reliability of the Company’s financial reporting and preparation of the financial statements.
No matter how well a system of internal control
over financial reporting is designed, any system has inherent limitations. Even systems determined to be effective can provide only reasonable
assurance of the reliability of financial statement preparation and presentation. Also, controls may become inadequate in the future because
of changes in conditions or deterioration in the degree of compliance with the Company’s policies and procedures.
Emerging growth companies are exempt from Section
404(b) of the Sarbanes-Oxley Act, which generally requires public companies to provide an independent auditor attestation of management’s
assessment of the effectiveness of their internal control over financial reporting. The Company qualifies as an emerging growth company
and therefore has not included an independent auditor attestation of management’s assessment of the effectiveness of its internal
control over financial reporting in its audited annual consolidated financial statements for the year ended June 30, 2023.
| (b) | Changes in Internal Control over Financial Reporting |
There has been no change in the Company’s
internal control over financial reporting during the six months ended December 31, 2023 that has materially affected or is reasonably
likely to materially affect the Company’s internal control over financial reporting.
TECHNICAL INFORMATION
The scientific and technical information contained
in this MD&A has been reviewed and approved by Alex Zhang, P. Geo., Vice President of Exploration of the Company, who is a qualified
person (as defined in National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”))
for the purposes of NI 43-101.
CAUTIONARY NOTE REGARDING RESULTS OF PRELIMINARY
ECONOMIC ASSESSMENT
The results of the PEA contained in the Silver
Sand PEA Technical Report, are preliminary in nature and are intended to provide an initial assessment of the Silver Sand Project’s
economic potential and development options. The PEA mine schedule and economic assessment includes numerous assumptions and is based
on both indicated and inferred mineral resources. Inferred resources are considered too speculative geologically to have the economic
considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the project
economic assessments described herein will be achieved or that the PEA results will be realized. The estimate of mineral resources may
be materially affected by geology, environmental, permitting, legal, title, socio-political, marketing or other relevant issues. Mineral
resources are not mineral reserves and do not have demonstrated economic viability. Additional exploration
Management’s Discussion and Analysis | Page 21 |
NEW PACIFIC METALS CORP. |
Management’s Discussion and Analysis |
For the three and six months ended December 31, 2023 |
(Expressed in United States
dollars, unless otherwise stated) |
will be required to potentially
upgrade the classification of the inferred mineral resources to be considered in future advanced studies. AMC Mining Consultants (Canada)
Ltd. (“AMC Consultants”) (mineral resource, mining, infrastructure and financial analysis) was contracted to conduct the
PEA in cooperation with Halyard Inc. (metallurgy and processing), and NewFields Canada Mining & Environment ULC (tailings, water
and waste management). The qualified persons (as defined in NI 43-101) for the PEA for the purposes of NI 43-101 are Mr. John Morton
Shannon, P.Geo, General Manage and Principal Geologist at AMC Consultants, Mr. Wayne Rogers, P.Eng, and Mr. Mo Molavi, P.Eng, both Principal
Mining Engineers with AMC Consultants, Mr. Andrew Holloway, P.Eng, Process Director with Halyard Inc., and Mr. Leon Botham, P.Eng., Principal
Engineer with NewFields Canada Mining & Environment ULC, in addition to Ms. Dinara Nussipakynova, P.Geo., Principal Geologist with
AMC Consultants, who estimated the mineral resources. All qualified persons for the PEA have reviewed the disclosure of the PEA herein.
The PEA is based on the MRE, which was reported on November 28, 2022. The effective date of the MRE is October 31, 2022. The cut-off
applied for reporting the pit-constrained mineral resources is 30 g/t silver. Assumptions made to derive a cut-off grade included mining
costs, processing costs and recoveries and were obtained from comparable industry situations. The model is depleted for historical mining
activities. Mineral resources are constrained by optimized pit shells at a silver price of US$22.50 per ounce, silver metallurgical recovery
of 91%, silver payability of 99%, open pit mining cost of US$2.6/t, processing cost of US$16/t, G&A cost of US$2/t, and slope angle
of 44-47 degrees. Key assumptions used for pit optimization for the PEA mining pit include silver price of US$22.50 per ounce, silver
metallurgical recovery of 91%, silver payability of 99%, open pit mining cost of US$2.6/t, incremental mining cost of US$0.04/t (per
10 m bench), processing cost of US$16/t, tailing storage facility operating cost of US$0.7/t, G&A cost of US$2/t, royalty of 6.00%,
mining recovery of 92%, dilution of 8%, and cut-off grade of 30 g/t silver.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING INFORMATION
Except for statements of historical facts relating
to the Company, certain information contained herein constitutes “forward-looking statements” within the meaning of the United
States Private Securities Litigation Reform Act of 1995 and “forward-looking information” within the meaning of applicable
Canadian provincial securities laws (collectively, “forward-looking statements”). Forward-looking statements are frequently
characterized by words such as “plan”, “expect”, “project”, “intend”, “believe”,
“anticipate”, “estimate”, “goals”, “forecast”, “budget”, “potential”
or variations thereof and other similar words, or statements that certain events or conditions “may”, “could”,
“would”, “might”, “will” or “can” occur. Forward-looking statements include, but are not
limited to: statements regarding anticipated exploration, drilling, development, construction, and other activities or achievements of
the Company; inferred, indicated or measured mineral resources or mineral reserves on the Company’s projects; the Silver Sand PFS;
the results of the PEA; timing of receipt of permits and regulatory approvals; and estimates of the Company’s revenues and capital
expenditures; success of exploration activities; government regulation of mining operations, environmental risks; and the sufficiency
of funds to support the Company’s normal exploration, development and operating requirements on an ongoing basis.
Forward-looking
statements are based on a number of estimates, assumptions, beliefs, expectations and opinions of management on the date the statements
are made and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ
materially from those projected in the forward-looking statements. These factors include the risk that the Silver Sand PFS is not a “preliminary
feasibility study” (as defined in NI 43-101); fluctuating equity prices, bond prices and commodity prices; calculation of resources,
reserves and mineralization; general economic conditions; foreign exchange risks; interest rate risk; foreign investment risk; loss of
key personnel; conflicts of interest; dependence on management; uncertainties relating to the availability and costs of financing needed
in the
Management’s Discussion and Analysis | Page 22 |
NEW PACIFIC METALS CORP. |
Management’s Discussion and Analysis |
For the three and six months ended December 31, 2023 |
(Expressed in United States
dollars, unless otherwise stated) |
future; environmental risks; operations and political conditions; the regulatory environment in Bolivia and Canada; risks associated
with community relations and corporate social responsibility; and other factors described in this MD&A, under the heading “Risk
Factors”, in the AIF and its other public filings. The foregoing is not an exhaustive list of the factors that may affect any of
the Company’s forward-looking statements or information.
The forward-looking statements are
necessarily based on a number of estimates, assumptions, beliefs, expectations and opinions of management as of the date of this
MD&A that, while considered reasonable by management, are inherently subject to significant business, economic and competitive
uncertainties and contingencies. These estimates, assumptions, beliefs, expectations and opinions include, but are not limited to,
those related to the Company’s ability to carry on current and future operations, including: development and exploration
activities; the timing, extent, duration and economic viability of such operations; the accuracy and reliability of estimates,
projections, forecasts, studies and assessments; the Company’s ability to meet or achieve estimates, projections and
forecasts; the stabilization of the political climate in Bolivia; the availability and cost of inputs; the price and market for
outputs; foreign exchange rates; taxation levels; the timely receipt of necessary approvals or permits, including the ratification
and approval of the Mining Production Contract with COMIBOL by the Plurinational Legislative Assembly of Bolivia; the ability of the
Company’s Bolivian partner to convert the exploration licenses at the Carangas Project to AMC; the ability to meet current and
future obligations; the ability to obtain timely financing on reasonable terms when required; the current and future social,
economic and political conditions; the ability of the Company to ensure that the Silver Sand PFS is a “preliminary feasibility
study” (as defined in NI 43-101); and other assumptions and factors generally associated with the mining industry.
Although the forward-looking statements contained
in this MD&A are based upon what management believes are reasonable assumptions, there can be no assurance that actual results will
be consistent with these forward-looking statements. All forward-looking statements in this MD&A are qualified by these cautionary
statements. Accordingly, readers should not place undue reliance on such statements. Other than specifically required by applicable laws,
the Company is under no obligation and expressly disclaims any such obligation to update or alter the forward-looking statements whether
as a result of new information, future events or otherwise except as may be required by law. These forward-looking statements are made
as of the date of this MD&A.
Cautionary
note TO United States INVESTORS
This MD&A has been prepared in accordance
with the requirements of the securities laws in effect in Canada which differ from the requirements of United States securities laws.
All mining terms used herein but not otherwise defined have the meanings set forth in NI 43-101. Unless otherwise indicated, the technical
and scientific disclosure herein has been prepared in accordance with NI 43-101, which differs significantly from the requirements adopted
by the United States Securities and Exchange Commission.
Accordingly, information contained in this
MD&A containing descriptions of the Company’s mineral deposits and any estimates of mineral reserves and mineral resources may
not be comparable to similar information made public by United States companies subject to the reporting and disclosure requirements of
United States federal securities laws and the rules and regulations thereunder.
Additional information relating to the Company,
including the AIF, can be obtained under the Company’s profile on SEDAR+ at www.sedarplus.ca, on EDGAR at www.sec.gov, and on the
Company’s website at www.newpacificmetals.com.
Management’s Discussion and Analysis | Page 23 |
Exhibit 99.3
Form 52-109F2
Certification of Interim Filings
Full Certificate
I, Andrew Williams, Chief Executive Officer of New Pacific Metals Corp. certify the following:
| 1. |
Review: I have reviewed the interim financial report and interim MD&A (together, the
“interim filings”) of New Pacific Metals Corp. (the “issuer”) for the interim period ended December 31, 2023. |
| 2. | No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the
interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that
is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered
by the interim filings. |
| 3. | Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim
financial report together with the other financial information included in the interim filings fairly present in all material respects
the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim
filings. |
| 4. | Responsibility: The issuer’s other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those
terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the
issuer. |
| 5. | Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s
other certifying officer(s) and I have, as at the end of the period covered by the interim filings |
| (a) | designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance
that |
| (i) | material information relating to the issuer is made known to us by others, particularly during the period
in which the interim filings are being prepared; and |
| (ii) | information required to be disclosed by the issuer in its annual filings, interim filings or other reports
filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified
in securities legislation; and |
| (b) | designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s
GAAP. |
| 5.1 | Control framework: The control framework the issuer’s other certifying officer(s)
and I used to design the issuer’s ICFR is the Internal Control – Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO). |
| 5.2 | ICFR – material weakness relating to design: The issuer has disclosed in its interim
MD&A for each material weakness relating to design existing at the end of the interim period |
| (a) | a description of the material weakness; |
| (b) | the impact of the material weakness on the issuer’s financial reporting and its ICFR; and |
| (c) | the issuer’s current plans, if any, or any actions already undertaken, for remediating the material
weakness. |
| 6. |
Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s
ICFR that occurred during the period beginning on October 1, 2023 and ended on December 31, 2023 that has materially affected, or
is reasonably likely to materially affect, the issuer’s ICFR. |
Date: February 13, 2024
“Andrew Williams” |
|
Andrew Williams |
|
Chief Executive Officer |
|
Exhibit 99.4
Form 52-109F2
Certification of Interim Filings
Full Certificate
I, Jalen Yuan, Chief Financial Officer of New
Pacific Metals Corp. certify the following:
| 1. |
Review: I have reviewed the interim financial report and interim MD&A (together, the
“interim filings”) of New Pacific Metals Corp. (the “issuer”) for the interim period ended December 31, 2023. |
| 2. | No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the
interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that
is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered
by the interim filings. |
| 3. | Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim
financial report together with the other financial information included in the interim filings fairly present in all material respects
the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim
filings. |
| 4. | Responsibility: The issuer’s other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those
terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the
issuer. |
| 5. | Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s
other certifying officer(s) and I have, as at the end of the period covered by the interim filings |
| (a) | designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance
that |
| (i) | material information relating to the issuer is made known to us by others, particularly during the period
in which the interim filings are being prepared; and |
| (ii) | information required to be disclosed by the issuer in its annual filings, interim filings or other reports
filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified
in securities legislation; and |
| (b) | designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s
GAAP. |
| 5.1 | Control framework: The control framework the issuer’s other certifying officer(s)
and I used to design the issuer’s ICFR is the Internal Control – Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO). |
| 5.2 | ICFR – material weakness relating to design: The issuer has disclosed in its interim
MD&A for each material weakness relating to design existing at the end of the interim period |
| (a) | a description of the material weakness; |
| (b) | the impact of the material weakness on the issuer’s financial reporting and its ICFR; and |
| (c) | the issuer’s current plans, if any, or any actions already undertaken, for remediating the material
weakness. |
| 6. |
Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s
ICFR that occurred during the period beginning on October 1, 2023 and ended on December 31, 2023 that has materially affected,
or is reasonably likely to materially affect, the issuer’s ICFR. |
Date: February 13, 2024
“Jalen Yuan” |
|
Jalen Yuan |
|
Chief Financial Officer |
|
Exhibit 99.5
CONSENT OF EXPERT
The undersigned hereby consents to the inclusion in the Management’s Discussion & Analysis of New Pacific Metals Corp. (the “Company”) for the period ended December 31, 2023 of references to the undersigned as a qualified person and the undersigned’s name with respect to the disclosure of technical and scientific information contained therein.
The undersigned further consents to the inclusion or incorporation by reference of all references to the undersigned in the Company’s Registration Statement on Form F-10 (No. 333-273541). This consent extends to any amendments to the Form F-10, including post-effective amendments.
“Alex Zhang” |
|
Alex Zhang, P.Geo. |
|
February 13, 2024 |
|
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