TIDMAEXG
RNS Number : 9901W
AEX Gold Inc
29 April 2021
2021 Strategic Update and Full Year Financial Results
TORONTO, ONTARIO - April 29(th) , 2021 - AEX Gold Inc. ("AEX" or
the "Company" or the "Corporation") (AIM: AEXG; TSXV: AEX),
provides a further strategic update to shareholders following the
update on March 19(th) , 2021 and presents the Full Year Financial
Results.
References to figures and tables relate to the version visible
in PDF format on the website by clicking the link below:
https://www.aexgold.com/investors/regulatory-news-alerts/#tsx-news
Highlights
-- Peer review of the current Nalunaq Project conducted by
Ausenco Engineering Canada Inc ("Ausenco") has identified scope for
project capital cost optimisation and de-risking
-- Internal 3rd party engineering study to commence imminently, to advance the Nalunaq Project cost and schedule to
a feasibility level of understanding1 with planned completion later this year
-- Potential for significant expansion and de-risking of the
Nalunaq Project through a fully-funded 20,000 - 30,000m drilling
campaign in 2021
-- InnovExplo contracted as a 3(rd) party expert in narrow vein,
coarse-gold deposits to review and update the Nalunaq Mineral
Resource model ahead of any new drill results from the 2021
campaign
-- Engineering Procurement Construction ("EPC") or Engineering,
Procurement and Construction Management ("EPCM") contracting
strategies now being considered with revised Nalunaq Project and
production start-up date to be announced in due course
-- Planned 2021 AEX exploration program to target gold and
strategic minerals across AEX's 3,870km(2) licence package, with
South Greenland increasingly seen as an attractive source of
strategic minerals given the intensifying global commodity supply
concerns. AEX has a current cash balance of approximately C$54
million. 2021 exploration and limited infrastructure 'early works'
program budgeted to cost approximately C$10 million in addition to
approximately C$10 million to be paid for the taking delivery of
long lead items already procured for Nalunaq and engineering costs
to date
-- Based on the existing development concept, the Company would
expect that significant additional capital, including an equity
component would be required to bring Nalunaq into production.
However, feasibility level information from the engineering study
combined with an updated resource model will allow for the
optimisation of the forward development plan, including alternative
funding avenues in order to minimise shareholder dilution
1. This will be an internal study using a feasibility framework
to present its findings.
Eldur Olafsson, CEO of AEX Gold, commented:
"I am pleased to provide increased clarity regarding AEX's plans
going forward. Having paused the Nalunaq Project in February given
ongoing travel restrictions and significant COVID-19 related cost
increases, we have been focused on preparing a secure and
cost-effective revised development plan and the best path forward
to maximise shareholder value.
"We are currently working tirelessly to de-risk the Nalunaq
Project as much as possible and increase the scale and value of the
resource. Once we have completed the Nalunaq feasibility level
engineering study and incorporated the updated resource model, we
aim to proceed directly with the revised development plan for
Nalunaq. I remain as confident as ever that not only will Nalunaq
prove to be a highly successful project, but that the work we are
currently undertaking will only serve to further enhance value for
our shareholders.
"Nalunaq remains one of the highest-grade gold projects in the
world. In addition, this year we will be accelerating our
exploration program to better quantify the resource potential
across our large licence portfolio. We have the premier land
package in South Greenland and this exploration activity coincides
with the rapidly growing interest the region is experiencing in the
global scramble for strategic minerals. We look forward to updating
shareholders regularly as the exploration program progresses."
Financial Results Highlights
-- The Corporation reported a net loss of C$4.3 million in Q4
2020 (Q4 2019: C$1.5 million), driven by increased exploration and
evaluation activities and corporate activity during the period, as
well as non-cash foreign exchange loss;
-- Exploration and evaluation expenses during the quarter were
C$2.6 million (Q4 2019: C$1.2 million), driven by increased
activity on the Nalunaq Project and its regional exploration
portfolio;
-- General and administrative expenses during the quarter were
C$1.3 million (Q4 2019: C$0.2 million), with the increase a result
of higher salaries and benefits, professional fees associated with
its AIM listing and as AEX progressed the development of
Nalunaq;
-- The Corporation had a cash balance of C$61.9 million at
December 31, 2020 (C$1.5 million at December 31, 2019), with no
debt, and total working capital of $61.4 million (C$1.2 million at
December 31, 2019).
Selected Financial Information
The following selected financial data are extracted from the
Financial Statements for the year ended December 31, 2020.
Three months Years
ended December 31, ended December 31,
2020 2019 2020 2019
C$ C$ C$ C$
----------- ----------- ------------ -----------
Exploration and evaluation
expenses 2,622,916 1,237,487 7,055,707 3,557,662
General and administrative 1,304,804 229,399 3,291,176 950,946
Net loss and comprehensive
loss (4,321,051) (1,465,347) (12,339,112) (5,102,106)
Basic and diluted loss per
common share (0.03) (0.02) (0.10) (0.08)
----------- ----------- ------------ -----------
Financial Position
As at December 31, As at December 31,
2020 2019
C$ C$
------------------ ------------------
Cash on hand 61,874,999 1,515,406
Total assets 65,944,682 2,720,473
Total current liabilities 897,799 645,933
Shareholders' equity 64,282,970 2,074,540
Working capital 61,411,208 1,157,012
------------------ ------------------
Nalunaq Development Plan
As previously announced, the COVID-19 pandemic has caused
significant cost escalation, unprecedented interruptions to
logistics and the closure of Greenland's borders. Consequently, due
to the increased macro-economic risks, the decision was taken by
the Company in February to suspend development activities at the
Nalunaq Project. This difficult but prudent decision was taken by
the Board and Management in order to preserve cash, while assessing
the best path forward for the Company. As a result, all
non-essential expenditures and commitments were either terminated
or suspended where possible to minimise expenditure, and a review
of the Nalunaq development plan and portfolio exploration program
was commenced.
Subsequently, Ausenco, a global company providing innovative,
value-add consulting studies, project delivery, asset operations
and maintenance solutions in the minerals and metals industry ,
undertook a peer review of the Company's Nalunaq Project
development plan. The conclusion of Ausenco's assessment was that
while the AEX revised capital cost model was within industry
benchmarks for the size and nature of the project, significant
potential cost saving alternatives exist which warrant further
analysis.
As part of its strategic process, the Company is also
investigating alternative solutions regarding the project's
execution methodology. The baseline strategy of AEX was to develop
the Nalunaq Project according to the self-perform execution model.
The Company's advisors have suggested that other project execution
methodologies could allow for further derisking through the use of
an EPCM or an EPC strategy. In such instances, a recognized
contractor would apply its expertise to further de-risk the project
execution and cost basis.
As a pre-requisite to validate the potential of changing the
project execution methodology, an internal technical study will be
undertaken. This study will incorporate, wherever appropriate and
cost-effective, all engineering and planning works undertaken to
date, together with equipment and other infrastructure purchases
already made/procured.
It is expected that this third party feasibility-level
engineering study, incorporating potential cost savings, will be
completed by Q4 2021. AEX is fully funded to deliver on this
milestone and a decision will then be taken on whether to tender
the project as an EPC or EPCM, or to continue as a self-perform
execution project. In either event, it is planned that by year-end
AEX will have the necessary engineering design, contractual and
procurement arrangements in place, together with an updated
resource model, so that we are in a position in Q1 2022 to commit
to the revised Nalunaq Project development plan under the selected
execution model. Consequently, the Company will update the market
with a revised production timeframe and associated funding plan as
soon as appropriate. The preliminary target is for initial
production from Nalunaq to commence by the end of 2022.
Nalunaq Exploration and Resource Modelling
In parallel with this workstream, the Company has contracted the
services of InnovExplo, a specialist in a wide range of exploration
and technical services in the metals and mining industry, to review
the Nalunaq Resource Model. InnovExplo is a specialist in modelling
coarse gold deposits and will provide the Company with a peer
review assessment of the Mineral Resource model in Nalunaq's
Competent Person Report of 2020.
Wider Portfolio Exploration Plan
AEX is the largest licence holder in south Greenland (Figure 1),
a region with significant potential for gold, rare earths and other
strategic minerals. The region is increasingly attracting
geo-political attention, and particular interest among major
international mining companies. AEX has, over several years,
countercyclically built an extensive and unique portfolio of high
potential assets in south Greenland. These licences vary in their
maturity, with some benefiting from significant exploration work
while others remain largely under-explored.
Geological research is actively progressing with GoldSpot, SRK
and our internal team to define the resource potential within our
licence area, as we continue to develop our exploration programme.
A number of activities have been worked up for 2021, as part of
this important wider exploration programme.
Figure 1. Map showing AEX's licence holdings in South
Greenland.
The following sets out the most important exploration targets
that our team of geoscientists have so far identified, and
anticipated work programmes for 2021:
-- Vagar
o Gold
o Orogenic gold and intrusion related gold
o Rock chip samples up to 2,533 g/t Au in quartz veins and 12.1
g/t Au in altered granodiorites which have an intrusion related
gold signature.
o 200+ rock samples greater than 1 g/t Au over 50 km
o Targeting multi-million ounce gold resources within deposits
of a similar style to the Barsele project in Sweden (Agnico Eagle),
and the Fort Knox mine in Alaska (Kinross Gold).
o High resolution airborne geophysical survey over the entire
licence coupled with extensive sampling campaigns to be undertaken
in 2021. Goal is to prioritise targets for follow up diamond
drilling.
-- Kangerluluk
o Gold, copper
o Orogenic gold
o Channel samples up to 175.1 g/t Au over 0.8 m, and 3.8% Cu in
rock float
o Steeply dipping shear zone over a strike length of more than1
km and up to 20 m wide. Open along strike and at depth. Gold
associated with copper in quartz veins and 2-5 m wide hydrothermal
alteration zones
o Further prospecting to be undertaken in 2021 to identify the
source of the copper float, and structural mapping along the main
shear zone to better understand controls on mineralization ahead of
future drilling programmes
-- Kangerluarsuk
o Gold, copper, zinc, molybdenum, REE, niobium, beryllium
o Iron-Oxide-Copper-Gold (IOCG) exploration mode, c.f. Olympic
Dam
o Historic rock chip samples have returned grades up to 3.4% Cu,
3.7% Zn, 0.28% Mo, 382 g/t Au, 100 g/t Ag, 19.9% Nb, 1.7% U.
o Pervasive magnetite and hematite-mineralised granites,
breccias and regional alternation signatures are described within
historic reports from the area, as are common with significant
global IOCG districts.
o IOCG / porphyry and Iron-Oxide-Apatite (IOA) deposits are
common in granitic rocks of similar age and geological setting in
northern Sweden, which can broadly be considered as a geological
extension of South Greenland. Possible analogue deposits include
Aitik and deposits in the Kiruna area.
o Beryl-pegmatites have been mapped in the northern part of the
licence and will be investigated for their potential to host
economic concentrations of beryllium and other rare metals.
o Spectral remote sensing will be carried out ahead of
geological fieldwork in the summer. Magnetic, radiometric and
gravity surveys will be considered later in the season to rapidly
advance the geological understanding of the project.
-- Tartoq
o Gold, Cu-Zn-Pb-Ag
o Orogenic gold and VMS exploration model
o Best samples on surface are 106 g/t Au over 0.5 m in quartz
veins and up to 14% Pb, 1,210 g/t Ag and 0.7% Cu in semi-massive
sulphide lenses.
o Classic example of an Archean Greenstone belt with high grade
gold mineralisation on surface and almost entirely untested at
depth
o Analogous to projects in Canada's Abitibi greenstone belt
o Work in 2021 will include ongoing desktop work on the Nuuluk
and Iterlak licence sub areas to prioritise targets for possible
future drilling. Any fieldwork in 2021 will be focused on
understanding the extent of known gold occurrences in the eastern
parts of the licence, including revisiting the unconformity where
the abovementioned sulphides were reported in historic work.
-- Sarqaa
o Palladium, platinum, gold; potential for rhodium, iridium,
ruthenium, rhenium, nickel, copper and cobalt
o Magmatic sulphides in 20-50 m wide peridotite dyke
o Best rock samples up to 10 g/t Pd and >1% Ni
o The focus is to understand the scale of this dyke, the
mineralisation, and its continuity at depth
o AEX intend to revisit the dyke in 2021 and take further
samples to confirm historic grades. Geophysical lines may be flown
along the Kirkespir valley to determine strike extensions.
-- Nørrearm, Ippatit, Nalunaq
o Graphite associated with massive iron sulphides
o Rock chip samples at Nørrearm returned 10-14% Graphite in a
stratiform layer at least 5 m thick with a strike length of at
least 2000 m.
o Potential for multimillion tonne deposit
o Further samples will be collected for metallurgical test work
including characterization of flake size. Given the fact that
graphite is in low quantities in Europe, exploration for graphite
in south Greenland is increasingly important for the US and
European market
-- Ippatit, Jokum's Shear, Sorte Nunatak, Anoritooq and Saarloq
o Gold, also potential for other minerals
o Orogenic gold exploration model
o Stream sediment anomalies and rock chip gold anomalies
indicate high potential for new gold discoveries. These areas are
at an early stage of exploration. Prospecting traverses will be
carried out over priority targets identified by the ongoing
GoldSpot prospectivity study.
In addition, there is high potential for other strategic
minerals across the licence portfolio and the wider region.
Priority targets will be visited by AEX geoscientists in the 2021
field season. The Company may apply for further licences in due
course.
Financing and Budget
The Company has a current cash balance of approximately C$54
million, compared to C$61.8 million at 31 December 2020.
Since the announcement in February providing an update on the
Nalunaq Development, management has focused on aligning its
corporate overhead with the revised 2021 work plan and revised
Nalunaq planning activity. As a result, the Company is in the
process of rationalising its cost base as appropriate during this
period.
The Company has proceeded with the purchase, or taken delivery,
of approximately C$6.3 million in components to date, including
certain components of the Nalunaq processing plant circuit as well
as mobile equipment. The Company has exercised cancellation rights
on a small number of its contracts, with an estimated total of
C$1.2 million to be paid in cancellation fees.
The 2021 accelerated exploration and minimal 'early works'
infrastructure programme is budgeted to cost approximately C$10m,
which includes an estimated C$4.68m of support infrastructure to
upgrade the temporary camp into a full year exploration and
construction camp, as per the original project plan and budget as
well as upgrade the access road to site.
Given the delay and cost escalations in the development, AEX
anticipates the need for new external capital to fund the revised
Nalunaq Project. The Company is aware of shareholders' desire for
clarity around expected development costs. However, the company
will take the time afforded by the engineering study and the
exploration drilling programme to refine and better determine the
development cost of the Nalunaq Project. The Company will provide
updates as appropriate and plans to provide shareholders with final
cost estimates following completion of the engineering study.
With the Nalunaq Project expected to be materially de-risked
ahead of funding, the Company aims to deliver a balanced financing
and is considering all funding avenues to maximise returns for
shareholders.
Following the completion of the internal third party feasibility
level engineering study(1) , scheduled for completion by Q4 2021,
AEX will finalise its revised development plan, timeline to
production and cost estimates and will report the results of this
work to the market as soon as appropriate.
Qualified Person Statement
The technical information presented in this press release has
been approved by James Gilbertson CGeol, who is a full-time
employee and Managing Director of SRK Exploration Services Limited
and a Chartered Geologist with the Geological Society of London,
and as such a Qualified Person as defined by NI 43-101.
Enquiries:
AEX Gold Inc.
Eddie Wyvill, Investor Relations +44 7713 126727
ew@aexgold.com
Eldur Olafsson, Director and CEO +354 665 2003
eo@aexgold.com
Stifel Nicolaus Europe Limited (Nominated +44 (0) 20 7710
Adviser and Broker) 7600
Callum Stewart
Simon Mensley
Ashton Clanfield
+44 (0) 20 3757
Camarco (Financial PR) 4980
Gordon Poole
Nick Hennis
Further Information:
About AEX
AEX's principal business objectives are the identification,
acquisition, exploration and development of gold properties in
Greenland. The Corporation's principal asset is a 100% interest in
the Nalunaq Project, an advanced exploration stage property with an
exploitation license including the previously operating Nalunaq
gold mine. The Corporation has a portfolio of gold assets covering
3870 km(2) , the largest portfolio of gold assets in Southern
Greenland covering the two known gold belts in the region. AEX is
incorporated under the Canada Business Corporations Act and wholly
owns Nalunaq A/S, incorporated under the Greenland Public Companies
Act.
Forward-Looking Information
This press release contains forward-looking information within
the meaning of applicable securities legislation, which reflects
the Corporation's current expectations regarding future events and
the future growth of the Corporation's business. In this press
release there is forward-looking information based on a number of
assumptions and subject to a number of risks and uncertainties,
many of which are beyond the Corporation's control, that could
cause actual results and events to differ materially from those
that are disclosed in or implied by such forward-looking
information. Such risks and uncertainties include, but are not
limited to the factors discussed under "Risk Factors" in the Final
Prospectus available under the Corporation's profile on SEDAR at
www.sedar.com. Any forward-looking information included in this
press release is based only on information currently available to
the Corporation and speaks only as of the date on which it is made.
Except as required by applicable securities laws, the Corporation
assumes no obligation to update or revise any forward-looking
information to reflect new circumstances or events. No securities
regulatory authority has either approved or disapproved of the
contents of this press release. Neither TSX Venture Exchange nor
its Regulation Services Provider (as that term is defined in
policies of the TSX Venture Exchange) accepts responsibility for
the adequacy or accuracy of this release.
Inside Information
The information contained within this announcement is considered
to be inside information prior to its release, as defined in
Article 7 of the Market Abuse Regulation No. 596/2014, and is
disclosed in accordance with the Corporation's obligations under
Article 17 of those Regulations. Upon the publication of this
announcement, this inside information is now considered to be in
the public domain.
AEX Gold Inc.
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020 and 2019
Independent auditor's report
To the Shareholders of AEX Gold Inc
Our opinion
In our opinion, the accompanying consolidated financial
statements present fairly, in all material respects, the financial
position of AEX Gold Inc. and its subsidiary (together, the
Corporation) as at December 31, 2020 and 2019, and its financial
performance and its cash flows for the years then ended in
accordance with International Financial Reporting Standards as
issued by the International Accounting Standards Board (IFRS).
What we have audited
The Corporation's consolidated financial statements
comprise:
-- the consolidated statements of financial position as at December 31, 2020 and 2019;
-- the consolidated statements of comprehensive loss for the years then ended;
-- the consolidated statements of changes in equity for the years then ended;
-- the consolidated cash flow statements for the years then ended; and
-- the notes to the consolidated financial statements, which
include significant accounting policies and other explanatory
information.
Basis for opinion
We conducted our audit in accordance with Canadian generally
accepted auditing standards. Our responsibilities under those
standards are further described in the Auditor's responsibilities
for the audit of the consolidated financial statements section of
our report.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Corporation in accordance with the
ethical requirements that are relevant to our audit of the
consolidated financial statements in Canada. We have fulfilled our
other ethical responsibilities in accordance with these
requirements.
Other information
Management is responsible for the other information. The other
information comprises the Management's Discussion and Analysis,
which we obtained prior to the date of this auditor's report and
the information, other than the consolidated financial statements
and our auditor's report thereon, included in the annual report,
which is expected to be made available to us after that date.
Our opinion on the consolidated financial statements does not
cover the other information, and we do not and will not express an
opinion or any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial
statements, our responsibility is to read the other information
identified above and, in doing so, consider whether the other
information is materially inconsistent with the consolidated
financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated.
If, based on the work we have performed on the other information
that we obtained prior to the date of this auditor's report, we
conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing
to report in this regard. When we read the information, other than
the consolidated financial statements and our auditor's report
thereon, included in the annual report, if we conclude that there
is a material misstatement therein, we are required to communicate
the matter to those charged with governance.
Responsibilities of management and those charged with governance
for the consolidated financial statements
Management is responsible for the preparation and fair
presentation of the consolidated financial statements in accordance
with IFRS, and for such internal control as management determines
is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to
fraud or error.
In preparing the consolidated financial statements, management
is responsible for assessing the Corporation's ability to continue
as a going concern, disclosing, as applicable, matters related to
going concern and using the going concern basis of accounting
unless management either intends to liquidate the Corporation or to
cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the
Corporation's financial reporting process.
PricewaterhouseCoopers LLP/s.r.l./s.e.n.c.r.l.
1250 René-Lévesque Boulevard West, Suite 2500, Montréal, Quebec,
Canada H3B 4Y1
T: +1 514 205 5000, F: +1 514 876 1502
"PwC" refers to PricewaterhouseCoopers LLP/s.r.l./s.e.n.c.r.l.,
an Ontario limited liability partnership.
Auditor's responsibilities for the audit of the consolidated
financial statements
Our objectives are to obtain reasonable assurance about whether
the consolidated financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue
an auditor's report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with Canadian generally accepted auditing
standards will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic decisions of
users taken on the basis of these consolidated financial
statements.
As part of an audit in accordance with Canadian generally
accepted auditing standards, we exercise professional judgment and
maintain professional skepticism throughout the audit. We also:
-- Identify and assess the risks of material misstatement of the
consolidated financial statements, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide
a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal
control.
-- Obtain an understanding of internal control relevant to the
audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Corporation's internal control.
-- Evaluate the appropriateness of accounting policies used and
the reasonableness of accounting estimates and related disclosures
made by management.
-- Conclude on the appropriateness of management's use of the
going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Corporation's
ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in
our auditor's report to the related disclosures in the consolidated
financial statements or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditor's report. However, future
events or conditions may cause the Corporation to cease to continue
as a going concern.
-- Evaluate the overall presentation, structure and content of
the consolidated financial statements, including the disclosures,
and whether the consolidated financial statements represent the
underlying transactions and events in a manner that achieves fair
presentation.
-- Obtain sufficient appropriate audit evidence regarding the
financial information of the entities or business activities within
the Corporation to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and
performance of the group audit. We remain solely responsible for
our audit opinion.
We communicate with those charged with governance regarding,
among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies
in internal control that we identify during our audit.
We also provide those charged with governance with a statement
that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
The engagement partner on the audit resulting in this
independent auditor's report is Marc-Stéphane Pennee.
/s/PricewaterhouseCoopers LLP[1]
Montréal, Quebec
April 28, 2021
AEX Gold Inc.
Consolidated Statements of Financial Position
As at December 31, 2020 and 2019
(In Canadian Dollars)
As at December As at December
31, 31,
Notes 2020 2019
-------------------------------------------- ----- -------------- --------------
$ $
ASSETS
Current assets
Cash 61,874,999 1,515,406
Escrow account for environmental monitoring 5 - 174,864
Sales tax receivable 62,750 17,792
Prepaid expenses and others 371,258 94,883
Total current assets 62,309,007 1,802,945
Non-current assets
Deferred share issuance costs 11 - 166,348
Deposit on order 1,711,970 -
Escrow account for environmental monitoring 5 460,447 342,132
Mineral properties 6 62,244 41,945
Capital assets 7 1,401,014 367,103
Total non-current assets 3,635,675 917,528
-------------------------------------------- ----- -------------- --------------
TOTAL ASSETS 65,944,682 2,720,473
-------------------------------------------- ----- -------------- --------------
LIABILITIES AND EQUITY
Current liabilities
Trade and other payables 831,899 471,069
Lease liabilities - current portion 8 65,900 -
Environmental monitoring provision 9 - 174,864
Total current liabilities 897,799 645,933
Non-current liabilities
Lease liabilities 8 763,913 -
Total non-current liabilities 763,913 -
-------------------------------------------- ----- -------------- --------------
Total liabilities 1,661,712 645,933
-------------------------------------------- ----- -------------- --------------
Equity
Capital stock 10 88,500,205 13,883,611
Warrants 11 - 1,459,604
Contributed surplus 2,925,952 1,535,400
Accumulated other comprehensive loss (36,772) (36,772)
Deficit (27,106,415) (14,767,303)
-------------------------------------------- ----- -------------- --------------
Total equity 64,282,970 2,074,540
-------------------------------------------- ----- -------------- --------------
TOTAL LIABILITIES AND EQUITY 65,944,682 2,720,473
-------------------------------------------- ----- -------------- --------------
The accompanying notes are an integral part of these
consolidated financial statements.
Approved by the Board of Directors
(s) Eldur Ólafsson (s) Sigurbjorn Thorkelsson
Eldur Ólafsson Sigurbjorn Thorkelsson
Director Director
Notes 2020 2019
----------------------------------------- ----- ------------ -----------
$ $
Expenses
Exploration and evaluation expenses 15 7,055,707 3,557,662
General and administrative 16 3,291,176 950,946
Stock-based compensation 12 1,031,650 578,600
Foreign exchange 1,130,808 38,365
Operating loss 12,509,341 5,125,573
Other expenses (income)
Interest income (84,214) (30,337)
Finance costs 17 12,831 6,870
Other expenses (income) 9 (98,846) -
Net loss and comprehensive loss (12,339,112) (5,102,106)
----------------------------------------- ----- ------------ -----------
Weighted average number of common shares
outstanding - basic and diluted 119,729,081 64,529,667
Basic and diluted loss per common share 19 (0.10) (0.08)
----------------------------------------- ----- ------------ -----------
AEX Gold Inc.
Consolidated Statements of Comprehensive Loss
For the years ended December 31, 2020 and 2019
(In Canadian Dollars)
The accompanying notes are an integral part of these
consolidated financial statements.
AEX Gold Inc.
Consolidated Statements of Changes in Equity
For the years ended December 31, 2020 and 2019
(In Canadian Dollars)
Number of Accumulated
common other
shares Capital Contributed comprehensive Total
Notes outstanding stock Warrants surplus loss Deficit equity
-------------- ------ ----------- ----------- ------------ ----------- ------------- ------------ ------------
Balance,
January 1,
2019 57,788,499 10,058,355 321,788 956,800 (36,772) (9,665,197) 1,634,974
Net loss and
comprehensive
loss - - - - - (5,102,106) (5,102,106)
Shares and
warrants
issuance
under private
placements 10 13,157,895 3,853,718 1,146,282 - - - 5,000,000
Share issuance
costs 10 - (28,462) (8,466) - - - (36,928)
Stock-based
compensation 12 - - - 578,600 - - 578,600
Balance,
December 31,
2019 70,946,394 13,883,611 1,459,604 1,535,400 (36,772) (14,767,303) 2,074,540
-------------- ------ ----------- ----------- ------------ ----------- ------------- ------------ ------------
Balance,
January 1,
2020 70,946,394 13,883,611 1,459,604 1,535,400 (36,772) (14,767,303) 2,074,540
Net loss and
comprehensive
loss - - - - - (12,339,112) (12,339,112)
Share issuance
under a
fundraising 10 94,444,445 74,550,202 - - - - 74,550,202
Share issuance
costs 10 - (6,312,546) - - - - (6,312,546)
Warrants
exercised 11 11,607,898 6,318,938 (1,078,702) - - - 5,240,236
Warrants
expired 11 - - (380,902) 380,902 - - -
Options
exercised 12 100,000 60,000 - (22,000) - - 38,000
Stock-based
compensation 12 - - - 1,031,650 - - 1,031,650
Balance,
December 31,
2020 177,098,737 88,500,205 - 2,925,952 (36,772) (27,106,415) 64,282,970
-------------- ------ ----------- ----------- ------------ ----------- ------------- ------------ ------------
The accompanying notes are an integral part of these
consolidated financial statements.
AEX Gold Inc.
Consolidated Statements of Cash Flows
For the years ended December 31, 2020 and 2019
(In Canadian Dollars)
Notes 2020 2019
------------------------------------------------ ----- ------------ -----------
$ $
Operating activities
Net loss (12,339,112) (5,102,106)
Adjustments for:
Depreciation 7 228,267 172,186
Stock-based compensation 12 1,031,650 578,600
Finance costs 17 5,959 6,870
Other expenses (Income) 9 (98,846) -
Payment from cash held in escrow account for
environmental monitoring 5 (95,102) (28,846)
Escrow account for environmental monitoring 9 95,102 28,846
Foreign exchange 1,119,240 33,839
------------------------------------------------ ----- ------------ -----------
(10,052,842) (4,310,611)
Changes in non-cash working capital items:
Sales tax receivable (44,958) (8,507)
Prepaid expenses and others (276,316) (72,655)
Trade and other payables 508,094 241,951
Payables to shareholders - (8,234)
------------------------------------------------ ----- ------------ -----------
186,820 152,555
------------------------------------------------ ----- ------------ -----------
Cash flow used in operating activities (9,866,022) (4,158,056)
------------------------------------------------ ----- ------------ -----------
Investing activities
Acquisition of mineral properties 6 (20,299) (6,076)
Acquisition of capital assets 7 (421,098) (190,476)
Deposit on order (1,711,970) -
------------------------------------------------ ----- ------------ -----------
Cash flow used in investing activities (2,153,367) (196,552)
------------------------------------------------ ----- ------------ -----------
Financing activities
Shares and warrants issuance 10 74,550,202 5,000,000
Share issuance costs 10 (6,266,929) (36,928)
Deferred share issuance costs - (45,617)
Principal repayment - lease liabilities 8 (11,267) -
Exercise of warrants 5,240,236 -
Exercise of stock options 38,000 -
Cash flow from financing activities 73,550,242 4,917,455
------------------------------------------------ ----- ------------ -----------
Net change in cash before effects of exchange
rate changes on cash 61,530,853 562,847
Effects of exchange rate changes on cash (1,171,260) (11,229)
------------------------------------------------ ----- ------------ -----------
Net change in cash 60,359,593 551,618
Cash, beginning 1,515,406 963,788
------------------------------------------------ ----- ------------ -----------
Cash, ending 61,874,999 1,515,406
------------------------------------------------ ----- ------------ -----------
Supplemental cash flow information
Interest received 84,214 30,337
Deferred share issuance costs included in trade
and other payables - 120,731
Exercise of warrants credited to capital stock 1,078,702 -
Exercise of stock options credited to capital
stock 22,000 -
The accompanying notes are an integral part of these
consolidated financial statements.
AEX Gold Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(In Canadian Dollars, except as otherwise noted)
1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION
AEX Gold Inc. (the "Corporation") was incorporated on February
22, 2017 under the Canada Business Corporations Act. The
Corporation's head office is situated at 3400, One First Canadian
Place, P.O. Box 130, Toronto, Ontario, M5X 1A4, Canada. The
Corporation operates in one industry segment, being the
acquisition, exploration and development of mineral properties. It
owns interests in properties located in Greenland. The
Corporation's financial year ends on December 31. Since July 2017,
the Corporation's shares are listed on the TSX Venture Exchange
(the "TSX-V") under the AEX ticker and since July 2020, the
Corporation's shares are also listed on the AIM market of the
London Stock Exchange ("AIM") under the AEXG ticker (note 10).
These consolidated financial statements ("Financial Statements")
were reviewed and authorized for issue by the Board of Directors on
April 28, 2021.
1.1 Basis of presentation and consolidation
The Financial Statements include the accounts of the Corporation
and those of its subsidiary Nalunaq A/S, a corporation incorporated
under the Greenland Public Companies Act, owned at 100%.
Control is defined by the authority to direct the financial and
operating policies of a business in order to obtain benefits from
its activities. The amounts presented in the consolidated financial
statements of subsidiary have been adjusted, if necessary, so that
they meet the accounting policies adopted by the Corporation.
Profit or loss or other comprehensive loss of subsidiary set up,
acquired or sold during the year are recorded from the actual date
of acquisition or until the effective date of the sale, if any. All
intercompany transactions, balances, income and expenses are
eliminated at consolidation.
The Financial Statements have been prepared in accordance with
International Financial Reporting Standards as issued by the
International Accounting Standards Board ("IFRS").
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.1 Basis of measurement
The Financial Statements have been prepared on the historical
cost basis.
2.2 Functional and presentation currency - Foreign currency transactions
The functional and presentation currency of the Corporation is
Canadian dollars ("CAD"). The functional currency of Nalunaq A/S is
CAD. The functional currency of Nalunaq A/S is determined using the
currency of the primary economic environment in which the entity
evolves and using the currency which is more representative of the
economic effect of the underlying financings, transactions, events
and conditions.
Foreign currency transactions are translated into the functional
currency of the underlying entity using appropriate rates of
exchange prevailing on the dates of such transactions. Monetary
assets and liabilities denominated in foreign currencies are
translated at the functional currency rate of exchange in effect at
the end of each reporting period. Foreign exchange gains and losses
resulting from the settlement of such transactions are recognized
in the net profit or loss.
When a foreign operation is sold, such exchange differences are
recognized in the statement of comprehensive loss as part of the
gain or loss on sale.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
2.3 Deposit on order
The deposit on order represents the sum of money disbursed to a
supplier to start or continue the fulfillment of a purchase order
for capital assets. This deposit will be transferred to capital
assets when the asset has been completed and delivered.
2.4 Mineral properties and exploration and evaluation expenses
Mineral properties include rights in mining properties, paid or
acquired through a business combination or an acquisition of
assets, and costs related to the initial search for mineral
deposits with economic potential or to obtain more information
about existing mineral deposits.
All costs incurred prior to obtaining the legal rights to
undertake exploration and evaluation on an area of interest are
expensed as incurred.
Mining rights are recorded at acquisition cost or at its
recoverable amount in the case of a devaluation caused by an
impairment of value. Mining rights and options to acquire undivided
interests in mining rights are depreciated only as these properties
are put into commercial production. Proceeds from the sale of
mineral properties are applied as a reduction of the related
carrying costs and any excess or shortfall is recorded as a gain or
loss in the consolidated statement of comprehensive loss.
Exploration and evaluation expenses ("E&E expenses") also
typically include costs associated with prospecting, sampling,
trenching, drilling and other work involved in searching for ore
such as topographical, geological, geochemical and geophysical
studies. Generally, expenditures relating to exploration and
evaluation activities are expensed as incurred. Capitalization of
E&E expenses commences when a mineral resource estimate has
been obtained for an area of interest.
E&E expenses include costs related to establishing the
technical and commercial viability of extracting a mineral resource
identified through exploration or acquired through a business
combination or asset acquisition. E&E include the cost of:
-- establishing the volume and grade of deposits through
drilling of core samples, trenching and sampling activities in an
ore body that is classified as either a mineral resource or a
proven and probable reserve;
-- determining the optimal methods of extraction and
metallurgical and treatment processes, including the separation
process, for Corporation' mining properties;
-- studies related to surveying, transportation and infrastructure requirements;
-- permitting activities; and
-- economic evaluations to determine whether development of the
mineralized material is commercially justified, including scoping,
prefeasibility and final feasibility studies.
When a mine project moves into the development phase, E&E
expenses are capitalized to mine development costs. An impairment
test is performed before reclassification and any impairment loss
is recognized in the consolidated statement of comprehensive
loss.
E&E include overhead expenses directly attributable to the
related activities.
The Corporation has taken steps to verify the validity of title
to mineral properties on which it is conducting exploration
activities and is acquiring interests in accordance with industry
standards that apply to the current stage of exploration and
evaluation of such property. However, these procedures do not
guarantee the Corporation' title, as property title may be subject
to unregistered prior agreements, aboriginal claims or
noncompliance with regulatory requirements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
2.5 Capital assets
Capital assets are stated at cost less accumulated depreciation
and accumulated impairment losses. Cost includes expenditures that
are directly attributable to the acquisition of an asset.
Subsequent costs are included in the asset's carrying amount or
recognized as a separate asset, as appropriate, only when it is
probable that future economic benefit associated with the item will
flow to the Corporation and the cost can be measured reliably. The
carrying amount of a replaced asset is derecognized when
replaced.
The intangible assets include software with a definite useful
life. The assets are capitalized and amortized on a straight-line
basis in the consolidated statement of comprehensive loss. The
intangible assets are assessed for impairment whenever there is an
indication that the intangible assets may be impaired.
Repairs and maintenance costs are charged to the consolidated
statement of comprehensive loss during the period in which they are
incurred.
Depreciation is calculated to amortize the cost of the capital
assets less their residual values over their estimated useful lives
using the straight-line method and following periods by major
categories:
Field equipment and infrastructure related to exploration 3 years
and evaluation activities
Vehicles and rolling stock 3 to 10 years
Equipment 3 to 10 years
Software 3 to 10 years
Right-of-use assets Lease term
Depreciation of capital assets, if related to exploration
activities, is expensed consistently with the policy for
exploration and evaluation expenses. For those which are not
related to exploration and evaluation activities, depreciation
expense is recognized directly in the consolidated statement of
comprehensive loss.
Depreciation of an asset ceases when it is classified as held
for sale (or included in a disposal group that is classified as
held for sale) or when it is derecognized. Therefore, depreciation
does not cease when the asset becomes idle or is retired from
active use unless the asset is fully depreciated.
Residual values, methods of depreciation and useful lives of the
assets are reviewed annually and adjusted if appropriate.
Gains and losses on disposals of capital assets are determined
by comparing the proceeds with the carrying amount of the asset and
are recorded in the consolidated statement of comprehensive
loss.
2.6 Leases
At the commencement date of a lease, a liability is recognized
to make lease payments (i.e., the lease liability) and an asset
representing the right to use the underlying asset during the lease
term (i.e., the right-of-use asset) is also recognized. The
interest expense on the lease liability is recognized separately
from the depreciation expense on the right-of-use asset.
The lease liability is remeasured upon the occurrence of certain
events (e.g., a change in the lease term, a change in future lease
payments resulting from a change in an index or rate used to
determine those payments). This remeasurement is generally
recognized as an adjustment to the right-of-use asset. Leases of
"low-value" assets and short-term leases (12 months or less) are
recognized on a straight-line basis as an expense in the
consolidated statement of comprehensive loss.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
2.7 Impairment of non-financial assets
Mineral properties and capital assets are reviewed for
impairment if there is any indication that the carrying amount may
not be recoverable. Mineral properties and capital assets are
reviewed by area of interest. If any such indication is present,
the recoverable amount of the asset is estimated in order to
determine whether impairment exists. Where the asset does not
generate cash flows that are independent from other assets, the
Corporations estimates the recoverable amount of the asset group to
which the asset belongs.
An asset's recoverable amount is the higher of fair value less
costs of disposal and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value,
using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to
the asset for which estimates of future cash flows have not been
adjusted.
If the recoverable amount of an asset or asset group is
estimated to be less than its carrying amount, the carrying amount
is reduced to the recoverable amount. Impairment is recognized
immediately in the consolidated statement of comprehensive loss.
Where an impairment subsequently reverses, the carrying amount is
increased to the revised estimate of recoverable amount but only to
the extent that this does not exceed the carrying value that would
have been determined if no impairment had previously been
recognized. A reversal is recognized as a reduction in the
impairment charge for the period.
2.8 Environmental monitoring provision
Provisions are recorded when a present legal or constructive
obligation exists as a result of past events where it is probable
that an outflow of resources embodying economic benefits will be
required to settle the obligation, and a reliable estimate of the
amount of the obligation can be made. The Corporation is subject to
laws and regulations relating to environmental matters, including
land reclamation and discharge of hazardous materials and
environmental monitoring. The Corporation may be found to be
responsible for damage caused by prior owners and operators of its
unproven mineral interests and in relation to interests previously
held by the Corporation.
On initial recognition, the estimated net present value of a
provision is recorded as a liability and a corresponding amount is
added to the capitalized cost of the related non-financial asset or
charged to consolidated statement of comprehensive loss if the
property has been written off. Discount rates using a pre-tax rate
that reflects the time value of money and the risk associated with
the liability are used to calculate the net present value. The
provision is evaluated at the end of each reporting period for
changes in the estimated amount or timing of settlement of the
obligation.
2.9 Taxation
Income tax expense represents the sum of tax currently payable
and deferred tax.
Current income tax assets and liabilities for the current and
prior periods are measured at the amount expected to be recovered
from or paid to the taxation authorities. The tax rates and tax
laws used to compute the amount are those that are substantively
enacted by the date of the consolidated statement of financial
position.
Deferred income taxes are provided using the liability method on
temporary differences at the date of the statement of financial
position between the tax bases of assets and liabilities and their
carrying amounts for financial reporting purposes.
Deferred income tax liabilities are recognized for all taxable
temporary differences, except:
-- where the deferred income tax liability arises from the
initial recognition of goodwill or of an asset or liability in a
transaction that is not a business combination and, at the time of
the transaction, affects neither the accounting profit nor taxable
earnings; and
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
-- in respect of taxable temporary differences associated with
investments in subsidiaries, associates and interests in joint
ventures, where the timing of the reversal of the temporary
differences can be controlled and it is probable that the temporary
differences will not reverse in the foreseeable future.
Deferred income tax assets are recognized for all deductible
temporary differences, carry forward of unused tax credits and
unused tax losses, to the extent that it is probable that taxable
profit will be available against which the deductible temporary
differences and the carry forward of unused tax credits and unused
tax losses can be utilized except:
-- where the deferred income tax asset relating to the
deductible temporary difference arises from the initial recognition
of an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither
the accounting profit nor taxable earnings; and
-- in respect of deductible temporary differences associated
with investments in subsidiaries, associates and interests in joint
ventures, deferred income tax assets are recognized only to the
extent that it is probable that the temporary differences will
reverse in the foreseeable future and taxable profit will be
available against which the temporary differences can be
utilized.
The carrying amount of deferred income tax assets is reviewed at
each date of the consolidated statement of financial position and
reduced to the extent that it is no longer probable that sufficient
taxable profit will be available to allow all or part of the
deferred income tax asset to be utilized. Unrecognized deferred
income tax assets are reassessed at each date of the consolidated
statement of financial position and are recognized to the extent
that it has become probable that future taxable profit will allow
the deferred tax asset to be recovered.
Deferred income tax assets and liabilities are measured at the
tax rates that are expected to apply to the year when the asset is
realized or the liability is settled, based on tax rates (and tax
laws) that have been enacted or substantively enacted at the date
of the statement of financial position.
Deferred income tax relating to items recognized directly in
equity is recognized in equity and not in the consolidated
statement comprehensive loss.
Deferred income tax assets and deferred income tax liabilities
are offset if, and only if, a legally enforceable right exists to
set off current tax assets against current tax liabilities and the
deferred tax assets and liabilities relate to income taxes levied
by the same taxation authority on either the same taxable entity or
different taxable entities which intend to either settle current
tax liabilities and assets on a net basis, or to realize the assets
and settle the liabilities simultaneously, in each future period in
which significant amounts of deferred tax assets or liabilities are
expected to be settled or recovered.
2.10 Equity
Capital stock represents the amount received on the issue of
shares. Warrants represent the allocation of the amount received
for units issued as well as the charge recorded for the broker
warrants relating to financing. Options represent the charges
related to stock options until they are exercised. Contributed
surplus includes charges related to stock options and the warrants
that are expired and not yet exercised. Contributed surplus also
includes contributions from shareholders. Deficit includes all
current and prior period retained profits or losses and share issue
expenses.
Share and warrant issue expenses are accounted for in the year
in which they are incurred and are recorded as a deduction to
equity in the year in which the shares and warrants are issued.
Costs related to shares not yet issued are recorded as deferred
share issuance costs. These costs are deferred until the issuance
of the shares to which the costs relate to, at which time the costs
will be charged against the related share capital or charged to
operations if the shares are not issued.
Proceeds from unit placements are allocated between shares and
warrants issued on a pro-rata basis of their value within the unit
using the Black-Scholes pricing model.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
2.11 Interest income
Interest income from financial assets is accrued, by reference
to the principal outstanding and at the effective interest rate
applicable, which is the rate that exactly discounts estimated
future cash receipts through the expected life of the financial
asset to that asset's net carrying amount.
2.12 Stock-based compensation
Employees and consultants of the Corporation may receive a
portion of their compensation in the form of share-based payment
transactions, whereby employees or consultants render services as
consideration for equity instruments ("equity-settled
transactions").
In situations where equity instruments are issued for goods or
services, the transaction is measured at the fair value of the
goods or services received by the entity. When the value of the
goods or services cannot be specifically identified, they are
measured at fair value of the share-based payment. The costs of
equity-settled transactions with employees are measured by
reference to the fair value at the date on which they are
granted.
The costs of equity-settled transactions are recognized,
together with a corresponding increase in equity, over the period
in which the performance and/or service conditions are fulfilled,
ending on the date on which the relevant employees become fully
entitled to the award ("the vesting date"). The cumulative expense
is recognized for equity-settled transactions at each reporting
date until the vesting date reflects the Corporation' best estimate
of the number of equity instruments that will ultimately vest. The
profit or loss charge or credit for a period represents the
movement in cumulative expense recognized as at the beginning and
end of that period and the corresponding amount is represented in
contributed surplus.
No expense is recognized for awards that do not ultimately vest,
except for awards where vesting is conditional upon a market
condition, which are treated as vesting irrespective of whether or
not the market condition is satisfied provided that all other
performance and/or service conditions are satisfied.
Where the terms of an equity-settled award are modified, the
minimum expense recognized is the expense as if the terms had not
been modified. An additional amount is recognized on the same basis
as the amount of the original award for any modification which
increases the total fair value of the share-based payment
arrangement, or is otherwise beneficial to the employee as measured
at the date of modification.
2.13 Loss per share
The basic loss per share is computed by dividing the net loss by
the weighted average number of common shares outstanding during the
period. The diluted loss per share reflects the potential dilution
of common share equivalents, such as outstanding options and
warrants, in the weighted average number of common shares
outstanding during the year, if dilutive. During 2020 and 2019, all
the outstanding common share equivalents were anti-dilutive.
2.14 Financial instruments
Financial assets and financial liabilities are recognized when
the Corporation becomes a party to the contractual provisions of
the financial instrument.
Financial assets and liabilities are offset and the net amount
is reported in the consolidated statement of financial position
when there is an unconditional and legally enforceable right to
offset the recognized amounts and there is an intention to settle
on a net basis, or realize the asset and settle the liability
simultaneously.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
All financial instruments are required to be measured at fair
value on initial recognition. The fair value is based on quoted
market prices, unless the financial instruments are not traded in
an active market. In this case, the fair value is determined by
using valuation techniques like the Black-Scholes option pricing
model or other valuation techniques.
2.14.1 Financial assets
Financial assets are derecognized when the contractual rights to
receive the cash flows from the financial asset have expired, or
when the financial asset and all substantial risks and rewards have
been transferred. A financial liability is derecognized when it is
extinguished, discharged, cancelled or when it expires.
Financial assets are initially measured at fair value. If the
financial asset is not subsequently accounted for at fair value
through profit or loss, then the initial measurement includes
transaction costs that are directly attributable to the asset's
acquisition or origination. On initial recognition, the Corporation
classifies its financial instruments in the following categories
depending on the purpose for which the instruments were
acquired.
Amortized cost:
Financial assets at amortized cost are non-derivative financial
assets with fixed or determinable payments constituted solely of
payments of principal and interest that are held within a "held to
collect" business model. Financial assets at amortized cost are
initially recognized at the amount expected to be received, less,
when material, a discount to reduce the financial assets to fair
value. Subsequently, financial assets at amortized cost are
measured using the effective interest method less a provision for
expected losses. The Corporation's cash and escrow account for
environmental monitoring are classified within this category.
Any gain or loss arising on derecognition is recognized directly
in profit or loss and presented in other gains/(losses), together
with foreign exchange gains and losses. Impairment losses are
presented as separate line item in the consolidated statement
comprehensive loss.
2.14.2 Financial liabilities
A financial liability is derecognized when extinguished,
discharged, terminated, cancelled or expired.
Financial liabilities measured at amortized cost
Trade and other payables and payables to shareholders are
initially measured at the amount required to be paid, less, when
material, a discount to reduce the payables to fair value.
Subsequently, financial liabilities are measured at amortized cost
using the effective interest method.
2.14.3 Impairment of financial assets
Amortized cost:
At each reporting date, the Corporation assesses, on a forward
-- looking basis, the expected credit losses associated with its
debt instruments carried at amortized cost. The impairment
methodology applied depends on whether there has been a significant
increase in credit risk.
The expected loss is the difference between the amortized cost
of the financial asset and the present value of the expected future
cash flows, discounted using the instrument's original effective
interest rate. The carrying amount of the asset is reduced by this
amount either directly or indirectly through the use of an
allowance account. Provisions for expected losses are adjusted
upwards or downwards in subsequent periods if the amount of the
expected loss increases or decreases.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
2.15 Segment disclosures
The Corporation operates in one industry segment, being the
acquisition, exploration and evaluation of mineral properties. All
of the Corporation' activities are conducted in Greenland.
3. CHANGES IN ACCOUNTING POLICIES
3.1 New accounting standard adopted
Amendments to IAS 1 Presentation of Financial Statements
The IASB has made amendments to IAS 1 Presentation of Financial
Statements which use a consistent definition of materiality
throughout IFRS and the Conceptual Framework for Financial
Reporting, clarify when information is material and incorporate
some of the guidance in IAS 1 about immaterial information. In
particular, the amendments clarify that information is material if
omitting, misstating, or obscuring it could reasonably be expected
to influence decisions that the primary users of general-purpose
financial statements make based on those financial statements,
which provide financial information about a specific reporting
entity. Materiality depends on the nature or magnitude of
information, or both. An entity assesses whether information,
either individually or in combination with other information, is
material in the context of its financial statements taken as a
whole. The Corporation adopted IAS 1 on January 1, 2020, which did
not have a significant impact on the consolidated financial
statements disclosures.
3.2 Accounting standards issued but not yet effective
The Corporation has not yet adopted certain standards,
interpretations to existing standards and amendments which have
been issued but have an effective date of later than January 1,
2021. Many of these updates are not expected to have any
significant impact on the Corporation and are therefore not
discussed herein.
Amendments to IAS 16 Property, plant and equipment
The IASB has made amendments to IAS 16 Property, plant and
equipment, which will be effective for financial years beginning on
or after January 1, 2022. Proceeds from selling items before the
related item of Property, plant and equipment is available for use
should be recognized in profit or loss, together with the costs of
producing those items. The Corporation will therefore need to
distinguish between the costs associated with producing and selling
items before the item of Property, plant and equipment
(pre-production revenue) is available for use and the costs
associated with making the item of Property, plant and equipment
available for its intended use. For the sale of items that are not
part of a Corporation's ordinary activities, the amendments will
require the Corporation to disclose separately the sales proceeds
and related production cost recognized in profit or loss and
specify the line items in which such proceeds and costs are
included in the consolidated statement of comprehensive loss. These
amendments will have an impact on the Corporation's consolidated
financial statements.
4. CRITICAL ACCOUNTING JUDGMENTS AND ASSUMPTIONS
The preparation of these Financial Statements requires
Management to make judgments and form assumptions that affect the
reported amounts of assets and liabilities at the date of the
financial statements and reported amounts of expenses during the
reporting period. On an ongoing basis, Management evaluates its
judgments in relation to assets, liabilities and expenses.
Management uses historical experience and various other factors it
believes to be reasonable under the given circumstances as the
basis for its judgments. Actual outcomes may differ from these
estimates under different assumptions and conditions. Critical
judgments exercised in applying accounting policies with the most
significant effect on the amounts recognized in the Financial
Statements are described below.
JUDGMENTS
4.1 Impairment of mineral properties
Determining if there are any facts and circumstances indicating
impairment loss or reversal of impairment losses is a subjective
process involving judgment and a number of estimates and
interpretations in many cases.
Determining whether to test for impairment of mineral properties
requires Management's judgment, among others, regarding the
following: the period for which the entity has the right to explore
in the specific area has expired during the period or will expire
in the near future, and is not expected to be renewed; substantive
expenditure on further exploration and evaluation of mineral
resources in a specific area is neither budgeted nor planned;
exploration for and evaluation of mineral resources in a specific
area have not led to the discovery of commercially viable
quantities of mineral resources and the entity has decided to
discontinue such activities in the specific area; or sufficient
data exists to indicate that, although a development in a specific
area is likely to proceed, the carrying amount of the mineral
properties is unlikely to be recovered in full from successful
development or by sale.
When an indication of impairment loss or a reversal of an
impairment loss exists, the recoverable amount of the individual
asset must be estimated. If it is not possible to estimate the
recoverable amount of the individual asset, the recoverable amount
of the cash-generating unit to which the asset belongs must be
determined. Identifying the cash-generating units requires
considerable management judgment. In testing an individual asset or
cash-generating unit for impairment and identifying a reversal of
impairment losses, Management estimates the recoverable amount of
the asset or the cash-generating unit. This requires management to
make several assumptions as to future events or circumstances.
These assumptions and estimates are subject to change if new
information becomes available. Actual results with respect to
impairment losses or reversals of impairment losses could differ in
such a situation and significant adjustments to the Corporation'
assets and earnings may occur during the next period.
4.2 Recognition of deferred income tax assets and the measurement of income tax expense
Periodically, the Corporation evaluates the likelihood of
whether some portion of the deferred tax assets will not be
realized. Once the evaluation is completed, if the Corporation
believes that it is probable that some portion of the deferred tax
assets will fail to be realized, the Corporation records only the
remaining portion for which it is probable that there will be
available future taxable profit against which the temporary
differences can be utilized. Assessing the recoverability of
deferred income tax assets requires Management to make significant
judgment.
To the extent that future cash flows and taxable income differ
significantly from estimates, the ability of the Corporation to
realize the net deferred tax assets recorded at the statement of
financial position date could be impacted. Significant judgment is
required in determining the income tax recovery as there are
transactions and calculations for which the ultimate tax
determination is uncertain.
4.3 Determination of functional currency
In accordance with IAS 21 "The Effects of Changes in Foreign
Exchange Rates", Management determined that the functional currency
of the Corporation and its subsidiary is the Canadian dollar.
4. CRITICAL ACCOUNTING JUDGMENTS AND ASSUMPTIONS (CONT'D)
ESTIMATES AND ASSUMPTIONS
4.4 Environmental monitoring costs
The provisions for environmental monitoring costs are based on
estimated future costs using information available at the financial
reporting date. Determining these obligations requires significant
estimates and assumptions due to the numerous factors that affect
the amount ultimately payable. Such factors include estimates of
the scope and cost of restoration activities, legislative
amendments, known environmental impacts, the effectiveness of
reparation and restoration measures and changes in the discount
rate. This uncertainty may lead to differences between the actual
expense and the provision. At the date of the consolidated
statement of financial position, environmental monitoring costs
represent Management's best estimate of the charge that will result
when the actual obligation is terminated.
4.5 Uncertainty due to COVID-19
During the 2020 year, an outbreak of a new strain of coronavirus
(COVID-19) resulted in a major global health crisis which continues
to have impacts on the global economy and the financial markets at
the date of completion of the Financial Statements. These events
may cause significant changes on the Corporation's ability to
complete planned exploration and evaluation activities in the
future, meet its other obligations and existing commitments for the
exploration and evaluation programs or our ability to obtain debt
and equity financing. Following these events, the Corporation has
taken and will continue to take action to minimize the impact of
the COVID-19 pandemic. However, it is impossible to ultimately
determine the financial implications of these events.
5. ESCROW ACCOUNT FOR ENVIRONMENTAL MONITORING
On behalf of Nalunaq's licence holder, an escrow account has
been set up with the holder of the licence as holder of the account
and the Government of Greenland as beneficiary. The funds in the
escrow account have been provided in favour of the Government of
Greenland as security for fulfilling the environmental monitoring
expenses following the closure of the Nalunaq mine. This
environmental monitoring program was completed in 2020.
2020 2019
------------------------------------------------------- --------- ---------
$ $
Balance beginning 516,996 582,786
Effect of translation 38,553 (36,944)
Payment for environmental monitoring work (95,102) (28,846)
------------------------------------------------------- --------- ---------
Balance ending 460,447 516,996
Non-current portion - escrow account for environmental
monitoring (460,447) (342,132)
Current portion - escrow account for environmental
monitoring - 174,864
------------------------------------------------------- --------- ---------
6. MINERAL PROPERTIES
As at As at
December 31, December 31,
2019 Additions 2020
------------------------- --- ------------- --------- -------------
$ $ $
Nalunaq 1 - 1
Tartoq 18,431 - 18,431
Vagar 11,103 - 11,103
Naalagaaffiup Portornga 6,334 - 6,334
Nuna Nutaaq 6,076 - 6,076
Saarloq - 7,348 7,348
Anoritooq - 6,389 6,389
Kangerluarsuk - 6,562 6,562
Total mineral properties 41,945 20,299 62,244
------------------------------ ------------- --------- -------------
As at
As at December 31,
December 31,
2018 Additions 2019
------------------------- --- ------------- --------- -------------
$ $ $
Nalunaq 1 - 1
Tartoq 18,431 - 18,431
Vagar 11,103 - 11,103
Naalagaaffiup Portornga 6,334 - 6,334
Nuna Nutaaq - 6,076 6,076
Total mineral properties 35,869 6,076 41,945
------------------------------ ------------- --------- -------------
6.1 Nalunaq
Nalunaq A/S holds the gold exploitation licence number 2003/05
on the Nalunaq property (the "Nalunaq Licence") located in South
West Greenland. The licence expires in April 2033 with an extension
possible up to 20 years.
6.1.1 Collaboration agreement and project schedule
Cyrus Capital Partners LP was the main creditor of Angel Mining
PLC, the parent company of Angel Mining (Gold) A/S. Angel Mining
PLC went into administration in February 2013 and as part of the
Administrator's restructuring process, FBC Mining (Holdings) Ltd.
("FBC Mining") and Arctic Resources Capital S.à r.l. ("ARC") agreed
to enter into a collaboration agreement ("Collaboration Agreement")
(signed July 15, 2015) to progress the Nalunaq exploration project.
FBC Mining is a 100% subsidiary of FBC Holdings S.à r.l which is
managed by Cyrus Capital Partners LP.
In addition, ARC, FBC Mining and AEX Gold Limited (previously
known as FBC Mining (Nalunaq) Limited) (a 100% subsidiary of FBC
Mining) signed on July 17, 2015 the Nalunaq project schedule ("2015
Project Schedule") which was continued following the signature with
Nalunaq A/S on March 31, 2017 of the 2016-2017 Nalunaq Project
Schedule ("2016-2017 Project Schedule"), (collectively "Project
Schedules").
Finally, the conditions relating to a processing plant located
on the Nalunaq Licence ("Processing Plant") and a royalty payment
were outlined in the 2015 Project Schedule and formalized in the
processing plant and royalty agreement ("Processing Plant and
Royalty Agreement") signed on March 31, 2017 and the conditions are
as follows:
a) AEX Gold Limited transfers the Processing Plant to Nalunaq A/S under the following conditions:
i) An initial purchase price of US$1;
6. MINERAL PROPERTIES (CONT'D)
ii) A deferred consideration of US$1,999,999 ("Deferred
Consideration") on a pay as you go basis until the Deferred
Consideration is paid in full. If only part of the Processing Plant
is used, then the Deferred Consideration payable shall be reduced
by an amount to be agreed by the parties to reflect the value of
the part of the Processing Plant used.
iii) The Deferred Consideration may be reduced to the extent
that the Processing Plant or any part which is being used requires
repairs, is not in good working condition or will not be capable of
doing the work for which it was designed.
iv) Nalunaq A/S may dispose or otherwise deal with the
Processing Plant or any part of it at its own cost. If any disposal
proceeds (defined as proceeds received minus costs of dealing with
the disposal) are received, that disposal proceeds shall be paid to
AEX Gold Limited .and such amount shall be deemed to be Deferred
Consideration. If there are any disposal proceeds remaining after
the Deferred Consideration has been paid in full, the disposal
proceeds remaining may be retained by Nalunaq A/S.
b) Nalunaq A/S shall pay to AEX Gold Limited a 1% royalty on
Nalunaq A/S' net revenue generated on the Nalunaq Licence (total
revenue minus production, transportation and refining costs),
provided that in respect to the last completed calendar year, the
operating profit per ounce of gold exceeded US$500. The cumulative
royalty payments over the life of mine are capped at a maximum of
US$1,000,000.
6.1.2 Government of Greenland royalty
The Nalunaq Licence and subsequent Addendums does not have a
royalty clause. However, according to the Addendum 3 of the Mineral
Resources Act enacted on July 1, 2014, the Greenland Government may
set terms on the licensee's payment of royalty or consideration, if
the Greenland Government and the licensee agree, since the Nalunaq
Licence was granted before July 1, 2014. Nalunaq A/S may have to
pay to the Government of Greenland a sales royalty of up to 2.5% of
the value of the minerals. Nalunaq A/S may on certain terms offset
an amount equal to paid corporate income tax and corporate dividend
tax against the sales royalty to be paid.
6.1.3 Exploration commitments and exploitation milestones
After Nalunaq A/S has submitted its statements of expenses for
the Nalunaq Licence for the 2017 and 2018 years, the MLSA has
approved Nalunaq A/S' transition to the subsequent period (sub
period 4) without a rollover of the unspent amount.
The Government of Greenland has been confirmed with Addendum No.
5 dated March 2020 which was signed by the Government of Greenland
and therefore became effective on March 13, 2020, to extend the
requirement dates to perform the following tasks. No later than
December 31, 2022, the licensee shall prepare an environmental
impact assessment, make a social impact assessment and perform an
impact benefit agreement. The time limit for commencement of
exploitation is January 1, 2023.
Failure to satisfy any of the conditions set forth in the
addendums to the Nalunaq Licence may result in the MLSA revoking
the Nalunaq Licence without further notice.
6.2 Tartoq
6.2.1 Purchase of the Tartoq Licence
Nalunaq A/S signed on July 6, 2016 a sale and purchase
agreement, to purchase from Nanoq Resources Ltd. the Tartoq
exploration licence number 2015/17 located in Southwest Greenland,
for a total consideration of $7,221. The licence expires December
31, 2024 with the 5-year extension. The renewal for a period of
five years has been confirmed with Addendum No. 3 dated February
2020 which was signed by Nalunaq A/S on February 13, 2020 and
became effective on March 13, 2020 when it was signed by the
Government of Greenland. In response to the COVID 19 pandemic, the
Government of Greenland gave an extension of the licence period for
all exploration licences by two years, therefore the licence
expires December 31, 2026.
6. MINERAL PROPERTIES (CONT'D)
6.2.2 Exploration commitments
In response to the COVID 19 pandemic, the Government of
Greenland set the exploration obligation for years 2020 and 2021 to
DKK nil which also means that the transferred non-fulfilled
exploration obligation will be postponed by two years. For the
exploration licence, Nalunaq A/S shall complete DKK nil of
exploration activities in 2020, adding the non-fulfilled
exploration obligation 2019 of DKK 743,217, for a total of DKK
743,217 ($156,047 using the exchange rate as at December 31, 2020)
exploration obligation in 2020 which was confirmed by MLSA and
postponed to 2022. For the purpose of crediting expenditures
against the amounts set forth in the Tartoq Licence, actual
expenditures are multiplied by a factor of between 1.5 and 3,
depending upon the type of expenditures made. If these obligations
are not met, certain measures may be taken by the licence holder to
rectify the situation, including reducing the area of the licence
proportionately to the spending shortfall or rolling over the
exploration commitment to the next period subject to approval from
the MLSA. Nalunaq A/S submitted its statements of expenses for the
Tartoq exploration licence for the 2020 year to the MLSA by April
1, 2021.
6.3 Naalagaaffiup Portornga (Land Adjacent to Existing Tartoq Licence)
6.3.1 Purchase of the Naalagaaffiup Portornga Licence
The Corporation has acquired the right to conduct exploration
activities on approximately 170km(2) of land in an area adjacent to
the Tartoq Licence. The exploration rights have been granted to the
Corporation under a new separate exploration Licence 2018/17
Naalagaaffiup Portornga and the licence expires December 31, 2022
with a possible 5-year extension. The licence application has been
approved and all required documentation was signed by the
Corporation on January 16, 2018 and the licence became effective on
February 19, 2018 when it was signed by the Greenland authorities.
In response to the COVID 19 pandemic, the Government of Greenland
gave an extension of the licence period for all exploration
licences by two years, therefore the licence expires December 31,
2024.
6.3.2 Exploration commitments
In response to the COVID 19 pandemic, the Government of
Greenland set the exploration obligation for years 2020 and 2021 to
DKK nil which also means that the transferred non-fulfilled
exploration obligation will be postponed by two years. For the
exploration licence, Nalunaq A/S shall complete DKK nil of
exploration activities in 2020, adding the non-fulfilled
exploration obligation 2019 of DKK 231,634, for a total of DKK
231,634 ($48,634 using the exchange rate as at December 31, 2020)
exploration obligation in 2020 which was confirmed by MLSA and
postponed to 2022. For the purpose of crediting expenditures
against the amounts set forth in the Naalagaaffiup Portornga
Licence, actual expenditures are multiplied by a factor of between
1.5 and 3, depending upon the type of expenditures made. If these
obligations are not met, certain measures may be taken by the
licence holder to rectify the situation, including reducing the
area of the licence proportionately to the spending shortfall or
rolling over the exploration commitment to the next period subject
to approval from the MLSA. Nalunaq A/S submitted its statements of
expenses for the Naalagaaffiup Portornga exploration licence for
the 2020 year to the MLSA by April 1, 2021.
6. MINERAL PROPERTIES (CONT'D)
6.4 Vagar
6.4.1 Purchase of the Vagar Licence
Nalunaq A/S entered into a sale and purchase agreement with
NunaMinerals A/S, acting through its bankruptcy receiver, on
February 6, 2017 to acquire the Vagar exploration licence number
2006/10 ("Vagar Licence") located in Western Greenland, along with
all mineral exploration and mining-related data, maps and reports
pertaining to the Vagar Licence, studies and reports, for a
purchase price of $9,465 (DKK 50,000). Upon the approval of the
Greenland authorities received on October 30, 2017, Nalunaq A/S
signed the paperwork to complete the licence transfer, which became
effective upon the Greenland authorities executing the document on
January 18, 2018. The licence expires December 31, 2021 with a
possible 6-year extension. In response to the COVID 19 pandemic,
the Government of Greenland gave an extension of the licence period
for all exploration licences by two years, therefore the licence
expires December 31, 2023.
6.4.2 Exploration commitments
Nalunaq A/S asked in December 2019 for a reduction of the size
of the area covered by the licence to 292km(2) . This reduction of
the size of the area has been confirmed with Addendum No. 9 dated
January 2020 which was signed by Nalunaq A/S in January 23, 2020
and became effective on March 13, 2020 when it was signed by the
Government of Greenland.
In response to the COVID 19 pandemic, the Government of
Greenland set the exploration obligation for years 2020 and 2021 to
DKK nil which also means that the transferred non-fulfilled
exploration obligation will be postponed by two years. For the
exploration licence, Nalunaq A/S shall complete DKK nil of
exploration activities in 2020, reducing by the total credit from
2019 of DKK 709,960, for a total credit of DKK 709,960 (credit of
$149,065 using the exchange rate as at December 31, 2020) so there
is no exploration obligation in 2020 which was confirmed by MLSA.
For the purpose of crediting expenditures against the amounts set
forth in the Vagar Licence, actual expenditures are multiplied by a
factor of between 1.5 and 3, depending upon the type of
expenditures made. If these obligations are not met, certain
measures may be taken by the licence holder to rectify the
situation, including reducing the area of the licence
proportionately to the spending shortfall or rolling over the
exploration commitment to the next period subject to approval from
the MLSA. Nalunaq A/S submitted its statements of expenses for the
Vagar exploration licence for the 2020 year to the MLSA by April 1,
2021.
6.5 Nuna Nutaaq
6.5.1 Purchase of the Nuna Nutaaq Licence
The Corporation has acquired the right to conduct exploration
activities on approximately 266km(2) of land in an area of
Itillersuaq near Narsaq in South Greenland. The exploration rights
have been granted to the Corporation under a new separate
Exploration Licence 2019/113 Nuna Nutaaq. The licence application
has been approved and all required documentation was signed by the
Corporation on September 13, 2019 and the licence became effective
on September 26, 2019 when it was signed by the Government of
Greenland. The licence expires December 31, 2023 with a possible
5-year extension. In response to the COVID 19 pandemic, the
Government of Greenland gave an extension of the licence period for
all exploration licences by two years, therefore the licence
expires December 31, 2025.
6. MINERAL PROPERTIES (CONT'D)
6.5.2 Exploration commitments
In response to the COVID 19 pandemic, the Government of
Greenland set the exploration obligation for years 2020 and 2021 to
DKK nil which also means that the transferred non-fulfilled
exploration obligation will be postponed by two years. For the
exploration licence, Nalunaq A/S shall complete DKK nil of
exploration activities in 2020, adding the non-fulfilled
exploration obligation 2019 of DKK 440,502, for a total of DKK
440,502 ($92,489 using the exchange rate as at December 31, 2020)
exploration obligation in 2020 which was confirmed by MLSA and
postponed to 2022. For the purpose of crediting expenditures
against the amounts set forth in the Nuna Nutaaq Licence, actual
expenditures are multiplied by a factor of between 1.5 and 3,
depending upon the type of expenditures made. If these obligations
are not met, certain measures may be taken by the licence holder to
rectify the situation, including reducing the area of the licence
proportionately to the spending shortfall or rolling over the
exploration commitment to the next period subject to approval from
the MLSA. Nalunaq A/S submitted its statements of expenses for the
Nuna Nutaaq exploration licence for the 2020 year to the MLSA by
April 1, 2021.
6.6 Saarloq
6.6.1 Purchase of the Saarloq Licence
The Corporation acquired the right to conduct exploration
activities on approximately 818km(2) of land in the areas of
Quassugaarsuk and Sermeq Kangilleq in South Greenland. The
exploration rights have been granted to the Corporation under a new
separate Exploration Licence 2020/31, referred to as Saarloq. The
licence application has been approved and all required
documentation was signed by the Corporation on May 15, 2020 and the
licence became effective on May 28, 2020 when it was signed by the
Government of Greenland. The licence expires December 31, 2024 with
a possible 5-year extension. In response to the COVID 19 pandemic,
the Government of Greenland gave an extension of the licence period
for all exploration licences by two years, therefore the licence
expires December 31, 2026.
6.6.2 Exploration commitments
In response to the COVID 19 pandemic, the Government of
Greenland set the exploration obligation for years 2020 and 2021 to
DKK nil which also means that the transferred non-fulfilled
exploration obligation will be postponed by two years. The
exploration commitments for this new exploration licence are DKK
nil ($nil using the exchange rate as at December 31, 2020) in 2020.
For the purpose of crediting expenditures against the amounts set
forth in the Saarloq Licence, actual expenditures are multiplied by
a factor of between 1.5 and 3, depending upon the type of
expenditures made. If these obligations are not met, certain
measures may be taken by the licence holder to rectify the
situation, including reducing the area of the licence
proportionately to the spending shortfall or rolling over the
exploration commitment to the next period subject to approval from
the MLSA. Nalunaq A/S submitted its statements of expenses for the
Saarloq exploration licence for the 2020 year to the MLSA by April
1, 2021.
6. MINERAL PROPERTIES (CONT'D)
6.7 Anoritooq
6.7.1 Purchase of the Anoritooq Licence
The Corporation acquired the right to conduct exploration
activities on approximately 1,710km(2) of land in the areas of
Anoritooq and Kangerluluk in South Greenland. The exploration
rights have been granted to the Corporation under a new separate
Exploration Licence 2020/36, referred to as Anoritooq. The licence
application has been approved and all required documentation was
signed by the Corporation on June 11, 2020 and the licence became
effective on June 24, 2020 when it was signed by the Government of
Greenland. In October 2020, the Corporation was granted an addendum
to the Anoritooq Licence, increasing the size of the licence to
1,889km(2) and became effective November 6, 2020 when it was signed
by the Government of Greenland. The licence expires December 31,
2024 with a possible 5-year extension. In response to the COVID 19
pandemic, the Government of Greenland gave an extension of the
licence period for all exploration licences by two years, therefore
the licence expires December 31, 2026.
6.7.2 Exploration commitments
In response to the COVID 19 pandemic, the Government of
Greenland set the exploration obligation for years 2020 and 2021 to
DKK nil which also means that the transferred non-fulfilled
exploration obligation will be postponed by two years. The
exploration commitments for this new exploration Licence are DKK
nil ($nil using the exchange rate as at December 31, 2020) in 2020.
For the purpose of crediting expenditures against the amounts set
forth in the Anoritooq Licence, actual expenditures are multiplied
by a factor of between 1.5 and 3, depending upon the type of
expenditures made. If these obligations are not met, certain
measures may be taken by the licence holder to rectify the
situation, including reducing the area of the licence
proportionately to the spending shortfall or rolling over the
exploration commitment to the next period subject to approval from
the MLSA. Nalunaq A/S submitted its statements of expenses for the
Anoritooq exploration licence for the 2020 year to the MLSA by
April 1, 2021.
6.8 Kangerluarsuk
6.8.1 Purchase of the Kangerluarsuk Licence
The Corporation acquired the right to conduct exploration
activities on approximately 335km(2) of land in the area of Eqaluit
Iluat in South Greenland. The exploration rights have been granted
to the Corporation under a new separate Exploration Licence
2021/02, referred to as Kangerluarsuk. The licence application has
been approved and all required documentation was signed by the
Corporation on October 13, 2020 and the licence became effective on
November 6, 2020 when it was signed by the Government of Greenland.
The licence expires December 31, 2025 with a possible 5-year
extension. In response to the COVID 19 pandemic, the Government of
Greenland gave in December 2020, an extension of the licence period
for all exploration licences by one year, therefore the licence
expires December 31, 2026.
6.8.2 Exploration commitments
In response to the COVID 19 pandemic, the Government of
Greenland set the exploration obligation for years 2020 and 2021 to
DKK nil which also means that the transferred non-fulfilled
exploration obligation will be postponed by two years. The
exploration commitments for this new exploration licence are DKK
nil ($nil using the exchange rate as at December 31, 2020) in 2020.
For the purpose of crediting expenditures against the amounts set
forth in the Kangerluarsuk Licence, actual expenditures are
multiplied by a factor of between 1.5 and 3, depending upon the
type of expenditures made. If these obligations are not met,
certain measures may be taken by the licence holder to rectify the
situation, including reducing the area of the licence
proportionately to the spending shortfall or rolling over the
exploration commitment to the next period subject to approval from
the MLSA. Nalunaq A/S must submit its statements of expenses for
the Kangerluarsuk exploration licence for the 2020 and 2021 years
to the MLSA by April 1, 2022.
6. MINERAL PROPERTIES (CONT'D)
6.9 Genex
On October 16, 2017, Nalunaq A/S was awarded a prospecting
licence number 2017/45 covering West Greenland, in this context
defined as areas south of 78 N and west of 44 W. It is valid for a
term of five years until December 31, 2021. Nalunaq A/S is not
obligated to spend exploration expenses regarding this licence area
during this period.
On September 26, 2019, Nalunaq A/S was granted a prospecting
licence number 2019/146 covering East Greenland, in this context
defined as areas south of 75 N and east of 44 W. It is valid for a
term of five years until December 31, 2023. Nalunaq A/S is not
obligated to spend exploration expenses regarding this licence area
during this period.
7. CAPITAL ASSETS
Exploration and evaluation
Field equipment Vehicles and Equipment Total
and infrastructure rolling stock (including
intangible)
$ $ $ $
------------------------- ------------------- -------------- ------------ ---------
2019
Opening net book value 166,134 182,679 - 348,813
Additions 179,962 - 10,514 190,476
Depreciation (74,119) (96,023) (2,044) (172,186)
------------------------- ------------------- -------------- ------------ ---------
Closing net book value 271,977 86,656 8,470 367,103
As at December 31, 2019
Cost 387,323 288,066 10,514 685,903
Accumulated depreciation (115,346) (201,410) (2,044) (318,800)
------------------------- ------------------- -------------- ------------ ---------
Closing net book value 271,977 86,656 8,470 367,103
------------------------- ------------------- -------------- ------------ ---------
Field equipment Vehicles Equipment Right-of-use Total
and infrastructure and rolling (including assets (note
stock intangible) 8)
$ $ $ $ $
------------------------- ------------------- ------------ ------------ ------------- ---------
2020
Opening net book value 271,977 86,656 8,470 - 367,103
Additions - 245,734 175,364 841,080 1,262,178
Depreciation (125,774) (75,525) (6,782) (20,186) (228,267)
------------------------- ------------------- ------------ ------------ ------------- ---------
Closing net book value 146,203 256,865 177,052 820,894 1,401,014
As at December 31,
2020
Cost 387,323 533,800 185,878 841,080 1,948,081
Accumulated depreciation (241,120) (276,935) (8,826) (20,186) (547,067)
------------------------- ------------------- ------------ ------------ ------------- ---------
Closing net book value 146,203 256,865 177,052 820,894 1,401,014
------------------------- ------------------- ------------ ------------ ------------- ---------
Depreciation of capital assets related to exploration and
evaluation properties is being recorded in exploration and
evaluation expenses in the consolidated statement of comprehensive
loss, under depreciation. Depreciation of $206,153 ($172,186 -
2019) was expensed as exploration and evaluation expenses in
2020.
As at December 31, 2020, the Corporation had capital asset
purchase commitments, net of deposit on order, of $ 8,796,288 (nil
as at December 31, 2019). These commitments relate to purchases of
equipment, infrastructure and vehicles.
8. LEASE LIABILITIES
As at As at
December December
31, 31,
2020 2019
---------------------------------------- --------- ---------
$ $
Balance beginning - -
Additions 841,080 -
Principal repayment (11,267) -
---------------------------------------- --------- ---------
Balance ending 829,813 -
Non-current portion - lease liabilities (763,913) -
---------------------------------------- --------- ---------
Current portion - lease liabilities 65,900 -
---------------------------------------- --------- ---------
The Corporation has presently only one lease for its office. In
October 2020, the Corporation started the lease for five years and
five months including five free rent months during this period. The
monthly rent is $8,825 until March 2024 and $9,070 for the balance
of the lease. The Corporation has the option to renew the lease for
an additional five-year period at $9,070 monthly rent indexed
annually to the increase of the consumer price index of the
previous year for the Montreal area.
A right-of-use asset of $841,080 and an equivalent long term
lease liability was recorded as of October 1, 2020, with a 5%
incremental borrowing rate and considering that the renewal option
would be exercised. Depreciation of right-of-use assets is being
recorded in general and administrative expenses in the consolidated
statement of comprehensive loss, under depreciation. Depreciation
of $20,186 (nil - 2019) was expensed as general and administration
expenses in 2020.
9. ENVIRONMENTAL MONITORING PROVISION
2020 2019
----------------------------------------------- -------- --------
$ $
Balance beginning 174,864 209,695
Effect of foreign exchange translation 13,125 (12,855)
Payment from cash held in escrow account for
environmental monitoring (95,102) (28,846)
Accretion expense 5,959 8,980
Change in estimates (98,846) (2,110)
----------------------------------------------- -------- --------
Balance ending - 174,864
Non-current portion - environmental monitoring
provision - -
Current portion - environmental monitoring
provision - 174,864
----------------------------------------------- -------- --------
In September 2020, a final payment to settle the environmental
monitoring obligations attached to the Nalunaq Licence has been
completed and no further payments are expected to be made regarding
this obligation.
10. SHARE CAPITAL
10.1 Share Capital
The Corporation is authorized to issue an unlimited number of
common voting shares and an unlimited number of preferred shares
issuable in series, all without par value.
10.2 AIM Admission
During the quarter ended September 30, 2020, the Corporation
completed the admission of its entire issued share capital to
trading on the AIM market of the London Stock Exchange and trading
commenced on AIM on July 31, 2020 ("Admission") under the ticker
AEXG.
10. SHARE CAPITAL (CONT'D)
10.3 Completion of the fundraising
On July 31, 2020, the Corporation completed the fundraising by
issuing 94,444,445 common shares at a price of $0.77 per share for
subscription made in Canadian dollars and GBP 0.45 per share for
subscriptions made in British pounds sterling, for gross proceeds
to the Corporation of $74,550,202 (the "Fundraising").
The Corporation incurred total issuance costs of $6,312,546 in
relation to this process.
Certain officers and directors of the Corporation purchased an
aggregate of 1,177,581 common shares for $906,737 (note 20). The
officers and directors of the Corporation subscribed to the
Fundraising under the same terms and conditions as set forth for
all subscribers.
10.4 Private placements
a) June 2019
On June 28, 2019, the Corporation completed a non-brokered
private placement by issuing 13,157,895 units at a price of $0.38
per unit, for gross proceeds to the Corporation of $5,000,000.
Each unit was comprised one common share and one common share
purchase warrant, with each warrant being exercisable into one
additional common share for 36 months from the closing date of the
private placement at an exercise price of $0.45 per common share.
The Corporation can accelerate the expiry of the warrants if the
daily volume-weighted average trading price of the common share on
the Exchange exceeds $0.50 for 20 consecutive trading days at any
time following 120 days after closing of the private placement.
From the total proceeds received from the units of $5,000,000,
$1,146,282 has been allocated to warrants and $3,853,718 to capital
stock, according to a pro-rata allocation of the estimated fair
value of each of the two components. The estimated fair value of
the warrants was determined using the Black-Scholes pricing model
based on the following assumptions: no expected dividend yield, a
risk-free interest rate of 1.41%, an expected stock price
volatility of 62.01%, and an expected life of the warrants of 3
years. The expected volatility was estimated by benchmarking
comparable situations for companies that are similar to the
Corporation.
The corporation incurred total issuance costs of $36,928 of
which $28,462 was allocated to capital stock and $8,466 to
warrants.
Insiders of the Corporation purchased an aggregate of 1,337,173
units for $508,126 (note 20).
11. WARRANTS
11.1 Warrants
Changes in the Corporation's warrants are as follow:
2020 2019
------------------- ---------------------------------- --------------------------------
Weighted Weighted
average average
Number of Carrying exercise Number of Carrying exercise
warrants Value price warrants Value price
------------------- ------------ --------- --------- ---------- --------- ---------
$ $ $ $
Balance, beginning 13,157,895 1,137,816 0.45 - - -
Issued (note
10) - - - 13,157,895 1,137,816 0.45
Exercised (11,272,271) (974,758) 0.45 - - -
Expired (1,885,624) (163,058) 0.45 - - -
Balance, end - - - 13,157,895 1,137,816 0.45
------------------- ------------ --------- --------- ---------- --------- ---------
11. WARRANTS (CONT'D)
The Corporation has accelerated the expiry of certain common
share purchase warrants ("Warrants"), bearing an expiration date of
June 28, 2022. The certificate evidencing the Warrants ("Warrant
Certificate") provided for acceleration in certain circumstances,
which were met during the period. From the period February 6, 2020
to March 5, 2020, the daily volume weighted average price of the
Corporation's common shares on the TSX-V was equal to or greater
than $0.50, thus satisfying the acceleration requirements under the
Warrants. Accordingly, Warrant holders were provided with
notification that any Warrants that were not exercised before April
20, 2020, being the 30(th) trading day following the occurrence of
the acceleration event, would expire and be cancelled. Certain
Warrant holders exercised 11,272,271 Warrants, each entitling the
holder to receive one common share of the Corporation, at an
exercise price per warrant of $0.45, representing gross proceeds of
$5,072,522. The remaining Warrants amounting to 1,885,624
expired.
11.2 Agent warrants
Changes in the Corporation's agent and finders warrants are as
follow:
2020 2019
------------------- ------------------------------- ------------------------------
Weighted Weighted
average average
Number of Carrying exercise Number of Carrying exercise
warrants Value price warrants Value price
------------------- --------- --------- --------- --------- -------- ---------
$ $ $ $
Balance, beginning 1,067,739 321,788 0.49 1,067,739 321,788 0.49
Exercised (335,627) (103,944) 0.50 - - -
Expired (732,112) (217,844) 0.49 - - -
Balance, end - - - 1,067,739 321,788 0.49
------------------- --------- --------- --------- --------- -------- ---------
12. STOCK OPTIONS
An incentive stock option plan (the "Plan") was approved
initially in 2017 and renewed by shareholders on June 17, 2020. The
Plan is a "rolling" plan whereby a maximum of 10% of the issued
shares at the time of the grant are reserved for issue under the
Plan to executive officers and directors, employees and
consultants. The Board of directors attributes the stock options
and the exercise price of the options shall not be less than the
closing price on the last trading day preceding the grant date. The
options have a maximum term of ten years. Options granted pursuant
to the Plan shall vest and become exercisable at such time or times
as may be determined by the Board, except options granted to
consultants providing investor relations activities shall vest in
stages over a 12 month period with a maximum of one-quarter of the
options vesting in any three-month period. The Corporation has no
legal or constructive obligation to repurchase or settle the
options in cash.
On July 9, 2019, the Corporation granted to its directors,
officers and consultants 2,630,000 stock options exercisable at an
exercise price of $0.38, with an expiry date of December 31, 2025.
The stock options vest 100% at the grant date. Those options were
granted at an exercise price over the closing market value of the
shares the previous day of the grant. Total stock-based
compensation costs amount to $578,600 for an estimated fair value
of $0.22 per option. The fair value of the options granted was
estimated using the Black-Scholes model with no expected dividend
yield, 75.05% expected volatility, 1.57% risk-free interest rate
and 6.5 years options expected life. The expected life and expected
volatility were estimated by benchmarking comparable situations for
companies that are similar to the Corporation.
12. STOCK OPTIONS (CONT'D)
On June 17, 2020, the Corporation granted to its directors,
officers and consultants 2,195,000 stock options exercisable at an
exercise price of $0.70, with an expiry date of December 31, 2026.
The stock options vested 100% at the grant date. Those options were
granted at an exercise price equal to the closing market value of
the shares the previous day of the grant. Total stock-based
compensation costs amount to $1,031,650 for an estimated fair value
of $0.47 per option. The fair value of the options granted was
estimated using the Black-Scholes model with no expected dividend
yield, 76.41% expected volatility, 0.41% risk-free interest rate
and 6.5 years options expected life. The expected life and expected
volatility were estimated by benchmarking comparable companies to
the Corporation.
Changes in stock options are as follow:
2020 2019
------------------- ---------------------------- ----------------------------
Weighted Weighted
Number of average exercise Number of average exercise
options price options price
------------------- --------- ----------------- --------- -----------------
$
Balance, beginning 5,650,000 0.43 3,020,000 0.47
Granted 2,195,000 0.70 2,630,000 0.38
Exercised (100,000) 0.38 - -
Balance, end 7,745,000 0.51 5,650,000 0.43
------------------- --------- ----------------- --------- -----------------
Stock options outstanding and exercisable as at December 31,
2020 are as follows:
Number of options Exercise
outstanding and exercisable price Expiry date
---------------------------- -------- -----------------
$
1,360,000 0.50 July 13, 2022
1,660,000 0.45 August 22, 2023
2,530,000 0.38 December 31, 2025
2,195,000 0.70 December 31, 2026
---------------------------- -------- -----------------
7,745,000
---------------------------- -------- -----------------
13. CAPITAL MANAGEMENT
The capital of the Corporation consists of the items included in
equity and balances thereof and changes therein are depicted in the
consolidated statement of changes in equity.
The Corporation' objectives are to safeguard the Corporation'
ability to continue as a going concern in order to pursue its
acquisition, exploration and evaluation activities and to maintain
a flexible capital structure which optimizes the costs of capital
at an acceptable risk. The Corporation manages the capital
structure and makes adjustments to it in light of changes in
economic conditions and the risk characteristics of the underlying
assets. As the Corporation does not have cash flow from operations,
to maintain or adjust the capital structure, the Corporation may
attempt to issue new shares, issue debt, acquire or dispose of
assets or adjust the amount of cash. In order to maximize ongoing
development efforts and to continue operations, the Corporation
does not pay out dividends.
The Corporation is not subject to externally imposed
restrictions on capital.
14. EMPLOYEE REMUNERATION
Salaries
2020 2019
------------------------------------------------- ----------- ---------
$ $
Salaries 1,154,302 642,421
Director's fees 252,083 56,250
Benefits 218,740 83,745
------------------------------------------------- ----------- ---------
1,625,125 782,416
Less : salaries and benefits presented in
E&E expenses (1,024,094) (726,166)
------------------------------------------------- ----------- ---------
Salaries disclosed in general and administrative
expenses 601,031 56,250
------------------------------------------------- ----------- ---------
15. EXPLORATION AND EVALUATION EXPENSES
Naalagaaffiup Nuna
2020 Nalunaq Vagar Tartoq Portornga Nutaaq Saarloq Anoritooq Kangerluarsuk Genex Total
--------------- --------- ------- ------ ------------- ------ ------- --------- ------------- ----- ---------
$ $ $ $ $ $ $ $ $ $
Geology 1,968,010 158,392 11,426 14,110 18,630 32,549 55,760 9,937 - 2,268,814
Lodging and
on-site
support 278,440 7,088 - - - - - - - 285,528
Underground
works 75,396 - - - - - - - - 75,396
Drilling 186,955 - - - - - - - - 186,955
Safety and
environment 21,402 - - - - - - - - 21,402
Analysis 259,188 263 - - - - - - - 259,451
Transport 638,533 519 - - 104 156 259 - - 639,571
Helicopter
Charter 4,922 40,451 - - 30,115 - 6,789 - - 82,277
Logistic
support 339,200 19,652 19,652 19,652 19,652 - - - - 417,808
Insurance 37,990 - - - - - - - - 37,990
Maintenance
infrastructure 2,434,862 14,116 - - 2,823 4,235 7,058 - - 2,463,094
Government fees 87,224 8,468 14,615 - - - - - 961 111,268
Depreciation 206,153 - - - - - - - - 206,153
--------------- --------- ------- ------ ------------- ------ ------- --------- ------------- ----- ---------
Exploration and
evaluation
expenses 6,538,275 248,949 45,693 33,762 71,324 36,940 69,866 9,937 961 7,055,707
--------------- --------- ------- ------ ------------- ------ ------- --------- ------------- ----- ---------
Naalagaaffiup
2019 Nalunaq Vagar Tartoq Portornga Nuna Nutaaq Genex Total
--------------------------- --------- ------- ------ ------------- ----------- ------ ---------
$ $ $ $ $ $ $
Geology 822,113 118,858 70,763 71,382 9,626 8,896 1,101,638
Lodging and on-site
support 308,754 - - - - - 308,754
Underground works 12,500 - - - - - 12,500
Drilling 229,473 - - - - - 229,473
Safety and environment 29,900 - - - - - 29,900
Analysis 45,558 - - - - - 45,558
Transport 312,513 - - - - - 312,513
Helicopter Charter - 18,768 - - 9,130 - 27,898
Logistic support 182,430 26,086 20,487 15,801 2,000 - 246,804
Insurance 38,512 - - - - - 38,512
Maintenance infrastructure 992,539 - - - - - 992,539
Government fees 17,963 14,651 980 - - 5,793 39,387
Depreciation 172,186 - - - - - 172,186
--------------------------- --------- ------- ------ ------------- ----------- ------ ---------
Exploration and evaluation
expenses 3,164,441 178,363 92,230 87,183 20,756 14,689 3,557,662
--------------------------- --------- ------- ------ ------------- ----------- ------ ---------
16. GENERAL AND ADMINISTRATIVE
2020 2019
----------------------------------- --------- -------
$ $
Salaries and benefits 348,948 -
Management and consulting fees 633,220 298,885
Director's fees 252,083 56,250
Professional fees 1,077,541 300,017
Marketing and industry involvement 466,465 160,199
Insurance 218,355 40,029
Travel and other expenses 140,135 71,674
Regulatory fees 132,315 23,892
Depreciation 22,114 -
----------------------------------- --------- -------
General and administrative 3,291,176 950,946
----------------------------------- --------- -------
17. FINANCE COSTS
2020 2019
----------------------------------------------- ------ -------
$ $
Accretion expense - environmental monitoring
provision 5,959 8,980
Change in estimates - environmental monitoring
provision - (2,110)
Financing fees lease 6,872 -
----------------------------------------------- ------ -------
Finance costs (income) 12,831 6,870
----------------------------------------------- ------ -------
18. INCOME TAXES
Tax expense differs from the amount computed by applying the
combined Canadian Statutory and Greenlandic income tax rates,
applicable to the Corporation, to the loss before income taxes due
to the following:
2020 2019
----------------------------------------------- ------------ -----------
$ $
Net loss before income taxes (12,339,112) (5,102,106)
Income tax rates 26.5% 26.5%
Income tax recovery (3,269,865) (1,352,058)
Increase (decrease) attributable to:
Non deductible expenses 274,878 154,345
Difference in statutory tax rate 111,110 (132,014)
Changes in unrecognized deferred tax assets 2,883,877 1,329,727
Tax recovery - -
----------------------------------------------- ------------ -----------
The analysis of the Corporation's deferred tax assets and
liabilities as at December 31, 2020 and 2019 is as follows:
2020 2019
----------------------------------- -------- --------
$ $
Deferred tax assets (liabilities):
Deferred share issuance costs - (8,816)
Capital assets (25,949) (11,765)
Non-capital losses 25,949 20,581
- -
----------------------------------- -------- --------
18. INCOME TAXES (CONT'D)
The Corporation records deferred income tax assets to the extent
that it is probable that sufficient taxable income will be realized
during the carry-forward period to utilize these net future tax
assets.
The significant components of deductible temporary differences
and unused tax losses for which the benefits have not been recorded
on the consolidated statement of financial position as at December
31, 2020 are as follows:
Greenland As at
December 31,
2020
---------------------------------- --- -------------
$
Non-capital losses carry forwards 19,044,293
--------------------------------------- -------------
As the Corporation is a mineral licence holder, the non-capital
losses in Greenland have no expiration date.
Canada As at
December 31,
2020
------------------------------------------- --- -------------
$
Non-capital losses carry forwards expiring
in 2038 965,032
Non-capital losses carry forwards expiring
in 2039 1,272,338
Non-capital losses carry forwards expiring
in 2040 1,210,346
Non-capital losses carry forwards expiring
in 2041 5,484,776
------------------------------------------------ -------------
19. NET LOSS PER SHARE
The calculation of basic and diluted net loss per share for the
year ended December 31, 2020, was based on the net loss
attributable to shareholders of $12,339,112 ($5,102,106 for the
year ended December 31, 2019) and the weighted average number of
common shares outstanding for the year ended December 31, 2020 of
119,729,081 (64,529,667 for the year ended December 31, 2019). As a
result of the net loss for the years ended December 31, 2020 and
2019, all potentially dilutive common shares are deemed to be
antidilutive and thus diluted net loss per share is equal to the
basic net loss per share for these periods.
20. RELATED PARTY TRANSACTIONS AND KEY MANAGEMENT COMPENSATION
The Corporation's key management are the members of the board of
directors, the President and Chief Executive Officer, the Chief
Financial Officer, the Chief Operating Officer and the Corporate
Secretary. Key management compensation is as follows:
2020 2019
-------------------------------------------------- --------- ---------
$ $
Short-term benefits
Management and consulting fees 633,220 298,885
Professional fees included in the deferred
share issuance costs - 9,638
Professional fees - 59,783
Salaries and benefits 292,562 -
Salaries and benefits included in the E&E
expenses 72,170 -
Professional fees included in the E&E expenses 261,292 76,680
Director's fees 252,083 56,250
Long-term benefits
Stock-based compensation (note 12) 916,500 572,000
-------------------------------------------------- --------- ---------
Total compensation 2,427,827 1,073,236
-------------------------------------------------- --------- ---------
The compensation for Joan Plant (Corporate Secretary) is charged
through FBC BA for $161,925 for 2020 ($50,099 for 2019).
In addition to the amounts listed above in the compensation to
key management, following are the related party transactions, in
the normal course of operations:
-- A company in which Eldur Olafsson (director, President and
Chief Executive Officer) holds shares charged exploration work and
equipment amounting to $nil ($19,666 in 2019);
-- A firm in which Georgia Quenby (director) is a partner
charged legal professional fees for $168,309 ($15,350 in 2019);
-- A company controlled by Ingrid Martin (chief financial
officer from April 28, 2017 to December 16, 2019) charged
accounting professional fees of $127,180 in 2019 for her staff;
-- A company controlled by Martin Ménard (Chief Operating
Officer, appointed July 9, 2019) charged engineering professional
fees of $765,235 for his staff ($186,720 in 2019). The Chief
Operating Officer is the son of a Robert Ménard;
-- Nicolas and Catherine Ménard and Samuel Martel, engineering
consultants, (the son, the daughter and the son-in-law of Robert
Ménard, director and the brother, the sister and brother-in-law of
Martin Ménard, Chief Operating Officer) were paid $464,896 ($77,365
in 2019);
-- A company controlled by Robert Ménard, director, charged
engineering professional fees of $nil ($62,213 in 2019);
-- As at December 31, 2020, the balance due to those related
parties listed above and in the compensation to key management
amounted to $150,829 ($144,063 as at December 31, 2019).
Following are the related party transactions, outside of the
normal course of operations:
-- Directors and officers of the Corporation participated in the
July 31, 2020 fundraising for $906,737 ($508,126 in 2019). The
directors and officers subscribed to the fundraising in 2020 and
2019 under the same terms and conditions set forth to all
subscribers.
-- Key management are subject to employment agreements which
provide for payments on termination, without cause or following a
change of control, providing for payments up to one base
salary.
20. RELATED PARTY TRANSACTIONS AND KEY MANAGEMENT COMPENSATION (CONT'D)
The compensation of directors is as follows:
2020 2019
----------------------- --------------------------------------------- ---------------------------------------------
Short-term Short-term
benefits Stock-based benefits Stock-based
(a) compensation Total compensation (a) compensation Total compensation
----------------------- ---------- ------------- ------------------ ---------- ------------- ------------------
$ $ $ $ $ $
Eldur Olafsson 406,265 211,500 617,765 209,200 330,000 539,200
George Fowlie 270,888 117,500 388,388 39,586 33,000 72,586
Graham Stewart 110,000 188,000 298,000 18,750 22,000 40,750
Georgia Quenby 55,833 47,000 102,833 18,750 22,000 40,750
Sigurbjorn Thorkelsson 41,250 - 41,250 - - -
Robert Ménard 45,000 47,000 92,000 18,750 22,000 40,750
Total compensation 929,236 611,000 1,540,236 305,036 429,000 734,036
----------------------- ---------- ------------- ------------------ ---------- ------------- ------------------
(a) Short-term benefits comprise salary, director fees as applicable, annual bonus and pension.
The directors participated in the July 31, 2020 fundraising for
$836,596 ($508,126 in 2019). The director participation is as
follows:
2020 2019
----------------------- ----------- -----------
Number of Number of
new shares new shares
----------------------- ----------- -----------
Eldur Olafsson 222,222 1,139,805
George Fowlie 100,000 -
Graham Stewart 222,222 131,579
Georgia Quenby - -
Sigurbjorn Thorkelsson 444,444 -
Robert Ménard 97,600 65,789
Total 1,086,488 1,337,173
----------------------- ----------- -----------
21. FINANCIAL INSTRUMENTS
The Corporation is exposed to various financial risks resulting
from both its operations and its investment activities. The
Management manages financial risks. The Corporation does not enter
into financial instruments agreements, including derivative
financial instruments, for speculative purposes. The Corporation's
main financial risks exposure and its financial policies are
described below.
21.1 Credit risk
Credit risk is the risk that one party to a financial instrument
will cause a financial loss for the other party by failing to
discharge an obligation. The Corporation's cash and escrow account
for environmental monitoring are exposed to credit risk. Management
believes the credit risk on cash and escrow account for
environmental monitoring is small because the counterparties are
chartered Canadian and Greenlandic banks.
21.2 Liquidity risk
Liquidity risk is the risk that the Corporation will encounter
difficulty in meeting obligations associated with financial
liabilities. The Corporation seeks to ensure that it has sufficient
capital to meet short-term financial obligations after taking into
account its exploration and operating obligations and cash on hand.
The Corporation anticipates seeking additional financing in order
to fund general and administrative costs and exploration and
evaluation costs. The Corporation' options to enhance liquidity
include the issuance of new equity instruments or debt.
21. FINANCIAL INSTRUMENTS (CONT'D)
The following table summarizes the carrying amounts and
contractual maturities of financial liabilities:
As at December 31, 2020 As at December
31, 2019
Trade and other Trade and
payables Lease liabilities other payables
-------------- --------------- ----------------- -----------------
$ $ $
Within 1 year 831,899 105,894 471,069
1 to 5 years - 411,320 -
5 to 10 years - 544,178 -
--------------- --------------- ----------------- -----------------
Total 831,899 1,061,392 471,069
--------------- --------------- ----------------- -----------------
21.3 Currency risk
As at December 31, 2020 and 2019, a portion of the Corporation's
transactions are denominated in DKK, Euros, US$ and British Pounds
(GBP) to the extent such currencies are different from the relevant
group entities' functional currency.
The Corporation had the following balances in currencies:
As at December 31, 2020 In DKK In Euros In US$ In GBP
--------------------------------- --------- --------- --------- --------
Cash 324,536 3,178,405 6,658,837 2,142
Escrow account for environmental
monitoring 2,193,001 - - -
Trade and other payables (977,053) - (2,214) (40,603)
1,540,484 3,178,405 6,656,623 (38,461)
Exchange rate 0.2100 1.5625 1.2741 1.7390
---------------------------------- --------- --------- --------- --------
Equivalent to CAD 323,502 4,966,258 8,481,203 (66,884)
---------------------------------- --------- --------- --------- --------
Based on the above net exposures as at December 31, 2020, and
assuming that all other variables remain constant, a 10%
appreciation or depreciation of the Canadian dollar against the
DKK, Euro, US$ and GBP by 10% would decrease/increase profit or
loss by $1,370,409.
As at December 31, 2019 In DKK In Euros In US$ In GBP
-------------------------------------- --------- -------- ------ --------
Cash 272,320 209 752 -
Escrow account for environmental
monitoring 2,646,497 - - -
Prepaid expenses and others 257,592 - - -
Trade and other payables (726,684) - - (49,223)
Payables to shareholders - - - -
Environmental monitoring provision(1) (895,125) - - -
1,554,600 209 752 (49,223)
Exchange rate 0.1954 1.4597 1.3016 1.7161
--------------------------------------- --------- -------- ------ --------
Equivalent to CAD 303,769 305 979 (84,472)
--------------------------------------- --------- -------- ------ --------
(1) The provision is not a financial instrument but is
considered a DKK exposure for currency risk management
purposes.
Based on the above net exposures as at December 31, 2019, and
assuming that all other variables remain constant, a 10%
appreciation or depreciation of the Canadian dollar against the
DKK, Euro, US$ and GBP by 10% would decrease/increase profit or
loss by $22,059.
21. FINANCIAL INSTRUMENTS (CONT'D)
21.4 Fair value risk
Fair value estimates are made at the consolidated statement of
financial position date, based on relevant market information and
other information about financial instruments. As at December 31
2020, the Corporation' financial instruments are cash, escrow
account for environmental monitoring, trade and other payables and
lease liabilities. For all the financial instruments, the amounts
reflected in the consolidated statement of financial position are
carrying amounts and approximate their fair values due to their
short-term nature.
[1] CPA auditor, CA, public accountancy permit No. A123642
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