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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April 29, 2021 02:00 ET (06:00 GMT)