Arras Minerals Corp 20-F for FY2023
Arras Minerals Corp. (ARRKF)
About this 20-F
Arras Minerals Corp filed this 20-F on February 28, 2024, covering the fiscal year ended October 31, 2023 (FY2023).
Headline figures
Fiscal year ended October 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $5.72M
- compared with a net loss of $5.95M a year earlier
- Diluted EPS
- -$0.09
- compared with -$0.12 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
| REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended |
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________________________ to ______________________________ |
OR
| SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of event requiring this shell company report _______________________________________________
|
Commission File Number:
(Exact name of registrant as specified in its charter)
N/A
(Translation of Registrant’s name into English)
(Jurisdiction of incorporation or organization)
(Address of principal executive office)
Chief Executive Officer
Tel:
(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)
Copies to:
Brian Boonstra
Davis Graham & Stubbs LLP
1550 Seventeenth Street, Suite 500
Denver, CO 80202
Tel: (303) 892-7348
Securities registered or to be registered pursuant to Section 12(b) of the Act.
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Trading Symbol(s) |
Name of each exchange on which registered | |||
Securities for which there is a reporting obligation pursuant to Section 12(g) of the Act.
Common Shares, without par value
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act. None.
Indicate the number of outstanding shares of
each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐
If this report is an annual or transition report,
indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934. Yes ☐
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☐
Indicate by check mark whether the registrant has
submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ | Emerging growth company |
If an emerging growth company that prepares
its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended period
for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.
| † | The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012. |
Indicate by check mark whether the registrant
has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared
or issued its audit report.
If securities are registered pursuant to Section
12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction
of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
| U.S. GAAP ☐ | International Accounting Standards Board ☒ | Other ☐ |
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 ☐ Item 18 ☐
If this is an annual report, indicate by check
mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
No
TABLE OF CONTENTS
| Page | |
| INTRODUCTION AND USE OF CERTAIN TERMS | 2 |
| MARKET INFORMATION | 2 |
| CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS | 3 |
| PART I | |
| ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS. | 5 |
| ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE. | 5 |
| ITEM 3. KEY INFORMATION. | 5 |
| ITEM 4. INFORMATION ON THE COMPANY. | 17 |
| ITEM 4A. UNRESOLVED STAFF COMMENTS. | 35 |
| ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS. | 35 |
| ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES. | 36 |
| ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS. | 50 |
| ITEM 8. FINANCIAL INFORMATION. | 51 |
| ITEM 9. THE OFFER AND LISTING. | 52 |
| ITEM 10. ADDITIONAL INFORMATION. | 52 |
| ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. | 63 |
| ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES. | 63 |
| PART II | |
| ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES. | 64 |
| ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS. | 64 |
| ITEM 15. CONTROLS AND PROCEDURES. | 64 |
| ITEM 16. [RESERVED]. | 65 |
| ITEM 16A. AUDIT COMMITTEE AND FINANCIAL EXPERT. | 65 |
| ITEM 16B. CODE OF ETHICS. | 65 |
| ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES. | 65 |
| ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES. | 66 |
| ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS. | 66 |
| ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT. | 66 |
| ITEM 16G. CORPORATE GOVERNANCE. | 66 |
| ITEM 16H. MINE SAFETY DISCLOSURE. | 66 |
| ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS. | 66 |
| ITEM 16J INSIDER TRADING POLICIES | 66 |
| ITEM 16K CYBERSECURITY | 66 |
| PART III | |
| ITEM 17. FINANCIAL STATEMENTS. | 67 |
| ITEM 18. FINANCIAL STATEMENTS. | 67 |
| ITEM 19. EXHIBITS. | 67 |
| SIGNATURES | 69 |
| 1 |
INTRODUCTION AND USE OF CERTAIN TERMS
We have prepared this annual report on Form 20-F (this “Annual Report”) using a number of conventions, which you should consider when reading the information contained herein. In this Annual Report, the “Company,” “we,” “us,” “our” and “Arras” shall refer to Arras Minerals Corp. as the context may require. As used in this Annual Report, the terms “Mineral Resource,” “Measured Mineral Resource,” “Indicated Mineral Resource,” “Measured Mineral Resource,” and “Inferred Mineral Resource” and any grammatical variations thereof are based on the definitions of such terms set forth in Item 1300 of Regulation S-K.
The Company was incorporated under the Business Corporations Act (British Columbia) on February 5, 2021 as a wholly owned subsidiary of Silver Bull Resources, Inc. (“Silver Bull”). Arras was formed to hold Silver Bull’s interests in the Beskauga Project located in Kazakhstan. On March 19, 2021, Silver Bull transferred its Kazakh assets to the Company pursuant to the terms of an Asset Purchase Agreement (the “APA”) in exchange for the issuance of 36,000,000 common shares of the Company to Silver Bull (the “Asset Transfer”). On May 25, 2021, Silver Bull announced plans to spin off substantially all of its shares of Arras to the Silver Bull shareholders. On September 24, 2021, Silver Bull distributed approximately 34.5 million of the Company’s common shares to its shareholders by way of a special dividend, on the basis of one common share for each share of common stock in the capital of Silver Bull held by such shareholders (the “Distribution,” and together with the Asset Transfer, the “Spin-off”).
The Company publishes financial statements expressed in U.S. dollars. The Company’s consolidated financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
MARKET INFORMATION
This Annual Report contains industry and market data prepared by management on the basis of such industry sources and management’s knowledge of and experience in the industry and markets in which the Company operates (including management’s estimates and assumptions relating to such industry and markets based on that knowledge). Management has developed its knowledge of such industry and markets through its experience and participation in these markets.
| 2 |
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report uses certain statements that may be deemed to be “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the United States Private Securities Litigation Reform Act of 1995, and “forward-looking information” within the meaning of applicable Canadian securities legislation. The Company uses words such as “anticipate,” “continue,” “likely,” “estimate,” “expect,” “may,” “will,” “projection,” “should,” “believe,” “potential,” “could,” or similar words suggesting future outcomes (including negative and grammatical variations) to identify forward-looking statements. These statements include statements regarding the following, among other things:
| ● | the sufficiency of existing cash resources to enable the Company to continue operations as a going concern; |
| ● | future exploration expenditures on the Beskauga Property, the potential exercise of the Beskauga Option and potential bonus payments under the Beskauga Option Agreement; |
| ● | future payments that may be made by Teck Resources Limited (“Teck”) under the terms of the Teck Alliance Agreement; |
| ● | the prospects of entering the development or production stage with respect to any of the Company’s projects; |
| ● | planned activities at the Beskauga Project in 2024 and beyond; |
| ● | whether any part of the Beskauga Project will ever be confirmed or converted into Regulation S-K 1300-compliant “reserves”; |
| ● | the Company’s ability to obtain and hold additional concessions in the Beskauga Project area; |
| ● | the sufficiency of surface rights in respect of the Beskauga Property if a mining operation is determined to be feasible; |
| ● | the potential acquisition of additional mineral properties or property concessions; |
| ● | the impact of recent accounting pronouncements on the Company’s financial position, results of operations or cash flows and disclosures; |
| ● | the Company’s ability to raise additional capital and/or pursue additional strategic options, and the potential impact on the Company’s business, financial condition and results of operations of doing so or not; and |
| ● | the impact of changing foreign currency exchange rates on the Company’s financial condition. |
These statements are based on certain assumptions and analyses made in light of the Company’s experience and perception of historical trends, current conditions, expected future developments and other factors believed to be appropriate in the circumstances. Such statements are subject to a number of assumptions, risks and uncertainties, and actual results could differ from those expressed or implied in these forward-looking statements as a result of the risk factors discussed in more detail in this Annual Report under “Item 3. Key Information—Risk Factors,” including without limitation, risks associated with the following:
| ● | the Company’s ability to continue as a going concern as a single-project company; |
| ● | uncertainty whether the Company will be able to maintain sufficient cash to accomplish its business objectives; |
| ●; | exploration activities require significant amounts of capital that may not be recovered; |
| ● | the Company’s ability to meet current and future capital requirements on favorable terms or at all; |
| ● | risks relating to the results of future exploration at the Beskauga Property and the Company’s ability to raise the capital for exploration expenditures on the Beskauga Property to maintain the effectiveness of the Beskauga Option; |
| ● | the Company being an exploration stage mining company with no history of operations; |
| ● | the Company having no commercially mineable ore body; |
| ● | the reliability of Mineral Resource estimates; |
| 3 |
| ● | the Company’s ability to acquire additional mineral properties or property concessions; |
| ● | inherent risks in the mineral exploration industry; |
| ● | risks relating to fluctuations of metal prices; |
| ● | risks relating to competition in the mining industry; |
| ● | risks relating to the title to the Company’s properties; |
| ● | risks relating to option and joint venture agreements; |
| ● | risks associated with joint ventures; |
| ● | ability to obtain required permits; |
| ● | timing of receipt and maintenance of government approvals; |
| ● | compliance with laws is costly and may result in unexpected liabilities; |
| ● | success depends on developing and maintaining relationships with local communities and other stakeholders; |
| ● | risks relating to social and environmental activism; |
| ● | risks relating to evolving corporate governance and public disclosure regulations; |
| ● | risks relating to foreign operations; |
| ● | risks relating to worldwide economic and political events; |
| ● | risk of political and economic instability in Kazakhstan; |
| ● | the Company’s financial condition could be adversely affected by changes in currency exchange rates; |
| ● | risks relating the Company’s “foreign private issuer” status; |
| ● | risks relating to the Company’s possible status as a passive foreign investment company; |
| ● | risks relating to volatility in the Company’s share value; |
| ● | further equity financings leading to the dilution of the Company’s common shares; |
| ● | the Company’s common shares continuing not to pay dividends; |
| ● | risks relating to information systems and cybersecurity; |
| ● | the Company’s ability to retain key management, consultants and experts necessary to successfully operate and grow the business; |
| ● | overlapping officers and directors with Silver Bull may give rise to conflicts of interest; |
| ● | reliance on international advisors and consultants; |
| ● | risks relating to changes in tax laws; and |
| ● | risks relating to changes in regulatory frameworks or regulations affecting the Company’s activities. |
All forward-looking statements speak only as of the date made. All subsequent written and oral forward-looking statements attributable to the Company, or persons acting on its behalf, are expressly qualified in their entirety by the cautionary statements. Except as required by law, the Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. Readers should not place undue reliance on these forward-looking statements.
Cautionary Note Regarding Exploration Stage Companies
Arras is an exploration stage company and does
not currently have any known reserves and cannot be expected to have known reserves unless and until a feasibility study is completed
for the Beskauga Property concessions that shows proven and probable reserves. There can be no assurance that Arras’ concessions
contain proven and probable reserves or that even if such reserves are found, that the Company will be successful in economically recovering
them. Investors may lose their entire investment.
| 4 |
PART I
| ITEM 1. | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS. |
Directors and Senior Management
Not applicable.
Advisers
Not applicable.
Auditors
Not applicable.
| ITEM 2. | OFFER STATISTICS AND EXPECTED TIMETABLE. |
Not applicable.
| ITEM 3. | KEY INFORMATION. |
[Reserved]
Capitalization and Indebtedness
Not applicable.
Reasons for the Offer and Use of Proceeds
Not applicable.
Risk Factors
Readers should carefully consider the risks described below, together with all other information included in this Annual Report, in evaluating the Company and its shares. The following risk factors could adversely affect the Company’s business, financial condition, results of operations and the price of its shares.
Risks Relating to the Company
If Teck exercises its option to purchase 51% of the ownership of the designated property, Arras will no longer control the development of the designated property.
On December 7, 2023, Arras entered into the Teck Alliance Agreement (described in the “Item 4. Information on the Company”) with Teck, whereby Teck is able to obtain the option to purchase 51% to 75% of the ownership of designated property and oversee the mineral exploration of the property. If Teck exercises the option, then Arras will no longer control the development of this designated property. Teck would have the ability to control the timing and pace of future development, and its decisions may not be in the best interests of the Company and its shareholders.
| 5 |
There is substantial doubt about whether the Company can continue as a going concern.
As of October 31, 2023, Arras has earned no revenues and has incurred accumulated net losses of approximately $[13.8] million, and expects to incur additional losses in the future. In addition, the Company has limited financial resources. As of October 31, 2023, Arras had cash and cash equivalents of approximately $0.3 million and working capital deficit of approximately $134,000. The Company’s ability to continue as a going concern is dependent on raising additional capital or executing other strategic alternatives, such as the Teck Alliance Agreement, to fund exploration plans and ultimately to attain profitable operations. During the year ended October 31, 2023, Arras raised approximately $5.2 million through the issuance of its common shares. However, there is no assurance that the Company will be successful in raising additional capital. Accordingly, there is substantial doubt as to whether existing cash resources and working capital are sufficient to enable the Company to continue its operations as a going concern. Ultimately, in the event that Arras cannot obtain additional financial resources, or achieve profitable operations, it may have to liquidate its business interests and investors may lose their investment. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. Continued operations are dependent on Arras’ ability to obtain additional financial resources or generate profitable operations. Such additional financial resources may not be available or may not be available on reasonable terms. The Company’s consolidated financial statements do not include any adjustments that may result from the outcome of this uncertainty. Such adjustments could be material.
The Company may have difficulty meeting its current and future capital requirements.
Arras is required to incur cumulative exploration expenditures on the Beskauga Project of $15 million over the four-year option period in order to maintain the Beskauga Option. As of October 31, 2023, Arras has incurred approximately $9.9 million of these expenditures, with approximately $5.1 million remaining to be incurred. If the Company elects to exercise the Beskauga Option, it is required to pay an additional $15 million. In addition, Arras must have sufficient funds to pay general and administrative expenses and conduct other exploration activities. If the Company is unable to fund these amounts by way of financings, including public or private offerings of equity or debt securities, it will need to reorganize or significantly reduce its operations, which may result in an adverse impact on its business, financial condition and exploration activities. If Arras is unable to fund the amounts specified under the Beskauga Option, it may lose its ability to acquire the Beskauga Project. Arras does not have a credit, off-take or other commercial financing arrangement in place that would finance continued evaluation or development of the Beskauga Project, and the Company believes that securing credit for these projects may be difficult. Moreover, equity financing may not be available on attractive terms and, if available, will likely result in significant dilution to existing shareholders.
The Company is an exploration stage mining company with no history of operations.
Arras is an exploration stage enterprise engaged in mineral exploration in Kazakhstan. The Company was formed in 2021 and therefore has a very limited operating history and is subject to all the risks inherent in a new business enterprise. As an exploration stage company, Arras may never enter the development and production stages. To date, Arras has had no revenues and has relied upon equity financing to fund its operations. The likelihood of Arras’ success must be considered in light of the problems, expenses, difficulties, complications, and delays frequently encountered in connection with an exploration stage business, and the competitive and regulatory environment in which it operates and will operate, such as under-capitalization, personnel limitations, and limited financing sources.
| 6 |
The Company has no commercially mineable ore body.
No commercially mineable ore body has been delineated on the Beskauga Project, nor has the Beskauga Project been shown to contain proven or probable mineral reserves. Investors should not assume that the Mineral Resource estimates described in “Item 4. Information on the Company—Property, Plant and Equipment—Beskauga Project” will ever be extracted. The Company cannot assure you that any mineral deposits identified on the Beskauga Project will qualify as an ore body that can be legally and economically exploited or that any particular level of recovery of gold, copper or other minerals from discovered mineralization will in fact be realized. Most exploration projects do not result in the discovery of commercially mineable ore deposits. Even if the presence of reserves is established at a project, the legal and economic viability of the project may not justify exploitation.
Mineral Resource estimates may not be reliable.
There are numerous uncertainties inherent in estimating quantities of Mineral Resources such as gold, copper, silver and zinc, including many factors beyond Arras’ control, and no assurance can be given that the recovery of Mineral Resources will be realized. In general, estimates of Mineral Resources are based upon a number of factors and assumptions made as of the date on which the estimates were determined, including:
| ● | geological and engineering estimates that have inherent uncertainties; |
| ● | the anticipated effects of regulation by governmental agencies; |
| ● | the judgment of the geologists and engineers preparing the estimate; |
| ● | estimates of future metals prices and operating costs; |
| ● | the quality and quantity of available data; |
| ● | the interpretation of that data; and |
| ● | the accuracy of various mandated economic assumptions, all of which may vary considerably from actual results. |
All estimates are, to some degree, uncertain. For these reasons, estimates of the Mineral Resources prepared by different geologists or by the same geologists at different times may vary substantially. As such, there is significant uncertainty in any Mineral Resource estimate, and actual deposits encountered and the economic viability of a deposit may differ materially from the Company’s estimates.
Arras’ business plan is highly speculative, and its success largely depends on the successful exploration of its concessions.
Arras’ business plan is focused on exploring the Beskauga Property to identify reserves and, if appropriate, to ultimately develop the property. Although the Company has reported Mineral Resources on the Beskauga Project, it has not established any reserves and remains in the exploration stage. Arras may never enter the development or production stage. Exploration of mineralization and determination of whether the mineralization might be extracted profitably is highly speculative, and it may take a number of years until production is possible, during which time the economic viability of the project may change. Substantial expenditures are required to establish reserves, extract metals from ore and construct mining and processing facilities.
The Beskauga Project is subject to all of the risks inherent in mineral exploration and development. The economic feasibility of any mineral exploration and/or development project is based upon, among other things, estimates of the size and grade of mineral reserves, proximity to infrastructures and other resources (such as water and power), anticipated production rates, capital and operating costs, and metals prices. To advance from an exploration project to a development project, Arras will need to overcome various hurdles, including completing favorable feasibility studies, securing necessary permits, and raising significant additional capital to fund activities. There can be no assurance that Arras will be successful in overcoming these hurdles. Because of the Company’s focus on the Beskauga Project, the success of operations and profitability may be disproportionately exposed to the impact of adverse conditions unique to the Pavlodar, Kazakhstan region due to the Beskauga Project’s proximity to these locales.
| 7 |
The Company is uncertain that it will be able to maintain sufficient cash to accomplish its business objectives.
Arras is not engaged in any revenue producing activities, and does not expect to be in the near future. Currently, potential sources of funding consist of the sale of additional equity securities, entering into joint venture agreements or selling a portion of the Company’s interests in its assets. There is no assurance that any additional capital that will be required will be obtainable on acceptable terms, if at all. Failure to obtain such additional financing could result in delays or indefinite postponement of further exploration of the Company’s projects. Additional financing, if available, will likely result in substantial dilution to existing shareholders.
Exploration activities require significant amounts of capital that may not be recovered.
Mineral exploration activities are subject to many risks, including the risk that no commercially productive or extractable resources will be encountered. There can be no assurance that activities will ultimately lead to an economically feasible project or that Arras will recover all or any portion of its investment. Mineral exploration often involves unprofitable efforts, including drilling operations that ultimately do not further exploration efforts. The cost of minerals exploration is often uncertain, and cost overruns are common. Drilling and exploration operations may be curtailed, delayed or canceled as a result of numerous factors, many of which are beyond the Company’s control, including title problems, weather conditions, protests, compliance with governmental requirements, including permitting issues, and shortages or delays in the delivery of equipment and services.
Arras’ financial condition could be adversely affected by changes in currency exchange rates, especially between the U.S. dollar and the Kazakh tenge (“KZT”) and the U.S dollar and the Canadian dollar given the focus on the Beskauga Project in Kazakhstan, and the Company’s corporate office in Vancouver, Canada.
Arras’ financial condition is affected in part by currency exchange rates, as portions of exploration costs in Kazakhstan and general and administration costs in Canada are denominated in the local currency. Although many Kazakh contracts have an adjustment provision to address substantial changes in foreign currency exchange rates, a weakening U.S. dollar relative to the KZT and Canadian dollar may have the effect of increasing exploration costs and general and administration costs, while a strengthening U.S. dollar may have the effect of reducing exploration costs and general and administration costs. The exchange rates between the Canadian dollar and the U.S. dollar and between the KZT and U.S. dollar have fluctuated widely in response to international political conditions, general economic conditions and other factors beyond the Company’s control.
Success depends on developing and maintaining relationships with local communities and other stakeholders.
Arras’ ongoing and future success depends on developing and maintaining productive relationships with the communities surrounding the Company’s operations and other stakeholders in its operating locations. The Company believes that its operations can provide valuable benefits to surrounding communities, in terms of direct employment, training and skills development. In addition, Arras seeks to maintain its partnerships and relationships with local communities and stakeholders in a variety of ways, including in-kind contributions, sponsorships and donations. Notwithstanding the Company’s ongoing efforts, local communities and stakeholders can become dissatisfied with the Company’s activities or the level of benefits provided, which may result in legal or administrative proceedings, civil unrest, protests, direct action or campaigns against the Company. Any such occurrences could materially and adversely affect the Company’s financial condition, results of operations and cash flows.
| 8 |
Compliance with laws is costly and may result in unexpected liabilities.
The Company is headquartered in Vancouver, Canada and its mineral properties are located in Kazakhstan. The Company’s business operations are subject to various laws and regulations in Canada and Kazakhstan. These laws include compliance with the Extractive Sector Transparency Measures Act (Canada), which requires companies to report annually on payments made to all levels of governments both in Canada and abroad. The Company is also required to comply with anti-corruption and anti-bribery laws, including the Corruption of Foreign Public Officials Act (Canada).
The legal and regulatory requirements in Kazakhstan are different from those in Canada. The Company relies, to a great extent, on the Company’s local advisors in respect of legal, environmental compliance, banking, financing and tax matters in order to ensure compliance with material legal, regulatory and governmental developments as they pertain to and affect the Company’s operations in Kazakhstan. Despite these resources and the Company’s efforts to comply, the Company may fail to comply with a legal or regulatory requirement in Kazakhstan, which may lead to the revocation of certain rights or to penalties or fees and in enforcement actions thereunder.
The Company’s exposure to information systems and cybersecurity risks.
Arras’ information systems (including those of any of its counterparties) may be vulnerable to the increasing threat of continually evolving cybersecurity risks. Unauthorized parties may attempt to gain access to these systems or the Company’s information through fraud or other means of deception. Arras’ operations depend, in part, on how well the Company and its counterparties protect networks, equipment, information technology systems and software against damage from threats. The failure of information systems or a component of information systems could, depending on the nature of any such failure, adversely impact the Company’s reputation and results of operations. There can be no assurance that Arras or its counterparties will not incur such losses in the future. The Company’s risk and exposure to these matters cannot be fully mitigated because of, among other things, the evolving nature of these threats. As a result, cybersecurity and the continued development and enhancement of controls, processes and practices designed to protect systems, computers, software, data and networks from attack, damage or unauthorized access remain an area of attention.
The Company needs and relies upon key personnel.
Presently, Arras employs a limited number of full-time employees, utilizes outside consultants, and in large part relies on the efforts of its officers and directors. Success will depend, in part, upon the ability to attract and retain qualified employees. In particular, Arras has only three executive officers, Timothy Barry, Darren Klinck and Christopher Richards, and the loss of the services of any of these three persons could adversely affect its business.
The Company faces general risks in respect of its option and joint venture agreements.
The Company has and may continue to enter into option agreements and/or joint ventures as a means of acquiring property interests. Any failure of any partner to meet its obligations to the Company or other third parties, or any disputes with respect to third parties’ respective rights and obligations could have a material adverse effect on the Company’s rights under such agreements. Furthermore, the Company may be unable to exert direct influence over strategic decisions made in respect of properties that are subject to the terms of these agreements, and the result may be a materially adverse impact on the strategic value of the underlying mineral claims.
| 9 |
The Company is subject to specific risks associated with joint venture agreements.
The Company holds its interest in the Stepnoe and Ekidos properties through the Stepnoe and Ekidos JV Agreement (as defined below), and the Akkuduk, Nogurbek, Maisor, Elemes, Aktasty, Besshoky, Aimandai and South Bozshakol properties through the Maikain JV Agreement (as defined below). The existence or occurrence of one or more of the following circumstances and events could have a material adverse impact on the Company’s profitability or the viability of the Company’s interest in the properties, which could have a material adverse impact on the Company’s future cash flows, earnings, results of operations and financial condition:
| ● | disagreement amongst joint venture parties on how to conduct business; |
| ● | inability of joint venture parties to meet their obligations to the joint venture or third parties; |
| ● | litigation arising between joint venture shareholders; |
| ● | inability to exert influence over certain strategic decisions; |
| ● | inability of the Company to make its required contributions under the Stepnoe and Ekidos JV Agreement, which may result in dilution to the Company’s interest in the joint venture; and |
| ● | decisions under the dispute resolution provisions of the Stepnoe and Ekidos JV Agreement may not be resolved in the Company’s favor. |
The Company may expand into other geographic areas, which could increase the Company’s operational, regulatory and other risks.
While currently all of the Company’s exploration activities are in Kazakhstan, the Company may in the future expand into other geographic areas, which could increase the Company’s operational, regulatory, compliance, reputational and foreign exchange rate risks. The failure of the Company’s operating infrastructure to support such expansion could result in operational failures and regulatory fines or sanctions. Future international expansion could require the Company to incur a number of up-front expenses, including those associated with obtaining regulatory approvals, as well as additional ongoing expenses, including those associated with infrastructure, staff and regulatory compliance. The Company may not be able to successfully identify suitable acquisition and expansion opportunities, or integrate such operations successfully with the Company’s existing operations.
Risks Relating to the Mineral Exploration Industry
There are inherent risks in the mineral exploration industry.
The Company is subject to all of the risks inherent in the minerals exploration industry, including, without limitation, the following:
| ● | competition from a large number of companies, most of which are significantly larger than Arras, in the acquisition, exploration, and development of mining properties; |
| ● | Arras may not be able raise enough money to pay the fees and taxes and perform the labor necessary to maintain its concessions in good status; |
| ● | exploration for minerals is highly speculative, involves substantial risks and is frequently unproductive, even when conducted on properties known to contain significant quantities of mineralization, and the Company’s exploration projects may not result in the discovery of commercially mineable deposits of ore; |
| ● | Arras’ operations are subject to a variety of existing laws and regulations relating to exploration and development, permitting procedures, safety precautions, property reclamation, employee health and safety, air quality standards, pollution and other environmental protection controls, and it may not be able to comply with these regulations and controls; and |
| ● | a large number of factors beyond the Company’s control, including fluctuations in metal prices, inflation, and other economic conditions, will affect the economic feasibility of mining. |
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Metals prices are subject to extreme fluctuation.
Arras’ activities are influenced by the prices of commodities, including gold, copper, silver, zinc, lead and other metals. These prices fluctuate widely and are affected by numerous factors beyond the Company’s control, including interest rates, expectations for inflation, speculation, currency values (in particular, the strength of the U.S. dollar), global and regional demand, political and economic conditions and production costs in major metal-producing regions of the world.
Arras’ ability to establish reserves through its exploration activities, its future profitability and long-term viability depend, in large part, on the market prices of gold, copper, silver, zinc, lead and other metals. The market prices for these metals are volatile and are affected by numerous factors beyond the Company’s control, including:
| ● | global or regional consumption patterns; |
| ● | supply of, and demand for, gold, copper, silver, zinc and lead; |
| ● | speculative activities and producer hedging activities; |
| ● | expectations for inflation; |
| ● | political and economic conditions; and |
| ● | supply of, and demand for, consumables required for production. |
Future weakness in the global economy could increase volatility in metals prices or depress metals prices, which could in turn reduce the value of the Company’s properties, make it more difficult to raise additional capital, and make it uneconomical for it to continue exploration activities.
Future operations will require additional permits from various governmental authorities.
The Company’s operations are and will continue to be governed by laws and regulations governing prospecting, mineral exploration, exports, taxes, labor standards, occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety, mining royalties and other matters. There can be no assurance that Arras will be able to acquire all required licenses, permits or property rights on reasonable terms or in a timely manner, or at all, that such terms will not be adversely changed, that required extensions will be granted, or that the issuance of such licenses, permits or property rights will not be challenged by third parties.
Title to the Company’s properties may be challenged or defective.
Arras attempts to confirm the validity of its rights of title to, or contract rights with respect to, each mineral property in which it has a material interest. However, the Company cannot guarantee that title to its properties will not be challenged. The Beskauga Property may be subject to prior unregistered agreements, interests or native land claims, and title may be affected by undetected defects. There may be valid challenges to the title of any of the claims comprising the Beskauga Property that, if successful, could impair possible development and/or operations with respect to such properties in the future. Challenges to permits or property rights (whether successful or unsuccessful), changes to the terms of permits or property rights, or a failure to comply with the terms of any permits or property rights that have been obtained could have a material adverse effect on the Company’s business by delaying or preventing or making continued operations economically unfeasible.
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A title defect could result in Arras losing all or a portion of its right, title, and interest to and in the properties to which the title defect relates. Title insurance generally is not available, and the Company’s ability to ensure that it has obtained secure title to individual mineral properties or mining concessions may be severely constrained. In addition, Arras may be unable to operate its properties as permitted or to enforce its rights with respect to its properties. As of February 27, 2024, Arras is not aware of any challenges from the government or from third parties.
The Company is subject to complex environmental and other regulatory risks, which could expose it to significant liability and delay and potentially the suspension or termination of its exploration efforts.
Arras’ mineral exploration activities are subject to federal, state and local environmental regulations in Kazakhstan. These regulations mandate, among other things, the maintenance of air and water quality standards and land reclamation. They also set forth limitations on the generation, transportation, storage and disposal of solid and hazardous waste. No assurance can be given that environmental standards imposed by the government of Kazakhstan will not be changed, thereby possibly materially adversely affecting the Company’s proposed activities. Compliance with these environmental requirements may also necessitate significant capital outlays or may materially affect the Company’s earning power.
Environmental legislation is evolving in a manner that will require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects, and a heightened degree of responsibility for companies and their officers, directors and employees.
Future changes in environmental regulations in Kazakhstan may adversely affect Arras’ exploration activities, make them prohibitively expensive, or prohibit them altogether. Environmental hazards may exist on the properties in which the Company currently holds interests, or may hold interests in the future, that are unknown to the Company at present and that have been caused by it or previous owners or operators, or that may have occurred naturally. Arras may be liable for remediating any damage that it may have caused. The liability could include costs for removing or remediating the release and damage to natural resources, including ground water, as well as the payment of fines and penalties.
The industry is highly competitive, attractive mineral properties and property concessions are scarce, and the Company may not be able to obtain quality properties or concessions.
Arras competes with other mining and exploration companies in the acquisition of mineral properties and property concessions. There is competition for a limited number of attractive mineral property acquisition opportunities, some of which is with other companies having substantially greater financial resources, staff and facilities than Arras does. As a result, the Company may have difficulty acquiring quality mineral properties or property concessions.
The Company’s operations are subject to various hazards.
Arras is subject to risks and hazards, including environmental hazards, possible encounters with unusual or unexpected geological formations, cave-ins, flooding and earthquakes, and periodic interruptions due to inclement or hazardous weather conditions. These occurrences could result in damage to, or the destruction of, mineral properties or future production facilities, personal injury or death, environmental damage, delays in exploration activities, asset write-downs, monetary losses and possible legal liability. Arras may not be insured against all losses or liabilities, either because such insurance is unavailable or because it has elected not to purchase such insurance due to high premium costs or other reasons. Although Arras maintains insurance in an amount that it considers to be adequate, liabilities might exceed policy limits, in which event it could incur significant costs that could adversely affect its activities. The realization of any significant liabilities in connection with Arras’ activities as described above could negatively affect its activities.
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Social and environmental activism can negatively impact exploration, development and mining activities.
There is an increasing level of public concern relating to the effects of mining on the natural landscape, on communities and on the environment. Certain non-governmental organizations, public interest groups and reporting organizations (“NGOs”) who oppose resource development can be vocal critics of the mining industry. In addition, there have been many instances in which local community groups have opposed resource extraction activities, which have resulted in disruption and delays to the relevant operation. While the Company seeks to operate in a socially responsible manner and believes it has good relationships with local communities in the regions in which it operates, NGOs or local community organizations could direct adverse publicity against and/or disrupt the operations of the Company in respect of one or more of its properties, regardless of its successful compliance with social and environmental best practices, due to political factors, activities of unrelated third parties on lands in which the Company has an interest or the Company’s operations specifically. Any such actions and the resulting media coverage could have an adverse effect on the reputation and financial condition of the Company or its relationships with the communities in which it operates, which could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.
Risks Relating to Foreign Operations
There are inherent risks with foreign operations.
Arras’ business activities are primarily conducted in Kazakhstan, and as such, its activities are exposed to various levels of foreign political, economic and other risks and uncertainties. These risks and uncertainties include, but are not limited to, terrorism, hostage taking, military repression, extreme fluctuations in currency exchange rates, high rates of inflation, labor unrest, war or civil unrest, expropriation and nationalization, renegotiation or nullification of existing concessions, licenses, permits, approvals and contracts, illegal mining, changes in taxation policies, restrictions on foreign exchange and repatriation, changing political conditions, currency controls and governmental regulations that favor or require the rewarding of contracts to local contractors or require foreign contractors to employ citizens of, or purchase supplies from, a particular jurisdiction.
Changes, if any, in mining or investment policies or shifts in political attitude in Kazakhstan may adversely affect the Company’s exploration and possible future development activities. Arras may also be affected to varying degrees by government regulations with respect to, but not limited to, foreign investment, maintenance of claims, environmental legislation, land use, land claims of local people, water use and mine safety. Failure to comply strictly with applicable laws, regulations and local practices relating to mineral right applications and tenure could result in loss, reduction or expropriation of entitlements, or the imposition of additional local or foreign parties as joint venture partners with carried or other interests.
The occurrence of these various factors and uncertainties cannot be accurately predicted and could have an adverse effect on Arras’ operations. In addition, legislation in Canada or Kazakhstan regulating foreign trade, investment and taxation could have a material adverse effect on the Company’s financial condition.
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The Company faces risks as a result of operating in Kazakhstan.
The Beskauga Project is in Kazakhstan. As is typical of an emerging market, Kazakhstan’s business, legal and regulatory infrastructure has been subject to substantial political, economic and social change. Arras’ business in Kazakhstan is subject to Kazakhstan-specific laws and regulations, including with respect to tax, anti-corruption, and foreign exchange controls. Such laws are often rapidly changing and are unpredictable. The Company’s failure to manage the risks associated with doing business in Kazakhstan could have a material adverse effect upon its results of operations.
The Company’s main project is the Beskauga Project, and any adverse development affecting the Beskauga Project, including the Company’s interests, licenses and permits relating thereto, could be expected have a material adverse effect on the Company, its businesses, prospects, assets, results of operations and condition (financial or otherwise).
The Company has obtained permits from the Government of Kazakhstan that enable it to conduct exploration activities. Notwithstanding these arrangements, the Company’s ability to conduct exploration activities is subject to changes in government regulations or shifts in political attitudes over which the Company has no control.
There can be no assurance that industries deemed of national or strategic importance to Kazakhstan such as mineral production will not be nationalized. Government policy may change to discourage foreign investment, renationalization of mining industries may occur and other government limitations, restrictions or requirements not currently foreseen may be implemented. There can be no assurance that the Company’s assets in Kazakhstan will not be subject to nationalization, requisition or confiscation, whether legitimate or not, by any authority or body. Similarly the Company’s operations may be affected in varying degrees by government regulations with respect to restrictions on production, price controls, export controls, income taxes, expropriation of property, environmental legislation, mine safety and annual payments to maintain mineral properties in good standing. There can be no assurance that the laws of Kazakhstan protecting foreign investments will not be amended or abolished or that these existing laws will be enforced or interpreted to provide adequate protection against any or all of the risks detailed above. There can be no assurance that any agreements with the government of Kazakhstan will prove to be enforceable or provide adequate protection against any or all of the risks described above.
Existing contracts or licenses with respect to the Company’s operations may be subject to selective or arbitrary government action.
The Company’s contracts and licenses in Kazakhstan may be susceptible to arbitrary revision and termination. Legal redress for such actions may be uncertain, delayed or unavailable. In addition, it is often difficult to determine from governmental records whether statutory and corporate actions have been properly completed by the parties or applicable regulatory agencies. In some cases, failure to follow the actions may call into question the validity of the entity or the action taken. Examples include corporate registration or amendments, capital contributions, transfers of assets or issuances or transfers of capital stock. Ensuring the Company’s ongoing rights to mineral properties will require a careful monitoring of performance of its contracts and other licenses and monitoring the evolution of the laws and practices of Kazakhstan. Failure to comply with the terms of the necessary licenses or contracts or show compliance against official records may result in their revocation which may have an adverse effect on the Company’s operations.
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Changes in the political environment in Kazakhstan could have a material impact on the Company’s business, prospects, results of operations and financial condition.
Since Kazakhstan declared its independence in 1991 after the dissolution of the Soviet Union, Kazakhstan has had political stability as an independent nation. Yet, there is potential for social, political, economic, legal and fiscal instability. The Company cannot predict the possibility of any future changes in the political environment in Kazakhstan that would have an impact on Kazakh laws and regulations, their interpretation or enforcement, or the effect of such changes on the Company’s business, prospects, results of operations and financial condition. The risks include, among other things:
| ● | local currency devaluation; |
| ● | exchange controls or availability of hard currency; |
| ● | changes in export and transportation regulations relating to metals; |
| ● | changes in national fiscal regulations; |
| ● | changes in anti-monopoly legislation or its exercise; |
| ● | nationalization or expropriation of property; and |
| ● | interruption or blockage of the export of metals. |
There can be no assurance that changes in the political environment will not affect governmental regulation and policy.
The Company relies on international advisors and consultants.
The legal and regulatory requirements in Kazakhstan with respect to conducting mineral exploration and mining activities, banking system and controls, as well as local business culture and practices are different from those in Canada and the United States. The officers and directors of the Company must rely, to a great extent, on the Company’s local legal counsel and local consultants retained by the Company in order to keep abreast of material legal, regulatory and governmental developments as they pertain to and affect the Company’s business operations, and to assist the Company with its governmental relations. The Company must rely, to some extent, on those members of management and the Company’s board of directors (the “Arras Board”) who have previous experience working and conducting business in Kazakhstan in order to enhance its understanding of and appreciation for the local business culture and practices. The Company also relies on the advice of local experts and professionals in connection with current and new regulations that develop in respect of banking, financing, labor, litigation and tax matters in this jurisdiction. Any developments or changes in such legal, regulatory or governmental requirements or in local business practices are beyond the control of the Company. The impact of any such changes may adversely affect the business of the Company.
Risks Relating to the Company’s Common Shares
Further equity financings may lead to the dilution of the Company’s common shares.
In order to finance future operations, Arras may raise funds through the issuance of common shares or the issuance of debt instruments or other securities convertible into common shares. Arras cannot predict the size of future issuances of common shares or the size and terms of future issuances of debt instruments or other securities convertible into common shares or the effect, if any, that future issuances and sales of the Company’s securities will have on the market price of the Company’s common shares. Any transaction involving the issuance of previously authorized but unissued shares, or securities convertible into common shares, would result in dilution, possibly substantial, to present and prospective security holders. Demand for equity securities in the mining industry has been weak; therefore, equity financing may not be available on attractive terms and, if available, will likely result in significant dilution to existing shareholders.
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Arras may lose its “foreign private issuer” status in the future, which could result in additional costs and expenses.
Arras is a “foreign private issuer,” as such term is defined in Rule 405 under the Securities Act and is not subject to the same requirements that are imposed upon U.S. domestic issuers by the Securities and Exchange Commission (the “SEC”). Arras may in the future lose foreign private issuer status if a majority of its common shares are held in the United States and it fails to meet the additional requirements necessary to avoid loss of foreign private issuer status, such as if (i) a majority of its directors or executive officers are U.S. citizens or residents; (ii) a majority of its assets are located in the United States; or (iii) its business is administered principally in the United States. The regulatory and compliance costs to the Company under U.S. securities laws as a U.S. domestic issuer will be significantly more than the costs incurred as a Canadian foreign private issuer. If Arras is not a foreign private issuer, it may be required to file periodic and current reports and registration statements on U.S. domestic issuer forms with the SEC, which are generally more detailed and extensive than the forms available to a foreign private issuer. In addition, Arras may lose the ability to rely upon exemptions from corporate governance requirements that are available to foreign private issuers. Further, if Arras engages in capital raising activities after losing foreign private issuer status, there is a higher likelihood that investors may require the Company to file resale registration statements with the SEC as a condition to any such financing.
The Company is subject to risks associated with evolving corporate governance and public disclosure regulations.
The Company is subject to changing rules and regulations promulgated by the United States and Canadian governmental and self-regulated organizations, including the SEC, the CSA, any exchange or marketplace on which Arras’s securities are listed or trade, and the Financial Accounting Standards Board. These rules and regulations continue to evolve in scope and complexity making compliance more difficult and uncertain. The Company’s efforts to comply with these and other new and existing rules and regulations have resulted in, and are likely to continue to result in, increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities.
No dividends are anticipated.
At the present time, Arras does not anticipate paying dividends, cash or otherwise, on its common shares in the foreseeable future. Future dividends will depend on earnings, if any, the Company’s financial requirements and other factors. There can be no assurance that Arras will pay dividends.
The Company may be a passive foreign investment company for U.S. federal income tax purposes.
The Company may be, or could become, a passive foreign investment company within the meaning of Section 1297 of the Internal Revenue Code of 1986, as amended, which could result in certain potentially adverse U.S. federal income tax consequences to certain U.S. taxpayers with respect to such taxpayer’s ownership and disposition of the Company’s common shares.
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| ITEM 4. | INFORMATION ON THE COMPANY. |
Business Overview
Arras is an exploration stage company, engaged in the business of mineral exploration. The Company’s exploration is focused on discovering and delineating Mineral Resources at the Company’s material property, the Beskauga Project (as defined below), which is comprised of three contiguous licenses located in Kazakhstan. Arras has not realized any revenues. The Company has not established any reserves with respect to its exploration projects and may never enter into the development stage with respect to any of its projects.
Organizational Structure
The Company was incorporated under the Business Corporations Act (British Columbia) on February 5, 2021 as a wholly owned subsidiary of Silver Bull. Arras was formed to hold Silver Bull’s interests in the Beskauga Project located in Kazakhstan. On March 19, 2021, Silver Bull transferred its Kazakh assets to the Company pursuant to the terms of the APA in exchange for the issuance of 36,000,000 common shares of the Company to Silver Bull. The transferred assets included an option agreement with respect to the Beskauga Property (as defined below), a joint venture agreement with respect to the Stepnoe and Ekidos properties (the “Stepnoe and Ekidos JV Agreement”) and loans payable by Ekidos Minerals LLP (“Ekidos LLP”) to Silver Bull. On September 24, 2021, Silver Bull distributed approximately 34.5 million of its common shares issued to its shareholders by way of a special dividend, on the basis of one common share for each share of common stock in the capital of Silver Bull held by such shareholders. Upon completion of the Spin-off, Silver Bull retained an approximately 4% ownership interest in Arras. As of October 31, 2022, Silver Bull no longer had any ownership interest in Arras. On February 3, 2022, the Company purchased 100% of the issued and outstanding shares of Ekidos LLP, and Ekidos LLP became a wholly owned subsidiary of the Company.
On February 10, 2023, Arras Metals Ltd. (“Arras Metals”) was incorporated at Astana International Financial Centre in Astana, Republic of Kazakhstan, as a wholly owned subsidiary of the Company, for the purpose of holding mineral exploration investments.
History and Development of the Company
The Spin-off
On February 5, 2021, the Company was incorporated under the Business Corporations Act (British Columbia) as a wholly owned subsidiary of Silver Bull. Arras was formed to hold Silver Bull’s interests in the Beskauga Project located in Kazakhstan. On March 19, 2021, Silver Bull transferred its Kazakh assets to the Company pursuant to the terms of the APA in exchange for the issuance of 36,000,000 common shares of the Company to Silver Bull. The transferred assets included an option agreement with respect to the Beskauga Property, a joint venture agreement with respect to the Stepnoe and Ekidos properties and loans payable by Ekidos LLP to Silver Bull. On May 25, 2021, Silver Bull announced plans to spin off substantially all of its shares of Arras to the Silver Bull shareholders. On September 24, 2021, Silver Bull distributed approximately 34.5 million of the Company’s common shares to its shareholders by way of a special dividend, on the basis of one common share for each share of common stock in the capital of Silver Bull held by such shareholders.
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Beskauga Option Agreement
Pursuant to the APA, Silver Bull transferred its interest in an option agreement (the “Beskauga Option Agreement”) among Silver Bull, Copperbelt AG (“Copperbelt”) and Dostyk LLP (“Dostyk,” and together with Copperbelt, “CB”) to Arras.
Silver Bull entered into the Beskauga Option Agreement on August 12, 2020. Upon the execution of the Beskauga Option Agreement, Silver Bull paid Copperbelt $30,000. In addition, Silver Bull paid Copperbelt $40,000 upon completion of its due diligence on the Beskauga Project on January 26, 2021 (the “Option Closing Date”).
Pursuant to the Beskauga Option Agreement, Arras has the exclusive right and option (the “Beskauga Option”) to acquire CB’s right, title and 100% interest in the Beskauga property located in Kazakhstan (the “Beskauga Property”), which consists of the Beskauga Main project (the “Beskauga Main Project”) and the Beskauga South project (the “Beskauga South Project,” and together the Beskauga Main Project, the “Beskauga Project”).
The Beskauga Option Agreement provides that subject to its terms and conditions, in order to maintain the effectiveness of the Beskauga Option, the Company must have incurred $2,000,000 in cumulative exploration expenditures on the Beskauga Project by January 26, 2022 (the first anniversary of the Option Closing Date), $5,000,000 in cumulative exploration expenditures on the Beskauga Project by January 26, 2023 (the second anniversary of the Option Closing Date), $10,000,000 in cumulative exploration expenditures on the Beskauga Project by January 26, 2024 (the third anniversary of the Option Closing Date), and $15,000,000 in cumulative exploration expenditures on the Beskauga Project by January 26, 2025 (the fourth anniversary of the Option Closing Date) (collectively, the “Exploration Expenditures”).
As of October 31, 2023, approximately $9.9 million of the required Exploration Expenditures have been incurred under the Beskauga Option Agreement. The Company expects to finance additional Exploration Expenditures through proceeds from issuances of equity securities of the Company. See “Risk Factors—Risks Relating to the Company—the Company may have difficulty meeting its current and future capital requirements.”
The Beskauga Option Agreement provides that, subject to its terms and conditions, after the Company or its affiliate has incurred the Exploration Expenditures, the Company or its affiliate may exercise the Beskauga Option and acquire (i) the Beskauga Project by paying CB $15,000,000 in cash, (ii) only the Beskauga Main Project by paying CB $13,500,000 in cash, or (iii) only the Beskauga South Project by paying CB $1,500,000 in cash.
In addition, the Beskauga Option Agreement provides that subject to its terms and conditions, the Company or its affiliate may be obligated to make the following bonus payments (collectively, the “Bonus Payments”) to Copperbelt if the Beskauga Main Project or the Beskauga South Project is the subject of a bankable feasibility study in compliance with National Instrument 43-101 – Standards of Disclosure for Mineral Projects of the Canadian Securities Administrators (“National Instrument 43-101”) indicating gold equivalent resources in the amounts set forth below, with (i) (A) 20% of the Bonus Payments payable after completion of the bankable feasibility study or after the Mineral Resource statement is finally determined and (B) the remaining 80% of the Bonus Payments due within 15 business days of commencement of on-site construction of a mine for the Beskauga Main Project or the Beskauga South Project, as applicable, and (ii) up to 50% of the Bonus Payments payable in shares of Silver Bull common to be valued at the 20-day volume-weighted average trading price of the shares on the TSX calculated as of the date immediately preceding the date such shares are issued:
| Gold equivalent resources | Cumulative Bonus Payments ($) |
| Beskauga Main Project | |
| 3,000,000 ounces | $2,000,000 |
| 5,000,000 ounces | $6,000,000 |
| 7,000,000 ounces | $12,000,000 |
| 10,000,000 ounces | $20,000,000 |
| Beskauga South Project | |
| 2,000,000 ounces | $2,000,000 |
| 3,000,000 ounces | $5,000,000 |
| 4,000,000 ounces | $8,000,000 |
| 5,000,000 ounces | $12,000,000 |
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Pursuant to the Beskauga Option Agreement, the bankable feasibility study (i) must be a detailed report in compliance with National Instrument 43-101, in form and substance sufficient for presentation to arm’s length institutional lenders considering project financing, showing the feasibility of placing any part of the Beskauga Property into commercial production as a mine, and (ii) must include a reasonable assessment of the various categories of mineral reserves and their amenability to metallurgical treatment, a complete description of the work, equipment and supplies required to bring such part of the Beskauga Property into commercial production and the estimated cost thereof, a description of the mining methods to be employed and a financial appraisal of the proposed operations. As noted above, the feasibility study must be prepared in compliance with National Instrument 43-101 and the accompanying definition of “feasibility study” prescribed by the Canadian Institute of Mining, Metallurgy and Petroleum. The definition is substantially similar to the definition of “feasibility study” provided in Item 1300 of Regulation S-K.
The Beskauga Option Agreement may be terminated under certain circumstances, including (i) upon the mutual written agreement of the Company and CB; (ii) upon the delivery of written notice by the Company, provided that at the time of delivery of such notice, unless there has been a material breach of a representation or warranty given by CB that has not been cured, the Beskauga Property is in good standing; or (iii) if there is a material breach by a party of its obligations under the Beskauga Option Agreement and the other party has provided written notice of such material breach, which is incapable of being cured or remains uncured.
Stepnoe and Ekidos JV Agreement
Additionally, in connection with the Spin-off and pursuant to the APA, Silver Bull transferred its interest in the Stepnoe and Ekidos JV Agreement to Arras.
On September 1, 2020, Silver Bull entered into the Stepnoe and Ekidos JV Agreement in connection with, among other things, mineral license applications (the “Stepnoe and Ekidos Licenses”) for, and further exploration and evaluation of certain properties, including the Stepnoe and Ekidos properties located in Kazakhstan. The exploration licenses for the Stepnoe and Ekidos properties were granted on October 22, 2020.
Pursuant to the Stepnoe and Ekidos JV Agreement, Ekidos LLP was incorporated on behalf of Copperbelt for the purpose of applying for the Stepnoe and Ekidos Licenses with the funding previously provided by Silver Bull. Pursuant to the terms of the Stepnoe and Ekidos JV Agreement and in connection with the Asset Transfer, 100% of the equity interests in Ekidos LLP were acquired by the Company on February 3, 2022.
The Company (through Ekidos LLP) and Copperbelt have initial participating interests in the joint venture of 80% and 20%, respectively. Pursuant to the Stepnoe and Ekidos JV Agreement, once the Company spends a minimum of $3,000,000 on either the Stepnoe or Ekidos property, the Company has the option to acquire Copperbelt’s participating interest in such property for $1,500,000. As of October 31, 2023, approximately $1,219,000 of the required expenditures have been incurred under the Stepnoe and Ekidos JV Agreement.
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The Stepnoe and Ekidos JV Agreement shall terminate automatically upon there being one participant in the joint venture, or by written agreement between the parties.
On November 11, 2023, the Stepnoe and Ekidos JV Agreement was amended to allow for financing and third- party support of exploration and development activities on some or all of the JV licenses.
Maikain JV Agreement
On May 20, 2021, Ekidos LLP entered into the Maikain Joint Venture Agreement (the “Maikain JV Agreement”) with Orogen LLP, a company incorporated under the laws of Kazakhstan, in connection with, among other things, mineral license applications for, and further exploration and evaluation of, certain properties in an area of interest, including the Akkuduk, Nogurbek, Maisor, Elemes, Aktasty, Besshoky, Aimandai and South Bozshakol properties located in Kazakhstan. The following exploration licenses have been granted for an initial six-year period, with the possibility of a five-year extension.
| Property | Exploration License | Grant Date |
| Akkuduk | 1178-EL | February 2, 2021 |
| Nogurbek | 1413-EL | August 20, 2021 |
| Maisor | 1471-EL | October 22, 2021 |
| Elemes | 1555-EL | January 14, 2022 |
| Aktasty | 1675-EL | March 18, 2022 |
| Besshoky | 1819-EL | August 15, 2022 |
| Aimandai | 1840-EL | September 23, 2022 |
| South Bozshakol | 1866-EL | October 22, 2022 |
The Company (through Ekidos LLP) and Orogen LLP have initial participating interests in the Maikain joint venture of 80% and 20%, respectively. Pursuant to the Maikain JV Agreement, once the Company spends a minimum of $3,000,000 on a property in the area of interest, the Company has the option to acquire Orogen LLP’s participating interest in such property for $1,500,000. As of October 31, 2023, approximately $1,534,000 of the required expenditures have been incurred.
The Maikain JV Agreement shall terminate automatically upon the earlier of (i) there being one participant in the joint venture, (ii) by written agreement between the parties, or (iii) May 20, 2024.
On November 11, 2023, the Maikain JV Agreement was amended to accommodate the Teck Alliance Agreement to allow for third-party financing and support of exploration and development activities on some or all of the JV licenses. The amended agreement also clarifies that the Maikain JV Agreement shall not terminate and will continue in full force and effect with respect to any mineral licenses held by or on behalf of the Maikain joint venture as of the date of expiry (May 20, 2024).
Teck Alliance Agreement
On December 7, 2023. the Company entered into the Teck Alliance Agreement with Teck and received $1.5 million cash, primarily for the reimbursement of certain related expenses made by the Company prior to the Teck Alliance Agreement until December 31, 2023. Upon the terms and subject to the conditions set forth in the Teck Alliance Agreement, in order for Teck to earn and maintain its option, Teck must have contributed for the exploration expenditure of $5 million for two licenses packages totaling approximately 1,736 square kilometers located in Pavlodar, Kazakhstan before December 31, 2025 (the “Initial Exploration Period”). Of this, $2 million is a firm commitment to be completed in calendar year 2024. Funding is made on a quarterly basis based on the subsequent quarter’s exploration budget. The following exploration licenses are included in the Teck Alliance Agreement and have been granted for an initial six-year period, with the possibility of a five-year extension.
| Property | Exploration License | Grant Date |
| Akkuduk | 1178-EL | February 2, 2021 |
| Nogurbek | 1413-EL | August 20, 2021 |
| Maisor | 1471-EL | October 22, 2021 |
| Elemes | 1555-EL | January 14, 2022 |
| Aktasty | 1675-EL | March 18, 2022 |
| Besshoky | 1819-EL | August 15, 2022 |
| South Bozshakol | 1866-EL | October 22, 2022 |
| Azhe-1 | 2207-EL | October 23, 2023 |
| Karatol-1 | Application Pending | NA |
| Karatol-3 | 2367-EL | January 10, 2024 |
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On the completion of the Initial Exploration Period, Teck may exercise an option in the Teck Alliance Agreement by selecting up to four designated properties up to 120 square kilometers each. Teck must have paid $500,000 for each designated property to the Company as an additional reimbursement for the previously invested exploration expenditure.
Teck will have three options to earn and maintain its option:
| ● | “First Option”: Teck may elect to solely fund $5.5 million over the next two years ($2.5 million committed in Year 1) and on completion will be deemed to own 51% of the designated property, |
| ● | “Second Option”: Teck may elect to solely fund $18 million over the next three years ($5 million committed in Year 1) to earn an additional 14% (total of 65%) of the designated property, |
| ● | “Third Option”: Teck may elect to solely fund $24 million over four years ($6 million committed in Year 1) to earn an additional 10% (total of 75%) of the designated property. |
If Teck elects not to continue with the Teck Alliance Agreement before December 31, 2025, the licenses will remain 100% owned by the Company. The exploration programs will be initially managed by the Company, with Teck being able to approve the exploration program funded by it. Thereafter, Teck will have the right to assume the role of manager. If the Teck Alliance Agreement is terminated by Teck without cause at the Initial Exploration Period, the Company is under no obligation to reimburse Teck for amounts contributed under the Teck Alliance Agreement. On February 9, 2024, the Company has received a second payment of $626,000 from Teck pursuant to the Teck Alliance Agreement to fund the alliance exploration activities for the first calendar quarter of 2024.
Financings and Issuances of the Company’s Securities
On November 10, 2022, Arras entered into a series of substantially similar subscription agreements (each, a “November 2022 Subscription Agreement”) pursuant to which Arras issued and sold to certain investors an aggregate of 15,938,250 Arras common shares at a price of CDN$0.45 per share, for gross proceeds of CDN$7,172,213. The private placement included subscriptions from certain members of the board of directors and management team (and their respective affiliates) of Arras for an aggregate of 331,000 Arras common shares (CDN$148,950). All Arras common shares issued in the private placement were subject to a hold period under applicable Canadian securities laws, which expired on March 20, 2023. The Company relied on the exemption from registration under Section 4(a)(2) of the Securities Act, or Rule 506 of Regulation D, or Regulation S, for purposes of the private placement.
See also “Item 6. Directors, Senior Management and Employees—Compensation” and “Item 6. Directors, Senior Management and Employees—Share Ownership—Compensation Plans—Arras Minerals Corp. Equity Incentive Plan” for other issuances of securities of Arras under its equity incentive plan.
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Property, Plant and Equipment
Beskauga Project
Location, Access and Infrastructure
The Beskauga Project is located in the Pavlodar Region of northeastern Kazakhstan, approximately 300 km from the Kazakhstan capital, Astana, approximately 70 kilometers southwest of the city of Pavlodar (population of approximately 330,000), and approximately 65 kilometers east of the town of Ekibastuz (population of approximately 125,000). There is an international airport at Astana. Access to the project area is via sealed road from Pavlodar.
The property comprises three licenses, the Beskauga mineral license (40 square kilometers) in the center of the property, which has been the subject of all work carried out thus far, and the Stepnoe (371 square kilometers) and Ekidos (252 square kilometers) mineral exploration licenses.
The region has sufficient infrastructure to host large-scale mining operations and is a sophisticated transportation and communication node with a local economy dominated by activity in the mining and industrial sectors. Some 40% of all of Kazakhstan’s power-generating capacity comes from the region, which contains six power stations, three of which are in Pavlodar. Fresh water is supplied to the area from the Irtysh River/Karaganda Canal, and there is a large, well-trained labor force to draw upon for any future mining activities.
The map below shows the location of the Beskauga Project:
Property History, Title and Ownership Rights
The Beskauga deposit was discovered by a regional shallow drilling program conducted during the Soviet-era in the 1980s. Dostyk maintained minerals rights for the Beskauga deposit based on License No. 785 (series MG) dated January 8, 1996, and a series of subsequent contracts and addendums as per the Republic of Kazakhstan legislation.
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On May 27, 2023, the government of Kazakhstan agreed to convert the Beskauga exploration contract to an exploration license under the current Kazakh mining code. On August 8, 2023, exploration license 2092-EL was granted until February 8, 2024, with the option to renew for an additional five-year period. On November 3, 2023, the exploration license 2092-EL was renewed until February 8, 2029.
Geology and Mineralization
The Beskauga Project is located in northeastern Kazakhstan, an area underlain by the rocks of the Altaid tectonic collage or Central Asian Orogenic Belt (CAOB), an extensive Palaeozoic subduction–accretion complex made up of fragments of sedimentary basins, island arcs, accretionary wedges and tectonically bounded terranes that was progressively developed from the late Neoproterozoic Era, through the Palaeozoic Era to the early Mesozoic Era, and which extends eastwards into Russia, Mongolia and China as the Transbaikal–Mongolian orogenic collage. These tectonic collages contain several major porphyry copper-gold/molybdenum and epithermal gold deposits formed over an extensive period from the Ordovician to the Jurassic and associated with the various magmatic arcs.
Beskauga is thought to be located in the lower Boshchekul–Chingiz volcanic arc, part of the Kipchak arc system. Island-arc volcanism was calc-alkaline in nature, evolving from are more sodic chemistry to more potassic in later stages and formed small hypabyssal intrusive bodies of gabbro, diorites, granodiorite and sodic granite. These intrusives are responsible for the formation of the copper-gold porphyry deposits in the region.
Beskauga is a copper-gold porphyry deposit with elevated grades of molybdenum and silver. The Beskauga Project area is predominantly underlain by sedimentary and volcanogenic-sedimentary rocks of Ordovician age. These have been intruded by small stock-like intrusive bodies of porphyry ranging in composition from granodiorite to quartz diorite to gabbro-diorite, also interpreted to be Ordovician in age. Dikes of diorite porphyry, diabase and graniteporphyry also cut the host sequence. The host rocks are hornfelsed proximal to intrusive contacts. The deposit area is covered by 10–40 meters of younger sediments of upper Eocene and Quaternary age.
The Beskauga Main porphyry-style copper-gold mineralization is largely hosted within granodiorite porphyry, whereas the Beskauga South gold mineralization is hosted within diorite porphyry and may represent an epithermal overprint. The diorite is interpreted to cut and postdate the granodiorite. Diabase is also interpreted to cut granodiorite. Intrusive relationships and timing relative to mineralization have not been clearly established.
Porphyry-style mineralization is hosted in granodiorite and plagiogranite intrusions that have elongated sheet-like shapes, often with offshoots. Mineralized zones are affected by stockwork veining and hydrothermal alteration and dip steeply. Alteration is represented by albitization, sericitization and pyritization, with the most intensive alteration at a depth of 250–500 meters. Tourmaline has also been described. Potassic alteration is described from mineralogical work. Sericite-pyrophyllite-quartz alteration and silicification in steeply dipping alteration zones is also described, indicating a degree of epithermal overprint.
Pyrite and chalcopyrite are the dominant sulphide minerals at Beskauga, with smaller amounts of bornite, chalcocite, tennantite, enargite, and molybdenite, with magnetite and hematite also described. Sulphides occur as fine-grained disseminations as well as in stockwork veins and veinlets, consisting of quartz-carbonate, quartz-carbonate-chlorite, and quartz-pyrite.
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Mineral Resource Estimate
The Company retained Archer, Cathro & Associates (1981) Limited (“Archer Cathro”) to prepare an independent technical report summary on the Beskauga Project dated February 27, 2024 (the “Technical Report Summary”). The purpose of the Technical Report Summary is to support the disclosure of Mineral Resource estimates for the Beskauga Project. The Technical Report Summary conforms to SEC Modernized Property Disclosure Requirements for Mining Registrants as described in Item 1300 of Regulation S-K, Disclosure by Registrants Engaged in Mining Operations (“S-K 1300”) and Item 601(b)(96) (Technical report summary) of Regulation S-K.
To demonstrate potential of the Beskauga deposit for eventual economic extraction, a preliminary pit optimization study was completed. The pit optimisation was carried out using the mining module of the Studio NPVS software application using the Lerch-Grossman algorithm.
The Mineral Resource estimate has been reported for all blocks in the resource model that are contained within the pit and have a gross metal value (“GMV”) exceeding $20/tonne. The GMV was calculated using base-case metal prices and recoveries for copper, gold, and silver.
The entire Mineral Resource estimate has reasonable prospects for eventual economic extraction, and is a realistic inventory of mineralization, which, under assumed and justifiable technical and economic conditions, might, in whole or in part, become economically extractable.
Mineral Resources were classified in accordance with Item 1302(d)(1)(iii)(A) of Regulation S-K into Indicated and Inferred Mineral Resources. The classification is based upon an assessment of geological and mineralization continuity and quality assurance/quality control (“QAQC”) results, considering the level of geological understanding of the deposit, and specific requirements concerning the minimum number of samples and minimum number of drillholes used for grade interpolation for each block as carried out for each search pass. The classification of the Mineral Resources takes into account all uncertainties related to geological interpretation, mineralization continuity and geostatistical analysis, sampling method and sample and data security, drill sample control and quality, data quality and reliability, density, and topographic reliability.
In the Qualified Person’s opinion, further drilling and evaluation work is expected to improve classification of the Mineral Resource and provide better resolution of technical and economic factors that are likely to influence the prospect of economic extraction.
Beskauga Deposit—Summary of Copper, Silver and Gold Mineral Resources as of October 31, 2023
based on a GMV cut-off that uses three-year trailing prices to December 27 2021 of $3.50/pound for copper, $22.00/ounce for silver and $1,750/ounce for gold
| Category | Tonnage (Mt) | Cu (%) | Au (g/t) | Ag (g/t) |
| Indicated Mineral Resources | 111.2 | 0.30 | 0.49 | 1.34 |
| Inferred Mineral Resources | 92.6 | 0.24 | 0.50 | 1.14 |
Notes:
| ● | A GMV $/t cut-off of $20/t was used, and the GMV formula is: GMV $/t = Au(grams)*74.5%*$56.26+ Cu(tonnes)*85%*$7.714 + Ag(grams)*50%*$0.71 |
| ● | Base metal prices considered were $3.50/lb copper, $22.00/oz silver, and $1,750/oz gold. |
| ● | The Mineral Resource is stated within a pit shell using the base-case metal prices. |
| ● | S-K 1300 definitions were followed for the Mineral Resource. |
| ● | The Mineral Resource is not believed to be materially affected by any known environmental, permitting, legal, title, taxation, socio-economic, marketing, political or other relevant factors. |
| ● | These Mineral Resources are not Mineral Reserves as they do not have demonstrated economic viability. |
| ● | The quantity and grade of reported Inferred Resources in this Mineral Resource estimate are uncertain in nature and there has been insufficient exploration to define these Inferred Resources as Indicated or Measured; however, it is reasonably expected that the majority of Inferred Mineral Resources could be upgraded to Indicated Mineral Resources with continued exploration. | |
| ● | See also pages 12 and 13 of the Technical Report Summary (filed as Exhibit 15.3) to this Annual Report on Form 20-F for the material assumptions and criteria for the Mineral Resource estimates. |
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Sample Preparation, Analyses and Security
Sample preparation was carried out at the Dostyk facility in Ekibastuz. Half-core samples were dried, weighed, and crushed and screened to −2 millimeters, and a ~1 kilogram split was milled to 200 mesh fineness (−90 µm). Milled pulps were split and sent to the Stewart Assay and Environmental Laboratory (“SAEL”) in Kara-Balta, Kyrgyzstan for analysis. All equipment used for sample crushing and milling was cleaned and blown with compressed air after each sample, and after each batch of samples a clean blank material was passed though the equipment. The sample preparation area was subject to compulsory wet cleaning once a day. The split core and crushed duplicate sample are stored in the specifically equipped sample storage facility in Ekibastuz, which can be locked and has on-site security.
SAEL has been utilized by Dostyk as the primary laboratory since 2007. SAEL is internationally accredited and independent of Dostyk. Umpire assays were carried out at Genalysis Laboratory in Perth, Australia (“Genalysis”). At both SAEL and Genalysis, samples were analyzed for gold using fire assay (“FA”) with an atomic absorption spectrometry (“AAS”) finish. A 30 gram bead was used in the FA process. A further 33 elements were determined by an aqua regia digest followed by inductively coupled plasma-optical emission spectrometry (ICP-OES) measurement of elemental concentrations.
QAQC samples comprised certified reference materials (“CRMs”), blanks, duplicates, and umpire assays. CRMs used were OREAS 209, OREAS 501b, OREAS 502b, OREAS 503b, and OREAS 54Pa. A total of 187 gold CRMs and 124 copper CRMs were analyzed, representing 0.52% and 0.34%, respectively, of the 36,271 samples in the database, below the recommended amount of 5% of CRMs. A total of 318 blank samples (0.9% of all samples) were submitted for analysis. Of all the blank material sampled, the majority had below detection or very low values reported, indicating that there is very little contamination overall. In 2013, 97 pulp duplicates were submitted for re-assay, and the results show relatively good repeatability. However, this only represents one year and 0.27% of all samples, and no core duplicates have been submitted; this represents a significant gap in QAQC.
External control check assays at Genalysis were completed on 966 samples (2.7% of all assays), and results show relatively good repeatability and similar distribution for gold and copper, although there is a slight positive bias towards the original results, especially for the copper grades.
It is the Qualified Person’s opinion that sample preparation and analyses were done in line with industry standards and are satisfactory. Although the number of CRM, duplicate, and blank samples are lower than what is considered standard, the quality of assays is considered to be adequate to be used for the Mineral Resource estimate.
Exploration Program - Beskauga
Arras commenced an exploration program in the second calendar quarter of 2021 on the Beskauga Property, which commenced after the date of the Technical Report Summary. This involved a geological mapping and sampling program of key select areas, as well as a diamond drilling program targeting extensions to the known mineralization. The exploration program’s design was determined based on historical geological information in the area and an airborne geophysics program that was completed in April 2021.
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Final geophysical products for the airborne magnetic survey were received in July 2021 and confirmed a 300m x 300m “bulls-eye” magnetic high that had been previously identified with a ground magnetic survey completed in 2012. A lower magnetic response surrounds the bulls-eye magnetic high which is interpreted to be an alteration halo around an intrusion. The Beskauga deposit sits on the eastern margin of the interpreted intrusion and the alteration halo. Only 30% of this margin has been tested with the drill.
From the commencement of the project’s exploration program in the second calendar quarter of 2021 to December 31, 2023, approximately 25,000 meters of diamond drilling has been completed.
In 2024, the exploration program at the Beskauga Property will encompass a continuation of geological mapping and sampling, alongside additional diamond drilling. This program’s blueprint draws upon Arras’ 2023 findings, as well as historical geological data from other firms and various geophysical surveys. Its objective is to enhance the current resource and explore the broader, undrilled area.
The program will feature a 5,000-meter exploration drill initiative to comprehensively examine Beskauga’s mineralizing system. It will also involve gathering multi-element litho-geochemical and hyperspectral data from historical pulps and drill cores, along with ongoing relogging of selected drill cores. Furthermore, the program includes follow-up investigations on regional targets using geophysics and prospect drilling within the Beskauga license area.
A key aim of the 2024 program is to determine Arras' decision regarding the potential purchase of the Beskauga license from Copperbelt AG.
Overall, the 2024 program aims to deepen the Company’s understanding of the deposit architecture and support the development of an enhanced three-dimensional (3D) geological model, crucial for guiding additional metallurgical sampling and other objectives. The outlined activities are slated for completion by December 31, 2024.
Apart from the Beskauga license, Arras holds additional regional mineral exploration licenses (Elemes, Aimandai, Stepnoe and Ekidos), all targeting the same geological belt hosting the Beskauga deposit. These areas are early-stage greenfield projects. The 2024 work program builds upon activities from the preceding year and includes:
| ● | Compilation of historical Soviet data on these areas to glean insights into their geology, mineralization, and exploration prospects. |
| ● | Follow-up mapping and prospecting to identify rock types, structures, and other geological features, alongside systematic searches for mineralization. |
| ● | Targeting areas with suitable soil horizons through soil grids to detect anomalies indicative of mineralization. |
| ● | Conducting targeted geophysics and prospect drilling in prospective areas to confirm and delineate mineralization. |
Furthermore, on December 7, 2023, Arras announced a strategic alliance with Teck, encompassing eight additional licenses controlled by Arras (Azhe 1, Karatol 2, Bozshakol South, Maisor, Aktasty, Nogurbek, Akkuduk, and Besshoky). Key aspects of this alliance include Teck’s funding of generative exploration work through 2025, with Arras acting as manager initially. The exploration program with Teck largely mirrors that of Arras’ regional licenses, focusing on compiling historical data, mapping, prospecting, soil grid targeting, geophysics, and prospect drilling.
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The location of all licenses mentioned are shown in the map below.
Figure 1. Map showing Arras’s mineral license situation. Package A and Package B fall under the Strategic Alliance agreement with Teck Resources. Elemes, Aimandai, Stepnoe, and Ekidos are licenses controlled by Arras. The Beskauga license is controlled by Arras via an option to purchase agreement with the Swiss private company Copperbelt AG.
Capital Expenditures
As the Company’s activities are at the exploration stage, minimal capital expenditures are required. Minor costs have been incurred in setting up the program infrastructure, such as a vehicle, computers, tools and equipment being used by the Company’s geologists in Kazakhstan. No major capital expenditures are anticipated in the coming year.
Seasonality
The Company’s mineral exploration activities may be subject to seasonality due to adverse weather conditions including, without limitation, inclement weather, frozen ground and restricted access due to snow, ice or other weather-related factors. In addition, the mining and mineral exploration business is subject to global economic cycles effecting, among other things, the marketability and price of mineral products in the global marketplace.
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Competition
The mineral exploration and mining industry is competitive in all phases of exploration, development and production. The Company competes with a number of other entities and individuals in the search for and the acquisition of attractive mineral properties. As a result of this competition, the Company may not be able to acquire attractive properties in the future on terms it considers acceptable. The Company may also encounter competition from other mining companies in efforts to hire experienced mining professionals. Increased competition could adversely affect the Company’s ability to attract necessary funding or acquire suitable properties or prospects for mineral exploration in the future. See “Risk Factors—Risks Relating to the Mineral Exploration Industry.”
Social and Environmental Policies
The Company is committed to conducting its operations in accordance with sound social and environmental practices. At present, the scale of operations has not required the adoption of formal policies. The Company will re-evaluate this position if and when necessary.
The Company is subject to the laws and regulations relating to environmental matters in all jurisdictions in which it operates, including provisions relating to property reclamation, discharge of hazardous materials and other matters. The Company may also be held liable should environmental problems be discovered that were caused by former owners and operators of its properties. The Company conducts its mineral exploration activities in compliance with applicable environmental protection legislation.
Employees
As of the date hereof, the Company has two employees. The Company also relies on consultants and contractors to carry on its business activities and, in particular, to supervise and carry out mineral exploration on the Beskauga Property.
Corporate Offices
The Company is domiciled in Canada and its registered office is located at Suite 2600, Three Bentall Centre, 595 Burrard Street, Vancouver, British Columbia V7X 1L3, Canada. The principal executive offices are located at 777 Dunsmuir Street, Suite 1605, Vancouver, British Columbia V7Y 1K4, Canada, and the Company’s telephone number is (604) 687-5800.
Available Information
The SEC maintains an Internet website that contains reports and other information about issuers, like Arras, that file electronically with the SEC. The address of that website is www.sec.gov.
Regulatory Overview
Kazakhstan Mining Law
Kazakhstan has recently updated its mining code and since 2018 all new licenses are issued under this code. The new mining code, the Code on Subsoil and Subsoil Use (the “SSU Code”) was adopted on June 29, 2018 and is based on the Western Australian model. Under the SSU Code, Kazakhstan transferred from a contractual regime to a licensing regime for solid minerals (except for uranium, which remains under a contractual regime). The purpose has been to boost investment in exploration and mining in Kazakhstan and remove administrative burdens for subsoil users. The mining industry in Kazakhstan accounts for about 14% of gross domestic product and more than 20% of exports and is seen as a key industry.
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Under the Kazakhstan Constitution, the subsoil is owned by the state. In regulating the mining sector, the state is represented by the competent authority, the Ministry of Industry and Infrastructural Development (“MIID”), which is authorized to grant and terminate subsoil use rights (“SURs”) and control compliance obligations related to SURs. Under the SSU Code, SURs are granted under subsoil use licenses, either for exploration or mining. Under the previous regime, SURs were granted under contracts for the right of exploration, mining, or combined exploration and mining.
Exploration licenses are granted for up to six years with the possibility of an extension for five more years and provide an exclusive right to use the subsoil for the purpose of exploration and for assessment of resources and reserves for subsequent mining. If a deposit is discovered, the exploration license holder has an exclusive right to obtain a mining license if the discovery is confirmed by a report on estimation of resources and reserves of solid minerals. The SSU Code entitles subsoil users to estimate resources and reserves under the KAZRC standard, which is aligned with the CRIRSCO, JORC and CIM reporting codes.
The SSU Code is the principal law regulating the mining sector, with detail provided by a number of government decrees and ministerial orders. Mining of precious metals is also affected by the Law on Precious Metals and Precious Stones (the “Precious Metals Law”) under which the Kazakhstan National Bank can exercise a priority right to buy fine gold at international prices.
Ecological Requirements
The Environmental Code of the Republic of Kazakhstan came into force on July 1, 2021. The Environmental Code provides for the following mechanisms for economic regulation of environmental protection:
| ● | fees for impact on the environment, the rates of which are established by tax legislation; |
| ● | market-based mechanisms for managing emissions into the environment, which include setting limits on emissions into the environment, allocating quotas for emissions into the environment, trading in quotas and commitments to reduce emissions into the environment; |
| ● | environmental insurance, the purpose of which is to ensure the civil liability of a person to compensate for environmental damage caused by an accident; and |
| ● | economic stimulation of activities aimed at environmental protection (establishment of incentives for renewable energy sources, promotion of “green” technologies, etc.). |
The most important features of the Environmental Code that affect exploration and mining of solid minerals are as follows.
The Environmental Code provides that impacts of the planned activity must be evaluated either in a mandatory environmental impact assessment or mandatory screening of the impacts of the planned activity. The screening is a process of identifying potential significant environmental impacts, to determine whether an environmental impact assessment (“EIA”) is necessary or not.
An EIA is mandatory for open-pit mining of solid minerals on an area of more than 25 hectares and primary processing (concentrating) of extracted solid minerals. A screening is mandatory for (i) exploration for solid minerals, which is associated with the extraction of rock mass and soil movement for the purpose of assessing solid mineral resources, (ii) open pit mining on an area of less than 25 hectares, and (iii) underground mining. In certain cases, the authorized body can decide based on the screening results that the full EIA is necessary for the planned activity.
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For those projects that must undergo an EIA, the next step after the EIA is preparation of the potential impact report (“Potential Impact Report”), which based on the results of the EIA. The Potential Impact Report:
| ● | must be considered by the public at a public hearing, with the participation of representatives of state bodies and the public; and |
| ● | is subject to expert examination at the authorized body special commission for expert examination. |
Based on the results of the expert examination, the authorized body issues an opinion on the draft Potential Impact Report (valid for three years).
The conclusions and conditions contained in the Potential Impact Report must be taken into account by state bodies when issuing environmental permits, accepting notifications and during the course of administrative procedures related to the implementation of the planned activities.
The Environmental Code provides for the following types of environmental permits:
| ● | integrated environmental permits; and |
| ● | environmental impact permits. |
An integrated environmental permit is required for facilities of Category I (these include facilities related to the production and processing of solid minerals) with the exception of those facilities of Category I, which were commissioned before July 1, 2021, or facilities a positive conclusion for construction of which was obtained by July 1, 2021. The requirement for the mandatory obtaining an integrated environmental permit comes into force on January 1, 2025. The integrated environmental permit is valid indefinitely.
An environmental impact permit is required for the construction and/or operation of facilities of Category II (these include facilities used in the exploration of solid minerals with the extraction of rock mass and movement of soil for the purpose of assessing the resources of solid minerals), as well as for the operation of facilities of Category I indicated above.
Environmental impact permits are issued for a period not exceeding ten years.
Another important matter is regulation of waste management. There is a hierarchy of measures to be applied in the management of mining waste:
| ● | prevention of waste generation; |
| ● | preparation of waste for re-use; |
| ● | waste processing; |
| ● | waste recycling; and |
| ● | waste disposal. |
Thus, depending on which technological solutions are applied by Arras during exploration and further mining of solid minerals, it will be necessary to comply with the following environmental requirements:
| ● | conducting the screening and/or environmental impact assessment of the planned production activity (including passing environmental impact assessment); and |
| ● | obtaining environmental permit(s). |
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Water Use
The use of surface and underground water resources with or without withdrawal for drinking, household and project needs, as well as the discharge of industrial, domestic, drainage and other wastewater (“special water use”) is carried out on the basis of special water use permits.
One of the types of special water use is its use in injection wells to maintain the reservoir pressure of underground leaching during the production of solid minerals. Special water use also includes the discharge of groundwater (mine, quarry, mine), incidentally taken during the exploration and/or production of solid minerals into surface water bodies, subsoil, water facilities or terrain.
A permit for special water use is not required for:
| ● | the use of the following water intake structures: mine and tubular filter wells and capturing structures operating without forced lowering of the level with the withdrawal of water in all cases no more than 50 cubic meters per day from the first aquifer from the surface not used for centralized water supply; or |
| ● | intake (pumping out) of underground waters (pit, quarry, mine), incidentally taken during the exploration and/or production of solid minerals. |
Payment for special water use is determined by tax legislation.
During exploration and mining operations, Arras may be required to obtain a special water use permit depending on what use of water resources is planned.
Land Use Regulations
During the Exploration Stage
All issues related to obtaining land for exploration and production of solid minerals are governed by the Land Code dated June 20, 2003.
Mineral exploration operations can be carried out on state-owned land that is not provided for land use, on the basis of a public easement. Also, subsoil users have a right to carry out the exploration of mineral operations on land plots in private ownership or land use, on the basis of a private or public easement, without the seizure of land plots from private owners or land users.
A subsoil user conducting exploration operations is entitled to demand that an owner or land user grant it the right to limited use of these areas (i.e., a private servitude).
A public easement is formalized by decisions of local executive bodies on the basis of a relevant subsoil use license or subsoil use contract.
A private easement is established by an agreement on the establishment of a private easement concluded between the subsoil user and the owner or land user. If no agreement is reached on the terms of such an agreement, the terms of the private easement must be determined by the court.
A license for the extraction of solid minerals serves as a basis for the local government body to grant the subsoil user the right to temporary paid land use (i.e., a lease) to a land plot (for the entire period of validity of the license or contract).
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Beskauga Project
Arras’s Beskauga Project consists of three licenses: the Beskauga license, which was re-issued under the current SSU Code in August 2023, and extended until February 8, 2029; and the Ekidos and Stepnoe licenses, which were issued under the SSU Code in October 2020. The Beskauga license is held by Dostyk, a Kazakh entity 100% owned by Copperbelt, a private mineral exploration company registered in Switzerland with which Arras has an option agreement.
Beskauga License
Dostyk maintains minerals rights for the Beskauga deposit based on Exploration License No. 2092-EL dated November 3, 2023, with a license term ending on February 8, 2029.
The subsoil right for the Beskauga area was initially acquired by Goldbelt Resources Ltd in 1996 as part of a much larger License No. 785 (Mykubinsk), issued to its 80% subsidiary, Dostyk, under the old permitting system. In 2000, Goldbelt Resources Ltd sold its interest in Dostyk to Celtic Resources, a London-listed company.
Exploration rights under License No. 785 including Beskauga were re-issued to Dostyk in October 2001 as Contract No. 759 for the Maikuben area. No drilling at the Beskauga deposit was conducted by Goldbelt Resources Ltd or Celtic Resources.
Via its option agreement with Copperbelt, Arras has acquired the right to explore for “All Minerals” (except uranium) on the remaining Dostyk license including the Beskauga deposit. The present contract set forth its validity period as until the last day of validity of License MG No. 785, January 8, 2021, with an ability to extend until the full depletion of resources.
On February 8, 2021, the MIID granted an extension of the exploration rights to Dostyk until February 8, 2024.
On May 27, 2023, MIID agreed to convert the Beskauga exploration contract to an exploration license under the current SSU Code. On August 8, 2023, exploration license 2092-EL was granted until February 8, 2024, with the option to renew for an additional five-year period. On November 3, 2023, exploration license 2092-EL was renewed until February 8, 2029.
Other Exploration Licenses
Ekidos LLP holds twelve exploration licenses. All licenses were applied for under the SSU Code. Under the code, the licenses are granted for “All Minerals” (except uranium) for an initial six-year period. The licenses can be extended once for an additional five years.
An annual exploration commitment for each license is calculated based on the number of 2.1 km2 “blocks” contained within the license. The exploration commitment for each block is calculated based on a “minimum wage index” (MRP) by the Kazakh State which is then multiplied by the index established by the SSU Code. The rates vary slightly from year to year due to changing MRP indices, but the annual expenditure commitment for 2023 for the exploration licenses were calculated via a formula outlined in the SSU Code. It is not expected that the annual exploration commitment cost will materially vary over the first three years.
In addition to the annual exploration commitment costs, there is an annual “land lease” fee, which is calculated using the formula “15MRP x No. of blocks.”
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The annual expenditure commitment in a given year can be covered by expenditure accrued over the years where the exploration expenditure exceeds the calculated commitment amount. The annual expenditure commitment can be reduced by ceding ground.
The map below shows the location of the Company’s exploration properties, including in relation to the Beskauga Property and the Stepnoe and Ekidos properties:
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The Company (through Ekidos LLP) and Orogen LLP have initial participating interests in the Maikain joint venture of 80% and 20%, respectively. Pursuant to the Maikain JV Agreement, once the Company spends a minimum of $3,000,000 on a property in the area of interest, the Company has the option to acquire Orogen LLP’s participating interest in such property for $1,500,000.
The Maikain JV Agreement shall terminate automatically upon the earlier of (i) there being one participant in the joint venture, (ii) by written agreement between the parties, or (iii) May 20, 2024.
On November 11, 2023, the Maikain JV Agreement was amended to accommodate the Teck Alliance Agreement to allow for third-party financing and support of exploration and development activities on some or all of the JV licenses. The amended agreement also clarifies that the Maikain JV Agreement shall not terminate and will continue in full force and effect with respect to any mineral licenses held by or on behalf of the Maikain joint venture as of the date of expiry (May 20, 2024). For sake of clarity, new licenses acquired subsequent to May 20, 2024 will not fall under the Maikain JV Agreement.
The exploration licenses sit in the same Ordovician aged belt of rocks as the Beskauga deposit and are considered highly prospective for porphyry and volcanogenic massive sulphide (VMS) deposits. Historical Soviet reports from between 1965 and 1970 describe a program of mapping and sampling in the area.
Tax Code
In late-2017, Kazakhstan announced substantial changes to its Tax Code (the “Tax Code”) effective as of January 2018, with a mix of generally applicable changes and measures targeted at mining. The new Tax Code includes specific mineral taxation provisions and lists special taxes imposed on subsoil use in addition to such general taxes as the corporate income tax and value added tax, as well as import- and export-related taxes. Notably, several taxes and payments applicable to the mining sector have been removed from the new Tax Code, including the excess profit tax, historical cost payments, and the requirement to pay a commercial discovery bonus.
These reforms are aligned with the SSU Code which will require geological data to be published after a specified period.
Environmental Code
Kazakhstan’s Environmental Code (the “Environmental Code”) was introduced in 2007 and was followed by various changes to the country’s environmental legislation, including the adoption of the Law on Supporting the Use of Renewable Sources of Energy in 2009 and the Law on Energy Saving and Energy Efficiency in 2012. Water resources and related matters are also discussed in separate water legislation. The new Environmental Code took effect on July 1, 2021.
The SSU Code requires subsoil users’ compliance with all relevant environmental legislation.
The Environmental Code separately obliges companies to perform an environmental impact assessment which is reviewed by “the competent environmental authorities” and, in the case of high-risk operations, by the Ministry of Ecology, Geology and Natural Resources. Extending the assessment to involve an initial environmental screening could be considered, as within the current framework the assessment takes place only once the project plans are well advanced.
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An environmental permit is available for subsoil operators in Kazakhstan, setting out limits for emissions of pollutants according to a set of emission limit values (“ELVs”). The new Environmental Code refers to the permit which allows operators to legally emit pollutants into the environment within certain limits. The complex mechanisms of calculating ELVs involve a large number of different pollutants, creating challenges for operators seeking to comply with ELVs even through the application of best available techniques (BATs) for managing emissions. The ELVs also form the basis of environmental taxes for an operator, but these and other taxation issues are not covered by the new SSU Code and instead addressed in the Tax Code.
The Spin-off
Since the completion of the Spin-off on September 24, 2021, Arras has operated as a stand-alone company. Prior to completion of the Spin-off, on August 31, 2021, Arras entered into a Separation and Distribution Agreement with Silver Bull. The Separation and Distribution Agreement set forth the Company’s agreements with Silver Bull regarding in connection with the Distribution and providing a framework for the relationship between the parties after the Distribution.
Pursuant to the Separation and Distribution Agreement, Silver Bull agreed to continue to incur the salaries of its employees and other office-related overhead costs and charge Arras for a portion of these costs on a pro-rata cost-recovery basis until the earlier of (i) the date on which our common shares are listed on a stock exchange or (ii) December 31, 2021. In February 2022, the Company entered into an employment or consulting agreement, effective January 1, 2022, with each member of the senior management team. See “Item 6. Directors, Senior Management and Employees—Compensation—Directors and Senior Management—Employment Agreements with Senior Management” for a description of those agreements.
Pursuant to the Separation and Distribution Agreement, Silver Bull, may, in its sole discretion, offer holders of outstanding Silver Bull warrants who exercise them after the Distribution the right to receive, instead of solely Silver Bull shares, one Silver Bull share and one Arras common share in exchange for the original exercise price, subject to compliance with applicable securities laws. If Silver Bull makes such an offer, then (i) Arras must issue Arras common shares to the holders of Silver Bull warrants who elected to accept such offer and (ii) Silver Bull must remit to Arras a portion of the aggregate cash warrant exercise price received by Silver Bull.
These and other arrangements between Silver Bull and the Company are described in greater detail under “Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions.”
| ITEM 4A. | UNRESOLVED STAFF COMMENTS. |
Not applicable.
| ITEM 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS. |
Operating Results
For the year ended October 31, 2023, the Company had a net loss of $5,717,894 compared to a net loss of $5,945,556 for the year ended October 31, 2022.
Liquidity and Capital Resources
As of October 31, 2023, the Company had cash and cash equivalents of $290,684, as compared to cash and cash equivalents of $424,124 as of October 31, 2022. The decrease in liquidity was primarily the result of the exploration activities in Kazakhstan and general and administrative expenses, which were partially offset by the proceeds of the following private placements.
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From November 10, 2022 to December 16, 2022, the Company completed a series of tranches of a private placement, issuing a total of 15,938,250 common shares at a price of $CDN 0.45 per common share for gross proceeds of $CDN 7,172,213 ($5,340,350). The Company paid finder’s fees totaling $CDN 84,432 ($61,629) to agents with respect to certain purchasers who were introduced to the Company. The Company incurred other offering costs associated with this private placement in the amount of $43,749.
As of October 31, 2023, the Company has earned no revenues and has incurred accumulated net losses of approximately $13.8 million. The Company’s ability to continue as a going concern is dependent on raising additional capital to fund the Company’s exploration plans and ultimately to attain profitable operations. Management plans to pursue possible financing options, including but not limited to obtaining additional equity financing or executing other strategic alternatives, such as the Teck Alliance Agreement. However, there is no assurance that the Company will be successful in pursuing these plans.
As future additional financing in the near term will likely be in the form of proceeds from issuances of equity securities, it is likely that there will be dilution to the Company’s existing shareholders. Moreover, Arras may incur fees and expenses in the pursuit of such financings, which will increase the rate at which its cash and cash equivalents are depleted.
Research and Development, Patents and Licenses, Etc.
Not applicable.
Trend Information
Please see “Item 5. Operating and Financial Review and Prospects—Operating Results” for trend information.
Critical Accounting Estimates
Not applicable.
Safe Harbor
This Annual Report contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act and as defined in the Private Securities Litigation Reform Act of 1995. See “Cautionary Statement Regarding Forward-Looking Statements.”
| ITEM 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES. |
Directors and Senior Management
Board of Directors
The Arras Board is comprised of five seats, two of which are filled by current members of the Silver Bull Board. A majority of the members of the Arras Board are independent based on applicable Canadian securities laws and non-U.S. persons.
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The following table sets forth certain summary information in respect of the current directors of the Company.
|
Name and |
Position(s)/title |
Date first |
Principal occupation(s) |
| Brian D. Edgar Vancouver, British Columbia |
Chairman | February 5, 2021 | Corporate Director |
| Timothy T. Barry Squamish, British Columbia |
Director and Chief Executive Officer | February 5, 2021 | President (February 5, 2021–October 1, 2021) and Chief Executive Officer (since February 5, 2021) of Arras; and Chief Executive Officer of Silver Bull (a mining company) (since 2011). |
| Darren E. Klinck, Vancouver, British Columbia | Director and President | October 1, 2021 | President, Arras (since October 1, 2021); President, Silver Bull (a mining company) (October 1, 2021–April 2023); and President (August 2017–April 2021) and Chief Executive Officer (August 2017–January 2020) of Bluestone Resources Inc. |
| G. Wesley Carson Vancouver, British Columbia |
Director | April 1, 2021 | Vice President, Mining Operations at Wheaton Precious Metals Corp. (since 2017); and Vice President, Project Development at Sabina Gold & Silver Corp. (from 2012 to 2017). |
| Daniel J. Kunz Boise, Idaho |
Director | April 1, 2021 | President and Chief Executive Officer of Prime Mining Corp. (a mining company) (since June 2020); and Managing Member of Daniel Kunz & Associates, LLC (an advisory and engineering services company) (since 2014). |
| Vera Kobalia New Westminster, British Columbia |
Director | March 2, 2022 | Founder, Kobalia Consulting (a firm advising public and private sector leaders, including local and federal governments) (since 2013); and Co-founder, Olyn Inc. (an asset registry service) (since 2020). |
| Christian Milau Vancouver, British Columbia |
Director | September 8, 2022 | Chief Executive Officer of Blue Dot Carbon Corp. (since September 2022); and Chief Executive Officer of Equinox Gold Corp. (from August 2016 to August 2022). |
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Brian D. Edgar
Mr. Edgar has served as Chairman of Arras since its inception on February 5, 2021 and as Chairman of the Silver Bull Board since April 2010. Mr. Edgar has broad experience working in junior and mid-size natural resource companies. He served as Dome’s President and Chief Executive Officer from February 2005 to April 2010, when Dome was acquired by Silver Bull. Further, Mr. Edgar served as a director of Dome (1998–2010), Lundin Mining Corp. (September 1994 – May 2015), Lucara Diamond Corp. (2007–May 2020), BlackPearl Resources Inc. (2006–December 2018), and ShaMaran Petroleum Corp. (2007–June 2019). He has served as a director of Denison Mines Corp. since 2005 and of numerous public resource companies over the last 30 years. Mr. Edgar practiced corporate/securities law in Vancouver, British Columbia, Canada for 16 years.
Timothy T. Barry
Mr. Barry has served as President (February 5, 2021–October 1, 2021) and Chief Executive Officer (since February 5, 2021) of Arras and as President (2011–October 1, 2021 and since April 21, 2023), Chief Executive Officer and a director and (since March 2011) of Silver Bull. Since October 2021, he has served as a director of Torrent Gold Inc. From August 2010 to March 2011, he served as Silver Bull’s Vice President – Exploration. Between 2006 and August 2010, Mr. Barry spent five years working as Chief Geologist in West and Central Africa for Dome. During this time, he managed all aspects of Dome’s exploration programs and oversaw corporate compliance for Dome’s various subsidiaries. Mr. Barry also served on Dome’s board of directors. In 2005, he worked as a project geologist in Mongolia for Entree Gold, a company that has a significant stake in the Oyu Tolgoi mine in Mongolia. Between 1998 and 2005, Mr. Barry worked as an exploration geologist for Ross River Minerals Inc. on its El Pulpo copper/gold project in Sinaloa, Mexico, for Canabrava Diamonds Corporation on its exploration programs in the James Bay lowlands in Ontario, Canada, and for Homestake Mining Company on its Plutonic Gold Mine in Western Australia. He has also worked as a mapping geologist for the Geological Survey of Canada in the Coast Mountains, and as a research assistant at the University of British Columbia, where he examined the potential of CO2 sequestration in Canada using ultramafic rocks. Mr. Barry received a bachelor of science degree from the University of Otago in Dundein, New Zealand and is a Chartered Professional Geologist (CPAusIMM).
Darren E. Klinck
Mr. Klinck has served as President of Arras since October 1, 2021. He most recently served as President of Silver Bull (October 1, 2021–April 21, 2023) and as President (August 2017–April 2021) and Chief Executive Officer (August 2017–January 2020) of Bluestone Resources Inc. From April 2007 to June 2017, he served in numerous roles at OceanaGold Corporation, including Executive Vice President and Head of Corporate Development, Head of Business Development, and Vice President of Corporate and Investor Relations. Mr. Klinck has served as a director of ValOre Metals Corp. since June 1, 2021. In addition, he served as a director of Bluestone Resources Inc. from August 2017 to April 2021. Mr. Klinck has a Bachelor of Commerce degree from the Haskayne School of Business at The University of Calgary.
G. Wesley Carson
Mr. Carson, BASc., P.Eng., has over 20 years of experience in the mining industry and has held a variety of leadership roles in operations, project development and engineering with both junior and major mining companies, including multiple M&A integrations. Since June 2017, he has been the Vice President, Mining Operations at Wheaton Precious Metals Corp. From June 2012 to June 2017, Mr. Carson was the Vice President – Project Development with Sabina Gold & Silver Corp. He also worked with Thompson Creek Metals Company Inc. as Vice President and General Manager for the Mt. Milligan project in Central British Columbia from October 2010 to February 2012, and for Terrane Metals Corp. as its Director, Mining from November 2007 to November 2010. Prior to this, he worked for Cominco Ltd., Teck Corporation, Placer Dome Inc. and Barrick Gold Corporation in a variety of operating roles in both North America and Africa. Mr. Carson received his Bachelor of Applied Science, Mining and Mineral Process Engineering at the University of British Columbia, and is a registered Professional Engineer in the Province of British Columbia.
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Daniel J. Kunz
Mr. Kunz has more than 35 years of experience in international mining, energy, engineering and construction, including in executive, business development, management, accounting, finance and operations roles. He has served as a member of the Silver Bull Board since April 2011. In June 2020, he was appointed President and Chief Executive Officer of Prime Mining Corp., serving in this role until his retirement in January 2024. Since 2014, he has been the managing member of Daniel Kunz & Associates, LLC, an advisory and engineering services company focused on the natural resources sector. From 2013 to 2018, he was the Chairman and Chief Executive Officer of Gold Torrent, Inc., a mine development company. In addition, Mr. Kunz is the founder, and from 2003 until he retired in April 2013 was the President and Chief Executive Officer and a director, of U.S. Geothermal, Inc., a renewable energy company that owns and operates geothermal power plants in Idaho, Oregon, and Nevada and was sold to Ormat Technologies, Inc. in 2018. Mr. Kunz was Senior Vice President and Chief Operating Officer of Ivanhoe Mines Ltd. from 1997 to October 2000, and served as its President and Chief Executive Officer and as a director from November 2000 to March 2003. He was part of the team that discovered Oyu Tolgoi, one of the world’s largest copper-gold deposits. From March 2003 to March 2004, Mr. Kunz served as President and Chief Executive Officer of China Gold International Resources Corp. Ltd. and served as a director from March 2003 to October 2009. Mr. Kunz was a founder of MK Resources LLC, formerly known as the NASDAQ-listed company MK Gold Corporation, and directed the company’s 1993 initial public offering as the President and Chief Executive Officer and a director. For 17 years, he held executive positions with NYSE-listed Morrison Knudsen Corporation (including Vice President and Controller). Mr. Kunz holds a Masters of Business Administration and a Bachelor of Science in Engineering Science. He is currently a director of Torrent Gold Inc., Prime Mining Corp., and Greenbriar Capital Corp.
Vera Kobalia
Ms. Kobalia is founder of Kobalia Consulting, a private consultancy advising public and private sector leaders around the world since 2013. Clients have included local and federal governments of Australia, Kazakhstan, Philippines, United Arab Emirates, Indonesia and United Kingdom. She is also co-founder of Olyn Inc., a blockchain based solution for asset registry. Ms. Kobalia previously was Deputy Chair of the Board of the Astana Expo 2017 National Company, which was responsible for the management and construction of associated facilities and infrastructure for the International Exposition held in Astana, Kazakhstan in 2017. Ms. Kobalia served as Advisor to the President of Georgia in 2012-2013 and was Minister of Economy and Sustainable Development for the Republic of Georgia in 2010-2012.
Ms. Kobalia is currently a visiting lecturer at the European Academy of Diplomacy (Warsaw, Poland); a member of the Economic Development Advisory Committee for the City of New Westminster (British Columbia, Canada); and a member of the Board of Directors for Sandstorm Gold (TSX: SSL). Ms. Kobalia was recognized as one of Business in Vancouver’s “Top 40 Under 40” award winners in 2019 and is a frequent speaker at various international forums including the World Economic Forum, where she was a Board Member on the Global Council for Development Finance in 2018-2019.
She is fluent in English, Russian and Georgian and frequently speaks on public policy issues, fighting corruption in public and private institutions, sustainable development as economic growth tool and women leadership at international conferences and forums, including the Council of Europe’s World Forum for Democracy, the World Economic Forum, the Warsaw Security Forum and the International Transport Forum.
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Christian Milau
Mr. Milau has been the CEO of Blue Dot Carbon Corp since September 2022. He was the CEO of Equinox Gold (NYSE:EQX) from August 2016 to August 2022, leading the company through five mergers and acquisitions to grow the company from a single-asset developer to a multi-asset producer. Prior to joining Equinox Gold, Mr. Milau was the CEO of True Gold until it was acquired in April 2016. Prior to True Gold, he held senior executive positions at Endeavour Mining, New Gold, BNP Paribas in London and Deloitte. He has served as a director of Northern Dynasty Minerals Ltd. since 2016. Mr. Milau brings more than 25 years of experience to Arras with expertise in finance and capital markets as well as operational, government and stakeholder relations experience.
Public Company Directorships
The following directors currently serve on the board of directors of the public companies set out below:
|
Name |
Public company directorship(s) |
| Brian D. Edgar | Denison Mines Corp. and Silver Bull |
| Timothy T. Barry | Silver Bull and Torrent Gold Inc. |
| Darren E. Klinck | ValOre Metals Corp. |
| G. Wesley Carson | Prosper Gold Corp. |
| Daniel J. Kunz | Greenbriar Capital Corp., Prime Mining Corp. and Torrent Gold Inc. |
| Vera Kobalia | Sandstorm Gold Ltd. |
| Christian Milau | Northern Dynasty Minerals Ltd. |
Senior Management
The following table sets forth certain summary information in respect of the Company’s senior management as of the date of this Annual Report.
|
Name and |
Position(s)/title |
Principal occupation(s) |
| Timothy T. Barry Squamish, British Columbia |
Chief Executive Officer | President (February 5, 2021–October 1, 2021 and since April 21, 2023) and Chief Executive Officer (since February 5, 2021) of Arras; and Chief Executive Officer of Silver Bull (a mining company) (since 2011). |
| Darren E. Klinck Vancouver, British Columbia |
President | President, Arras (since October 1, 2021); President, Silver Bull (a mining company) (October 1, 2021–April 21, 2023); President (August 2017–April 2021) and Chief Executive Officer (August 2017–January 2020) of Bluestone Resources Inc. |
| Christopher Richards Vancouver, British Columbia |
Chief Financial Officer | Chief Financial Officer of Silver Bull (a mining company) (since September 2020); Vice President of Finance for Great Panther Mining Limited (a mining company) (from June 2018 until February 2020); self-employed senior financial consultant (January 2017 until May 2018). |
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Timothy T. Barry, Chief Executive Officer
See “—Directors and Senior Management—Board of Directors” above.
Darren E. Klinck, President
See “—Directors and Senior Management—Board of Directors” above.
Christopher Richards, Chief Financial Officer
Mr. Richards was appointed as Silver Bull’s Chief Financial Officer effective as of September 28, 2020. Previously, Mr. Richards served as the Vice President of Finance for Great Panther Mining Limited, a U.S. and Canadian dual-listed gold and silver producer, from June 2018 to February 2020. From January 2017 to May 2018, he was self-employed as a senior financial consultant, advising public and private companies in the mining and natural resources industries. Prior to that, Mr. Richards served as the Vice President of Finance and Corporate Secretary (December 2013–December 2016) and Group Controller (April 2009–November 2013) of Kyzyl Gold Ltd., a wholly owned subsidiary of Polymetal International plc, engaged in the development of the Kyzyl Gold Mine located in Kazakhstan. From July 2015 to October 2016, he served as the Chief Financial Officer of TSX Venture Exchange-listed True North Gems Inc. Earlier in his career, Mr. Richards served as the Corporate Controller of U.S. and Canadian dual-listed NovaGold Resources Inc. and as a Senior Manager of Audit for KPMG LLP. He is a CPA (Chartered Professional Accountant, British Columbia), CA, and received a Bachelor of Business Administration degree from Simon Fraser University in 2000 and a certificate in mining studies from the University of British Columbia in 2014.
Arrangements Concerning Election of Directors; Family Relationships
The Company is not a party to, and are not aware of, any arrangements pursuant to which any of its senior management members or directors was selected as such. In addition, there are no family relationships among the Company’s senior management members or directors.
Compensation
Directors and Senior Management
Compensation Expenses for the Year Ended October 31, 2023
Salary and related benefits ($) | Non-Equity Incentive Plan compensation ($) | Share-based compensation ($)(1) | Total ($) | |||||||||||||
| Timothy Barry, CEO and Director | 231,542 | 27,698 | 85,159 | 344,399 | ||||||||||||
| Darren Klinck, President and Director | 231,542 | 27,698 | 85,159 | 344,399 | ||||||||||||
| Christopher Richards, CFO | 139,067 | 16,619 | 51,095 | 206,781 | ||||||||||||
| Brian Edgar, Chairmana nd Director | 44,370 | nil | nil | 44,370 | ||||||||||||
| Wesley Carson, Director | 20,336 | nil | nil | 20,336 | ||||||||||||
| Daniel Kunz, Director | 20,336 | nil | nil | 20,336 | ||||||||||||
| Vera Kobalia, Director | 18,487 | nil | nil | 18,487 | ||||||||||||
| Christian Milau, Director | 22,185 | nil | nil | 22,185 | ||||||||||||
| Total | $ | 727,865 | $ | 72,015 | $ | 221,413 | $ | 1,021,293 | ||||||||
| (1) | In accordance with IFRS, this is the estimated grant date fair value of each restricted share unit (“RSU”) granted during the period. |
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Employment Agreements with Senior Management
In February 2022, the Company entered into an employment or consulting agreement, effective January 1, 2022, with each member of the senior management team.
Timothy T. Barry
In February 2022, the Company entered into a consulting agreement (the “Barry Consulting Agreement”) with Mr. Barry, pursuant to which Mr. Barry serves as the Chief Executive Officer of the Company. Pursuant to the terms and conditions of the Barry Consulting Agreement, Mr. Barry received an annual fee of CDN$300,000 (the “Barry Consulting Fee”) and is eligible to participate in the Company’s annual bonus plans during the term of the Barry Consulting Agreement, with a bonus target of up to 50% of the annual fee, or a target determined by the Arras Board. Effective January 1, 2023, the annual fee was revised to CDN$315,000.
In addition, Mr. Barry is eligible to participate in the Company’s Management Retention Bonus Plan. In the event that the Barry Consulting Agreement is terminated by the Company without cause or by Mr. Barry for “good reason” (as defined in the Barry Consulting Agreement), Mr. Barry is entitled to 12 months of the Barry Consulting Fee plus one month of the Barry Consulting Fee for each additional year of service from February 9, 2022, up to a maximum of 24 months of the Barry Consulting Fee plus a payment equal to a pro-rated portion of the annual cash bonus. If the Company terminates the Barry Consulting Agreement without cause within three months following a “change of control” (as defined in the Barry Consulting Agreement), Mr. Barry is entitled to 24 months of the Barry Consulting Fee plus a lump-sum payment equal to two times the annual cash bonus (such payment, the “Barry Change of Control Payment”). In addition, Mr. Barry has the right to terminate the Barry Consulting Agreement for any reason within six months following a “change of control” and receive the Barry Change of Control Payment from the Company. In addition, upon any termination pursuant to which Mr. Barry receives any of the termination of Barry Change of Control Payments described above, Mr. Barry is further entitled to continued benefits provided under the Company’s insured standard benefit plan for a period of 12 months following such termination.
Darren E. Klinck
In February 2022, the Company entered into an amended consulting agreement (the “Westcott Consulting Agreement”) with Mr. Klinck’s personal service corporation, Westcott Management Ltd. (“Westcott”), pursuant to which Mr. Klinck serves as the President of the Company. Pursuant to the terms and conditions of the Westcott Consulting Agreement, Westcott received an annual fee of CDN$300,000 (the “Westcott Consulting Fee”) and is eligible to participate in the Company’s annual bonus plans during the term of the Westcott Consulting Agreement, with a bonus target of up to 50% of the annual fee, or a target determined by the Arras Board. Effective January 1, 2023, the annual fee was revised to CDN$315,000.
In addition, Wescott is entitled to the following retention amounts, subject to the Company reaching the applicable market capitalization targets by April 15, 2027: (i) CDN$500,000 if and when the Company’s market capitalization reaches at least CDN$250,000,000 for five consecutive trading days, (ii) CDN$500,000 if and when the Company’s market capitalization reaches at least CDN$500,000,000 for five consecutive trading days, and (iii) CDN$1,000,000 if and when the Company’s market capitalization reaches at least CDN$1,000,000,000 for five consecutive trading days (collectively, the “Retention Bonus”). In the event that the Company undergoes a “change of control” (as defined in the Westcott Consulting Agreement) and the Company’s market capitalization at any point prior to such a “change in control” equals or exceeds CDN$250,000,000, Wescott will be entitled to a retention bonus equal to 0.2% of the applicable bid price less any Retention Bonus previously paid to Wescott.
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In the event that the Westcott Consulting Agreement is terminated by the Company without cause or by Wescott for “good reason” (as defined in the Westcott Consulting Agreement), Wescott is entitled to 12 months of the Westcott Consulting Fee plus one month of the Westcott Consulting Fee for each additional year of service from October 1, 2021, up to a maximum of 24 months of the Westcott Consulting Fee plus a payment equal to a pro-rated portion of the annual cash bonus. If the Company terminates the Westcott Consulting Agreement without cause within three months following a “change of control,” Wescott is entitled to 24 months of the Westcott Consulting Fee plus a lump-sum payment equal to two times the annual cash bonus (such payment, the “Westcott Change of Control Payment”). In addition, Wescott has the right to terminate the Westcott Consulting Agreement for any reason within six months following a “change of control” and receive the Westcott Change of Control Payment from the Company. In addition, upon any termination pursuant to which Wescott receives any of the termination of Westcott Change of Control Payments described above, Wescott is further entitled to continued benefits provided under the Company’s insured standard benefit plan for a period of 12 months following such termination.
Christopher Richards
In February 2022, the Company and Silver Bull entered into an amended employment agreement (the “Richards Employment Agreement”) with Mr. Richards, pursuant to which he serves at the Company’s and Silver Bull’s Chief Financial Officer. The Richards Employment Agreement provided for a base salary of CDN$240,000. Of this annual salary, the Company was responsible for CDN$180,000 (the “Company Base Salary”), with Silver Bull paying the remaining CDN$60,000. Mr. Richards is eligible to participate in the Company’s annual bonus plan with a target bonus of up to 50% of the Company Base Salary. Mr. Richards is further eligible to participate in the Company’s Management Retention Bonus Plan and Equity Incentive Plan, as well as any employee benefit plans maintained by the Company. If Mr. Richards is terminated without “cause” or resigns for “good reason” (as such terms are defined in the Richards Employment Agreement), he will be entitled to receive a lump-sum payment equal to 12 months of the Company Base Salary plus a pro-rated portion of the annual bonus. If the Company terminates Mr. Richards without cause within three months of a “change of control” (as defined in the Richards Employment Agreement) or if Mr. Richards resigns with good reason within six months of a change of control, Mr. Richards is entitled to a lump sum payment equal to 24 months of the Company Base Salary and two times the average annual bonus previously paid to Mr. Richards. Effective January 1, 2023, the Company Base Salary was revised to $189,000.
Director Compensation
Each of the Company’s independent directors is compensated CDN$25,000 per year, paid in quarterly installments, and is issued additional stock option grants for their services. In addition, the person serving as the Chair the Arras Board receives an additional annual cash fee of CDN$35,000, the Chair of the Audit Committee of the Arras Board receives an additional annual cash fee of CDN$5,000 (payable in quarterly installments), and the Compensation Committee Chair and Corporate Governance and Nominations Committee Chair receive an additional annual cash fee of CDN$2,500 each (payable in the same manner), in each case in consideration for its respective service as the Chair of the Arras Board or such committee.
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Share-based Compensation
Stock Option Awards
On April 15, 2021 and August 5, 2021, the Arras Board approved the issuance to each of the following persons, in his capacity as a director and/or officer or employee of Arras, of non-qualified options to purchase Arras common shares under the Arras Minerals Corp. Equity Incentive Plan (the “Arras Equity Plan”) in the amounts set forth below:
|
Name and principal position |
Number of Arras common shares underlying option award |
|
Brian D. Edgar Chairman |
800,000 |
|
Timothy T. Barry Chief Executive Officer |
1,000,000 |
|
Darren E. Klinck President |
800,000 |
|
Christopher Richards Chief Financial Officer |
500,000 |
The options have a term of five years and an exercise price of CDN$0.50 per share. One-third of each grant will vest on each of the grant date and the first and second anniversaries of the grant date.
On April 15, 2021, each of the following independent directors, who are not officers of the Company, were issued in partial compensation for his services as a director options to purchase Arras common shares under the Arras Equity Plan in the amounts set forth below:
|
Name |
Number of Arras common shares underlying option award |
| G. Wesley Carson | 300,000 |
| Daniel J. Kunz | 300,000 |
The options have a term of five years and an exercise price of CDN$0.50 per share. One-third of each grant vests on each of the grant date and the first and second anniversaries of the grant date.
On March 2 and September 22, 2022, each of the following independent directors, who are not officers of the Company, were issued in partial compensation for his services as a director options to purchase Arras common shares under the Arras Equity Plan in the amounts set forth below:
|
Name |
Number of Arras common shares underlying option award |
| Vera Kobalia | 300,000 |
| Christian Milau | 300,000 |
The options issued to Ms. Kobalia and Mr. Milau have a term of five years and an exercise price of CDN$1.00 and CDN$0.35 per share, respectively. One-third of each grant vests on each of the grant date and the first and second anniversaries of the grant date.
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Restricted Share Units
On February 24, 2023, the Arras Board approved the issuance to each of the following persons, in his capacity as an officer of Arras and in lieu of 50% of their annual cash bonuses, of non-qualified RSUs to receive Arras common shares under the Arras Equity Plan in the amounts set forth below:
|
Name |
Number of Arras common shares underlying RSU award |
|
Timothy T. Barry Chief Executive Officer |
159,609 |
|
Darren E. Klinck President |
159,609 |
|
Christopher Richards Chief Financial Officer |
95,766 |
The RSUs vest on the first anniversary of the grant date.
Board Practices
On February 5, 2021, Brian Edgar and Timothy Barry were confirmed as the first directors of the Company to hold office until the Company’s next annual general meeting of shareholders or until the directors cease to hold office. On March 31, 2021, G. Wesley Carson, Daniel Kunz and John McClintock were confirmed as additional directors of the Company to hold office until the Company’s next annual general meeting of shareholders or until the directors cease to hold office. On October 1, 2021, Darren Klinck was confirmed as an additional director of the Company to hold office until the Company’s next annual general meeting of shareholders or until the directors cease to hold office. On November 30, 2021, John McClintock retired from the Arras Board. On March 2, 2022, Vera Kobalia was confirmed as an additional director of the Company to hold office until the Company’s next annual general meeting of shareholders or until she ceases to hold office. On September 8, 2022, Christian Milau was confirmed as an additional director of the Company to hold office until the Company’s next annual general meeting of shareholders or until he ceases to hold office.
Audit Committee
The Company has a separately designated standing Audit Committee. The following persons currently serve on its Audit Committee: Christian Milau (Chair), Daniel Kunz and Vera Kobalia. The charter of the Audit Committee provides that it is responsible for, among other things, overseeing the Company’s consolidated financial statements and financial disclosures; overseeing the work of the Company’s external auditors; reviewing the Company’s system of internal controls; overseeing management’s identification and assessment of the principal risks to the operations of the Company and the establishment and management of appropriate systems to manage such risks; reviewing legal or compliance matters, including the effectiveness of the Company’s compliance policies; establishing procedures for the receipt, retention, and treatment of complaints or concerns received by the Company regarding accounting, internal accounting controls or auditing matters; reviewing the Company’s policies relating to the avoidance of conflicts of interest; and reviewing and approving all payments to be made pursuant to any related party transactions. The Audit Committee’s charter was adopted by the Board on December 7, 2021.
Compensation Committee
The Company’s Compensation Committee currently consists of G. Wesley Carson (Chair), Daniel Kunz and Brian Edgar. The charter of the Compensation Committee provides that it is responsible for, among other things, reviewing and making compensation related recommendations to the Arras Board and determinations regarding senior executives and directors; reviewing and making recommendations to the Arras Board regarding equity-based compensation plans of the Company and any grants under such plans; and considering the potential risks associated with the adoption of the Company’s compensation policies and practices. The Compensation Committee’s charter was adopted by the Board on December 7, 2021.
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Corporate Governance and Nominations Committee
The Company’s Corporate Governance and Nominations Committee currently consists of G. Wesley Carson (Chair) and Daniel Kunz. The charter of the Corporate Governance and Nominations Committee provides that it is responsible for, among other things, ensuring that an appropriate system is in place to formally and regularly evaluate the effectiveness of the Arras Board, its committees, and individual directors; reviewing the governance policies of the Company to ensure compliance with applicable requirements and where necessary or desirable, on account of governance trends that are appropriate for the Company; monitoring conflicts of interest of members of the Arras Board and management in accordance with the Company’s code of business conduct and ethics; and reviewing any shareholder proposals submitted to the Company. The Corporate Governance and Nominations Committee’s charter was adopted by the Board on December 7, 2021.
Other Board Committees
The Board established a Health, Safety and Sustainability (“HSS”) Committee in September 2022. The Company’s HSS Committee currently consists of Daniel Kunz (Chair), Christian Milau and Brian Edgar. The Charter for the HSS Committee is posted on the Company’s website.
Employees
Please see “Item 4. Information on the Company—Employees” for information regarding employees of the Company.
Share Ownership
Share Ownership of Directors and Management
The following sets forth the beneficial ownership of Arras shares by each director and member of senior management of the Company based on 68,504,400 Arras common shares outstanding as of February 27, 2024.
| Holder | Arras shares | Percentage Arras ownership | ||||||
| Brian D. Edgar (1) | 2,201,204 | 2.86 | % | |||||
| Timothy T. Barry (2) | 1,520,758 | 1.97 | % | |||||
| Christian Milau (3) | 1,395,855 | 1.83 | % | |||||
| Darren E. Klinck (4) | 1,395,109 | 1.82 | % | |||||
| Daniel J. Kunz (5) | 872,096 | 1.14 | % | |||||
| Christopher Richards (6) | 659,766 | * | ||||||
| G. Wesley Carson (7) | 340,000 | * | ||||||
| Vera Kobalia (8) | 300,000 | * | ||||||
| Directors and senior management as a group (8 persons) | 10,200,788 | 13.92 | % | |||||
| * | The percentage of Arras common shares beneficially owned is less than one percent (1%). |
| (1) | Holdings of Mr. Edgar include (i) 1,045,102 Arras common shares held directly, (ii) 249,602 Arras common shares owned by Tortuga Investments Corp., a company wholly owned by Mr. Edgar, (iii) 800,000 stock options that are vested or will vest within 60 days and (iv) warrants to purchase 106,500 Arras common shares that are exercisable or will be exercisable within 60 days but exclude (A) 475,000 Arras common shares and warrants to purchase 212,500 Arras common shares, in each case that are owned by 0893306 B.C. Ltd., a company wholly owned by Mr. Edgar’s spouse, and of which Mr. Edgar disclaims beneficial ownership, and (B) 50,000 Arras common shares that are owned by Mr. Edgar’s spouse and of which Mr. Edgar disclaims beneficial ownership. |
| (2) | Holdings of Mr. Barry include (i) 361,119 Arras common shares held directly, (ii) 1,000,000 stock options that are vested or will vest within 60 days and (iii) 159,609 RSUs that are vested or will vest within 60 days but exclude (A) 319,000 Arras common shares and warrants to purchase 159,500 Arras common shares, in each case that are owned by Mr. Barry’s spouse, and of which Mr. Barry disclaims beneficial ownership. |
| (3) | Holdings of Mr. Milau include (i) 1,195,855 Arras common shares held directly, and (ii) 200,000 stock options that are vested or will vest within 60 days, but exclude 100,000 stock options that will not vest within 60 days. |
| (4) | Holdings of Mr. Klinck include (i) 122,500 Arras common shares held directly, (ii) 300,000 Arras common shares that are owned by Mr. Klinck’s spouse and of which Mr. Klinck claims beneficial ownership, (iii) 800,000 stock options that are vested or will vest within 60 days and (iv) 159,609 RSUs that are vested or will vest within 60 days. |
| (5) | Holdings of Mr. Kunz include (i) 492,096 Arras common shares held directly, (ii) 300,000 stock options that are vested or will vest within 60 days and (iii) warrants to purchase 80,000 Arras common shares that are exercisable or will be exercisable within 60 days. |
| (6) | Holdings of Mr. Richards include (i) 56,000 Arras common shares held directly, (ii) 500,000 stock options that are vested or will vest within 60 days, (iii) 95,766 RSUs that are vested or will vest within 60 days and (iv) warrants to purchase 8,000 Arras common shares that are exercisable or will be exercisable within 60 days. |
| (7) | Holdings of Mr. Carson include (i) 40,000 Arras common shares held directly and (ii) 300,000 stock options that are vested or will vest within 60 days. |
| (8) | Holdings of Ms. Kobalia include 300,000 stock options that are vested or will vest within 60 days. |
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Except as otherwise noted, each person or entity identified above has sole voting and investment or dispositive power with respect to the securities they hold.
As of October 31, 2023, approximately 8.9% of the Company’s outstanding shares were held of record by residents of the United States.
Beneficial ownership is determined in accordance with the rules and regulations of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, Arras has included shares that such person has the right to acquire within 60 days, including through the exercise of any option, warrant or other right or the conversion of any RSU or other security. These shares, however, are not included in the computation of the percentage ownership of any other person.
The Company is not aware of any arrangement that may, at a subsequent date, result in a change of control of the Company.
Compensation Plans
Arras Minerals Corp. Equity Incentive Plan
As of October 31, 2023, Arras had one formal equity compensation plan under which equity securities were authorized for issuance to the Company’s officers, directors, employees and consultants: the Arras Equity Plan. The maximum number of shares of Arras issuable pursuant to grants made under the Arras Equity Plan, together with all other security-based compensation arrangements of Arras, was 10,295,030 common shares. As of October 31, 2023, 5,160,000 options and 414,984 RSUs were issued under the Arras Equity Plan that were outstanding to acquire Arras common shares. As of October 31, 2023, there were 4,720,046 Arras common shares remaining available for future issuance under the Arras Equity Plan.
The Arras Equity Plan was adopted and approved by the Arras Board on April 15, 2021, amended and approved by the shareholders of Arras on July 5, 2021. The Arras Equity Plan was further amended and approved by the Arras Board on March 4, 2022, and by shareholders on September 8, 2022.
Under the Arras Equity Plan, Arras may grant incentive or nonqualified stock options, RSUs or performance share units (“PSUs”), and restricted stock to employees (including officers), directors, and consultants of Arras or any subsidiary thereof.
For so long as Arras shares are listed on a stock exchange, the maximum number of shares of Arras that may be reserved for issuance to any one participant under the Arras Equity Plan, together with all other security-based compensation arrangements of Arras, is 5.0% of the total issued and outstanding shares of Arras from time to time. For so long as Arras shares are listed on a stock exchange, the maximum number of shares of Arras that may be issued to a director or officer of Arras or other “insider” within any one-year period, or that may be issuable to such persons at any time, under the Arras Equity Plan, or when combined with all other security-based compensation arrangements of Arras, is 10.0% of the total issued and outstanding shares of Arras from time to time. Except with respect to certain U.S. persons, there are no limitations on the maximum number of shares of Arras that may be reserved for issuance to participants under the Arras Equity Plan prior to the listing of the Arras shares on a stock exchange.
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For so long as Arras common shares are listed or trade on a stock exchange or other market, options granted under the Arras Equity Plan must have an exercise price that is not less than 100% of the “fair market value” on the grant date. With respect to any incentive stock options granted to a person owning more than 10.0% of the total voting securities of Arras or certain parent or subsidiary corporations, the exercise price of such options must be at a price of not less than 110% of the fair market value on the grant date, and the exercise period of such options must not exceed five years. Options may be exercised on a cash or cashless basis. Unless otherwise designated by the Arras Board in the applicable grant agreement, one-third of the options granted under the Arras Equity Plan must vest on each of the grant date and the first and second anniversaries of the grant date, subject to acceleration in certain circumstances. The exercise period of any option must not exceed 10 years from the grant date. Subject to the terms of the applicable grant agreement and the board of directors’ discretion, upon the termination of an optionholder’s employment or other relationship with Arras, including as a result of death or disability, outstanding options held by such person are subject to accelerated expiry, as follows: (i) upon the death or disability of an optionholder, vested options shall continue to be exercisable for 12 months while unvested options shall be forfeited; (ii) upon a resignation from Arras by an optionholder or termination of an optionholder without cause, vested options shall continue to be exercisable for 90 days while unvested options shall be forfeited; and (iii) upon the termination of an optionholder for cause, all outstanding options (vested or unvested) shall be forfeited.
Settlement of RSUs and PSUs must be made by the issuance of one share for each RSU or PSU being settled, a cash payment equal to the market price on the vesting date of the RSUs or PSUs being settled, or a combination of shares and cash, all as determined by the Arras Board or as specified in the applicable grant agreement. Unless the applicable grant agreement specifies that RSUs and PSUs must be settled through the issuance of shares, settlement will occur upon or as soon as reasonably practicable following vesting and, in any event, on or before December 31 of the third year following the year in which the participant performed the services to which the grant of RSUs or PSUs relates. Subject to the terms of the applicable grant agreement and the board of directors’ discretion, upon the termination of the employment or other relationship with Arras, including as a result of death or disability, of a holder of RSUs or PSUs, all unvested entitlements shall be forfeited.
Unless otherwise specified in the grant agreement in respect of a particular award, awards granted pursuant to the Arras Equity Plan are not assignable other than by testamentary disposition or the laws of intestate succession.
The Arras Equity Plan, and any grant made pursuant to the Arras Equity Plan, may be amended without approval of the Arras shareholders, except (i) no amendment to the Arras Equity Plan or any grant made pursuant to the Arras Equity Plan may be made without the consent of a participant in the Arras Equity Plan if it adversely alters or impairs the rights of such participant in respect of any previous grant to such participant; and (ii) for so long as the Arras shares are listed on a stock exchange, Arras shareholder approval will be required to (A) increase the maximum number of shares issuable pursuant to the Arras Equity Plan, (B) reduce the exercise price of an outstanding option, except as permitted by the Arras Equity Plan, (C) extend the maximum term of any grant made under the Arras Equity Plan, except as permitted by the Arras Equity Plan, (D) amend the assignment provisions of the Arras Equity Plan, (E) increase the number of shares issuable to “insiders” of Arras or removing the restriction on “insider” participation in the Arras Equity Plan, (F) include other types of equity compensation involving the issuance of shares of Arras under the Arras Equity Plan or (G) amend the amendment provisions of the Arras Equity Plan or to grant additional powers to the Arras Board to amend the Arras Equity Plan without shareholder approval.
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The following table sets forth the outstanding equity awards for each of the following officers of Arras at October 31, 2023.
Outstanding Equity Awards at October 31, 2023
| Option-Based Awards | Share-Based Awards | |||||||||||||||||
| Name | Number of securities underlying unexercised options (1) | Option exercise price (2) | Option expiration date | Number of shares or units of shares that have not vested (3) | Market or payout value of shares that have not vested (4) | |||||||||||||
| Timothy T. Barry | 1,000,000 | $ | 0.36 | 4/15/26 | 159,609 | $ | 14,958 | |||||||||||
| Darren E. Klinck | 800,000 | $ | 0.36 | 8/04/26 | 159,609 | $ | 14,958 | |||||||||||
| Christopher Richards | 500,000 | $ | 0.36 | 4/15/26 | 95,766 | $ | 8,975 | |||||||||||
| (1) | Options vest in three equal installments: one-third on the grant date, one-third on the first anniversary of the grant date and one-third on the second anniversary of the grant date. All options granted have vested as of October 31, 2023. |
| (2) | Exercise price of CDN$0.50 was converted based on the foreign currency exchange rate as of October 31, 2023 (CDN$1.00 = US$0.7209). |
| (3) | RSUs granted on February 24, 2023, vest on the first anniversary of the grant date. |
| (4) | Based on closing share price on the TSX Venture Exchange of CDN$0.13 per share, converted at the foreign currency exchange rate as of October 31, 2023 (CDN$1.00 = US$0.7209). |
The following table gives information about the Company’s common shares that may be issued upon the exercise of options, warrants and rights under its compensation plans as of October 31, 2023.
Equity Compensation Plan Information
| Plan category | Number of securities to be issued upon exercise of outstanding options | Weighted average exercise price of outstanding options | Number of securities remaining available for future issuance | |||||||||
| Equity compensation plans approved by security holders | 5,160,000 | (1) | $ | 0.38 | (1) | 4,720,046 | ||||||
| Equity compensation plans not approved by security holders | — | — | — | |||||||||
| Total | 5,160,000 | $ | 0.38 | 4,720,046 | ||||||||
| (1) | Weighted average exercise price of CDN$0.53 was converted based on the foreign currency exchange rate as of October 31, 2023 (CDN$1.00 = US$0.7209). |
Arras Minerals Corp. Management Retention Bonus Plan
The Arras Board adopted and approved on April 15, 2021, and further amended in February, 2022, the Arras Minerals Corp. Management Retention Bonus Plan (the “Arras Retention Plan”) in order to encourage the retention of the management team of Arras amidst the mining industry’s highly competitive market for talent and to align the team’s interests with those of the shareholders of Arras.
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Pursuant to the Arras Retention Plan, Arras will pay cash bonuses to each of the following persons in the amounts set forth in the following table upon Arras reaching a market capitalization target for five consecutive trading days as set forth in the table (it being understood that that the common shares of Arras are not currently listed or posted for trading on any stock exchange or market):
Name and principal position | CDN$250 million market capitalization | CDN$500 million market capitalization | CDN$1 billion market capitalization | Total bonus opportunity | ||||
| Brian D. Edgar Chairman | CDN$750,000 | CDN$750,000 | CDN$1,500,000 | CDN$3,000,000 | ||||
| Timothy T. Barry Chief Executive Officer | CDN$1,125,000 | CDN$1,125,000 | CDN$2,250,000 | CDN$4,500,000 | ||||
| Christopher Richards Chief Financial Officer | CDN$375,000 | CDN$375,000 | CDN$750,000 | CDN$1,500,000 |
The Arras Retention Plan further provides that if Arras is the subject of a Change of Control (as defined in the Arras Retention Plan) that exceeds CDN$250 million, Arras must pay to Mr. Edgar, Mr. Barry, and Mr. Richards cash bonuses equal to 0.30%, 0.45%, and 0.15%, respectively, of the Change of Control transaction amount, less any cash bonuses that may have previously been paid to such persons pursuant to the market capitalization targets noted above. The market capitalization targets or Change of Control must be achieved or completed by April 15, 2027 in order for any officer or employee of Arras to earn the applicable bonus payment described above. Any bonus payable in the future to an officer or employee of Arras will be cancelled (subject to the discretion of the Arras Board) if such officer or employee is not employed directly or indirectly by Arras when such bonus is earned and becomes payable. At the sole discretion of the Arras Board, Arras shall not be obligated to pay a bonus in cash under the Arras Retention Plan if it lacks funds at the time. In lieu of cash, the Arras Board may choose to settle any bonus by issuing and delivering shares of Arras for such amount valued at the five-day trading volume-weighted average price for Arras’s shares on the market calculated up to the day before the issuance of the shares.
Please see “—Compensation—Directors and Senior Management—Employment Agreements with Senior Management—Darren E. Klinck” above for the amounts owed to Westcott, Mr. Klinck’s personal service corporation, pursuant to the Westcott Consulting Agreement upon Arras reaching certain market capitalization targets and upon the Company undergoing a Change of Control (as defined in the Westcott Consulting Agreement).
| ITEM 7. | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS. |
Major Shareholders
Teck Resources Limited, which owns approximately 6.65 million shares of the Company (9.7%), is the only person or entity that the Company knows that beneficially owns 5% or more of its shares based on 68,504,400 Arras common shares outstanding as of February 27, 2024. Teck acquired its shares via private placements completed by the Company in November and December 2022. The Company has granted Teck an equity participation right to maintain its pro-rata ownership in the Company, provided that Teck’s ownership interest remains above 5% of the Company’s outstanding shares. Teck is a widely held, publicly listed company, with no individual or entity owning or controlling more than 10% of the voting power of Teck or either class of its shares.
Related Party Transactions
Separation and Distribution Agreement
On August 31, 2021, the Company entered into a Separation and Distribution Agreement with Silver Bull. The Separation and Distribution Agreement sets forth Arras’ agreements with Silver Bull in connection with the Distribution and providing a framework for the relationship between the parties after the Distribution.
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Silver Bull Warrants
Pursuant to the Separation and Distribution Agreement, Silver Bull, may, in its sole discretion, offer holders of outstanding Silver Bull warrants who exercise them after the Distribution the right to receive, instead of solely Silver Bull shares, one Silver Bull share and one Arras common share in exchange for the original exercise price, subject to compliance with applicable securities laws. If Silver Bull makes such an offer, then (i) Arras must issue Arras common shares to the holders of Silver Bull warrants who elected to accept such offer and (ii) Silver Bull must remit to Arras a portion of the aggregate cash warrant exercise price received by Silver Bull.
Beskauga Option Agreement
Pursuant to the Separation and Distribution Agreement, Arras may, in its sole discretion, seek the consent of the other parties to the Beskauga Option Agreement to make certain amendments thereto such that the Bonus Payments that Arras or its affiliate may be obligated to pay Copperbelt pursuant to the Beskauga Option Agreement could be satisfied, at the option of Arras, in Arras common shares. If Arras is not successful in obtaining such consents, Silver Bull will agree to use commercially reasonable efforts to enter into an arrangement with Arras providing for (i) the issuance of Silver Bull common stock to Copperbelt upon (A) Arras becoming obligated to make the Bonus Payments and (B) Arras electing to pay a portion of such Bonus Payments in Silver Bull common stock in accordance with the Beskauga Option Agreement and (ii) a payment by Arras to Silver Bull in consideration for the issuance by Silver Bull of Silver Bull common stock to Copperbelt.
Termination
The Separation and Distribution Agreement may not be terminated following the completion of the Distribution unless the parties mutually agree in writing to terminate it.
This description of the Separation and Distribution Agreement is only a summary and does not purport to be complete and is qualified by reference to the full text of the agreement, which is incorporated by reference as an exhibit to this Annual Report.
Interests of Experts and Counsel
Not applicable.
| ITEM 8. | FINANCIAL INFORMATION. |
Consolidated Statements and Other Financial Information
Please refer to pages F-1 through F-30 of this Annual Report.
Significant Changes
A discussion of significant changes in the Company’s business can be found under “Item 4. Information on the Company—History and Development of the Company” and “Item 5. Operating and Financial Review and Prospects—Operating Results.”
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| ITEM 9. | THE OFFER AND LISTING. |
Offer and Listing Details
Not applicable.
Plan of Distribution
Not applicable.
Markets
Since June 14, 2022, Arras common shares have been listed and trading on the TSX Venture Exchange (ticker: ARK.V).
Selling Shareholders
Not applicable.
Dilution
Not applicable.
Expenses of the Issue
Not applicable.
| ITEM 10. | ADDITIONAL INFORMATION. |
Share Capital
Not applicable.
Memorandum and Articles of Association
Copies of the Company’s notice of articles and articles of incorporation are attached as Exhibits 1.1 and 1.2, respectively, to this Annual Report. The information called for by this Item is set forth in Exhibit 2.1 to this Annual Report and is incorporated by reference into this Annual Report.
Material Contracts
For information concerning the Company’s material contracts, please refer to the following sections in this Annual Report:
|
Section |
Material Contract(s) |
| “Item 4. Information on the Company—History and Development of the Company” |
● the APA ● the Beskauga Option Agreement ● the Stepnoe and Ekidos JV Agreement |
| “Item 6. Directors, Senior Management and Employees—Compensation—Directors and Senior Management—Employment Agreements with Senior Management” |
● Barry Consulting Agreement ● Westcott Consulting Agreement ● Richards Employment Agreement |
| “Item 6. Directors, Senior Management and Employees—Share Ownership—Compensation Plans” |
● the Arras Equity Plan ● the Arras Retention Plan |
| “Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions” | ● the Separation and Distribution Agreement |
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Exchange Controls
Arras is not aware of any laws, decrees or regulations in Canada relating to restrictions on the export or import of capital, or affecting the remittance of interest, dividends or other payments to non-resident holders of its common shares.
Taxation
Material U.S. Federal Income Tax Considerations
The following is a discussion of certain U.S. federal income tax considerations to the U.S. Holders (as defined below) of the ownership and disposition of the Company’s common shares. This discussion does not address all tax considerations that might be relevant to particular beneficial owners of the Company’s common shares in light of their personal circumstances or to persons that are subject to special tax rules. In particular, this description of the material U.S. federal income tax considerations does not address the tax treatment of special classes of beneficial owners of the Company’s common shares, such as:
| ● | financial institutions; |
| ● | regulated investment companies; |
| ● | real estate investment trusts; |
| ● | subchapter S corporations; |
| ● | tax exempt entities; |
| ● | insurance companies; |
| ● | persons that do not hold common shares as capital assets within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the “Code”); |
| ● | persons holding Arras common shares, as part of an integrated or conversion transaction or a constructive sale or a straddle; |
| ● | persons that own, have owned or will own (directly, indirectly, or by attribution) 10% or more of the total combined voting power or value of Arras’ outstanding common shares; |
| ● | U.S. expatriates; |
| ● | dealers or traders in securities; or |
| ● | a person whose functional currency is not the U.S. dollar. |
This summary does not address the alternative minimum tax, U.S. federal estate and gift tax consequences or tax consequences under any state, local or non-U.S. laws.
For purposes of this discussion, a person is a “U.S. Holder” if it is a beneficial owner of Arras common shares that is: (1) an individual citizen or resident alien of the United States for U.S. federal income tax purposes; (2) a corporation, or other entity treated as a corporation for U.S. federal income tax purposes, created or organized under the laws of the United States, any state thereof, or the District of Columbia; (3) an estate the income of which is subject to U.S. federal income taxation regardless of its source; or (4) a trust (A) if a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons have authority to control all substantial decisions of the trust or (B) that has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person.
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If a partnership, or other pass through entity or arrangement treated as a partnership for U.S. federal income tax purposes, is a beneficial owner of Arras common shares, the U.S. federal income tax consequences to the partners (or other owners) will generally depend upon the status of the partners (or other owners) and the activities of the entity. Partners (or other owners) of a partnership or other pass through entity that holds Arras common shares should consult with their tax advisors regarding the tax consequences of owning and disposing of such common shares.
The following discussion is based upon the Code, U.S. judicial decisions, administrative pronouncements and existing and proposed Treasury Regulations, all as in effect as of the date hereof. All of the preceding authorities are subject to change, possibly with retroactive effect, so as to result in U.S. federal income tax consequences different from those discussed below. Arras has not requested, and will not request, a ruling or other guidance from the U.S. Internal Revenue Service (the “IRS”) with respect to any of the U.S. federal income tax considerations described below, and as a result there can be no assurance that the IRS will not disagree with or challenge any of the conclusions described herein.
The following discussion is for general information only and is not intended to be, nor should it be construed to be, legal or tax advice to any beneficial owner of the Company’s common shares and no opinion or representation with respect to the U.S. federal income tax consequences to any such beneficial owner is given. Holders of Arras common shares are urged to consult their tax advisors as to the particular consequences to them under U.S. federal, state and local, and any applicable non-U.S. tax laws of owning and disposing of its common shares.
Tax Consequences to U.S. Holders of the Ownership and Disposition of Our Common Shares
The following discussion is subject in its entirety to the rules described below under the heading “—Passive Foreign Investment Company Rules.”
Taxation of Distributions on Our Common Shares
A U.S. Holder that receives a distribution, including a constructive distribution, with respect to Arras common shares generally will be required to include the amount of such distribution in gross income as a dividend (without reduction for any foreign income tax withheld from such distribution) to the extent such distribution is paid out of the Company’s current or accumulated earnings and profits (as determined under U.S. federal income tax principles). If a distribution with respect to Arras common shares exceeds its current and accumulated earnings and profits, the excess will be treated as a tax free return of the capital up to such U.S. Holder’s tax basis in Arras common shares. Any remaining excess distribution generally will be treated as capital gain. However, the Company may not maintain the calculations of its earnings and profits in accordance with U.S. federal income tax principles, and each U.S. Holder may have to assume that any distribution with respect Arras common shares will constitute ordinary dividend income.
Dividends received with respect to Arras common shares by corporate U.S. Holders generally will not be eligible for the “dividends received deduction.” Provided that Arras is eligible for the benefits of the Canada–United States Tax Convention (1980) (the “Canada–U.S. Tax Convention”) or that Arras common shares are “readily tradable” on a U.S. securities market, dividends paid by us to non-corporate U.S. Holders generally will be eligible for the preferential tax rates applicable to long-term capital gains for dividends, provided certain holding period and other conditions are satisfied, including that the Company will not be classified as a PFIC (as defined below) in the tax year of distribution or in the preceding tax year.
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Foreign Tax Credit
In general, any Canadian withholding tax imposed on dividend payments in respect of Arras common shares will be treated as a foreign income tax eligible for credit against a U.S. Holder’s U.S. federal income tax liability (or, at a U.S. Holder’s election, may, in certain circumstances, be deducted in computing taxable income). Dividends paid with respect to Arras common shares will generally be treated as foreign-source income, and generally will be treated as “passive category income” for U.S. foreign tax credit purposes. The Code applies various complex limitations on the amount of foreign taxes that may be claimed as a credit by U.S. taxpayers. U.S. Holders are urged to consult their own tax advisors with respect to the amount of foreign taxes that can be claimed as a credit.
Sale or Other Taxable Disposition of Arras Common Shares
A U.S. Holder will generally recognize capital gain or loss upon the sale or other taxable disposition of Arras common shares in an amount equal to the difference between the U.S. Holder’s tax basis in such common shares disposed of and the amount realized on the disposition. Gain or loss realized by a U.S. Holder on the sale or other taxable disposition of Arras common shares will be capital gain or loss for U.S. federal income tax purposes, and will be long term capital gain or loss if the U.S. Holder’s holding period for such common shares is more than one year. In the case of a non-corporate U.S. Holder, long term capital gains will be subject to reduced rates of taxation. The deductibility of capital losses is subject to limitations.
Receipt of Foreign Currency
The amount of any distributions on or proceeds on the sale, exchange or other taxable disposition of Arras common shares paid to a U.S. Holder in foreign currency, generally will be equal to the U.S. dollar value of such foreign currency based on the exchange rate applicable on the date of receipt, regardless of whether such foreign currency is converted into U.S. dollars at that time. A U.S. Holder will have a basis in the foreign currency equal to its U.S. dollar value on the date of receipt. Any U.S. Holder who converts or otherwise disposes of the foreign currency after the date of receipt may have a foreign currency exchange gain or loss that would be treated as ordinary income or loss, and generally will be U.S. source income or loss for foreign tax credit purposes. Different rules apply to U.S. Holders who use the accrual method of tax accounting. U.S. Holders are urged to consult their own tax advisors regarding the U.S. federal income tax consequences of receiving, owning, and disposing of foreign currency.
Medicare Tax
An additional 3.8% Medicare tax is imposed on the “net investment income” of certain U.S. Holders who are individuals, estates or trusts. Among other items, “net investment income” generally includes gross income from dividends, and certain net gains from sales or other taxable dispositions of Arras common shares. Special rules apply to PFICs (as defined below). U.S. Holders are urged to consult their tax advisors with respect to the Medicare tax and its applicability in their particular circumstances to income and gains in respect of the ownership and disposition of Arras common shares.
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Backup Withholding and Information Reporting
In general, information reporting will apply to payments made with respect toArras common shares through a U.S. paying agent or U.S. intermediary to a U.S. Holder other than certain exempt recipients, such as corporations. In general, payments to U.S. Holders may be subject to backup withholding, currently at a rate of 24%, if the U.S. Holder fails to provide its taxpayer identification number or otherwise comply with the backup withholding rules. Backup withholding is not an additional tax. Any amounts withheld from payments to a U.S. Holder under the backup withholding rules will be allowed as a credit against such U.S. Holder’s U.S. federal income tax liability and may entitle such U.S. Holder to a refund, provided the required information is furnished to the IRS. Each U.S. Holder is urged to consult its own tax advisor regarding the information reporting and backup withholding tax rules.
Owners of “specified foreign financial assets” with an aggregate value in excess of $50,000 (and in some circumstances, a higher threshold), may be required to file an information report with respect to such assets with their tax returns. “Specified foreign financial assets” generally include any financial accounts maintained by foreign financial institutions, as well as any of the following, but only if they are not held in accounts maintained by financial institutions: (i) stocks and securities issued by non-U.S. persons, (ii) financial instruments and contracts held for investment that have non-U.S. issuers or counterparties and (iii) interests in foreign entities. U.S. Holders are urged to consult their own tax advisors regarding this legislation and any other information reporting that may be required in connection with their ownership of Arras common shares.
Passive Foreign Investment Company Rules
If Arras was to be classified as a “passive foreign investment company” (“PFIC”) for any year during a U.S. Holder’s holding period, then certain potentially adverse rules would affect the U.S. federal income tax consequences to a U.S. Holder resulting from the acquisition, ownership and disposition of the Company’s common shares.
PFIC Status of the Company
The Company generally will be a PFIC if, for a given tax year, (a) 75% or more of the gross income of the Company for such tax year is passive income or (b) 50% or more of the assets held by the Company either produce passive income or are held for the production of passive income, based on the fair market value of such assets. “Gross income” generally includes all income less the cost of goods sold, and “passive income” includes, for example, dividends, interest, certain rents and royalties, certain gains from the sale of stock and securities, and certain gains from commodities transactions. Active business gains arising from the sale of commodities generally are excluded from passive income if substantially all (85% or more) of a foreign corporation’s commodities are stock in trade or inventory, depreciable property used in a trade or business, or supplies regularly used or consumed in a trade or business.
For purposes of the PFIC income test and asset test described above, if the Company owns, directly or indirectly, 25% or more of the total value of the outstanding shares of another corporation, the Company will be treated as if it (a) held a proportionate share of the assets of such other corporation and (b) received directly a proportionate share of the income of such other corporation. In addition, for purposes of the PFIC income test and asset test described above, “passive income” does not include any interest, dividends, rents or royalties that are received or accrued by the Company from a “related person” (as defined in Section 954(d)(3) of the Code), to the extent such items are properly allocable to the income of such related person that is not passive income.
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Under certain attribution rules, if the Company is a PFIC, U.S. Holders will be deemed to own their proportionate share of any subsidiary of the Company which is also a PFIC (a “lower-tier PFIC”), and will be subject to U.S. federal income tax on (a) a distribution on the shares of a lower-tier PFIC and (b) a disposition of shares of a lower-tier PFIC, both as if the U.S. Holder directly held the shares of such lower-tier PFIC.
The Company may (or may not) be a PFIC for the current tax year and may (or may not) be a PFIC in subsequent years. The determination of whether the Company (or a subsidiary of the Company) was, or will be, a PFIC for a tax year depends, in part, on the application of complex U.S. federal income tax rules, which are subject to differing interpretations. In addition, whether the Company (or subsidiary) will be a PFIC for any tax year depends on the assets and income of the Company (and each such subsidiary) over the course of each such tax year and, as a result, cannot be predicted with certainty as of the date of this Annual Report. Accordingly, there can be no assurance that the IRS will not challenge any determination made by the Company (or subsidiary) concerning its PFIC status or that the Company (and any subsidiary) was not, or will not be, a PFIC for any tax year. U.S. Holders should consult their own tax advisors regarding the PFIC status of the Company and any subsidiary of the Company.
Default PFIC rules under Section 1291 of the Code
If the Company is a PFIC, the U.S. federal income tax consequences to a U.S. Holder of the acquisition, ownership and disposition of Arras common shares will depend on whether such U.S. Holder makes a “qualified electing fund” or “QEF” election (a “QEF Election”) or makes a mark-to-market election under Section 1296 of the Code (a “Mark-to-Market Election”) with respect to Arras common shares. A U.S. Holder that does not make either a QEF Election or a Mark-to-Market Election will be referred to in this summary as a “Non-Electing U.S. Holder.”
A Non-Electing U.S. Holder will be subject to the rules of Section 1291 of the Code with respect to (a) any gain recognized on the sale or other taxable disposition of Arras common shares and (b) any excess distribution paid on its common shares. A distribution generally will be an “excess distribution” to the extent that such distribution (together with all other distributions received in the current tax year) exceeds 125% of the average distributions received during the three preceding tax years (or during a U.S. Holder’s holding period for Arras common shares, if shorter).
If the Company is a PFIC, under Section 1291 of the Code any gain recognized on the sale or other taxable disposition of Arras common shares (including an indirect disposition of shares of a lower-tier PFIC), and any excess distribution paid on its common shares (or a distribution by a lower-tier PFIC to its shareholder that is deemed to be received by a U.S. Holder) must be rateably allocated to each day of a Non-Electing U.S. Holder’s holding period for Arras common shares, as applicable. The amount of any such gain or excess distribution allocated to the tax year of disposition or excess distribution and to years before the Company became a PFIC, if any, would be taxed as ordinary income. The amounts allocated to any other tax year would be subject to U.S. federal income tax at the highest tax rate applicable to ordinary income in each such year without regard to the U.S. Holder’s other tax attributes, and an interest charge would be imposed on the tax liability for each such year, calculated as if such tax liability had been due in each such year. A Non-Electing U.S. Holder that is not a corporation must treat any such interest paid as “personal interest,” which is not deductible.
If the Company is a PFIC for any tax year during which a Non-Electing U.S. Holder holds Arras common shares, the Company will continue to be treated as a PFIC with respect to such Non-Electing U.S. Holder, regardless of whether the Company ceases to be a PFIC in one or more subsequent years. If the Company ceases to be a PFIC, a Non-Electing U.S. Holder may terminate this deemed PFIC status with respect to Arras common shares by electing to recognize gain (which will be taxed under the rules of Section 1291 of the Code discussed above) as if such common shares were sold on the last day of the last tax year for which the Company was a PFIC.
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QEF Election
If the Company is a PFIC and a U.S. Holder makes a QEF Election for the first tax year in which its holding period of Arras common shares begins, such U.S. Holder generally will not be subject to the rules of Section 1291 of the Code discussed above with respect to Arras common shares. However, a U.S. Holder that makes a QEF Election will be subject to U.S. federal income tax on such U.S. Holder’s pro rata share of (a) the net capital gain of the Company, which will be taxed as long-term capital gain to such U.S. Holder, and (b) the ordinary earnings of the Company, which will be taxed as ordinary income to such U.S. Holder. Generally, “net capital gain” is the excess of (i) net long-term capital gain over (ii) net short-term capital gain, and “ordinary earnings” are the excess of (i) “earnings and profits” over (ii) net capital gain. A U.S. Holder that makes a QEF Election will be subject to U.S. federal income tax on such amounts for each tax year in which the Company is a PFIC, regardless of whether such amounts are actually distributed to such U.S. Holder by the Company. However, a U.S. Holder that makes a QEF Election may, subject to certain limitations, elect to defer payment of current U.S. federal income tax on such amounts, subject to an interest charge. If such U.S. Holder is not a corporation, any such interest paid will be treated as “personal interest,” which is not deductible.
A U.S. Holder that makes a QEF Election generally (a) may receive a tax-free distribution from the Company to the extent that such distribution represents “earnings and profits” of the Company that were previously included in income by the U.S. Holder because of such QEF Election and (b) will adjust such U.S. Holder’s tax basis in Arras common shares to reflect the amount included in income or allowed as a tax-free distribution because of such QEF Election. In addition, a U.S. Holder that makes a QEF Election generally will recognize capital gain or loss on the sale or other taxable disposition of Arras common shares.
The procedure for making a QEF Election, and the U.S. federal income tax consequences of making a QEF Election, will depend on whether such QEF Election is timely. A QEF Election will be treated as timely if it is made for the first year in the U.S. Holder’s holding period for Arras common shares in which the Company was a PFIC. A U.S. Holder may make a timely QEF Election by filing the appropriate QEF Election documents at the time such U.S. Holder files a U.S. federal income tax return for such year.
A QEF Election will apply to the tax year for which such QEF Election is made and to all subsequent tax years, unless such QEF Election is invalidated or terminated or the IRS consents to revocation of such QEF Election. If a U.S. Holder makes a QEF Election and, in a subsequent tax year, the Company ceases to be a PFIC, the QEF Election will remain in effect (although it will not be applicable) during those tax years in which the Company is not a PFIC. Accordingly, if the Company becomes a PFIC in a subsequent tax year, the QEF Election will be effective, and the U.S. Holder will be subject to the QEF rules described above during a subsequent tax year in which the Company qualifies as a PFIC.
The Company will use commercially reasonable efforts to make available to U.S. Holders, upon their written request, for each year in which the Company may be a PFIC, all information and documentation that a U.S. Holder making a QEF Election with respect to the Company, and any lower-tier PFIC in which the Company owns, directly or indirectly, more than 50% of such lower-tier PFIC’s total aggregate voting power, is required to obtain for U.S. federal income tax purposes in the event it is a PFIC. However, U.S. Holders should be aware that the Company provides no assurances that it will attempt to provide any such information relating to any lower-tier PFIC in which the Company owns, directly or indirectly, 50% or less of such lower-tier PFIC’s aggregate voting power. Because the Company may own shares in one or more lower-tier PFICs, and may acquire shares in one or more lower-tier PFICs in the future, they will continue to be subject to the rules discussed above with respect to the taxation of gains and excess distributions with respect to any lower-tier PFIC for which the U.S. Holders do not obtain the required information. U.S. Holders should consult their tax advisors regarding the availability of, and procedure for making, a QEF Election with respect to the Company and any lower-tier PFIC.
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Mark-to-Market Election
A U.S. Holder may make a Mark-to-Market Election only if Arras common shares are marketable stock. The Company’s common shares generally will be “marketable stock” if they are regularly traded on (a) a national securities exchange that is registered with the SEC; (b) the national market system established pursuant to Section 11A of the Exchange Act; or (c) a foreign securities exchange that is regulated or supervised by a governmental authority of the country in which the market is located, provided that (i) such foreign exchange has trading volume, listing, financial disclosure and other requirements and the laws of the country in which such foreign exchange is located, together with the rules of such foreign exchange, ensure that such requirements are actually enforced; and (ii) the rules of such foreign exchange ensure active trading of listed stocks. If such stock is traded on such a qualified exchange or other market, such stock generally will be “regularly traded” for any calendar year during which such stock is traded, other than in de minimis quantities, on at least 15 days during each calendar quarter. It is anticipated that Arras common shares will not initially be marketable stock, but may become marketable stock in the future if the conditions described above are met.
A U.S. Holder that makes a Mark-to-Market Election with respect to Arras common shares generally will not be subject to the rules of Section 1291 of the Code discussed above. However, if a U.S. Holder does not make a Mark-to-Market Election beginning in the first tax year of such U.S. Holder’s holding period for Arras common shares or such U.S. Holder has not made a timely QEF Election, the rules of Section 1291 of the Code discussed above will apply to certain dispositions of, and distributions on, Arras common shares.
A U.S. Holder that makes a Mark-to-Market Election will include in ordinary income, for each tax year in which the Company is a PFIC, an amount equal to the excess, if any, of (a) the fair market value of Arras common shares, as of the close of such tax year over (b) such U.S. Holder’s tax basis in such common shares. A U.S. Holder that makes a Mark-to-Market Election will be allowed a deduction in an amount equal to the excess, if any, of (i) such U.S. Holder’s adjusted tax basis in Arras common shares over (ii) the fair market value of such common shares (but only to the extent of the net amount of previously included income as a result of the Mark-to-Market Election for prior tax years).
U.S. Holders that make a Mark-to-Market Election generally also will adjust their tax basis in Arras common shares to reflect the amount included in gross income or allowed as a deduction because of such Mark-to-Market Election. In addition, upon a sale or other taxable disposition of Arras common shares, a U.S. Holder that makes a Mark-to-Market Election will recognize ordinary income or loss (not to exceed the excess, if any, of (a) the amount included in ordinary income because of such Mark-to-Market Election for prior tax years over (b) the amount allowed as a deduction because of such Mark-to-Market Election for prior tax years).
A Mark-to-Market Election applies to the tax year in which such Mark-to-Market Election is made and to each subsequent tax year, unless Arras common shares cease to be “marketable stock” or the IRS consents to revocation of such election. U.S. Holders should consult their own tax advisors regarding the availability of, and procedure for making, a Mark-to-Market Election.
Although a U.S. Holder may become eligible in the future to make a Mark-to-Market Election with respect to Arras common shares, no such election may be made with respect to the stock of any lower-tier PFIC that a U.S. Holder is treated as owning because such stock would not be marketable. Hence, the Mark-to-Market Election will not be effective to eliminate the interest charge described above with respect to deemed dispositions of lower-tier PFIC stock or distributions from a lower-tier PFIC.
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Other PFIC Rules
Under Section 1291(f) of the Code, the IRS has issued proposed Treasury Regulations that, subject to certain exceptions, would cause a U.S. Holder that had not made a timely QEF Election to recognize gain (but not loss) upon certain transfers of Arras common shares that would otherwise be tax-deferred (e.g., gifts and exchanges pursuant to corporate reorganizations) in the event the Company is a PFIC during such U.S. Holder’s holding period for the relevant shares. However, the specific U.S. federal income tax consequences to a U.S. Holder may vary based on the manner in which Arras common shares are transferred.
Certain additional adverse rules will apply with respect to a U.S. Holder if the Company is a PFIC, regardless of whether such U.S. Holder makes a QEF Election. For example, under Section 1298(b)(6) of the Code, a U.S. Holder that uses Arras common shares as security for a loan will, except as may be provided in Treasury Regulations, be treated as having made a taxable disposition of such common shares.
If the Company were a PFIC, a U.S. Holder would be required to attach a completed IRS Form 8621 to its tax return every year in which it recognized gain on a disposition of Arras common shares or received an excess distribution. In addition, subject to certain rules intended to avoid duplicative filings, U.S. Holders may also be required to file an annual information return on IRS Form 8621 with respect to each PFIC in which the U.S. Holder holds a direct or indirect interest. U.S. Holders should consult their own tax advisors regarding their filing obligations with respect to such information returns.
In addition, a U.S. Holder who acquires Arras common shares from a decedent will not receive a “step up” in tax basis of such common shares to fair market value unless such decedent had a timely and effective QEF Election in place.
Special rules also apply to foreign tax credits that a U.S. Holder may claim on a distribution from a PFIC.
The PFIC rules are complex, and U.S. Holders should consult their own tax advisors regarding the PFIC rules and how they may affect the U.S. federal income tax consequences of the ownership, and disposition of Arras common shares in the event the Company is a PFIC at any time during the holding period for such common shares.
THE ABOVE SUMMARY IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF ALL U.S. FEDERAL INCOME TAX CONSIDERATIONS APPLICABLE WITH RESPECT TO THE OWNERSHIP AND DISPOSITION OF ARRAS COMMON SHARES. U.S. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX CONSIDERATIONS APPLICABLE TO THEM IN THEIR OWN PARTICULAR CIRCUMSTANCES.
Material Canadian Income Tax Considerations
The following summarizes, as of the date hereof, certain Canadian federal income tax considerations generally applicable under the Income Tax Act (Canada) and the regulations thereunder (collectively, the “Canadian Tax Act”) and the Canada–United States Tax Convention (1980) (the “Convention”) to the holding and disposition of the common shares.
Comment is restricted to beneficial owners of the common shares, whom, at all relevant times and for purposes of the Canadian Tax Act and the Convention: (i) have not been and will not be deemed to be resident in Canada; (ii) are resident solely in the United States and are entitled to benefits of the Convention; (iii) do not use or hold, and are not deemed to use or hold, the common shares in, or in the course of, carrying on a business in Canada; (iv) deal at arm’s length with and are not affiliated with the Company; (v) hold the common shares as capital property; and (vi) are not an “authorized foreign bank” (as defined in the Canadian Tax Act) or an insurer that carries on business in Canada and elsewhere (each such holder, a “U.S. Resident Holder”). Generally, a U.S. Resident Holder’s common shares will be considered to be capital property of the holder provided that the holder is not a trader or dealer in securities, does not acquire, hold or dispose of (or is not deemed to have acquired, held or disposed of) the common shares in one or more transactions considered to be an adventure or concern in the nature of trade, and does not hold or use (or is not deemed to hold or use) the common shares, in the course of carrying on a business of trading or dealing in securities.
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Certain U.S.-resident entities that are fiscally transparent for U.S. federal income tax purposes (including limited liability companies) may not in all circumstances be entitled to benefits under the Convention. U.S. Resident Holders are urged to consult with their own tax advisors to determine their entitlement to benefits under the Convention based on their particular circumstances.
This summary is based upon the current provisions of the Canadian Tax Act and the Convention in effect as of the date hereof, and the Company’s understanding of the current published administrative policies and assessing practices of the Canada Revenue Agency (“CRA”) published in writing prior to the date hereof. This summary does not anticipate or take into account any changes in law or in the administrative policies or assessing practices of the CRA, whether by legislative, governmental or judicial decision or action, except only the specific proposals to amend the Canadian Tax Act publicly and officially announced by or on behalf of the Minister of Finance (Canada) prior to the date hereof (the “Tax Proposals”). This summary assumes that the Tax Proposals will be enacted in the form proposed. This summary does not take into account any other federal or any provincial, territorial or foreign tax legislation or considerations, which may differ significantly from those set out herein. No assurances can be given that the Tax Proposals will be enacted as proposed or at all, or that legislative, judicial or administrative changes will not modify or change the statements expressed herein.
This summary is of a general nature only, is not exhaustive of all possible Canadian federal income tax considerations and is not intended and should not be construed as legal or tax advice to any particular U.S. Resident Holder. No representations with respect to the income tax consequences to any holder of the common shares are made herein. Accordingly, holders of the common shares are urged to consult their own tax advisors with respect to their own particular circumstances. This summary is qualified accordingly.
Dividends
Under the Canadian Tax Act, dividends paid or credited or deemed to be paid or credited to a U.S. Resident Holder by the Company are subject to Canadian withholding tax at the rate of 25% on the gross amount of the dividend, unless such rate is reduced by the terms of an applicable tax treaty. Under the Convention, the rate of withholding tax on dividends paid or credited to a U.S. Resident Holder is generally reduced to 15% of the gross amount of the dividend (or 5% in the case of a U.S. Resident Holder that is a company beneficially owning at least 10% of the Company’s voting shares). U.S. Resident Holders should consult their own tax advisors.
Disposition of Common Shares
A U.S. Resident Holder generally will not be subject to tax under the Canadian Tax Act in respect of a capital gain realized by such U.S. Resident Holder on the disposition or deemed disposition of a common share nor will capital losses arising therefrom be recognized under the Canadian Tax Act unless the common share constitutes “taxable Canadian property” of the U.S. Resident Holder for purposes of the Canadian Tax Act, and is not “treaty protected property” of the U.S. Resident Holder for purposes of the Canadian Tax Act at the time of disposition.
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Common shares generally will not be “taxable Canadian property” to a U.S. Resident Holder unless at any time during the 60-month period immediately preceding the disposition, more than 50% of the fair market value of the common shares was derived directly or indirectly, from one or any combination of real or immovable property situated in Canada, “Canadian resource properties”, “timber resource properties” (each as defined in the Canadian Tax Act), and options in respect of or interests in, or for civil law rights in, any such properties (whether or not such property exists). Notwithstanding the foregoing, in certain circumstances set out in the Canadian Tax Act, the common shares may be deemed to be “taxable Canadian property”.
Even if a common share is “taxable Canadian property” to a U.S. Resident Holder, any capital gain realized upon the disposition or deemed disposition of such common share may not be subject to tax under the Canadian Tax Act if the common shares is “treaty-protected property” (as defined in the Canadian Tax Act). The common shares of a U.S. Resident Holder will generally constitute “treaty-protected property” for purposes of the Tax Act unless the value of the common shares is derived principally from real property situated in Canada. For this purpose, “real property” has the meaning that term has under the laws of Canada and includes any option or similar right in respect thereof and in any case, includes usufruct of real property, rights to explore for or to exploit mineral deposits, sources and other natural resources and rights to amounts computed by reference to the amount or value of production from such resources.
A U.S. Resident Holder contemplating a disposition of common shares that may constitute taxable Canadian property should consult a tax advisor prior to such disposition.
Dividends and Paying Agents
Not applicable.
Statement by Experts
Not applicable.
Documents on Display
Any statement in this Annual Report about any of the Company’s contracts or other documents is not necessarily complete. If the contract or document is filed as an exhibit to this Annual Report, the contract or document is deemed to modify the description contained in this Annual Report. You must review the exhibits themselves for a complete description of the contract or document.
After completion of the Spin-off on September 24, 2021, Arras became subject to the informational requirements of the Exchange Act. Accordingly, the Company is required to file reports and other information with the SEC, including annual reports on Form 20-F and periodic reports on Form 6-K. The SEC maintains an Internet website that contains reports and other information about issuers, like Arras, that file electronically with the SEC. The address of that website is www.sec.gov.
As an FPI, Arras is exempt under the Exchange Act from, among other things, the rules prescribing the furnishing and content of proxy statements, and the Company’s executive officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, the Company is not required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act. However, the Company intends to furnish or make available to its shareholders annual reports containing its consolidated financial statements prepared in accordance with IFRS.
Subsidiary Information
As of October 31, 2023, the Company had two wholly owned subsidiaries, Ekidos LLP and Arras Metal Ltd. Pursuant to the terms of the Stepnoe and Ekidos JV Agreement and in connection with the Asset Transfer, 100% of the equity interests in Ekidos LLP were transferred to the Company on February 3, 2022.
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| ITEM 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. |
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, foreign currency exchange rate risk and other price risk. The Company is not currently exposed to any significant interest rate risk or other price risk. The Company is exposed to foreign currency exchange rate risk with respect to cash denominated in Canadian dollars. As at October 31, 2023, a 10% strengthening (weakening) of the Canadian dollar against the U.S. dollar would have increased (decreased) the Company’s comprehensive loss by approximately $20,000 for the year ended October 31, 2023.
For additional information about the effects of foreign currency translation and foreign currency exchange rate risk on the Company’s consolidated financial statements, see the statement of comprehensive loss and statement of cash flows on pages F-5 and F-7 of the Company’s consolidated financial statements and “Note 17. Financial Instruments” on page F-28 of the Company’s consolidated financial statements and related notes included elsewhere in this Annual Report.
| ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES. |
Debt Securities
Not applicable.
Warrants and Rights
Not applicable.
Other Securities
Not applicable.
American Depositary Shares
Not applicable.
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PART II
| ITEM 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES. |
None.
| ITEM 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS. |
Not applicable.
| ITEM 15. | CONTROLS AND PROCEDURES. |
Disclosure Controls and Procedures
As of October 31, 2023, the Company has carried out an evaluation under the supervision of, and with the participation of its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based on the evaluation as of October 31, 2023, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) were effective.
Disclosure controls and procedures are designed to ensure that information required to be disclosed in the Company’s reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the Company’s reports filed under the Exchange Act is accumulated and communicated to its management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Management’s Annual Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as that term is defined in Rule 13a-15(f) under the Exchange Act. Under the supervision and with the participation of the Company’s management, including its principal executive and principal financial officers, the Company assessed, as of October 31, 2023, the effectiveness of its internal control over financial reporting. This assessment was based on criteria established in the Internal Control–Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the Company’s assessment using those criteria, management concluded that its internal control over financial reporting as of October 31, 2023 was effective.
A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the internal control system are met. Because of the inherent limitations of any internal control system, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected.
Attestation Report of the Registered Public Accounting Firm
This Annual Report does not include an attestation report of the Company’s registered public accounting firm due to a transition period established by rules of the SEC for newly public companies (i.e. those who’ve listed in the previous five years). In addition, the Company’s registered public accounting firm will not be required to opine on the effectiveness of its internal control over financial reporting until the Company is no longer an emerging growth company.
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Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting during the fiscal period ended October 31, 2023 that materially affected, or were reasonably likely to materially affect, the Company’s internal control over financial reporting.
| ITEM 16. | [RESERVED]. |
| ITEM 16A. | AUDIT COMMITTEE AND FINANCIAL EXPERT. |
The Arras Board has determined that Christian Milau, Daniel J. Kunz, and Vera Kobalia each satisfy the “independence” requirements set forth in Rule 10A-3 under the Exchange Act The Arras Board has also determined that Christian Milau, Daniel J. Kunz, and Vera Kobalia shall each be considered an “audit committee financial expert” as defined in Item 16A of Form 20-F under the Exchange Act.
| ITEM 16B. | CODE OF ETHICS. |
Arras has adopted a Code of Business Conduct and Ethics that applies to all of its directors, officers and employees, including its principal executive officer, principal financial officer, principal accounting officer, and those of its officers performing similar functions. If the Arras Board approves an amendment to or waiver from any provision of the Code of Business Conduct and Ethics, Arras will disclose the required information pertaining to such amendment or waiver on its website. The information contained on the Company’s website is not incorporated by reference in this Annual Report.
| ITEM 16C. | PRINCIPAL ACCOUNTANT FEES AND SERVICES. |
Auditors
The
Company’s independent registered auditors are Smythe LLP (PCAOB ID No,
Audit Fees
During the year ended October 31, 2023, Smythe billed the Company audit fees and expenses in the amount of $31,651.
Audit-Related Fees
During the year ended October 31, 2023, Smythe billed the Company audit-related fees and expenses in the amount of $29,241.
| 65 |
Tax Fees
There were no tax fees and expenses billed by Smythe during the year ended October 31, 2023.
All Other Fees
There were no other fees and expenses billed by Smythe during the year ended October 31, 2023.
Audit Committee’s Pre-Approval Policies and Procedures
Section 10A(i) of the Exchange Act prohibits the Company’s auditors from performing audit services for it as well as any services not considered to be “audit services” unless such services are pre-approved by the Audit Committee of the Arras Board, or unless the services meet certain de minimis standards.
The Audit Committee’s charter, effective as of December 7, 2021, provides that the Audit Committee (i) must approve in advance any and all audit services and permissible non-audit services to be performed by the auditors for the Company or its subsidiary entities that the Audit Committee deems advisable in accordance with applicable requirements and Arras Board-approved policies and procedures, and adopt and implement policies for such pre-approval; (ii) must consider the impact of such service and fees on the independence of the auditor; and (iii) may delegate pre-approval authority to a member of the Audit Committee, provided that the decisions of any member of the Audit Committee to whom this authority has been delegated must be presented to the full Audit Committee at its next scheduled Audit Committee meeting.
| ITEM 16D. | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES. |
Not applicable.
| ITEM 16E. | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS. |
None.
| ITEM 16F. | CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT. |
None.
| ITEM 16G. | CORPORATE GOVERNANCE. |
Not applicable.
| ITEM 16H. | MINE SAFETY DISCLOSURE. |
Not applicable.
| ITEM 16I. | DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS. |
Not applicable.
| ITEM 16J. | INSIDER TRADING POLICIES. |
Not applicable.
| ITEM 16K. | CYBERSECURITY. |
Not applicable.
| 66 |
PART III
| ITEM 17. | FINANCIAL STATEMENTS. |
Historical Financial Statements
Please refer to pages F-1 through F-30 of this Annual Report.
| ITEM 18. | FINANCIAL STATEMENTS. |
Not applicable.
| ITEM 19. | EXHIBITS . |
The Company has filed the following documents as exhibits to this Annual Report:
| 67 |
| X | Filed herewith. |
| XX | Furnished herewith. |
| + | Indicates a management contract or compensatory plan, contract or arrangement. | |
| ‡ | Portions of this exhibit have been omitted in accordance with Form 20-F. The omitted information is not material and would likely cause competitive harm to the registrant if publicly disclosed. The registrant hereby agrees to furnish supplementally an unredacted copy of this exhibit to the Securities and Exchange Commission upon request. |
| * | The following financial information from the Annual Report on Form 20-F of Arras Minerals Corp. for the fiscal year ended October 31, 2023, formatted in XBRL (Extensible Business Reporting Language): Statement of Financial Position, Statement of Comprehensive Loss, Statement of Changes in Shareholders’ Equity, Statement of Cash Flows. |
| 68 |
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
| ARRAS MINERALS CORP. | ||
| By: | /s/ Timothy T. Barry | |
| Timothy T. Barry Chief Executive Officer |
||
| By: | /s/ Christopher Richards | |
| Christopher Richards Chief Financial Officer |
||
Date: February 28, 2024
| 69 |
Consolidated Financial Statements
For the years ended October 31, 2023 and 2022
(Expressed in United States dollars)
| Index | Page | |||
| Report of Independent Registered Public Accounting Firm | F-2 | |||
| Consolidated Financial Statements | ||||
| Consolidated Statements of Financial Position | F-4 | |||
| Consolidated Statements of Comprehensive Loss | F-5 | |||
| Consolidated Statements of Changes in Shareholders’ Equity | F-6 | |||
| Consolidated Statements of Cash Flows | F-7 | |||
| Notes to the Consolidated Financial Statements | F-8 — F-30 | |||
| F-1 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE SHAREHOLDERS AND DIRECTORS OF ARRAS MINERALS CORP.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of financial position of Arras Minerals Corp. (the “Company”) and subsidiaries as of October 31, 2023 and 2022, and the related consolidated statements of comprehensive loss, changes in shareholders’ equity, and cash flows for the years ended October 31, 2023 and 2022, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of October 31, 2023 and 2022, and the results of its operations and its cash flows for the years ended October 31, 2023 and 2022, in conformity with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board.
Material Uncertainty Related to Going Concern
Without modifying our opinion, we draw attention to Note 1 of the consolidated financial statements, which indicates that the Company incurred a net loss during the year ended October 31, 2023 and has not yet commenced revenue producing operations. As stated in Note 1 to the consolidated financial statements, these conditions, along with other matters as set forth in Note 1, indicate that a material uncertainty exists that casts substantial doubt on the Company’s ability to continue as a going concern.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
| F-2 |
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.
We have determined that there are no critical audit matters to communicate in our auditors’ report.
/s/
Smythe LLP, Chartered Professional Accountants
We have served as the Company's auditor since 2021.
February 27, 2024
| F-3 |
ARRAS MINERALS CORP.
Consolidated Statements of Financial Position
As at October 31, 2023 and 2022
(Expressed in United States Dollars)
| Notes | October 31, 2023 | October 31, 2023 | ||||||||||
| $ | $ | |||||||||||
| Assets | ||||||||||||
| Current | ||||||||||||
| Cash and cash equivalents | 16 | |||||||||||
| Other receivables | ||||||||||||
| Prepaid expenses and deposits | 7 | |||||||||||
| Non-Current | ||||||||||||
| Office and equipment | 4,5,9 | |||||||||||
| Mineral properties | 4,5,6,10 | |||||||||||
| Right-of use assets | 11 | |||||||||||
| Prepaid expenses and deposits | 7 | |||||||||||
| Total Assets | ||||||||||||
Liabilities | ||||||||||||
| Current | ||||||||||||
| Accounts payable and accrued liabilities | 14 | |||||||||||
| Lease liability | 11 | |||||||||||
| Due to related party | 14, 20 | |||||||||||
| Non-Current | ||||||||||||
| Lease liability | 11 | |||||||||||
| Total Liabilities | ||||||||||||
Shareholders’ Equity | ||||||||||||
| Share capital | 12 | |||||||||||
| Reserves | 12 | |||||||||||
| Deficit | ( | ) | ( | ) | ||||||||
| Total Shareholders’ Equity | ||||||||||||
| Total Liabilities and Shareholders’ Equity | ||||||||||||
On behalf of the Board
| /s/ Brian Edgar | /s/ Christian Milau | |
| Director | Director | |
The accompanying notes are an integral part of these in consolidated financial statements.
| F-4 |
ARRAS MINERALS CORP.
Consolidated Statements of Comprehensive Loss
For the years ended October 31, 2023 and 2022
(Expressed in United States Dollars)
| Notes | 2023 | 2022 | ||||||||||
| $ | $ | |||||||||||
| Expenses | ||||||||||||
| Exploration | 9,12 | |||||||||||
| Personnel | 12,14 | |||||||||||
| Marketing and shareholders’ communication | ||||||||||||
| Directors’ fees | 12,14 | |||||||||||
| Professional services | 14 | |||||||||||
| Office and administrative | 11,14 | |||||||||||
| Depreciation | 9,11 | |||||||||||
| Loss from operations | ( | ) | ( | ) | ||||||||
| Foreign currency exchange gain (loss) | ( | ) | ||||||||||
| Interest income | ||||||||||||
| Other income (expenses) | ( | ) | ||||||||||
Net and Comprehensive Loss for the Year | ( | ) | ( | ) | ||||||||
| ( | ) | ( | ) | |||||||||
Weighted Average Number of Common Shares Outstanding | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-5 |
ARRAS MINERALS CORP.
Consolidated Statements of Changes in Shareholders’ Equity
For the years ended October 31, 2023 and 2022
(Expressed in United States Dollars)
| Share Capital | Reserves | |||||||||||||||||||||||
| Common | Shareholders’ | |||||||||||||||||||||||
| Shares | Amount | Options | Warrants | Deficit | Equity | |||||||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||||||
| Balance, October 31, 2022 | ( | ) | ||||||||||||||||||||||
| Private placement, net of share issue costs | ||||||||||||||||||||||||
| Share-based payment | — | |||||||||||||||||||||||
| Net loss for the year | — | ( | ) | ( | ) | |||||||||||||||||||
| Balance, October 31, 2023 | ( | ) | ||||||||||||||||||||||
| Share Capital | Reserves | |||||||||||||||||||||||
| Common | Shareholders’ | |||||||||||||||||||||||
| Shares | Amount | Options | Warrants | Deficit | Equity | |||||||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||||||
| Balance, October 31, 2021 | ( | ) | ||||||||||||||||||||||
| Private placement, net of share issue costs | ||||||||||||||||||||||||
| Shares issued to agents | ||||||||||||||||||||||||
| Share-based payment | — | |||||||||||||||||||||||
| Net loss for the year | — | ( | ) | ( | ) | |||||||||||||||||||
| Balance, October 31, 2022 | ( | ) | ||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-6 |
ARRAS MINERALS CORP.
Consolidated Statement of Cash Flows
For the years ended October 31, 2023 and 2022
(Expressed in United States Dollars)
| 2023 | 2023 | |||||||
| $ | $ | |||||||
| Operating Activities | ||||||||
| Net loss for the year | ( | ) | ( | ) | ||||
| Items not affecting cash | ||||||||
| Depreciation | ||||||||
| Share-based payment | ||||||||
| Interest expense | ||||||||
| Unrealized foreign exchange loss | ||||||||
| ( | ) | ( | ) | |||||
| Changes in non-cash working capital, net of acquisition | ||||||||
| Other receivables | ||||||||
| Prepaid expenses and deposits | ( | ) | ( | ) | ||||
| Due to related party | ||||||||
| Accounts payable and accrued liabilities | ( | ) | ||||||
| Due from related party | ||||||||
| Other non-current assets | ( | ) | ||||||
| Cash Used in Operating Activities | ( | ) | ( | ) | ||||
| Financing Activities | ||||||||
| Issuance of common shares, net of share issue costs | ||||||||
| Repayment of lease liability | ( | ) | ( | ) | ||||
| Payment of share issuance costs | ( | ) | ||||||
| Cash Provided by Financing Activities | ||||||||
| Investing Activities | ||||||||
| Purchase of office and equipment | ( | ) | ( | ) | ||||
| Net cash received on acquisition of Ekidos Minerals LLP | ||||||||
| Loans to Ekidos Minerals LLP | ( | ) | ||||||
| Cash Used in Investing Activities | ( | ) | ( | ) | ||||
| Net Change in Cash and Cash Equivalents | ( | ) | ( | ) | ||||
| Cash and Cash Equivalents, Beginning of Year | ||||||||
| Cash and Cash Equivalents, End of Year | ||||||||
Supplemental Cash Flow Information (Note 16)
The accompanying notes are an integral part of these consolidated financial statements.
| F-7 |
Arras Minerals Corp.
Notes to the Consolidated Financial Statements
For years ended October 31, 2023 and 2022
(Expressed in United States dollars)
| 1. | NATURE OF OPERATIONS AND GOING CONCERN |
Arras Minerals Corp. (the “Company”) was incorporated on February 5, 2021 under the Business Corporations Act (British Columbia) as part of an asset purchase agreement to reorganize Silver Bull Resources, Inc. (“Silver Bull”) as described in Note 5. The Company’s head office is located at 1605-777 Dunsmuir Street, Vancouver, British Columbia, Canada, V7Y 1K4.
The Company is engaged in the acquisition, exploration, and
development of mineral property interests in Kazakhstan. On February 3, 2022, the Company purchased
On February 10, 2023, Arras Metals Ltd. (“Arras Metals”) was incorporated at Astana International Financial Centre in Astana, Republic of Kazakhstan, as a wholly owned subsidiary of the Company, for the purpose of holding mineral exploration investments.
The Company’s assets consist
primarily of the option to acquire a
The Company has not yet determined whether the properties contain mineral reserves where extraction is both technically feasible and commercially viable. The business of mining and the exploration for minerals involves a high degree of risk and there can be no assurance that such activities will result in profitable mining operations.
These consolidated financial statements
are prepared on a going concern basis, which contemplate that the Company will continue in operation for the foreseeable future and will
be able to realize its assets and discharge its liabilities in the normal course of business. The Company has incurred operating losses
since inception and has no current sources of revenue or cash inflows from operations. The Company relies on share issuances in order
to fund its exploration and other business objectives. During the year ended October 31, 2023, the Company raised gross amounts of $
The Company’s ability to continue as a going concern and fulfill its commitments under the Beskauga option agreement and exploration licenses is dependent upon successful execution of its business plan, raising additional capital, or evaluating other strategic alternatives, such as the Teck Agreement. The Company expects to continue to raise the necessary funds primarily through the issuance of common shares and funding from strategic partners. There can be no guarantees that future equity financing will be available, in which case the Company may need to reduce its exploration activities. There can be no assurance that management’s plan will be successful. If the going concern assumption was not appropriate for these consolidated financial statements, then adjustments would be necessary to the carrying values of assets and liabilities, the reported expenses and the balance sheet classifications used. Such adjustments could be material.
| F-8 |
Arras Minerals Corp. Notes to the Consolidated Financial Statements For years ended October 31, 2023 and 2022 (Expressed in United States dollars) |
| 2. | BASIS OF PRESENTATION |
| a) | Statement of compliance |
These consolidated financial statements were prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”) appliable to the preparation of financial statements.
These consolidated financial statements are presented in $USD, which is the Company’s and its subsidiaries’ functional currency.
| b) | Basis of measurement |
These consolidated financial statements have been prepared on a historical cost basis, except for certain financial instruments which are measured at fair value. In addition, these consolidated financial statements have been prepared using the accrual basis of accounting, except for cash flow information. Certain comparative figures have been reclassified to conform to the presentation in the current period. Such reclassifications were not considered significant.
| c) | Approval of the consolidated financial statements |
These consolidated financial statements were authorized for issue by the Board of Directors on February 27, 2024.
| 3. | SIGNIFICANT ACCOUNTING POLICIES |
The accounting policies set out below have been applied in these consolidated financial statements.
| a) | Foreign currency translation |
Consolidated statement of financial position: monetary assets and liabilities are translated into USD using period end exchange rates. Non-monetary assets and liabilities are translated into USD using historical exchange rates. All exchange differences are recognized in profit or loss.
Consolidated statement of comprehensive loss: income, expenses, and other comprehensive income are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions). All exchange differences are recognized in profit or loss.
Consolidated statement of changes in shareholders’ equity: all resulting exchange differences are recognized as a separate component of equity and in other comprehensive loss.
| b) | Financial instruments |
Recognition and measurement of financial assets
The Company recognizes a financial asset when it becomes a party to the contractual provisions of the instrument.
Classification of financial assets
The Company classifies financial assets at initial recognition as financial assets: measured at amortized cost, measured at fair value through other comprehensive income or measured at fair value through profit or loss.
| i. | Financial assets measured at amortized cost |
A financial asset that meets both of the following conditions is classified as a financial asset measured at amortized cost:
| ● | The Company’s business model for such financial assets is to hold the assets in order to collect contractual cash flows. |
| ● | The contractual terms of the financial asset gives rise on specified dates to cash flows that are solely payments of principal and interest on the amount outstanding. |
| F-9 |
Arras Minerals Corp. Notes to the Consolidated Financial Statements For years ended October 31, 2023 and 2022 (Expressed in United States dollars) |
A financial asset measured at amortized cost is initially recognized at fair value plus transaction costs directly attributable to the asset. After initial recognition, the carrying amount of the financial asset measured at amortized cost is determined using the effective interest method, net of impairment loss, if necessary. As at October 31, 2023 and 2022, the Company has no financial assets as amortized cost.
| ii. | Financial assets measured at fair value through other comprehensive income (“FVTOCI”) |
A financial asset measured at fair value through other comprehensive income is recognized initially at fair value plus transaction cost directly attributable to the asset. After initial recognition, the asset is measured at fair value with changes in fair value included as “financial asset at fair value through other comprehensive income” in other comprehensive income. As at October 31, 2023 and 2022, the Company has no financial assets as FVTOCI.
| iii. | Financial assets measured at fair value through profit or loss (“FVTPL”) |
A financial asset measured at fair value through profit or loss is recognized initially at fair value with any associated transaction costs being recognized in profit or loss when incurred. Subsequently, the financial asset is re-measured at fair value, and a gain or loss is recognized in profit or loss in the reporting period in which it arises. The Company classifies its cash and cash equivalents as fair value through profit or loss.
Derecognition of financial assets
The Company derecognizes a financial asset if the contractual rights to the cash flows from the asset expire, or the Company transfers substantially all the risks and rewards of ownership of the financial asset. Any interests in transferred financial assets that are created or retained by the Company are recognized as a separate asset or liability. Gains and losses on derecognition are generally recognized in the statement of comprehensive loss. However, gains and losses on derecognition of financial assets classified as FVTOCI remain within accumulated other comprehensive income (loss).
Recognition and measurement of financial liabilities
The Company recognizes financial liabilities when it becomes a party to the contractual provisions of the instruments.
Classification of Financial Liabilities
The Company classifies financial liabilities at initial recognition as financial liabilities: measured at amortized cost or measured at fair value through profit or loss.
i. Financial liabilities measured at amortized cost
A financial liability at amortized cost is initially measured at fair value less transaction cost directly attributable to the issuance of the financial liability. Subsequently, the financial liability is measured at amortized cost based on the effective interest rate method. The Company classifies its accounts payable and accrued liabilities, lease liability and due to related party as amortized cost.
ii. Financial liabilities measured at fair value through profit or loss
A financial liability measured at fair value through profit or loss is initially measured at fair value with any associated transaction costs being recognized in profit or loss when incurred. Subsequently, the financial liability is re-measured at fair value, and a gain or loss is recognized in profit or loss in the reporting period in which it arises. As at October 31, 2023 and 2022, the Company has no financial liabilities at fair value through profit or loss.
Derecognition of financial liabilities
The Company derecognizes a financial liability when the financial liability is discharged, cancelled or expired. Generally, the difference between the carrying amount of the financial liability derecognized and the consideration paid and payable, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss.
Offsetting financial assets and liabilities
Financial assets and liabilities are offset and the net amount is presented in the consolidated statement of financial position only when the Company has a legally enforceable right to set off the recognized amounts and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.
All financial assets except for those at fair value through profit or loss are subject to review for impairment at least at each reporting date. Financial assets are impaired when there is any objective evidence that a financial asset or a group of financial assets is impaired. Different criteria to determine impairment are applied for each category of financial assets, which are described above.
| F-10 |
Arras Minerals Corp. Notes to the Consolidated Financial Statements For years ended October 31, 2023 and 2022 (Expressed in United States dollars) |
| c) | Fair value hierarchy |
Fair value measurements of financial instruments are required to be classified using a fair value hierarchy that reflects the significant of inputs used in making the measurements. The levels of the fair value hierarchy are defined as follows:
Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 – Inputs for assets or liabilities that are not based on observable market data.
Company’s financial instruments classified as Level 1 in the fair value hierarchy are cash and cash equivalents, other receivable, prepaid expenses and deposits, loans to Ekidos, accounts payable and accrued liabilities, and due to related party. The lease liability is classified as Level 3 financial instruments. The carrying values approximate the fair values due to the short-term maturity of these instruments. There were no transfers between fair value levels during the years ended October 31, 2023 and 2022.
| d) | Mineral properties |
Costs directly related to the acquisition of mineral properties are capitalized. Option payments are considered acquisition costs if the Company has the intention of exercising the underlying option.
Exploration, evaluation and property maintenance costs incurred on sites without an existing mine and on areas outside the boundary of a known mineral deposit which contains proven and probable reserves are expensed as incurred up to the date of establishing that property costs are economically recoverable and that the project is technically feasible.
Mineral properties are not subject to depletion or amortization, but rather are tested for impairment when circumstances indicate that the carrying value may not be recoverable.
Development expenditures are those incurred subsequent to the establishment of economic recoverability and after receipt of project development approval from the Board of Directors. The approval from the Board of Directors will be dependent upon the Company obtaining sufficient financial resources, permits, and licenses to develop the mineral property. Development costs are capitalized and included in the carrying amount of the related property.
Mineral property and mine development costs capitalized are amortized using the units-of-production method over the estimated life of the proven and probable reserves.
| e) | Office and equipment |
Items of office and equipment are recorded at cost less accumulated depreciation. Cost includes all expenditures incurred to bring assets to the location and condition necessary for them to be operated in the manner intended by management, including estimated decommissioning and restoration costs and, where applicable, borrowing costs. If significant parts of an item of office and equipment have different useful lives, then they are accounted for as separate items (major components) of office and equipment.
No depreciation is recorded until the asset is substantially complete and ready for use. Capital assets are depreciated over their estimated useful lives as follows:
| Mining equipment | Straight-line over five years |
| Computer equipment and software | Straight-line over one year |
| Vehicles | Straight-line over five to ten years |
| Office equipment | Straight-line over three years |
| F-11 |
Arras Minerals Corp. Notes to the Consolidated Financial Statements For years ended October 31, 2023 and 2022 (Expressed in United States dollars) |
| f) | Impairment of non-financial assets |
The Company reviews the carrying amounts of its non-financial assets, including mineral properties and office and equipment every reporting period. If there is any indication that the assets or Cash-Generating Units (the “CGU”) may not be fully recoverable, the recoverable amount of the asset or CGU is estimated in order to determine the extent of the impairment loss, if any. CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflow from other assets or group of assets.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows to be derived from continuing use of the asset or CGU 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. Fair value less cost to sell is the amount obtainable from the sale of an asset or CGU in an arm’s length transaction between knowledgeable, willing parties, less the cost of disposal. When a binding sale agreement is not available, fair value less costs to sell is estimated using a discounted cash flow approach with inputs and assumptions consistent with those at market. If the recoverable amount of an asset or CGU is estimated to be less than its carrying amount, the carrying amount of the asset or CGU is reduced to its recoverable amount. An impairment loss is recognized immediately in profit or loss. Where an impairment loss subsequently reverses, the carrying amount of the asset or CGU is increased to the revised estimate of its recoverable amount, such that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized.
| g) | Restoration provisions |
The Company recognizes liabilities for legal, contractual and constructive obligations for decommissioning and restoration when those obligations result from the acquisition, construction, development or normal operation of the asset. Provisions are measured at the present value of the expected expenditures required to settle the obligation using a discount rate reflecting the time value of money and risks specific to the liability. Upon initial recognition of the liability, the corresponding decommissioning and restoration cost is capitalized to the carrying amount of the related asset and amortized as an expense over the useful life of the related asset. Following the initial recognition of the restoration provision, the carrying amount of the liability is increased for the passage of time and adjusted for changes to the current market-based discounted rate and the amount or timing of cash flows needed to settle the obligation.
| h) | Other provisions |
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of past events, and it is probable that an outflow of resources that can be reliably estimated will be required to settle the obligation. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation.
| i) | Income taxes |
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to taxation authorities. The tax rates and tax laws used are those that are enacted or substantively enacted by the reporting date.
Deferred income tax is provided for based on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax liabilities are generally recognized for all taxable temporary differences, and deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Such assets and liabilities are not recognized if the temporary difference arises from goodwill or from the initial recognition of assets and liabilities in a transaction that is not a business combination and affects neither the taxable profit nor the accounting profit. The change in the net deferred income tax asset or liability is included in net income (loss) except for deferred income tax relating to equity items, which are recognized directly in equity. Deferred income tax assets and liabilities are measured using the substantively enacted statutory income tax rates which are expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled.
The carrying amount of deferred tax assets is reviewed at each financial position reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
| F-12 |
Arras Minerals Corp. Notes to the Consolidated Financial Statements For years ended October 31, 2023 and 2022 (Expressed in United States dollars) |
Deferred income tax assets and liabilities are offset only if a legally enforceable right exists to offset current tax assets against liabilities and the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on the same taxable entity.
The determination of current and deferred taxes requires interpretation of tax legislation, estimates of expected timing of reversal of deferred tax assets and liabilities, and estimates of future earnings.
| j) | Share-based compensation |
The Company’s stock option plan (Note 12) allows the Company’s employees, directors, officers and service providers to acquire shares of the Company. The fair value of options granted is recognized as share-based payment expense with a corresponding increase in reserves. An individual is classified as an employee when the individual is an employee for legal or tax purposes (direct employee) or provides services similar to those performed by a direct employee. Where stock options are subject to vesting, each vesting tranche is considered a separate award with its own vesting period and grant date fair value. The fair value of each tranche is measured at the grant date using the Black-Scholes option pricing model, taking into account the terms and conditions upon which the options were granted. Share-based payment expense is recognized over the tranche’s vesting period by a charge to profit or loss. At each financial position reporting date, the amount recognized as an expense is adjusted to reflect the actual number of stock options that are expected to vest. In situations where equity instruments are issued to service providers and some or all of the goods or services received by the entity as consideration cannot be specifically identified, they are measured at the fair value of the share-based payment. Otherwise, share-based payments are measured at the fair value of goods or services received.
Equity-settled share-based compensation arrangements such as the Company’s stock option plan and restricted share unit (“RSUs”) plan are measured at fair value at the date of grant and recorded within equity. The restricted share unit plan includes restricted share units without performance-based criteria. The fair value at grant date of all share-based compensation is recognized as compensation expense over the vesting period, with a corresponding credit to shareholders’ equity. The amount recognized as an expense is adjusted to reflect share options forfeited.
| k) | Share capital |
Equity instruments are contracts that give a residual interest in the net assets of the Company. Financial instruments issued by the Company are classified as equity only to the extent that they do not meet the definition of a financial asset or financial liability. The Company’s common shares and warrants are classified as equity instruments. Share issuance costs are recorded against share proceeds.
| l) | Loss per share |
Basic loss per share is computed by dividing net loss available to common shareholders by the weighted average number of shares outstanding during the reporting period. Diluted loss per share is computed similarly to basic loss per share except that the weighted average shares outstanding are increased to include additional shares for the assumed exercise of stock options and warrants, if dilutive. The number of additional shares is calculated by assuming that outstanding stock options and warrants were exercised and that the proceeds from such exercises were used to acquire common shares at the average market price during the reporting periods.
| m) | Non-monetary transactions |
Shares issued for consideration other than cash are valued at the fair value of assets received or services rendered. If the fair value of assets received or services rendered cannot be reliably measured, shares issued for consideration will be valued at the quoted market price at the date of issuance.
| n) | Economic recoverability of future economic benefits of exploration and evaluation assets |
The Company capitalizes the acquisition costs of mineral properties. Exploration and evaluation expenditures are expensed as incurred.
| F-13 |
Arras Minerals Corp. Notes to the Consolidated Financial Statements For years ended October 31, 2023 and 2022 (Expressed in United States dollars) |
When a project is deemed to no longer have commercially viable prospects for the Company, mineral property assets in respect of that project are deemed to be impaired. As a result, those mineral property assets, in excess of estimated recoveries, are written off to net income (loss). The Company assesses mineral properties for indicators of impairment at each reporting date. Management uses several criteria in its assessments of indicators of impairment and probability of future economic benefit including geological data, scoping studies, accessible facilities, and existing and future permits.
| o) | Principle of consolidation |
Subsidiaries are entities controlled by the Company and are included in the consolidated financial statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries are changed where necessary to align with the policies adopted by the Company. All intercompany balances are eliminated on consolidation.
The consolidated financial statements include accounts of the Company and its wholly owned subsidiaries, Ekidos, from the date of acquisition on February 3, 2022 and Arras Metals from the date of incorporation.
| p) | Leases |
As per IFRS 16 Leases (“IFRS 16”), at inception, the Company assesses whether a contract contains an embedded lease. A contract contains a lease when the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration.
The Company, as lessee, is required to recognize a right-of-use asset (“ROU asset”), representing its right to use the underlying asset, and a lease liability, representing its obligation to make lease payments.
The Company may elect to not apply IFRS 16 to leases with a term of less than 12 months, or to low value assets, which is made on an asset by asset basis.
The Company recognizes a ROU asset and a lease liability at the commencement of the lease. The ROU asset is initially measured based on the present value of lease payments, plus initial direct cost, less any incentives received. It is subsequently measured at cost less accumulated amortization, impairment losses and adjusted for certain remeasurements of the lease liability. The ROU asset is amortized from the commencement date over the shorter of the lease term or the useful life of the underlying as set. The ROU asset is subject to testing for impairment if there is an indicator of impairment.
The lease liability is initially measured at the present value of the lease payments that are paid at the commencement date, discounted by the interest rate implicit in the lease, or if that rate cannot be readily determined, the incremental borrowing rate. The incremental borrowing rate is the rate which the operation would have to pay to borrow over a similar term and with similar security, the funds necessary to obtain an asset of similar value to the ROU asset in a similar economic environment.
Lease payments included in the measurement of the lease liability are comprised of:
• fixed payments, including in-substance fixed payments;
• variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;
• amounts expected to be payable under a residual value guarantee;
• the exercise price under a purchase option that the Company is reasonably certain to exercise;
• lease payments in an optional renewal period if the Company is reasonably certain to exercise an extension option; and
• penalties for early termination of a lease unless the Company is reasonably certain not to terminate early.
The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments made. It is remeasured when there is a change in future lease payments arising from a change in an index or a rate, a change in the estimate of the amount expected to be payable under a residual value guarantee, or as appropriate, changes in the assessment of whether a purchase or extension option is reasonably certain to be exercised or a termination option is reasonably certain not to be exercised.
| F-14 |
Arras Minerals Corp. Notes to the Consolidated Financial Statements For years ended October 31, 2023 and 2022 (Expressed in United States dollars) |
Variable lease payments that do not depend on an index or a rate not included in the initial measurement of the ROU asset and lease liability are recognized as an expense in profit or loss in the period in which they are incurred.
The ROU assets are presented within “Right-of-use assets” and the lease liabilities are presented in “Lease liability” on the consolidated statement of financial position.
| q) | Cash and cash equivalents |
Cash and cash equivalents consist of cash on hand, bank deposits and highly liquid investments with an original maturity of three months or less.
| r) | New standards not yet adopted |
In May 2021, the IASB issued Deferred Tax related to Assets and Liabilities Arising from a Single Transaction which amended IAS 12, Income Taxes (“IAS 12”). The amendments narrowed the scope of the recognition exemption in IAS 12, relating to the recognition of deferred tax assets and liabilities, so that it no longer applies to transactions that, on initial recognition, give rise to equal taxable and deductible temporary differences such as leases and reclamation and closure cost provisions. The amendments are effective for annual reporting periods beginning on or after January 1, 2023 to transactions that occur on or after the beginning of the earliest comparative period presented. Earlier application is permitted. At this time, the Company does not expect this standard to affect the Company’s financial position, results of operations or cash flows and disclosures.
Other recent accounting pronouncements issued by the IASB did not or are not expected to have a significant impact on the Company’s present or future consolidated financial statements.
| s) | Critical accounting estimates, judgments and assumptions |
The preparation of the Company’s consolidated financial statements in conformity with IFRS requires management to make judgments, estimates, and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The Company’s management reviews these estimates and underlying assumptions on an ongoing basis, based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to estimates are adjusted for prospectively in the period in which the estimates are revised.
| i) | Determination of functional currency |
The determination of the Company’s and its subsidiaries’ functional currency is a matter of judgment based on an assessment of the specific facts and circumstances relevant to determining the primary economic environment of the Company. The Company reconsiders the functional currencies used when there is a change in events and conditions considered in determining the primary economic environment of the entities.
| ii) | Going concern |
The assessment of whether the going concern assumption is appropriate requires management to take into account all available information about the future, which is at least, but not limited to, 12 months from the end of the reporting period. The Company is aware that material uncertainties exist related to events or conditions that cast substantial doubt upon the Company’s ability to continue as a going concern.
| F-15 |
Arras Minerals Corp. Notes to the Consolidated Financial Statements For years ended October 31, 2023 and 2022 (Expressed in United States dollars) |
| iii) | Asset acquisition versus business combination |
Management had to apply judgment with respect to whether the acquisition through the asset purchase agreement (as discussed in Notes 4 and 5) was an asset acquisition or business combination. The assessment required management to assess the inputs, processes and outputs of the company acquired at the time of the acquisition. Pursuant to the assessment, the asset purchase agreement with Silver Bull and acquisition of Ekidos were considered to be asset acquisitions.
| iv) | Valuation of mineral properties |
The Company carries the acquisition costs of its mineral properties at cost less any provision for impairment. The Company undertakes periodic reviews of the carrying values of mineral properties and whenever events or changes in circumstances indicate that their carrying values may exceed their fair value. In undertaking these reviews, management of the Company is required to make significant estimates. These estimates are subject to various risks and uncertainties, which may ultimately have an effect on the expected recoverability of the carrying values of the mineral properties and related expenditures.
| v) | Fair value of net assets acquired |
The Company makes estimates in determining the fair value of the assets acquired as part of an acquisition. Management exercises judgment in estimating the probability and timing of when cash flows are expected to be achieved, which is used as the basis for estimating fair value. Future performance results that differ from management’s estimates could result in changes to liabilities recorded, which are recorded as they arise through profit or loss.
| vi) | Indicators of impairment |
Judgement is required in assessing whether certain factors would be considered an indicator of impairment. The Company considers both external and internal sources of information in assessing whether there are any indications that the Company’s assets are impaired, or reversal of impairment is needed. Factors considered include current and forecast economic conditions, internal projections and the Company’s market capitalization relative to its net asset carrying amount.
| vii) | Share-based payments |
The computation amount of share-based compensation is not based on historical cost but is derived based on subjective assumptions input into appropriate option pricing model to determine fair value at granting and the reporting dates. The model requires management to make forecasts as to future events, including estimates of: expected price volatility, the average future hold period of options and units, and the appropriate risk-free rate of interest. Changes in these input assumptions can significantly affect the fair value estimate.
| viii) | Right-of-use assets and lease liabilities |
The right of use assets and lease liabilities are measured by discounting the future lease payments at incremental borrowing rate. The incremental borrowing rate is an estimated rate the Company would have to obtain an asset of a similar value to the right-of-use assets in a similar economic environment.
| ix) | Related party transactions |
Silver Bull incurs certain expenditures on behalf of the Company (note 14). If specific identification of the expenses is not practicable, a proportional cost allocation based on management's estimation is applied. A change to the cost allocation could impact the Company's operating expenses.
| 4. | ACQUISITION OF EKIDOS MINERALS LLP |
On February 3, 2022, the Company purchased
The acquisition has been accounted for by the Company as a purchase of assets and assumption of liabilities. The acquisition did not qualify as a business combination under IFRS 3 - Business Combinations, as the significant inputs, processes and outputs, that together constitute a business, did not exist in Ekidos at the time of acquisition.
| F-16 |
Arras Minerals Corp. Notes to the Consolidated Financial Statements For years ended October 31, 2023 and 2022 (Expressed in United States dollars) |
| Purchase price: | ||||
| Cash | $ | |||
| Total consideration | ||||
| Net assets acquired: | ||||
| Cash | ||||
| Other receivables | ||||
| Prepaid expenses and deposits | ||||
| Vehicles, Office and equipment | ||||
| Mineral properties | ||||
| Accounts payable and accrued liabilities | ( | ) | ||
| Loans payable to Arras | ( | ) | ||
| Total net assets acquired | $ | |||
| 5. | ASSET PURCHASE AND SEPARATION AND DISTRIBUTION AGREEMENTS |
On March 19, 2021, pursuant to an
asset purchase agreement with Silver Bull, a majority shareholder (
| Mineral properties | $ | |||
| Mining equipment | ||||
| Computer equipment and software | ||||
| Loans to Ekidos (the “Silver Bull Loans”) (Note 8) | ||||
| Net assets acquired | $ | |||
At the date of the Distribution, the assets transferred did not meet the definition of a business, as there were no substantive processes in place, and the transaction has been accounted for as an acquisition of assets, rather than a business combination. The transaction is accounted for in accordance with IFRS 2 – Share-based Payments.
| F-17 |
Arras Minerals Corp. Notes to the Consolidated Financial Statements For years ended October 31, 2023 and 2022 (Expressed in United States dollars) |
| 6. | BESKAUGA OPTION AGREEMENT |
On August 12, 2020,
Silver Bull entered into the Beskauga Option Agreement with Copperbelt AG (“Copperbelt”) pursuant to which it has the exclusive
right and option to acquire Copperbelt’s right, title and
On March 19, 2021, pursuant
to an asset purchase agreement, Silver Bull transferred all its rights, title and interest in and to the Beskauga Option Agreement to
the Company. The consideration payable by the Company to Silver Bull for the purchased assets was $
| Period | Annual Expenditure Required | Cumulative Expenditure Required | Annual Expenditure Incurred | Cumulative
Expenditure Incurred | ||||
| By January 26, 2022 (1 year from Closing Date) | $ | $ | $ | |||||
| By January 26, 2023 (2 years from Closing Date) | $ | $ | $ | |||||
| By January 26, 2024 (3 years from Closing Date) | $ | $ | ||||||
| By January 26, 2025 (4 years from Closing Date) | $ | $ |
As
of October 31, 2023, approximately $
The Beskauga Option Agreement
also provides that subject to the terms and conditions set forth in the Beskauga Option Agreement, after the Company or its affiliate
has incurred the exploration expenditures (outlined above), the Company or its affiliate may exercise the Beskauga Option and acquire
(i) the Beskauga Property by paying Copperbelt $
In addition, the Beskauga Option Agreement
provides that subject to its terms and conditions, the Company or its affiliate may be obligated to make the following bonus payments
(collectively, the “Bonus Payments”) to Copperbelt if the Beskauga Main Project or the Beskauga South Project is the subject
of a bankable feasibility study in compliance with National Instrument 43-101 – Standards of Disclosure for Mineral Projects
of the Canadian Securities Administrators (“National Instrument 43-101”) indicating gold equivalent resources in the
amounts set forth below, with (i) (A)
| Gold equivalent resources | Cumulative Bonus Payments | |||
| Beskauga Main Project | ||||
| 3,000,000 ounces | $ | |||
| 5,000,000 ounces | $ | |||
| 7,000,000 ounces | $ | |||
| 10,000,000 ounces | $ | |||
| Beskauga South Project | ||||
| 2,000,000 ounces | $ | |||
| 3,000,000 ounces | $ | |||
| 4,000,000 ounces | $ | |||
| 5,000,000 ounces | $ | |||
The Beskauga Option Agreement may be terminated under certain circumstances, including (i) upon the mutual written agreement of the Company and Copperbelt; (ii) upon the delivery of written notice by the Company, provided that at the time of delivery of such notice, unless there has been a material breach of a representation or warranty given by Copperbelt that has not been cured, the Beskauga Property is in good standing; or (iii) if there is a material breach by a party of its obligations under the Beskauga Option Agreement and the other party has provided written notice of such material breach, which is incapable of being cured or remains uncured.
| F-18 |
Arras Minerals Corp. Notes to the Consolidated Financial Statements For years ended October 31, 2023 and 2022 (Expressed in United States dollars) |
| 7. | PREPAID EXPENSES AND DEPOSITS |
| October 31, 2023 | October 31, 2022 | |||||||
| General insurance | $ | $ | ||||||
| Other prepaid deposits - current | ||||||||
| Exploration license insurance - current | ||||||||
| Prepaid expenses and deposits – current | ||||||||
| Prepaid deposits - non-current | ||||||||
| Exploration license insurance - non-current | ||||||||
| Prepaid expenses and deposits – non-current | ||||||||
| Total prepaid expenses and deposits | $ | $ | ||||||
| 8. | LOANS TO EKIDOS MINERALS LLP |
On March 19, 2021, pursuant to an asset purchase agreement,
Silver Bull transferred $
| 9. | OFFICE AND EQUIPMENT |
| Mining Equipment | Computer Equipment and Software | Office Equipment | Vehicles | Total | ||||||||||||||||
| Cost | ||||||||||||||||||||
| Balance, October 31, 2021 | $ | |||||||||||||||||||
| Acquisition (Note 4) | ||||||||||||||||||||
| Additions | ||||||||||||||||||||
| Balance, October 31, 2022 | ||||||||||||||||||||
| Additions | ||||||||||||||||||||
| Balance, October 31, 2023 | $ | |||||||||||||||||||
| Accumulated depreciation | ||||||||||||||||||||
| Balance, October 31, 2021 | $ | |||||||||||||||||||
| Depreciation expense | ||||||||||||||||||||
| Balance, October 31, 2022 | ||||||||||||||||||||
| Depreciation expense | ||||||||||||||||||||
| Balance, October 31, 2023 | $ | |||||||||||||||||||
| Net book value | ||||||||||||||||||||
| Balance, October 31, 2022 | $ | |||||||||||||||||||
| Balance, October 31, 2023 | $ | |||||||||||||||||||
During the year ended October 31, 2023, the Company
acquired mining equipment of $
During the year ended October 31, 2022, the Company
acquired vehicles of $
| F-19 |
Arras Minerals Corp. Notes to the Consolidated Financial Statements For years ended October 31, 2023 and 2022 (Expressed in United States dollars) |
| 10. | MINERAL PROPERTIES |
The
Company, through the asset purchase agreement (Note 5), entered into an option agreement dated August 12, 2020 with Copperbelt, to earn
up to a
On
February 3, 2022, the Company acquired Ekidos, including a $
| Balance, October 31, 2021 | $ | |||
| Acquisition of Ekidos (Note 4) | ||||
| Balance, October 31, 2022 | $ | |||
| Balance, October 31, 2023 and 2022 | $ | |||
Additionally, the Company holds its interest in the Stepnoe and Ekidos properties through the Stepnoe and Ekidos Joint Venture Agreement (the “Stepnoe and Ekidos JV Agreement”), and the Akkuduk, Nogurbek, Maisor, Elemes, Aktasty, Besshoky, Aimandai and South Bozshakol properties through the Maikain Joint Venture Agreement (the “Maikain JV Agreement”).
Stepnoe and Ekidos JV Agreement
In connection with the spin-off and pursuant to the Separation and Distribution Agreement (Note 5), Silver Bull transferred its interest in the Stepnoe and Ekidos JV Agreement to Arras.
On September 1, 2020, Silver Bull entered into the Stepnoe and Ekidos JV Agreement in connection with, among other things, mineral license applications (the “Stepnoe and Ekidos Licenses”) for, and further exploration and evaluation of certain properties, including the Stepnoe and Ekidos properties located in Kazakhstan. The exploration licenses for the Stepnoe and Ekidos properties were granted on October 22, 2020.
The Company (through Ekidos LLP) and Copperbelt
have initial participating interests in the joint venture of
The Stepnoe and Ekidos JV Agreement shall terminate automatically upon there being one participant in the joint venture, or by written agreement between the parties.
On November 11, 2023, the Stepnoe and Ekidos JV Agreement was amended to allow for financing and third- party support of exploration and development activities on some or all of the JV licenses.
Maikain JV Agreement
On May 20, 2021, Ekidos LLP entered into the Maikain JV Agreement with Orogen LLP, a company incorporated under the laws of Kazakhstan, in connection with, among other things, mineral license applications for, and further exploration and evaluation of, certain properties in an area of interest, including the Akkuduk, Nogurbek, Maisor, Elemes, Aktasty, Besshoky, Aimandai and South Bozshakol properties located in Kazakhstan. The following exploration licenses have been granted for an initial six-year period, with the possibility of a five-year extension.
| F-20 |
Arras Minerals Corp. Notes to the Consolidated Financial Statements For years ended October 31, 2023 and 2022 (Expressed in United States dollars) |
The Company (through Ekidos LLP) and Orogen
LLP have initial participating interests in the Maikain joint venture of
The Maikain JV Agreement shall terminate automatically upon the earlier of (i) there being one participant in the joint venture, (ii) by written agreement between the parties, or (iii) May 20, 2024.
On November 11, 2023, the Maikain JV Agreement was amended to accommodate the Teck Alliance Agreement to allow for third-party financing and support of exploration and development activities on some or all of the JV licenses. The amended agreement also clarifies that the Maikain JV Agreement shall not terminate and will continue in full force and effect with respect to any mineral licenses held by or on behalf of the Maikain joint venture as of the date of expiry (May 20, 2024).
| 11. | RIGHT-OF-USE ASSET AND LEASE LIABILITY |
The Company entered into a lease agreement
for its corporate head office commencing March 1, 2022, until February 28, 2026. Upon entering into this lease, the Company recognized
a right-of use (“ROU”) asset in the amount of $
The continuity of the ROU asset and lease liability for the years ended October 31, 2023 and 2022 is as follows:
| Value of ROU asset as of October 31, 2021 | $ | ||||
| Additions | |||||
| Depreciation | ( | ) | |||
| Value of ROU asset as of October 31, 2022 | |||||
| Depreciation | ( | ) | |||
| Value of ROU asset as of October 31, 2023 | $ | ||||
| Lease liability recognized as of October 31, 2021 | $ | |||
| New office lease | ||||
| Lease payments | ( | ) | ||
| Lease interest | ||||
| Lease liability recognized as of October 31, 2022 | ||||
| Lease payments | ( | ) | ||
| Lease interest | ||||
| Lease liability recognized as of October 31, 2023 | $ | |||
| Current portion | $ | |||
| Non-current portion | ||||
| Closing balance | $ | |||
| Less than one year | $ | |||
| One to three years | ||||
| Total undiscounted lease liabilities | $ | |||
| F-21 |
Arras Minerals Corp. Notes to the Consolidated Financial Statements For years ended October 31, 2023 and 2022 (Expressed in United States dollars) |
| 12. | SHARE CAPITAL |
| a) | Authorized |
Unlimited number of common shares and an unlimited number of preferred shares, without par value.
| b) | Issued and outstanding |
Preferred shares
No preferred shares have been issued.
Common shares
As of October 31, 2023 and 2022, there were
During the year ended October 31, 2023, the following transactions occurred:
From November 10, 2022 to December 16,
2022, the Company completed a series of tranches of a private placement, issuing a total of
During the year ended October 31, 2022, the following transactions occurred:
On November 21, 2021, the Company completed
the second tranche of a private placement for
On December 20, 2021, the Company
completed the third and final tranche of a private placement for
On May 30, 2022,
the Company completed a private placement for
Shares held in escrow
As a requirement of the Company’s listing on the TSX Venture Exchange on June 14, 2022 (the “Listing Date”), certain directors, officers and their affiliates were required to have their shares held in escrow by the Company’s transfer agent.
As at October 31,
2023,
| ● | 1/4 of remaining escrow securities on the 18-month anniversary of the Listing Date (released subsequent to year-end); |
| ● | 1/3 of remaining escrow securities on the 24-month anniversary of the Listing Date; |
| ● | 1/2 of remaining escrow securities on the 30-month anniversary of the Listing Date; and |
| ● | The remaining escrow securities on the 36-month anniversary of the Listing Date. |
| F-22 |
Arras Minerals Corp. Notes to the Consolidated Financial Statements For years ended October 31, 2023 and 2022 (Expressed in United States dollars) |
| c) | Stock options |
Pursuant to the Company’s Equity Incentive Plan (the “Plan”) approved by the Board of Directors, the Company grants stock options to employees, directors, officers and advisors. Under the Plan, options can be granted for a maximum term of ten years and the stock options shall vest in three equal installments, with one third of the options vesting on each of the grant date, the first-year anniversary of the grant date and the second anniversary of the grant date, unless otherwise designated by the Board. Further, the exercise price shall not be less than the price of the Company’s common shares on the date of the stock option grant.
No options were granted or exercised during the year ended October 31, 2023.
During the year ended
October 31, 2022, the Company granted options to acquire
No options were exercised during year ended October 31, 2022
| Number of Options | Weighted Average Exercise Price | |||||||||
| Balance, October 31, 2021 | ||||||||||
| Granted | ||||||||||
| Cancelled | ( | ) | ||||||||
| Balance, October 31, 2022 | ||||||||||
| Cancelled | ( | ) | ||||||||
| Balance, October 31, 2023 | ||||||||||
| Grant Date | Expiry Date | Exercise Price | Number of Options Outstanding | Number of Options Exercisable | Weighted Average Remaining Life | |||||||||||||
| $CDN | ||||||||||||||||||
| $CDN | ||||||||||||||||||
| $CDN | ||||||||||||||||||
| $CDN | ||||||||||||||||||
| $CDN | ||||||||||||||||||
| $CDN | ||||||||||||||||||
| F-23 |
Arras Minerals Corp. Notes to the Consolidated Financial Statements For years ended October 31, 2023 and 2022 (Expressed in United States dollars) |
| Grant Date | Expiry Date | Exercise Price | Number of Options Outstanding | Number of Options Exercisable | Weighted Average Remaining Life | |||||||||||||
| $CDN | ||||||||||||||||||
| $CDN | ||||||||||||||||||
| $CDN | ||||||||||||||||||
| $CDN | ||||||||||||||||||
| $CDN | ||||||||||||||||||
| $CDN | ||||||||||||||||||
The weighted average remaining contractual
life for options outstanding is
The total fair value of options granted
during the year ended October 31, 2023, was $ (2022 – $
As of October 31, 2023, there is a total
remaining unrecognized compensation expenses of $
Total share-based payments recognized
during the year ended October 31, 2023, was $
The Company applies the fair value method
using the Black-Scholes Option Pricing Model in accounting for its stock options granted. Accordingly, share-based payments of $
| Options | For the Year Ended October 31, 2023 | For the Year Ended October 31, 2022 | ||||||
| Expected volatility | ||||||||
| Risk-free interest rate | ||||||||
| Expected life (in years) | ||||||||
| Dividend rate | — | — | ||||||
The expected volatility assumption
is based on the historical and implied volatility of the comparable companies’ common share price. The risk-free interest rate assumption
is based on yield curves on government zero-coupon bonds with a remaining term equal to the stock options’ expected life. The Company
has not paid and does not anticipate paying dividends on its common stock. Companies are required to utilize an estimated forfeiture rate
when calculating the expense for the reporting period. Based on the best estimate, management applied the estimated forfeiture rate of
| d) | Restricted shares units (“RSUs”) |
On
February 24, 2023, the Company granted
Compensation expense for RSUs was $
Number of RSUs Outstanding | Fair Value Per Arras Share issuable | |||||||||||||
| Balance, October 31, 2022 and 2021 | $CDN | |||||||||||||
| Granted | $CDN | |||||||||||||
| Balance, October 31, 2023 | $CDN | |||||||||||||
| F-24 |
Arras Minerals Corp. Notes to the Consolidated Financial Statements For years ended October 31, 2023 and 2022 (Expressed in United States dollars) |
| e) | Shares issuable for Silver Bull Warrants |
Pursuant to the Distribution (Note 5),
warrant holders will receive, upon exercise of any Silver Bull Warrant, one Silver Bull common share and one common share of the Company.
The Company will receive $
| Warrants | Shares | Weighted Average Exercise Price Per Arras share issuable | Weighted Average Exercise Price Per Silver Bull Share issuable | |||||||||||
| Balance, October 31, 2021 | $ | $ | ||||||||||||
| Balance, October 31, 2023 and 2022 | $ | $ | ||||||||||||
No warrants were issued or exercised during the years ended October 31, 2023 and 2022.
| Expiry Date | Exercise Price | Number of Options Outstanding | Weighted Average Remaining Life | |||||||||
| $ | ||||||||||||
| 13. | INCOME TAXES |
| For the Year Ended October 31, 2023 | For the Year Ended October 31, 2022 | |||||||
| Loss before income taxes | $ | ( | ) | $ | ( | ) | ||
| Statutory income tax rate | % | % | ||||||
| Income tax benefit computed at statutory tax rate | ( | ) | ( | ) | ||||
| Differences between Canadian and foreign tax rates | ||||||||
| Items not deductible for income tax purposes | ||||||||
| Impact of foreign exchange | ( | ) | ||||||
| Unrecognized benefit of deferred income tax assets | ||||||||
| Income tax benefit | $ | $ | ||||||
| F-25 |
Arras Minerals Corp. Notes to the Consolidated Financial Statements For years ended October 31, 2023 and 2022 (Expressed in United States dollars) |
The Company recognizes tax benefits on losses or other
deductible amounts where it is probable the Company will generate sufficient taxable income to utilize its deferred tax assets.
| For the Year Ended October 31, 2023 | For the Year Ended October 31, 2022 | |||||||
| Deferred tax liabilities: | ||||||||
| Mineral properties | $ | ( | ) | $ | ( | ) | ||
| Office and equipment | ( | ) | ( | ) | ||||
| Deferred tax assets: | ||||||||
| Non-capital losses | ||||||||
| Net deferred income tax liabilities | $ | $ | ||||||
| For the Year Ended October 31, 2023 | For the Year Ended October 31, 2022 | |||||||
| Share issuance costs | $ | $ | ||||||
| Office and equipment | ||||||||
| Non-capital losses carried forward | ||||||||
| Unrecognized deductible temporary differences | $ | $ | ||||||
The Company has available Canadian net operational
losses of approximately $
| 14. | RELATED PARTY TRANSACTIONS |
Included
in accounts payable and accrued liabilities at October 31, 2023 is $
As at October 31, 2023, due to related party consists
of $
During the years ended October 31, 2023 and 2022, expenses
totalling $
| For the Year Ended October 31, 2023 | For the Year Ended October 31, 2022 | |||||||
| Directors’ fees | $ | $ | ||||||
| Personnel | ||||||||
| Office and administrative | ||||||||
| Office rent reimbursement | ( | ) | ( | ) | ||||
| $ | $ | |||||||
| F-26 |
Arras Minerals Corp. Notes to the Consolidated Financial Statements For years ended October 31, 2023 and 2022 (Expressed in United States dollars) |
| For the Year Ended October 31, 2023 | For the Year Ended October 31, 2022 | |||||||
| Share-based payment | $ | $ | ||||||
| Directors’ fees | ||||||||
| Personnel | ||||||||
| $ | $ | |||||||
| 15. | COMMITMENTS AND CONTINGENCIES |
< 1 year $ | 1-2 years $ | 2-3 years $ | 3-4 years $ | 4-5 years $ | Thereafter $ | Total $ | ||||||||||||||||||||||
| Lease commitments (Note 11) | ||||||||||||||||||||||||||||
| Beskauga Option agreement commitments (Note 6) | ||||||||||||||||||||||||||||
| Exploration licenses expenditure commitments | ||||||||||||||||||||||||||||
The Company’s commitments include contractually obligated payments associated to its office lease (Note 11), the exploration expenditure requirements under the Beskauga Option Agreement (detailed in Note 6), and minimum expenditure requirements to maintain its exploration licenses as mandated by Kazakh government authorities to keep the tenements in good standing.
| 16. | SUPPLEMENTAL CASH FLOW INFORMATION |
As at October 31, 2023, cash and cash equivalents
consist of guaranteed investment certificates (the “GIC”) of $
| For the Year Ended October 31, 2023 | For the Year Ended October 31, 2022 | |||||||
| Supplemental Information | ||||||||
| Interest paid | $ | $ | ||||||
| Income taxes paid | ||||||||
| Non-cash investing and financing activities | ||||||||
| Shares issued to agent | $ | $ | ||||||
| Right-of-use assets recognized (Note 11) | ||||||||
| F-27 |
Arras Minerals Corp. Notes to the Consolidated Financial Statements For years ended October 31, 2023 and 2022 (Expressed in United States dollars) |
| 17. | FINANCIAL INSTRUMENTS |
The Company’s financial instruments consist of cash and cash equivalents, accounts payable and accrued liabilities, lease liability, and due to related party. The Company’s risk exposure and the impact on the Company’s financial instruments are summarized below.
| a) | Credit risk |
Credit risk is the risk of financial loss to the Company if a counter party to a financial instrument fails to meet its payment obligations. The Company is exposed to credit risk with respect to its cash and cash equivalents. Management believes that the credit risk concentration with respect to cash and cash equivalents is remote as it maintains accounts with highly rated financial institutions. Cash and cash equivalents are denominated in $USD, $CDN and Kazakh Tenge, and consist of guaranteed investment certificates for the terms of less than 100 days acquired from a Canadian financial institution.
| b) | Liquidity risk |
Liquidity
risk is the risk that the Company will encounter difficulty in satisfying its financial obligations as they become due. The Company manages
its liquidity risk by forecasting cash flows from operations and anticipating investing and financing activities. As at October 31, 2023,
the Company had net working capital deficit of $
Accounts payable and accrued liabilities and due to related party are non-interest-bearing and are normally settled on 30-day terms.
| c) | Market risk |
Market
risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices.
The Company also maintains a minimum cash balance of local currency in bank account in Kazakhstan and the Company assessed such foreign currency risk as low.
The Company has not hedged any of its foreign currency risks.
| d) | Commodity price risk |
The ability of the Company to raise funds to explore and develop its exploration and evaluation assets and the future profitability of the Company are directly related to the price of copper and gold. The Company monitors copper and gold prices to determine the appropriate course of action to be taken.
| e) | Fair value hierarchy |
Fair value measurements of financial instruments are required to be classified using a fair value hierarchy that reflects the significant of inputs used in making the measurements. The levels of the fair value hierarchy are defined as follows:
Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 – Inputs for assets or liabilities that are not based on observable market data.
The Company’s financial instruments classified as Level 1 in the fair value hierarchy are cash and cash equivalents, accounts payable and accrued liabilities, and due to related party. The lease liability is classified as Level 3 financial instruments. The carrying values approximate the fair values due to the short-term maturity of these instruments except the lease liability. There were no transfers between fair value levels during the year ended October 31, 2023.
| F-28 |
Arras Minerals Corp. Notes to the Consolidated Financial Statements For years ended October 31, 2023 and 2022 (Expressed in United States dollars) |
| 18. | CAPITAL MANAGEMENT |
The Company defines its capital as shareholders’ equity. Capital requirements are driven by the Company’s general operations and exploration. To effectively manage the Company’s capital requirements, the Company monitors expenses and overhead to ensure costs and commitments are being paid. The Company is not subject to any externally imposed capital requirements. The Company did not change its approach to capital management during the year ended October 31, 2023.
| 19. | SEGMENTED INFORMATION |
Operating segments
The Company operated in a single reportable operating segment - the acquisition, exploration and evaluation of mineral properties, with its head office function in Canada. As at October 31, 2023, the Company’s exploration and evaluation assets are currently located in Kazakhstan.
| Canada | Kazakhstan | Total | ||||||||||
| Cash and cash equivalents | $ | $ | $ | |||||||||
| Other receivables | ||||||||||||
| Prepaid expenses | ||||||||||||
| Office and equipment | ||||||||||||
| Minerals properties | ||||||||||||
| Right-of use assets | ||||||||||||
| Other non-current assets | ||||||||||||
| Prepaid expense non-current | ||||||||||||
| $ | $ | $ | ||||||||||
| Canada | Kazakhstan | Total | ||||||||||
| Cash and cash equivalents | $ | $ | $ | |||||||||
| Other receivables | ||||||||||||
| Prepaid expenses | ||||||||||||
| Office and equipment | ||||||||||||
| Minerals properties | ||||||||||||
| Right-of use assets | ||||||||||||
| Other non-current assets | ||||||||||||
| Prepaid expense non-current | ||||||||||||
| $ | $ | $ | ||||||||||
| F-29 |
Arras Minerals Corp. Notes to the Consolidated Financial Statements For years ended October 31, 2023 and 2022 (Expressed in United States dollars) |
| 20. | SUBSEQUENT EVENTS |
On
December 7, 2023. the Company entered into the Teck Alliance Agreement with Teck and received $
On
the completion of the Initial Exploration Period, Teck may exercise an option in the Teck Alliance Agreement by selecting up to four designated
properties up to 120 square kilometers each. Teck must have paid $
Teck will have three options to earn and maintain its option:
| ● | “First Option”:
Teck may elect to solely fund $ |
| ● | “Second Option”:
Teck may elect to solely fund $ |
| ● | “Third Option”:
Teck may elect to solely fund $ |
If Teck elects not to continue with the Teck Alliance
Agreement before December 31, 2025, the license will remain
Subsequent to year end, Ekidos was granted the following additional exploration licenses, all located in Kazakhstan:
| ● | Tay, 2241-EL |
| ● | Beskauga West, 2345-EL |
| ● | Beskauga East, EL-2346 |
| ● | Karatol-3, 2367-EL |
These
licenses have been granted for initial
As of January 26, 2024, the Company met the three-year cumulative expenditure requirements under the Beskauga Option Agreement.
F-30
Exhibit 2.2
DESCRIPTION OF SECURITIES
The following is a description of each class of securities of Arras Minerals Corp. (“Arras,” the “Company,” “we,” “us,” or “our”) that is registered under Section 12 of the Securities Exchange Act of 1934, as amended, and does not purport to be complete. For a complete description of the terms and provisions of such securities, refer to the Company’s notice of articles and articles of incorporation, which are incorporated herein by reference to Exhibits 1.1 and 1.2 to the Company’s Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission on February 27, 2024. This summary is qualified in its entirety by reference to these documents.
Share Capital
Our authorized share capital consists of an unlimited number of common shares without par value. As of October 31, 2023, we had 68,504,400 common shares issued and outstanding. We currently have only one class of issued and outstanding shares, which have identical rights in all respects and rank equally with one another.
Common Shares
All of our common shares rank equally as to voting rights, participation in a distribution of the assets of the Company on a liquidation, dissolution or winding-up of the Company and entitlement to any dividends declared by the Company. The holders of our common shares are entitled to receive notice of, and to attend and vote at, all meetings of shareholders (other than meetings at which only holders of another class or series of shares are entitled to vote). Each common share carries the right to one vote. In the event of the liquidation, dissolution or winding-up of the Company, or any other distribution of the assets of the Company among its shareholders for the purpose of winding-up its affairs, the holders of our common shares will be entitled to receive, on a pro rata basis, all of the assets remaining after the payment by the Company of all of its liabilities. The holders of our common shares are entitled to receive dividends as and when declared by the board of directors of the Company (the “Arras Board”) in respect of the common shares on a pro rata basis.
Any alteration of the rights, privileges, restrictions and conditions attaching to our common shares under the Company’s articles of incorporation (the “Articles”) must be approved in accordance with the Articles and the Business Corporations Act (British Columbia).
Incorporation
The Company was incorporated under the Business Corporations Act (British Columbia) (as currently in effect) (the “Act”) on February 5, 2021. Our British Columbia incorporation number is BC1287773.
Objects and Purposes of Our Company
Our Articles do not contain a description of the Company’s objects and purposes. We are entitled under the Act to carry on all lawful businesses which can be carried on by a natural person.
Conflicts of Interest and Director Compensation
The directors of the Company manage and supervise the management of the affairs and business of the Company and have authority to exercise all such powers of the Company as are not, under the Act or by our Articles, required to be exercised by the Company’s shareholders.
Under our Articles, any director or senior officer who holds any office or possesses any property, right or interest that could result, directly or indirectly, in the creation of a duty or interest that materially conflicts with that individual’s duty or interest as a director or senior officer, must disclose the nature and extent of the conflict as required by the Act. Such director or senior officer that has a disclosable interest in a contract shall be liable to account to the Company for any profits that accrue to the director or senior officer under or as a result of the contract or transaction unless disclosure is made thereof and the contract or transaction is approved in accordance with the provisions of the Act. A director is not allowed to vote on any transaction or contract with the Company in which he or she has a disclosable interest unless all directors have a disclosable interest in that transaction or contract, in which case all of these directors may vote on such resolution.
The directors are entitled to the remuneration for acting as directors, if any, as the directors may from time to time determine, or, if the directors so decide, as determined by the shareholders of the Company. If any director performs any professional or other services for the Company that in the opinion of the directors are outside the ordinary duties of a director, or if any director is otherwise specially occupied in or about the Company’s business, he or she may be paid remuneration fixed by the directors, or, at the option of that director, fixed by a resolution passed at a meeting of shareholders by a simple majority (an “ordinary resolution”), and such remuneration may be either in addition to, or in substitution for, any other remuneration that he or she may be entitled to receive. A director or senior officer does not hold a disclosable interest in a contract or transaction merely because the contract or transaction relates to the remuneration of the director or senior officer in that person’s capacity as director, officer, employee or agent of the Company or of an affiliate of the Company.
Borrowing Powers
Our Articles provide that, if authorized by the Arras Board, the Company may:
| · | borrow money in the manner and amount, on the security, from the sources and on the terms and conditions that the Arras Board considers appropriate; |
| · | issue bonds, debentures and other debt obligations either outright or as security for any liability or obligation of the Company or any other person and at such discounts or premiums and on such other terms as the Arras Board considers appropriate; |
| · | guarantee the repayment of money by any other person or the performance of any obligation of any other person; and |
| · | mortgage, charge, whether by way of specific or floating charge, grant a security interest in, or give other security on, the whole or any part of the present and future assets and undertaking of the Company. |
Qualifications of Directors
Under our Articles, a director is not required to hold common shares as qualification for his or her office but must be qualified as required by the Act to become, act or continue to act as a director. There are no age limit requirements pertaining to the retirement or non-retirement of directors of the Company.
Procedures to Alter Share Rights
Our Articles state that, subject to compliance with the Act, the Company may, by a resolution passed at a meeting of shareholders by at least two-thirds of the votes cast on the resolution (a “special resolution”), (a) create one or more classes or series of shares or, if none of the shares of a class or series of shares are allotted or issued, eliminate that class or series of shares; (b) increase, reduce or eliminate the maximum number of shares that the Company is authorized to issue out of any class or series of shares or establish a maximum number of shares that the Company is authorized to issue out of any class or series of shares for which no maximum is established; (c) subdivide or consolidate all or any of its unissued, or fully paid issued, shares; (d) if the Company is authorized to issue shares of a class of shares with par value: (i) decrease the par value of those shares; or (ii) if none of the shares of that class of shares are allotted or issued, increase the par value of those shares; (e) change all or any of its unissued, or fully paid issued, shares with par value into shares without par value or all or any of its unissued shares without par value into shares with par value; (f) alter the identifying name of any of its shares; (g) otherwise alter its shares or authorized share structure when required or permitted to do so by the Act; (h) create special rights or restrictions for, and attach those special rights or restrictions to, the shares of any class or series of shares, whether or not any or all of those shares have been issued; or (i) vary or delete any special rights or restrictions attached to the shares of any class or series of shares, whether or not any or all of those shares have been issued. Pursuant to our Articles, if the Act does not specify the type of resolutions and the Articles do not specify another type of resolution, the Company may, by special resolution, alter the Articles.
Meetings
Each director holds office until our next annual general meeting or until his or her office is earlier vacated in accordance with our Articles or with the provisions of the Act. A director appointed or elected to fill a vacancy on the Arras Board also holds office until our next annual general meeting. The Articles provide that our annual meetings of shareholders must be held at least once in each calendar year and not more than 15 months after the last annual general meeting at such time and place as the Arras Board may determine; provided that, in the case of our first annual meeting of shareholders, such meeting must only be held within 18 months after our date of incorporation. The Company’s directors may, at any time upon proper notice, call a meeting of our shareholders. Pursuant to the Act, shareholders who hold in the aggregate at least five percent of our issued shares that carry the right to vote at a general meeting may, in accordance with the Act, requisition a general meeting of shareholders for the purposes stated in the requisition. Our Articles state that in addition to those persons who are entitled to vote at a meeting of the shareholders, the only other persons entitled to be present at the meeting are the directors, the president (if any), the secretary (if any), the assistant secretary (if any), any lawyer for the Company, the auditor of the Company and any persons invited to be present at the meeting by the directors. An extraordinary meeting of shareholders may be called at any time upon proper notice for the transaction of any business the general nature of which is specified in the notice calling the meeting. Under our Articles, the quorum for the transaction of business at a meeting of shareholders is two persons who are, or who represent by proxy, shareholders who, in the aggregate, hold at least 5% of the issued shares entitled to be voted at the meeting. If there is only one shareholder entitled to vote at a meeting of shareholders, the quorum is that shareholder, present in person or by proxy.
Limitations on Ownership of Securities
Except as provided in the Investment Canada Act (Canada), there are no limitations specific to the rights of non-Canadians to hold or vote our common shares under the laws of Canada or British Columbia or in the Company’s charter documents.
Change in Control
There are no provisions in our Articles or in the Act that would have the effect of delaying, deferring or preventing a change in the control of the Company, and that would operate only with respect to a merger, acquisition, arrangement or corporate restructuring involving the Company or its subsidiaries.
Ownership Threshold
Our Articles and the Act do not contain any provisions governing the ownership threshold above which shareholder ownership must be disclosed.
Listing
Our common shares are listed for trading on the TSX Venture Exchange under the symbol ARK.
Transfer Agent and Registrar
The transfer agent and registrar for Arras common shares is Olympia Trust Company, located at 925 West Georgia Street, Suite 1900, Vancouver, British Columbia V6C 3L2, Canada.
No Preemptive or Similar Rights
Under the Act, a shareholder of a corporation does not have a preemptive right to acquire the corporation’s unissued shares unless there is a provision to the contrary in the articles of incorporation. Our Articles do not provide our shareholders with any preemptive or similar rights.
Exhibit 4.9
ARras Minerals Corp.
EQUITY
Incentive PLAN
April 15, 2021
as amended and restated on July 5, 2021 and March 4, 2022
PART I – GENERAL PROVISIONS
| 1. | PREAMBLE AND DEFINITIONS |
| 1.1 | Title and Parts. |
The Plan described in this document shall be called the “Arras Minerals Corp. Equity Incentive Plan”.
The Plan is divided into three Parts. This Part I contains provisions of general application to all Grants; Part II applies specifically to Options; and Part III applies specifically to Share Units.
| 1.2 | Eligibility |
Only Eligible Persons shall be eligible to receive Grants under this Plan.
| 1.3 | Purpose of the Plan. |
The purposes of the Plan are:
| (a) | to promote a further alignment of interests between officers, employees and other eligible service providers and the shareholders of the Corporation; |
| (b) | to associate a portion of the compensation payable to officers, employees and other eligible service providers with the returns achieved by shareholders of the Corporation; and |
| (c) | to attract and retain officers, employees and other eligible service providers with the knowledge, experience and expertise required by the Corporation. |
| 1.4 | Definitions. |
| 1.4.1 | “affiliate” means “affiliated corporations” and a corporation shall be deemed to be an affiliate of another corporation if one of them is the Subsidiary of the other or if both are Subsidiaries of the same corporation or if each of them is controlled by the same Person and also includes those issuers that are similarly related, whether or not any of the issuers are corporations, partnerships, limited partnerships, trusts, income trusts or investment trusts or any other organized entity issuing securities. |
| 1.4.2 | “Applicable Law” means any applicable provision of law, domestic or foreign, including, without limitation, applicable securities legislation, together with all regulations, rules, policy statements, rulings, notices, orders or other instruments promulgated thereunder, and Stock Exchange Rules. |
| 1 |
| 1.4.3 | “associate”, where used to indicate a relationship with a Person, means: |
| (a) | any corporation of which such Person beneficially owns, directly or indirectly, voting securities carrying more than 10 per cent of the voting rights attached to all voting securities of the corporation for the time being outstanding; |
| (b) | any partner of that Person; |
| (c) | any trust or estate in which such Person has a substantial beneficial interest or as to which such Person serves as trustee or in a similar capacity; |
| (d) | any relative of that Person who resides in the same home as that Person; |
| (e) | any Person who resides in the same home as that person and to whom that Person is married or with whom that Person is living in a conjugal relationship outside marriage; or |
| (f) | any relative of a Person mentioned in clause (e) who has the same home as that Person. |
| 1.4.4 | “Beneficiary” means, subject to Applicable Law, an individual who has been designated by a Participant, in such form and manner as the Board may determine, to receive benefits payable under the Plan upon the death of the Participant, or, where no such designation is validly in effect at the time of death, the Participant’s legal representative. |
| 1.4.6 | “Board” means the Board of Directors of the Corporation. |
| 1.4.7 | “Cause” means: |
| (a) | subject to (b) or (c), as applicable, below, “just cause” or “cause” for Termination by the Corporation or a Subsidiary of the Corporation as determined under Applicable Law; |
| (b) | where a Participant has a written employment agreement with the Corporation or a Subsidiary of the Corporation, “Cause” as defined in such employment agreement, if applicable; or |
| (c) | where a Participant provides services as an independent contractor pursuant to a contract for services with the Corporation or a Subsidiary of the Corporation, any material breach of such contract. |
| 2 |
| 1.4.8 | “Change in Control” means: |
| (a) | the acquisition by any “offeror” (as defined in the Securities Act (Ontario)) of beneficial ownership of more than 50% of the outstanding voting securities of the Corporation, by means of a take-over bid or otherwise; |
| (b) | any consolidation, reorganization, merger, amalgamation or statutory amalgamation or arrangement of the Corporation with or into another corporation, a separation of the business of the Corporation into two or more entities, or pursuant to which Shares would be converted into cash, securities or other property, other than a merger of the Corporation in which shareholders immediately prior to the merger have the same proportionate ownership of stock of the surviving corporation immediately after the merger; |
| (c) | any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Corporation; |
| (d) | the approval by the shareholders of any plan of liquidation or dissolution of the Corporation; or |
| (e) | the replacement by way of election or appointment at any time of one-half or more of the total number of the then incumbent members of the Board, unless such election or appointment is approved by 50% or more of the Board in office immediately preceding such election or appointment in circumstances where such election or appointment is to be made other than as a result of a dissident public proxy solicitation, whether actual or threatened. |
| 1.4.9 | “Code” means the United States Internal Revenue Code of 1986, as amended, and any applicable United States Treasury Regulations and other binding regulatory guidance thereunder. |
| 1.4.10 | “Control” means: |
| (a) | when applied to the relationship between a Person and another Person, the beneficial ownership by that first Person, directly or indirectly, of voting securities or other interests in such second Person entitling the holder to exercise control and direction in fact over the activities of such second Person, including by way of electing a majority of the members of the board of the second Person; and |
| (b) | notwithstanding the foregoing, when applied to the relationship between a Person and a partnership, limited partnership or joint venture, means the contractual right to direct the affairs of the partnership, limited partnership or joint venture; and |
the words “Controlled by”, “Controlling” and similar words have corresponding meanings; provided that a Person who Controls a second Person will be deemed to Control a third Person which is Controlled by such second Person and so on.
| 3 |
| 1.4.11 | “Corporation” means Arras Minerals Corp., and includes any successor corporation thereof. |
| 1.4.12 | “Director” means a director of the Corporation from time to time. |
| 1.4.13 | “Discounted Market Price” has the meaning ascribed to that term in Policy 1.1 of the TSX Venture Exchange Corporate Finance Manual, as the same may be amended from time to time. |
| 1.4.14 | “Disability” means: |
| (a) | subject to (b) below, a Participant’s physical or mental incapacity that prevents him/her from substantially fulfilling his or her duties and responsibilities on behalf of the Corporation or, if applicable, a Subsidiary of the Corporation as determined by the Board and, in the case of a Participant who is an employee of the Corporation or a Subsidiary of the Corporation, in respect of which the Participant commences receiving, or is eligible to receive, disability benefits under the Corporation’s or Subsidiary’s long-term disability plan; or |
| (b) | where a Participant has a written employment agreement with the Corporation or a Subsidiary of the Corporation, “Disability” as defined in such employment agreement, if applicable. |
| 1.4.15 | “Disability Date” means, the date of a Participant’s Termination as a result of a Disability. |
| 1.4.16 | “Eligible Person” means an individual Employed by the Corporation or any Subsidiary of the Corporation, a Director, an Officer or a Service Provider, who, by the nature of his or her position or job is, in the opinion of the Board, in a position to contribute to the success of the Corporation. |
| 1.4.17 | “Employed” means, with respect to a Participant, that: |
| (a) | the Participant is rendering services to the Corporation or a Subsidiary of the Corporation (excluding services exclusively as a Director) including as a Service Provider (referred to in Section 1.4.43 as “active Employment”); or |
| (b) | the Participant is not actively rendering services to the Corporation or a Subsidiary of the Corporation due to vacation, temporary illness, maternity or parental leave or leave on account of Disability or other authorized leave of absence (provided, in the case of a US Taxpayer, that the Participant has not incurred a “Separation From Service”, within the meaning of Section 409A of the Code). |
and “Employment’ has the corresponding meaning.
| 4 |
| 1.4.19 | “Grant” means a grant or right granted under the Plan consisting of one or more Options, RSUs or PSUs or such other award as may be permitted hereunder. |
| 1.4.20 | “Grant Agreement” means an agreement between the Corporation and a Participant evidencing a Grant and setting out the terms under which such Grant is made, together with such schedules, amendments, deletions or changes thereto as are permitted under the Plan. |
| 1.4.21 | “Grant Date” means the effective date of a Grant. |
| 1.4.22 | “Insider” means: |
| (a) | a director or officer of the Corporation; |
| (b) | a director or officer of a Person that is itself an Insider or subsidiary of the Corporation; |
| (c) | a Person that has, |
| (i) | beneficial ownership of, or control or direction over, directly or indirectly, securities of the Corporation carrying more than 10 per cent of the voting rights attached to all the Corporation’s outstanding voting securities; or |
| (ii) | a combination of beneficial ownership of, and control or direction over, directly or indirectly, securities of a reporting issuer carrying more than 10 per cent of the voting rights attached to all the Corporation’s outstanding voting securities, excluding, for the purpose of the calculation of the percentage held, any securities held by the Person as underwriter in the course of a distribution; |
| (d) | the Corporation in the event that it has purchased, redeemed or otherwise acquired a security of its own issue, for so long as it continues to hold that security; |
| (e) | a Person designated as an insider under the Securities Act (Ontario); and |
| (f) | an associate or affiliate of any of the foregoing. |
| 5 |
| 1.4.23 | “Investor Relations Activities” has the meaning ascribed to that term in Policy 1.1 of the TSX Venture Exchange Corporate Finance Manual, as the same may be amended from time to time. |
| 1.4.24 | “Investor Relations Service Provider” means any Service Provider that performs Investor Relations Activities, and any Director, Officer, or employee whose roll and duties primarily consist of Investor Relations Activities. |
| 1.4.25 | “Market Price” means, with respect to any particular date: |
| (a) | if the Shares are listed on the TSX Venture Exchange (regardless of whether they are listed on any other Stock Exchange), the volume weighted average trading price per Share on the TSX Venture Exchange during the five (5) immediately preceding Trading Days; |
| (b) | if the Shares are listed on one Stock Exchange which is not the TSX Venture Exchange, the volume weighted average trading price per Share on such Stock Exchange during the five (5) immediately preceding Trading Days; |
| (c) | if the Shares are listed on more than one Stock Exchange and are not listed on the TSX Venture Exchange, the Market Price as determined in accordance with paragraph (b) above for the primary Stock Exchange on which the greatest volume of trading of the Shares occurred during the five (5) immediately preceding Trading Days; and |
| (d) | if the Shares are not listed for trading on a Stock Exchange, a price which is determined by the Board in good faith to be the fair market value of the Shares. |
| 1.4.26 | “Officer” means an officer of the Corporation or any Subsidiary of the Corporation from time to time. |
| 1.4.27 | “Option” means an option to purchase a Share granted by the Board to an Eligible Person in accordance with Section 3 and Section 8.1. |
| 1.4.28 | “Participant” means an Eligible Person to whom a Grant is made and which Grant or a portion thereof remains outstanding. |
| 1.4.29 | “Performance Conditions” means such financial, personal, operational or transaction-based performance criteria as may be determined by the Board in respect of a Grant to any Participant or Participants and set out in a Grant Agreement. Performance Conditions may apply to the Corporation, a Subsidiary of the Corporation, the Corporation and its Subsidiaries as a whole, a business unit of the Corporation or group comprised of the Corporation and some Subsidiaries of the Corporation or a group of Subsidiaries of the Corporation, either individually, alternatively or in any combination, and measured either in total, incrementally or cumulatively over a specified performance period, on an absolute basis or relative to a pre-established target or milestone, to previous years’ results or to a designated comparator group, or otherwise, and may incorporate multipliers or adjustments based on the achievement of any such performance criteria. |
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| 1.4.30 | “Performance Period” means, with respect to PSUs, a period specified by the Board for achievement of any applicable Performance Conditions as a condition to Vesting. |
| 1.4.31 | “Performance Share Unit” or “PSU” means a right granted to an Eligible Person in accordance with Section 3.1(c) and (d) and Section 11.1 to receive a Share or the Market Price, as determined by the Board, that generally becomes Vested, if at all, subject to the attainment of certain Performance Conditions and satisfaction of such other conditions to Vesting, if any, as may be determined by the Board. |
| 1.4.32 | “Person” means an individual, corporation, company, cooperative, sole proprietorship, partnership, limited partnership, limited liability partnership, joint venture, venture capital fund, limited liability company, unlimited liability company, trust, trustee, executor, administrator, legal personal representative, estate, unincorporated association, organization or syndicate, entity with juridical personality or governmental authority or body, or other entity, whether or not having legal status, however designated or constituted, and pronouns which refer to a Person shall have a similarly extended meaning. |
| 1.4.33 | “Plan” means this Arras Minerals Corp. Equity Incentive Plan, including any schedules or appendices hereto, as may be amended from time to time. |
| 1.4.34 | “Restricted Share Unit” or “RSU” means a right granted to an Eligible Person in accordance with Section 3.1(c) and (d) and Section 11.1 to receive a Share or the Market Price, as determined by the Board, that generally becomes Vested, if at all, following a period of continuous Employment of the Participant. |
| 1.4.35 | “Restrictive Covenant” means any obligation of a Participant to the Corporation or a Subsidiary of the Corporation to (A) maintain the confidentiality of information relating to the Corporation or the Subsidiary of the Corporation and/or its business, (B) not engage in employment or business activities that compete with the business of the Corporation or the Subsidiary of the Corporation, (C) not solicit employees or other service providers, customers and/or suppliers of the Corporation or the Subsidiary of the Corporation, whether during or after employment with the Corporation or Subsidiary of the Corporation, and whether such obligation is set out in a Grant Agreement issued under the Plan or other agreement between the Participant and the Corporation or Subsidiary of the Corporation, including, without limitation, an employment agreement, or otherwise. |
| 1.4.36 | “Security Based Compensation Arrangement” includes any stock option plan, deferred share unit plan, performance share unit plan, restricted share unit plan, stock appreciation right plan, stock purchase plan and /or any other compensation or incentive mechanism involving the issuance or potential issuance of securities of the Corporation from treasury to a Participant. |
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| 1.4.37 | “Service Provider” means a Person, other than an employee, Officer or Director of the Corporation or a Subsidiary of the Corporation, that: |
| (a) | is engaged to provide, on an ongoing bona fide basis, consulting, technical, management or other services to the Corporation or a Subsidiary of the Corporation, other than services provided in relation to a distribution of securities; |
| (b) | provides the services under a written contract between the Corporation or a Subsidiary of the Corporation and the Person; |
| (c) | in the reasonable opinion of the Corporation, spends or will spend a significant amount of time and attention on the affairs and business of the Corporation or a Subsidiary of the Corporation; |
and includes
| (d) | for an individual Service Provider, a corporation of which the individual Service Provider is an employee or shareholder, and a partnership of which the individual Service Provider is an employee or partner; and |
| (e) | for a Service Provider that is not an individual, an employee, executive officer, or director of the Service Provider, provided that the individual employee, executive officer, or director spends or will spend a significant amount of time and attention on the affairs and business of the Corporation or a Subsidiary of the Corporation. |
| 1.4.38 | “Share” means a common share of the Corporation or, in the event of an adjustment contemplated by Section 5.1, such other security to which a Participant may be entitled upon the exercise or settlement of a Grant as a result of such adjustment. |
| 1.4.39 | “Share Unit” means either an RSU or a PSU, as the context requires. |
| 1.4.40 | “Stock Exchange” means the TSX Venture Exchange and/or such other stock exchange on which the Shares are listed. |
| 1.4.41 | “Stock Exchange Rules” means the applicable rules of any Stock Exchange upon which Shares of the Corporation are listed. |
| 1.4.42 | “Subsidiary” means, in respect of a Person, another Person that is Controlled directly or indirectly by such Person and includes a Subsidiary of that Subsidiary. |
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| 1.4.43 | “Termination” means (i) the termination of a Participant’s Employment with the Corporation or a Subsidiary of the Corporation (other than in connection with the Participant’s transfer to Employment with the Corporation or another Subsidiary), which shall occur on the date on which the Participant ceases to render services to the Corporation or Subsidiary, as applicable, whether such termination is lawful or otherwise (including, without limitation, by reason of resignation, death, frustration of contract, termination for cause, termination without cause, or constructive dismissal), without giving effect to any pay in lieu of notice (paid by way of lump sum or salary continuance), severance pay, benefits continuance or other termination-related payments or benefits to which the Participant may be entitled pursuant to the common law or otherwise (except as may be expressly required to satisfy the minimum requirements of applicable employment or labour standards legislation), but, for greater certainty, a Participant’s absence from active work during a period of vacation, temporary illness, maternity or parental leave, leave on account of Disability or any other authorized leave of absence shall not be considered to be a “Termination”, and (ii) in the case of a Participant who does not return to active Employment with the Corporation or a Subsidiary of the Corporation immediately following a period of absence due to vacation, temporary illness, maternity or parental leave, leave on account of Disability or other authorized leave of absence, such cessation shall be deemed to occur on the last day of such period of absence as approved by the Corporation or a Subsidiary of the Corporation; provided, in each case, that, in the case of any Grant that constitutes deferred compensation subject to Section 409A of the Code that is issued to a US Taxpayer, the Termination constitutes a “Separation From Service”, within the meaning of Section 409A of the Code, and “Terminated” and “Terminates” shall be construed accordingly. |
| 1.4.44 | “Time Vesting” means any conditions relating to the passage of time or continued service with the Corporation or Subsidiary of the Corporation for a period of time in respect of a Grant, as may be determined by the Board. |
| 1.4.45 | “Trading Day” means a day on which the relevant Stock Exchange is open for trading and on which the Shares actually traded. |
| 1.4.46 | “US Taxpayer” means an individual who is subject to tax under the Code in respect of any Grants, amounts payable or Shares deliverable under this Plan. |
| 1.4.47 | “Vested” means, with respect to any Option, Share Unit, or other award included in a Grant, that the applicable conditions with respect to Time Vesting, achievement of Performance Conditions and/or any other conditions established by the Board have been satisfied or, to the extent permitted under the Plan, waived, whether or not the Participant’s rights with respect to such Grant may be conditioned upon prior or subsequent compliance with any Restrictive Covenants (and any applicable derivative term shall be construed accordingly). |
| 1.4.48 | “Vesting Date” means the date on which the applicable Time Vesting, Performance Conditions and/or any other conditions for an Option, Share Unit, or other award included in a Grant becoming Vested are met, deemed to have been met or waived as contemplated in Section 3.1. |
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| 2. | CONSTRUCTION AND INTERPRETATION |
| 2.1 | Gender, Singular, Plural. |
In the Plan, references to one gender include all genders; and references to the singular shall include the plural and vice versa, as the context shall require.
| 2.2 | Severability. |
If any provision or part of the Plan is determined to be void or unenforceable in whole or in part, such determination shall not affect the validity or enforcement of any other provision or part thereof.
| 2.3 | Headings and Sections. |
Headings wherever used herein are for reference purposes only and do not limit or extend the meaning of the provisions herein contained. A reference to a section or schedule shall, except where expressly stated otherwise, mean a section or schedule of the Plan, as applicable.
| 3. | ADMINISTRATION |
| 3.1 | Administration by the Board. |
The Plan shall be administered by the Board in accordance with its terms and subject to Applicable Law. Subject to and consistent with the terms of the Plan, in addition to any authority of the Board specified under any other terms of the Plan, and Applicable Law, the Board shall have full and complete discretionary authority to:
| (a) | interpret the Plan and Grant Agreements; |
| (b) | prescribe, amend and rescind such rules and regulations and make all determinations necessary or desirable for the administration and interpretation of the Plan and instruments of grant evidencing Grants, including (i) requiring, as a condition of any such Grant, the Participant receiving the grant to complete any requisite forms or filings required by Applicable Law and (ii) such rules and regulations as are necessary to ensure that employees and Service Providers are eligible to receive Grants hereunder; |
| (c) | determine those Eligible Persons who may receive Grants as Participants, grant one or more Grants to such Participants and approve or authorize the applicable form and terms of the related Grant Agreement; |
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| (d) | determine the terms and conditions of Grants granted to any Participant, including, without limitation, as applicable (i) Grant value and the number of Shares subject to a Grant, (ii) the Exercise Price for Shares subject to a Grant, (iii) the conditions to the Vesting of a Grant or any portion thereof, including, as applicable, the period for achievement of any applicable Performance Conditions as a condition to Vesting, and conditions pertaining to compliance with Restrictive Covenants, and the conditions, if any, upon which Vesting of any Grant or any portion thereof will be waived or accelerated without any further action by the Board, (iv) the circumstances upon which a Grant or any portion thereof shall be forfeited, cancelled or expire, including in connection with the breach by a Participant of any Restrictive Covenant, (v) the consequences of a Termination with respect to a Grant, (vi) the manner of exercise or settlement of the Vested portion of a Grant, (vii) whether, and the terms upon which, a Grant may be settled in cash, newly issued Shares or a combination thereof, and (viii) whether, and the terms upon which, any Shares delivered upon exercise or settlement of a Grant must be held by a Participant for any specified period of time; |
| (e) | determine whether, and the extent to which, any Performance Conditions or other conditions applicable to the Vesting of a Grant have been satisfied or shall be waived or modified; |
| (f) | make such rules, regulations and determinations as it deems appropriate under the Plan in respect of any leave of absence or disability of any Participant. Without limiting the generality of the foregoing, the Board shall be entitled to determine: |
| (i) | whether or not any such leave of absence shall constitute a Termination within the meaning of the Plan; |
| (ii) | the impact, if any, of any such leave of absence on Grants issued under the Plan made to any Participant who takes such leave of absence (including, without limitation, whether or not such leave of absence shall cause any Grants to expire and the impact upon the time or times such Grants shall be exercisable); |
| (g) | amend the terms of any Grant Agreement or other documents evidencing Grants; and |
| (h) | determine whether, and the extent to which, adjustments shall be made pursuant to Section 5 and the terms of such adjustments. |
| 3.2 | Provided that such determinations are made in accordance with this Plan and Applicable Law, all determinations, interpretations, rules, regulations, or other acts of the Board respecting the Plan or any Grant shall be made in its sole discretion and shall be conclusively binding upon all persons. |
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| 3.3 | Subject to Section 6.5, the Board may, from time to time, amend the Plan for the purpose of establishing one or more sub-plans for the benefit of Eligible Persons who are subject to the laws of a jurisdiction other than Canada in connection with their participation in the Plan. |
The Board may also prescribe terms for Grant Agreements in respect of Eligible Persons who are subject to the laws of a jurisdiction other than Canada in connection with their participation in the Plan that are different than the terms of the Grant Agreements for Eligible Persons who are subject to the laws of Canada in connection with their participation in the Plan, and/or deviate from the terms of the Plan set out herein, for purposes of compliance with Applicable Law in such other jurisdiction or where, in the Board’s opinion, such terms or deviations are necessary or desirable to obtain more advantageous treatment for the Corporation, a Subsidiary of the Corporation or the Eligible Person in respect of the Plan under the Applicable Law of the other jurisdiction.
Notwithstanding the foregoing, the terms of any Grant Agreement authorized pursuant to this Section 3.3 shall be consistent with the Plan to the extent practicable having regard to the Applicable Law of the jurisdiction in which such Grant Agreement is applicable and in no event shall contravene Applicable Law.
| 3.4 | The Board may, in its discretion, subject to Applicable Law, delegate its powers, rights and duties under the Plan, in whole or in part, to a committee of the Board or a person or persons, as it may determine, from time to time, on terms and conditions as it may determine, except that the Board shall not, and shall not be permitted to delegate any such powers, rights or duties (i) with respect to the grant, amendment, administration or settlement of any Grant to the extent delegation is not consistent with Applicable Law and any such purported delegation or action shall not be given effect, and (ii) provided that the composition of the committee of the Board, person or persons, as the case may be, shall comply with Applicable Law. In addition, provided it complies with the foregoing, the Board may appoint or engage a trustee, custodian or administrator to administer or implement the Plan or any aspect of it. |
| 4. | SHARE RESERVE |
| 4.1 | Subject to Section 4.6 and any adjustment pursuant to Section 5.1, the aggregate number of Shares that may be issued pursuant to Grants made under the Plan shall be equal to 10,295,030 Shares. |
| 4.2 | For so long as the Shares are listed on a Stock Exchange, unless the Corporation has obtained the requisite disinterested shareholder approval required under Applicable Law, the aggregate number of Shares reserved for issuance to any one Participant under the Plan, together with all other Security Based Compensation Arrangements of the Corporation, including Shares issuable to companies that are wholly owned by such Participant, in any 12 month period must not exceed 5% of the number of aggregate issued and outstanding Shares, calculated as at the date any Grant is made and in accordance with all Applicable Laws, including all applicable Stock Exchange Rules. |
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| 4.3 | For so long as the Shares are listed on a Stock Exchange, unless the Corporation has obtained the requisite disinterested shareholder approval required under Applicable Law, |
| (a) | the aggregate number of Shares reserved for issuance to Insiders (as a group) under the Plan, together with all other Security Based Compensation Arrangements of the Corporation, must not exceed 10% of the number of aggregate issued and outstanding Shares; |
| (b) | the aggregate number of Shares reserved for issuance to Insiders (as a group) under the Plan, together with all other Security Based Compensation Arrangements of the Corporation, in any 12 month period must not exceed 10% of the number of aggregate issued and outstanding Shares, calculated as at the date any Grant is made to an Insider in accordance with all Applicable Laws, including all applicable Stock Exchange Rules; |
| 4.4 | For so long as the Shares are listed on a Stock Exchange, the aggregate number of Shares reserved for issuance to all Investor Relations Service Providers, in aggregate, under the Plan, together with all other Security Based Compensation Arrangements of the Corporation, in any 12 month period must not exceed 2% of the number of aggregate issued and outstanding Shares, calculated as at the date any Grant is made and in accordance with all Applicable Laws, including all applicable Stock Exchange Rules. |
| 4.5 | For so long as the Corporation’s Shares are listed on a Stock Exchange, the aggregate number of Shares reserved for issuance to any one Service Provider under the Plan, together with all other Security Based Compensation Arrangements of the Corporation, in any 12 month period must not exceed 2% of the number of aggregate issued and outstanding Shares, calculated as at the date any Grant is made and in accordance with all Applicable Laws, including all applicable Stock Exchange Rules. |
| 4.6 | For purposes of computing the total number of Shares available for grant under the Plan or any other Security Based Compensation Arrangement of the Corporation, Shares subject to any Grant (or any portion thereof) that are settled in cash, forfeited, surrendered, cancelled or otherwise terminated, prior to the issuance of such Shares shall again be available for grant under the Plan. Notwithstanding the foregoing, if Shares are issued pursuant to Section 8.6 upon the Surrender of Options, the number of Options Surrendered, and not the number of Shares actually issued by the Corporation, shall be included in computing the total number of Shares available for grant under the Plan or any other Security Based Compensation Arrangement of the Corporation. Where a Grant is subject to Performance Conditions, the maximum aggregate number of Shares that might possibly be issued pursuant to such Performance Conditions must be included in calculating the total number of Shares available for grant under the Plan or any other Security Based Compensation Arrangement of the Corporation. All dividend equivalent RSUs and PSUs shall also be included when computing the total number of Shares available for grant under the Plan or any other Security Based Compensation Arrangement. |
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| 5. | Alteration of Capital And Change In Control |
| 5.2 | No adjustment provided for pursuant to Section 5.1 shall require the Corporation to issue fractional Shares or consideration in lieu thereof in satisfaction of its obligations under the Plan. Any fractional interest in a Share that would, except for the provisions of this Section 5.2, be deliverable upon the exercise of any Grant shall be cancelled and not deliverable by the Corporation. |
| 5.3 | In the event of a Change in Control prior to the Vesting of a Grant, and subject to the terms of a Participant’s written employment agreement or contract for services with the Corporation or a Subsidiary of the Corporation and the applicable Grant Agreement and Applicable Law, including, if required, the approval of any Stock Exchange, the Board shall have full authority to determine in its sole discretion the effect, if any, of a Change in Control on the Vesting, exercisability, settlement, payment or lapse of restrictions applicable to a Grant, which effect may be specified in the applicable Grant Agreement or determined at a subsequent time. Subject to Applicable Law, including, if required, the approval of any Stock Exchange, the Board shall, at any time prior to, coincident with or after the effective time of a Change in Control, take such actions as it may consider appropriate, including, without limitation: (i) provide for the acceleration of any Vesting or exercisability of a Grant; (ii) provide for the deemed attainment of Performance Conditions relating to a Grant; (iii) provide for the lapse of restrictions relating to a Grant; (iv) provide for the assumption, substitution, replacement or continuation of any Grant by a successor or surviving corporation (or a parent or subsidiary thereof) with cash, securities, rights or other property to be paid or issued, as the case may be, by the successor or surviving corporation (or a parent or subsidiary thereof); (v) provide that that a Grant shall terminate or expire unless exercised or settled in full on or before a date fixed by the Board; or (vi) terminate or cancel any outstanding Grant in exchange for a cash payment (provided that, if as of the date of the Change in Control, the Board determines that no amount would have been realized upon the exercise or settlement of the Grant, then the Grant may be cancelled by the Corporation without payment of consideration). For greater certainty, for so long as the Shares are listed on the TSX Venture Exchange, the Board shall not, in the event of a Change in Control, have the ability to accelerate any Vesting or exercisability of a Grant to an Investor Relations Service Provider without the prior written approval of the TSX Venture Exchange. |
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| 6. | MISCELLANEOUS |
| 6.1 | Compliance with Laws and Policies. |
The Corporation’s obligation to make any payments or deliver (or cause to be delivered) any Shares hereunder is subject to compliance with Applicable Law. Each Participant shall acknowledge and agree (and shall be conclusively deemed to have so acknowledged and agreed by participating in the Plan) that the Participant will, at all times, act in strict compliance with Applicable Law and all other laws and any policies of the Corporation applicable to the Participant in connection with the Plan including, without limitation, the Insider Trading Policy of the Corporation, and furnish to the Corporation all information and undertakings as may be required to permit compliance with Applicable Law.
| 6.2 | Withholdings. |
So as to ensure that the Corporation or a Subsidiary of the Corporation, as applicable, will be able to comply with the applicable obligations under any federal, provincial, state or local law relating to the withholding of tax or other required deductions, the Corporation or the Subsidiary of the Corporation shall withhold or cause to be withheld from any cash amount payable to a Participant, either under this Plan, or otherwise, such amount as may be necessary to permit the Corporation or the Subsidiary of the Corporation, as applicable, to so comply. The Corporation and any Subsidiary of the Corporation may also satisfy any liability for any such withholding obligations, on such terms and conditions as the Corporation may determine in its sole discretion, by (a) selling on such Participant’s behalf, or requiring such Participant to sell, any Shares issued under this Plan, and retaining any amount payable which would otherwise be provided or paid to such Participant in connection with any such sale, or (b) requiring, as a condition to the delivery of Shares hereunder, that such Participant make such arrangements as the Corporation may require so that the Corporation and its Subsidiaries can satisfy such withholding obligations, including requiring such Participant to remit an amount to the Corporation or a Subsidiary of the Corporation in advance, or reimburse the Corporation or any Subsidiary of the Corporation for, any such withholding obligations.
| 6.3 | No Right to Continued Employment. |
Nothing in the Plan or in any Grant Agreement entered into pursuant hereto shall confer upon any Participant the right to continue in the employ or service of the Corporation or any Subsidiary of the Corporation, to be entitled to any remuneration or benefits not set forth in the Plan or a Grant Agreement or to interfere with or limit in any way the right of the Corporation or any Subsidiary of the Corporation to terminate Participant’s employment or service arrangement with the Corporation or any Subsidiary of the Corporation.
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| 6.4 | No Additional Rights. |
Neither the designation of an individual as a Participant nor the Grant of any Options, Share Units or other award to any Participant entitles any person to the Grant, or any additional Grant, as the case may be, of any Options, Share Units or other award under the Plan. For greater certainty, the Board’s decision to approve a Grant in any period shall not require the Board to approve a Grant to any Participant in any other period; nor shall the Board’s decision with respect to the size or terms and conditions of a Grant in any period require it to approve a Grant of the same or similar size or with the same or similar terms and conditions to any Participant in any other period. The Board shall not be precluded from approving a Grant to any Participant solely because such Participant may have previously received a Grant under this Plan or any other similar compensation arrangement of the Corporation or a Subsidiary. No Eligible Person has any claim or right to receive a Grant except as may be provided in a written employment or services agreement between an Eligible Person and the Corporation or a Subsidiary of the Corporation.
| 6.5 | Amendment, Termination. |
Subject to compliance with Applicable Law, including, if required, the approval of any Stock Exchange, the Plan and any Grant made pursuant to the Plan may be amended, modified or terminated by the Board without approval of shareholders, provided that no amendment to the Plan or Grants made pursuant to the Plan may be made without the consent of a Participant if it adversely alters or impairs the rights of the Participant in respect of any Grant previously granted to such Participant under the Plan, except that Participant consent shall not be required where the amendment is required for purposes of compliance with Applicable Law. Notwithstanding the foregoing, the Board may amend the Plan and any Grant without approval for shareholders or Participants in order to satisfy the requirements of any Stock Exchange.
For greater certainty, for so long as the Corporation’s Shares are listed on a Stock Exchange, the Plan may not be amended without shareholder approval in accordance with the Stock Exchange Rules to do any of the following:
| (a) | increase in the maximum number of Shares issuable pursuant to the Plan and as set out in Section 4.1; |
| (b) | reduce the Exercise Price of an outstanding Option, except as set forth in Section 5, provided that, for so long as the Shares are listed on the TSX Venture Exchange, disinterested shareholder approval will be obtained for any reduction in the Exercise Price of an Option if the Participant holding such Option is an Insider at the time of the proposed amendment; |
| (c) | extend the maximum term of any Grant made under the Plan, except pursuant to Section 8.7 or Section 13.3, provided that, for so long as the Shares are listed on the TSX Venture Exchange, disinterested shareholder approval will be obtained for any extension of the maximum term of any Option if the Participant holding such Option is an Insider at the time of the proposed amendment; |
| (d) | amend the assignment provisions contained in Section 6.11; |
| (e) | amend the termination provisions applicable to any Grant; |
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| (f) | amend the limitations contained in Sections 4.2, 4.3, 4.4 or 4.5; |
| (g) | amend the method for determining the Exercise Price of an Option, as set out in Section 8.2, or the value of a Share Unit on the Grant Date or the Vesting Date, as set out in Sections 11.2 and 13.2; |
| (h) | include other types of equity compensation involving the issuance of Shares under the Plan; |
| (i) | amend the categories of persons who may participate in the Plan as Participants; |
| (j) | amend the Plan or any Grant in any manner which results in benefit to an Insider, provided that, for so long as the Shares are listed on the TSX Venture Exchange, disinterested shareholder approval will be obtained for any such amendment; or |
| (k) | amend this Section 6.5 to amend or delete any of (a) through (j) or grant additional powers to the Board to amend the Plan or Grants without shareholder approval. |
For greater certainty and without limiting the foregoing, shareholder approval shall not be required for the following amendments and the Board may make the following changes without shareholder approval, subject to any regulatory approvals including, where required, the approval of any Stock Exchange:
| (l) | amendments of a “housekeeping” nature; |
| (m) | a change to the Vesting provisions of any Grants; |
| (n) | a change to the termination provisions of any Grant that does not entail an extension beyond the original term of the Grant; or |
| (o) | amendments to the provisions relating to a Change in Control. |
| 6.6 | Currency. |
All references in the Plan to currency refer to lawful Canadian, U.S. or other currency as determined from time to time by the Board in its sole discretion, failing which the reference shall be deemed to be to Canadian currency except where the context otherwise requires. To the extent that any amounts referenced in this Plan are denominated in a currency other than Canadian dollars or U.S. dollars, and are determined by the Board in its sole discretion to be converted to Canadian dollars, U.S. dollars or other currency, such amounts shall be converted at the applicable Bank of Canada daily exchange rate on the date as of which the converted amount is required to be determined.
| 6.7 | Administration Costs. |
The Corporation will be responsible for all costs relating to the administration of the Plan.
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| 6.8 | Designation of Beneficiary. |
Subject to the requirements of Applicable Law, a Participant may designate a Beneficiary, in writing, to receive any benefits that are provided under the Plan upon the death of such Participant. The Participant may, subject to Applicable Law, change such designation from time to time. Such designation or change shall be in such form as may be prescribed by the Board from time to time. A Beneficiary designation under this Section 6.8 and any subsequent changes thereto shall be filed with the general counsel of the Corporation.
| 6.9 | Governing Law. |
The Plan and any Grants pursuant to the Plan shall be governed by and construed in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein, and with respect to Participants who are US Taxpayers, with the Code and applicable federal laws of the US. The Board may provide that any dispute to any Grant shall be presented and determined in such forum as the Board may specify, including through binding arbitration. Any reference in the Plan, in any Grant Agreement issued pursuant to the Plan or in any other agreement or document relating to the Plan to a provision of law or rule or regulation shall be deemed to include any successor law, rule or regulation of similar effect or applicability. To the extent applicable, with respect to Participants who are US Taxpayers, this Plan shall be interpreted in accordance with the requirements of Code Sections 409A and the regulations, notices, and other guidance of general applicability issued thereunder.
| 6.10 | Assignment. |
The Plan shall enure to the benefit of and be binding upon the Corporation, its successors and assigns.
| 6.11 | Transferability. |
No Grant, and no rights or interests therein, shall or may be assigned, transferred, sold, exchanged, encumbered, pledged or otherwise hypothecated or disposed of by a Participant other than by testamentary disposition by the Participant or the laws of intestate succession. No such interest shall be subject to execution, attachment or similar legal process including without limitation seizure for the payment of the Participant’s debts, judgments, alimony or separate maintenance.
| 7. | EFFECTIVE DATE |
| 7.1 | The Plan is established effective April 15, 2021. |
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PART II – OPTIONS
| 8. | Options |
| 8.1 | The Corporation may, from time to time, make one or more Grants of Options to Eligible Persons on such terms and conditions, consistent with the Plan, as the Board shall determine. In granting such Options, subject to the provisions of the Plan, the Corporation shall specify, |
| (a) | the maximum number of Shares which the Participant may purchase under the Options; |
| (b) | the Exercise Price at which the Participant may purchase his or her Shares under the Options; and |
| (c) | the term of the Options, to a maximum of ten (10) years from the Grant Date of the Options, the Vesting period or periods within this period during which the Options or a portion thereof may be exercised by a Participant and any other Vesting conditions (including Performance Conditions). |
| 8.2 | The Exercise Price for each Share subject to an Option shall be fixed by the Board but under no circumstances shall any Exercise Price be less than one hundred percent (100%) of the Discounted Market Price based upon the most recent closing price of the Shares prior to the Grant of such Option. |
| 8.3 | Unless otherwise designated by the Board in the applicable Grant Agreement, and subject to Section 8.4, the Options included in a Grant shall Vest in three equal installments over a three (3) year period, with one third of the Options vesting on each of the Grant Date, the first anniversary of the Grant Date, and the second anniversary of the Grant Date, and, subject to Section 8.7, any such Options shall expire on the tenth anniversary of the Grant Date (unless exercised or terminated earlier in accordance with the terms of the Plan or the Grant Agreement). |
| 8.4 | Notwithstanding Section 8.3, Options granted to any Investor Relations Service Provider must vest in stages over a period of not less than 12 months such that: |
| (a) | no more than 1/4 of the Options vest no sooner than three months after the Options were granted; |
| (b) | no more than another 1/4 of the Options vest no sooner than six months after the Options were granted; |
| (c) | no more than another 1/4 of the Options vest no sooner than nine months after the Options were granted; and |
| (d) | the remainder of the Options vest no sooner than 12 months after the Options were granted. |
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| 8.5 | Subject to the provisions of the Plan and the terms governing the granting of the Option, and subject to payment or other satisfaction of all related withholding obligations in accordance with Section 6.2, Vested Options or a portion thereof may be exercised from time to time by delivery to the Corporation at its registered office of a notice in writing signed by the Participant or the Participant’s legal personal representative, as the case may be, and addressed to the Corporation. This notice shall state the intention of the Participant or the Participant’s legal personal representative to exercise the said Options and the number of Shares in respect of which the Options are then being exercised and must be accompanied by payment in full of the Exercise Price under the Options which are the subject of the exercise. |
| 8.6 | Notwithstanding Section 8.5, the Board may permit a Participant other than an Investor Relations Service Provider, in lieu of paying the aggregate exercise price in cash, to indicate in the exercise notice that such Participant intends to transfer and dispose of the Options (the “Surrender”) for cancellation and, in such case, the Participant shall surrender the Options being exercised and elect to receive that number of Shares calculated using the following formula, subject to acceptance of a notice of Surrender (“Surrender Notice”) by the Board and provided that arrangements satisfactory to the Corporation have been made to pay any applicable withholding taxes: |
X = (Y*(A-B))/A
Where:
X = the number of Shares to be issued to the Participant upon surrendering such Options; provided that if the foregoing calculation results in a negative number, then no Shares shall be issued.
Y = the number of Shares underlying the Options to be Surrendered.
A = the Market Price of the Shares as at the date of the Surrender.
B = the Exercise Price of such Options.
| 8.7 | If the normal expiry date of any Option falls within any Blackout Period, then the expiry date of such Option shall, without any further action, be extended to the date that is ten (10) business days following the end of such Blackout Period. The foregoing extension applies to all Options whatever the Grant Date and shall not be considered an extension of the term of the Options as referred to in Section 6.5. |
| 9. | Termination of Employment, Death, AND Disability – Options |
| 9.1 | Outstanding Options held by a Participant as of the Participant’s Termination shall be subject to the provisions of this Section 9, as applicable; except that, in all events, the period for exercise of Options shall end no later than the last day of the maximum term thereof established under Section 8.1(c), 8.7, or 9.4, as the case may be. Options that are not exercised prior to the expiration of the exercise period, including any extended exercise period contemplated by this Section 9.1, following a Participant’s date of Termination or Disability Date, as the case may be, shall automatically expire on the last day of such period. |
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| 9.4 | In addition to the Board’s rights under Section 3.1, the Board may, at the time of a Participant’s Termination or Disability Date, extend the period for exercise of some or all of the Participant’s Options, but not beyond the original expiry date, and/or allow for the continued Vesting of some or all of the Participant’s Options during the period for exercise or a portion of it, in each case for a period of time not to exceed 12 months following the date of a Participant’s Termination or Disability. |
| 9.5 | Notwithstanding any other provision hereof or in any Grant Agreement, in the case of a Participant’s Termination for Cause, any and all then outstanding Vested and unvested Options granted to the Participant shall be immediately forfeited and cancelled, without any consideration as of the Termination. |
| 9.6 | For greater certainty, a Participant shall have no right to receive Shares or a cash payment, as compensation, damages or otherwise, with respect to any Options that do not become Vested, that have been forfeited, or that are not exercised before the date on which the Options expire, whether related or attributable to any contractual or common law termination entitlements or otherwise. |
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PART III – SHARE UNITS
| 10. | DEFINITIONS |
| 10.1 | “Grant Value” means the dollar amount allocated to an Eligible Person in respect of a Grant of Share Units. |
| 10.2 | “Share Unit Account” has the meaning set out in Section 12.1. |
| 10.3 | “Valuation Date” means the date as of which the Market Price is determined for purposes of calculating the number of Share Units included in a Grant, which unless otherwise determined by the Board shall be the Grant Date, provided that the Market Price may not be below the Discounted Market Price based on the last closing price of the Shares prior to the Grant of Share Units. |
| 10.4 | “Vesting Period” means, with respect to a Grant of Share Units, the period specified by the Board, commencing on the Grant Date and ending on the last Vesting Date for such Share Units. |
| 11. | Eligibility and Grant Determination. |
| 11.1 | The Board may from time to time make one or more Grants of Share Units to Eligible Persons other than Investor Relations Service Providers on such terms and conditions, consistent with the Plan, as the Board shall determine, provided that, in determining the Eligible Persons to whom Grants are to be made and the Grant Value for each Grant, the Board shall take into account the terms of any written employment agreement or contract for services between an Eligible Person and the Corporation or any Subsidiary of the Corporation and may take into account such other factors as it shall determine in its sole and absolute discretion. |
| 11.3 | Each Grant Agreement issued in respect of Share Units shall set forth, at a minimum, the type of Share Units and Grant Date of the Grant evidenced thereby, the number of RSUs or PSUs subject to such Grant, the applicable Vesting conditions, the applicable Vesting Period(s) and the treatment of the Grant upon Termination, and may specify such other terms and conditions consistent with the terms of the Plan as the Board shall determine or as shall be required under any other provision of the Plan. The Board may include in a Grant Agreement under this Part III terms or conditions pertaining to confidentiality of information relating to the Corporation’s operations or businesses which must be complied with by a Participant including as a condition of the grant or Vesting of Share Units. |
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| 12. | ACCOUNTS AND DIVIDEND EQUIVALENTS |
| 12.1 | Share Unit Account. |
An account, called a “Share Unit Account”, shall be maintained by the Corporation, or a Subsidiary of the Corporation, as specified by the Board, for each Participant who has received a Grant of Share Units and will be credited with such Grants of Share Units as are received by a Participant from time to time pursuant to Section 11 and any dividend equivalent Share Units pursuant to Section 12.2. Share Units that fail to Vest to a Participant and are forfeited pursuant to Section 13, or that are paid out to the Participant or his or her Beneficiary, shall be cancelled and shall cease to be recorded in the Participant’s Share Unit Account as of the date on which such Share Units are forfeited or cancelled under the Plan or are paid out, as the case may be. For greater certainty, where a Participant is granted both RSUs and PSUs, such RSUs and PSUs shall be recorded separately in the Participant’s Share Unit Account.
| 12.2 | Dividend Equivalent Share Units. |
Except as otherwise provided in the Grant Agreement relating to a Grant of RSUs or PSUs, if and when cash dividends (other than extraordinary or special dividends) are paid with respect to Shares to shareholders of record as of a record date occurring during the period from the Grant Date under the Grant Agreement to the date of settlement of the RSUs or PSUs granted thereunder, a number of dividend equivalent RSUs or PSUs, as the case may be, shall be credited to the Share Unit Account of the Participant who is a party to such Grant Agreement. The number of such additional RSUs or PSUs will be calculated by dividing the aggregate dividends or distributions that would have been paid to such Participant if the RSUs or PSUs in the Participant’s Share Unit Account had been Shares by the Market Price on the date on which the dividends or distributions were paid on the Shares, provided that if such Market Price is less than the Discounted Market Price of the Shares based on the last closing price of the Shares prior to the date on which the dividends or distributions were paid, the number of additional RSUs or PSUs shall be determined by dividing the aggregate dividends or distributions that would have been paid to such Participant if the RSUs or PSUs in the Participant’s Share Unit Account had been Shares by the Discounted Market Price based on the last closing price of the Shares prior to date on which the dividends or distributions were paid. The additional RSUs or PSUs granted to a Participant will be subject to the same terms and conditions, including Vesting and settlement terms, as the corresponding RSUs or PSUs, as the case may be.
| 13. | VESTING AND SETTLEMENT OF SHARE UNITS |
| 13.1 | Vesting. |
Subject to this Section 13 and the applicable Grant Agreement, Share Units subject to a Grant and dividend equivalent Share Units credited to the Participant’s Share Unit Account in respect of such Share Units shall Vest in such proportion(s) and on such Vesting Date(s) as may be specified in the Grant Agreement governing such Grant provided that the Participant’s Employment has not Terminated on the relevant Vesting Date and provided further that any Share Units, and dividend equivalent Share Units credited to a Participant in respect of such Share Units, may not vest before the date that is one year following the date that such Share Units are granted.
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| 13.2 | Settlement. |
A Participant’s RSUs and PSUs, adjusted in accordance with the applicable multiplier, if any, as set out in the Grant Agreement, and rounded down to the nearest whole number of RSUs or PSUs, as the case may be, shall be settled, by a distribution as provided below to the Participant or his or her Beneficiary following the Vesting thereof in accordance with Section 13.1 or 13.7, as the case may be, subject to the terms of the applicable Grant Agreement. In all events, unless the Grant Agreement specifies that RSUs and PSUs must be settled through the issuance of Shares, settlement will occur upon or as soon as reasonably practicable following Vesting and, in any event, on or before December 31 of the third year following the year in which the Participant performed the services to which the Grant of RSUs or PSUs relates. Settlement shall be made by the issuance of one Share for each RSU or PSU then being settled, a cash payment equal to the Market Price on the Vesting Date of the RSUs or PSUs being settled in cash (subject to Section 13.3), or a combination of Shares and cash, all as determined by the Board in its discretion, or as specified in the applicable Grant Agreement, and subject to payment or other satisfaction of all related withholding obligations in accordance with Section 6.2.
| 13.3 | Postponed Settlement. |
If a Participant’s Share Units would, in the absence of this Section 13.3 be settled within a Blackout Period applicable to such Participant, such settlement shall be postponed until the earlier of the tenth business day following the date on which such Blackout Period ends and the otherwise applicable date for settlement of the Participant’s Share Units as determined in accordance with Section 13.2, and the Market Price of any RSUs or PSUs being settled in cash will be determined as of the earlier of the business day on which the Blackout Period ends and the day prior to the settlement date.
| 13.4 | Failure to Vest. |
Subject to the terms of the Grant Agreement and this Section 13, all Share Units that are not Vested and do not become Vested on the Participant’s Termination shall be immediately forfeited. For greater certainty, a Participant shall have no right to receive Shares or a cash payment, as compensation, damages or otherwise, whether related or attributable to any contractual or common law notice period or otherwise, with respect to any RSUs or PSUs that do not become Vested or are forfeited hereunder.
| 13.5 | Resignation, Death and Disability. |
Subject to the applicable Grant Agreement and Section 13.7, in the event a Participant’s employment is Terminated as a result of the Participant’s resignation (which is not in connection with a constructive dismissal by the Corporation or a Subsidiary of the Corporation), death or Disability, no Share Units that have not Vested prior to such Termination, including dividend equivalent Share Units in respect of such Share Units, shall Vest and all such Share Units shall be forfeited immediately.
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| 13.6 | Termination of Employment without Cause. |
Subject to the applicable Grant Agreement and Section 13.7, in the event a Participant’s Termination without Cause (which shall include a constructive dismissal by the Corporation or a Subsidiary of the Corporation), no Share Units that have not Vested prior to such Termination, including dividend equivalent Share Units in respect of such Share Units, shall Vest and all such Share Units shall be forfeited immediately.
| 13.7 | Extension of Vesting. |
The Board may, at the time of Termination or a Disability Date, extend the period for Vesting of Share Units for a period of time not to exceed 12 months following the date of a Participant’s Termination or Disability, but not beyond the original end of the applicable Vesting Period.
| 13.8 | Termination of Employment for Cause. |
In the event a Participant’s employment is Terminated for Cause by the Corporation or a Subsidiary, no Share Units that have not Vested prior to the date of the Participant’s Termination for Cause, including dividend equivalent Share Units in respect of such Share Units, shall Vest and all such Share Units shall be forfeited immediately, except only as may be required to satisfy the express minimum requirements of applicable employment or labour standards legislation. The Participant shall have no further entitlement to Share Units following the Termination and waives any claim to damages in respect thereof whether related or attributable to any contractual or common law termination entitlements or otherwise.
| 14. | SHAREHOLDER RIGHTS |
| 14.1 | No Rights to Shares. |
Share Units are not Shares and a Grant of Share Units will not entitle a Participant to any shareholder rights, including, without limitation, voting rights, dividend entitlement or rights on liquidation.
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Exhibit “A”
Arras Minerals Corp. Equity Incentive Plan
Special Provisions Applicable to US Taxpayer
This Exhibit sets forth special provisions of the Arras Minerals Corp. Equity Incentive Plan (the “Plan”) that apply to Participants who are US Taxpayers. This Exhibit shall apply to such Participants notwithstanding any other provisions of the Plan. Terms defined elsewhere in the Plan and used herein shall have the meanings set forth in the Plan, as may be amended from time to time.
| 1. | Definitions |
“Disability” means, (i) solely with respect to Incentive Stock Options, a Participant’s total and permanent disability within the meaning of Section 22(e)(3) of the Code, or (ii) solely with respect to an award that constitutes deferred compensation subject to Section 409A of the Code that includes Disability as a payment date, a “disability” as defined under Section 409A of the Code.
“Eligible Person” means, solely with respect to Options, an individual Employed by the Corporation or any of its subsidiaries who, by the nature of his or her position or job is, in the opinion of the Board, in a position to contribute to the success of the Corporation; provided, however, that only officers and employees of the Corporation or Subsidiary shall be eligible to receive Incentive Stock Options.
“Greater than 10% Shareholder” means an Eligible Person who, effective as of the Grant Date of an Incentive Stock Option, owns (directly or indirectly, within the meaning of Section 424(d) of the Code) more than ten percent (10%) of the total combined voting power of all classes of stock of the Corporation (or any subsidiary or parent of the Corporation within the meaning of Sections 424(e) and 424(f) of the Code).
“Incentive Stock Option” means an Option awarded under the Plan to a US Taxpayer that is intended to be an “incentive stock option” as defined in Section 422 of the Code.
“Market Price” means, solely with respect to the term “Exercise Price”, (a) if the Shares are listed on the Stock Exchange, the closing price per Share on the Stock Exchange on the Grant Date; (b) if the Shares are listed on more than one Stock Exchange, the fair market value as determined in accordance with paragraph (a) above for the primary Stock Exchange on which the Shares are listed, as determined by the Board; and (c) if the Shares not listed for trading on a Stock Exchange, a price which is determined by the Board in good faith to be the fair market value of the Shares in compliance with Section 409A of the Code.
“Nonqualified Stock Option” means an Option granted under the Plan that is not intended to be, and does not otherwise qualify as, an Incentive Stock Option.
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“Separation From Service” shall have the meaning assigned to it in Section 1.409A-1(h), which generally means that an individual’s employment or service with the Corporation and any entity that is to be treated as a single employer with the Corporation for purposes of United States Treasury Regulation Section 1.409A-1(h) terminates such that it is reasonably anticipated that no further services will be performed or that the level of bona fide services performance would decrease to no more than 20% of the average level of bona fide services performed over the immediately preceding 36-month period.
“Specified Employee” means a US Taxpayer who meets the definition of “specified employee,” as defined in Section 409A(a)(2)(B)(i) of the Code.
“Subsidiary” shall have the meaning assigned to it in Section 424(f) of the Code with respect to any Incentive Stock Option.
| 2. | Options |
| a. | Grant Date. The Grant Date for any Options granted to a US Taxpayer may not be earlier than the date that the Board approves the Grant. |
| b. | Shares Available. The aggregate number of Shares that may be issued to US Taxpayers under the Plan shall be 1,000,000 Shares, all of which may be issued pursuant to Incentive Stock Options. |
| c. | Grant of Incentive Stock Options. The Board may grant Incentive Stock Options to Eligible Persons that are US Taxpayers under the Plan. If an Incentive Stock Option is granted to a Greater than 10% Shareholder, then the Exercise Price may not be less than 110% of the Market Value on the Grant Date, and the expiration of the exercise period shall not be later than the fifth anniversary of the Grant Date. Any Option that is intended to be an Incentive Stock Option, but fails to so qualify for any reason, including, without limitation, the portion of an Option becoming exercisable in any year in excess of the $100,000 limitation described in Treasury Regulation Section 1.422-4, shall be treated as Nonqualified Stock Options. Neither the Corporation nor the Board shall have any liability to a US Taxpayer, or any other party, if an Option (or any part thereof) which is intended to qualify as an Incentive Stock Option fails to qualify as such for any reason. |
| d. | Shareholder Approval for Incentive Stock Options. Incentive Stock Options may only be granted under the Plan if the Corporation’s shareholders approve the Plan within twelve (12) months of the Effective Date. Any Incentive Stock Options granted under the Plan prior to such approval shall be conditioned on such approval. No Incentive Stock Options may be granted after then tenth (10th) anniversary of the Effective Date of the Plan unless the Corporation’s shareholders approve an extension of the Plan for such purpose. |
| e. | Notice of Disposition of Shares Acquired from Incentive Stock Options. A Participant shall give prompt notice to the Corporation of any disposition or other transfer of any Shares acquired upon exercise of an Incentive Stock Option if such disposition is made before the earlier of (i) the second anniversary of the Grant Date and (ii) the first anniversary of the date the Shares were issued upon exercise. Such notice shall specify the date of such disposition or transfer and the amount realized by the Participant as a result of such disposition or transfer. |
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| 3. | Transferability. |
Notwithstanding anything in the Plan or Grant Agreement to the contrary, Incentive Stock Options may only be exercised during a Participant’s lifetime by the Participant, and may only be transferred by will or pursuant to the laws of descent and distribution. Any other awards may only be transferred by will, the laws of descent and distribution, or as permitted by Rule 701 of the Securities Act of 1933, as amended.
| 4. | Impact of Blackout on Exercise or Settlement of Awards. |
Section 8.7 of the Plan shall not apply to Options granted to US Taxpayers. Section 13.3 of the Plan shall not apply to Share Units granted to US Taxpayers that are deferred compensation subject to the rules of Code Section 409A unless permitted by Treas. Reg. Section 1.409A-2(b)(7)(ii).
| 5. | Change in Control Treatment |
Notwithstanding anything to the contrary, if the Change in Control event does not constitute a change in ownership or effective control of the Corporation or a change in ownership of a substantial portion of the assets of the Corporation under Section 409A of the Code, and if the Corporation determines any award under the Plan constitutes deferred compensation subject to Section 409A of the Code, then as determined in the sole discretion of the Board, the vesting of such award may be accelerated as of the effective date of the Change in Control, but the Corporation shall pay such award in accordance with the original terms and conditions of the award as if the Change of Control had not occurred.
| 6. | Adjustments |
Any adjustments made to an award granted to a US Taxpayer under Section 5 of the Plan shall be intended to comply with the requirements of Section 422 of the Code with respect to Incentive Stock Options and Section 409A of the Code with respect to any other awards to the extent needed for the award to continue to be exempt from, or comply with, Section 409A of the Code.
| 7. | Compliance with Section 409A |
The intent of the parties is that payments and benefits under this Plan comply with or be exempt from Section 409A of the Code, and accordingly, to the maximum extent permitted, this Plan shall be interpreted and administered in accordance with such intent. Notwithstanding anything contained herein to the contrary, to the extent required in order to avoid accelerated taxation and/or tax penalties under Section 409A of the Code, a Participant shall not be considered to have terminated employment with the Corporation for purposes of this Plan unless the Participant would be considered to have incurred a Separation from Service from the Corporation. Each amount to be paid or benefit to be provided under this Plan shall be construed as a separate identified payment for purposes of Section 409A of the Code, and any payments described in this Plan that are due within the “short term deferral period” as defined in Section 409A of the Code shall not be treated as deferred compensation unless applicable law requires otherwise. Without limiting the foregoing and notwithstanding anything contained herein to the contrary, to the extent required in order to avoid accelerated taxation and/or tax penalties under Section 409A of the Code, deferred compensation amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to this Plan (or any other plan or agreement of the Corporation) during the six (6) month period immediately following the Specified Employee’s Separation from Service shall instead be paid on the first business day after the date that is six (6) months following the Specified Employee’s Separation from Service (or death, if earlier). The Plan and any award agreements issued thereunder may be amended in any respect deemed by the Board to be necessary in order to preserve compliance with Section 409A of the Code. The Corporation makes no representation that any or all of the payments described in this Plan will be exempt from or comply with Section 409A of the Code and makes no undertaking to preclude Section 409A of the Code from applying to any such payment. Each Participant shall be solely responsible for the payment of any taxes and penalties incurred under Section 409A of the Code.
28
Exhibit 8.1
Subsidiaries of the Registrant
Arras Minerals Corp. (the “Company”) currently conducts its operations through subsidiaries. The names and ownership structure of its subsidiaries as of October 31, 2023 are set forth in the chart below:
| Name | Jurisdiction of Incorporation or Organization | Ownership Percentage |
| Eidos Minerals LLP (“Ekidos”) | Kazakhstan | 100% by Arras Minerals |
| Arras Metals Ltd. (“Arras Metals”) | Kazakhstan | 100% by Arras Minerals |
Exhibit 12.1
Certification
of CEO Pursuant to Exchange Act Rules 13a-14 and 15d-14,
as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
I, Timothy Barry, certify that:
| 1. | I have reviewed this Annual Report on Form 20-F of Arras Minerals Corp.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report; |
| 4. | The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and |
| 5. | The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting. |
| Dated: February 28, 2024 | By: | /s/ Timothy Barry |
|
Timothy Barry, Chief Executive Officer (Principal Executive Officer) | ||
Exhibit 12.2
Certification
of CFO Pursuant to Exchange Act Rules 13a-14 and 15d-14,
as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
I, Christopher Richards, certify that:
| 1. | I have reviewed this Annual Report on Form 20-F of Arras Minerals Corp.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report; |
| 4. | The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and |
| 5. | The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting. |
| Dated: February 28, 2024 | By: | /s/ Christopher Richards |
|
Christopher Richards, Chief Financial Officer (Principal Accounting and Financial Officer) | ||
Exhibit 13.1
CERTIFICATION OF CEO PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 1350 of Chapter 63 of Title 18 of the United States Code), the undersigned officer of Arras Minerals Corp. (the “Company”) does hereby certify with respect to the Annual Report of the Company on Form 20-F for the year ended October 31, 2023 (the “Report”) that:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Dated: February 28, 2024 | By: | /s/ Timothy Barry | ||
|
Timothy Barry, Chief Executive Officer (Principal Executive Officer) | ||||
The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 1350 of Chapter 63 of Title 18 of the United States Code). It shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934 (15 U.S.C. Section 78r) or otherwise subject to the liability of that section. It shall also not be deemed incorporated by reference into any filing under the Securities Exchange Act of 1934, as amended, or the Securities Act of 1933, as amended, except to the extent that the Company specifically incorporates it by reference.
Exhibit 13.2
CERTIFICATION OF CFO PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 1350 of Chapter 63 of Title 18 of the United States Code), the undersigned officer of Arras Minerals Corp. (the “Company”) does hereby certify with respect to the Annual Report of the Company on Form 20-F for the year ended October 31, 2023 (the “Report”) that:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Dated: February 28, 2024 | By: | /s/ Christopher Richards | ||
|
Chief Financial Officer (Principal Accounting and Financial Officer) | ||||
The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 1350 of Chapter 63 of Title 18 of the United States Code). It shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934 (15 U.S.C. Section 78r) or otherwise subject to the liability of that section. It shall also not be deemed incorporated by reference into any filing under the Securities Exchange Act of 1934, as amended, or the Securities Act of 1933, as amended, except to the extent that the Company specifically incorporates it by reference.
Exhibit 15.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in this Annual Report on Form 20-F of Arras Minerals Corp. (the “Company”) of our report dated February 27, 2024 with respect to the financial statements of the Company as of October 31, 2023 and for the year then ended. We also consent to the reference to us under the heading “Principal Accountant Fees and Services” in this Annual Report.
/s/ Smythe LLP
Smythe LLP, Chartered Professional Accountants
Vancouver, Canada
February 27, 2024
Exhibit 15.2
CONSENT OF ARCHER, CATHRO & ASSOCIATES (1981) LIMITED
We, Archer, Cathro & Associates (1981) Limited, in connection with Arras Minerals Corp.’s Annual Report on Form 20-F for the fiscal year ended October 31, 2023 (the “Form 20-F”), consent to:
- the filing and use of the technical report summary titled “Beskauga Copper-Gold Project, Republic of Kazakhstan, Mineral Resource Estimate — S-K 1300 Technical Report Summary” (the “Technical Report Summary”), dated February 27, 2024, as an exhibit to and referenced in the Form 20-F or any amendment thereto;
- the use of and references to our name in connection with the Form 20-F or any amendment thereto and any such Technical Report Summary; and
- the information derived, summarized, quoted or referenced from the Technical Report Summary, or portions thereof, that was prepared by us, that we supervised the preparation of and/or that was reviewed and approved by us, that is included or incorporated by reference in the Form 20-F or any amendment thereto.
| Archer, Cathro & Associates (1981) Limited | ||
| Date: February 27, 2024 | By: | /s/ Matthew Dumala, P.Eng, |
| Name: | Matthew Dumala, P.Eng, | |
| Title: | Partner and Senior Engineer | |
Exhibit 15.3
Beskauga Copper-Gold Project, Republic of Kazakhstan, Mineral Resource Estimate
S-K 1300 TECHNICAL REPORT SUMMARY
PREPARED FOR: Arras Minerals Corp.
Click here to enter Report Number…
27 February 2024
Prepared by
Mr. Timothy Barry, MAusIMM (CP)., Arras Minerals Corp.
&
Archer, Cathro & Associates (1981) Limited
Report prepared for
| Client Name | Arras Minerals Corp. |
| Project Name/Job Code | |
| Contact Name | Tim Barry |
| Contact Title | CEO |
| Office Address | Suite 1605, 777 Dunsmuir Street, Vancouver, BC, V7Y 1K4, Canada |
Report issued by
| Filename | Archer Cathro |
| Last Edited | 27 February 2024 |
| Report Status | Final |
| I |
Arras Minerals Corp. Beskauga Copper-Gold Project – S-K 1300 TECHNICAL REPORT |
Contents
| Report prepared for | I |
| Report issued by | I |
| 1 Executive Summary | 8 |
| 1.1 Introduction | 8 |
| 1.2 Location and Tenure | 8 |
| 1.3 Accessibility, Climate, Local Resources, Infrastructure and Physiography | 9 |
| 1.4 History | 9 |
| 1.5 Geology and Mineralization | 9 |
| 1.6 Deposit Types | 11 |
| 1.7 Exploration | 11 |
| 1.8 Drilling | 11 |
| 1.9 Sample Preparation, Analyses and Security | 12 |
| 1.10 Mineral Processing and Metallurgical Testing | 13 |
| 1.11 Mineral Resource Estimate | 14 |
| 1.12 Adjacent Properties | 15 |
| 1.13 Interpretation and Conclusions | 15 |
| 1.14 Recommendations | 16 |
| 2 Introduction | 18 |
| 2.1 Registrant | 18 |
| 2.2 Terms of Reference | 18 |
| 2.3 Sources of Information | 18 |
| 2.4 Qualified Persons | 19 |
| 2.5 Qualified Person Property Inspection | 19 |
| 2.6 Previous Resource Estimates. | 19 |
| 3 Property Description | 20 |
| 3.1 Location of Property | 20 |
| 3.2 Area of Property | 21 |
| 3.3 Mineral Tenure | 21 |
| 3.3.1 Kazakhstan Mining Code | 21 |
| 3.3.2 Beskauga Project | 22 |
| 3.3.3 Beskauga Licence | 22 |
| 3.3.4 Stepnoe and Ekidos Exploration Licences | 24 |
| 3.3.5 Beskauga East and Beskauga West Exploration Licenses. | 25 |
| 3.4 Tenure Agreements and Encumbrances | 25 |
| 3.4.1 Beskauga Mineral Licence Option Agreement | 25 |
| 3.4.2 Ekidos-Stepnoe JV agreement | 26 |
| 3.5 Environmental Liabilities | 26 |
| 3.6 Risks | 26 |
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Arras Minerals Corp. Beskauga Copper-Gold Project – S-K 1300 TECHNICAL REPORT |
| 4 Accessibility, Climate, Local Resources, Infrastructure and Physiography | 27 |
| 4.1 Topography, Elevation and Vegetation | 27 |
| 4.2 Access to Property | 27 |
| 4.3 Climate | 27 |
| 4.4 Infrastructure | 28 |
| 4.4.1 Sources of Power | 28 |
| 4.4.2 Water | 28 |
| 4.4.3 Local Infrastructure and Mining Personnel | 28 |
| 4.4.4 Property Infrastructure | 29 |
| 4.4.5 Adequacy of Property Size | 29 |
| 5 History | 30 |
| 5.1 Historical Exploration | 30 |
| 5.1.1 Soviet Period | 30 |
| 5.1.2 Goldbelt Resources | 30 |
| 5.2 Previous Exploration by Copperbelt | 31 |
| 5.3 Historical Mineral Resource Estimates | 31 |
| 6 Geological Setting, Mineralization and Deposit | 32 |
| 6.1 Regional Geology and Metallogeny | 32 |
| 6.1.1 Central Asian Orogenic Belt in Northeastern Kazakhstan | 34 |
| 6.2 Property Geology | 36 |
| 6.3 Mineralization and Alteration | 39 |
| 6.4 Deposit Type | 42 |
| 6.4.1 Mineralization Styles | 43 |
| 6.4.2 Conceptual Models | 44 |
| 7 Exploration | 46 |
| 7.1 Geophysics | 46 |
| 7.2 Diamond Drilling | 50 |
| 7.2.1 Collar Surveying | 55 |
| 7.2.2 Downhole Surveying | 55 |
| 7.2.3 Core Logging and Photography | 56 |
| 7.2.4 Core Sampling | 56 |
| 7.2.5 Significant Intervals | 56 |
| 7.2.6 Interpretation | 57 |
| 7.3 KGK Drilling | 58 |
| 7.3.1 Sampling and Results | 58 |
| 7.4 Hydrogeology Studies | 64 |
| 7.5 Geotechnical Studies | 65 |
| 7.6 Regional Evaluation | 67 |
| 8 Sample Preparation, Analyses and Security | 68 |
| 8.1 Sample Preparation and Security | 68 |
| 8.2 Analytical Method | 70 |
| 8.3 Quality Assurance and Quality Control | 70 |
| III |
Arras Minerals Corp. Beskauga Copper-Gold Project – S-K 1300 TECHNICAL REPORT |
| 8.3.1 Internal Laboratory QA/QC | 71 |
| 8.3.2 Certified Reference Materials | 74 |
| 8.3.3 Blanks | 85 |
| 8.3.4 Duplicates | 87 |
| 8.3.5 Laboratory Umpire Analysis | 90 |
| 8.4 Author’s Opinion on Sample Preparation, Security and Analytical Procedures | 91 |
| 9 Data Verification | 92 |
| 9.1 Internal Data verification | 92 |
| 9.2 Site Visit | 92 |
| 9.3 Data Verification by Qualified Person | 92 |
| 9.4 Qualified Person’s Opinion on Data Adequacy | 93 |
| 10 Mineral Processing and Metallurgical Testing | 94 |
| 10.1 Sample Selection | 94 |
| 10.2 Metallurgical Test Results | 95 |
| 10.3 Conclusions, Risks and Other Factors | 102 |
| 11 Mineral Resource Estimates | 103 |
| 12 Mineral Reserve Estimates | 113 |
| 13 Mining Methods | 114 |
| 14 Process and Recovery Methods | 115 |
| 15 Infrastructure | 116 |
| 16 Market Studies | 117 |
| 17 Environmental Studies, Permitting and Plans, Negotiations or Agreements with Individuals or Groups | 118 |
| 18 Capital and Operating Costs | 119 |
| 19 Economic Analysis | 120 |
| 20 Adjacent Properties | 121 |
| 21 Other Relevant Data and Information | 122 |
| 22 Interpretation and Conclusions | 123 |
| 23 Recommendations | 124 |
| 24 References | 125 |
| 25 Reliance on Information by the Registrant | 126 |
| 26 Date and Signature Page | 127 |
| IV |
Arras Minerals Corp. Beskauga Copper-Gold Project – S-K 1300 TECHNICAL REPORT |
| 27 Abbreviations and Units of Measurement | 128 |
| V |
Arras Minerals Corp. Beskauga Copper-Gold Project – S-K 1300 TECHNICAL REPORT |
Figures
| Figure 1: Location of the Beskauga Project in Kazakhstan in relation to the major cities (coordinate grid is WGS84, geographic coordinates) | 20 |
| Figure 2: Location of the Beskauga Project licences (coordinates are WGS84/UTM Zone 43N). | 21 |
| Figure 3: Drilling on the Beskauga deposit | 28 |
| Figure 4: Location of the town of Ekibastuz in relation to the mineral licences owned by Arras Minerals | 29 |
| Figure 5: Simplified tectonic map of the Altaid and Transbaikal-Mongolian orogenic collage in central Eurasia | 33 |
| Figure 6: Geotectonic map of the Paleozoic of Kazakhstan and contiguous China, showing the location of the Beskauga deposit (from Windley et al., 2007) | 34 |
| Figure 7: Schematic tectonic map of the CAOB in northeast Kazakhstan showing mineral deposits. | 36 |
| Figure 8: Location of the Beskauga prospect within the larger Beskauga Project area | 37 |
| Figure 9: Stratigraphic column showing the Beskauga sedimentary-volcanic succession. | 38 |
| Figure 10: Beskauga igneous suite of rocks. | 39 |
| Figure 11: Geological map of the Beskauga deposit area, showing drillhole collars. Section line A-A’ (Figure 12) is also shown. | 40 |
| Figure 12: Cross section A-A’ through the Beskauga deposit, looking W (section location is shown on Figure 11) | 41 |
| Figure 13: Plot of gold grade vs total resources for selected gold-rich porphyry projects globally | 43 |
| Figure 14: Cartoon cross-section of a porphyry copper deposit showing idealized alteration zoning and relationship to mineralization (from Berger et al., 2008). | 44 |
| Figure 15: Anatomy of a porphyry mineral system showing the spatial relationship between a centrally located porphyry deposit with skarn, carbonate-replacement, sediment-hosted and epithermal vein type deposits. From Sillitoe (2010). | 45 |
| Figure 16: Magnetic anomaly map (Total Magnetic Intensity) and grid points for the magnetic survey | 46 |
| Figure 17: IP anomaly map of chargeability over the Beskauga deposit – depth slice at 300 m. | 47 |
| Figure 18: AN-2 Aircrafts and exterior of CS-3 Magnetometer on Tail Stinger | 48 |
| Figure 19: RMI-RTP 2021 Airborne magnetic survey over Beskauga, Stepnoe and Ekidos license | 49 |
| Figure 20: 2023 Beskauga ground magnetics survey field crew with equipment and magnetometers. | 50 |
| Figure 21: Beskauga Main drill collars | 55 |
| Figure 22: Location of the shallow KGK holes drilled by Dostyk between 2007 and 2017 | 59 |
| Figure 23: Cu geochemical anomalies from KGK drilling and Soviet drilling | 60 |
| Figure 24: Au geochemical anomalies from KGK drilling | 61 |
| Figure 25: Location of the shallow KGK holes drilled by Arras Minerals 2021 and 2022 drilling campaigns. | 62 |
| Figure 26: Cu geochemical anomalies from 2021-2022 KGK drilling. | 63 |
| Figure 27: Au geochemical anomalies from 2021-2022 KGK drilling. | 64 |
| Figure 28: Dostyk LLP storage facility with core and crushed duplicate samples. | 69 |
| Figure 30. OREAS 209 Shewhart Control Chart for gold | 76 |
| Figure 31. OREAS 501b Shewhart Control Chart for gold | 76 |
| Figure 32. OREAS 501b Shewhart Control Chart for copper | 77 |
| Figure 33. OREAS 502b Shewhart Control Chart for gold | 77 |
| Figure 34. OREAS 503b Shewhart Control Chart for gold | 78 |
| Figure 35. OREAS 503b Shewhart Control Chart for copper | 78 |
| Figure 36. OREAS 54Pa Shewhart Control Chart for gold | 79 |
| Figure 37. OREAS 54Pa Shewhart Control Chart for copper | 79 |
| Figure 38. OREAS 152a Shewhart Control Chart for gold | 80 |
| Figure 39. OREAS 152a Shewhart Control Chart for copper | 80 |
| Figure 40. OREAS 503d Shewhart Control Chart for gold | 81 |
| Figure 41. OREAS 503d Shewhart Control Chart for copper | 81 |
| Figure 42. OREAS 505 Shewhart Control Chart for gold | 82 |
| Figure 43. OREAS 505 Shewhart Control Chart for copper | 82 |
| Figure 44. OREAS 506 Shewhart Control Chart for gold | 83 |
| Figure 45. OREAS 506 Shewhart Control Chart for copper | 83 |
| Figure 46. OREAS 606 Shewhart Control Chart for gold | 84 |
| Figure 47. OREAS 606 Shewhart Control Chart for copper | 84 |
| Figure 48. 2021 Blanks - control chart for gold | 86 |
| VI |
Arras Minerals Corp. Beskauga Copper-Gold Project – S-K 1300 TECHNICAL REPORT |
| Figure 49. 2021 Blanks - control chart for copper | 86 |
| Figure 50. Linear regression of gold for duplicates from 2013 | 87 |
| Figure 51. Linear regression of copper for duplicates from 2013 | 88 |
| Figure 53. Linear regression of gold for duplicates from 2021-2023 Arras drilling campaigns | 89 |
| Figure 54. Linear regression of copper for duplicates from 2021-2023. | 89 |
| Figure 33: Linear regression of gold for duplicates | 90 |
| Figure 34: Linear regression of copper for duplicates | 91 |
| Figure 55. QEMSCAN® modal mineralogy for the sulphide phases | 96 |
| Figure 56. Ammtec “Average Grade” rougher/scavenger grade-recovery curves | 98 |
| Figure 57. Ammtec “Average Grade” cleaner grade-recovery curves | 99 |
| Figure 41. Mineralized solids – View looking east. | 104 |
| Figure 42. Visual validation of block model copper grades vs drillhole grades | 109 |
| Figure 80: Location of the salt mine within the Beskauga Project area (coordinates are WGS/UTM Zone 43N) | 121 |
Tables
| Table 1: Mineral Resource estimate for the Beskauga deposit with an effective date of 27 December 2021 | 15 |
| Table 2. Recommended Work program budget estimate. | 17 |
| Table 3: Qualified Persons – report responsibilities | 19 |
| Table 3: License table for Beskauga outlining the validity of the licences. | 22 |
| Table 4: Bonus payments under the Beskauga Option Agreement | 25 |
| Table 5: Previous Mineral Resource estimates at the Beskauga Project | 31 |
| Table 6: Summary table of the diamond drilling conducted by Dostyk between 2007 and 2017, and Arras Minerals between 2021 and 2023 | 51 |
| Table 7: Collar positions, lengths, and orientations of all diamond drillholes at Beskauga Main used for the Mineral Resource estimate. | 51 |
| Table 8: Significant intervals drilled at Beskauga (>100 m intervals at >0.3 g/t Au) | 56 |
| Table 9: Summary table of the KGK drilling conducted by Dostyk between 2011 and 2022 | 58 |
| Table 10: CRM grades | 74 |
| Table 13. Blank assay results for period before 2021 | 85 |
| Table 14. Blank assay results 2021-23 | 85 |
| Table 12: Correlation coefficient and precision values for pulp duplicates | 90 |
| Table 15 Results of optimal WAI rougher tests for three different samples | 99 |
| Table 16. Results of optimal WAI cleaner tests for three different samples | 100 |
| Table 17. Average grade from different areas of the Beskauga deposit | 100 |
| Table 18: Drillhole database files | 103 |
| Table 19. Statistics for copper, gold and silver within mineralized domains | 105 |
| Table 20. Capping values | 106 |
| Table 21: Declustered capped composite statistics. | 106 |
| Table 22: Semi-Variogram Parameters | 106 |
| Table 23: Block model dimensions and parameters | 107 |
| Table 24: Interpolation parameters | 108 |
| Table 25: Comparison of grades between block model and composites | 108 |
| Table 26: Pit optimization parameters (base case) | 110 |
| Table 27: Mineral Resource estimate for the Beskauga Project with an effective date of 27 December 2021. | 111 |
| Table 26: Work program estimate | 124 |
| VII |
Arras Minerals Corp. Beskauga Copper-Gold Project – S-K 1300 TECHNICAL REPORT |
| 1 | Executive Summary |
| 1.1 | Introduction |
The Beskauga project is a relatively early-stage exploration stage copper-gold porphyry deposit located in the Northeast of Kazakhstan, Central Asia. This report has been written to comply with S-K 1300 reporting standards as outlined by the SEC.
As the reader reviews this report, he/she will realise that considerable follow up work needs to be completed, not least of which will be closer spaced drilling to increase the understanding of the mineral resource model and minimise the risk associated with advancing its development. There is considerable upside to further drilling as this increased data will identify upside. The presence of significant quantities arsenic as a deleterious element has been identified as well as a process to mitigate its impact on the project.
Arras Minerals Corp. (“Arras” or the “Registrant”) is a mineral exploration company based in Vancouver, Canada, listed on the TSX Venture Exchange (Ticker: ARK). On 17 August 2020, Silver Bull Resources (“Silver Bull”), a publicly listed company on the TSX (Symbol: SVB) and OTCQB (Symbol: SVBL) announced that it had entered an option to purchase agreement to acquire a 100% interest in the Beskauga Copper-Gold Project located in in the Pavlodar Province in northeastern Kazakhstan from Copperbelt, a private mineral exploration company registered in Zug, Switzerland.
On 1 April 2021, Silver Bull announced its intention to transfer the option to purchase agreement of the Beskauga project to Arras, who at the time was a 100% owned subsidiary. Silver Bull also announced its intention to issue 34.2 million shares of Arras to Silver Bull shareholders. On 27 September 2021, Silver Bull announced the completion of the share issuance.
| 1.2 | Location and Tenure |
The Beskauga Project is in Pavlodar Region, north-eastern Kazakhstan, approximately 70 km southwest of the city of Pavlodar (population ~330,000). The property comprises three contiguous licences and 2 new applications, the Beskauga Mineral Licence (40.5 km2) in the centre of the property, which has been the subject of all work carried out thus far, and the Stepnoe (370.8 km2) and Ekidos (252.1 km2) mineral exploration licences.
Two new licenses, Beskauga East (17.0km2) and Beskauga West (6.4km2) were granted to the Company on 8 January 2024. In total the property covers 686.8km2. The Beskauga deposit at approximately 51° 48'N, 76° 17'E (WGS84, Geographic Coordinates).
Kazakhstan has recently updated its mining code and all new licences are issued under this code. The new mining code, the Code on Subsoil and Subsoil Use (“the SSU Code”) was ratified on 29 June 2018 and is based on the Western Australian model. The Beskauga licence was originally issued under the older contract permitting system in Kazakhstan and gives Arras Minerals, via its agreement with the private company, Copperbelt, the right to explore for “All Minerals” (except uranium) until 31 December 2023. On May 27, 2023, the government of Kazakhstan agreed to convert the Beskauga exploration contract to an exploration license under the SSU code. On August 8, 2023, exploration license 2092-EL was granted until February 8, 2024, with the option to renew for an additional five-year period. On November 3, 2023, the exploration license 2092-EL was renewed until February 8, 2029.
The Stepnoe and Ekidos exploration licences were both granted to Arras Minerals 100% subsidiary, Ekidos LLP, on 22 October 2020 under the new mining code for an initial six-year period.
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Arras Minerals Corp. Beskauga Copper-Gold Project – S-K 1300 TECHNICAL REPORT |
| 1.3 | Accessibility, Climate, Local Resources, Infrastructure and Physiography |
The Beskauga deposit is located approximately 300 km from the Kazakhstan capital, Nur-Sultan (formerly Astana), which has all modern services and a well-connected international airport. Access to the Project area is via sealed highway from Ekibastuz (population ~125,000), some 40 km to the west of the Project area, or from Pavlodar, some 70 km to the northeast of the Project area. Ekibastuz is about four hours drive from Nur-Sultan. Pavlodar is also serviced by an international airport. Access around the Project area is by gravel tracks of moderate to good quality which may be temporarily closed because of severe winter weather.
The climate in the Beskauga Project region is characteristic of arid steppe with hot summers and cold winters. Precipitation is generally low, with an average annual total of 200–280 mm. Most of the precipitation falls in the summer. Seasonally appropriate mineral exploration activities may be conducted year-round, and mine operations can operate year-round with supporting infrastructure.
The region has sufficient infrastructure to host large-scale mining operations and is a sophisticated transportation and communication node, with a local economy dominated by activity in the mining and industrial sectors. Some 40% of all of Kazakhstan’s power generating capacity comes from the region. Fresh water is supplied to the area from Irtysh River via the Karaganda Canal. There is a large, well-trained labour force to draw upon for any future mining activities.
| 1.4 | History |
The Beskauga deposit was discovered by a regional shallow drilling program conducted during the Soviet period in the 1980s. Following privatisation, Licence No. MG 785 (Maikuben) issued to Goldbelt Resources via its 80% subsidiary, Dostyk LLP (Dostyk), included the Beskauga Project area. Goldbelt Resources divested its interest in Dostyk to Celtic Resources in 2000. Neither Goldbelt Resources nor Celtic Resources conducted exploration at Beskauga.
Dostyk was acquired by Cigma Metals in 2007 and by Copperbelt in 2009. Cigma Metals and Copperbelt conducted exploration at Beskauga, as well as other targets in the larger licence area. Copperbelt’s current 67.8 km2 licence only covers the Beskauga deposit; the other prospects were relinquished or divested. Two previous Mineral Resource estimates were completed for Copperbelt on the Beskauga Project by CSA Global Ltd in 2013 and by Geosure Exploration and Mining Solutions in 2015, both reported in accordance with the Joint Ore Reserves Committee Code 2012 Edition (JORC Code). Neither Mineral Resource estimate was publicly reported.
Arras Minerals Corp acquired an option on the property in 2020, and at the Report effective date had completed surface geological and reconnaissance mapping, sampling of selected historic drill-core, core drilling and regional and local geophysical surveys. An initial NI-43-101 compliant resource report was produced by Arras in 2022.
| 1.5 | Geology and Mineralization |
The Beskauga Project is in north-eastern Kazakhstan, within the “Central Asian Orogenic Belt” or CAOB that is also referred to as the “Altaid Tectonic Collage” and extends eastwards into Russia, Mongolia, and China as the Transbaikal-Mongolian orogenic collage. These combined collages extend from the Ural Mountains in Russia and Kazakhstan in the west, through Kazakhstan, Uzbekistan, Tajikistan, Kyrgyzstan, China, and Mongolia. The CAOB is a region of geological complexity characterised as a collage of numerous tectonic, structural, and stratigraphic domains, that were assembled and intermittently deformed beginning in the Late Neoproterozoic through the Paleozoic to the early Mesozoic, with accretion essentially complete by about 250 Ma. This makes the CAOB the most extensive and long-lived accretionary orogen globally. It progressively developed through the accretion of island arcs, ophiolites, oceanic islands, seamounts, accretionary wedges, oceanic plateaux, and microcontinents in a manner comparable with that of circum-Pacific Mesozoic–Cenozoic accretionary orogens. The CAOB is one of the world’s most richly mineralised regions and contains several world class porphyry copper-gold/molybdenum and epithermal gold deposits.
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Arras Minerals Corp. Beskauga Copper-Gold Project – S-K 1300 TECHNICAL REPORT |
The Beskauga Project, as well as the producing Bozshakol porphyry Cu-Au deposit, are in the western part of the CAOB, namely the Late Cambrian to Early Ordovician Bozshakul–Chingiz (BC) magmatic-arc terrane, within the Kazakhstan Orocline. The BC arc is one of the major tectonic units in the western CAOB, extending for more than 1000 km and considered part of the larger Kipchak arc.
Beskauga is a gold-rich, copper-gold porphyry-epithermal deposit with elevated grades of silver and molybdenum. The project area is underlain by sedimentary and volcanogenic-sedimentary rocks of Ordovician age, that have been intruded by intrusives ranging in composition from gabbro-diorite to quartz diorite and granodiorite. These intrusive rocks represent the major portion of the Beskauga Main deposit area. Porphyry-style, copper-gold mineralisation in the Beskauga Main deposit is largely hosted within diorite and monzodiorite, whereas the Beskauga South gold mineralisation is hosted within porphyritic andesite, intruded by mineralised dykes of microdiorite. Post-mineral dykes of porphyritic diorite, basalt and basaltic andesite also cut the host sequence. The deposit area is covered by 10–40 m cover of younger sediments of upper Eocene and Quaternary age.
At Beskauga Main, a monzodiorite has been intruded into an extensive area of medium grained, equigranular diorite, and forms a “bullseye” magnetic high. The diorite surrounding the monzodiorite intrusion forms a broad concentric de-magnetised zone, coincident with an IP chargeability anomaly. This diorite is host to the bulk of the mineralisation identified to date, as stockwork mineralisation and intense sheeted veining on the eastern flank of the monzodiorite. Intrusive relationships and timing relative to mineralisation have not been clearly established. In 2021, Arras Minerals commissioned the Mineral Deposits Studies Group Unit (MDRU) at the University of British Columbia, to carry out U-Pb geochronology and trace element analysis of zircon on a drill core sample of the host diorite. A weighted mean 207Pb-corrected, 206Pb/238U age, yielded a late Ordovician age of 457.1 ± 3.3 Ma. As this is the age of the host diorite, this should be considered the maximum age of the mineralisation.
Beskauga is interpreted by Arras Minerals to represent a gold-rich porphyry Cu-Au deposit that has been overprinted by high-sulphidation epithermal mineralisation, either through telescoping or due to clustering of multiple porphyry centres in the Beskauga licence. The overprinted portions of the system are characterised by tennantite (±tennantite-enargite) as the major Cu-sulphide species. The overprinted portion of the Beskauga deposit frequently returns assays exceeding 4 g/t AuEq.
The principal metallic minerals at Beskauga include chalcopyrite, pyrite, tennantite, enargite, bornite and molybdenite, with magnetite and hematite also present. QEMSCAN mineralogy indicates that chalcopyrite and pyrite are the dominant sulphides with subordinate tennantite and chalcocite. Both historical and re-assays show that there is a close correlation between gold and copper grades. Sulphides occur as fine-grained disseminations as well as in stockwork veins and veinlets. The occurrence of significant tennantite at Beskauga is not unusual for gold-rich porphyry systems, particularly those with a high-sulphidation overprint, but does have metallurgical implications.
The highest-grade core of the Beskauga Main deposit is associated with advanced argillic alteration, comprised of kaolinite-dickite-illite-smectite, confirmed by on-going TerraSpec SWIR/NIR spectroscopy. The sheeted veining and stockwork mineralisation hosted within the diorite are generally associated with intense argillic (illite-smectite ± kaolinite) overprinting of earlier potassic (k-feldspar-biotite-magnetite-quartz) alteration. The argillic overprint gradually decreases with depth, eventually giving way to largely unaffected potassic alteration beyond approximately 700 – 850 m. At these depths, argillic alteration persists only as local alteration around faults and fractures. The adjacent monzodiorite which hosts variable mineralisation, including distinctive chalcopyrite-magnetite and chalcopyrite-only veins, is potassic (biotite-k-feldspar-magnetite) altered all the way up to the bedrock surface.
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Arras Minerals Corp. Beskauga Copper-Gold Project – S-K 1300 TECHNICAL REPORT |
Prior to Arras Minerals acquiring the Beskauga project, minimal work was completed to determine the geometry and zonation of alteration and mineralisation. This represents a substantial gap in the Project and presents an opportunity to improve modelling and resource extension targeting. During 2021, Arras Minerals re-analysed 18 historical drillholes for multi-element lithogeochemistry and the results announced in company news releases dated 05 and 07 November 2021. The primary objective of the re-assay program was to validate and increase the confidence in the 45,059 meters of historical drilling, as well as to provide the geochemical tools needed to map alteration and lithology across the deposit.
| 1.6 | Deposit Types |
The Beskauga Project hosts a gold-rich, porphyry-style, copper-gold system with probable high-sulphidation epithermal overprint, associated with calc-alkaline intrusions related to island arc volcanism during the Lower Palaeozoic. Porphyry systems host most of the world’s copper deposits, and mineralisation typically forms at shallow levels (in the upper 4 km of the crust) as low-grade disseminations associated with a halo of hydrothermal alteration related to an intrusion, which may range in composition from diorite to granodiorite and granite. These deposits form by precipitation of mineralisation from magmatic hydrothermal fluids enriched in metals. Owing to their relationship with hydrothermal fluids, porphyry copper deposits display a consistent, broad-scale alteration-mineralisation zoning pattern related to these fluids, comprising a core of potassic alteration, surrounded sequentially outwards by phyllic and propylitic alteration, with the zone of potassic alteration typically being of primary importance for copper mineralisation. Primary (hypogene) copper mineralisation typically occurs as chalcopyrite and bornite.
| 1.7 | Exploration |
In 2009–2010, a ground-based magnetic and dipole-dipole induced polarization (IP) survey was carried out over the Beskauga deposit area. The chargeability data has a spatial correlation with the mineralisation defined by the drilling and indicates that the mineralizing system may be much larger than identified to date. Increasing chargeability values with depth suggests that the deposit drilled thus far, lies on the upper part of the “pyritic” halo of a mineralized porphyry system, with an insignificant erosional truncation. However, the deeper extensions of the deposit have never been drill-tested.
Arras is currently conducting a compilation of regional geophysical surveys, 1:250,000 geological mapping, Shuttle Radar Topography Mission (SRTM) and Landsat ASTER images to support exploration targeting within the larger project area.
In 2021, Arras Minerals commissioned SPC Geoken LLP to conduct a high resolution airborne magnetic survey, over the Beskauga and neighbouring Ekidos and Stepnoe licence areas, with flight lines-oriented east-west. The survey was flown at 70 m ground clearance with a line spacing of 100 m and tie-lines of 1000 m. QA/QC and inversion of the resulting magnetic data was carried out by Condor North Consulting, ULC., Vancouver.
| 1.8 | Drilling |
Between 2007 and 2017, Dostyk undertook both diamond and KGK (hydraulic-core lift) drilling at Beskauga. A total of 112 diamond drillholes, totalling 45,059.5 m was completed over this period at either HQ or NQ diameter, with hole depths between 150 m and 1170 m.
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Arras Minerals Corp. Beskauga Copper-Gold Project – S-K 1300 TECHNICAL REPORT |
The coordinates of points (drillholes) were determined by using high precision geodetic sets single-frequency 12-channel global positioning system (GPS) Trimble R3 (base station + mobile receiver with GPS antenna on a telescopic rod. All drillholes have downhole surveys completed by the drilling contractor using an IEM-36 instrument. Surveys were completed every 20 m of the downhole length and are taken after the drilling has been completed. Core was split using a diamond saw and half-core was sampled based on geological contacts, and the sample length was generally between 0.5 m and 1 m, with a lesser proportion up to 2 m.
KGK or hydraulic-core lift drilling is a system designed to drillholes for geochemical sampling and geological mapping of cover sediments and basement rocks. The method was developed in the Soviet Union and is in general like “wet” reverse circulation (RC) drilling. KGK drilling was carried out between 2011 and 2014 to collect geochemical samples through the Quaternary cover. The depths of drillholes ranged from 22 m to 65 m and holes were typically terminated within 5 m of intersecting bedrock. A total of 1,556 KGK holes, totalling 52,529.9m were drilled by Dostyk.
Arras Minerals has drilled an additional 32 holes, totalling 22,371.6m exploring the depth and lateral extensions to the Beskauga mineralization as well as exploring several local and regional exploration targets. In addition, Arras Minerals drilled 860 KGK holes for 32,171.9m confirming and expanding on the historic KGK drilling.
A total of 144 diamond holes 1,606 holes were drilled for a total of 52,580 m, and some 2,496 samples were taken and analysed. Geochemistry defined the outlines of the mineralized intrusive and a map of primary (in-bedrock) dispersion haloes of copper, gold, molybdenum, zinc, and other associated elements was compiled.
| 1.9 | Sample Preparation, Analyses and Security |
Sample preparation was carried out at the Dostyk facility in Ekibastuz. Half-core samples were dried, weighed, crushed, and screened to -2 mm and thereafter a ~1 kg split was milled to 200 mesh fineness (-90 µm) with the remaining crushed samples stored on site. Milled pulps were split and sent to the Stewart Assay and Environmental Laboratory (SAEL) in Kara-Balta, Kyrgyzstan for the gold fire assay (FA) and copper, molybdenum, silver ICP-OES (inductively coupled plasma-optical emission spectrometry) analysis. All equipment used for sample crushing and milling was cleaned and blown with compressed air after each sample. In addition, after each batch of samples, a clean blank sample was passed though the equipment. The sample preparation area was subject to compulsory wet cleaning once a day. The split core and crushed duplicate samples are stored in the specifically equipped sample storage facility in Ekibastuz, which can be locked and has on-site security.
The Stewart Assay and Environmental Laboratories LLC (SAEL) has been utilised by Dostyk as the primary laboratory from 2007 to now, with all results used for the Mineral Resource estimate provided by SAEL. Umpire assays were carried out at Genalysis Laboratory in Perth, Australia.
At both SAEL and Genalysis, Samples were analysed for gold using FA with an atomic absorption spectrometry (AAS) finish with a 30 g bead used in the FA process. A further 33 elements were determined by an aqua regia digest followed by ICP-OES measurement of elemental concentrations.
Historical quality assurance/quality control (QA/QC) samples were comprised of certified reference materials (CRMs), blanks, duplicates, and umpire assays. CRMs used were OREAS 209, OREAS 501b, OREAS 502b, OREAS 503b, and OREAS 54Pa. A total of 187 gold CRMs and 124 copper CRMs were analysed, representing 0.52% and 0.34% respectively, of the 36,271 samples in the database, well below the recommended rate for CRMs. A total of 318 blank samples (0.9% of all samples) were submitted for analysis, although no information was provided regarding the acquisition and preparation of the blank samples. Of all the blank material sampled, the majority had below detection or very low values reported, indicating that there is little contamination overall. In 2013, 97 pulp duplicates were submitted for re-assay and the results show relatively good repeatability. However, this only represents one year and 0.27% of all samples and in addition no core duplicates were submitted, representing a significant gap in QA/QC.
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Arras Minerals Corp. Beskauga Copper-Gold Project – S-K 1300 TECHNICAL REPORT |
External control check assays at Genalysis, were completed on 966 samples (2.7% of all assays) and results show relatively good repeatability and similar distribution for gold and copper, although there is a slight positive bias towards the original results, especially for the copper grades.
In the 2021-2023 drilling campaign of 32 holes, a total of 1025 gold and copper CRMs were analysed, representing 4.98% (insertion rate 1 CRM per 20 samples) of all the 20577 samples. The CRMs used were OREAS 152a, OREAS 503d, OREAS 505, OREAS 506, and OREAS 606 which were submitted to ALS for analysis together with the samples.
It is the Qualified Person’s opinion that sample preparation and analyses were done in line with industry standards and are satisfactory. Although the number of CRM, duplicate, and blank samples are lower than what is considered standard, the quality of assays is reliable and suitable to be used for the Mineral Resource estimate.
| 1.10 | Mineral Processing and Metallurgical Testing |
Six metallurgical testing programs have been conducted on the mineralisation at Beskauga between 2009 and 2017, including initial evaluation of flotation testing on a master composite (2009), mineralogical evaluation and flotation response on average grade metallurgical composite (2010), flotation response on high grade metallurgical composite (2011), comminution and flotation optimization testing on various metallurgical composites (2015), gold optimization testing on bulk product (2017) and Toowong Process amenability testing (2017). Testing was carried out at Kazmekhanbor (Almaty, Kazakhstan), ALS Ammtec (Perth, Australia), Wardell Armstrong International (Cornwall, United Kingdom) and HRL Testing (Brisbane, Australia).
Initial laboratory testing showed copper recovery of 78.44% and concentrate grades of 18.48% Cu which were lower than desired, as well as identifying high arsenic levels in the final copper concentrate due to the presence of tennantite. Subsequent bench-scale test work focused on the testing of a starter pit composite and an average copper grade composite, which enabled a rougher/scavenger stage to recover most of the mineralisation into a low concentrate mass (at a primary grind size P80 of 120 µm), followed by regrinding the rougher/ scavenger concentrate and then utilising three-stage cleaning to produce a final copper concentrate. Concentrate grades of >22% Cu were achieved for all samples, with recoveries between 78.18% and 87.58%.
Locked cycle tests carried out on each of the Beskauga Main metallurgical composites showed that copper grades of >20% were achieved at recoveries ranging from 82.66% to 89.06%.
Cyanide leach testing was carried out on rougher and first cleaner scavenger tail products for the gold at Beskauga Main, which is primarily associated with chalcopyrite but also occurs in pyrite. Results showed that there is a high portion of cyanide soluble gold in the rougher tail and first cleaner scavenger tail products and that good recoveries (52.8% and 60.4%, respectively) could be achieved. It is proposed that a pyrite float stage on the rougher tailings stream is included to produce a gold-bearing pyrite concentrate.
The Toowong Process is an emerging hydrometallurgical treatment process designed to remove arsenic, antimony and other metalloid and non-metal penalty or hazardous elements from base and precious metal concentrates. A final copper concentrate sample was used to test the amenability of Beskauga concentrate to the Toowong process. Preliminary benchtop leaching test work demonstrated that the Beskauga Main concentrate is amenable to removal of the penalty element arsenic with this process.
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| 1.11 | Mineral Resource Estimate |
The Beskauga drill hole data was provided to Archer Cathro, on December 12, 2023, as Microsoft Excel files and imported into Geovia GEMS for validation. Data was inspected for overlapping or missing data, inconsistent hole depths, downhole survey errors, and mis-matching hole identification.
Wireframes representing mineralised areas were generated by the Company in Leapfrog. Grade shells were based on copper and gold assay data and took into consideration lithological constraints and known structural trends. One-meter composites were generated down drillholes passing through the mineralized wireframes.
Classical statistical analysis was carried out for composites within the mineralized wireframes to determine appropriate capping values for copper, gold, and silver. The top cut values for copper, gold, and silver were 3.00%, 10.0 g/t, and 25.0 g/t respectively.
Variograms were calculated and modelled for the composited sample file constrained by the corresponding mineralised envelopes using Supervisor software (version 8.14.3.2). Geostatistical analysis was carried out separately for copper, gold, and silver mineralisation.
Horizontal continuity was modeled first at twenty 18° increments. Continuity models were then created for the across strike and dip-plane orientations. Once the direction of maximum continuity was selected, a down-hole linear semi-variogram was created to determine the nugget effect.
Bulk density values were assigned to block model cells using a single bulk density value of 2.73 t/m3.
Block modelling was carried out using Geovia GEMS software (version 6.7.2). An empty block model was created to enclose the wireframe models with block sizes of 20 m x 20 m x 20 m. Copper, gold, and grades were interpolated into the empty block model using both Ordinary Kriging (OK) and Inverse Distance Weighting (IDW). The IDW method with a power of two was used to support and validate the kriged estimates.
The first search radii for all mineralised envelopes were selected to be equal to approximately one quarter of the semi-variogram long ranges in all directions. Model cells that did not receive a grade estimate from the first pass interpolation run were used in the next (second pass) interpolation with search radii equal to approximately two-thirds the semi-variogram ranges in all directions. A third interpolation run using search radii equal to the semi-variogram ranges. The model cells that did not receive grades from the first three passes were then estimated using a fourth pass with search radii equal to twice the semi-variogram ranges.
Validation of the Beskauga grade interpolation was completed using comparison of the block model and composite mean grades, visual checks on screen in sectional view to ensure that block model grades honour the general grade of downhole composites, swath plots comparing input and output grades in a semi-local sense, and comparison of the block model volume with the combined wireframe volume. There is a degree of smoothing as expected from the estimation method used, particularly evident in areas of wide spaced drilling where the number of composites was relatively low. However, the general trend in the composites is reflected in the block model.
Mineral Resources were classified using the S-K 1300 definition of Mineral Resources into Indicated and Inferred Mineral Resources. The classification is based upon an assessment of geological and mineralisation continuity, and QAQC results, as well as considering the level of geological understanding of the deposit. Classification was done by colour coding the interpolation run, with blocks falling within the first two interpolation runs classified as Indicated, and all others inferred. The resulting block model was displayed on screen and the classification of outlying blocks downgraded.
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To demonstrate potential of the Beskauga deposit for eventual economic extraction, a preliminary pit optimisation study was completed. The pit optimisation was carried out using the Mining module of the Studio NPVS software application using the Lerch-Grossman algorithm.
The Mineral Resource estimate has been reported for all blocks in the resource model that are contained within the pit and have a gross metal value (GMV) exceeding $20/t. The GMV was calculated using base-case metal prices and recoveries for copper, gold, and silver.
The Mineral Resource estimate has reasonable prospects for eventual economic extraction, and is a realistic inventory of mineralisation which, under assumed and justifiable technical and economic conditions, might, in whole or in part, become economically extractable.
| Table 1: | Mineral Resource estimate for the Beskauga deposit (27 December 2021) |
| Category | Tonnage (Mt) | Cu (%) | Au (g/t) | Ag (g/t) |
| Indicated | 111.2 | 0.30 | 0.49 | 1.34 |
| Inferred | 92.6 | 0.24 | 0.50 | 1.14 |
Notes:
| · | A GMV $/t cut-off of $20/t was used, and the GMV formula is: GMV $/t = Au(grams)*74.5%*$56.26+ Cu(tonnes)*85%*$7.714 + Ag(grams)*50%*$0.71 |
| · | Base metal prices considered were $3.50/lb copper, $22.00/oz silver, and $1,750/oz gold. |
| · | The Mineral Resource is stated within a pit shell using the base-case metal prices. |
| · | S-K 1300 definitions were followed for the Mineral Resource. |
| · | The Mineral Resource is not believed to be materially affected by any known environmental, permitting, legal, title, taxation, socio-economic, marketing, political or other relevant factors. |
| · | These Mineral Resources are not Mineral Reserves as they do not have demonstrated economic viability. |
| · | The quantity and grade of reported Inferred Resources in this Mineral Resource estimate are uncertain in nature and there has been insufficient exploration to define these Inferred Resources as Indicated or Measured; however, it is reasonably expected that the majority of Inferred Mineral Resources could be upgraded to Indicated Mineral Resources with continued exploration. |
| 1.12 | Adjacent Properties |
There is a working salt mine run by a private company immediately south of the Beskauga mineral licence that covers an area of 21.3 km2. The Ekidos and Stepnoe exploration licences surround the salt mining licence. There are no other mineral licences adjacent to the licence package.
In addition, Arras Minerals owns an additional 12 exploration concessions totalling approximately 2585.5km2 covering several exploration porphyry-copper prospects in the Bozshakol-Chingas Magmatic Arc.
| 1.13 | Interpretation and Conclusions |
The Beskauga deposit is a large porphyry copper-gold deposit within a magmatic arc terrain of the CAOB, that has a demonstrated pedigree for economic porphyry deposits. This updated Mineral Resource has been completed only for the Beskauga Main porphyry-style mineralisation and not for the Beskauga South mineralisation, which is gold only and may represent an epithermal overprint to the system. The indications of epithermal overprint (limited potassic and dominant argillic alteration) suggest that drilling to date may only have tested the upper part of the porphyry system.
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The work required to understand the geometry and zonation of the alteration and mineralisation at Beskauga has not been completed. This is a substantial gap in the Project status and represents an opportunity to improve modelling and resource extension targeting. At this stage, the deposit is not well understood and has not been drill tested thoroughly enough to determine the architecture and extent of the system, including the gold only Beskauga South zone. The available information suggests substantial upside potential.
The proposed work program will substantially improve understanding of the geology and economic characteristics of the Project and advance it towards a Preliminary Economic Assessment.
The work program will address several possible risks to the Mineral Resource estimate and project economics, identified in the current study. These include the following:
| · | Poor geological understanding to support deposit modelling. |
| · | Limited density data and the measurement procedures and data have not been reviewed. A single average density value of 2.73 g/cm3 has been used which, although appropriate for the granodioritic host rock, represents a potential source of risk to the estimated tonnage. |
| · | Although the results of QA/QC are acceptable, the low number of QA/QC samples and general lack of duplicates in historical drilling by Dostyk represents a risk to the project. This has been addressed by Arras in the current drill program. |
| · | Comparison of original and umpire samples show a slight positive bias towards the original samples analysed at SAEL. This discrepancy has not been investigated further and represents a risk to the grade of the Mineral Resource estimate. |
| · | Concentrates produced to date contain elevated levels of arsenic that may affect the saleability of the concentrate. Although the concentrates show amenability to further processing via the Toowong Process, which removes arsenic and other deleterious elements from the concentrate, the cost of this process has not been determined and thus the presence of arsenic presents a project risk. |
| 1.14 | Recommendations |
The authors recommend an additional work program by Arras on the Beskauga Project over the next 12 months should include:
| · | A drill program testing the extensions of the known mineralisation at Beskauga. |
| · | Collection of multi-element and hyperspectral data from a selection of historical pulps and drill core to enable the design of routine analytical protocol for all additional drilling. |
| · | Relogging of all available drill core including detailed alteration and vein logging, and development of an appropriate Standard Operating Procedure for logging for future drilling |
| · | Submission of additional QA/QC samples (~5% pulp duplicates and 5% umpire samples) together with CRMs, to improve the quality control data, and design of a routine QA/QC protocol for ongoing drilling. |
| · | A comprehensive density testing program to confirm the density value used in the Mineral Resource estimate. |
| · | Integrated geological, structural, alteration, litho-geochemical and hyperspectral study to support the development of a three-dimensional (3D) geological model along with a geometallurgical domain model. |
| · | Additional metallurgical test work to confirm recovery and comminution parameters as well as deleterious element mitigation, with sample selection based on geometallurgical domains. |
| · | Follow-up on regional targets with mapping and sampling. |
| · | Identify power and water sources, project requirements, and begin all permitting processes. |
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| · | Address any other gaps to be filled to advance the Project towards a Mineral Resource update and Preliminary Economic Assessment. |
These items should be carried out concurrently as a single phase of work over the next 12 months.
The authors estimate that the total cost of the next phase work program is approximately US$1.5 million.
Table 2. Recommended Work program budget estimate.
| Item | Cost in US$ |
| Drilling of 6,000 m at Beskauga (exploration to test extensions of deposit | 600,000 |
| Mapping & Sampling | 200,000 |
| Geophysics | 180,000 |
| Study of infrastructure | 20,000 |
| QAQC sampling and density testing | 50,000 |
| Additional metallurgical testing | 100,000 |
| In-country general and administration and logistics | 400,000 |
| Total | 1,500,000 |
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Arras Minerals Corp. Beskauga Copper-Gold Project – S-K 1300 TECHNICAL REPORT |
| 2 | Introduction |
| 2.1 | Registrant |
On 17 August 2020, Silver Bull Resources (“Silver Bull”), a publicly listed company on the TSX (Symbol: SVB) and OTCQB (Symbol: SVBL) announced that it had entered an option to purchase agreement to acquire a 100% interest in the Beskauga Copper-Gold Project located in in the Pavlodar Province in northeastern Kazakhstan from Copperbelt, a private mineral exploration company registered in Zug, Switzerland.
On 1 April 2021, Silver Bull announced its intention to transfer the option to purchase agreement of the Beskauga project to a 100% owned subsidiary company incorporated in British Columbia, Canada, called Arras Minerals Corp (“Arras”). Silver Bull also announced its intention to issue 34.2 million shares of Arras to Silver Bull shareholders. On 27 September 2021, Silver Bull announced the completion of the share issuance.
Following the completion of the share issuance, Arras emerged as an independent private Canadian-based mineral exploration company engaged in exploring for copper and gold in Kazakhstan. In June 2022, Minerals listed on the TSX Venture Exchange (Symbol: ARK).
| 2.2 | Terms of Reference |
Arras commissioned The Authors to prepare an updated resource report on the Beskauga Copper-Gold Project. The mineral Resource estimate has been prepared in accordance with Mineral resources are reported using the definitions in Regulation S–K 1300 (S–K 1300), under Item 1300.
As per an agreement announced on 17 August 2020, Arras has the option to purchase a 100% interest in the Beskauga Project from Copperbelt.
Only Mineral Resources are estimated – no Mineral Reserves are defined. The report is intended to enable the Registrant and potential partners to reach informed decisions with respect to the Project.
The principal authors of this report are Matthew Dumala and Tim Barry, who are Qualified Persons according to S-K 1300 standards.
The Date of this report is 27 February 2024. The report is based on technical information known to the author and The Authors at that date.
The Registrant reviewed draft copies of this report for factual errors. Any changes made because of these reviews did not include alterations to the interpretations and conclusions made. Therefore, the statements and opinions expressed in this document are given in good faith and in the belief that such statements and opinions are not false and misleading at the date of this report.
All measurement units used in this Report are metric unless otherwise noted, and currency is expressed in United States dollars (US$) as identified in the text. The Kazakhstan currency is the Kazakhstani tenge (₸).
| 2.3 | Sources of Information |
This report is based, in part, on internal Arras technical reports and maps, consultants’ reports, and public information as listed in Section 27 (References) of this Technical Report. Previous Mineral Resource estimates for the Beskauga Project have been reported under both the JORC and NI43-101 Codes by “CSA Global Ltd.” in February 2021 (NI43-101) and November 2013 (JORC) and by Geosure Exploration and Mining Solutions Pty Ltd in January 2015 (JORC).
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Arras Minerals Corp. Beskauga Copper-Gold Project – S-K 1300 TECHNICAL REPORT |
The various studies and reports have been collated and integrated into this report by Tim Barry. The Authors have taken reasonable steps to verify the information provided, where possible.
This report includes technical information that requires calculations to derive subtotals, totals, and weighted averages, which inherently involve a degree of rounding and, consequently, introduce a margin of error. Where this occurs, the authors do not consider it to be material.
| 2.4 | Qualified Persons |
This report was prepared by the Qualified Persons listed in Table 3.
| Table 3: | Qualified Persons – report responsibilities |
| Qualified Person | Report section responsibility |
| Tim Barry – CEO, Arras Minerals Corp. | 1 (excluding 1.11), 2, 3, 4, 5, 6, 7, 8, 10, 11, 12.1, 13 and 15–27 inclusive: Property visit in Nov 2023. |
| Archer, Cathro & Associates (1981) Limited | Sections 1.11, 2, 11, 12 |
The Authors are Qualified Persons with the relevant experience, education, and professional standing for the portions of the report for which they are responsible.
| 2.5 | Qualified Person Property Inspection |
Multiple visits to the Beskauga Project were completed by Tim Barry, with his latest visit from 6 November 2023 – 24 November 2023 and meets the requirements of a site visit under section 9.2 of S-K 1300.
Archer, Cathro & Associates (1981) Limited has not conducted a site visit due to work visa requirements.
| 2.6 | Previous Resource Estimates. |
The principal document used in report preparation was:
| · | Underwood, D, Dumala, M, 2022: Beskauga Copper-Gold Project, Pavlodar Province, Republic of Kazakhstan. Reported prepared by Archer Cathro Ltd., effective date 20 February 2022. |
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| 3 | Property Description |
| 3.1 | Location of Property |
The Beskauga Project is in Pavlodar region, north-eastern Kazakhstan, approximately 300 km east-northeast of Nur-Sultan (formerly Astana), the capital of Kazakhstan (Figure 1) and approximately 70 km southwest of the city of Pavlodar (population ~330,000), and approximately 65 km east of the town of Ekibastuz (population ~125,000). The property comprises three contiguous licences, the Beskauga mineral licence in the centre of the property (which has been the subject of all work carried out thus far) and two additional mineral exploration licences, termed “Stepnoe” and “Ekidos” (Figure 2). The centre of the property lies at approximately 51°48'N, 76°17'E (WGS84, geographic coordinates).
| Figure 1: | Location of the Beskauga Project in Kazakhstan in relation to the major cities (coordinate grid is WGS84, geographic coordinates) |
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Arras Minerals Corp. Beskauga Copper-Gold Project – S-K 1300 TECHNICAL REPORT |
| Figure 2: | Location of the Beskauga Project licences (coordinates are WGS84/UTM Zone 43N). |
| 3.2 | Area of Property |
The Beskauga licence is 40.3 km2 (6,780 hectares) in area, and the Stepnoe (370km2) and Ekidos (251km2) licences, bringing the total area held or under option to 661.3 km2 (66,130 hectares).
In November 2023, Arras Minerals located submitted 2 additional applications to cover newly released areas between the original Beskauga Contract and the Stepnoe and Ekidos exploration licenses. These applications were accepted in December 2023 and the Company was granted these licences on 8 January 2024.
| 3.3 | Mineral Tenure |
| 3.3.1 | Kazakhstan Mining Code |
Kazakhstan has recently updated its mining code and all new licences are issued under this code. The new mining code, the Code on Subsoil and Subsoil Use (“the SSU Code”) was ratified on 29 June 2018 and is based on the Western Australian model. Under the SSU Code, Kazakhstan transferred from a contractual regime to a licensing regime for solid minerals (except for uranium, which remains under a contractual regime). The purpose has been to boost investment in exploration and mining in Kazakhstan and remove administrative burdens for subsoil users. The mining industry in Kazakhstan accounts for about 14% of gross domestic product and more than 20% of exports and is seen as a key industry.
Under the Kazakhstan Constitution, the subsoil is owned by the state. In regulating the mining sector, the state is represented by the competent authority, the Ministry of Industry, and Infrastructural Development (MIID), which is authorised to grant and terminate subsoil use rights (SURs) and control compliance obligations related to SURs. Under the new mining code, SURs are granted under subsoil use licences (SULs), either for exploration or mining. Under the previous regime, SURs were granted under contracts for the right of exploration, mining, or combined exploration and mining (SUCs).
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Arras Minerals Corp. Beskauga Copper-Gold Project – S-K 1300 TECHNICAL REPORT |
Exploration licences are granted for up to six years with the possibility of an extension for five more years and provide an exclusive right to use the subsoil for the purpose of exploration and for assessment of resources and reserves for subsequent mining. If a deposit is discovered, the exploration licence holder has an exclusive right to obtain a mining licence if the discovery is confirmed by a report on estimation of resources and reserves of solid minerals. The SSU Code entitles subsoil users to estimate resources and reserves under the KAZRC standard, which is aligned with the CRIRSCO, JORC and CIM reporting codes.
Under the older contractual permitting system, a company agreed to meet certain milestones and expenditure. Despite a new mining code being in place, obligations under existing contracts are still enforced. Should a company fail to meet its obligations as stated in the contract, or the company needs to extend or change the terms, the company can approach the government and add an “Addendum” to the contract.
The SSU Code is the principal law regulating the mining sector, with detail provided by several government decrees and ministerial orders. Mining of precious metals is also affected by the Law on Precious Metals and Precious Stones (the “Precious Metals Law”) under which the Kazakhstan National Bank can exercise a priority right to buy fine gold. Other relevant legislation includes the Tax Code, the Land Code, and the Environmental Code.
| 3.3.2 | Beskauga Project |
Arras Minerals’ Beskauga Project consists of three licences: the Beskauga licence, which was issued under the older permitting system, and the Ekidos and Stepnoe licences which were issued under the new SSU Code in October 2020. The Beskauga licence is held by Dostyk, a Kazakh entity 100% owned by Copperbelt, a private mineral exploration company registered in Switzerland with which Arras Minerals has an option agreement (see Section 3.4.1). The Ekidos and Stepnoe licences are held by Ekidos LLP, a Kazakh entity 100% controlled by Arras Minerals (See Table 3 below).
| Table 3: | License table for Beskauga outlining the validity of the licences. |
| Licence Name | Licence Number | Issue Date | Expiry Date | Comment |
| Beskauga | 2092-EL | October 21, 2001 | February 8, 2029 | Original Mining contract converted to Exploration License in Nov 2023. |
| Ekidos | 875-EL | October 22, 2020 | October 22, 2026 | 6 Year exploration period. Can be renewed for an additional 5 years |
| Stepnoe | 876-EL | October 23, 2020 | October 23, 2026 | 6 Year exploration period. Can be renewed for an additional 5 years |
| Beskauga NE | New applications, license Pending | |||
| Beskauga W | New applications, license Pending |
| 3.3.3 | Beskauga Licence |
Dostyk maintains minerals rights for the Beskauga deposit based on Licence No. 785 (series MG) dated 8 January 1996, and a series of subsequent contracts and addendums as per the Republic of Kazakhstan legislation.
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The subsoil right for the Beskauga area was initially acquired by Goldbelt Resources Ltd in 1996 as part of a much larger Licence No. 785 (Mikulins), issued to its 80% subsidiary, Dostyk, under the old permitting system. In 2000, Goldbelt Resources Ltd sold its interest in Dostyk to Celtic Resources, a London listed company.
Exploration rights under Licence No. 785 including Beskauga were re-issued to Dostyk in October 2001 as Contract No. 759 for the Maikuben area. No drilling at the Beskauga deposit was conducted by Goldbelt Resources Ltd or Celtic Resources.
In 2007, Cigma Metals, a Vancouver-based company, purchased 80% of Dostyk from Celtic Resources and, later that year, the remaining 20%. Relinquishment of areas considered to be poorly prospective in 2008 reduced the contract area to five plots totalling 2,723.87 km2. In 2009, the ownership of Dostyk was fully transferred to Copperbelt from Cigma Metals.
Following exploration results from work programs from 2007 to 2010 on the Beskauga, Karagandyozek and Ushtagan prospects, Dostyk was issued rights in 2011 for further exploration/appraisal works for a reduced 419.76 km2 area. After relinquishment of areas in 2017 (23.23 km2) and in 2020 (328.73 km2), reducing the size of the mining contract to 67.8 km2.
White and Case (2020) report the following amendments to the subsoil use contract:
| a. | Amendment No. 1 dated 7 December 2004 which, inter alia: |
| § | amended section 16 (Taxes and Other Mandatory Payments) to reflect provisions of the 2001 Tax Code; and |
| § | introduced a provision stating that guaranties of stability of laws do not apply in respect of military, national security, and people's health laws. |
| b. | Amendment No. 2 dated 31 October 2006 which, inter alia, extended the exploration period for two years (until 31 December 2007). |
| c. | Amendment No. 3 dated 14 May 2008 which, inter alia: |
| § | extended the exploration period for two years (until 31 December 2009). |
| § | introduced an obligation to comply with the memorandum of understanding under EITI; and |
| § | harmonized section 29 (Termination of the Contract) with the Subsoil Use Law. |
| d. | Amendment No. 4 dated 6 September 2010 which, inter alia: |
| § | extended the exploration period for one year (until 31 December 2010). |
| § | introduced local content obligations; and |
| § | introduced a provision stating that guaranties of stability of laws do not apply in respect of environment and tax laws (in addition to military, national security, people's health). |
| e. | Amendment No. 5 dated 13 February 2014 which, inter alia: |
| § | extended the exploration period (an appraisal stage) until 31 December 2015. |
| § | introduced a provision on applicability of provisions of the Subsoil Use Law to the Contract; and |
| § | introduced payment obligations for research and development ("R& D") and training of staff. |
| f. | Amendment No. 6 dated 16 March 2016 which, inter alia: |
| § | extended the exploration period (an appraisal stage) until 31 December 2018; and |
| § | amended the obligation for training of staff by making it 0.1 % of production costs. |
| g. | Amendment No. 7 dated 26 May 2017 which, inter alia: |
| § | extracted the Ushtagan deposit from the Contract to a separate subsoil use contract. |
| § | amended the obligation for training of staff by making it 1% of exploration investments and 0.1% of production costs. |
| § | amended the obligation for R&D by making it 1% of annual profit. |
| § | introduced obligations to follow governmental rules for procurement of goods/works/services. |
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| h. | Amendment No. 8 dated 27 February 2019 which, inter alia: |
| § | extended the exploration period (an appraisal stage) until 31 December 2020. |
| § | approved a new work program; and |
| § | introduced an obligation on payment for social and economic development of the region in the amount of 0.64% of appraisal costs. |
Via its option agreement with Copperbelt, Arras Minerals has acquired the right to explore for “All Minerals” (except uranium) on the remaining Dostyk licence including the Beskauga deposit. The present contract set forth its validity period as until the last day of validity of Licence MG No. 785, 8 January 2021, with an ability to extend until the full depletion of resources.
On 14 January 2021, the Competent Authority, the MIID, granted an extension of the exploration rights to Dostyk until 31 December 2023. Under this addendum, Arras Minerals via its agreement with Copperbelt will be required to spend the following over three years to keep the licence in good standing:
| · | 2021: US$1.801 million |
| · | 2022: US$2.726 million |
| · | 2023: US$4.7 million. |
In November 2023, the Beskauga Mining Contract was converted into an exploration license, and it was renewed for an additional 5 years (until February 8, 2029). However, 40% of the mineral license needed to be relinquished to permit the contract conversion, and the Beskauga License (2092-EL) was reduced to 40.3km2.
| 3.3.4 | Stepnoe and Ekidos Exploration Licences |
Arras Minerals recently acquired two exploration licences, both of which were granted on 22 October 2020 to Ekidos LLP, a Kazakh entity 100% owned by Arras Minerals. The Ekidos (No. 875-EL) and Stepnoe (No. 876-EL) licences were applied for under the new SSU Code. Under the new code, the licences are granted for “All Minerals” (except uranium) for an initial six-year period. The licence can be extended once for an additional 5 years.
An annual exploration commitment for each licence is calculated based on the number of 2.5 km2 “blocks” contained within the licence. The exploration commitment for each block is calculated based on a “Minimum wage index” (“MRP”) by the Kazakh State which is then multiplied by the exchange rate of the Kazakh Tenge to the United States dollar (US$). The rates will vary slightly from year to year due to changing exchange rates, but the annual expenditure commitment for 2021 for the Stepnoe and Ekidos licences is calculated via a formula outlined in the mining code to be approximately US$15,584 for each licence. It is not expected this annual exploration commitment cost will materially vary over the first three years.
In addition to the annual exploration commitment costs there is also an annual “land lease” fee which is calculated using the formula “15MRP x No. of blocks”. It is calculated this fee will equate to approximately US$21,000 each per year for the Ekidos and Stepnoe licences.
The annual expenditure commitment each year can be covered by expenditure accrued over the years where exploration expenditure exceeds the calculated commitment amount. The annual expenditure commitment can be reduced by ceding ground.
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| 3.3.5 | Beskauga East and Beskauga West Exploration Licenses. |
In November 2023 Arras Minerals located 2 concessions, Beskauga East (17.0km2) and Beskauga West (6.4km2) to cover open ground adjacent to the Beskauga mining contract.
| 3.4 | Tenure Agreements and Encumbrances |
| 3.4.1 | Beskauga Mineral Licence Option Agreement |
A summary of the option agreement between Arras Minerals and Copperbelt on the Beskauga licence is outlined below.
On execution of the option agreement, Arras Minerals paid Copperbelt US$30,000. An additional US$40,000 was paid to Copperbelt following the closing of the deal on 27 January 2021.
Commencing on 27 January 2021, Arras Minerals has four years to conduct exploration on the property. A cumulative US$15 million in exploration expenditure on the Beskauga licence, as well as the Ekidos and Stepnoe exploration licences (see Section 3.4.2 Ekidos-Stepnoe JV agreement below) is required to keep the option in good standing over the four-year period. Minimum expenditures each year are as follows: US$2 million in year one, US$3 million in year two, US$5 million in year three and US$5 million in year four, for a total exploration spend of US$15 million over four years.
The Beskauga Option Agreement also provides that subject to its terms and conditions, after Arras Minerals has incurred the exploration expenditures, it may exercise the Beskauga Option and acquire the Beskauga Property for a US$15 million cash payment.
In addition to the $15 million cash payment, the Beskauga Option Agreement provides that, subject to its terms and conditions, Arras Minerals may be obligated to make additional bonus payments to Copperbelt if the Beskauga Main Project or the Beskauga South Prospect is the subject of a bankable feasibility study in compliance with Canadian National Instrument 43-101 indicating gold equivalent resources in the amounts in Table 4. Twenty percent of the Bonus Payments is payable after completion of the bankable feasibility study and the remaining 80% is payable within 15 business days of commencement of on-site construction of a mine at Beskauga Main or Beskauga South. Up to 50% of the bonus payments is payable in shares of Arras Minerals’ common stock valued at the 20-day volume-weighted average trading price of the shares on the Toronto Stock Exchange calculated as of the date immediately preceding the date such shares are issued.
| Table 4: | Bonus payments under the Beskauga Option Agreement |
| Gold equivalent resources | Cumulative Bonus Payments |
| Beskauga Main Project | |
| 3,000,000 ounces | $2,000,000 |
| 5,000,000 ounces | $6,000,000 |
| 7,000,000 ounces | $12,000,000 |
| 10,000,000 ounces | $20,000,000 |
| Beskauga South Prospect | |
| 2,000,000 ounces | $2,000,000 |
| 3,000,000 ounces | $5,000,000 |
| 4,000,000 ounces | $8,000,000 |
| 5,000,000 ounces | $12,000,000 |
The Beskauga Option Agreement may be terminated under certain circumstances, including (i) upon the mutual written agreement of Arras Minerals and Copperbelt; (ii) upon the delivery of written notice by Arras Minerals in its sole discretion; or (iii) if there is a material breach by a party of its obligations under the Beskauga Option Agreement and the other party has provided written notice of such material breach, which is incapable of being cured or remains uncured.
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| 3.4.2 | Ekidos-Stepnoe JV agreement |
On September 1, 2020, Arras Minerals also entered an 80:20 joint venture with Copperbelt on the “Stepnoe” and “Ekidos” exploration licences. Under the terms of the agreement Arras Minerals will manage and fund all exploration activities on the properties. Arras Minerals can acquire Copperbelt’s 20% interest in the joint venture for $1.5 million each in cash. Exploration expenditures on these licences under the joint venture can contribute to Arras Minerals’ US$15 million expenditure commitment under the Beskauga option agreement.
No other liens or royalties are reported by Arras Minerals management.
| 3.5 | Environmental Liabilities |
To the Qualified Person’s knowledge, there are no known environmental liabilities at the Project. The deposit is under cover and no past mining has been undertaken.
| 3.6 | Risks |
The Qualified Persons are not aware of any significant factors or risks that may affect title or access and the ability to perform work on the property. Several drilling campaigns have been previously conducted and the property title has a history of title renewal. There is no indication that this situation will change in the future.
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| 4 | Accessibility, Climate, Local Resources, Infrastructure and Physiography |
| 4.1 | Topography, Elevation and Vegetation |
The Project is located within the vast western steppe ecoregion of central Asia that is characterized by grassland plains without trees apart from those near rivers and lakes. The project area consists of low-lying plains with numerous depressions that form lakes. Topography is gentle and the landscape is dominated by sloping hills and ridges of the Irtysh River flood plain. Elevations range from 100 m to 150 m above sea level.
The Irtysh is a major river that rises from the glaciers on the southwestern slopes of the Altai Mountains in the Uygur Autonomous Region of Xinjiang in far northwestern China. The Ob-Irtysh drainage basin is one of the largest in central Asia, encompassing most of Western Siberia, northeastern Kazakhstan, and the Altai Mountains.
Permanent river systems are rare to absent in the Project area but there are numerous stream beds of an ephemeral nature, of which the largest one is Karagandyozek River. The area is rich in lakes, large shallow depressions that fill with saline water during periods of snow melt.
Soils in the region are light-chestnut colour and often saline in character and lacking in nutrients. The overburden cover on the site is an approximately 40 m sheet of loose Cenozoic sediments, primarily alluvial sands, and lacustrine sediments. Vegetation is scarce and dominated by grasses. Fauna sparsely populates the Project area.
| 4.2 | Access to Property |
The Beskauga deposit is located approximately 300 km from the Kazakhstan capital, Nur-Sultan (formerly Astana), which has a population of over one million. The international airport at Nur Sultan is serviced by multiple international commercial airlines.
The larger towns of Ekibastuz, Maykain and Bayanaul are within 30–50 km of the licence area. Several smaller villages occur in the vicinity of the Project, including Tortkuduk and Kudyakol which are serviced by rail lines and sealed highways.
Access to the Project area is via sealed highway from Ekibastuz (population ~125,000), some 40 km to the west of the Project area, or from Pavlodar, some 70 km to the northeast of the Project area. Ekibastuz is about four hours drive from Nur-Sultan (Astana) via the P4 and A17 highways. Pavlodar is serviced by an international airport.
Access around the Project area is gained by gravel tracks of moderate to good quality. Roads are accessible by two-wheel drive vehicles; however, they are often subject to seasonal closure because of winter weather.
| 4.3 | Climate |
The climate in the Beskauga Project region is characteristic of arid steppes (prairies). Summers (May to September) are dry and hot with daytime temperatures ranging between 20°C and 35°С, although majority of the precipitation falls in the summer. Winters (November to March) are cold, with average temperatures between 0°C and -20°C with the coldest temperatures in January and February. Winters typically last for three to four months and feature light snow falls.
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Precipitation is generally low, with an average annual total of 200–280 mm. The Project region is characterized by moderate winds, with occasional wind gusts, which prevail from the west and southwest. Snow is common in winter, but the ground coverage is inconsistent. Snow cover has an average depth of 0.3 m and soils generally freeze to depths of 2.0–2.5 m.
Seasonally appropriate mineral exploration activities may be conducted year-round at the Project. Mine operations in the region can operate year-round with supporting infrastructure.
| Figure 3: | Drilling on the Beskauga deposit |
| 4.4 | Infrastructure |
| 4.4.1 | Sources of Power |
The region provides some 40% of all power generating capacity of Kazakhstan with six power stations, three of which are in Pavlodar, two in Ekibastuz, and one in Aksu. Power transmission lines run to various regions of Kazakhstan and Russia. Power generation was developed based on mining of coal from Devonian rocks in the Ekibastuz basin.
| 4.4.2 | Water |
Generally, the region has a lack of water resources. Water courses typically have low flow rates and disappear over the summer months. Fresh water is supplied to the area from Irtysh River via the Irtysh-Karaganda Canal with water inflow of approximately 250,000 m3 per hour. The canal runs through Ekibastuz and passes approximately 18 km from the Beskauga deposit.
Water resources are considered sufficient for a large-scale mining project.
| 4.4.3 | Local Infrastructure and Mining Personnel |
The Ekibastuz–Pavlodar region is a major transportation and communication node transected by highways, railways, power transmission lines, and Kazakhstan’s largest oil pipeline which travels to Shymkent in the south of the country. The northern boundary of the licence is the Astana/Ekibastuz/Pavlodar/Barnaul rail line and the Astana/Pavlodar highway. Rail lines connect this centre with Russia and various parts of Kazakhstan.
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The local economy is dominated by activity in the mining and industrial sectors, with agriculture contributing to a much lesser extent. The Pavlodar region is one the major industrial regions of Kazakhstan with many large industrial companies focused on exports. The region is rich in natural resources and has a well-developed industrial and social infrastructure, up to date transport and communications, foreign investment, and the availability of state-run development programs. A well-developed market for construction materials such as limestone, gravel and quarry stone can be found in the region.
The significant mining activities in the area include the coal mines around Ekibastuz as well as metal mines. KAZ Minerals major Bozshakol open pit porphyry copper mine is located 72 km west of Ekibastuz. The substantial mining industry means that there is a large, well-trained labour force to draw upon for any future mining activities.
The region has sufficient infrastructure and resources to host large-scale mining operations.
| 4.4.4 | Property Infrastructure |
The Project has no infrastructure apart from gravel roads. However, a 1,100 kVA powerline passes through the property (Figure 4).
| Figure 4: | Location of the town of Ekibastuz in relation to the mineral licences owned by Arras Minerals |
Also shown are roads, rail, and power infrastructure in the immediate area.
| 4.4.5 | Adequacy of Property Size |
The area of the claims making up the Beskauga Project at this time appear to be sufficiently large for the proposed exploration activities and for the infrastructure necessary for potential future mining operations (including potential tailings storage areas, potential waste disposal areas, and potential processing plant sites) should a mineable mineral deposit be delineated at the Project.
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| 5 | History |
The Beskauga deposit was initially discovered during state-funded exploration when Kazakhstan was part of the Soviet Union. Following privatization, the subsoil rights in the Maikuben licence area including the Beskauga Project area were held from 1996 to 1999 by Canadian company, Goldbelt Resources, under Licence No. MG 785, via its 80% subsidiary, Dostyk. Goldbelt explored the area in 1996 and 1997 but relinquished or divested all its Kazakh assets by 2001, including its interest in Dostyk which was sold to Celtic Resources, a UK-listed company, in 2000.
Dostyk was acquired by Vancouver-based Cigma Metals in 2007 when exploration at Beskauga commenced. In 2009, Copperbelt acquired Dostyk from Cigma Metals and continued to undertake exploration at Beskauga, as well as other targets in the larger licence area.
| 5.1 | Historical Exploration |
| 5.1.1 | Soviet Period |
Geological investigation began in the district in the late 1920s when Kazakhstan was part of the Soviet Union. In the 1960s, regional scale mapping outlined some promising areas of alteration and geophysical anomalies that were worthy of follow up work. In the 1970s and the 1980s, continued regional-scale mapping and exploration further delineated zones of interest.
Between 1981 and 1990, the Beskauga area saw ground magnetic and IP surveys and shallow drilling programs. Shallow drilling on a 200 m x 200 m grid (partially infilled at 200 m x 100 m) through the overlying Quaternary cover targeted geophysical and geochemical anomalies. A total of 411 holes were drilled during this period for 15,063 m. This drilling was performed by URB-2A (KGK-100) and SBU-ZIF-150 drill-rigs. The drillholes were generally 30–40 m deep with a few reaching depths between 60 m and 80 m, with the primary aim of obtaining bedrock information, including geochemistry.
A further 20 diamond holes were also drilled during this period to depths of 100–200 m for a total of 3,818 m. Drilling was performed by ZIF-300, ZIF-650 and SBA-500 drill rigs and used tungsten carbide and diamond bits. These drillholes had a diameter of 59mm and were drilled at angles between 75° and 80° towards the southeast. Core recovery in all drillholes drilled in 1981–1990 was between 60% and 80%.
This initial drilling identified Beskauga as an area of interest, but no significant mineralised intercepts were obtained, and the area was not followed up until Dostyk commenced drilling in 2007.
Drillhole locations, survey and analytical data from this period are not available and therefore these holes have not been considered in the preparation of this Report.
| 5.1.2 | Goldbelt Resources |
In 1996, Goldbelt Resources, via Dostyk, acquired the Maikuben exploration licence that included the Beskauga area. Goldbelt Resources defined about 20 areas of interest and conducted work programs on these prospects in 1996 and 1997. Based on the results of this program, Goldbelt relinquished approximately 25% of the area covered by Licence MG No. 785.
There is no documentation of this exploration at Beskauga by Goldbelt Resources, but it is understood that the exploration focus was on other targets within the larger licence area and that no significant work was completed at Beskauga itself. The Goldbelt Resources exploration data have not been obtained and have therefore not been considered in the preparation of this report.
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| 5.2 | Previous Exploration by Copperbelt |
Exploration and drilling completed on the Beskauga Project by Copperbelt between 2007 and 2017 is described in Sections 9 and 10.
| 5.3 | Historical Mineral Resource Estimates |
Three historical Mineral Resource estimates have previously been completed for Copperbelt on the Beskauga Project, namely by CSA Global in November 2013 (JORC) and again in February 2021 (NI43-101) and by Geosure Exploration and Mining Solutions Pty Ltd in January 2015 (JORC). The Mineral Resource estimate in 2021 was publicly reported by Silver Bull, however the two JORC reports announced in 2013 & 2015 were not publicly reported as the work was completed for a private company, Copperbelt.
The JORC Code is closely aligned with the CIM Definition Standards for Mineral Resources and Mineral Reserves, adopted by the CIM Council on 10 May 2014. However, the estimates have not been reported according to NI 43-101 standards of disclosure. Most significantly, the historic estimates have not been constrained by an open pit.
The previous mineral resource estimates are presented in the table below for historical context and informational purposes only.
| Table 5: | Previous Mineral Resource estimates at the Beskauga Project |
| Author | Classification | Tonnes (Mt) | Au (g/t) | Cu (%) |
| CSA Global (2013) – JORC | Indicated | 226 | 0.4 | 0.25 |
| Inferred | 273 | 0.36 | 0.15 | |
| Geosure Exploration and Mining Solutions Pty Ltd (2015) – JORC | Indicated | 248 | 0.42 | 0.3 |
| Inferred | 306 | 0.37 | 0.2 | |
| CSA Global (2021) – NI43-101 | Indicated | 207 | 0.35 | 0.23 |
| Inferred | 147 | 0.33 | 0.15 |
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| 6 | Geological Setting, Mineralization and Deposit |
| 6.1 | Regional Geology and Metallogeny |
The Beskauga Project is in northeastern Kazakhstan, an area underlain by rocks forming part of the Altaid tectonic collage or CAOB (Sengör et al., 1993; Jahn et al., 2000) which extends eastwards into Russia, Mongolia, and China as the Transbaikal-Mongolian orogenic collage (Yakubchuk, 2002). The CAOB is the most extensive and long-lived accretionary orogenic collage globally, progressively developed from the late Mesoproterozoic through the Paleozoic to the early Mesozoic by accretion of magmatic arcs, ophiolites, microcontinents, and accretionary wedges.
The CAOB collage formed during Rodinia break-up predominantly on the Paleo-Tethys Ocean margin of the Siberian craton and proto-Asian continent, but also on the adjacent Paleo-Pacific margin and associated with the closure of rifted back-arc basins behind the ocean-facing margins (Seltmann and Porter, 2005). The CAOB collage is made up of fragments of sedimentary basins, island arcs, accretionary wedges and tectonically bounded terranes composed of Neoproterozoic to Cenozoic rocks (Figure 5), the product of a complex sequence of processes resulting from subduction, collision, transcurrent movement and continuing tectonism over the interval from the Neoproterozoic to the present (Seltmann and Porter, 2005). The pattern was further complicated by the late overprint of the Alpine-Himalayan deformation related to Indo-Asian collision between Gondwana and Asia (Yakubchuk et al., 2002).
Models involving either a single long-lived arc system (Sengör et al., 1993) or multiple arc and back-arc systems (Yakubchuk, 2002) that collided with the Baltic and Siberian cratons have been suggested, and Windley et al. (2007) suggests several independent and short-lived arc systems that were welded together by a process of consecutive collisions, and that many of these arcs appear to be characterized by relatively short periods of volcanic activity and were not synchronous.
The CAOB collage is highly endowed with mineral deposits, as is typical of accretionary orogenic belts, including volcanic and sedimentary massive sulphide deposits, epithermal and orogenic gold deposits, and porphyry copper-gold/molybdenum deposits.
The CAOB contains several major porphyry copper-gold/molybdenum and epithermal gold deposits formed over an extensive period from the Ordovician to the Jurassic and associated with the various magmatic arcs of this complex, including the huge Devonian Oyu Tolgoi deposit in Mongolia. Eastern Kazakhstan also hosts a cluster of large porphyry deposits including Kounrad in the Balkhash belt and Bozshakol in Pavlodar, ~180 km west of Beskauga.
The Bozshakol deposit is currently mined by London Stock Exchange-listed KAZ Minerals and has a published resource of 991.9 Mt at 0.36% Cu, 0.15 g/t Au and 1.1 g/t Ag in Measured and Indicated classification (https://www.kazminerals.com/our-business/mineral-resources/).
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| Figure 5: | Simplified tectonic map of the Altaid and Transbaikal-Mongolian orogenic collage in central Eurasia |
Shows the location of selected porphyry copper-gold/molybdenum deposits, after removal of Mesozoic-Cenozoic basins and superficial cover (from Seltmann and Porter, 2005). Beskauga location shown by yellow star.
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| 6.1.1 | Central Asian Orogenic Belt in Northeastern Kazakhstan |
In the region of northern Kazakhstan, several microcontinents and island arcs are separated by suture zones of deep, marine, volcanic, and sedimentary formations, and ophiolites (Windley et al., 2007). The Maikain-Kyziltas ophiolitic suite (Figure 6) represents such as suture and comprises a serpentinite melange with abyssal and terrigenous siliceous sediments, tholeiitic, basalt and ferrobasalt, various gabbroids, eutaxic gabbro-amphibolitic bodies, representing oceanic crustal rocks. Sedimentary formations are represented by a thick pile of deformed volcanogenic-terrigenous strata, often having limestones at their base, and are typical of island arc settings.
| Figure 6: | Geotectonic map of the Paleozoic of Kazakhstan and contiguous China, showing the location of the Beskauga deposit (from Windley et al., 2007) |
PR, Proterozoic; Cm, Cambrian; O, Ordovician; S, Silurian; D, Devonian; C, Carboniferous; P, Permian; PZ, Paleozoic; MZ, Mesozoic; CZ, Cenozoic. Subscripts 1, 2, 3 refer to Early, Middle, late.
Beskauga is thought to be in the lower Boshchekul-Chingiz volcanic arc, part of the Kipchak arc system, marginal to the Maikain-Kyziltas ophiolitic melange belt. Island-arc volcanism was calc-alkaline in nature, evolving from are more sodic chemistry to more potassic in later stages and formed small hypabyssal intrusive bodies of gabbro, diorites, granodiorite, and sodic granite. These intrusives are responsible for the formation of the copper-gold porphyry systems in the magmatic arc belts. No significant porphyry-style deposits are found within the accretionary complexes of the sutured back-arc and intra-arc basins, although they do host large and giant, non-arc related orogenic gold deposits within fold and thrust belts (Seltmann and Porter, 2005).
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These rocks being of early Ordovician age in Boschekulskaya zone (Chagan complex) and later Ordovician or Silurian age in Kendiktinskaya and Maikain-Aleksandrovskaya zones (Zharlikol complex). Often these intrusive systems are closely related to porphyry copper gold mineralization.
Within the Project area, later stage (early to late Permian age) granitic intrusive bodies are also present.
Owing to the fact that that the Beskauga area is overlain by a 10–40 m thick cover of younger sediments, and the fact that several belts of magmatic arc rocks and accretionary volcano-sedimentary units are juxtaposed in close proximity on northeastern Kazakhstan (Figure 7), the precise age of the rocks underlying the Beskauga area is unclear – the Bozshakol deposit 160 km to the west is Cambrian-Ordovician (481 Ma), but younger arc-related rocks are also found in the area. The Nukazgan porphyry deposit (290 km to the southwest) has been dated at lower Silurian and the Aktogai deposits (600 km to the southeast) are thought to be Carboniferous in age. See the stratigraphic columns for the sedimentary sequence in Figure 9 and the stratigraphic column for the igneous intrusive suite in Figure 10 overleaf.
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| Figure 7: | Schematic tectonic map of the CAOB in northeast Kazakhstan showing mineral deposits. |
From Shen et al., 2016
| 6.2 | Property Geology |
The Beskauga Project includes the Beskauga and Beskauga South mineralized zones within the larger Beskauga Project licence area (Figure 8). The prospective Ordovician geology is concealed by a thin cover of Cenozoic sediments throughout the project area.
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| Figure 8: | Location of the Beskauga prospect within the larger Beskauga Project area |
The prospective Ordovician is concealed by a thin cover of younger Cenozoic sediments. Google Earth image, drill holes shown in green on inset map.
The project area is predominantly underlain by sedimentary rocks of upper Ordovician age, termed the Oroiskaya and Angrensorskaya suites, and volcanogenic-sedimentary rocks, termed the Biikskaya suite (Figure 9). These have been intruded by small stock-like intrusive bodies of porphyry ranging in composition from diorite, monzodiorite to quartz monzonite and referred to as the Shangirau complex (Figure 10). Thin (25 m), short (100–200 m) dikes of diorite porphyry and basalt (rarely granodiorite and syenodiorite) also cut the host sequence.
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| Figure 9: | Stratigraphic column showing the Beskauga sedimentary-volcanic succession. |
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| Figure 10: | Beskauga igneous suite of rocks. |
The Beskauga mineral system is related to a Late Ordovician Shangirau suite intrusive centre that cuts the Ordovician sediments and volcanics. The reported Late Ordovician ages of the volcanics and intrusives suggests a broadly co-magmatic sequence in a magmatic arc setting.
The Beskauga Main porphyry-style copper-gold mineralization is largely hosted within Shangirau suite diorite and appears to represent an epithermal overprint within a telescoped mineralization system, whereas the Beskauga South gold mineralization is hosted within quartz monzonite porphyry. Note that Beskauga South has been drilled but has not been included in the Mineral Resource estimate.
Intrusive rocks represent the major portion of the deposit area. The northern main zone of the deposit is represented by a complex hypabyssal intrusive body of diorite composition with stockwork mineralization. The western, eastern, and southern parts of the area are mainly composed of sedimentary rocks of upper Ordovician age (siltstone, sandstone, and tuffaceous sandstone with rare conglomeratic and limestone interbeds) and andesite, andesitic tuff, andesite-dacite and basalt. The southern part of the deposit area (Beskauga South) is represented by hypabyssal-subvolcanic quartz monzonite porphyry and eruption breccia with gold mineralization.
Several varieties of monzonite are interpreted to cut and postdate the diorite. Barren diorite porphyry and barren basalt dykes are also postdating diorite. Intrusive relationships and timing relative to mineralization have not been clearly established; based on latest deep drilling there is possibility that causative intrusion sits beyond currently drilled depths.
The Project area is covered by a 10 m (southern part) to 40 m (northern part) thick cover of younger sediments (Figure 9). This includes upper Eocene Tavda Formation consisting of dark-gray bluish-greenish clay with lignite and aleurolite (siltstone) with interlayers and lenses of inequigranular quartz sand. Younger lower to middle Quaternary cover consists of lacustrine-alluvial sand-gravel-pebble sediments.
The deposit is described as fresh beneath the young sedimentary cover, without weathering or oxidation.
| 6.3 | Mineralization and Alteration |
Beskauga is a copper-gold porphyry deposit with elevated grades of molybdenum and silver, related to intrusions of diorite composition. A map of the deposit area is shown in Figure 11 and a cross-section through the deposit is shown in Figure 12.
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| Figure 11: | Geological map of the Beskauga deposit area, showing drillhole collars. Section line A-A’ (Figure 12) is also shown. |
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| Figure 12: | Cross section A-A’ through the Beskauga deposit, looking W (section location is shown on Figure 11) |
Porphyry-style mineralization is hosted in diorite and monzodiorite intrusions that have elongated sheet-like shapes. Mineralized zones are affected by stockwork veining and hydrothermal alteration and dip steeply to the South, broadly parallel with the contact zone of the diorite-monzodiorite stock (Figure 11). Alteration is described as argillic (kaolinite-dickite-smectite-illite) alteration up to depth of around 350 m, where this alteration gradually becoming weaker – kaolinite and dickite disappear while smectite and illite still prevails up to depths of 700 m. Beyond 700 m sodic-potassic alteration is preserved and represented with presence of N-feldspar, K-feldspar, magnetite and locally biotite. Tourmaline has also been described. Presence of white mica-quartz alteration which is mostly affecting diorite indicating a degree of epithermal overprint.
The principal sulphide minerals at Beskauga include pyrite, chalcopyrite, tennantite, enargite, bornite and molybdenite, with magnetite and hematite also described. QEMSCAN mineralogy completed as part of metallurgical test work indicates that pyrite and chalcopyrite are the dominant sulphides with subordinate tennantite and chalcocite. Analysis indicates a close correlation between gold and copper grades. Sulphides occur as fine-grained disseminations as well as in stockwork veins and veinlets, 3–5 mm thick, consisting of quartz-carbonate, quartz-carbonate-chlorite, and quartz-pyrite. Free gold has been identified in polished sections and microprobe analysis showed high fineness (gold – 83.41%, silver – 12.63%). Sulphides are also seen to a much lesser extent in weakly altered intrusion rocks.
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Arras Minerals Corp. Beskauga Copper-Gold Project – S-K 1300 TECHNICAL REPORT |
To understand the geometry and zonation of alteration and mineralization at Beskauga Cu-Au deposit, together with detail drill core logging Arras Minerals has conducted inhouse SWIR-NIR spectral analyses with TerraSpec4 analytical device and using TSG8 software for interpretation, and ioGAS software for geochem analyses.
The occurrence of significant tennantite at Beskauga is not unusual for gold-rich porphyry systems but does have metallurgical implications as discussed in Section 10. The combination with enargite suggests a high level in the porphyry system or a high-sulphidation overprint. Higher sulphidation-state sulphides are generated progressively upward in porphyry systems with lower temperatures and hydrolytic alteration.
| 6.4 | Deposit Type |
The Beskauga deposit is interpreted as a porphyry-style copper-gold system, associated with calc-alkaline intrusions related to island arc volcanism during the Lower Palaeozoic. Porphyry systems host majority of the world’s major copper deposits and are typically high-tonnage and low-grade (Figure 11 and Figure 13). Several large porphyry deposits (including Kounrad, Bozshakol, Aktogai, and Koksai) are in Kazakhstan. Kounrad has been mined out while Bozshakol, Aktogai and Koksai are currently in production or under development by KAZ Minerals.
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Arras Minerals Corp. Beskauga Copper-Gold Project – S-K 1300 TECHNICAL REPORT |
| Figure 13: | Plot of gold grade vs total resources for selected gold-rich porphyry projects globally |
Area of circles is proportional to contained gold. Company data acquired from reports files on SEDAR and/or other publicly available data.
| 6.4.1 | Mineralization Styles |
In porphyry systems such as Beskauga, mineralization forms as vein stockworks and disseminations associated with a halo of hydrothermal alteration related to an intrusion. Owing to their relationship to hydrothermal fluids, porphyry copper deposits display a consistent, broad-scale alteration-mineralization zoning pattern related to the chemistry and evolution of these fluids.
This alteration typically comprises a core of potassic alteration (characterized by K-feldspar, biotite, and muscovite) surrounded sequentially outwards by phyllic alteration (characterized by chlorite and sericite) and propylitic alteration (characterized by chlorite and epidote). The zone of potassic alteration being of primary importance for copper mineralization (Figure 14). Argillic alteration (characterized by kaolinite and montmorillonite). Mineralization occurs at shallow levels (in the upper 4 km of the crust), and the mineralizing system is closely related to underlying composite plutons at paleodepths of 5–15 km (Sillitoe, 2010). Porphyry deposits are generally large and low grade, and semicircular to elliptical in plan view.
Primary (hypogene) copper mineralization typically occurs as chalcopyrite and bornite, although copper may also occur as tennantite, enargite, and chalcocite (Berger et al., 2008). Deposits may also contain molybdenite and trace amounts of native gold. Other associated minerals may include sphalerite, galena, tetrahedrite (Berger et al., 2008).
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Arras Minerals Corp. Beskauga Copper-Gold Project – S-K 1300 TECHNICAL REPORT |
| 6.4.2 | Conceptual Models |
Porphyry deposits form because of precipitation of mineralization from magmatic fluids enriched in metals and derived from intrusions emplaced shallower than 4 km depth. This shallow emplacement depth results in early vapour saturation and the formation of a chlorine-enriched magmatic fluid that can effectively scavenge copper and other metals from the relatively unfractionated magma. The parental magmas need to be sufficiently water-rich to allow saturation of the magma with the fluid phase and need to be oxidized to suppresses magmatic sulfide which may sequester metals before they can partition into the aqueous phase (Sillitoe, 2010).
When a porphyry deposit begins to form, potassic alteration occurs in the core of the up-flow zone of the mineralizing magmatic fluid. Cooling of the fluid over the ~550°C to 350°C range, assisted by fluid-rock interaction, is largely responsible for precipitation of the mineralization at the margins of this core zone. The thermal gradient associated with this high-temperature up-flow zone leads to convection of surrounding ground waters that results in a peripheral propylitic alteration zone (Berger et al., 2008). Phyllic alteration crosscuts potassic alteration and is thought to form from a mixture of meteoric and magmatic fluids. Phyllic alteration is associated with important tonnages of ore in some deposits but is not present as a distinct alteration type in all deposits (Sillitoe, 2000).
A variety of other deposit types are spatially related to porphyry systems, including skarns, polymetallic veins and replacements, and epithermal veins (Figure 15Figure 15), although none of these have yet been identified at Beskauga.
| Figure 14: | Cartoon cross-section of a porphyry copper deposit showing idealized alteration zoning and relationship to mineralization (from Berger et al., 2008). |
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Arras Minerals Corp. Beskauga Copper-Gold Project – S-K 1300 TECHNICAL REPORT |
| Figure 15: | Anatomy of a porphyry mineral system showing the spatial relationship between a centrally located porphyry deposit with skarn, carbonate-replacement, sediment-hosted and epithermal vein type deposits. From Sillitoe (2010). |
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| 7 | Exploration |
The following section details exploration carried out at Beskauga between 2007 and 2023 by Dostyk and Arras Minerals. Apart from drilling the primary exploration technique was geophysics.
| 7.1 | Geophysics |
In 2012, Dostyk undertook a ground-based magnetic and IP survey over the main Beskauga deposit area. Both the magnetic and IP surveys were completed by SPC Geoken LLP, a local geophysical survey service provider.
The survey points for the magnetic survey were collected at 20 second intervals with a variable line spacing of 200 m to 400 m using a Proton Precession Magnetometer MM-61.
The results of the magnetic survey show several relative magnetic highs >1000 nT (red in Figure 16 below) which present interesting targets for follow-up exploration. Further assessment is required to determine magnetic sources related to magnetic intrusions as opposed to magnetite alteration.
| Figure 16: | Magnetic anomaly map (Total Magnetic Intensity) and grid points for the magnetic survey |
Yellow outline indicates area of the main deposit.
The survey points for the IP dipole-dipole survey were taken on 100 m centres with a 400 m line spacing using a Zonge GGT 30 kW transmitter. The IP survey (Figure 17) showed a good correlation with the mineralization defined by the drilling and indicated the mineralizing system may be much larger. The anomalous area is ~9 km2, comparable to known large gold-bearing copper porphyry deposits of the world.
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Arras Minerals Corp. Beskauga Copper-Gold Project – S-K 1300 TECHNICAL REPORT |
Increasing chargeability values with depth suggests that the deposit drilled thus far lies on the upper part of the “pyritic” halo of a mineralized porphyry system with an insignificant erosional truncation. The deeper extensions of the deposit have however never been drill-tested. This accords with the mineralogy and alteration types identified in drilling to date which suggest the upper part of a system has been tested.
| Figure 17: | IP anomaly map of chargeability over the Beskauga deposit – depth slice at 300 m. |
Yellow outline indicates area of the main deposit.
In 2021, Arras Minerals commissioned SPC Geoken LLP to conduct a high resolution airborne magnetic survey, over the Beskauga and neighbouring Ekidos and Stepnoe licence areas, with flight lines-oriented east-west. The survey was flown at 70 m ground clearance with a line spacing of 100 m and tie-lines of 1000 m. QA/QC and inversion of the resulting magnetic data was carried out by Condor North Consulting, ULC., Vancouver.
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Arras Minerals Corp. Beskauga Copper-Gold Project – S-K 1300 TECHNICAL REPORT |
| |
 |
 |
| Figure 18: AN-2 Aircrafts and exterior of CS-3 Magnetometer on Tail Stinger |
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Arras Minerals Corp. Beskauga Copper-Gold Project – S-K 1300 TECHNICAL REPORT |
| Figure 19: | RMI-RTP 2021 Airborne magnetic survey over Beskauga, Stepnoe and Ekidos license |
This survey has yield couple of additional targets with magnetic signatures like Beskauga worth drill testing.
In 2023 Arras Minerals has completed ground magnetic survey with 1770 line/km on 70 m line spacing, covering entire Beskauga license using GSM-19W GEM magnetometers with accuracy of magnetic field registration ± 0.01 nT.
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Arras Minerals Corp. Beskauga Copper-Gold Project – S-K 1300 TECHNICAL REPORT |
| Figure 20: | 2023 Beskauga ground magnetics survey field crew with equipment and magnetometers. |
Arras is currently conducting a compilation of regional geophysical surveys, 1:25,000 geological mapping, Shuttle Radar Topography Mission (SRTM) and Landsat ASTER images to support exploration targeting within the larger project area.
| 7.2 | Diamond Drilling |
A total of 118 diamond drillholes, totaling 45,605.8 m, were completed by Dostyk between 2007 and 2017 (Table 6). From Jun 2021 to date Arras Minerals has drilled total of 32 drill holes with total of 23,343 m. Diamond drilling was performed by SKB-5M, CDH-1600 and CDH-1300 drill rigs using Boart Longyear and Atlas Copco tooling by drilling contractor CenterGeolSyomka LLP and GRK Iskander. Drilling was done at either HQ or NQ diameter depending on the depth of the hole, which ranged from 150 m to 1,170 m. Core recovery was on average >90%.
From total of 150 diamond drillholes completed, 117 have been used for the Beskauga Main Mineral Resource estimate (Table 6 and Table 7). The location of drill collars at Beskauga Main is shown in Figure 18.
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Table 6: Summary table of the diamond drilling conducted by Dostyk between 2007 and 2017, and Arras Minerals between 2021 and 2023
| Year | No. of holes | Drilled (m) |
| 2007 | 16 | 4,714.3 |
| 2008 | 6 | 1,671.0 |
| 2009 | 7 | 2,130.7 |
| 2010 | 6 | 3,639.5 |
| 2011 | 18 | 7,960.1 |
| 2012 | 9 | 2,918.5 |
| 2013 | 8 | 3,806.0 |
| 2014 | 19 | 7,732.1 |
| 2017 | 29 | 11,033.6 |
| 2021 | 10 | 8,472.8 |
| 2022 | 13 | 8,450.6 |
| 2023 | 9 | 5,442.8 |
| Total | 150 | 67,972 |
| Table 7: | Collar positions, lengths, and orientations of all diamond drillholes at Beskauga Main used for the Mineral Resource estimate. |
| Hole ID | X | Y | Z | Length | Azimuth | Dip | Year |
| Bg-1 | 588110.9 | 5739469 | 127 | 309 | 123.5 | -70 | 2007 |
| Bg-2 | 588169.4 | 5739454 | 126 | 333 | 124.5 | -70 | 2007 |
| Bg-3 | 588135.5 | 5739695 | 126 | 310.3 | 114.5 | -69.5 | 2007 |
| Bg-4 | 588399.9 | 5739998 | 126 | 192.5 | 143.5 | -69.75 | 2007 |
| Bg-5 | 588458.9 | 5739914 | 126 | 250.5 | 129.5 | -69.75 | 2007 |
| Bg-6 | 588243.5 | 5739610 | 127 | 304.6 | 116.5 | -69.5 | 2007 |
| BgS-7 | 588314.6 | 5738834 | 126 | 304.5 | 109.5 | -70 | 2007 |
| BgS-8 | 586981.7 | 5737959 | 126 | 307.6 | 49.5 | -70 | 2007 |
| Bg-9 | 588444 | 5739391 | 127 | 305 | 114.5 | -70 | 2007 |
| BgS-10 | 588208.2 | 5738652 | 126 | 168.1 | 114.5 | -70 | 2007 |
| BgS-11 | 587007.1 | 5737697 | 126 | 403 | 54.5 | -70 | 2007 |
| Bg-12 | 588075.6 | 5739726 | 127 | 152.2 | 117.5 | -70 | 2007 |
| BgS-13 | 586681.3 | 5738673 | 126 | 304 | 54.5 | -69 | 2007 |
| BgS-14 | 586660.3 | 5739431 | 126 | 306 | 77.5 | -68 | 2007 |
| Bg-15 | 588027.6 | 5739754 | 127 | 425 | 119.5 | -70 | 2007 |
| Bg-16 | 588013.4 | 5739494 | 127 | 339 | 124.5 | -70 | 2007 |
| Bg-17 | 588105.1 | 5739285 | 127 | 312.2 | 112.5 | -70 | 2008 |
| Bg-18 | 588336.1 | 5739060 | 127 | 276.6 | 112.5 | -70 | 2008 |
| Bg-19 | 588181.3 | 5739919 | 126 | 305.7 | 160.5 | -70 | 2008 |
| Bg-20 | 588239.4 | 5739077 | 127 | 338 | 97.5 | -70 | 2008 |
| Bg-21 | 588009.1 | 5739300 | 127 | 193.4 | 89.5 | -70 | 2008 |
| Bg-22 | 588341.8 | 5740083 | 127 | 245 | 164.5 | -70 | 2008 |
| Bg-23 | 587927.3 | 5739533 | 127 | 318.7 | 14.5 | -70 | 2009 |
| Bg-24 | 587937.9 | 5739635 | 127 | 337 | 14.5 | -70 | 2009 |
| Bg-25 | 587736.1 | 5739592 | 127 | 348 | 14.5 | -72.5 | 2009 |
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| Hole ID | X | Y | Z | Length | Azimuth | Dip | Year |
| Bg-26 | 588226.1 | 5739436 | 127 | 254 | 111.5 | -70 | 2009 |
| BgS-27 | 588168.9 | 5738053 | 126 | 251 | 99.5 | -70 | 2009 |
| Bg-29 | 588117.4 | 5738051 | 125 | 301 | 99.5 | -70 | 2009 |
| BgS-30 | 588028.9 | 5738054 | 125 | 406.4 | 99.5 | -70 | 2010 |
| Bg-31 | 588071.8 | 5739479 | 126 | 501 | 114.5 | -71 | 2010 |
| Bg-32 | 587967.5 | 5739513 | 126 | 504.1 | 112.5 | -70 | 2010 |
| Bg-33 | 588188.9 | 5739448 | 126 | 801 | 0 | -90 | 2010 |
| Bg-34 | 588006.4 | 5739252 | 126 | 741.2 | 100.5 | -75 | 2010 |
| Bg-35 | 587853.6 | 5739561 | 126 | 685.8 | 112.5 | -75 | 2010 |
| Bg-36 | 587987.8 | 5739631 | 127 | 633 | 119.5 | -70 | 2011 |
| Bg-37 | 588105.2 | 5739587 | 126 | 522.4 | 117.5 | -70 | 2011 |
| Bg-38 | 587694.9 | 5739516 | 126 | 271.6 | 29.5 | -70 | 2011 |
| Bg-39 | 588191.3 | 5739670 | 126 | 622 | 144.5 | -75 | 2011 |
| Bg-40 | 588207.7 | 5739551 | 126 | 392.3 | 114.5 | -70 | 2011 |
| Bg-41 | 588336 | 5739505 | 127 | 617.4 | 299.5 | -70 | 2011 |
| Bg-42 | 588641.8 | 5739761 | 127 | 300.4 | 0 | -90 | 2011 |
| BgS-43 | 587789.7 | 5737044 | 125 | 280.3 | 69.5 | -72 | 2011 |
| Bg-44 | 588097.5 | 5739668 | 126 | 568 | 124.5 | -70 | 2011 |
| Bg-45 | 588266.9 | 5739186 | 126 | 375.2 | 114.5 | -70 | 2011 |
| Bg-46 | 587989.5 | 5739703 | 126 | 527 | 122.5 | -70 | 2011 |
| BgS-47 | 587898.3 | 5738345 | 126 | 485 | 99.5 | -70 | 2011 |
| Bg-48 | 588486.8 | 5739753 | 127 | 355 | 99.5 | -70 | 2011 |
| BgS-49 | 587698.6 | 5737058 | 125 | 299.9 | 99.5 | -70 | 2011 |
| Bg-50 | 588401.3 | 5739386 | 126 | 605.7 | 299.5 | -70 | 2011 |
| BgS-51 | 587754.4 | 5737061 | 125 | 221.9 | 99.5 | -70 | 2011 |
| BgS-52 | 588078 | 5738150 | 126 | 350 | 105.5 | -70 | 2011 |
| Bg-53 | 588031.6 | 5739491 | 126 | 533.1 | 107.5 | -70 | 2011 |
| Bg-54 | 588103 | 5739572 | 126 | 525.4 | 0 | -90 | 2012 |
| Bg-55 | 588165.4 | 5739508 | 126 | 726 | 0 | -90 | 2012 |
| Bg-56 | 588117.2 | 5739523 | 126 | 732.1 | 0 | -90 | 2013 |
| Bg-58 | 588289.9 | 5739727 | 127 | 506.5 | 120.5 | -90 | 2013 |
| BgS-59 | 587580.2 | 5737077 | 126 | 304.3 | 0 | -90 | 2012 |
| BgS-60 | 587833.2 | 5737081 | 127 | 259 | 196.5 | -76.2 | 2012 |
| BgS-61 | 587672.4 | 5737074 | 126 | 301 | 259.5 | -75 | 2012 |
| Bg-62 | 588205.9 | 5739386 | 127 | 694.3 | 29.5 | -90 | 2013 |
| Bg-63 | 588209.6 | 5739500 | 127 | 676 | 29.5 | -90 | 2013 |
| Bg-64 | 588257.8 | 5739482 | 127 | 681.7 | 29.5 | -90 | 2013 |
| Bg-65 | 588067.3 | 5739531 | 127 | 565.5 | 29.5 | -88.6 | 2013 |
| Bg-66 | 588110.4 | 5739588 | 127 | 500 | 114.5 | -69.9 | 2013 |
| Bg-67 | 588190.3 | 5739617 | 128 | 509 | 294.5 | -88.9 | 2014 |
| Bg-68 | 588198 | 5739725 | 126 | 394.5 | 125.5 | -89.7 | 2014 |
| Bg-69 | 588240.6 | 5739698 | 126.5 | 451.5 | 114.5 | -89.1 | 2014 |
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| Hole ID | X | Y | Z | Length | Azimuth | Dip | Year |
| Bg-70 | 588155.4 | 5739749 | 126 | 379 | 233.5 | -87.8 | 2014 |
| Bg-71 | 588181.7 | 5739673 | 126 | 430 | 124.5 | -88.4 | 2014 |
| BgS-72 | 587907.2 | 5737128 | 127 | 308 | 231.5 | -76.8 | 2014 |
| Bg-73 | 588239.7 | 5739643 | 127 | 510 | 99.5 | -88.4 | 2014 |
| Bg-74 | 588197.2 | 5739549 | 127 | 500 | 121.5 | -88.8 | 2014 |
| BgS-75 | 587569.1 | 5736916 | 125 | 300 | 71.5 | -70 | 2014 |
| Bg-76 | 588109.6 | 5739412 | 127.7 | 659 | 4.5 | -88.9 | 2014 |
| Bg-77 | 588060.3 | 5739602 | 129 | 500 | 139.5 | -88.8 | 2014 |
| Bg-78 | 588283.8 | 5739621 | 127.053 | 300 | 184.5 | -88.9 | 2014 |
| Bg-79 | 588242.4 | 5739591 | 127.18 | 369.5 | 135.5 | -88.8 | 2014 |
| Bg-80 | 588039.3 | 5739685 | 126.975 | 500 | 104.5 | -71.8 | 2014 |
| Bg-81 | 588023 | 5739557 | 127.158 | 496.7 | 178.5 | -89.5 | 2014 |
| Bg-82 | 587976.7 | 5739635 | 127.22 | 330 | 339.5 | -88.1 | 2014 |
| Bg-83 | 587971 | 5739715 | 127 | 197.3 | 129.5 | -88.5 | 2014 |
| Bg-84 | 587976.3 | 5739567 | 127.339 | 300 | 194.5 | -88.1 | 2015 |
| Bg-85 | 587833.4 | 5739386 | 127.257 | 297.6 | 109.5 | -78 | 2015 |
| BgS-86 | 587518.2 | 5737072 | 126.508 | 147.1 | 0 | -90 | 2016 |
| BgS-87 | 587576.5 | 5737003 | 126.315 | 150.6 | 0 | -90 | 2016 |
| BgS-88 | 587681.9 | 5736997 | 126.407 | 221.3 | 0 | -90 | 2017 |
| BgS-89 | 587578.6 | 5736875 | 126.054 | 158.6 | 0 | -90 | 2017 |
| BgS-90 | 587829.4 | 5737054 | 126.671 | 161.7 | 0 | -90 | 2017 |
| BgS-91 | 587659.9 | 5736880 | 126.338 | 213.6 | 0 | -90 | 2017 |
| BgS-92 | 587755.6 | 5737030 | 126.401 | 150.4 | 0 | -90 | 2017 |
| Bg-93 | 588295 | 5739561 | 127.145 | 540.3 | 0 | -90 | 2017 |
| Bg-94 | 588347.2 | 5739497 | 127.084 | 500.4 | 0 | -90 | 2017 |
| Bg-95 | 587909.2 | 5739440 | 126.955 | 585 | 0 | -90 | 2017 |
| Bg-96 | 588021.7 | 5739434 | 127.038 | 502.2 | 0 | -90 | 2017 |
| Bg-97 | 587951.4 | 5739457 | 126.988 | 516 | 0 | -90 | 2017 |
| Bg-98 | 587947.7 | 5739404 | 127.055 | 528.7 | 0 | -90 | 2017 |
| Bg-99 | 587812.7 | 5739447 | 127.11 | 484.5 | 0 | -90 | 2017 |
| Bg-100 | 588223.7 | 5739771 | 127.145 | 275.8 | 0 | -90 | 2017 |
| Bg-101 | 588008 | 5739768 | 126.706 | 195 | 0 | -90 | 2017 |
| Bg-102 | 588287.1 | 5739674 | 127.248 | 373 | 0 | -90 | 2017 |
| Bg-103 | 587909 | 5739489 | 127.1 | 497.4 | 0 | -90 | 2017 |
| Bg21001 | 588138.3 | 5739662.711 | 124.3 | 1017.2 | 180 | -70 | 2021 |
| Bg21002 | 588497.75 | 5739287.098 | 124 | 1108.5 | 310 | -70 | 2021 |
| Bg21003 | 587811.43 | 5739406.24 | 124 | 404.7 | 180 | -70 | 2021 |
| Bg21004 | 588037.9 | 5739658 | 124 | 1164.3 | 180 | -70 | 2021 |
| Bg21005 | 587790.7 | 5739672 | 124 | 952.6 | 180 | -70 | 2021 |
| Bg21006 | 588248 | 5739308 | 124 | 732.2 | 180 | -70 | 2021 |
| Bg21007 | 588138 | 5739737 | 124 | 1170.1 | 180 | -70 | 2021 |
| Bg21008 | 587915 | 5739315 | 124 | 610.6 | 0 | -70 | 2021 |
| Bg21009 | 587325 | 5739225 | 124 | 591 | 45 | -70 | 2021 |
| Bg21010 | 588335 | 5740206 | 124 | 721.6 | 180 | -70 | 2021 |
| Bg22011 | 587748.9437 | 5737014.547 | 124 | 450.1 | 56 | -70 | 2022 |
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| Hole ID | X | Y | Z | Length | Azimuth | Dip | Year |
| Bg22012 | 588090.6 | 5739586 | 124 | 1091 | 335 | -85 | 2022 |
| Bg22013 | 587539 | 5736873 | 124 | 898.7 | 56 | -70 | 2022 |
| Bg22014 | 587930 | 5737380 | 124 | 379.6 | 300 | -70 | 2022 |
| Bg22015 | 588286 | 5739390.1 | 124 | 1109.8 | 20 | -85 | 2022 |
| Bg22016 | 586901 | 5739691 | 124 | 274.4 | 25 | -70 | 2022 |
| Bg22017 | 587466.812 | 5737506.352 | 127 | 532.3 | 300 | -75 | 2022 |
| Bg22018 | 586672.8297 | 5738544.883 | 128.6448 | 351.7 | 71 | -65 | 2022 |
| Bg22019 | 586818.34 | 5739510.03 | 127 | 637.9 | 25 | -80 | 2022 |
| Bg22020 | 589523.46 | 5739500 | 127 | 406.7 | 90 | -85 | 2022 |
| Bg22021 | 587976 | 5739271 | 126 | 739.7 | 0 | -85 | 2022 |
| Bg22022 | 587372 | 5736760 | 127 | 578 | 55 | -70 | 2022 |
| Bg22023 | 588039.0166 | 5739270.385 | 126.479 | 1000.7 | 0 | -85 | 2022 |
| Bg23024 | 587940 | 5739124 | 126.479 | 919.6 | 10 | -85 | 2023 |
| Bg23025 | 587753.84 | 5738357 | 127 | 535.3 | 99.5 | -70 | 2023 |
| Bg23026 | 587999.11 | 5738312.85 | 127 | 599.5 | 100 | -70 | 2023 |
| Bg23027 | 587314.92 | 5738357.21 | 127 | 391.4 | 100 | -70 | 2023 |
| Bg23028 | 588453.12 | 5738499.14 | 127 | 883 | 340 | -70 | 2023 |
| Bg23029 | 586699.45 | 5738970.4 | 128 | 445.9 | 61.8 | -70 | 2023 |
| Bg23030 | 587360.98 | 5739511.33 | 127 | 664.8 | 70 | -70 | 2023 |
| Bg23031 | 587083.13 | 5739397.11 | 128 | 658.7 | 70 | -70 | 2023 |
| Bg23032 | 586348.46 | 5740626.4 | 128 | 350 | 44 | -70 | 2023 |
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Arras Minerals Corp. Beskauga Copper-Gold Project – S-K 1300 TECHNICAL REPORT |
| Figure 21: | Beskauga Main drill collars |
| 7.2.1 | Collar Surveying |
The coordinates of points (drillholes) were determined by using high precision single-frequency 12-channel GPS Trimble R3 base station and mobile receiver with GPS antenna on a telescopic rod.
| 7.2.2 | Downhole Surveying |
All drillholes, including vertical drillholes, have downhole surveys completed by the drilling contractor using an IEM-36 survey instrument (a Soviet/Russian instrument for use in a non-magnetic environment) and REFLEX GYRO SPRINT-IQ. Surveys were completed every 20 m of the downhole length and were taken after the drilling has been completed, before closing the drillhole. All related documents are kept at the Dostyk head office in Almaty.
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Arras Minerals Corp. Beskauga Copper-Gold Project – S-K 1300 TECHNICAL REPORT |
| 7.2.3 | Core Logging and Photography |
Primary field logging was performed the Dostyk LLP base camp upon the core delivery from drilling sites. A logging geologist is responsible for tracing the mineralized zones boundaries, recording drilling runs, meter marking and definition of core recovery ratios.
Prior to logging, the core is placed onto special tables where it is thoroughly washed and photographed. The core is described in the field core logs and the data are then recorded into special logging blank forms and captured digitally. The core logging is based upon a system of coding.
Arras Minerals methodology of core processing includes acquiring measurements of core specific gravity, magnetic susceptibility with KT-20 device, and SWIR-NIR spectral measurements by TerraSpec 4 spectrometer.
Intervals to be sampled were determined by the logging geologist according to geological core logging. The sample length was generally between 0.5 m and 1 m, with a lesser proportion up to 2 m.
Upon completion of logging the drill core is sent for photographing and finally splitting and sampling.
| 7.2.4 | Core Sampling |
Core sampling was performed by splitting the core along long axis into two equal portions using a diamond saw. One half of the core was sampled and sent to the laboratory for assay, whereas the other half was retained to serve as a library sample hat could be used for future duplicate sampling, for additional test work, or for petrography and mineralogy studies.
Between 1981 and 1990, core was divided using a manual core splitter (578 samples) whereas from 2007 to date core was divided using a diamond core sawing machine. Drill data prior to 2007 has not been used in the Mineral Resource estimate.
| 7.2.5 | Significant Intervals |
The following table (Table 8) provides details of the most significant intersections at Beskauga in terms of intersection length and grade. The cut-off parameters used in the table have been selected to reduce the number of reported intersections, they are not an indication of Mineral Resource reporting or economic cut-off parameters.
| Table 8: | Significant intervals drilled at Beskauga (>100 m intervals at >0.3 g/t Au) |
| Drillhole name | From (m) | To (m) | Core length (m) | Au (g/t) | Cu (%) |
| Bg1 | 45.1 | 309 | 263.9 | 0.41 | 0.2 |
| Bg2 | 46.2 | 333 | 286.8 | 0.38 | 0.17 |
| Bg3 | 48 | 241.4 | 193.4 | 0.57 | 0.42 |
| Bg31 | 46.9 | 501 | 454.1 | 0.6 | 0.29 |
| Bg32 | 47 | 504.1 | 457.1 | 0.42 | 0.28 |
| Bg33 | 48.5 | 801 | 752.5 | 0.54 | 0.26 |
| Bg36 | 51 | 496.3 | 445.3 | 0.43 | 0.33 |
| Bg37 | 46 | 431.7 | 385.7 | 0.81 | 0.53 |
| Bg39 | 44.7 | 200.9 | 156.2 | 0.36 | 0.36 |
| Bg40 | 45 | 184.6 | 139.6 | 0.32 | 0.18 |
| Bg41 | 208.2 | 509.7 | 301.5 | 0.74 | 0.43 |
| Bg44 | 47.6 | 230.6 | 183 | 0.68 | 0.59 |
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| Drillhole name | From (m) | To (m) | Core length (m) | Au (g/t) | Cu (%) |
| Bg44 | 47.6 | 182.9 | 135.3 | 0.85 | 0.71 |
| Bg44 | 337.9 | 568 | 230.1 | 0.35 | 0.26 |
| Bg47 | 341 | 482 | 141 | 0.34 | 0.09 |
| Bg53 | 115 | 352.4 | 237.4 | 0.33 | 0.2 |
| Bg53 | 399.9 | 533.1 | 133.2 | 0.34 | 0.15 |
| Bg54 | 46.1 | 484.2 | 438.1 | 0.37 | 0.31 |
| Bg55 | 43.5 | 471.2 | 427.7 | 0.58 | 0.3 |
| Bg55 | 233.1 | 365.8 | 132.7 | 0.71 | 0.47 |
| Bg56 | 62.1 | 267.4 | 205.3 | 0.34 | 0.26 |
| Bg56 | 280.3 | 509 | 228.7 | 0.55 | 0.39 |
| Bg62 | 45.7 | 694.3 | 648.6 | 0.33 | 0.13 |
| Bg63 | 43 | 676 | 633 | 0.62 | 0.4 |
| Bg64 | 46.5 | 681.7 | 635.2 | 0.48 | 0.24 |
| Bg65 | 45 | 565.5 | 520.5 | 0.38 | 0.3 |
| Bg66 | 49 | 500 | 451 | 0.79 | 0.54 |
| Bg67 | 46 | 407 | 313.9 | 0.41 | 0.35 |
| Bg74 | 42 | 500 | 398.4 | 0.66 | 0.42 |
| Bg77 | 45.2 | 396 | 350.8 | 0.56 | 0.36 |
| Bg81 | 125.8 | 302 | 176.2 | 0.35 | 0.33 |
| Bg21001 | 44.00 | 1017.20 | 973.20 | 0.56 | 0.32 |
| Bg21002 | 623.00 | 740.40 | 117.40 | 0.60 | 0.23 |
| Bg21004 | 43.90 | 1164.30 | 1120.40 | 0.39 | 0.25 |
| Bg21006 | 43.00 | 732.20 | 689.20 | 0.60 | 0.24 |
| Bg21007 | 46.00 | 1170.10 | 1124.10 | 0.40 | 0.25 |
| Bg21008 | 286.30 | 479.00 | 192.70 | 0.40 | 0.24 |
| Bg22011 | 96.00 | 225.00 | 129.00 | 0.55 | 0.01 |
| Bg22012 | 41.00 | 406.00 | 365.00 | 0.54 | 0.40 |
| Bg22015 | 652.00 | 768.40 | 116.40 | 0.54 | 0.19 |
| Bg22021 | 503.00 | 641.50 | 138.50 | 0.48 | 0.35 |
| Bg23024 | 582.70 | 909.75 | 327.05 | 0.32 | 0.17 |
| Bg23026 | 155.00 | 282.00 | 127.00 | 0.49 | 0.17 |
Note that since mineralization occurs as a broad dissemination, actual core length is considered to represent true thickness.
| 7.2.6 | Interpretation |
Mineralization Orientation
Mineralization occurs as a broad, steeply west-dipping to subvertical zone that strike on average north-northeast (020°); however, this strike is locally variable between north (000°) and east-northeast (060°).
True Thickness
The zone of disseminated mineralization at Beskauga is varied between approximately 50 m and 600 m wide, extends for approximately 2.2 km along a north-northeast strike, with a depth of between 300 m and 800 m.
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| 7.3 | KGK Drilling |
KGK or hydraulic-core lift drilling is a system designed to drillholes for geochemical sampling and geological mapping of cover sediments and basement rocks. The method was developed in the Soviet Union and is in general like RC drilling. Rocks are cut by hard alloy crown bits and the cut chips and drill mud are delivered through a dual rod by pump to the surface where the material is filtered out and collected. The method is used in the early phases of mineral exploration for a quick assessment of relatively large areas.
Between 2011 and 2014, Dostyk undertook an extensive KGK drill program for the purpose of better defining “blind” mineralized targets through the Quaternary cover. The depths of drillholes ranged from 22 m to 65 m in length and averaged around 35 m. Often the holes were terminated within 5 m of intersecting bedrock. In this period a total of 1,606 holes were drilled for a total of 52,580 m within the area regional Beskauga area. Some 2,496 samples were taken and analysed.
Between 2021 and 2023 Arras Minerals continued exploring Beskauga with KGK drilling by completing total of 610 drill holes for a total of 28,197.8 drilled meters.
A summary table (Table 9) of the metres drilled each year and the locations of the drillholes are shown above the map (Figure 19) below.
| 7.3.1 | Sampling and Results |
The purpose of KGK drilling was to define areas of mineralization below the overburden, and hence these holes were only sampled at or near the contact with the underlying bedrock. Details of sampling procedures for 2011-2014 phase of drilling are unclear; however, these drill results have not been used for mineral resource estimation and the lack of sampling information is not considered material.
Arras Minerals 2021-2022 KGK drilling campaigns included geological logging od KGK drill core samples - alteration, lithology, and mineralisation; measurements of magnetic susceptibility and collection of SWIR-NIR spectral readings over drill core samples. After logging detail photo is taken of each drill core sample. Samples are stored in labeled cotton bags and sent to ALS.
The copper and gold results show strong anomalism that is coincident with known mineralization and extends into area that remain poorly drilled or undrilled (Figure 20 and Figure 21).
| Table 9: | Summary table of the KGK drilling conducted by Dostyk between 2011 and 2022 |
| Year | Holes | Samples | Drilled (m) |
| 2011 | 801 | 1,207 | 28,281 |
| 2012 | 556 | 813 | 16,948 |
| 2014 | 249 | 476 | 7,351 |
| 2021 | 379 | 391 | 19,526 |
| 2022 | 231 | 231 | 8644.8 |
| Total | 2216 | 3118 | 80750.8 |
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| Figure 22: | Location of the shallow KGK holes drilled by Dostyk between 2007 and 2017 |
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| Figure 23: | Cu geochemical anomalies from KGK drilling and Soviet drilling |
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| Figure 24: | Au geochemical anomalies from KGK drilling |
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| Figure 25: | Location of the shallow KGK holes drilled by Arras Minerals 2021 and 2022 drilling campaigns. |
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| Figure 26: | Cu geochemical anomalies from 2021-2022 KGK drilling. |
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| Figure 27: | Au geochemical anomalies from 2021-2022 KGK drilling. |
| 7.4 | Hydrogeology Studies |
A hydrological study of Beskauga was completed for Dostyk by CenterGeolSyomka Ltd. in 2017 to determine the main filtration parameters of the water-bearing fractured zones of the Late Ordovician intrusions and upper-middle Ordovician volcanogenic-sedimentary rocks (Egorova et al., 2017). Work completed consisted of rotary open-hole drilling, downhole geophysical studies, trial, and test pumping-out, and analysis.
There are two water-bearing domains at Beskauga,
| · | shallow water-bearing aquifer in Quaternary alluvial deposits. |
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| · | moderately-water-bearing zones of fractured intrusive and sedimentary–volcanic rocks. |
The domains are separated by the thick clayey layer of upper Eocene Tavda Formation.
Based on the results of test filtration works, the main parameters of water-bearing complexes have been determined.
The water-bearing zone of fractured intrusive and sedimentary–volcanic rocks have the following parameters:
| · | average water-conductivity factor 1.41 m2/day. |
| · | average level-conductivity factor 608 m2/day. |
| · | average water yield factor 0.002; average rock filtration factor (at water bearing zone thickness 61.5 m within the modelled open pit) 0.023m/day. |
Two test holes in the alluvial aquifer yielded the following parameters:
| · | average water-conductivity factor 303 m2/day. |
| · | average level-conductivity factor 16 776 m2/day. |
| · | average water yield factor 0.013; average rock filtration factor (at water bearing horizon thickness 7.5 m within the modelled open pit) 40.4 m/day. |
A preliminary estimation of water inflows into the modelled open pit was completed based on these parameters, separately for alluvial and fractured rock aquifers. The geometry and open pit depth were derived from a development study by CenterGeolSyomka Ltd. completed in 2010. The predicted water-inflows to be recalculated if the open pit geometry changes. Estimation of water inflows was done using a balance method including estimation of underground water reserves in the volume subjected to dewatering while mining, natural renewable water resources and water inflow into the open pit during its dewatering. The natural resources were not included in the total water balance due to unavailability of annual winter-spring precipitation recordings of the nearest meteorological station.
The predicted water-inflows into the open pit from alluvial water-bearing horizon is 1 169 m3/day, while the water-inflows from the fractured rock zone is 108.5 m3/day. Water inflows due to underwater drainage would be regular. Besides continuous water inflows, there would be temporary water inflows into the open pit due to snow-melting and shower-resulted-floods.
It was concluded that the Beskauga site displays simple hydrogeological conditions. It was noted that prior dewatering of the water-bearing alluvial horizon by the perimeter of the open pit would be necessary while doing the waste-rock-stripping operations prior to pit development.
| 7.5 | Geotechnical Studies |
SRK Consulting (UK) Limited completed a geotechnical study for Dostyk in 2018 to assess an open pit development at Beskauga. The study assessed the geotechnical characteristics of the sedimentary, volcanogenic-sedimentary, and intrusive rocks that host the mineralization and the overlying low strength clays and sands which are up to 40 m thick.
Five orientated drillholes (1750 m of core) were located to intersect the proposed pit shell approximately one third to half-way up the proposed slope. Except for one drillhole, all drillholes were drilled into the pit slope to give the best possible chance of intersection with any structures dipping out of the of the slope and into the pit. In addition, to remove any potential bias due to the drillhole orientation when defining structural domains and influential small scale joint sets, the drilling programme was designed to intersect the preliminary pit walls at different azimuths. Rock mass quality and structural logging was undertaken by Dostyk geologists trained in geotechnical logging and QA/QC by SRK. In addition, samples of both the overlying weak sediments and underlying competent rock were collected for strength testing which was undertaken in Kazakhstan.
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Laboratory strength testing characterised the rock as strong and assessment of Rock Mass Rating (RMR89) values for the main lithologies indicated minimal variability between lithologies with mean RMR89 values ranging from 59 to 62. RMR89 reduces in zones of more intense alteration or weathering, but these zones were discrete and discontinuous; 78% of the drill core was slightly altered and 19% moderately altered, while 46% of core was fresh and 40% slightly weathered.
In addition to the faults identified by Soviet mapping, five joint sets were defined from the orientated core data that dip shallowly to moderately steeply. No specific structural domains were identified.
Finite element analysis was completed to define appropriate overall slope angles to achieve a Factor of Safety (FoS) more than 1.3 and a Probability of Failure (PoF) of less than 5%. Rock mass strength was determined from laboratory testing and geotechnical logging, groundwater surfaces interpreted from limited hydrogeological data, and a global Disturbance Factor of 0.3 was applied to the model to avoid masking of deeper-seated failure because of superficial failure within any modelled ‘disturbance’ skin close to the excavated slope. Several models were assessed to define estimated depressurization requirements and to achieve an acceptable combination of FoS and PoF criteria.
Modelling a 500 m deep pit with three, 150 m stacks with inter-ramp angle of 55°, it would be necessary to draw back groundwater ~50 m from the face of the slope. Modelling this scenario returned an SRF value of 1.9 and a PoF slightly more than 5%. Kinematic assessment of structural data and finite element modelling was undertaken to develop a slope design for pit optimisation. To contain 80 % of failed material with a 20m bench with a face angle of 70° required a 7 m berm. Inter-ramp angles within the weakly consolidated overburden should not exceed 30°.
SRK made several recommendations for additional work, including:
| · | Complete additional geotechnical drillholes at different azimuths to confirm than no major joint sets are present in the blind areas of the structural dataset from the study completed. |
| · | Develop a 3D large-scale structural model. Some regional and deposit scale faults had been identified and modelled but work to identify any additional faults not intersected during geotechnical drilling was considered crucial as these zones could be critical to the overall pit slope stability due to lower rock mass quality. Further investigations using geophysics data, drillhole data and field mapping was recommended. |
| · | Develop a 3D alteration model. Although the study indicated little variability and minimal impact from alteration on the host rocks, better understanding of the alteration domains especially in the region of the final pit slopes was recommended to provide better information on the effects of alteration on the rock mass forming interim and push-back slopes. |
| · | Develop a 3D groundwater model Although groundwater surfaces were considered in the slope stability analysis, the inputs were limited due to the lack of a 3D model with results incorporated as pore pressure grids within finite element slope stability analysis. This would allow more detailed analysis of the sensitivity of the slopes to changes in groundwater pore pressure. |
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| 7.6 | Regional Evaluation |
Arras Minerals is currently integrating an abundance of information and data, both public and private, on the greater regional area around Beskauga. From the public side, the information from work conducted during the Soviet era including regional geophysical surveys and 1:250,000 geological mapping is a valuable initial basis for prospect evaluation when used with targeted stratigraphy and structural analysis. In addition, Arras Minerals has employed SRTM and Landsat ASTER images to develop remote sensed hydrothermal alteration models of selected target areas. Arras Minerals also intends to fly a high resolution airborne magnetic survey to act as a base for regional licence targeting and exploration.
Arras Minerals, via its 100% owned subsidiary Ekidos LLP, have two additional large exploration licences, adjacent to Beskauga the Stepnoe (370.8km2) and Ekidos (252.1km2). In November 2003, an additional 2 concessions (totaling 23.4km2) were staked by the company and should be granted in Q1, 2024.
Arras also has an additional 12 exploration concessions totaling approximately 2545.4km2 covering a number of porphyry copper exploration targets in the Bozshakul-Chingiz Arc.
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| 8 | Sample Preparation, Analyses and Security |
| 8.1 | Sample Preparation and Security |
During the 2007–2017 exploration program, samples were prepared at the Dostyk facility in Ekibastuz. The half-core samples were dried in a drying chamber and weighed using laboratory scales with a 0.05 g division value with weights registered in a sample receipt log. Samples were then crushed using two-stage crushing, with the first stage involving jaw crushing (to -7 mm) and the second stage using a roller crusher and screen (to -2 mm).
Following crushing, samples were split with a Jones splitter, with the bulk of the sample stored as a crush reject and ~1 kg milled using cup vibration mills to 200 mesh fineness (-90 μm). The samples were then split again, with one portion sent to the Stewart Assay and Environmental Laboratories LLC (SAEL) in Kara-Balta, Kyrgyzstan. Upon arrival at SAEL, the samples were coded and registered in the sample coding log and then re-registered under their new codes in the sample passing log. Following registration of samples and inclusion into the operator database, the samples were sent for analysis for gold by fire assay and copper, molybdenum, and silver by 0.2 g aqua regia digestion, followed by inductively coupled plasma optical emission spectrometry (ICP-OES) analysis.
A second portion of selected samples was sent to Jetysugeomining LLP laboratory for atomic-absorption analysis, and the remaining sample was stored as a pulp duplicate. All equipment used for sample crushing and milling (including tables) was cleaned and blown with compressed air after each sample. After each batch of samples, a clean blank material was passed though the equipment (glass for crushers, quartz sand for mills). The sample preparation area was subject to compulsory wet cleaning once a day.
The split core and crushed duplicate sample were stored in the specifically equipped sample storage facility consisting of a hangar with shelves. This facility can be locked and has on-site security.
During 2021 Arras exploration program, cut drill-core samples were placed in fabric bags with a unique sample ID tag. The bags were sealed with ties and taken weekly to the ALS laboratory in Karaganda where sample preparation was undertaken. Upon delivery, samples were logged into the laboratory’s tracking system. Samples were weighed and dried, crushed to 70% passing 2 mm, and pulverized to 85% passing -75 µm.
Gold fire assay and atomic absorption spectroscopy were carried out at the Karaganda laboratory, while prepared samples were shipped to ALS laboratory in Ireland for ICP-MS analyses.
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| Figure 28: | Dostyk LLP storage facility with core and crushed duplicate samples. |
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| 8.2 | Analytical Method |
Between 2007 and 2021, various laboratories were utilized for analytical requirements including the following:
| · | Quartz Chemical/Analytical Laboratory, Semipalatinsk, Kazakhstan (2007–2008) |
| · | Jetysugeomining Laboratory LLP, Almaty, Kazakhstan (2009–2011) |
| · | HelpGeo Laboratory, Almaty, Kazakhstan (2012–2014) |
| · | Stewart Assay and Environmental Laboratories LLC (SAEL), Kara-Balta, Kyrgyzstan (2007–2017) |
| · | ALS Kaz Geochemistry LLP, Karaganda, Kazakhstan (2021) |
SAEL was utilised by Dostyk as the primary laboratory from the commencement of the 2007 exploration program until 2017. It should be noted that all results used for the Mineral Resource estimate were provided by SAEL up to and including 2017, while results from 2021 were provided by ALS laboratory in Kazakhstan.
Samples were analysed at SAEL for gold using FA on a 30g bead with an AAS finish. A further 33 elements were determined by aqua regia digest followed by ICP-OES analysis of elemental concentrations.
Umpire assays at Genalysis Laboratory Services Pty Ltd (Perth, Australia) were performed using FA on a 30g bead with an AAS finish. A further 33 elements were determined by an aqua regia digest followed by ICP-OES analysis of elemental concentrations.
For the samples generated by the Arras drilling campaigns since 2021. After sample preparation, the prepared pulps were shipped to ALS Ireland for analysis. Samples were analyzed using the following techniques.
| · | Gold was assayed using ALS code Au-AA23, with overlimit values re-assayed using method Au- GRA22: |
| · | Gold samples were assayed by fire assay with an atomic absorption finish (detection range of 0.005–10 g/t Au). |
| · | Gold samples returning assay values >10 g/t Au were re-assayed by fire assay with gravimetric finish (detection range of 0.05–10,000 g/t Au). |
Multi-element analysis (including base metals) consisted of:
| · | Four acid digest with an inductively coupled plasma atomic emission spectrometry (ICP-AES) finish (detection range of 1–10,000 ppm Cu, and 2–10,000 ppm for lead and zinc). |
| · | Copper samples returning values >10,000 ppm were re-assayed with a four-acid digest with and ICP-AES finish (detection range of 0.001–50% Cu). |
The Qualified Person notes that for SAEL analyses only copper, gold, molybdenum, and silver data has been provided by Copperbelt.
| 8.3 | Quality Assurance and Quality Control |
The quality of any exploration data depends on the sample selection, sample preparation and analytical techniques adopted, as well as implementation of a quality assurance program with collection of quality control data. QA/QC programs should be implemented at all exploration stages, including drilling, collection of all types of samples, sample preparation and analysis, determination of sample density, collection of geotechnical data, data digitization, data storage and other associated aspects.
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QA/QC may be implemented through several steps, which may include but are not limited to adding blank samples, CRMs (or “standards”) with predetermined grades, and various duplicate samples (field duplicates, crush duplicates, pulp duplicates).
For the Beskauga Project, the quality control samples were submitted during the drilling programs are outlined below. [The QP has not been provided with a detailed breakdown but understands that quality control sample submission varied from program to program. The description in this section is based on the information and data provided by Copperbelt without reference to specific programs].
Pulverized duplicates of 0.0074 mm in size, produced at the second stage of the sample preparation process.
| · | Blank samples |
| · | CRM samples. |
In addition to these QA/QC checks, the SAEL Laboratory conducted internal QA/QC checks and Dostyk completed second laboratory checks at Genalysis Laboratories. In 2021 ALS laboratory conducted internal QA/QC checks.
| 8.3.1 | Internal Laboratory QA/QC |
Internal QA/QC checks carried out by SAEL LLP 2007-2017
All the measuring equipment was regularly tested. Daily, before work, all scales were checked with the special set of weights, and the temperature of the oven was measured by thermocouple unit.
All standard materials were acquired from reliable suppliers that are accredited in accordance with ISO Guide 34:2000. The laboratory used a broad range of standards prepared by well-known brands, such as CANMET, CDN Resource Laboratories, Geostats, ORE, Rocklabs, and others. One standard, one blank and five duplicates were inserted every 50 samples.
SAEL performed several routine quality control checks during the analytical process to monitor contamination, accuracy, and precision. Contamination was monitored by the insertion of a blank and standard at standard intervals. Accuracy was monitored using appropriate CRMs and precision by the duplication of samples.
SAEL operated a three-tier quality control system. Instrument operators stored data in job files and then perused the data to ensure analytical sequences were correct, standard values were correct and other controls also confirmed that the analytical run had not been beset with problems. These staff members-initiated checking of suspicious results. The second phase of quality control checking was performed either by quality control staff in each department or by the head of the department. Lastly, and before any batch of results were reported, senior staff in charge of reporting of results also perused the data. These staff members were not directly associated with the laboratory sections generating the results; however, they may also initiate queries in relation to any work which had been carried out on a sample and they may return work for re-analysis if they were dissatisfied with analytical quality.
All laboratory quality control data was reported within the structure of the final reports.
Quality control limits for the CRM, blank and duplicate samples were determined according to the analytical technique employed and were automatically flagged by the laboratory information management system (LIMS) as being erroneous if they fell outside these limits by the laboratory information management system. Prior to their release, laboratory personnel validated all results and flagged errors were assessed and, if possible, the sample batch was re assayed, or the errors reported. All data generated from quality control samples were captured for assessment.
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Quality control reports were generated and dispatched with the sample result file for each laboratory job.
Montgomery (2015) described the results of the SAEL final analysis report 14K014-14K016 and found no significant issues relating to the Beskauga drill database resulting from exploration between 2007 and 2017. The SAEL Final Analysis Report 14K014-14K016 contained records for 600 samples analysed and was accompanied by 164 repeat analyses for gold (>20%). The spreadsheet also contained 30 records for blanks and 30 records for CRM analysis (5%). All blank analyses were below detection limits. Two standards were included in the CRM results, ST 4/12 (19 results) and ST 7/12 (11 results), and 164 repeat (duplicate) analyses were carried out.
Internal QAQC checks carried out by ALS in 2021-2023.
ALS Geochemistry - Loughrea, Ireland is accredited by The Irish National Accreditation Board (INAB) which is the Irish body for the accreditation of organisations including laboratories.
Accreditation to this ISO standard involves detailed, on-site audits by skilled specialist assessors to evaluate ALS quality management system and verify the technical competence of their methods and personnel. This technical verification includes the requirement for successful participation in inter-laboratory proficiency testing programs and full method validation.
The quality assurance program is an integral part of all day-to-day activities at ALS Geochemistry Loughrea and involves all levels of staff. Responsibilities are formally assigned for all aspects of the quality assurance program.
The ALS sample tracking system ensures complete chain of custody records at every stage in the sample preparation and analytical process.
| · | Complete traceability of the sample through the entire laboratory process. |
| · | Sample integrity is guaranteed by scanning the sample label at every stage. |
Record of every sample weight submitted to the laboratory from the field.
The weighing room is segregated for the weighing of low- and high-grade samples and follow specialised standard operating procedures in sample handling, equipment used and cleaning.
The laboratory operates a policy of calibration to ensure that, where the concept is applicable, all principal and subsidiary measurements are traceable to SI units as realised by appropriate national or international standards. Laboratory staff has appropriate training to monitor calibration of equipment.
All items of equipment are subject to regular calibration verification which is recorded in an appropriate section of the Equipment Log. Equipment subject to calibration or verification at specific time intervals is clearly labelled to show when re-calibration or re-verification is due. Staff may not use any equipment, which is overdue for calibration or verification. Emphasis is on setting intervals conservatively so that problems will be detected before the quality of service or product is affected.
An electronic balance is used to weigh samples which are calibrated yearly to UKAS standards by an external accredited company. Calibration is checked daily by the operator using check weights. Weights are recorded on quality record sheet QR_005. These daily check weights are then checked yearly against reference weights which are calibrated externally by an external accredited company and are traceable to National Standards.
If any deviations in calibration of equipment is suspected, it will be checked using externally calibrated reference equipment and action taken as required.
Quality control samples are an important part of the ALS quality assurance program. They monitor the accuracy and precision of an analytical method and are used to evaluate the quality of the “unknown” sample data. GEMS (Laboratory Information System) inserts quality control samples (reference materials, method blanks and duplicates) on each analytical run, based on the rack sizes associated with the method.
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Each batch of samples contains a minimum of the following:
1 method blank. It is placed in the first position of the batch and does not contain a sample and goes through the entire analytical process from weighing to instrument analysis. This blank contains the same reagents as the regular samples and is used to monitor contamination throughout the analytical process.
1 reference material. Reference materials are homogenous samples containing known concentrations of analytes. They go through the exact same process as the regular samples and therefore can be used to monitor the accuracy and precision of the method, as well as sample order, contamination, and digestion quality of the batch. The first reference material is inserted in the second position of the batch and a second reference material is inserted into a random position chosen by GEMS. Results for the reference materials should be within the criteria set for the method.
1 set of duplicates. The duplicate sample is the last sample in the batch and is a separate weighing from the same pulp as the original sample. Duplicates are used to evaluate the precision of the analytical method. For gold analysis, duplicates show the degree of homogeneity of the sample.
Laboratory staff analyse quality control samples at least at the frequency specified above. If necessary, they may include additional quality control samples above the minimum specifications.
All data gathered for quality control samples – blanks, duplicates and reference materials are automatically captured, sorted, and retained in the QC Database.
QC program may include the following clients QC samples which are not monitored during approval of data:
| - | Barren Material to be crushed or pulverized or both. May also be a pulp sample. |
| - | Reference Materials could be purchased from the same suppliers used by ALS or prepared from the client’s property (i.e. matrix matched to samples). |
| - | Field Duplicates collected out in the field. |
| - | Preparation Duplicates taken after either crushing or pulverizing as per client’s instructions. |
Quality Control Limits for reference materials and duplicate analyses are established according to the precision and accuracy requirements of the method.
Data outside control limits are identified and investigated and require corrective actions to be taken. Quality control data is scrutinised at several levels. Each analyst is responsible for ensuring the data submitted is within control specifications. In addition, there are several other checks.
If any data for reference materials, duplicates, or blanks falls beyond the control limits established, it is automatically flagged red by the computer system for serious failures, and yellow for borderline results. The Department Manager conducting the final review of the Certificate is thus made aware that a problem may exist with the data set.
After the import, results become available for approval. The approval process involves three stages.
| - | During initial stage the data is reviewed by one of the technicians from the department who will check the results and make sure that all QC samples such as duplicates, and blanks reported are within method specifications. Any failures and deviations are automatically flagged by GEMS. The samples can be sent for re-weight, where new analysis would be initiated on a new sample split. If all results are within spec, the technician will approve the run and this stage is called Tech Approval. |
| - | After tech approval the run is reviewed by one of our more qualified members of staff in the department such as department supervisor. Once they are satisfied with the quality of results, they carry out Final Approval. After this the analysis of the samples involved by the method code in question is treated as finished. |
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| - | Final approval is carried out by Data approval department, who approve results for entire completed workorder, frequently having results coming from more than one analysis code. They review the data, checking not only QC performance for individual methods but also reviewing entire set of results and looking at correlations between results from different methods. After their approval, entire workorder is finalized and results are automatically sent to the customer. |
At any of the three approval stages any failures and deviations from the method specifications are flagged. If there is an indication that the failures are due to problems that occurred at any stage of the procedure, the samples can be sent for re-weight, where new analysis would be initiated on a new sample split.
Results are provided to clients by workorder batch. Reporting formats are specified to ensure results are reported accurately, clearly, and unambiguously. To meet client needs, results can be reported via several avenues and in many customized formats like Webtrive™, electronic format sending Email with excel/.csv results or sending traditional hard copy.
Evaluation of Trends - Control charts for frequently used method codes are generated and evaluated by laboratory staff on a regular basis. The control charts are evaluated to ensure internal specifications for precision and accuracy are met. The data is also reviewed for any long-term trends and drifts.
Precision Specifications and Definitions are discussed on the accompanying fact sheet (ALS QC Limits for Reference Materials & Duplicates) which we regularly share with clients.
External Proficiency Tests - Proficiency testing is designed to provide an independent assessment of laboratory performance by an outside agency. Test materials are regularly distributed to the participants and results are processed by a central agency. The results are usually converted to a Z-Score to rate the laboratory’s result against the consensus value from all participating labs.
| 8.3.2 | Certified Reference Materials |
Several CRMs were submitted for analysis together with samples, namely OREAS 209, OREAS 501b, OREAS 502b, OREAS 503b, and OREAS 54Pa. The CRM certificates can be downloaded from the company’s website (https://www.ore.com.au/).
The reference grades and standard deviation (SD) for the CRMs are shown in Table 10. A total of 187 gold CRMs and 124 copper CRMs were analysed, representing 0.52% and 0.34% of the 36,271 samples in the database, below the recommended amount of 5% of CRMs.
| Table 10: | CRM grades |
| Exploration year | CRM | Company | Element/Test type | Grade | SD | No. of analyses |
| 2007-2017 | 209 | OREAS | Au, Pb FA (ppm) | 1.58 | 0.044 | 52 |
| Cu, aqua regia (ppm) | 76 | 3.7 | 0 | |||
| 501b | OREAS | Au, Pb FA (ppm) | 0.248 | 0.01 | 45 | |
| Cu, four-acid digestion (wt. %) | 0.26 | 0.011 | 40 | |||
| 502b | OREAS | Au, Pb FA (ppm) | 0.494 | 0.015 | 11 | |
| Cu, four-acid digestion (wt. %) | 0.773 | 0.02 | 11 | |||
| 503b | OREAS | Au, Pb FA (ppm) | 0.695 | 0.021 | 65 | |
| Cu, four-acid digestion (wt. %) | 0.531 | 0.023 | 63 | |||
| 54Pa | OREAS | Au, Pb FA (ppm) | 2.9 | 0.11 | 14 | |
| Cu, four-acid digestion (wt. %) | 1.55 | 0.02 | 10 |
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| Exploration year | CRM | Company | Element/Test type | Grade | SD | No. of analyses |
| 2021-Present | 152a | OREAS | Au, Pb FA (ppb) | 116 | 5 | 181 |
| Cu, four-acid digestion (wt. %) | 0.385 | 0.009 | 181 | |||
| 503d | OREAS | Au, Pb FA (ppm) | 0.666 | 0.015 | 68 | |
| Cu, four-acid digestion (wt.%) | 0.524 | 0.01 | 68 | |||
| 505 | OREAS | Au, Pb FA (ppm) | 0.555 | 0.014 | 162 | |
| Cu, four-acid digestion (wt. %) | 0.321 | 0.008 | 162 | |||
| 506 | OREAS | Au, Pb FA (ppm) | 0.364 | 0.01 | 60 | |
| Cu, four-acid digestion (wt. %) | 0.444 | 0.01 | 60 | |||
| 606 | OREAS | Au, Pb FA (ppm) | 0.34 | 0.01 | 38 | |
| Cu, four-acid digestion ppm) | 268 | 11 | 38 |
When using control charts, upper and lower warning limits are set to identify a range of values where the process can be considered “in control”. Most of the data is expected to be plotted within this range. Two SDs are generally used to define this range. An action limit generally represents an excess of deviation within a process, which exceeds three times the SD. A point outside of the mean ±3 SD range represents an out-of-control situation, and it is recommended that action be taken. The figures below show Shewhart Control Charts for the analyzed CRMs. Figure 24 provides a legend for the control charts where the warning limit 1 boundary represents one SD; the warning limit 2 boundary represents two SDs and the action limit boundary represents three SDs.
OREAS 209
CRM OREAS 209 was prepared from a blend of gold-bearing Magdala ore from the Stawell Gold Mine, west-central Victoria, Australia and barren tholeiitic basalt from Epping, Victoria, Australia. The Magdala lode is intimately associated with an intensely deformed package of volcanogenic sedimentary rocks. The ore samples were taken from basalt contact lodes and are strongly chlorite-altered (± silica, stilpnomelane) carbonaceous mudstones located directly on the western margin of the Magdala basalt dome. Mineralization in the ore consists of a quartz-sericite-carbonate schist assemblage containing the sulphides arsenopyrite, pyrrhotite and pyrite. OREAS 209 is one of a suite of 11 CRMs ranging in gold content from 0.340 ppm to 9.25 ppm.
A total of 52 samples were analyzed for gold and most samples were within three SDs and close to the actual grades (Figure 25). There were five samples that were outside of three SDs with one sample showing a significantly lower value than the reference grades (0.293 ppm Au instead of expected 1.58 ppm Au).
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Figure 30. OREAS 209 Shewhart Control Chart for gold
OREAS 501b
OREAS 501b was prepared from porphyry copper-gold ore and waste samples from a mine located in central western New South Wales, Australia with the addition of a minor quantity of copper-molybdenum concentrate.
A total of 45 samples were analyzed for gold and the majority of samples were within three SDs and close to the actual grades (Figure 26). There were five samples that were outside of three SDs with one sample showing a significantly lower value than the reference grades (0.026 ppm Au instead of expected 0.248 ppm Au).
A total of 40 samples were analyzed for copper and majority of samples were within three SDs and close to the actual grades (Figure 27). There was one sample that was outside of three SDs and this was possibly due to the erroneous database entry.
Figure 31. OREAS 501b Shewhart Control Chart for gold
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Figure 32. OREAS 501b Shewhart Control Chart for copper
OREAS 502b
OREAS 502b was prepared from porphyry copper-gold ore and waste samples from a mine deposit located in central western New South Wales, Australia with the addition of a minor quantity of copper-molybdenum concentrate.
Figure 33. OREAS 502b Shewhart Control Chart for gold
OREAS 503b
OREAS 503b was prepared from porphyry copper-gold ore and waste samples from a mine located in central western New South Wales, Australia with the addition of a minor quantity of copper-molybdenum concentrate.
A total of 65 samples were analyzed for gold (Figure 29) and copper (Figure 30) and the majority of samples were within three SDs and close to the actual grades. There were two samples that were outside of three SDs for gold, and one sample that was outside of three SDs for copper.
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Figure 34. OREAS 503b Shewhart Control Chart for gold
Figure 35. OREAS 503b Shewhart Control Chart for copper
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OREAS 54Pa
Reference material OREAS 54Pa is a porphyry copper-gold standard prepared from ore and waste rock samples from a porphyry copper-gold deposit in central western New South Wales, Australia. Copper-gold mineralization occurs as stockwork quartz veins and disseminations associated with potassic alteration. This alteration is intimately associated spatially and temporally with the small finger-like quartz monzonite porphyries that intrude the Goonumbla Volcanics.
A total of 14 samples were analyzed for gold and 10 samples for copper, and majority of the samples were within three SDs and close to the actual grades for both elements (Figure 31, Figure 32). There was one sample for both gold and copper that was outside of three SDs.
Figure 36. OREAS 54Pa Shewhart Control Chart for gold
Figure 37. OREAS 54Pa Shewhart Control Chart for copper
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OREAS152a
OREAS 152a is one of three porphyry Cu-Au-Mo-S certified reference materials prepared from copper ore from the Waisoi district, Viti Levu, Fiji. The two deposits in the area are the Waisoi East deposit (quartz porphyry) and the Waisoi West deposit (diorite porphyry). Copper mineralisation in the region is accompanied by stockwork quartz veinlets and is characterised by bornite-chalcopyrite-pyrite assemblages.
Au - 3 samples failed with reporting higher than 3 standard deviations than the mean average.
Cu – 18 samples fell outside the 3SD limit. This standard needs to monitored as the variation is more than we would expect from a CRM.
Figure 38. OREAS 152a Shewhart Control Chart for gold
Figure 39. OREAS 152a Shewhart Control Chart for copper
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OREAS 503d
OREAS 503d was prepared from a blend of porphyry copper-gold ore, barren granodiorite and a minor quantity of Cu-Mo concentrate sourced from the Ridgeway underground mine located in the Cadia Valley Operations situated in central western New South Wales, Australia.
A total of 68 samples were analyzed for gold and copper, and most of the samples were within three SDs with only 3 samples for Au and Cu falling outside these limits.
Figure 40. OREAS 503d Shewhart Control Chart for gold
Figure 41. OREAS 503d Shewhart Control Chart for copper
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OREAS 505
OREAS 505 was prepared from a blend of porphyry copper-gold ores, barren granodiorite, and a minor quantity of Mo concentrate. The ores were sourced from both the Northparkes Mine and Ridgeway Mine. Both mines are in the Central West of New South Wales, Australia. The barren granodiorite was sourced from the mafic, S-Type, Late Devonian Bulla Granodiorite complex located in northern Melbourne, Australia.
A total of 162 samples analyzed for both gold and copper where only 6 samples for gold and 2 samples for copper was outside 3SD range.
Figure 42. OREAS 505 Shewhart Control Chart for gold
Figure 43. OREAS 505 Shewhart Control Chart for copper
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OREAS 506
OREAS 506 was prepared from a blend of porphyry copper-gold ore, barren granodiorite, and a minor quantity of Cu-Mo concentrate. The ore was sourced from the Northparkes Mine located in the Central West of New South Wales, Australia. The barren granodiorite was sourced from the mafic, S-Type, Late Devonian Bulla Granodiorite complex located in northern Melbourne, Australia.
A total of 59 samples analyzed for copper and gold. Only 4 gold and 2 copper samples fell outside the 3SD range (Figure 39, Figure 40).
Figure 44. OREAS 506 Shewhart Control Chart for gold
Figure 45. OREAS 506 Shewhart Control Chart for copper
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OREAS 606
This CRM was prepared from a blend of silver-copper-gold bearing ores from Evolution Mining’s Mount Carlton Operation in Queensland, Australia and argillic rhyodacite waste rock sourced from a quarry east of Melbourne, Australia. The mineralization assemblage at Mount Carlton consists of pyrite, enargite/tennantite, tetrahedrite, digenite, covellite, sphalerite, galena, alunite, dickite, kaolinite and vuggy silica, hosted in advanced argillic altered rhyodacite containing Sulphur-salts.
A total of 38 samples was analyzed for copper and gold, and only 2 gold samples fell outside the 3SD range.
Figure 46. OREAS 606 Shewhart Control Chart for gold
Figure 47. OREAS 606 Shewhart Control Chart for copper
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| 8.3.3 | Blanks |
In campaigns before 2021 a total of 318 blank samples (0.9% of all samples) were submitted for analysis. No information was provided by Copperbelt regarding the acquisition and preparation of the blank samples. Of all the blank material sampled, the majority had below detection or very low values reported; thus, the blank values indicate that there is very little contamination overall. However, it should be noted that only a small proportion of the whole database comprise blanks, and usually a greater number (~4% of all samples) would be expected.
Table 13.Blank assay results for period before 2021
| Element | Minimum | Maximum | Mean | Median | No. of results |
| Au (ppm) | 0.025 | 0.18 | 0.04 | 0.03 | 313 |
| Cu (ppm) | 3 | 2,893 | 273 | 175 | 240 |
A total of 529 blank samples (2.57 % with insertion rate 1/40 samples) were submitted for analysis by Arras Minerals since 2021. The blank used is a quartz sand supplied locally by CJSC Quarry "Gora Khrustalnaya".
For all the blank material analyzed for gold, only one sample exceed the 3 x lower limit of detection (LLD) and this sample does not appear to indicate any carryover contamination.
For Gold, 9 samples returned values 5 time the lower detection limit (0.025 ppm Au), and these are either due to mis-labeling of standards (certified reference material being labelled as blank sampling in the database), or sample translations (data form adjacent samples being allocated to the blank sample ID).
For copper, only 2 samples returned values >50ppm Cu, again, suggesting that these samples are certified reference material rather than blank samples.
Table 14. Blank assay results 2021-23
| Element | Minimum | Maximum | Mean | No. of results |
| Au (ppm) | 0.005 | 0.45 | 0.010 | 528 |
| Cu (ppm) | 4 | 4510 | 36.33 | 528 |
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Figure 48. 2021 Blanks - control chart for gold
Figure 49. 2021 Blanks - control chart for copper
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| 8.3.4 | Duplicates |
A total of 97 pulp duplicates were submitted in 2013 to estimate the laboratory assay precision and to quantify the related risk for the MRE. No information for duplicate samples submitted in other years has been provided by Copperbelt. The duplicates were analyzed for gold, silver, and copper.
The laboratory results for all analyzed elements show relatively good repeatability with the statistics and plots showing similar distributions. Tests for all laboratory results show a precision of ±4.05% for gold (Figure 45), and ±2.91% for copper (Figure 46), which are within the acceptable limits and indicate a low risk related to assay precision. However, the available dataset represents just one year and a small proportion of the complete database (only 0.27% of all assays) so it is not possible to draw general conclusions on the quality of the entire assay dataset.
There is no information on core duplicates for previous drilling campaigns, and it has been assumed that no core duplicate samples were collected.
Figure 50. Linear regression of gold for duplicates from 2013
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Figure 51. Linear regression of copper for duplicates from 2013
From 2021 to present, Arras Minerals campaign in 2021 a total of 509 field duplicates – quarter of halved core, and coarse reject duplicates (2.5% % with insertion rate 1/40 samples) were analyzed. Results of copper and gold showed good repeatability with the plots showing similar distribution.
Laboratory results for the duplicates returned a coefficient of correlation of 96.5%. There is minor scatter in copper values, generally at the lower analytical values, this is probably reflecting the distribution of copper and gold in veinlets and along fractures and can be highly variable in the drill core.
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Figure 53. Linear regression of gold for duplicates from 2021-2023 Arras drilling campaigns
Figure 54. Linear regression of copper for duplicates from 2021-2023.
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| 8.3.5 | Laboratory Umpire Analysis |
CRMs and blanks can only partially cover the question related to potential sample bias. Therefore, 966 sample pulps (2.7% of all assays) were selected for external control check assays and were sent to a certified Genalysis laboratory in Australia.
Table 12 shows duplicate correlation coefficient and precision results and Figure 33 to Figure 35 show linear regression graphs for umpire samples. Both precision results and graphs show relatively good repeatability and similar distribution for gold and copper; however, there is a slight positive bias towards the original results, especially for the copper grades.
| Table 12: | Correlation coefficient and precision values for pulp duplicates |
| Element | No. of tests | Minimum grade | Maximum grade | Correlation coefficient | Precision |
| Au (ppm) | 966 | 0.061 | 3.88 | 0.97 | ±13.17 |
| Cu | 968 | 0.014 | 2.21 | 0.99 | ±12.35 |
| Figure 33: | Linear regression of gold for duplicates |
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| Figure 34: | Linear regression of copper for duplicates |
| 8.4 | Author’s Opinion on Sample Preparation, Security and Analytical Procedures |
It is the Qualified Person’s opinion that the reported sample preparation and analyses were completed in line with industry standards and are adequate for the purposes of this Mineral Resource Estimate and S-K 1300 Technical Report Summary. Although, in the historic drilling, the number of CRM, duplicate and blank samples are lower than what is considered appropriate, based on the assessment of the quality control data, the Qualified Person considers that the quality of assays is adequate and suitable to be used for the Mineral Resource Estimate.
The Qualified Person however does note that documentation of historical quality control data is incomplete and has identified quality control as a risk to the Mineral Resource Estimate and has considered this in classification. Additional check sampling and analysis on existing drill core and pulps is recommended in the next phase of work to bring the type and proportion of data to accepted industry standards. The author is happy that Arras Minerals have increased the number of CRM (5%), Blanks (2.6%) and Duplicate (2.5%) samples and is happy with the quality of the data.
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| 9 | Data Verification |
| 9.1 | Internal Data verification |
Arras Minerals uses validated excel data capture spreadsheets to prevent incorrect data from entering the database, including:
• Intervals exceeding the total hole length.
• Gaps in lithology data.
• Negative length intervals.
• Positive down-hole dip measurements.
• Out-of-sequence and overlapping intervals.
• Sample intervals overlapping areas of no recovery (e.g., historical workings).
• No interval defined within analyzed sequences (not sampled or missing samples/results).
• Inconsistent drill hole labelling between tables.
• Invalid data formats, logging codes and out-of-range values.
• Unusual assay results, including excessively long assay intervals.
• Recovery and RQD values exceeding interval length.
After the data were imported into Mapinfo, Micromine and Leapfrog software systems, the data were reviewed in two dimensions and three dimensions to confirm data quality and to ensure that there were no unreasonable downhole deviations or gaps in the logging and assay data fields. There are also multiple drill hole data validation processes completed in Micromine that are undertaken to ensure data quality and integrity.
| 9.2 | Site Visit |
A site visit was carried out by Tim Barry, Qualified Person, between 6 November and 24 November 2023, during which drill rigs and core storage sites were visited, and logging and sample preparation facilities and procedures were inspected. All procedures observed were considered appropriate.
During the site visit, Tim Barry observed core logging and sampling procedures, reviewed sampling preparation facilities and procedures, and inspected documentation related to drilling, sampling, and assaying. No samples were collected for additional laboratory verification; however, mineralized intervals were inspected and compared with assay values for confirmation of mineralization.
| 9.3 | Data Verification by Qualified Person |
The Authors have reviewed all the information provided by the Company and all publicly available historical reports.
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Original assay certificates were made available for drilling completed between 2007 and 2023. The Author compared randomly chosen sample intervals within the drill database provided by the Company, to the original assay certificates. Several instances were noted where provisional values were not updated with final assay values. The database was updated using the final certified values. No other discrepancies were identified.
Drill hole logs from all years of drilling were reviewed for consistency and anomalies. Intervals were inspected for gaps in data or overlaps. No discrepancies were identified.
Validation completed as part of the Mineral Resource estimation is described in Section 14.
| 9.4 | Qualified Person’s Opinion on Data Adequacy |
It is the Qualified Persons’ opinion that the data available are a reasonable and accurate representation of the Beskauga Project and are of sufficient quality to provide the basis for the conclusions and recommendations reached in this Technical Report.
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| 10 | Mineral Processing and Metallurgical Testing |
Six metallurgical testing programs have been conducted on the mineralisation at Beskauga between 2009 and 2017. The results obtained during each phase of testing indicated specific areas that needed further evaluation in subsequent phases. Larger scale (pilot plant) and downstream testing programs were also carried out as part of later phases of work, as is typical for large-scale copper porphyry projects.
The following is a summary of the chronology of the testing programs completed to date:
| · | 2009: Kazmekhanbor, Almaty, Kazakhstan – initial evaluation of flotation testing on a master composite |
| · | 2010: ALS Ammtec, Perth, Australia – mineralogical evaluation and flotation response on average grade metallurgical composite |
| · | 2011: ALS Ammtec, Perth, Australia – flotation response on high grade metallurgical composite |
| · | 2015: Wardell Armstrong International (WAI), Cornwall, United Kingdom – comminution and flotation optimization testing on various metallurgical composites |
| · | 2017: WAI, Cornwall, United Kingdom – gold optimization testing on bulk products. |
| · | 2017: HRL Testing, Brisbane, Australia – Toowong Process amenability testing. |
| 10.1 | Sample Selection |
| 10.1.1 | 2009 Kazmekhanbor Metallurgical Composite Sample |
A single master composite representing the resource grade was obtained from holes BG1 and BG3. Half HQ core samples were shipped to the Kazmekhanbor laboratory in Almaty. Twenty-five core samples were used to create 104.3 kg sample averaging 0.875 g/t Au and 0.424% Cu, 5.1 g/t Ag, and 0.05% As.
| 10.1.2 | 2010 ALS Ammtec Metallurgical Composite Sample |
Two metallurgical composite samples were prepared for the 2010 metallurgical program conducted by ALS Ammtec, from holes drilled during the 2009 and 2010 drilling campaigns. The composites were as follows:
| · | A “resource grade” composite of 106.7 kg, created from 11 samples from holes Bg30, Bg31, Bg32, and Bg33, averaging 0.45 g/t Au and 0.2% Cu, 5.135 g/t Ag, and 0.065% As |
· A 43.9 kg “high-grade” composite created from 11 samples from holes Bg23, Bg25, Bg26, and Bg27 averaging 0.67 g/t Au and 0.68% Cu, <2 g/t Ag, and 0.017% As.
Half HQ core was shipped to the Ammtec laboratory in Perth where the composite was prepared.
| 10.1.3 | 2015 WAI Metallurgical Composite Sample Grade |
Three composite metallurgical samples were prepared by WAI in 2015 representing a composite sample for a potential “starter pit”, a composite sample representing the “average grade” of the resource, and a composite representing “high-grade” within the resource. The sample intervals from various drillholes are as follows:
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| · | Starter Pit Composite: 11 samples from 11 holes totaling 217.3 kg (Bg63, Bg64, Bg65, Bg66, Bg67, Bg68, Bg71, Bg74, Bg77, Bg78 and Bg79) averaging 0.56 g/t Au and 0.38% Cu, 1.46 g/t Ag, and 0.06% As |
| · | Average Grade Composite: 30 samples from four holes totaling 233.9 kg (Bg68, Bg74, Bg77 and Bg79) averaging 0.43 g/t Au and 0.29% Cu, 1.21 g/t Ag, and 0.044% As |
| · | High Grade Composite: 11 samples from 11 holes totaling 209.9 kg (Bg63, Bg64, Bg65, Bg66, Bg67, Bg68, Bg71, Bg74, Bg77, Bg78 and Bg79) averaging 0.91 g/t Au and 0.51% Cu, 2.13 g/t Ag, and 0.078% As. |
Half HQ core was shipped to the WAI laboratory in Cornwall where composites were prepared. The 2010 and 2015 composite samples were also used for later test work.
| 10.2 | Metallurgical Test Results |
| 10.1.1 | Mineralogy |
An initial mineralogical assessment undertaken by Kazmekhanbor in 2010 using optical microscopy on the composite samples showed mineralogy typical of copper-gold porphyry. Mineralisation is comprised of pyrite, chalcopyrite, tennantite, magnetite, and hematite (with minor molybdenite, bornite, sphalerite, galena, pyrrhotite, native gold and silver telluride), and was seen to vary between disseminated and vein style. Mineralisation was hosted in a strongly potassic-altered diorite that was often overprinted with later silicification, sericitization, and argillic alteration.
QEMSCAN® test work was carried out on the “Starter Pit” composite by as part of the 2015 WAI metallurgical test work program. The sample was subdivided into four size fractions (106 μm, -106/+53 μm, -53/+20 μm, and -20/+2 μm). The aim was to determine mineralogy, mineral association and liberation characteristics, mineral deportment and theoretical grade recovery curve information.
The test work showed that sulphide mineralisation is comprised of predominantly pyrite and chalcopyrite, with lesser copper arsenides, bornite, chalcocite (in slightly varying proportions depending on grain size – Figure 51), with gangue mineralogy comprised of predominantly quartz and muscovite, with minor K-feldspar, plagioclase feldspar, ankerite, iron/manganese carbonate, chlorite and biotite with trace barite, ilmenite, rutile, apatite, and zircon. “Cu arsenides” is assumed to include tennantite and possibly enargite.
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Figure 55. QEMSCAN® modal mineralogy for the sulphide phases
| 10.1.2 | Bench-Scale Test work |
The laboratory testing program completed at Ammtec in 2010 provided encouraging copper recovery results (78.44 %) but the concentrate grades of 18.48% Cu were lower than desired. Initial open cycle cleaner tests also identified high arsenic levels in the final copper concentrate arising from the presence of tennantite (Cu12As4S13). Molybdenum grades in the feed were too low to produce a saleable molybdenum concentrate.
Subsequent bench-scale test work by WAI in 2015 focused on testing of a starter pit composite and an average copper grade composite to represent the life-of-mine resource grade for the Beskauga Main zone. Additionally, a high-grade copper and gold composite was tested to determine maximum design parameters for the flotation circuit, with respect to residence time and concentrate production.
Bench-scale float tests at both Ammtec and WAI entailed a rougher/scavenger stage to recover most of the mineralisation into a low concentrate mass (at a primary grind size P80 of 120 μm), followed by regrinding the rougher/scavenger concentrate and then utilising three-stage cleaning to produce a final copper concentrate. Regrind optimization tests showed that the optimum concentrate regrind size was a P80 of 34 μm.
Open cycle cleaner tests carried out on the Average Grade Composite indicated that a recovery of 80.3% was achievable into a concentrate mass of 0.95% by weight, assaying 23.74% Cu. Additional locked cycle tests indicated that a copper recovery of 84.8% could be achieved into a concentrate mass of 1.17% by weight, assaying 20.15% Cu. Gold recovery to the final cleaner copper concentrate was 54.6%, at a final concentrate grade of 19.8 g/t Au.
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This gold recovery was considered lower than expected, and further gold optimization test work was initiated to determine effect of pH on gold float performance, as well as testing of a sequential chalcopyrite-pyrite float with separate regrinding and cleaning of the chalcopyrite and pyrite rougher/scavenger concentrates.
| 10.1.3 | Flotation Test work |
Flotation optimization test work was carried out by Ammtec (2010) and WAI (2015), both carrying out open-cycle rougher and cleaner testing with WAI also carrying out locked cycle test work. The composite samples used had similar head grades of copper (0.2% Cu – Ammtec, 0.29% Cu – WAI) and gold (0.45 g/t Au – Ammtec, 0.43 g/t Au – WAI), representing “average grade” material. However, the Ammtec sample had substantially higher total sulphur content (1.47%) than the WAI sample (0.55%), owing to a higher pyrite content in the Ammtec sample. As a result of the increased pyrite content, there is evidence of non-selectivity during the Ammtec rougher/scavenger flotation.
Ammtec Flotation Tests – 2010
The Ammtec results show that highest rougher recovery (copper recovery of 90.0%) was achieved at a primary grind size P80 of 75 μm (Figure 52), with a concentrate mass of 7.29% by weight, assaying 2.63% Cu. Gold recovery to the rougher/scavenger concentrate was 74.5% at 4.8 g/t Au. Because typical low-grade copper porphyry projects require high installed grinding power requirements for high throughput rates, a standard primary grind size P80 of 106 μm is probably the more suitable for future cleaner tests, as this size achieved recoveries very close to the 75 μm tests (Figure 52).
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Figure 56. Ammtec “Average Grade” rougher/scavenger grade-recovery curves
Ammtec also conducted a rougher/scavenger float test on the high-grade copper composite to determine its flotation performance. Optimal grade-recovery performance to the rougher/scavenger concentrate was achieved at pH 10.5, with 88.4% Cu recovery into a concentrate mass of 5.72%, assaying 5.30% Cu. Gold recovery was 74.7%, at 11.3 g/t Au.
Ammtec conducted two-stage cleaner tests on the average grade and high-grade copper composite samples, at various concentrate regrind sizes and pH levels.
In the most optimal two-stage cleaner test for the average grade (Figure 53), overall copper recovery was 78.44%, at a final concentrate grade of 18.48% Cu. Gold recovery to the copper concentrate was 45.59% at a gold grade of 21.9 g/t Au. The cleaner grade-recovery curves achieved by Ammtec were satisfactory; however, the high pyrite content resulted in difficulty achieving a >21% Cu target saleable copper concentrate after two stages of cleaning. In the most optimal three-stage cleaner test for the high-grade, copper recovery was 80.5%, at a final concentrate grade of 27.6% Cu. Gold recovery to the copper concentrate was 59.0% at 51.0 g/t Au.
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Figure 57. Ammtec “Average Grade” cleaner grade-recovery curves
WAI Flotation Tests – 2015
WAI conducted rougher optimization float tests on three main composites (Starter Pit, Average Grade, and High Grade) using the optimum test conditions derived from the Ammtec testing program in 2010. A series of rougher tests were conducted to determine the effect of primary grind size, collector type and float time on the rougher flotation performance. The primary objective of the rougher tests was to maximize both copper and gold recoveries into the rougher concentrate product.
Rougher performance improved relative to the 2010 Ammtec tests, with >90% copper recovery and >70% gold recovery achieved for all samples (Table 14), at a grind size P80 of 120 μm (coarser than that used for the 2010 test work).
Table 15 Results of optimal WAI rougher tests for three different samples
| Composite ID | Test no. | P80 μm | Concentrate mass wt.% | Grade | Recovery | ||||
| Cu % | Au g/t | % TS | Cu % | Au g/t | % TS | ||||
| Starter Pit | FT 8 | 120 | 14.52 | 1.97 | 2.72 | 3.97 | 92.54 | 74.27 | 91.34 |
| Average Grade | FT 1 | 120 | 19.40 | 1.29 | 1.69 | 2.70 | 90.92 | 75.77 | 91.179 |
| High Grade | FT 5 | 120 | 17.49 | 2.59 | 4.03 | 5.99 | 94.66 | 78.78 | 82.14 |
A number of first cleaner (timed kinetics) and three-stage open cycle cleaner tests were also carried out to test several variables including regrind size, pH and float time. The primary objective of the open cycle cleaner tests
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was to maximize copper and gold recoveries at a saleable concentrate grade of circa 22% Cu. Concentrate grades of >22% Cu were achieved for all samples, with recoveries between 78.18% and 87.58% (Table 15).
Table 16. Results of optimal WAI cleaner tests for three different samples
| Composite ID | Test no. | Concentrate mass wt.% | Grade | Recovery | ||||
| Cu % | Au g/t | % TS | Cu % | Au g/t | % TS | |||
| Starter Pit | FCT 16 | 0.93 | 24.72 | 24.76 | 27.03 | 78.18 | 49.50 | 43.52 |
| Average Grade | FCT 7 | 0.95 | 23.74 | 23.79 | 29.17 | 80.26 | 50.93 | 53.91 |
| High Grade | FCT 11 | 1.87 | 22.61 | 27.74 | 35.32 | 87.58 | 65.63 | 60.69 |
Locked cycle tests were carried out on each of the Beskauga Main metallurgical composites. In these tests, the cleaner tails streams from each of the cleaner stages are recycled back through to the head of the previous unit cleaner stage. The locked cycle tests were carried out for six cycles for equilibrium to be achieved. The objective of the locked cycle testing was to determine the final copper and gold grade recovery relationships that could be expected under actual plant conditions.
For all samples, copper grades of >20% were achieved at recoveries ranging from 82.66% to 89.06% (Table 16). A comprehensive analysis of the concentrate showed that there are potential issues with the arsenic, antimony and mercury levels in the final copper concentrate which would incur smelter penalties. However, it appears these smelter penalty elements can be removed using the Toowong leach technology (see Section 10.2.6).
Table 17. Average grade from different areas of the Beskauga deposit
| Composite | Product | Copper | Gold | Total sulphur | |||
| Grade (%) | Recovery (%) | Grade (ppm) | Recovery (%) | Grade (%) | Recovery (%) | ||
| Shallow at surface mineralization | Concentrate | 21.96 | 82.66 | 22.92 | 56.65 | 26.74 | 52.95 |
| Tailings | 0.05 | 17.34 | 0.20 | 43.35 | 0.27 | 47.05 | |
| Average Grade | Concentrate | 20.15 | 84.74 | 19.83 | 54.63 | 27.35 | 61.23 |
| Tailings | 0.04 | 15.26 | 0.20 | 45.37 | 0.21 | 38.77 | |
| High Grade | Concentrate | 21.48 | 89.06 | 28.01 | 67.57 | 37.41 | 69.55 |
| Tailings | 0.05 | 10.94 | 0.27 | 32.43 | 0.33 | 30.45 | |
| 10.1.4 | Cyanidation Leach Testing |
Based on mineralogical investigation, the gold at Beskauga Main is primarily associated with chalcopyrite, with minor pyrite and non-sulphide gangue associations. Investigative testing looked to determine the potential for leaching of gold lost in the rougher and 1st cleaner scavenger tail products, via a separate “add on” carbon-in-leach (CIL) circuit.
Cyanide leach testing was carried out on the rougher and 1st cleaner scavenger tail products from the 2015 WAI flotation tests, which make up the final tailings and the overall gold losses. Bulk sulphide flotation was also carried out on the rougher tail to establish the gold recovery to a pyrite concentrate.
Direct cyanidation leach tests were conducted at varying cyanide concentrations to determine potential recoveries for gold and silver. Results showed that there is a high proportion of cyanide soluble gold in the rougher tail and 1st cleaner scavenger tail products and that good recoveries (52.8% and 60.4%, respectively) could be achieved. However, owing to the large mass pull to the rougher tails (>88% by weight), it is unlikely to be viable to leach the entire rougher tail at the proposed design tonnage rate of 13 million tonnes per annum, therefore the proposed approach is to include a pyrite float stage on the rougher tailings stream to produce a gold-bearing pyrite concentrate. The pyrite concentrate in combination with the 1st cleaner scavenger tail would be sent to a conventional CIL circuit.
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| 10.1.5 | Copper/Molybdenum Separation Testing |
The recovery and upgrading of molybdenum contained in a bulk flotation concentrate was the objective of test work conducted at Ammtec Perth, Australia. Testing of the concentrate from the high-grade composite sample focused on using additional flotation stages to recovery molybdenum from bulk flotation concentrates. The key parameters evaluated included rougher flotation density, rougher flotation time, molybdenum concentrate re-grind requirements, and the number of cleaning stages required in molybdenum flotation.
The molybdenum recovery to the copper rougher concentrate, was 24.5%. Following three stages of molybdenum cleaning, a concentrate grade of 15.9% Mo with 15.2% molybdenum recovery was obtained. It was concluded that the molybdenum grade in the sulphide ore was too low to warrant incorporating a copper-molybdenum circuit.
| 10.1.6 | Toowong Process Test Program |
The Toowong Process is an emerging hydrometallurgical treatment process designed to remove arsenic, antimony and other metalloid and non-metal penalty or hazardous elements from base and precious metal concentrates. The Toowong Process has underdone numerous test work programs including continuous pilot plant testing on concentrates from the Tampakan copper project in the Philippines, which successfully reduced the arsenic content of the concentrates from 1.1% As to 0.05% As. Although at a pilot stage, it utilises established hydrometallurgical processes. At the heart of the process is a patented Alkaline Sulphide Leaching step that solubilises key penalty impurities or metals, generating either an enrichment product or a process stream suitable for conventional downstream metal recovery.
A final copper concentrate sample produced from the 2017 WAI test work was used to test the amenability of Beskauga concentrate for the Toowong process. Preliminary benchtop leaching test work demonstrated that the concentrate can be treated to remove arsenic. In Test 3, arsenic was reduced from 3.69% to 0.31% after 24 hours leaching time. Antimony was reduced from 0.224% to 0.023%.
Leaching was found to be selective for arsenic and antimony with the following results for other elements:
· Gold extraction was negligible in all tests and reported with the clean concentrate product.
· Copper and iron are insoluble in the Toowong Process leaching conditions and remain in the leached concentrate (leach residue).
· Mercury was partially removed (28%) after 24 hours.
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· Reagent consumption use may be reduced by closed circuit processing and further optimizations to the process.
| 10.3 | Conclusions, Risks and Other Factors |
Several stages of test work have demonstrated the following key findings:
| · | Approximately 85% or above of the copper in the Beskauga deposit can be recovered to a sulphide concentrate via floatation using a coarse grind size P80 of 120 µm, resulting in a copper concentrate >21% Cu. |
| · | Approximately 55% of the gold contained in the Beskauga deposit reports to the copper concentrate, which grades at approximately 20 g/t Au or above. |
| · | An additional 19.5% of the gold in the Beskauga deposit that does not report to the copper concentrate could potentially be recovered by including a pyrite float stage on the rougher tailings stream to produce a gold bearing pyrite concentrate. The pyrite concentrate in combination with the first cleaner scavenger tail would be sent to a conventional CIL circuit to recover the gold as a gold Doré. |
| · | The Toowong Process is a potential avenue to address penalty levels of arsenic in the copper concentrate. |
The high levels of deleterious elements such as arsenic, antimony and mercury in the final copper concentrate require this material to be further treated using the Toowong Process to produce a saleable copper concentrate with arsenic levels <0.5% As. Amenability tests using the Toowong Process showed that the arsenic content in the final copper concentrate was reduced from 3.69% As to 0.3% As after 24 hours of leaching. Other smelter penalty elements such as antimony and mercury were also leached from the copper concentrate during the Toowong Process.
The metallurgical testing to date has utilized sample composites that have been selected from drillholes that cover the full mineralisation area and are suitable for support of the Mineral Resource estimate. A range of mineral processing techniques have been tested that are typical for the region and mineralization style. Further refined investigation has been completed on the management of contaminants in the flotation concentrate allowing this feature to be incorporated in the assessment for Mineral Resource estimation. Future evaluation of mining scoping studies will refine the metallurgical process path and will necessitate more detailed metallurgical studies on whole of mineralization composites but will also require local variability tests for the preferred extractive methods.
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| 11 | Mineral Resource Estimates |
The Beskauga drill hole data was initially provided to Archer Cathro, on December 12, 2021, as Microsoft Excel files and comprised:
| • | Collar Locations |
| • | Downhole survey information |
| • | Lithology |
| • | Drill hole assays |
Surfaces representing overburden, topography, faults, and lithologies was presented in DXF format.
All of the data was imported into Geovia GEMS and validated. Data was inspected for overlapping or missing data, inconsistent hole depths, downhole survey errors, and mis-matching hole identification. No issues were found with the provided data.
A total of 40,037 samples in 105 drill holes have been considered during the mineral resource estimate. Of these, 29,436 samples in 85 drill holes were used to estimate the Mineral Resource.
Drill hole data included in the files provided by the Company for the Beskauga deposit is summarized in the table below.
Table 18: Drillhole database files
| Description | No. of records |
| Drillhole collars | 105 |
| Drillhole survey | 2,162 |
| Assay data | 40,037 |
More recent drilling, completed after December 2021 was provided to Archer Cathro on December 12, 2023 and has been used to validate the mineral resource estimate. This drilling has not yet been integrated into the geological model and therefore not used in the current mineral resource estimation. Results from the most recent drilling were used to validate historical drilling and the geological modeling.
| 11.1 | Solid and Surface Interpretation |
Wireframes representing mineralized areas were generated by the Company in Leapfrog. Grade shells were based on copper and gold assay data and took into consideration lithological constraints and known structural trends.
The interpreted 3D solid wireframes for the mineralized envelopes (Figure 41) and lithological units were used to constrain the mineral resource estimate.
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Figure 41. Mineralized solids – View looking east.
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| 11.1.1 | Topography |
The topographic surface for the deposit was constructed from the drillhole collar elevations. Since the deposit area is relatively flat and the mineralization does not crop out at surface, this is considered sufficient for the Mineral Resource estimate.
| 11.1.2 | Overburden |
A surface representing overburden deposit was constructed from the drillhole lithology logs. The depth to overburden is relatively consistent throughout the deposit area. This surface was used to clip the mineral resource wireframes.
| 11.2 | Statistical Analyses |
Classical statistical analysis was carried out for samples within the mineralization wireframes. Samples not within these wireframes do not impact the Mineral Resource estimate.
Samples were coded separately for each mineralization zone. Visual validation was then performed to check sample coding. Log histograms and probability plots were then analysed to determine top cut grade values. Statistical analysis was performed separately for copper and gold.
The distribution of copper grades was lognormal (Figure 41). The log histogram for gold values within the mineralization is close to a lognormal distribution with a slightly positive skew (Figure 42). There is no evidence for mixing of either gold or copper grades, supporting the selected cut-off grades.
Table 19. Statistics for copper, gold and silver within mineralized domains
| Copper (%) | Gold (g/t) | Silver (g/t) | |
| Mean | 0.219 | 0.341 | 1.159 |
| Maximum | 4.816 | 155.67 | 110 |
| Minimum | 0.001 | 0.005 | 0.005 |
| COV | 1.071 | 2.958 | 1.568 |
| Standard Deviation | 0.234 | 1.009 | 1.818 |
| 11.3 | Sample Compositing and Capping |
To ensure all samples have the same weight during interpolation and geostatistical analysis, all sample intervals within mineralized domains were composited. A composite length of 1.0 m was used, which represents the mean sample length. Samples were composited from the top of the hole down. Any composites less than 0.50 cm were discarded.
A review of grade outliers was undertaken to ensure that extreme grades are treated appropriately during grade interpolation. All composited drillhole data within the interpreted mineralization was selected to determine if top cuts for copper and gold were required. Histograms, log-probability plots, and coefficient of variation (COV) values were reviewed. The following table shows the top cut values and number of samples cut for each element.
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Table 20. Capping values
| Value | Capped | |
| Copper | 3.0% | 1 |
| Gold | 10 g/t | 4 |
| Silver | 25 g/t | 10 |
Prior to geostatistical analysis, composite intervals were declustered. The following table summarizes the declustered composite statistics.
Table 21: Declustered capped composite statistics.
| Copper (%) | Gold (g/t) | Silver (g/t) | |
| Mean | 0.211 | 0.324 | 1.122 |
| Maximum | 3.000 | 10.000 | 25.000 |
| Minimum | 0.001 | 0.005 | 0.005 |
| COV | 1.027 | 1.269 | 1.121 |
| Standard Deviation | 0.217 | 0.411 | 1.258 |
| 11.4 | Geostatistical Analysis |
Variograms were calculated and modelled for the composited sample file constrained by the corresponding mineralized envelopes using Supervisor software (version 8.14.3.2). Geostatistical analysis was carried out separately for copper, gold, and silver mineralization.
Horizontal continuity was modeled first at twenty 18° increments. Continuity models were then created for the across strike and dip-plane orientations. Once the direction of maximum continuity was selected, a down-hole linear semi-variogram was created to determine the nugget effect. Nested models were fitted for all elements as summarized in the following table. The anisotropy was assessed using Azimuth, Dip, and Azimuth (ADA) rotation.
Table 22: Semi-Variogram Parameters
| Metal | Azimuth | Dip | Azimuth | C0 | C1 | C2 | X(m) | Y(m) | Z(m) | Type |
| Copper | 300 | 70 | 210 | 0.153 | 0.488 | 46 | 47 | 48 | Exponential | |
| 0.359 | 188 | 164 | 118 | Spherical | ||||||
| Gold | 197 | 74 | 216 | 0.177 | 0.461 | 54 | 45 | 26 | Exponential | |
| 0.362 | 202 | 144 | 99 | Spherical | ||||||
| Silver | 49 | 79 | 256 | 0.287 | 0.561 | 49 | 33 | 44 | Exponential | |
| 0.152 | 177 | 117 | 145 | Spherical |
| 11.5 | Density |
Bulk density values were assigned to block model cells using a single bulk density value for the Beskauga deposit of 2.73 t/m3. This density value is based upon specific gravity measurements made by Arras. Specific gravity was determined by weighing a sample in air and immersed in water, and then calculated using Archimedes method. This value determined by Arras is consistent with historical density measurements collected by previous operators.
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| 11.6 | Block Model |
Block modelling was carried out using Geovia GEMS software (version 6.7.2). An empty block model was created to enclose the wireframe models. The block model is not rotated, and its parameters are summarized in the following table.
Table 23: Block model dimensions and parameters
| Axis | Extent (m) | Block size (m) |
Number of Blocks | |
| Minimum | Maximum | |||
| Easting | 587349 | 589089 | 20 | 87 |
| Northing | 5737530 | 5740530 | 20 | 150 |
| Elevation | -1050 | 150 | 20 | 60 |
All blocks falling within the mineralized wireframes were coded with the percentage of the block within the wireframe.
| 11.7 | Grade Interpolation |
Copper, gold and silver grades were interpolated into the empty block model using both OK and IDW. The IDW method with a power of two using both a spherical and anisotropic search was used to support and validate the kriged estimates.
Interpolation was carried out separately for each metal and was conducted for the blocks that fell within the boundaries of the mineralized wireframe. The radii of the search ellipsoid and orientation of axes were selected based on the results of geostatistical analysis.
The first search radii for all mineralized envelopes were selected to be equal to approximately one quarter of the semi-variogram long ranges in all directions. Model cells that did not receive a grade estimate from the first pass interpolation run were used in the next (second pass) interpolation with search radii equal to approximately two-thirds the semi-variogram ranges in all directions. A third interpolation run using search radii equal to the semi-variogram ranges. The model cells that did not receive grades from the first three passes were then estimated using a fourth pass with search radii equal to twice the semi-variogram ranges. Interpolation parameters are presented in the following table.
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Table 24: Interpolation parameters
| Metal | Pass | Orientation | Search Size | # of Composites | Max per Hole | |||||
| Azimuth | Dip | Azimuth | X (m) | Y (m) | Z (m) | Min | Max | |||
| Copper | 1 | 300 | 70 | 210 | 50 | 40 | 30 | 8 | 16 | 6 |
| 2 | 125 | 110 | 80 | 6 | 16 | 4 | ||||
| 3 | 190 | 160 | 120 | 4 | 16 | 3 | ||||
| 4 | 380 | 330 | 235 | 3 | 16 | 2 | ||||
| Gold | 1 | 197 | 74 | 216 | 50 | 35 | 25 | 8 | 16 | 6 |
| 2 | 135 | 95 | 65 | 6 | 16 | 4 | ||||
| 3 | 200 | 145 | 100 | 4 | 16 | 3 | ||||
| 4 | 405 | 290 | 200 | 3 | 16 | 2 | ||||
| Silver | 1 | 49 | 79 | 256 | 45 | 30 | 35 | 8 | 16 | 6 |
| 2 | 120 | 80 | 95 | 6 | 16 | 4 | ||||
| 3 | 180 | 115 | 145 | 4 | 16 | 3 | ||||
| 4 | 355 | 235 | 290 | 3 | 16 | 2 | ||||
The blocks were interpolated using only assay composites restricted by the wireframe models. Change of support was honoured by discretizing to 4-point x 4-point x 4-point kriged estimates. These point estimates are simple averages of the block estimates.
| 11.8 | Model Validation |
Validation of the Beskauga block model was completed by comparing the OK interpolated model with the ID2 model and original composites. A summary of the average grade of each model is shown in the table below.
Table 25: Comparison of grades between block model and composites
| Average grade | Block Model (OK) | Block Model (ID2) | Composites |
| Copper | 0.14% | 0.15% | 0.22% |
| Gold | 0.27 g/t | 0.27 | 0.34 g/t |
| Silver | 0.98 g/t | 1.00 g/t | 1.15 g/t |
Validation histograms and probability plots were generated for composites and block model grades. Grade distribution, populations, and swath plots were reviewed and compared. They show that the distribution of block grades honours the distribution of input composite grades. There is a degree of smoothing evident, which is to be expected from the estimation method used, whereby block grades overstate on the lower grade ranges and understate on the higher-grade ranges. Smoothing is particularly evident in areas of wide spaced drilling where the number of composites was relatively low. However, the general trend in the composites is reflected in the block model.
The block models were visually validated by comparing the blocks estimated with actual drill hole composite data on both section and in plan view. Figure 41 is an east-west section showing copper values in the composites plotted against the block model. Composite grades are a good match to the estimated block grades.
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Figure 42.Visual validation of block model copper grades vs drillhole grades
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| 11.9 | Mineral Resource Classification |
Mineral Resources were classified using the S-K 1300 definition of Mineral Resources into Indicated and Inferred Mineral Resources. The classification is based upon an assessment of geological and mineralization continuity and QAQC results, as well as considering the level of geological understanding of the deposit. Specific requirements concerning the minimum number of samples and minimum number of drillholes used for grade interpolation for each block as carried out for each search pass were applied as detailed above.
The model cells were coded according to the interpolation run. Generally, the Indicated Mineral Resource class was assigned for the model cells that were interpolated in the first two runs. All other interpolated model cells were classified as Inferred.
The block model was then colour coded based on interpolation run and displayed on screen in plan and section views. Isolated blocks and outliers were identified and downgraded or removed from the resource model.
| 11.10 | Prospects for Economic Extraction |
To demonstrate potential of the Beskauga deposit for economic extraction, a preliminary pit optimization study was completed.
The Authors did not estimate Ore Reserves for the deposit. The optimization study was for the sole purpose of providing information that could be used in development of a pit shell for definition of Mineral Resources for the Beskauga Project. This study is conceptual in nature and does not represent any kind of Ore Reserve estimate.
| 11.10.1 | Input Parameters |
Inputs for the pit optimization study was based on metallurgical test work and geotechnical pit-slope studies previously completed on the deposit. Mining and processing costs are derived from a review of similar mines in Kazakhstan, in particular KAZ Minerals’ operations.
Metal prices were chosen to be consistent with five-year averages, which is believed to be a sufficiently long enough period to balance erratic price fluctuations.
It is the QP’s opinion that these prices are adequate for the determination of “reasonable prospects for economic extraction”. The material factors that could cause actual results to differ materially from the conclusions, estimates, or designs in the following section include any significant differences from one or more of the material factors or assumptions that were set forth in this section including cut-off grade assumptions, and product pricing forecasts.
The input parameters for the base case are shown in the table below (all costs and prices are in US$).
Table 26: Pit optimization parameters (base case)
| Parameter | Unit | |
| Metal prices | ||
| Copper | 3.50 | $/lb |
| Gold | 1,750 | $/oz |
| Silver | 22.00 | $/oz |
| Mining and transport | ||
| Mining cost | 1.50 | $/t |
| Incremental mining cost | 0.02 | $/t per level |
| Recoveries | ||
| Copper | 85.0 | % |
| Gold | 74.5 | % |
| Silver | 50.0 | % |
| Processing cost | ||
| Processing cost (including G&A) | 15.00 | $/t |
| Discount rate | 8.0 | % |
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| Parameter | Unit | |
| Pit slopes | ||
| Pit slope for overburden | 35 | ° |
| Pit slope | 55 | ° |
| Density for model and waste | 2.73 | t/m3 |
| Density for overburden | 1.50 | t/m3 |
| 11.10.2 | Pit Optimization |
The pit optimization was carried out using Studio NPVS software application using the Lerch-Grossman algorithm. The Lerch-Grossman algorithm is an industry-standard optimization technique used in mining and exploration. It is based on graph theory and is one of the widely used methods that allows the detection of the true optimum pit.
In the Lerch-Grossmann algorithm, directed arcs indicate which blocks need to be removed before a block can either be mined and processed, or be dumped as waste. Each block in the model is assigned a revenue value based on the grade of that block and metal price, and then all associated costs are subtracted from the revenue, so that all blocks are assigned a positive or negative dollar value. If the dollar value is positive, that block could potentially be mined profitably providing that all the blocks above do not make a loss if mined. The model pit slopes are specified in terms of the blocks that must be removed to provide access to each block within the block model.
In order to validate the pit shell selected for the prospect for economic extraction, multiple scenarios were evaluated. This included shallower pit angles, higher processing and mining costs, and different recoveries. The pit shell selected is considered a reasonable representation of the potential prospect for economic extraction.
| 11.11 | Mineral Resource Reporting |
The Mineral Resource estimate has been reported for all blocks in the resource model that fall within a pit shell that was developed during the pit-optimization process and a gross metal value exceeding $20/t. The gross metal value was calculated using the recovery factors and metal prices showing in the pit optimization parameters table above.
The Mineral Resource estimate has reasonable prospects for eventual economic extraction, and is a realistic inventory of mineralization which, under assumed and justifiable technical and economic conditions, might, in whole or in part, become economically extractable.
Table 27: Mineral Resource estimate for the Beskauga Project (27 December 2021).
| Category | Tonnage (Mt) | Cu % | Au g/t | Ag g/t |
| Indicated | 111.2 | 0.30 | 0.49 | 1.34 |
| Inferred | 92.6 | 0.24 | 0.50 | 1.14 |
Notes:
| · | A GMV $/t cut-off of $20/t was used, and the GMV formula is: GMV $/t = Au(grams)*74.5%*$56.26+ Cu(tonnes)*85%*$7.714 + Ag(grams)*50%*$0.71 |
| · | Base metal prices considered were $3.50/lb copper, $22.00/oz silver, and $1,750/oz gold. |
| · | The Mineral Resource is stated within a pit shell using the base-case metal prices. |
| · | S-K 1300 definitions were followed for the Mineral Resource |
| · | The Mineral Resource is not believed to be materially affected by any known environmental, permitting, legal, title, taxation, socio-economic, marketing, political or other relevant factors. |
| · | These Mineral Resources are not Mineral Reserves as they do not have demonstrated economic viability. |
| · | The quantity and grade of reported Inferred Resources in this Mineral Resource estimate are uncertain in nature and there has been insufficient exploration to define these Inferred Resources as Indicated or Measured; however, it is reasonably expected that the majority of Inferred Mineral Resources could be upgraded to Indicated Mineral Resources with continued exploration. |
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| 11.12 | Factors That May Affect The Estimate |
It is the QP’s opinion that the Mineral Resource block model is representative of the informing data and that the data is of sufficient quality to support the Mineral Resource Estimate.
Risk factors that could potentially affect the Mineral Resources estimates include:
| • | Assumptions used to generate the conceptual data for consideration of reasonable prospects of economic extraction including: |
| • | long-term commodity price assumptions |
| • | changes in local interpretations of mineralization geometry and continuity of mineralization zones |
| • | metal recovery assumptions |
| • | concentrate grade and smelting/refining terms. |
| • | The estimated tonnage of mineralization to be mined may vary as infill drilling provides more detailed information about characteristics, thickness and continuity of grade in the deposit. |
| • | Delays or other issues in reaching agreements with local communities |
| • | Changes in permitting requirements |
It is the QP’s opinion that technical factors that are likely to influence the prospect of economic extraction, including geological interpretations and metallurgical recovery, can be resolved through additional testwork and drilling. Issues related to existing agreements and permitting requirements believed to be able to be resolved.
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| 12 | Mineral Reserve Estimates |
This section is not applicable to the current report.
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| 13 | Mining Methods |
This section is not applicable to the current report.
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| 14 | Process and Recovery Methods |
This section is not applicable to the current report.
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| 15 | Infrastructure |
This section is not applicable to the current report.
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| 16 | Market Studies |
This section is not applicable to the current report.
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| 17 | Environmental Studies, Permitting and Plans, Negotiations or Agreements with Individuals or Groups |
This section is not applicable to the current report.
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| 18 | Capital and Operating Costs |
This section is not applicable to the current report.
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| 19 | Economic Analysis |
This section is not applicable to the current report.
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| 20 | Adjacent Properties |
There is a working salt mine run by a private company immediately south of the Beskauga mineral licence that covers an area of 21.3 km2. The Ekidos and Stepnoe exploration licences surround the salt mining licence (Figure 61).
There are no other mineral licences adjacent to the licence package.
Arras also has an additional 12 exploration concessions totaling approximately 2545.4km2 covering several porphyry copper exploration targets in the Bozshakul-Chingiz Arc.
| Figure 80: | Location of the salt mine within the Beskauga Project area (coordinates are WGS/UTM Zone 43N) |
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| 21 | Other Relevant Data and Information |
The Qualified Persons are not aware of any other relevant data or information that has not been included in this report.
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| 22 | Interpretation and Conclusions |
The Beskauga Project includes the large, gold-rich Beskauga porphyry copper-gold deposit within the Bozshakol–Chingiz magmatic-arc terrane of the CAOB, that has a demonstrated pedigree for economic porphyry deposits, notably KAZ Minerals operating Bozshakol mine 135 km to the west. This maiden Mineral Resource completed to CIM guidelines and reported under NI 43-101 represents a major milestone for the Project. The Mineral Resource has been completed only for the Beskauga Main porphyry-style mineralisation and not for the Beskauga South mineralisation which is gold only and may represent a separate porphyry-epithermal system.
The indications of a high-sulphidation epithermal overprint, including the presence of tennantite and minor enargite, with dominant argillic and local advanced argillic alteration, suggest that drilling to date may only have tested the upper part of the porphyry system. However, more work is required to determine the geometry and zonation of alteration and mineralisation at Beskauga. This represents a substantial understanding gap in the Project and presents an opportunity to improve modelling and resource extension targeting. On-going work by Arras Minerals to address this gap includes detailed re-logging of all historical drill core for lithology, alteration and mineralisation (including vein type and vein intensity) as well as magnetic susceptibility, conductivity, density, TerraSpec SWIR/NIR spectroscopy measurements and re-photographing of the historical drill cores. There appears to be substantial upside potential at Beskauga once the understanding of the mineral system architecture is improved and the Beskauga South mineralisation can be added in.
The proposed work program will substantially improve understanding of the geology and economic characteristics of the Project and advance it towards a Preliminary Economic Assessment. These work programs will address several possible risks to the Mineral Resource estimate and project economics identified in the current study. These include the following:
| · | There is poor geological understanding to support deposit modelling. |
| · | The density measurement procedures and data have not been reviewed and a single density value of 2.73 g/cm3 has been used, which although appropriate for the dioritic host rock, represents a potential source of risk to the estimated tonnage. Arras have implemented density measurements on a per sample basis for their current drill program and plan to carry out density measurements of all historical drill core. |
| · | Limited numbers of QA/QC samples have been submitted for historical drilling by Dostyk – CRMs for gold and copper represent 0.52% and 0.34% of the total samples respectively, blanks represent only 0.9% of all samples, duplicates 0.27% and umpire samples 2.7%. Although the results of QA/QC are acceptable, the low number of QA/QC samples represents a risk to the Project. Arras have implemented a robust QA/QC program for their current drilling consisting of CRM’s, blanks and duplicates at an insertion rate of 2.5%, 2.5% and 5% respectively, which is deemed appropriate for this stage of exploration. |
| · | Comparison of original and umpire samples show a slight positive bias to the original samples analysed at SAEL, which has not been investigated further and which represents a risk to the grade of the Mineral Resource estimate. |
| · | Concentrates contain elevated levels of arsenic that may affect the saleability of the concentrate. Although the concentrates show amenability to further processing via the Toowong Process, which removes arsenic and other deleterious elements from the concentrate, the cost of this process has not been determined and thus the presence of arsenic presents a project risk. |
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| 23 | Recommendations |
The authors recommend an additional work program by Arras on the Beskauga Project over the next 12 months should include:
| · | A drill program testing the extensions of the known mineralisation at Beskauga. |
| · | Collection of multi-element and hyperspectral data from a selection of historical pulps and drill core to enable the design of routine analytical protocol for all additional drilling. |
| · | Relogging of all available drill core including detailed alteration and vein logging, and development of an appropriate Standard Operating Procedure for logging for future drilling |
| · | Submission of additional QA/QC samples (~5% pulp duplicates and 5% umpire samples) together with CRMs, in order to improve the quality control data, and design of a routine QA/QC protocol for ongoing drilling. |
| · | A comprehensive density testing program to confirm the density value used in the Mineral Resource estimate. |
| · | Integrated geological, structural, alteration, litho-geochemical and hyperspectral study to support the development of a three-dimensional (3D) geological model along with a geometallurgical domain model. |
| · | Additional metallurgical test work to confirm recovery and comminution parameters as well as deleterious element mitigation, with sample selection based on geometallurgical domains. |
| · | Follow-up on regional targets with mapping and sampling |
| · | Identify power and water sources, project requirements, and begin all permitting processes. |
| · | Address any other gaps to be filled in order to advance the Project towards a Mineral Resource update and Preliminary Economic Assessment. |
These items should be carried out concurrently as a single phase of work over the next 12 months.
The authors estimate that the total cost of the next phase work program is approximately US$1.5 million.
| Table 26: | Work program estimate |
| Item | Cost in US$ |
| Drilling of 6,000 m at Beskauga (exploration to test extensions of deposit | 600,000 |
| Mapping & Sampling | 200,000 |
| Geophysics | 180,000 |
| Study of infrastructure | 20,000 |
| QAQC sampling and density testing | 50,000 |
| Additional metallurgical testing | 100,000 |
| In-country general and administration and logistics | 400,000 |
| Total | 1,500,000 |
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| 24 | References |
Ammtec Ltd (December 2010), Flotation Testing conducted on Beskauga Samples, Report No. A12741.
Ammtec Ltd (September 2011), Metallurgical Testing conducted upon High Grade ore composite, Report No. A13457.
Berger, B.R., Ayuso, R.A., Wynn, J.C., and Seal, R.R. (2008). Preliminary Model of Porphyry Copper Deposits. USGS Open-File Report 2008-1321, 55 p.
Brown, M, Marshall, N. (June 2018) “Geotechnical Pre-Feasibility study of the Beskauga Project, Kazakhstan”. Report prepared by SRK Consulting (UK) for Dostyk Ltd.
CSA Global Pty Ltd, (November 2013) JORC Compliant Report, Modelling and Resource Estimation on the Beskauga Au-Ag-Cu-Mo Project, Pavlodar Province, Republic of Kazakhstan.
Egorova, I.V., Ismailov, H.K. (2017) Beskauga deposit, hydrogeological report. Produced for Dostyk Ltd by CenterGeolSyomka Ltd. of Karaganda, Kazakhstan.
Jahn, B.-M., Wu, F. and Chen, B. 2000 - Granitoids of the Central Asian Orogenic Belt and continental growth in the Phanerozoic. Transactions of the Royal Society of Edinburgh, Earth Sciences, 91, 181-193.
Joint Ore Reserves Committee, 2012. Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. The JORC Code, 2012 Edition. [online]. Available from http://www.jorc.org (The Joint Ore Reserves Committee of The Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists, and Minerals Council of Australia).
Kazmekhanbor (July 2009), Processing Test Results on Geological Sample from Beskauga Main deposit.
Montgomery, M. (2015), JORC compliant Report, Modelling Resource Estimation on the Beskauga Porphyry Cu/Au Deposit, Pavlodar Province, Republic of Kazakhstan. Prepared by Geosure Exploration & Mining Solutions Pty Ltd for Copperbelt AG.
Seltmann, R., and Porter, T.M. 2005 - The Porphyry Cu-Au/Mo Deposits of Central Eurasia: 1. Tectonic, Geologic & Metallogenic Setting and Significant Deposits; in Porter, T.M. (Ed.), Super Porphyry Copper & Gold Deposits: A Global Perspective; PGC Publishing, Adelaide, v. 2, pp 467-512.
Sengor, A.M.C., Natal’in, B.A., and Burtman, V.S. (1993) - Evolution of the Altaid tectonic collage and Paleozoic crustal growth in Eurasia. Nature, 364, 299-307.
Sillitoe, R.H. (2000). Gold-rich porphyry deposits—Descriptive and genetic models and their role in exploration and discovery. Reviews in Economic Geology, 13, 315-345.
Sillitoe, R.H. (2010). Porphyry Copper Systems. Economic Geology, 105, 3-41.
Starkey & Associates Inc. (April 2017), Comminution Analysis Report, S&A Project No. S216.
Wardell Armstrong International Ltd (November 2015), Grinding and Flotation Testing of Samples from the Beskauga Main Deposit (Grinding Test work Report), Report No. ZT64-0493
Wardell Armstrong International Ltd (May 2017), Flotation Testing of 3 Bulk Ore Samples from the Beskauga Main deposit, report No. ZT64-0493.
White & Case Kazakhstan LLP, 2 October 2020, Legal Due Diligence Report: Project Arras Minerals (extracts provided by Arras Minerals)
Windley, B.F., Alexeiev, D., Xiao, W., Kröner, A., and Badarch, G. (2007) Bicentennial Review. Tectonic models for accretion of the Central Asian Orogenic Belt. Journal of the Geological Society, London, Vol. 164, 2007, pp. 31–47.
Yakubchuk, A. 2002 - The Baikalide-Altaid and North Pacific orogenic collages: similarity and diversity of structural patterns and metallogenic zoning; in Blundell, D., Neubauer, F. and von Quadt, A., (Eds.), Geological Society, London, Special Publications, 204, 273-297.
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| 25 | Reliance on Information by the Registrant |
The authors and have relied upon Arras Minerals and its management for information related to underlying contracts and agreements pertaining to the acquisition of the mining claims and their status and technical information not in the public domain (Section 3), including extracts from a legal due diligence report (White and Case, 2020) that were provided by Arras Minerals. The Property description presented in this report is not intended to represent a legal, or any other opinion as to title.
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| 26 | Date and Signature Page |
This report titled “Technical Report Summary on the Beskauga Copper-Gold Project, Pavlodar Province, Republic of Kazakhstan” with an effective date of 27 February 2024, was prepared and signed by:
Archer Cathro & Associates Ltd. (Sections 1,2,3, 9 & 11)
(“signed and sealed) Archer Cathro & Associates Ltd.
And
Timothy Barry, Arras Minerals Corp. (Sections 1-8, 10, 20 and 21)
(“signed and sealed) Arras Minerals Corp.
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| 27 | Abbreviations and Units of Measurement |
| ° | degrees |
| °C | degrees Celsius |
| 3D | three-dimensional |
| AAS | atomic absorption spectrometry |
| Ag | silver |
| As | arsenic |
| Au | gold |
| Beskauga | Beskauga Copper-Gold Project |
| CAOB | Central Asian Orogenic Belt |
| CIL | carbon-in-leach |
| CIM | Canadian Institute of Mining, Metallurgy and Petroleum |
| Copperbelt | Copperbelt AG |
| COV | coefficient of variation |
| CRM | certified reference material |
| CSA Global | CSA Global Canada Consultants Limited |
| Cu | copper |
| Dostyk | Dostyk LLP |
| DTM | digital terrain model |
| FA | fire assay |
| g | gram(s) |
| g/cm3 | grams per cubic centimetre |
| g/t | grams per tonne |
| GPS | global positioning system |
| ICP-OES | inductively coupled plasma-optical emission spectrometry. |
| IDW | inverse distance weighting |
| IP | induced polarization |
| JORC Code | Joint Ore Reserves Committee Code |
| kg | kilogram(s) |
| km, km2 | kilometre(s), square kilometre(s) |
| kVA | kilo-volt-amperes |
| lb | pound(s) |
| LIMS | laboratory information management system |
| M | million(s) |
| m, m2 | metre(s), square metre(s) |
| MIID | Ministry of Industry and Infrastructural Development |
| mm | millimetre(s) |
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| Mt | million tonnes |
| NI 43-101 | National Instrument 43-101 – Standards for Disclosure for Mineral Projects |
| NSR | net smelter return |
| OK | ordinary kriging |
| oz | ounce(s) |
| ppm | parts per million |
| QAQC | quality assurance/quality control |
| RC | reverse circulation |
| SAEL | Stewart Assay and Environmental Laboratory |
| SD | standard deviation |
| Arras Minerals | Arras Minerals Corp. |
| SRTM | Shuttle Radar Topography Mission |
| SSU Code | Code on Subsoil and Subsoil Use |
| SUL | subsoil use licence |
| SUR | subsoil use right |
| t | tonne(s) |
| t/m3 | tonnes per cubic metre |
| the Registrant | Arras Minerals Corp. |
| the Project | Beskauga Copper-Gold Project |
| US$ | United States dollars |
| WAI | Wardell Armstrong International |
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