First Mining Gold Corp 6-K, filed Nov 16, 2020
First Mining Gold Corp. (FFMGF)
6-K
2020-11-16
For: 2020-11-16
View Original
Added on
April 07, 2026
About this 6-K
First Mining Gold Corp filed this 6-K on November 16, 2020.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
REPORT OF FOREIGN
PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE
SECURITIES EXCHANGE ACT OF 1934
For the month of
November 2020
Commission File Number: 000-55607
First Mining Gold
Corp.
(Translation of registrant's name into English)
(Translation of registrant's name into English)
Suite
2070, 1188 West Georgia Street, Vancouver, B.C., V6E
4A2
(Address of principal executive office)
(Address of principal executive office)
Indicate by check mark whether the registrant
files or will file annual reports under cover of Form 20-F or Form
40-F.
Form 20-F [ ]
Form 40-F [ X ]
Indicate by check mark if the registrant is
submitting the Form 6-K in paper as permitted by Regulation S-T
Rule 101(b)(1): [ ]
DOCUMENTS INCORPORATED BY
REFERENCE
Exhibits
99.1 and 99.2 to this Report on Form 6-K are hereby incorporated by
reference as Exhibits to the Registration Statement on Form F-10 of
First Mining Gold Corp. (File No.
333-231801).
DOCUMENTS FILED AS PART OF THIS FORM
6-K
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Exhibits
|
Description
|
|
Condensed Interim Consolidated
Financial Statements for the period ended September 30,
2020
|
|
|
Management’s Discussion &
Analysis for the period ended September 30,
2020
|
|
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CEO Certification of Interim
Filings
|
|
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CFO Certification of Interim
Filings
|
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly
authorized.
|
|
|
First Mining Gold
Corp.
|
|
|
|
(Registrant)
|
|
|
|
|
|
|
|
|
|
Date: November 16, 2020
|
|
/s/ Samir
Patel
|
|
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|
Samir Patel
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|
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General Counsel and Corporate
Secretary
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EXHIBIT
INDEX
|
Exhibits
|
Description
|
|
Condensed Interim Consolidated
Financial Statements for the period ended September 30,
2020
|
|
|
Management’s Discussion &
Analysis for the period ended September 30,
2020
|
|
|
CEO Certification of Interim
Filings
|
|
|
CFO Certification of Interim
Filings
|
Exhibit
99.1
First Mining Gold Corp.
Condensed Interim Consolidated Financial Statements
For the three and nine months ended September 30, 2020 and
2019
(Unaudited)
FIRST
MINING GOLD CORP.
INTERIM
CONSOLIDATED STATEMENTS OF NET LOSS AND COMPREHENSIVE
LOSS
FOR THE THREE AND
NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(Expressed in
thousands of Canadian dollars, except share and per share
amounts)
(Unaudited)
|
|
September
30,
2020
|
December
31,
2019
|
|
|
|
|
|
ASSETS
|
|
|
|
Current
|
|
|
|
Cash and cash
equivalents
|
$32,477
|
$5,902
|
|
Investments (Note
5)
|
24,016
|
1,775
|
|
Prepaid expenses,
accounts and other receivables
|
886
|
652
|
|
Total
current assets
|
57,379
|
8,329
|
|
|
|
|
|
Non-current
|
|
|
|
Mineral properties
(Note 6)
|
168,188
|
252,815
|
|
Investment in
Treasury Metals Inc. (Note 3)
|
62,833
|
-
|
|
Mineral property
investments (Note 7)
|
6,724
|
5,398
|
|
Property and
equipment
|
536
|
608
|
|
Other
assets
|
683
|
870
|
|
Total
non-current assets
|
238,964
|
259,691
|
|
TOTAL
ASSETS
|
$296,343
|
$268,020
|
|
|
|
|
|
LIABILITIES
|
|
|
|
Current
|
|
|
|
Accounts payable
and accrued liabilities (Note 9)
|
$2,080
|
$1,398
|
|
Flow-through share
premium liability (Note 12)
|
48
|
341
|
|
Current portion of
lease liability
|
110
|
94
|
|
Current portion of
environmental reclamation provision (Note 10)
|
1,005
|
716
|
|
Option – PC
Gold (Note 6(a))
|
2,590
|
-
|
|
Obligation to
distribute investments (Note 3)
|
37,222
|
-
|
|
Total
current liabilities
|
43,055
|
2,549
|
|
|
|
|
|
Non-current
|
|
|
|
Silver Stream
derivative liability (Note 4)
|
13,490
|
-
|
|
Lease
liability
|
471
|
554
|
|
Environmental
reclamation provision (Note 10)
|
1,371
|
1,639
|
|
Deferred tax
liabilities
|
-
|
946
|
|
Total
non-current liabilities
|
15,332
|
3,139
|
|
TOTAL
LIABILITIES
|
58,387
|
5,688
|
|
SHAREHOLDERS’
EQUITY
|
|
|
|
Share capital (Note
11)
|
315,151
|
282,666
|
|
Warrant and
share-based payment reserve (Note 11)
|
44,594
|
33,330
|
|
Obligation to
distribute investments (Note 3)
|
(37,222)
|
-
|
|
Accumulated other
comprehensive loss
|
(1,207)
|
(3,649)
|
|
Accumulated
deficit
|
(83,360)
|
(50,015)
|
|
Total
shareholders’ equity
|
237,956
|
262,332
|
|
TOTAL
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$296,343
|
$268,020
|
|
Subsequent events
(Note 16)
|
|
|
The consolidated
financial statements were approved by the Board of
Directors:
|
Signed:
“Keith Neumeyer”, Director
|
Signed:
“Raymond Polman”, Director
|
The accompanying
notes are an integral part of these condensed interim consolidated
financial statements.
1
FIRST
MINING GOLD CORP.
INTERIM
CONSOLIDATED STATEMENTS OF NET LOSS AND COMPREHENSIVE
LOSS
FOR THE THREE AND
NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(Expressed in
thousands of Canadian dollars, except share and per share
amounts)
(Unaudited)
|
|
Three months
ended
September
30,
|
Nine months
ended
September
30,
|
||
|
|
2020
|
2019
|
2020
|
2019
|
|
|
|
|
|
|
|
OPERATING EXPENSES (Note
13)
|
|
|
|
|
|
General and
administration
|
$441
|
$914
|
$2,449
|
$2,555
|
|
Exploration and
evaluation
|
213
|
215
|
571
|
659
|
|
Investor relations
and marketing communications
|
346
|
230
|
892
|
963
|
|
Corporate
development and due diligence
|
59
|
116
|
285
|
399
|
|
Impairment of
non-current assets (Note 3)
|
2,372
|
341
|
24,870
|
341
|
|
Loss from
operational activities
|
(3,431)
|
(1,816)
|
(29,067)
|
(4,917)
|
|
|
|
|
|
|
|
OTHER
ITEMS
|
|
|
|
|
|
Foreign exchange
(loss) gain
|
(64)
|
13
|
543
|
9
|
|
Other
expenses
|
(25)
|
(9)
|
(71)
|
(70)
|
|
Interest and other
income
|
31
|
28
|
85
|
151
|
|
Investments fair
value loss (Notes 5)
|
(3,439)
|
-
|
(426)
|
-
|
|
Loss on disposal of
subsidiaries (Note 6(b))
|
-
|
-
|
(303)
|
-
|
|
Fair value loss on
Silver Stream derivative liability (Note 4)
|
(6,112)
|
-
|
(6,112)
|
-
|
|
Loss
before income taxes and equity income
|
$(13,040)
|
$(1,784)
|
$(35,351)
|
$(4,827)
|
|
Deferred income tax
recovery
|
221
|
141
|
1,539
|
141
|
|
Equity income from
investment in Treasury Metals (Note 3)
|
467
|
-
|
467
|
-
|
|
Net
loss for the period
|
$(12,352)
|
$(1,643)
|
$(33,345)
|
$(4,686)
|
|
|
|
|
|
|
|
OTHER
COMPREHENSIVE INCOME (LOSS)
|
|
|
|
|
|
Items that will not be reclassified to net income or
(loss):
|
|
|
|
|
|
Investments fair
value gain (Note 5)
|
1,648
|
1,030
|
1,721
|
1,181
|
|
Mineral property
investments fair value gain (Note 7)
|
423
|
-
|
1,326
|
-
|
|
Items that are or may be reclassified to net income or
(loss):
|
|
|
|
|
|
Currency
translation adjustment of foreign subsidiaries
|
(10)
|
19
|
25
|
(29)
|
|
Recycling of
currency translation adjustment on disposal of foreign subsidiaries
(Note 6(b))
|
-
|
-
|
(630)
|
-
|
|
Other comprehensive
income
|
2,061
|
1,049
|
2,442
|
1,152
|
|
|
|
|
|
|
|
Net
loss and comprehensive income for the period
|
$(10,291)
|
$(594)
|
$(30,903)
|
$(3,534)
|
|
Basic and diluted
loss per share
|
$(0.02)
|
$(0.01)
|
$(0.05)
|
$(0.01)
|
|
Weighted
average number of shares outstanding – Basic and
Diluted
|
656,270,866
|
584,221,888
|
632,847,071
|
571,352,155
|
The accompanying
notes are an integral part of these condensed interim consolidated
financial statements.
2
FIRST
MINING GOLD CORP.
INTERIM
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2020 AND 2019
(Expressed
in thousands of Canadian dollars)
(Unaudited)
|
Nine months
ended September 30,
|
||
|
|
2020
|
2019
|
|
|
|
|
|
Cash
flows from operating activities
|
|
|
|
Net loss for the
period
|
$(33,345)
|
$(4,686)
|
|
Adjustments
for:
|
|
|
|
Depreciation
|
233
|
129
|
|
Investments fair
value loss (Note 5)
|
426
|
-
|
|
Loss on disposal of
subsidiaries (Notes 3, 6(b))
|
303
|
-
|
|
Equity income from
investment in Treasury Metals (Note 3)
|
(467)
|
-
|
|
Fair value loss on
Silver Stream derivative liability (Note 4)
|
6,112
|
-
|
|
Unrealized foreign
exchange gain
|
(606)
|
(21)
|
|
Other
expenses
|
62
|
72
|
|
Share-based
payments (Note 11(d))
|
777
|
1,381
|
|
Impairment of
non-current assets (Note 3)
|
24,870
|
341
|
|
Deferred income tax
recovery
|
(1,539)
|
(141)
|
|
Operating
cash flows before movements in working capital
|
(3,174)
|
(2,925)
|
|
Changes in non-cash
working capital items:
|
|
|
|
Increase in
accounts and other receivables
|
(71)
|
(124)
|
|
Increase in prepaid
expenditures
|
(8)
|
(128)
|
|
(Decrease) increase
in accounts payables and accrued liabilities
|
(244)
|
14
|
|
Total
cash used in operating activities
|
(3,497)
|
(3,163)
|
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
Mineral property
expenditures (Note 6)
|
(9,474)
|
(4,096)
|
|
Investment in
Treasury Metals Inc. (Note 3)
|
(118)
|
-
|
|
Property and
equipment purchases
|
(197)
|
(83)
|
|
Option payments and
expenditures recovered (Note 6)
|
148
|
97
|
|
Proceeds from sale
of investments
|
-
|
504
|
|
Total
cash used in investing activities
|
(9,641)
|
(3,578)
|
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
Net proceeds from
bought deal financing (Note 11(b))
|
26,647
|
-
|
|
Net proceeds from
private placements (Note 11(b))
|
9,124
|
7,270
|
|
Net proceeds from
ATM program (Note 11(b))
|
125
|
-
|
|
Net proceeds from
First Majestic Silver Corp. (Note 4)
|
3,263
|
-
|
|
Proceeds from
exercise of warrants and stock options
|
706
|
43
|
|
Repayment of lease
liability
|
(67)
|
-
|
|
Finance costs
paid
|
(41)
|
-
|
|
Total
cash provided by financing activities
|
39,757
|
7,313
|
|
|
|
|
|
Foreign exchange
effect on cash
|
(44)
|
-
|
|
|
|
|
|
Change
in cash and cash equivalents
|
26,575
|
572
|
|
Cash
and cash equivalents, beginning
|
5,902
|
5,115
|
|
Cash
and cash equivalents, ending
|
$32,477
|
$5,687
|
The accompanying
notes are an integral part of these condensed interim consolidated
financial statements.
3
FIRST
MINING GOLD CORP.
INTERIM
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2020 AND 2019
(Expressed in
thousands of Canadian dollars, except share and per share
amounts)
(Unaudited)
|
|
Number
of
common
shares
|
Share
capital
|
Warrant
reserve
|
Share-based
payment
reserve
|
Accumulated
other
comprehensive
income
(loss)
|
Accumulated
deficit
|
Total
|
|
|
|
|
|
|
|
|
|
|
Balance
as at December 31, 2018
|
558,316,916
|
$275,068
|
$13,600
|
$16,630
|
$(5,292)
|
$ (43,056)
|
$ 256,950
|
|
Proceeds from private
placements (Note 11(b))
|
25,690,772
|
6,393
|
1,018
|
-
|
-
|
-
|
7,411
|
|
Flow-through share
premium liability (Note 11(b))
|
-
|
(475)
|
-
|
-
|
-
|
-
|
(475)
|
|
Shares issuance costs
(Note 11(b))
|
-
|
(120)
|
(21)
|
-
|
-
|
-
|
(141)
|
|
Exercise of warrants
(Note 11(c))
|
214,200
|
108
|
(65)
|
-
|
-
|
-
|
43
|
|
Share-based
payments
|
-
|
-
|
-
|
1,863
|
-
|
-
|
1,863
|
|
Loss for the
period
|
-
|
-
|
-
|
-
|
-
|
(4,686)
|
(4,686)
|
|
Other comprehensive
income
|
-
|
-
|
-
|
-
|
1,152
|
-
|
1,152
|
|
Balance
as at September 30, 2019
|
584,221,888
|
$280,974
|
$14,532
|
$18,493
|
$(4,140)
|
$(47,742)
|
$262,117
|
|
Balance
as at December 31, 2019
|
591,997,138
|
$282,666
|
$14,532
|
$18,798
|
$(3,649)
|
$(50,015)
|
$262,332
|
|
Proceeds from bought deal
financing (Note 11(b))
|
57,500,000
|
25,339
|
3,411
|
-
|
-
|
-
|
28,750
|
|
Bought deal financing share
issuance costs (Note 11(b))
|
-
|
(1,854)
|
(249)
|
-
|
-
|
-
|
(2,103)
|
|
Proceeds from private
placements (Note 11(b))
|
40,198,095
|
8,160
|
1,122
|
-
|
-
|
-
|
9,282
|
|
Flow-through share
premium liability (Note 11(b))
|
-
|
(300)
|
-
|
-
|
-
|
-
|
(300)
|
|
Private placements share
issuance costs (Note 11(b))
|
-
|
(136)
|
(22)
|
-
|
-
|
-
|
(158)
|
|
At-the-market
distributions (Note 11(b))
|
532,000
|
125
|
-
|
-
|
-
|
-
|
125
|
|
Exercise of options
(Note 11(d))
|
2,092,500
|
1,049
|
-
|
(428)
|
-
|
-
|
621
|
|
Exercise of warrants
(Note 11(c))
|
247,500
|
98
|
(13)
|
-
|
-
|
-
|
85
|
|
Shares issued for prior
mineral property acquisition
|
24,220
|
4
|
-
|
-
|
-
|
-
|
4
|
|
Warrants issued to First
Majestic Silver Corp. (Note 4)
|
-
|
-
|
6,278
|
-
|
-
|
-
|
6,278
|
|
Share-based
payments
|
-
|
-
|
-
|
1,165
|
-
|
-
|
1,165
|
|
Obligation to distribute
investments
|
--
|
-
|
-
|
-
|
-
|
(37,222)
|
(37,222)
|
|
Loss for the
period
|
-
|
-
|
-
|
-
|
-
|
(33,345)
|
(33,345)
|
|
Other comprehensive
income
|
-
|
-
|
-
|
-
|
2,442
|
-
|
2,442
|
|
Balance
as at September 30, 2020
|
692,591,453
|
$315,151
|
$25,059
|
$19,535
|
$(1,207)
|
$(120,582)
|
$237,956
|
The accompanying
notes are an integral part of these condensed interim consolidated
financial statements.
4
FIRST
MINING GOLD CORP.
NOTES TO THE
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in
Canadian dollars unless otherwise noted, tabular amounts are
expressed in thousands of Canadian dollars)
(Unaudited)
1. NATURE OF OPERATIONS
First Mining Gold
Corp. (the “Company” or “First Mining”) is
a public company which is listed on the Toronto Stock Exchange (the
“TSX”) under the symbol “FF”, on the OTCQX
under the symbol “FFMGF”, and on the Frankfurt Stock
Exchange under the symbol “FMG”. The Company’s
head office and principal address is Suite 2070 – 1188 West
Georgia Street, Vancouver, British Columbia, Canada, V6E
4A2.
First Mining was
incorporated on April 4, 2005. The Company changed its name to
First Mining Gold Corp. in January 2018.
First Mining is a
Canadian gold company focused on the development and permitting of
the Springpole Gold Project in northwestern Ontario. The Company
also holds a significant equity investment in Treasury Metals Inc.
(“Treasury Metals”) (TSX: TML) (Note 3) which is
advancing the Goliath-Goldlund gold projects in Ontario towards a
construction decision. First Mining’s portfolio of gold
projects in eastern Canada also includes Pickle Crow (being
advanced in partnership with Auteco Minerals Ltd.
(“Auteco”) (ASX: AUT)), Cameron, Hope Brook, Duparquet,
Duquesne, and Pitt.
These condensed
interim consolidated financial statements include the accounts of
the Company and its subsidiaries. The following table highlights
the Company’s material subsidiaries together with their
projects:
|
Name of
the
subsidiary
|
Ownership
Percentage
|
Project
|
Location
|
|
Gold Canyon
Resources Inc.
|
100%
|
Springpole Gold
Project (“Springpole”)
|
Northwestern
Ontario, Canada
|
|
Coastal Gold
Corp.
|
100%
|
Hope Brook Gold
Project (“Hope Brook”)
|
Newfoundland,
Canada
|
|
Cameron Gold
Operations Ltd.
|
100%
|
Cameron Gold
Project (“Cameron”)
|
Northwestern
Ontario, Canada
|
|
PC Gold
Inc.
|
100%
|
Pickle Crow Gold
Project (“Pickle Crow”) (Note 6(a))
|
Northwestern
Ontario, Canada
|
|
Clifton Star
Resources Inc.
|
100%
|
Duquesne Gold
Project (“Duquesne”)
10% indirect
interest in the Duparquet Gold Project
(“Duparquet”)
Pitt Gold Project
(“Pitt”)
|
Québec,
Canada
|
2. BASIS OF PRESENTATION
These condensed
interim consolidated financial statements have been prepared in
accordance with International Accounting Standard 34, Interim Financial Reporting using
policies consistent with International Financial Reporting
Standards (“IFRS”) as issued by the International
Accounting Standards Board. These condensed interim consolidated
financial statements should be read in conjunction with the
Company’s audited annual consolidated financial statements
for the year ended December 31, 2019, as some disclosures from the
annual consolidated financial statements have been condensed or
omitted. There are no IFRS or International Financial Reporting
Interpretations Committee interpretations that are not yet
effective that would be expected to have a material impact on the
Company’s consolidated financial statements.
These condensed
interim consolidated financial statements have been prepared on a
historical cost basis, except for financial instruments classified
as fair value through profit and loss or fair value through other
comprehensive income (loss), which are stated at their fair value.
The condensed interim consolidated financial statements are
presented in Canadian dollars, unless otherwise noted, and tabular
amounts are expressed in thousands of Canadian
dollars.
The functional
currency of the Company and its Canadian subsidiaries is the
Canadian dollar while the functional currency of the
Company’s non-Canadian subsidiaries is the US
dollar.
These condensed
interim consolidated financial statements were approved by the
Board of Directors on November 13, 2020.
In preparing the
Company’s unaudited condensed interim consolidated financial
statements for the three and nine months ended September 30, 2020,
the Company used the same accounting
policies and methods of computation as in the annual consolidated
financial statements for the year ended December 31, 2019, except
for the following policies adopted as a result of the new
transactions which occurred in the period:
a)
Investment in associate
An associate is an
entity over which the Company has significant influence and which
is neither a subsidiary nor a joint arrangement.
The Company has
significant influence over an entity when it has the power to
participate in the financial and operating policy decisions of the
associate but does not have control or joint control.
The Company’s
investment in the common shares of Treasury Metals (Note 3) has
been treated as an investment in associate and accounted for using
the equity method.
Under the equity
method, the Company’s investment in the common shares of the
associate is initially recognized at cost and subsequently
increased or decreased to recognize the Company’s share of
net income and losses of the associate, after any adjustments
necessary to give effect to uniform accounting policies, any other
movement in the associate’s reserves, and for impairment
losses after the initial recognition date. The Company’s
share of income and losses of the associate is recognized in net
income during the period.
Dividends and
repayment of capital received from an associate are accounted for
as a reduction in the carrying amount of the Company’s
investment.
At the end of each
reporting period, the Company assesses whether there is any
objective evidence that an investment in an associate is impaired.
Objective evidence includes observable data indicating there is a
measurable decrease in the estimated future cash flows of the
investee’s operations. A significant or prolonged decline in
the fair value of an equity investment below its cost is also
objective evidence of impairment. When there is objective evidence
that an investment is impaired, the carrying amount of such
investment is compared to its recoverable amount, being the higher
of its fair value less costs of disposal and value-in-use. If the
recoverable amount of an investment is less than its carrying
amount, the carrying amount is reduced to its recoverable amount
and an impairment loss, being the excess of carrying amount over
the recoverable amount, is recognized in the period in which the
relevant circumstances are identified. When an impairment loss
reverses in a subsequent period, the carrying amount of the
investment is increased to the revised estimate of recoverable
amount to the extent that the increased carrying amount does not
exceed the carrying amount that would have been determined had an
impairment loss not been previously recognized. A reversal of an
impairment loss is recognized in net income in the period in which
the reversal occurs.
5
FIRST
MINING GOLD CORP.
NOTES TO THE
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in
Canadian dollars unless otherwise noted, tabular amounts are
expressed in thousands of Canadian dollars)
(Unaudited)
2.
BASIS OF PRESENTATION (Continued)
b)
Accounting policy judgements and estimation
uncertainty
The Company’s
management makes judgments in its process of applying the
Company’s accounting policies in the preparation of its
unaudited condensed interim consolidated financial statements. In
addition, the preparation of the financial data requires the
Company’s management to make estimates of the impacts of
uncertain future events on the carrying amounts of the
Company’s assets and liabilities at the end of the reporting
period, and the reported amounts of revenues and expenses during
the reporting period. Actual results may differ from those
estimates as the estimation process is inherently uncertain.
Estimates are reviewed on an ongoing basis based on historical
experience and other factors that are considered relevant under the
circumstances. Revisions to estimates and the resulting impacts on
the carrying amounts of the Company’s assets and liabilities
are accounted for prospectively.
In preparing the
Company’s unaudited condensed interim consolidated financial
statements for the three and nine months ended September 30, 2020,
the policy judgments and estimation uncertainty disclosed in Note 3
of its audited consolidated financial statements for the year ended
December 31, 2019 continue to apply. In addition, the following new
areas of accounting policy judgment and estimation uncertainty are
applicable:
COVID-19
In March 2020, the
World Health Organization declared a global pandemic related to the
virus known as COVID-19. As the Company does not have production
activities, the ability to fund ongoing exploration is affected by
the availability of financing. Due to market uncertainty the
Company may be restricted in its ability to raise additional
funding. The impact of COVID-19 on the Company over time is not
determinable; however, its effects may have a material impact on
the Company’s financial position, results of operations and
cash flows in future periods.
Classification and fair value of silver stream derivative
liability
The Company has
concluded that its Silver Stream is a standalone derivative
measured at fair value through profit and loss
(“FVTPL”). The Silver Stream failed to qualify under
the ‘own use exemption’ as a result of the silver
substitution provisions within the Silver Purchase Agreement. In
addition, the Company has an unavoidable obligation to repay the
Advance Payment or deliver the silver to First
Majestic.
The determination
of the fair value is also an area of significant estimation
uncertainty. The fair value is calculated by utilising a Monte
Carlo simulation valuation model. A Monte Carlo valuation model
relies on random sampling and is often used when modeling cash
flows with many inputs and where there is significant uncertainty
in the future value of inputs and where the movement of the inputs
can be independent of each other. The key inputs used in the Silver
Stream fair value calculation are further disclosed in Note 4.
Changes in the inputs to the valuation model may result in material
changes in the fair value of the silver stream derivative liability
and the amount of fair value gains or losses recognized in the
statement of net loss and comprehensive loss in future
periods.
Recoverable
amount of the Goldlund project
As described in
Note 3(b), management estimated the recoverable amount of the
Goldlund project upon close of the Treasury Share Purchase
Agreement (defined in Note 3). The estimation uncertainty in this
calculation arose primarily from assumptions about:
●
The
probability of receipt of the contingent milestone payments
(discussed below)
●
The
fair value of Treasury Metals Warrants (defined in Note 3)
(discussed below); and
●
The
value of the retained property interest in the form of the 1.5%
NSR, which was calculated using a probability-weighted discounted
cash flow model.
Milestone
payments per Treasury Share Purchase Agreement
The Company applied
judgment in the determination of whether to recognize the
contingent milestone payments in accordance with the Treasury Share
Purchase Agreement (defined in Note 3). In management’s
judgment, it is probable that a significant reversal in the amount
of cumulative milestone payments recognized may occur due to the
uncertainty of these milestones being reached. In making this
judgment, management considered the expected length of time that
may pass before this uncertainty is resolved, as well as the fact
that achievement of the milestones is outside of the
Company’s control. Therefore, the milestone payments were not
considered in the determination of the recoverable amount of the
Goldlund project and have not been recognized as assets as at
September 30, 2020.
Fair value of Treasury Metals Warrants
The
Company made assumptions when estimating the fair value of its
warrants held in Treasury Metals, as described in Note 3. The fair
value of the warrants at the date of grant is measured using the
Black‐Scholes pricing model. Changes in the input assumptions
can significantly affect the fair value estimate.
Impairment
of investment in associate
With respect to its
investment in associate, the Company is required to make estimates
and judgments about future events and circumstances and whether the
carrying amount of the asset exceeds its recoverable amount.
Recoverability depends on various factors, including the
identification of economic recoverability of reserves at Treasury
Metals’ exploration properties, the ability of Treasury
Metals to obtain the necessary financing to complete the
development, and future profitable production or proceeds from the
disposition of the Treasury Metals shares themselves. The publicly
quoted share price of Treasury Metals is also a source of objective
evidence about the recoverable amount of the equity
investment.
Fair value of the Option – PC Gold
The
company has made assumptions when estimating the fair value of this
option liability which arises under the terms of the Earn-In
Agreement described in Note 6(a). As there is no observable market
data which can be used to determine the fair value of the Option
– PC Gold liability, management uses property specific and
market-based information to determine whether a significant change
in the fair value of the option liability has occurred. The
specific assumptions made are disclosed in Note 6(a). Changes in
these assumptions can significantly affect the fair value
estimate.
6
FIRST
MINING GOLD CORP.
NOTES TO THE
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in
Canadian dollars unless otherwise noted, tabular amounts are
expressed in thousands of Canadian dollars)
(Unaudited)
3.
INVESTMENT IN TREASURY METALS
a)
Treasury Share Purchase Agreement Overview
On August 7, 2020,
First Mining completed its transaction with Treasury Metals under a
share purchase agreement (the “Treasury Share Purchase
Agreement”), pursuant to which Treasury Metals agreed to
acquire all of the issued and outstanding shares of Tamaka Gold
Corporation, a previously wholly-owned subsidiary of the Company,
and 100% owner of the Goldlund Project. Under the terms of the
Treasury Share Purchase Agreement, First Mining received total
consideration of $91,521,000 which was comprised of (i) 43.33
million common shares (post-consolidation) of Treasury Metals
(“Treasury Metals Shares”); (ii) 11.67 million common
share purchase warrants (post-consolidation) of Treasury Metals
(“Treasury Metals Warrants”) with an exercise price of
$1.50 for a 3-year term; (iii) a retained 1.5% Net Smelter Returns
(“NSR”) royalty on Goldlund (0.5% of which can be
bought back by Treasury Metals for $5 million in cash); and (iv)
the right to certain contingent milestone payments totaling $5
million, payable in cash on certain key advancements at
Goldlund.
b)
Initial Recognition of Consideration Received
The components of
the consideration received in connection with the sale of Tamaka
comprised the following:
●
$78,000,000
for 43.33 million Treasury Metals Shares (the “Share
Consideration”);
●
$9,812,000
for 11.67 million Treasury Metals Warrants (the “Warrant
Consideration”) - Note 5; and
●
$3,709,000
for the retained 1.5% NSR (the
“NSR Consideration”) - Note 6.
$91,521,000
Share Consideration
The Company applies equity accounting for
the investment in the Treasury Metals Shares. The fair value of the
Treasury Metals Shares at closing of $78,000,000 was determined
using the quoted price of Treasury Metals common shares on August
7, 2020. Upon closing of the transaction, First Mining held
approximately 40% (September 30, 2020 – 40%) of Treasury
Metals common shares (on an undiluted basis) and has nominated
three individuals to its Board of Directors. The Company has
concluded it has significant influence over Treasury Metals and
will account for its investment using the equity
method.
Warrant
Consideration
The warrants of
Treasury Metals have been accounted for as FVTPL. The Company uses
the Black-Scholes option pricing model to calculate the fair value
of the warrants held in Treasury Metals both as at August 7, 2020
and on an ongoing basis. The Company used the following
assumptions:
|
|
August 7,
2020
|
September 30,
2020
|
|
Risk-free interest
rate
|
0.23%
|
0.23%
|
|
Expected life
(years)
|
3.00
years
|
2.85
years
|
|
Expected
volatility(1)
|
62.44%
|
62.79%
|
|
Expected dividend yield
|
Nil
|
Nil
|
(1)
The
computation of expected volatility was based on Treasury
Metals’ historical price volatility, over a period which
approximates the expected life of the warrant.
As at September 30,
2020, the fair value of the warrants decreased to $6,860,000 which
resulted in a loss of $2,952,000 for the period between August 7,
2020 to September 30, 2020. The loss is recorded within the
investments fair value gain (loss) in the statement of net loss and
comprehensive income.
NSR
Consideration
The 1.5% NSR
royalty on Goldlund was measured at fair value and recorded in
“Disposal, impairment or reclassification” under
“Mineral Properties” (Note 6).
c)
Equity Accounting Method for Investment in Treasury Metals and
Impairment
As at September 30,
2020 the fair market value of the Company’s investment in
common shares of Treasury Metals was $62,833,000, based on the
quoted market price. Due to the significant decline in fair value
of the Treasury Metals Shares at September 30, 2020, the Company
recorded an impairment of the investment in Treasury Metals
amounting to $15,634,000. This impairment is recorded within the
impairment of non-current assets in the statement of net loss and
comprehensive income.
|
|
Investment in Treasury Metals
|
|
Balance,
December 31, 2019
|
$-
|
|
Acquisition –
Initial Recognition on August 7, 2020
|
78,000
|
|
Equity
income
|
467
|
|
Impairment of
Investment in Treasury Metals Inc.
|
(15,634)
|
|
Balance,
September 30, 2020
|
$62,833
|
Treasury Metals Summarized Statement of Financial
Position
The assets and
liabilities of Treasury Metals are summarized in the following
table and the September 30, 2020 numbers are taken from Treasury
Metals’ interim condensed consolidated financial statements
as at September 30, 2020.
|
|
September 30, 2020
|
|
Current
assets
|
$9,060
|
|
Non-current
assets
|
175,354
|
|
|
184,414
|
|
Current
liabilities
|
6,470
|
|
Non-current
liabilities
|
8,289
|
|
|
14,759
|
|
Net
assets
|
$169,655
|
7
FIRST
MINING GOLD CORP.
NOTES TO THE
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in
Canadian dollars unless otherwise noted, tabular amounts are
expressed in thousands of Canadian dollars)
(Unaudited)
3.
INVESTMENT IN TREASURY METALS (Continued)
Reconciliation of Net Assets to Carrying value
|
Balance, December
31, 2019
|
$-
|
|
Initial Recognition
on August 7, 2020
|
167,238
|
|
Equity
income
|
1,194
|
|
Other increase in
equity of Treasury Metals
|
1,223
|
|
Balance,
September 30, 2020
|
$169,655
|
|
First
mining’s share of net assets
|
65,334
|
|
Incremental fair
value of Goldlund-Goliath mineral property
|
13,133
|
|
Impairment of
investment in Treasury Metals
|
(15,634)
|
|
Carrying
value
|
$62,833
|
d)
Goldlund Mineral Property Impairment
During the nine
months ended September 30, 2020, the Company recorded an impairment
of the Goldlund project amounting to $9,236,000 (2019 - $nil),
based on the recoverable amount indicated by the consideration
received under the Treasury Share Purchase Agreement. In
determining the recoverable amount, management determined the fair
value of the 43.33 million Treasury Metals Shares based on quoted
market prices, the fair value of the 11.67 million Treasury Metals
Warrants based on a Black-Scholes option valuation, and the fair
value of the retained 1.5% NSR royalty based on a probability
weighted discounted cash flow model. As at June 30, 2020, the
Company recorded an impairment of the Goldlund project amounting to
$22,498,000 (2019 - $nil) based on facts and circumstances in
existence at that date, which was partially reversed based on the
transaction value at the closing date on August 7, 2020, resulting
in an impairment reversal of $13,262,000 for the three months ended
September 30, 2020. This cumulative impairment is recorded within
the impairment of non-current assets in the statement of net loss
and comprehensive income.
Reconciliation of Income Statement expense: Impairment of
non-current assets
|
|
3 months ended
September 30,
2020
|
9 months ended
September 30,
2020
|
|
Mineral Property
impairment – recorded on June 30, 2020
|
$-
|
$22,498
|
|
Mineral Property
impairment reversal – recorded on August 7, 2020
|
(13,262)
|
(13,262)
|
|
Impairment of
Investment in Treasury Metals (Equity Interest)
|
15,634
|
15,634
|
|
Total
expense for the period
|
$2,372
|
$24,870
|
e)
Obligation to Distribute Investments
In accordance with
the terms of a Shareholders Agreement signed in connection with the
transaction, First Mining is required to distribute approximately
20.94 million Treasury Metals Shares and all of the Treasury Metals
Warrants to its shareholders (the “Distribution”)
within 12 months of closing of the transaction. Following the
Distribution, First Mining will retain approximately 22.39 million
Treasury Metals Shares, leaving the Company with a 19.9% interest.
As at September 30, 2020, the Company accrued a liability for the
obligation to distribute investments of $37,222,000 with a
corresponding entry booked into equity.
4.
SILVER STREAM DERIVATIVE LIABILITY
a)
Silver Purchase Agreement Overview
On
June 10, 2020, the Company entered into a silver purchase agreement
(the “Silver Purchase Agreement”) with First Majestic
Silver Corp. (“First Majestic”), which closed on July
2, 2020. Under the terms of the Silver Purchase Agreement, First
Majestic agreed to pay First Mining total consideration of US$22.5
million, in three tranches, for the right to purchase 50% of the
payable silver produced from the Springpole Gold Project over the
life of the project (the “Silver Stream”) and also
received 30 million common share purchase warrants of First Mining.
Each share purchase warrant entitles First Majestic to purchase one
common share of First Mining at an exercise price of $0.40 for a
period of five years.
Upon receipt of its share of silver production, First Majestic will
make ongoing cash payments to First Mining for each ounce of silver
delivered in an amount equal to 33% of the lesser of the average
spot price of silver for the applicable calendar quarter, and the
spot price of silver at the time of delivery (the "Silver Cash
Price"), subject to a price cap of US$7.50 per ounce of silver (the
“Price Cap”). The Price Cap is subject to annual
inflation escalation of 2%, beginning at the start of the third
year after commencement of production at the project.
First Mining has the right to repurchase 50% of the Silver Stream
for US$22.5 million at any time prior to the commencement of
production at Springpole (the “Buy-Back
Right”).
b)
Consideration Received and Future Silver Stream Terms
Per
the Silver Purchase Agreement, First Majestic paid US$10 million to
First Mining on the July 2, 2020 closing date, with US$2.5 million
paid in cash and the remaining US$7.5 million paid in common shares
of First Majestic (the Company received 805,698 First Majestic
common shares and these were recorded in Investments – see
Note 5).
Future consideration payable for the Silver Stream
includes two further tranches (split evenly between cash and First
Majestic common shares) based on the achievement of certain
Springpole Gold Project milestones. Upon completion of a
positive a Pre-Feasibility Study
(“PFS”), First Mining will
receive US$7.5 million from First Majestic, with a further US$5
million payable upon First Mining receiving approval of either a
Federal or Provincial Environmental Assessment. (The three tranches
of consideration totaling US$22.5 million constitute the
“Advance Payment”). In the event of default, First
Majestic may terminate the Silver Purchase Agreement and the
Advance Payment received by First Mining at that time would become
repayable.
The Advance Payment
amount is used to track the stream balance for commercial, but not
accounting purposes. Until the date where the Advance Payment is
reduced to nil, an amount equal to the number of ounces of silver
delivered to First Majestic multiplied by the difference between
the spot price of silver and the Silver Cash Price shall reduce the
balance of the Advance Payment on the delivery date. In the event
the Company exercises the Buy-Back Right by paying US$22.5 million
to First Majestic, the Advance Payment amount shall be reduced to
nil.
The Silver Stream
has an initial term of 40 years from July 2, 2020. The term is
automatically extended by successive 10-year periods as long as the
life of mine continues for the Springpole Gold Project. If upon
expiration of the term of the Silver Purchase Agreement, the
Company has not sold to First Majestic an amount of silver
sufficient to reduce the Advance Payment to nil, then a refund of
the uncredited balance, without interest shall be due and owing by
the Company to First Majestic.
8
FIRST
MINING GOLD CORP.
NOTES TO THE
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in
Canadian dollars unless otherwise noted, tabular amounts are
expressed in thousands of Canadian dollars)
(Unaudited)
4.
SILVER STREAM DERIVATIVE LIABILITY (Continued)
The silver
delivered to First Majestic may be sourced from the Springpole Gold
Project, or the Company may substitute any required refined silver
with refined silver from a source other than the Springpole Gold
Project, with the exception of silver purchased on a commodity
exchange.
c)
Silver Stream Derivative Liability Fair Value
The Company has
concluded that the Silver Stream is a standalone derivative
measured at FVTPL. The Company considered whether the Silver Stream
would qualify as an ‘own use contract’, whereby it
would not require fair value accounting under IFRS. An ‘own
use contract’ is one that results in the physical delivery of
a company’s own non-financial asset. The Silver Stream failed
to qualify under the ‘own use exemption’ as a result of
the silver substitution provisions within the Silver Purchase
Agreement. In addition, the Company has an unavoidable obligation
to repay the Advance Payment or deliver the silver to First
Majestic.
As of the
acquisition date, the estimated fair value of the Silver Stream
derivative liability was determined using a discounted cash flow
model which incorporated a Monte Carlo simulation. The fair value
of the Silver Stream derivative liability is a Level 3 measurement.
The key inputs to calculate the fair value of the silver stream
derivative liability at each reporting date include:
●
COMEX
spot silver price;
●
COMEX
silver forward curve;
●
COMEX
5-year at-the-money silver implied volatility;
●
USD
3-month LIBOR discount curve;
●
First
Mining’s estimated credit spread;
●
Probability
of receiving future advanced payments; and
●
Quarterly
delivery schedule of payable silver.
The fair value of
the Silver Stream derivative liability is calculated at each
reporting date as the net of the future Advance Payment
tranches receivable (an asset for the Company) and the Silver
Stream obligation (a liability to the company), with gains and
losses recorded in the statement of net loss and comprehensive
income loss. The fair value of the Silver Stream derivative
liability at July 2, 2020 was determined to be US$5,431,000
($7,378,000), which consisted of the fair value of the Advance
Payment tranches yet to be received of US$8,473,000 ($11,512,000),
net of the fair value of the future Silver Stream obligation of
US$13,904,000 ($18,890,000). At September 30, 2020, the fair value
of the Silver Stream is US$10,115,483 ($13,490,000), which
consisted of the fair value of the Advance Payment tranches
receivable of US$8,506,000 ($11,346,000) net of the fair value of
the Silver Stream obligation of US$18,621,000
($24,836,000).
|
|
Silver Stream derivative
liability
|
|
Balance,
December 31, 2019
|
$-
|
|
Fair value of
Silver Stream derivative liability - Initial Recognition on July 2,
2020
|
(7,378)
|
|
Change in fair
value during the period
|
(6,112)
|
|
Balance,
September 30, 2020
|
$(13,490)
|
The fair value of the 30 million common share
purchase warrants issued to First Majestic as part of the
transaction was calculated using the Black-Scholes option
pricing model. The fair value of the warrants of $6,278,000 was
recorded in Equity (Warrant reserve) on the Company’s
consolidated statements of financial position. The Company used the
following Black-Scholes assumptions:
|
|
July 2, 2020
|
|
Risk-free interest
rate
|
0.38%
|
|
Expected life
(years)
|
5.00
years
|
|
Expected
volatility(1)
|
70.65%
|
|
Expected dividend
yield
|
Nil
|
(1)
The
computation of expected volatility was based on the Company’s
historical price volatility, over a period which approximates the
expected life of the warrant.
5.
INVESTMENTS
The movements in
investments during the nine months ended September 30, 2020, and
year ended December 31, 2019 are summarized as
follows:
|
|
Marketable
Securities (FVTPL)
|
Marketable
Securities
(FVTOCI)
|
Warrants
(FVTPL)
|
Total
Investments
|
|
Balance
as at December 31, 2019
|
$-
|
$1,775
|
$-
|
$1,775
|
|
Additions
(Disposals)
|
11,134
|
-
|
9,812
|
20,946
|
|
Gain recorded in
other comprehensive loss
|
-
|
1,721
|
-
|
1,721
|
|
Gain (loss)
recorded in net loss
|
2,526
|
-
|
(2,952)
|
(426)
|
|
Balance
as at September 30, 2020
|
$13,660
|
$3,496
|
$6,860
|
$24,016
|
|
|
Marketable
Securities (FVTPL)
|
Marketable
Securities
(FVTOCI)
|
Warrants
(FVTPL)
|
Total
Investments
|
|
Balance
as at December 31, 2018
|
$-
|
$2,597
|
$-
|
$2,597
|
|
Additions
(Disposals)
|
-
|
(1,527)
|
-
|
(1,527)
|
|
Gain recorded in
other comprehensive loss
|
-
|
705
|
-
|
705
|
|
Balance
as at December 31, 2019
|
$-
|
$1,775
|
$-
|
$1,775
|
The Company holds
marketable securities of publicly traded companies as strategic
interests and has less than a 10% equity interest in each of the
investees above, with the exception of Treasury Metals (Note 3).
During the nine months ended September 30, 2020, the Company
received the 25 million shares of Auteco (Initial recognition:
$740,000, September 30, 2020: $3,460,000) in connection with its
option to acquire PC Gold Inc. (Note 6(a)), and 805,698 shares of
First Majestic Silver Corp. (Initial recognition: $10,394,000,
September 30, 2020: $10,200,000) in connection with its Silver
Purchase Agreement (Note 4). Auteco and First Majestic Silver Corp.
marketable securities were designated as FVTPL. Other marketable
securities are recorded as fair value through other comprehensive
income (loss) (“FVTOCI”) in accordance with the
Company’s accounting policy.
During the nine
months ended September 30, 2020, the Company also received the
11.67 million Treasury Metals Warrants in connection with its
Treasury Share Purchase Agreement (Note 3) which were classified as
FVTPL.
9
FIRST
MINING GOLD CORP.
NOTES TO THE
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in
Canadian dollars unless otherwise noted, tabular amounts are
expressed in thousands of Canadian dollars)
(Unaudited)
6.
MINERAL PROPERTIES
As at September 30,
2020 and December 31, 2019, the Company has capitalized the
following acquisition, exploration, and evaluation costs on its
mineral properties:
|
|
Balance
December
31, 2019
|
Concessions,
taxes, and royalties
|
Salaries
and share-based payments
|
Drilling,
exploration, and technical consulting
|
Assaying,
field supplies, and environmental
|
Travel
and other expenditures
|
Option
payments received and expenditures recovered
|
Currency
translation adjustments
|
Disposal,
impairment or reclassification
|
Balance
September
30, 2020
|
|
Springpole
|
$76,775
|
$291
|
$761
|
$3,677
|
$2,254
|
$599
|
$-
|
$-
|
$-
|
$84,357
|
|
Goldlund
|
98,894
|
2
|
430
|
796
|
255
|
126
|
-
|
-
|
(100,503)
|
-
|
|
Hope
Brook
|
20,071
|
20
|
105
|
77
|
118
|
47
|
-
|
-
|
-
|
20,438
|
|
Cameron
|
27,374
|
7
|
82
|
49
|
16
|
17
|
-
|
-
|
-
|
27,545
|
|
Pickle
Crow
|
19,263
|
35
|
51
|
2,437
|
15
|
4
|
-
|
-
|
-
|
21,805
|
|
Duquesne
|
5,133
|
3
|
1
|
5
|
-
|
-
|
-
|
-
|
-
|
5,142
|
|
Pitt
|
2,084
|
-
|
-
|
1
|
-
|
-
|
-
|
-
|
-
|
2,085
|
|
Others(1)
|
2,615
|
7
|
4
|
10
|
6
|
2
|
-
|
-
|
3,709
|
6,353
|
|
Canada
Total
|
252,209
|
$365
|
$1,434
|
$7,052
|
$2,664
|
$795
|
$-
|
$-
|
$(96,794)
|
$167,725
|
|
Mexico
Total
|
154
|
5
|
-
|
-
|
-
|
-
|
-
|
8
|
(167)
|
-
|
|
USA
|
452
|
48
|
-
|
-
|
-
|
-
|
(48)
|
11
|
-
|
463
|
|
Total
|
$252,815
|
$418
|
$1,434
|
$7,052
|
$2,664
|
$795
|
$(48)
|
$19
|
$(96,961)
|
$168,188
|
|
|
Balance
December
31, 2018
|
Concessions,
taxes, and royalties
|
Salaries
and share-based payments
|
Drilling,
exploration, and technical consulting
|
Assaying,
field supplies, and environmental
|
Travel
and other expenditures
|
Option
payments received and expenditures recovered
|
Currency
translation adjustments
|
Disposal,
impairment or reclassification
|
Balance
December
31, 2019
|
|
Springpole
|
$73,378
|
$347
|
$950
|
$1,058
|
$488
|
$554
|
$-
|
$-
|
$-
|
$76,775
|
|
Goldlund
|
96,604
|
3
|
726
|
1,085
|
240
|
236
|
-
|
-
|
-
|
98,894
|
|
Hope
Brook
|
19,581
|
20
|
213
|
105
|
41
|
111
|
-
|
-
|
-
|
20,071
|
|
Cameron
|
27,032
|
56
|
87
|
126
|
16
|
57
|
-
|
-
|
-
|
27,374
|
|
Pickle
Crow
|
16,754
|
31
|
88
|
46
|
2,376
|
18
|
(50)
|
-
|
-
|
19,263
|
|
Duquesne
|
5,091
|
2
|
3
|
35
|
1
|
1
|
-
|
-
|
-
|
5,133
|
|
Pitt
|
2,082
|
-
|
-
|
2
|
-
|
-
|
-
|
-
|
-
|
2,084
|
|
Others(1)
|
2,559
|
3
|
17
|
27
|
8
|
1
|
-
|
-
|
-
|
2,615
|
|
Canada Total
|
243,081
|
$462
|
$2,084
|
$2,484
|
$3,170
|
$978
|
$(50)
|
$-
|
$-
|
$252,209
|
|
Mexico Total
|
244
|
43
|
22
|
34
|
-
|
-
|
(179)
|
(10)
|
-
|
154
|
|
USA
|
804
|
46
|
-
|
-
|
-
|
-
|
(25)
|
(32)
|
(341)
|
452
|
|
Total
|
$244,129
|
$551
|
$2,106
|
$2,518
|
$3,170
|
$978
|
$(254)
|
$(42)
|
$(341)
|
$252,815
|
(1)
Other
mineral properties in Canada as at September 30, 2020 and December
31, 2019 include the mining claims and concessions located in the
Township of Duparquet, Quebéc, which are near the
Company’s Duquesne gold project and Lac Virot property
located in the Labrador West Region of Labrador. Other mineral
properties in Canada as at September 30, 2020 also include the 1.5%
NSR Royalty under the terms of the Treasury Share Purchase
Agreement (Note 3), which was reclassified from
“Goldlund” to “Others” during the nine
months ended September 30, 2020.
The Company has
various underlying agreements and commitments with respect to its
mineral properties, which define annual ofuture payments in
connection with royalty buy-backs or maintenance of property
interests.
a)
Pickle Crow Project
On March 12, 2020,
the Company and Auteco executed a definitive Earn-In Agreement (the
“Earn-In Agreement”) whereby Auteco may earn up to an
80% interest in PC Gold, a wholly-owned subsidiary of First Mining
which owns the Pickle Crow Project. Pursuant to the Earn-In Agreement, the Earn-In is
comprised of two stages:
●
Stage
1 Earn-In (51% earn-in) – Three-year initial earn-in period
to acquire a 51% equity interest in PC Gold by:
o
Spending
$5,000,000 on exploration and $1,000,000 on environmental matters
on the Pickle Crow Gold Project (or cash payments in lieu), of
which $750,000 must be incurred within the first 12 months;
and
o
Issuing
100 million shares of Auteco to First Mining.
●
Stage
2 Earn-In (additional 19% to earn-in to 70%) – Upon
completion of the Stage 1 Earn-In, Auteco will have a two-year
follow-on period to acquire an additional 19% equity interest in PC
Gold by:
o
Spending
a further $5,000,000 on exploration on the Pickle Crow Gold Project
(or cash payments in lieu);
o
Making
a $1,000,000 cash payment to First Mining within 90 days of
completing the additional exploration spend; and
o
Issuing
First Mining a 2% NSR royalty on the Project (1% of which can be
bought back for USD$2,500,000) (issued upon completion of the Stage
2 Earn-In).
In addition, upon
completion of the Stage 2 Earn-In, Auteco will have an option to
acquire an additional 10% equity interest in PC Gold, exercisable
any time following completion of the Stage 2 Earn-In, by paying
First Mining $3,000,000 in cash. First Mining’s residual 20%
interest in the project is carried until a construction decision at
Pickle Crow, which is to be made after a final feasibility study
and following Auteco having arranged sufficient financing to
achieve commercial production. If Auteco should fail to meet such
requirements within the applicable time periods, the Earn-In
Agreement will terminate and Auteco will be entitled to retain any
interest which it has earned-in to prior to the date of
termination. During the term of the Earn-In Agreement, Auteco will
incur all program costs and manage Pickle Crow exploration
activity.
During the nine
months ended September 30, 2020, the Company received the scheduled
consideration in cash of $100,000 and 25 million shares of Auteco
with a fair value on receipt of $740,000 under the terms of the
Earn-in Agreement. Auteco incurred a total of $1,750,000 in
exploration expenditures during the nine months ended September 30,
2020.
As the Earn-In
Agreement provides Auteco the right to earn an interest in PC Gold,
rather than a direct interest in the Pickle Crow project,
Auteco’s option to acquire PC Gold shares is a financial
liability of First Mining. As a derivative, the Option – PC
Gold liability is classified as FVTPL.
As there is no
observable market data which can be used to determine the fair
value of the Option – PC Gold liability, management uses
property specific and market-based information to determine whether
a significant change in the fair value of the option liability has
occurred. Factors that are considered include:
●
Performance
of the Auteco share price;
●
The
amount or timing of Pickle Crow exploration expenditures
incurred;
●
Updates
to the NI 43-101 resource report (or Australian
equivalent);
●
Milestone
payment probability assumptions; and
●
Gold
spot prices over the period from the Earn-In Agreement closing to
September 30, 2020.
10
FIRST
MINING GOLD CORP.
NOTES TO THE
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in
Canadian dollars unless otherwise noted, tabular amounts are
expressed in thousands of Canadian dollars)
(Unaudited)
6. MINERAL PROPERTIES (Continued)
As at September 30,
2020, management has estimated a fair value for the Option –
PC Gold liability of $2,590,000. Management has concluded that
there were no developments in the period since inception that would
indicate a material change in fair value and, accordingly, the
Option – PC Gold liability remains recorded at the amount
received from the counterparty. These amounts include cash,
exploration expenditures incurred and the value, at the time of
receipt, of the Auteco shares received.
b)
Mexican Property Portfolio
Mineral properties
in Mexico as at December 31, 2019 included Miranda, Socorro, San
Ricardo, Las Margaritas, Puertecitos, Los Tamales, Geranio, El
Apache, El Roble, Batacosa and Lachatao. On April 28, 2020, the
Company entered into a share purchase agreement with a third-party
private company (the “Purchaser”) pursuant to which the
Purchaser acquired all of the issued and outstanding shares of
0924682 B.C. Ltd. and 1089568 B.C. Ltd., two wholly-owned
subsidiaries of the Company that held all of the shares of two
Mexican subsidiaries which owned all of the Company’s Mexican
mineral properties. Consideration consisted of a nominal amount of
cash, and the grant to the Company of a 2% NSR on 10 of the 11
mineral properties. From the date of this sale transaction, First
Mining no longer holds any mineral properties in Mexico. The
transaction resulted in a $303,000 loss on disposal of subsidiaries
recorded on the statement of net loss and comprehensive loss for
the nine months ended September 30, 2020, and recycling of currency
translation adjustment on disposal of Mexican subsidiaries
amounting to $630,000.
7.
MINERAL PROPERTY INVESTMENTS
The Company,
through its subsidiary Clifton Star Resources Inc.
(“Clifton”), has a 10% equity interest in the shares of
Beattie Gold Mines Ltd., 2699681 Canada Ltd., and 2588111 Manitoba
Ltd which directly or indirectly own various mining concessions and
surface rights, collectively known as the Duparquet gold
project.
Mineral property
investments (which comprise equity interests in the shares of the
three private companies) are classified as FVTOCI, with changes in
fair value recorded in other comprehensive income
(loss).
As there is no
observable market data which can be used to determine the fair
value of the Company’s mineral property investments,
management uses property specific and market-based information to
determine whether a significant change in the fair value of these
investments has occurred. Factors that are considered
include:
●
Changes
in the economic and regulatory environment for the jurisdiction in
which the Duparquet Gold project is located;
●
Gold
spot prices over the period from the acquisition of the investment
to September 30, 2020;
●
The
Company’s market capitalization per in-situ ounce which are
attributable to the Duparquet Gold project; and
●
Recent
transactions involving mineral properties located in
Quebec.
During the nine
months ended September 30, 2020, management determined, as a
function of the rising gold price environment, that there was an
increase in the fair value of mineral property investments and a
fair value gain of $1,326,000 was recorded during the nine months
ended September 30, 2020 (nine months ended September 30, 2019 -
$nil) (Note 15). As at September 30, 2020, the fair value of the
Company’s mineral property investments is $6,724,000
(December 31, 2019 - $5,398,000).
8.
RELATED PARTY TRANSACTIONS
The Company’s
related parties consist of the Company’s Directors and
Officers, and any companies associated with them.
Key management
includes the Directors and Officers of the Company. The
compensation paid or payable to key management for services during
the three and nine months ended September 30, 2020 and 2019 is as
follows:
|
Service
or Item
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
||
|
|
2020
|
2019
|
2020
|
2019
|
|
Directors’
fees
|
$58
|
$133
|
$201
|
$217
|
|
Salaries and
consultants’ fees
|
283
|
249
|
839
|
761
|
|
Share-based
payments (non-cash)
|
137
|
347
|
778
|
1,380
|
|
Total
|
$478
|
$729
|
$1,818
|
$2,358
|
9.
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
|
Category
|
September 30,
2020
|
December 31,
2019
|
|
Accounts
payable
|
$1,301
|
$768
|
|
Other accrued
liabilities
|
779
|
630
|
|
Total
|
$2,080
|
$1,398
|
10.
ENVIRONMENTAL RECLAMATION PROVISION
The Company has an
obligation to undertake decommissioning, restoration,
rehabilitation and environmental work when environmental
disturbance is caused by the exploration and development of a
mineral property. As at September 30, 2020, the Company estimates
that the environmental reclamation provision for the Pickle Crow
Gold Project held by its subsidiary, PC Gold Inc, is $2,376,000
(December 31, 2019 - $2,355,000). Upon completion of the Stage 1
earn-in by AuTeco Minerals Inc., the Company’s ownership of
PC Gold Inc. would be reduced to 49% and the Company’s
liability would reduce by a commensurate percentage. The liability
was estimated based on management’s interpretation of current
regulatory requirements and is recognized at the present value of
such costs. The recorded amount has been measured using a risk-free
discount rate of 1.67% based on a Canadian government bond and an
inflation rate of 2%. The cash outflows in respect of the provision
are expected to occur over the next eight years.
11
FIRST
MINING GOLD CORP.
NOTES TO THE
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in
Canadian dollars unless otherwise noted, tabular amounts are
expressed in thousands of Canadian dollars)
(Unaudited)
10.
ENVIRONMENTAL RECLAMATION PROVISION (Continued)
|
|
September 30,
2020
|
December 31,
2019
|
|
Balance,
beginning of period
|
$2,355
|
$-
|
|
Additions to
present value of environmental reclamation provision
|
-
|
2,355
|
|
Interest or
accretion expense
|
21
|
-
|
|
Balance,
end of period
|
$2,376
|
$2,355
|
|
Statements
of Financial Position Presentation
|
September 30,
2020
|
December 31,
2019
|
|
Current portion of
environmental reclamation provision
|
$1,005
|
$716
|
|
Non-current
environmental reclamation provision
|
1,371
|
1,639
|
|
Total
|
$2,376
|
$2,355
|
11.
SHARE CAPITAL
a) Authorized
Unlimited number of
common shares with no par value.
Unlimited number of
preferred shares with no par value.
b) Issued
and Fully Paid
Common shares:
692,591,453 (December 31, 2019 – 591,997,138).
Preferred shares:
nil (December 31, 2019 – nil).
Bought
Deal Financing
On August 26, 2020,
the Company closed a bought deal offering (the “August
Offering”). Pursuant to the August Offering, the Company
issued 57,500,000 units of the Company (the “Bought Deal
Units”) at a price of $0.50 per Bought Deal Unit for gross
proceeds of $28,750,000. In connection with the August Offering,
the Company paid issuance costs of $2,103,000 in cash, including
professional fees, underwriters’ commission, and
underwriters’ legal fees. Each Bought Deal Unit consists of
one common share of the Company and one-half of one common share
purchase warrant (each whole common share purchase warrant, a
“Bought Deal Warrant”). Each Bought Deal Warrant
entitles the holder to acquire one common share of the Company for
a period of 24 months following the closing of the August Offering
at a price of $0.70. An amount of $23,485,000 ($25,339,000 net of
allocated issuance costs of $1,854,000) was recorded in share
capital. The Bought Deal Warrants were valued at $3,162,000
($3,411,000 net of allocated issuance costs of $249,000) using the
relative fair value method.
ATM
distributions
On August 20, 2019,
First Mining announced it had entered into an
at‐the‐market ("ATM") equity distribution agreement
with Cantor Fitzgerald Canada Corporation (“Cantor”) as
agent pursuant to which First Mining may, at its discretion and
from time‐to‐time, sell up to $15.0 million of common
shares of the Company to the public at the prevailing market price
of the Company’s common shares on the TSX at the time of such
sale. The sale of these common shares will be made through
“at‐the‐market distributions” as defined in
the Canadian Securities Administrators’ National Instrument
44‐102 Shelf Distributions, including sales made directly on
the TSX, or any other recognized marketplace upon which the
Company’s common shares are listed or quoted or where the
common shares are traded in Canada. During the nine months ended
September 30, 2020, First Mining sold 532,000 common shares of the
Company under the ATM program at an average price of $0.24 per
common share for gross proceeds of $129,000, or net proceeds of
$125,000 after deducting the commission of $4,000 paid to Cantor in
respect of these ATM sales.
Non-Brokered
Private Placement Financing
On March 6, 2020,
the Company completed a non-brokered private placement raising
aggregate gross proceeds of $8,532,000 (the “March
Offering”). Pursuant to the March Offering, the Company
issued an aggregate of 27,420,318 units of the Company (the
“Units”) at a price of $0.22 per Unit for gross
proceeds of $6,032,000 and 10,000,000 flow-through units of the
Company (the “FT Units”) at a price of $0.25 per FT
Unit for gross proceeds of $2,500,000. In connection with the March
Offering, the Company paid issuance costs of $158,000 in cash. Each
Unit consisted of one common share of the Company and one-half of
one common share purchase warrant (each whole common share purchase
warrant, a "Warrant"). Each Warrant entitles the holder to acquire
one common share of the Company for a period of 36 months from the
date of issuance at a price of $0.33. Each FT Unit consisted of one
flow-through common share of the Company that qualifies as a
"flow-through share" for the purposes of the Income Tax Act (Canada) (the
“ITA”) and one-half of one Warrant on the same terms as
the Warrants forming part of the Units. An amount of $7,274,000
($7,410,000 net of allocated issuance costs of $136,000) was
recorded in share capital. The Warrants were valued at $1,100,000
($1,122,000 net of allocated issuance costs of $22,000) using the
relative fair value method, and the remaining $300,000,
representing the implied premium, was recorded as a flow-through
share premium liability (Note 12).
Private
Placement Equity Financing with Ausenco
First Mining has
entered into an agreement with Ausenco Engineering Canada Inc.
(“Ausenco”) to complete a PFS for the Company’s
Springpole Gold Project. Ausenco or an affiliate will be
entitled to receive approximately $1,600,000 in fees thereunder.
Pursuant to the agreement with Ausenco, on January 15, 2020 the
Company closed a private placement with Ausenco, for gross cash
proceeds of approximately $750,000 in respect of its subscription
for common shares (the “Ausenco Offering”). Pursuant to
the Ausenco Offering, First Mining issued 2,777,777 common shares
to Ausenco at a price of $0.27 per common share. First Mining then
prepaid $750,000 to Ausenco for the first tranche of work under the
PFS. During the nine months ended September 30, 2020, PFS services
valued at $750,000 were provided to the Company.
c) Warrants
The movements in
warrants during the nine months ended September 30, 2020 and year
ended December 31, 2019 are summarized as follows:
12
FIRST
MINING GOLD CORP.
NOTES TO THE
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in
Canadian dollars unless otherwise noted, tabular amounts are
expressed in thousands of Canadian dollars)
(Unaudited)
11.
SHARE CAPITAL (Continued)
|
|
Number
|
Weighted average
exercise price
|
|
Balance
as at December 31, 2018
|
20,116,855
|
$0.99
|
|
Warrants
issued
|
12,845,383
|
0.40
|
|
Warrants
exercised
|
(214,200)
|
0.20
|
|
Warrants
expired
|
(16,875,040)
|
1.10
|
|
Balance
as at December 31, 2019
|
15,872,998
|
$0.41
|
|
Warrants
issued
|
77,460,159
|
0.49
|
|
Warrants
exercised
|
(247,500)
|
0.34
|
|
Balance
as at September 30, 2020
|
93,085,657
|
$0.48
|
The following table
summarizes information about warrants outstanding as at September
30, 2020:
|
Exercise
price
|
Number of warrants
outstanding
|
Weighted average
exercise price ($ per share)
|
Weighted average
remaining life (years)
|
|
$0.33
|
18,512,659
|
$0.33
|
2.41
|
|
$0.40
|
42,795,383
|
$0.40
|
3.82
|
|
$0.44
|
3,027,615
|
$0.44
|
0.71
|
|
$0.70
|
28,750,000
|
$0.70
|
1.90
|
|
|
93,085,657
|
$0.48
|
2.85
|
The Warrants issued
during the nine months ended September 30, 2020 and year ended
December 31, 2019 (excluding warrants issued to First Majestic
under the terms of the Silver Purchase Agreement (Note 4)) have
been valued using the Black-Scholes option pricing model with the
following weighted average assumptions:
|
|
Nine months
ended
|
Year
ended
|
|
|
September 30,
2020
|
December 31,
2019
|
|
Risk-free interest
rate
|
0.85%
|
1.55%
|
|
Expected life
(years)
|
2.39
years
|
3.00
years
|
|
Expected
volatility(1)
|
68.36%
|
67.22%
|
|
Expected dividend
yield
|
Nil
|
Nil
|
d) Stock
Options
The Company has
adopted a stock option plan that allows for the granting of stock
options to Directors, Officers, employees and certain consultants
of the Company for up to 10% of the Company’s issued and
outstanding common shares. Stock options granted under the plan may
be subject to vesting provisions as determined by the Board of
Directors.
The movements in
stock options during the nine months ended September 30, 2020 and
year ended December 31, 2019 are summarized as
follows:
|
|
Number
|
Weighted average
exercise price
|
|
Balance
as at December 31, 2018
|
48,265,000
|
$0.61
|
|
Granted –
January 7, 2019
|
5,000,000
|
0.40
|
|
Granted –
April 1, 2019
|
750,000
|
0.40
|
|
Granted –
April 29, 2019
|
2,000,000
|
0.40
|
|
Options
expired
|
(7,700,000)
|
0.68
|
|
Options
forfeited
|
(1,387,500)
|
0.50
|
|
Balance
as at December 31, 2019
|
46,927,500
|
$0.57
|
|
Granted –
January 31, 2020
|
8,750,000
|
0.25
|
|
Granted –
April 1, 2020
|
1,100,000
|
0.25
|
|
Options
exercised
|
(2,092,500)
|
0.30
|
|
Options
expired
|
(1,800,000)
|
0.40
|
|
Options
forfeited
|
(4,250,000)
|
0.56
|
|
Balance
as at September 30, 2020
|
48,635,500
|
$0.52
|
The weighted
average closing share price at the date of exercise for the nine
months ended September 30, 2020 was $0.42 (September 30, 2019
– $nil). 2,092,500 stock options were exercised during the
nine months ended September 30, 2020 (September 30, 2019 –
Nil).
The following table
summarizes information about the stock options outstanding as at
September 30, 2020:
|
|
Options Outstanding
|
Options
Exercisable
|
||||
|
Exercise
price
|
Number of
options
|
Weighted average
exercise price ($ per share)
|
Weighted average
remaining life (years)
|
Number of
options
|
Weighted average
exercise price ($ per share)
|
Weighted average
remaining life (years)
|
|
$0.01 – 0.50
|
28,350,000
|
$0.37
|
3.44
|
22,287,500
|
$0.37
|
3.29
|
|
$0.51 – 1.00
|
20,285,000
|
0.75
|
1.36
|
20,285,000
|
0.75
|
1.36
|
|
|
48,635,000
|
$0.52
|
2.57
|
42,572,500
|
$0.55
|
2.38
|
During the nine
months ended September 30, 2020, there were 9,850,000 (September
30, 2019 – 7,750,000) stock options granted with an aggregate
fair value of $1,170,000 (September 30, 2019 – $1,550,000),
or a weighted average fair value of $0.12 per option (September 30,
2019 – $0.20). As at September 30, 2020, 6,062,500 (September
30, 2019 – 11,350,000) stock options remain unvested with an
aggregate grant date fair value of $347,000 (September 30, 2019 -
$1,155,000).
13
FIRST
MINING GOLD CORP.
NOTES TO THE
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in
Canadian dollars unless otherwise noted, tabular amounts are
expressed in thousands of Canadian dollars)
(Unaudited)
11.
SHARE CAPITAL (Continued)
Certain stock
options granted were directly attributable to exploration and
evaluation expenditures on mineral properties and were therefore
capitalized to mineral properties. In addition, certain stock
options were subject to vesting provisions. These two factors
result in differences between the aggregate fair value of stock
options granted and total share-based payments expensed during the
periods. Total share-based payments expense during the periods
ended September 30, 2020 and September 30, 2019 was classified
within the financial statements as follows:
|
|
For the three
months ended September 30,
|
For the nine months
ended September 30,
|
||
|
Statements
of Net Loss:
|
2020
|
2019
|
2020
|
2019
|
|
General and
administration
|
$74
|
$155
|
$435
|
$720
|
|
Exploration and
evaluation
|
44
|
46
|
116
|
113
|
|
Investor relations
and marketing communications
|
10
|
67
|
132
|
283
|
|
Corporate
development and due diligence
|
-
|
64
|
94
|
265
|
|
Subtotal
|
$128
|
$332
|
$777
|
$1,381
|
|
Statements
of Financial Position:
|
|
|
|
|
|
Mineral
Properties
|
39
|
119
|
389
|
482
|
|
Total
|
$167
|
$451
|
$1,166
|
$1,863
|
The grant date fair
value of the stock options recognized in the period has been
estimated using the Black-Scholes option pricing model with the
following weighted average assumptions:
|
|
Nine months
ended
|
Year
ended
|
|
|
September 30,
2020
|
December 31,
2019
|
|
Risk-free interest
rate
|
1.94%
|
2.20%
|
|
Share price at
grant date (in dollars)
|
$0.22
|
$0.36
|
|
Exercise price (in
dollars)
|
$0.25
|
$0.40
|
|
Expected life
(years)
|
4.96
years
|
5.00
years
|
|
Expected
volatility(1)
|
69.20%
|
71.86%
|
|
Forfeiture
rate
|
5.00%
|
5.00%
|
|
Expected dividend
yield
|
Nil
|
Nil
|
(1)
The
computation of expected volatility was based on the Company’s
historical price volatility, over a period which approximates the
expected life of the option.
12.
FLOW-THROUGH SHARE PREMIUM LIABILITY
The following is a
continuity schedule of the liability portion of the Company’s
flow-through share issuances:
|
|
February 14,
2020
|
December 18,
2019
|
May 16,
2019
|
Total
|
|
Balance,
December 31, 2018
|
$-
|
$-
|
$-
|
$-
|
|
Liability incurred
for flow-through shares issued May 16, 2019
|
-
|
-
|
475
|
475
|
|
Settlement of
flow-through share premium liability upon incurring eligible
expenditures
|
|
-
|
(430)
|
(430)
|
|
Liability incurred
for flow-through shares issued December 18, 2019
|
-
|
296
|
-
|
296
|
|
Balance,
December 31, 2019
|
$-
|
$296
|
$45
|
$341
|
|
Liability incurred
for flow-through shares issued February 14, 2020
|
300
|
-
|
-
|
300
|
|
Settlement of
flow-through share premium liability upon incurring eligible
expenditures
|
(300)
|
(248)
|
(45)
|
(593)
|
|
Balance,
September 30, 2020
|
$-
|
$48
|
$-
|
$48
|
As at September 30,
2020, the Company had $321,000 (December 31, 2019 - $2,178,000) of
unspent flow-through expenditure commitments related to the
December 18, 2019 issuance.
13.
OPERATING EXPENSES
Components by
nature of the Company’s significant functional operating
expense categories are as follows:
|
|
For the three
months ended September 30, 2020
|
For the three
months ended September 30, 2019
|
||
|
|
General and
administration
|
Investor relations
and marketing communications
|
General and
administration
|
Investor relations
and marketing communications
|
|
Administrative and
office
|
$67
|
$9
|
$90
|
$38
|
|
Consultants
|
(45)
|
-
|
20
|
1
|
|
Depreciation
|
40
|
-
|
3
|
-
|
|
Directors
fees
|
58
|
-
|
133
|
-
|
|
Investor relations
and marketing communications
|
-
|
241
|
1
|
66
|
|
Professional
fees
|
47
|
-
|
262
|
-
|
|
Salaries
|
171
|
56
|
177
|
45
|
|
Share-based
payments (non-cash) (Note 11(d))
|
74
|
10
|
155
|
67
|
|
Transfer agent and
filing fees
|
25
|
25
|
56
|
-
|
|
Travel and
accommodation
|
4
|
5
|
17
|
13
|
|
Total
|
$441
|
$346
|
$914
|
$230
|
14
FIRST
MINING GOLD CORP.
NOTES TO THE
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in
Canadian dollars unless otherwise noted, tabular amounts are
expressed in thousands of Canadian dollars)
(Unaudited)
13.
OPERATING EXPENSES (Continued)
|
|
For the nine months
ended September 30, 2020
|
For the nine months
ended September 30, 2019
|
||
|
|
General and
administration
|
Investor relations
and marketing communications
|
General and
administration
|
Investor relations
and marketing communications
|
|
Administrative and
office
|
$172
|
$25
|
$291
|
$45
|
|
Consultants
|
97
|
10
|
50
|
30
|
|
Depreciation
|
104
|
-
|
10
|
-
|
|
Directors
fees
|
201
|
-
|
217
|
-
|
|
Investor relations
and marketing communications
|
3
|
509
|
1
|
477
|
|
Professional
fees
|
714
|
-
|
503
|
-
|
|
Salaries
|
556
|
159
|
566
|
106
|
|
Share-based
payments (non-cash) (Note 11(d))
|
435
|
132
|
720
|
283
|
|
Transfer agent and
filing fees
|
147
|
41
|
155
|
1
|
|
Travel and
accommodation
|
20
|
16
|
42
|
21
|
|
Total
|
$2,449
|
$892
|
$2,555
|
$963
|
14.
SEGMENT INFORMATION
The Company
operates in a single reportable operating segment, being the
acquisition, exploration, and development of North American mineral
properties. Geographic information about the Company’s
non-current assets, excluding financial instruments, as at
September 30, 2020 and December 31, 2019 is as
follows:
|
Non-current
assets
|
September 30,
2020
|
December 31,
2019
|
|
Canada
|
$231,774
|
$253,587
|
|
USA
|
466
|
454
|
|
Mexico
|
-
|
252
|
|
Total
|
$232,240
|
$254,293
|
15.
FAIR VALUE
Fair values have
been determined for measurement and/or disclosure purposes based on
the following methods.
The Company
characterizes fair value measurements using a hierarchy that
prioritizes inputs depending on the degree to which they are
observable. The three levels of the fair value hierarchy are as
follows:
●
Level
1: fair value measurements are quoted prices (unadjusted) in active
markets for identical assets or liabilities;
●
Level
2: fair value measurements are those derived from inputs other than
quoted prices included within level 1 that are observable for the
asset or liability, either directly (i.e. as prices) or indirectly
(i.e. derived from prices); and
●
Level
3: fair value measurements are those derived from valuation
techniques that include significant inputs for the asset or
liability that are not based on observable market data
(unobservable inputs).
15
FIRST
MINING GOLD CORP.
NOTES TO THE
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in
Canadian dollars unless otherwise noted, tabular amounts are
expressed in thousands of Canadian dollars)
(Unaudited)
15.
FAIR VALUE (Continued)
The carrying values
of cash and cash equivalents, current accounts receivables, and
accounts payable and accrued liabilities approximated their fair
values because of the short-term nature of these financial
instruments. These financial instruments are classified as
financial assets and liabilities at amortized cost.
The carrying value
of the non-current reclamation deposit approximated its fair values
as the amount is represented by a cash deposit. This financial
instrument is classified as a financial asset at amortized
cost.
The carrying value
of investments (except for Treasury Metals Warrants) was based on
the quoted market prices of the shares as at September 30, 2020 and
was therefore considered to be Level 1. The fair value of Treasury
Metals Warrants is determined using some Level 2 inputs, as the
Black-Scholes valuation model incorporates Treasury Metals’
share price volatility.
The mineral
property investments (First Mining’s 10% equity interest in
three privately held companies that own the Duparquet Gold Project)
are classified as financial assets at FVTOCI. The fair value of the
mineral property investments was not based on observable market
data and was therefore considered to be Level 3. The initial fair
value of the mineral property investments was determined based on
attributable pro-rata gold ounces for the Company’s 10%
indirect interest in the Duparquet project, which formed part of
the identifiable assets from the acquisition of
Clifton.
As the
Earn‐In Agreement provides Auteco the right to earn an
interest in PC Gold, rather than a direct interest in the Pickle
Crow project, Auteco’s option to acquire PC Gold shares is a
financial liability of First Mining. As a derivative, the Pickle
Crow project option liability is classified as financial liability
at FVTPL. The carrying value of the Option - Pickle Crow Gold
Project was not based on observable market data and involved
complex valuation methods and was therefore considered to be Level
3. The initial fair value of the Option – Pickle Crow Gold
Project was determined based on initial consideration in cash of
$100,000, 25 million shares of Auteco with a fair value upon
receipt of $740,000 and exploration expenditures incurred by Auteco
under the terms of the Earn-in Agreement. Scenarios which may
result in a significant change in fair value include, among others,
performance of the Auteco share price, the amount or timing of
Pickle Crow exploration expenditures incurred or updates to the NI
43-101 (or Australian equivalent) resource report. During the nine
months ended September 30, 2020, management concluded that there
was no significant change in the fair value of the Option –
PC Gold liability.
The Silver Stream
was determined to be a derivative liability, which is classified as
a financial liability at FVTPL. The carrying value of the
derivative liability was not based on observable market data and
involved complex valuation methods and was therefore considered to
be Level 3.
The following table
presents the Company’s fair value hierarchy for financial
assets and liabilities that are measured at fair
value:
|
|
September 30,
2020
|
December 31,
2019
|
||||||
|
|
|
Fair value
measurement
|
|
Fair value
measurement
|
||||
|
|
Carrying
value
|
Level
1
|
Level
2
|
Level
3
|
Carrying
value
|
Level
1
|
Level
2
|
Level
3
|
|
Financial
assets:
|
|
|
|
|
|
|
|
|
|
Investments (Notes
3, 5)
|
$24,016
|
$17,156
|
$6,860
|
$-
|
$1,775
|
$1,775
|
$-
|
$-
|
|
Mineral property
investments (Note 7)
|
6,724
|
-
|
-
|
6,724
|
5,398
|
-
|
-
|
5,398
|
|
Financial
liabilities:
|
|
|
|
|
|
|
|
|
|
Silver Stream
derivative liability (Note 4)
|
13,490
|
-
|
-
|
13,490
|
-
|
-
|
-
|
-
|
|
Option – PC
Gold (Note 6(a))
|
$2,590
|
$-
|
$-
|
$2,590
|
$-
|
$-
|
$-
|
$-
|
During the nine
months ended September 30, 2020 there have been no transfers of
amounts between Level 1, Level 2, and Level 3 of the fair value
hierarchy.
16.
SUBSEQUENT EVENTS
Exercise
and Forfeiture of Stock Options and Warrants
Subsequent to
September 30, 2020, 625,000 stock options were forfeited, and
950,000 stock options were exercised for gross proceeds of
$380,000.
Stock
Options Grant
Subsequent to
September 30, 2020, the Company granted 800,000 incentive stock
options to a new Director and a new employee, and 100,000 incentive
stock options to a consultant of the Company under the terms of its
stock option plan. The stock options have an exercise price of
$0.43 per share and are exercisable for a period of five years from
the grant date.
16
Exhibit
99.2
TSX:
FF | OTCQX: FFMGF | FRANKFURT: FMG
MANAGEMENT’S
DISCUSSION & ANALYSIS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020
|
Suite 2070 – 1188 West Georgia Street, Vancouver, British
Columbia V6E 4A2
www.firstmininggold.com |
1-844-306-8827
|
TABLE OF CONTENTS
|
COMPANY
OVERVIEW AND STRATEGY
|
1
|
|
2020
HIGHLIGHTS
|
1
|
|
SELECTED
FINANCIAL INFORMATION
|
2
|
|
ONTARIO
MINERAL PROPERTY PORTFOLIO LOCATIONS
|
3
|
|
MINERAL
PROPERTY PORTFOLIO REVIEW
|
4
|
|
SELECTED
QUARTERLY FINANCIAL INFORMATION
|
11
|
|
RESULTS
OF CONTINUING OPERATIONS
|
12
|
|
FINANCIAL
CONDITION, LIQUIDITY AND CAPITAL RESOURCES
|
14
|
|
OUTLOOK
|
15
|
|
FINANCIAL
INSTRUMENTS
|
15
|
|
RELATED
PARTY TRANSACTIONS
|
16
|
|
OFF-BALANCE
SHEET ARRANGEMENTS
|
16
|
|
NON-IFRS
MEASURES
|
16
|
|
ACCOUNTING
POLICIES, JUDGMENTS AND ESTIMATES
|
18
|
|
CRITICAL
ACCOUNTING ESTIMATES
|
18
|
|
ACCOUNTING
STANDARDS ISSUED BUT NOT YET APPLIED
|
19
|
|
RISKS
AND UNCERTAINTIES
|
31
|
|
QUALIFIED
PERSONS
|
34
|
|
SECURITIES
OUTSTANDING
|
34
|
|
MANAGEMENT’S
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
|
34
|
|
FORWARD-LOOKING
INFORMATION
|
35
|
|
CAUTIONARY
NOTE TO U.S. INVESTORS REGARDING MINERAL RESOURCE AND MINERAL
RESERVE ESTIMATES
|
36
|
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless otherwise
indicated)
|
For the three and nine months ended September 30,
2020
|
GENERAL
This
Management’s Discussion and Analysis (“MD&A”) should be read in
conjunction with the unaudited condensed interim consolidated
financial statements of First Mining Gold Corp. (the
“Company” or
“First Mining”)
for the three and nine months ended September 30, 2020, which are
prepared in accordance with International Financial Reporting
Standards (“IFRS”) as applicable to the
preparation of interim financial statements, including
International Accounting Standard IAS 34 Interim Reporting. The
unaudited condensed interim consolidated financial statements
should also be read in conjunction with the Company’s audited
consolidated financial statements for the year ended December 31,
2019, which are prepared in accordance with IFRS as issued by the
International Accounting Standards Board (“IASB”). These documents along with
additional information on the Company, including the
Company’s Annual Information Form for the year ended December
31, 2019, are available under the Company’s SEDAR profile at
www.sedar.com,
on EDGAR at www.sec.gov.,
and on the Company’s website at www.firstmininggold.com.
In this
MD&A, unless the context otherwise requires, references to the
“Company”, “First Mining”,
“we”, “us”, and “our” refer to
First Mining Gold Corp. and its subsidiaries.
This
MD&A contains “forward-looking statements” and
“forward-looking information” within the meaning of
applicable Canadian securities laws. See the section on page 36 of
this MD&A titled “Forward-Looking Information” for
further details. In addition, this MD&A has been prepared
in accordance with the requirements of Canadian securities laws,
which differ in certain material respects from the disclosure
requirements of United States securities laws, particularly with
respect to the disclosure of mineral reserves and mineral
resources. See the section on page 38 of this MD&A titled
“Cautionary Note to U.S. Investors Regarding Mineral Resource
and Mineral Reserve Estimates” for further
details.
This
MD&A contains disclosure of certain non-IFRS financial
measures. Non-IFRS measures do not have any standardized meaning
prescribed under IFRS. See the section on page 29 of the MD&A
entitled "Non-IFRS Measures" for further details.
All
dollar amounts included in this MD&A are expressed in Canadian
dollars unless otherwise noted. This MD&A is dated as of
November 16, 2020 and all information contained in this MD&A is
current as of November 13, 2020.
First
Mining was incorporated on April 4, 2005. The Company changed its
name to First Mining Gold Corp. in January 2018. First Mining is a
Canadian gold developer focused on the development and permitting
of the Springpole Gold Project in northwestern Ontario. Springpole
is one of the largest undeveloped gold projects in Canada,
currently hosting a mineral resource base of 4.67 million ounces of
gold in the Indicated category and 0.23 million ounces of gold in
the Inferred category. A Pre-Feasibility Study (the
“PFS”) is
underway at Springpole, with completion targeted in early 2021, and
permitting is on-going with submission of the Environmental Impact
Statement targeted for 2021. The Company also holds a significant
equity investment in Treasury Metals Inc. (“Treasury Metals”) (TSX: TML) which
is advancing the Goliath-Goldlund gold projects towards a
construction decision. First Mining’s portfolio of gold
projects in eastern Canada also includes Pickle Crow (being
advanced in partnership with Auteco Minerals Ltd.
(“Auteco”) (ASX:
AUT)), Cameron, Hope Brook, Duparquet, Duquesne, and
Pitt.
The
following highlights the Company’s developments during the
first nine months of 2020 (including subsequent events up to
November 13, 2020). For further information, please refer to the
“News” section on the Company’s website at
www.firstmininggold.com.
COVID-19 Response
In response to the onset of the COVID-19 pandemic, the Company
adopted a series of robust COVID-19 risk mitigation policies
incorporating recommendations set by the Government of Ontario, the
Government of British Columbia and the Government of Canada. To
date, First Mining has not had any cases of COVID-19 novel
coronavirus (“COVID-19”) at its camp operations or its head office
in Vancouver. The health and safety of First Mining’s
workforce, their families and the communities in which the Company
operates is First Mining’s primary concern. In the interests
of the health and well-being of its employees, contractors,
visitors to its office and operations, and the families of all such
persons, First Mining also implemented a work from home policy for
its employees until further notice. First Mining is committed to
fully supporting safety measures for our workforce, families and
communities.
At the Springpole Gold Project, the Company initially demobilized
one of its two drill crews. In order to ensure the health and
safety of all its employees the Company had intended to complete
the shift rotation while limiting access to site for any new
individuals. Work at site was nearing completion ahead of a planned
reduction in on-site activities until after the spring ice
break-up. However, due to the COVID-19 pandemic, First Mining
decided to demobilize the remaining contractors and staff at the
Springpole Gold Project in March, and to keep the project on care
and maintenance until it was able to restart its work
programs.
On May 28, 2020, the Company announced the restart of field
operations at the Springpole Gold Project. First Mining has
implemented a COVID-19 risk mitigation policy incorporating
recommendations set by the Government of Ontario, to provide health
and safety guidance and recommendations to its employees and
contractors. All employees and contractors at the Springpole Gold
Project will be subject to heightened health and safety standards
in accordance with precautions put in place by the Government of
Ontario and the Company. To date, the Company has had no cases of
COVID-19 at any of its operations.
Management continues to monitor the COVID-19 situation very closely
and will adapt technical work programs as the situation
evolves.
Springpole Gold Project - Silver Stream
On June
10, 2020, the Company entered into a silver purchase agreement (the
“Silver Purchase
Agreement”) with First
Majestic Silver Corp. (“First
Majestic”) (TSX: FR) (NYSE: AG). The transaction
closed on July 2, 2020. Under the terms of the Silver Purchase
Agreement, First Majestic agreed to pay First Mining total
consideration of US$22.5 million, in three tranches, for the right
to purchase 50% of the payable silver produced from Springpole over
the life of the project (the “Silver Stream”) and 30 million
common share purchase warrants of First Mining.
Upon
receipt of its share of silver production, First Majestic will make
cash payments to First Mining for each ounce of silver paid to
First Majestic under the Silver Purchase Agreement equal to 33% of
the lesser of the average spot price of silver for the applicable
calendar quarter, and the spot price of silver at the time of
delivery (the “Silver Cash
Price”), subject to a price cap of US$7.50 per ounce
of silver (the “Price
Cap”). First Mining has the right to repurchase 50% of
the Silver Stream for US$22.5 million at any time prior to the
commencement of production at Springpole.
Goldlund Gold Project (owned by Treasury Metals as of August 7,
2020) - Transaction with Treasury Metals
On June
3, 2020, First Mining entered into a share purchase agreement (the
“Share Purchase
Agreement”) with Treasury Metals, pursuant to which
Treasury Metals agreed to acquire all of the issued and outstanding
shares of Tamaka Gold Corporation, a previously wholly-owned
subsidiary of the Company (the “Transaction”) that indirectly held
the Goldlund Gold Project through its own wholly-owned subsidiary,
Goldlund Resources Inc. The transaction closed on August 7, 2020.
Under the terms of the Share Purchase Agreement, First Mining
received total consideration comprised of (i) 130 million common
shares of Treasury Metals (“Treasury Metals Shares”); (ii) 35
million common share purchase warrants of Treasury Metals
(“Treasury Metals
Warrants”) with an exercise price of $0.50 for a
3-year term; (iii) a 1.5% net smelter returns (“NSR”) royalty on Goldlund Gold
Project (0.5% of which can be bought back by Treasury Metals for $5
million in cash); and (iv) certain contingent milestone payments
totaling $5 million, payable in cash, on certain key advancements
at Goldlund Gold Project. On August 5, 2020, the shareholders of
Treasury Metals approved a three (3) for one (1) common share
consolidation (the “Consolidation”), which was made
effective prior to the opening of business on August 11, 2020. As a
result of the Consolidation, First Mining holds 43.33 million
Treasury Metals Shares and 11.67 million Treasury Metals Warrants,
and the exercise price of such warrants has been adjusted to $1.50
(the warrants are still for a 3-year term from the date of closing
the transaction).
1
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless otherwise
indicated)
|
For the three and nine months ended September 30,
2020
|
Pickle Crow Gold Project - Earn-In Agreement
On March 12, 2020, the Company and Auteco Minerals Ltd
(“Auteco”) (ASX: AUT) executed a definitive Earn-In
Agreement (the “Earn-In
Agreement”) pursuant to
which Auteco may earn up to an 80% interest in the Pickle Crow Gold
Project (the “Earn-In”). Under the terms of the Earn-In
Agreement, Auteco can earn up to an 80% equity interest in PC Gold
Inc. (“PC Gold”), a wholly-owned subsidiary of First
Mining which owns the Pickle Crow Gold Project, by: (a) incurring a
total of $10,000,000 in exploration and environmental expenditures
over five years, (b) making cash payments to First Mining totaling
$4,100,000 (of which the Company has received $100,000 to date),
and (c) issuing 125 million shares of Auteco to First Mining (of
which the Company has received 25 million shares to date). First
Mining will also retain a 2% NSR royalty, 1% of which can be
purchased by Auteco for USD$2,500,000.
Bought Deal Financing
On August 26, 2020, the Company closed a bought deal offering (the
“August
Offering”). Pursuant to
the August Offering, the Company issued 57,500,000 units of the
Company (the “Bought Deal
Units”) at a price of
$0.50 per Bought Deal Unit for gross proceeds of $28,750,000. In
connection with the August Offering, the Company paid issuance
costs of $2,103,000 in cash, including professional fees,
underwriters’ commission, and underwriters’ legal fees.
Each Bought Deal Unit consists of one common share of the Company
and one-half of one common share purchase warrant (each whole
common share purchase warrant, a “Bought Deal
Warrant”). Each Bought
Deal Warrant entitles the holder to acquire one common share of the
Company for a period of 24 months following the closing of the
August Offering at a price of $0.70. An amount of $23,485,000
($25,339,000 net of allocated issuance costs of $1,854,000) was
recorded in share capital. The Bought Deal Warrants were valued at
$3,162,000 ($3,411,000 net of allocated issuance costs of $249,000)
using the relative fair value method.
Non-Brokered Private Placement Financings
On
March 6, 2020, the Company closed the third and final tranche of a
non-brokered private placement initially announced on February 6,
2020, pursuant to which it raised aggregate gross proceeds of
$8,532,000 (the “March
Offering”). Pursuant to the March Offering, the
Company issued an aggregate of 27,420,318 units of the Company (the
“Units”) at a
price of $0.22 per Unit for gross proceeds of $6,032,000 and
10,000,000 flow-through units of the Company (the
“FT Units”) at a
price of $0.25 per FT Unit for gross proceeds of $2,500,000. The
March Offering closed in three tranches, with 10,000,000 FT Units
issued on February 14, 2020, 23,328,818 Units issued on February
28, 2020 and 4,091,500 Units issued on March 6, 2020. In connection
with the March Offering, the Company paid issuance costs of
$158,000 in cash. Each Unit consisted of one common share of the
Company and one-half of one common share purchase warrant (each
whole common share purchase warrant, a "Warrant"). Each Warrant entitles the
holder to acquire one common share of the Company for a period of
36 months from the date of issuance at a price of $0.33. Each FT
Unit consisted of one flow-through common share of the Company that
qualifies as a "flow-through share" for the purposes of the
Income Tax Act (Canada) and
one-half of one Warrant on the same terms as the Warrants forming
part of the Units.
At-The-Market Financing
On
August 20, 2019, First Mining announced it had entered into an
at-the-market ("ATM") equity
distribution agreement with Cantor Fitzgerald Canada Corporation
(“Cantor”) as
agent pursuant to which First Mining may, at its discretion and
from time-to-time, sell up to $15.0 million of common shares of the
Company to the public at the prevailing market price of the
Company’s common shares on the TSX at the time of such sale.
The sale of these common shares will be made through
“at-the-market distributions” as defined in the
Canadian Securities Administrators’ National Instrument
44-102 Shelf Distributions,
including sales made directly on the Toronto Stock Exchange
(“TSX”), or any
other recognized marketplace upon which the Company’s common
shares are listed or quoted or where the common shares are traded
in Canada. During the nine months ended September 30, 2020, First
Mining has sold 532,000 common shares of the Company under the ATM
program at an average price of $0.24 per common share for gross
proceeds of $129,000, or net proceeds of $125,000 after deducting
the commission of $4,000 paid to Cantor in respect of these ATM
sales.
SELECTED FINANCIAL INFORMATION
|
For
the nine months ended September 30,
|
|||
|
Financial
Results (in $000s Except for per Share Amounts):
|
2020
|
2019
|
2018
|
|
Mineral Property
Expenditures(1)
|
$9,474
|
$4,096
|
$6,303
|
|
Net
Loss
|
(33,345)
|
(4,686)
|
(5,987)
|
|
Net Loss Excluding
Certain Non-cash items(2)(3)
|
(2,863)
|
(2,964)
|
(3,347)
|
|
Basic and Diluted
Net Loss Per Share
(in
Dollars)(4)
|
$(0.05)
|
$(0.01)
|
$(0.01)
|
|
|
September 30,
|
December 31,
|
December 31,
|
|
Financial
Position (in $000s):
|
2020
|
2019
|
2018
|
|
Cash and Cash
Equivalents
|
$32,477
|
$5,902
|
$5,115
|
|
Working Capital(2)
|
14,324
|
5,780
|
7,536
|
|
Investments
|
24,016
|
1,775
|
2,597
|
|
Mineral
Properties
|
168,188
|
252,815
|
244,129
|
|
Investment in
Treasury Metals Inc.
|
62,833
|
-
|
-
|
|
|
|
|
|
|
Total
Assets
|
296,343
|
268,020
|
257,532
|
|
Total Non-current
Liabilities
|
$15,332
|
$3,139
|
$-
|
(1)
This
represents mineral property expenditures per consolidated
statements of cash flows.
(2)
This
is a non-IFRS measurement with no standardized meaning under IFRS
and may not be comparable to similar financial measures presented
by other issuers. For further information and a detailed
reconciliation, please see the section in this MD&A titled
“Non-IFRS Measures”.
(3)
“The
certain non-cash items excluded” refers to the
“Share-based payments expense”, “Impairment of
non-current assets”, “Investments fair value
loss”, “Loss on disposal of subsidiaries”,
“Fair value loss on Silver Stream derivative
liability”, “Deferred income tax expense
(recovery)” and “Equity income from investment in
Treasury Metals”.
(4)
The
basic and diluted loss per share calculations result in the same
amount due to the anti-dilutive effect of outstanding stock options
and warrants.
2
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless otherwise
indicated)
|
For the three and nine months ended September 30,
2020
|
(1)
Pickle
Crow Gold Project is subject to an Earn-In Agreement pursuant to
which Auteco is the operator of the property and may acquire up to
an 80% interest in the property.
The
Company classifies its mineral properties as Tier 1, Tier 2, and
Tier 3:
●
Tier 1 projects
are core, material assets which
include the Company’s largest and most advanced mineral
resource-stage projects.
●
Tier 2 projects
are resource-stage assets which host
mineral resources.
●
Tier 3 projects
are grassroots exploration projects
that host mineralization but have not received sufficient drilling
to delineate mineral resources.
3
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless otherwise
indicated)
|
For the three and nine months ended September 30,
2020
|
MINERAL PROPERTY PORTFOLIO GOLD RESOURCES
(1)
|
Project
|
Tonnes
|
Gold
Grade (g/t)
|
Silver
Grade (g/t)
|
Contained Gold Ounces (oz)
|
Contained Silver Ounces (oz)
|
|
Measured Resources
|
|||||
|
Cameron
Gold Project(2)
|
3,360,000
|
2.75
|
-
|
297,000
|
-
|
|
Duparquet
Gold Project(3)
|
18,470
|
1.52
|
-
|
901
|
-
|
|
Indicated Resources
|
|||||
|
Springpole
Gold Project(4)
|
139,100,000
|
1.04
|
5.40
|
4,670,000
|
24,190,000
|
|
Hope
Brook Gold Project
|
5,500,000
|
4.77
|
-
|
844,000
|
-
|
|
Cameron
Gold Project(5)
|
2,170,000
|
2.40
|
-
|
167,000
|
-
|
|
Duparquet
Gold Project(3)
|
7,122,070
|
1.73
|
-
|
396,134
|
-
|
|
Duquesne
Gold Project
|
1,859,200
|
3.33
|
-
|
199,161
|
-
|
|
Inferred Resources
|
|||||
|
Springpole
Gold Project(4)
|
11,400,000
|
0.63
|
3.10
|
230,000
|
1,120,000
|
|
Hope
Brook Gold Project
|
836,000
|
4.11
|
-
|
110,000
|
-
|
|
Cameron
Gold Project(6)
|
6,535,000
|
2.54
|
-
|
533,000
|
-
|
|
Pickle
Crow Gold Project(7)
|
9,452,000
|
4.10
|
-
|
1,230,500
|
-
|
|
Duparquet
Gold Project(3)
|
4,066,284
|
1.85
|
-
|
242,312
|
-
|
|
Duquesne
Gold Project
|
1,563,100
|
5.58
|
-
|
280,643
|
-
|
|
Pitt
Gold Project
|
1,076,000
|
7.42
|
-
|
257,000
|
-
|
|
|
|||||
|
Total Measured Resources
|
3,378,470
|
2.74
|
-
|
297,901
|
-
|
|
Total Indicated Resources
|
155,751,270
|
1.25
|
5.40
|
6,276,295
|
24,190,000
|
|
Total Measured and Indicated Resources
|
159,129,740
|
1.28
|
5.40
|
6,574,196
|
24,190,000
|
|
Total Inferred Resources
|
34,928,384
|
2.58
|
3.10
|
2,883,455
|
1,120,000
|
(1)
The
mineral resources set out in this table are based on the technical
report for the applicable property, the title and date of which are
set out under the applicable property description within the
section “Mineral Property Portfolio Review” in this
MD&A or in the Company’s Annual Information Form for the
year ended December 31, 2019, which is available under the
Company’s SEDAR profile at www.sedar.com.
(2)
Comprised
of 2,670,000 tonnes of pit-constrained (0.55 g/t Au cut-off)
measured resources at 2.66 g/t Au, and 690,000 tonnes of
underground (2.00 g/t Au cut-off) measured resources at 3.09 g/t
Au.
(3)
The
Company owns 100% of the Central Duparquet Property, and a 10%
indirect interest in the Duparquet Gold Project. The measured,
indicated and inferred mineral resources for Duparquet shown in the
above table reflect both of these ownership interests.
(4)
Open pit mineral resources are reported at a
cut-off grade of 0.4 g/t Au. Cut-off grades are based on a gold
price of USD$1,400/oz and a gold processing recovery of 80% and a
silver price of USD$15/oz and a silver processing recovery of 60%.
The estimated Life of Mine (“LOM”) strip ratio for the resource estimate is
2.1. Silver resource shown in separate column with grade
representing silver g/t, and contained ounces representing silver
Ag.
(5)
Comprised
of 820,000 tonnes of pit-constrained (0.55 g/t Au cut-off)
indicated resources at 1.74 g/t Au, and 1,350,000 tonnes of
underground (2.00 g/t Au cut-off) indicated resources at 2.08 g/t
Au.
(6)
Comprised
of 35,000 tonnes of pit-constrained (0.55 g/t Au cut-off) inferred
resources at 2.45 g/t Au, and 6,500,000 tonnes of underground (2.00
g/t Au cut-off) inferred resources at 2.54 g/t Au.
(7)
Comprises
1,887,000 tonnes of pit-constrained (0.50 g/t Au cut-off) inferred
resources at 1.30 g/t Au, and 7,565,000 tonnes of underground
inferred resources that consist of: (i) a bulk tonnage, long-hole
stoping component (2.00 g/t Au cut-off); and (ii) a high-grade
cut-and-fill component (2.60 g/t Au cut-off) over a minimum width
of 1 metre.
4
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless otherwise
indicated)
|
For the three and nine months ended September 30,
2020
|
First
Mining has properties located in Canada and the United States. The
following section discusses the Company’s priority and other
significant projects.
Readers are cautioned that, with respect to any Preliminary
Economic Assessment (“PEA”) referenced in the section
below or anywhere else in this MD&A, a PEA is preliminary in
nature, any inferred mineral resources included therein are
considered too speculative geologically to have the economic
considerations applied to them that would enable them to be
categorized as mineral reserves, and there is no certainty that the
PEA will be realized. Mineral resources that are not mineral
reserves do not have demonstrated economic viability. Actual
results may vary, perhaps materially. The Company is not aware of
any environmental, permitting, legal, title, taxation,
socio-political, marketing or other issue which may materially
affect this estimate of mineral resources. The projections,
forecasts and estimates herein and in any technical reports
referred to herein constitute forward-looking statements and
readers are urged not to place undue reliance on such
forward-looking statements.
The
Company continues with its environmental data collection,
permitting and Indigenous consultation processes at its Tier 1
Canadian mineral properties, focusing primarily on the Springpole
Gold Project. At the Springpole Gold Project, the goal in 2020 is
to continue to advance permitting and to substantially complete the
PFS. In Q3 2020 the Company also closed its announced transaction
with Treasury Metals. Upon closing of the transaction with Treasury
Metals, First Mining held approximately 40% (September 30, 2020
– 40%) of the issued and outstanding common shares of
Treasury Metals, which will be advancing the Goliath-Goldlund gold
project. Regarding First Mining’s broader gold asset
portfolio, including the Hope Brook Gold Project and the Cameron
Gold Project, the priority is to complete low-spend, incremental
work, including baseline environmental studies, internal scoping
studies and potential reconnaissance mapping and exploration
work.
In
addition to the below mineral property balances, $6,724,000
(December 31, 2019 - $5,398,000) is recorded as mineral property
investments on the statements of financial position, which
represents the Company’s 10% indirect interest in the
Duparquet Gold Project in Québec, Canada. During the nine
months ended September 30, 2020, management determined that there
was an increase in the fair value of mineral property investments
and a fair value gain of $1,326,000 (nine months ended September
30, 2019 - $nil) was recorded.
As
at September 30, 2020 and December 31, 2019, the Company had
capitalized the following acquisition, exploration and evaluation
costs to its mineral properties:
|
(in
$000s)
|
||||
|
|
Balance December
31, 2019
|
2020 capitalized
net expenditures
|
Disposal,
impairment or reclassification
|
Balance
September 30, 2020
|
|
Springpole
Gold Project
|
$76,775
|
$7,582
|
$-
|
$84,357
|
|
Goldlund
Gold Project
|
98,894
|
1,609
|
(100,503)
|
-
|
|
Hope
Brook Gold Project
|
20,071
|
367
|
-
|
20,438
|
|
Cameron
Gold Project
|
27,374
|
171
|
-
|
27,545
|
|
Pickle
Crow Gold Project
|
19,263
|
2,542
|
-
|
21,805
|
|
Duquesne
Gold Project
|
5,133
|
9
|
-
|
5,142
|
|
Pitt
Gold Project
|
2,084
|
1
|
-
|
2,085
|
|
Others(1)
|
2,615
|
29
|
3,709
|
6,353
|
|
Canada Total
|
$252,209
|
$12,310
|
$(96,794)
|
$167,725
|
|
Mexico
|
154
|
13
|
(167)
|
-
|
|
USA
|
452
|
11
|
-
|
463
|
|
Total
|
$252,815
|
$12,334
|
$(96,961)
|
$168,188
|
|
(in
$000s)
|
||||
|
|
Balance December
31, 2018
|
2019 capitalized
net expenditures
|
Disposal,
impairment or reclassification
|
Balance December
31, 2019
|
|
Springpole
Gold Project
|
$73,378
|
$3,397
|
$-
|
$76,775
|
|
Goldlund
Gold Project
|
96,604
|
2,290
|
-
|
98,894
|
|
Hope
Brook Gold Project
|
19,581
|
490
|
-
|
20,071
|
|
Cameron
Gold Project
|
27,032
|
342
|
-
|
27,374
|
|
Pickle
Crow Gold Project
|
16,754
|
2,509
|
-
|
19,263
|
|
Duquesne
Gold Project
|
5,091
|
42
|
-
|
5,133
|
|
Pitt
Gold Project
|
2,082
|
2
|
-
|
2,084
|
|
Others(1)
|
2,559
|
56
|
-
|
2,615
|
|
Canada Total
|
$243,081
|
$9,128
|
$-
|
$252,209
|
|
Mexico
|
244
|
(90)
|
-
|
154
|
|
USA
|
804
|
(11)
|
(341)
|
452
|
|
Total
|
$244,129
|
$9,027
|
$(341)
|
$252,815
|
(1)
Other mineral
properties in Canada as at September 30, 2020 and December 31, 2019
include the mining claims and concessions located in the Township
of Duparquet, Quebéc, which are near the Company’s
Duquesne gold project and Lac Virot property located in the
Labrador West Region of Labrador. Other mineral properties in
Canada as at September 30, 2020 also include the 1.5% NSR Royalty
under the terms of the Share Purchase Agreement, which was
reclassified from “Goldlund” to “Others”
during the nine months ended September 30, 2020.
Tier 1 Projects
Springpole Gold Project, Ontario
The
Springpole Gold Project covers an area of 41,943 hectares in
northwestern Ontario, consisting of 30 patented mining claims, 435
contiguous mining claims and thirteen mining leases. The project is
located approximately 110 kilometres (“km”) northeast of the Municipality
of Red Lake in northwestern Ontario and is situated within the
Birch-Uchi Greenstone Belt. The large, open pittable resource is
supported by significant infrastructure, including a 72-person
onsite camp, winter road access, a logging road and nearby power
lines within 40 km. Springpole Gold Project is located within an
area that is covered by Treaty Three and Treaty Nine First Nations
Agreements.
With
approximately 4.7 million ounces of gold and 24 million ounces of
silver in the indicated resource category, Springpole Gold Project
is one of the largest undeveloped gold projects in
Ontario1.
During
the nine months ended September 30, 2020, the most significant
expenditures at the Springpole Gold Project were $1,531,000 in
connection with geotechnical and metallurgical drilling, $1,173,000
in connection with pre-feasibility work, and $623,000 in connection
with the continuation of environmental fieldwork. In the prior year
period, the most significant expenditures were $549,000 for site
employees’ salaries and management salary allocations,
$274,000 in connection with the continuation of environmental
fieldwork and $265,000 in connection with the completion of
metallurgical testwork.
(1) Source: S&P Market
Intelligence database as of November 4, 2020. Ranking among
undeveloped primary gold resources per jurisdiction.
5
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless otherwise
indicated)
|
For the three and nine months ended September 30,
2020
|
Silver Stream
On June
10, 2020, First Mining entered into the Silver Purchase Agreement
with First Majestic regarding the Silver Stream. The transaction
closed on July 2, 2020. Under the terms of the Silver Purchase
Agreement, First Majestic has agreed to pay First Mining total
consideration of US$22.5 million, in three tranches, for the Silver
Stream and 30 million common share purchase warrants of First
Mining. Each warrant entitles First Majestic to purchase one common
share of First Mining at an exercise price of $0.40 for a period of
five years.
Pursuant to the Silver Purchase Agreement, consideration of US$22.5
million (the “Advance
Payment”) is payable in
three tranches:
●
US$10 million was paid on closing the transaction,
with US$2.5 million paid in cash and the remaining $7.5 million
satisfied by the issuance to First Mining of 805,698 common shares
of First Majestic (the “First Majestic
Shares”);
●
US$7.5 million is payable upon First Mining
publicly announcing the completion of a positive PFS for Springpole
(expected in 2021-Q1), with US$3.75 million payable in cash and
US$3.75 million payable in First Majestic Shares based on the
20-day volume-weighted average trading price
(“VWAP”) of the First Majestic Shares on the TSX
at the time; and
●
US$5
million is payable upon First Mining receiving approval of a
Federal or Provincial Environmental Assessment for the Springpole
Gold Project, with US$2.5 million payable in cash and the balance
in First Majestic Shares (based on 20-day VWAP).
In the
event of default, First Majestic may terminate the Silver Purchase
Agreement and the Advance Payment received by First Mining at that
time would become repayable.
Upon
receipt of its share of silver production, First Majestic will make
cash payments to First Mining for each ounce of silver paid to
First Majestic under the Silver Purchase Agreement equal to 33% of
the lesser of the average spot price of silver for the applicable
calendar quarter, and the spot price of silver at the time of
delivery (the “Silver Cash
Price”), subject to a price cap of US$7.50 per ounce
of silver (the “Price
Cap”). The Price Cap is subject to annual inflation
escalation of 2%, commencing at the start of the third year of
production. First Mining has the right to repurchase 50% of the
Silver Stream for US$22.5 million at any time prior to the
commencement of production at Springpole.
The
Silver Stream has an initial term of 40 years from July 2, 2020.
The term is automatically extended by successive 10-year periods as
long as the life of mine continues for the Springpole Gold Project.
If upon expiration of the term of the Silver Purchase Agreement,
the Company has not sold to First Majestic an amount of silver
sufficient to reduce the Advance Payment to nil, then a refund of
the uncredited balance, without interest shall be due and owing by
the Company to First Majestic.
The
proceeds received by First Mining will be used to advance
Springpole through the PFS and the federal and provincial
environmental assessment (“EA”) processes, and to fund
general corporate expenses.
The
Company has concluded that the Silver Stream is a standalone
derivative measured at FVTPL. As of the acquisition date, the
estimated fair value of the Silver Stream derivative liability was
determined using a discounted cash flow model which incorporated a
Monte Carlo simulation. The fair value of the Silver Stream
derivative liability is calculated at each reporting date as the
net of the future Advance Payment tranches receivable (an asset for
the Company) and the Silver Stream obligation (a liability to the
company), with gains and losses recorded in the statement of net
income (loss) and comprehensive income (loss). The fair value of
the Silver Stream derivative liability at July 2, 2020 was
determined to be US$5,431,000 ($7,378,000), which consisted of the
fair value of the Advance Payment tranches receivable of
US$8,473,000 ($11,512,000), net of the fair value of future Silver
Stream obligation of US$13,904,000 ($18,890,000). At September 30,
2020, the fair value of the Silver Stream is US$10,115,483
($13,490,000), which consisted of fair value of the Advance Payment
tranches receivable of US$8,506,000 ($11,346,000) net of the fair
value of the Silver Stream obligation of US$18,621,000
($24,836,000).
The
fair value of the 30 million common share purchase warrants issued
to First Majestic as part of the transaction was calculated using
the Black-Scholes option pricing model. At inception, the fair
value of the warrants was $6,278,000.
Commencement of Pre-Feasibility Study
On
November 14, 2019, the Company entered into an agreement with
Ausenco Engineering Canada Inc. (“Ausenco”) to complete a PFS for
Springpole Gold Project. The PFS will follow on from the work
completed during the Springpole Gold Project PEA phase (described
below), initially focusing on trade-off studies and optimizations
to define the ultimate project scope. The final project scope will
then be incorporated into the PFS. Ausenco or an affiliate will be
entitled to receive approximately $1,600,000 in fees
thereunder.
Pursuant
to the agreement referenced above, on January 15, 2020, the Company
closed a private placement with Ausenco, for gross cash proceeds of
approximately $750,000 in respect of its subscription for common
shares (the “Ausenco
Offering”). Pursuant to the Ausenco Offering, First
Mining issued 2,777,777 common shares to Ausenco at a price of
$0.27 per common share.
For the
balance of the PFS, the Company is required to pay cash to Ausenco,
or issue common shares to Ausenco in exchange for services
provided. Once Ausenco has completed an additional $375,000 in
services in relation to the PFS, First Mining will issue to Ausenco
a further $375,000 of common shares or pay such amount in cash.
Pricing will be based on the 30-day volume weighted average price
(“VWAP”) at that
time less the maximum discount allowed under TSX rules, subject to
the minimum pricing rules of the TSX.
Updated Preliminary Economic Assessment
On
October 16, 2019, the Company announced the results of an updated
independent Preliminary Economic Assessment study for the
Springpole Gold Project (the “2019 Springpole Gold Project
PEA”) that was
prepared by SRK Consulting (Canada) Inc. The 2019 Springpole Gold Project PEA provides
updates from the previous PEA for the Springpole Gold Project
completed in October 2017 (the “2017 Springpole Gold Project
PEA”).
The
2019 Springpole Gold Project PEA evaluates recovery of gold and
silver from a 36,000 tonne-per-day (“tpd”) open pit operation, with a
process plant that includes crushing, grinding and flotation, with
fine grinding of the flotation concentrate and agitated leaching of
both the flotation concentrate and the flotation tails followed by
a carbon-in-pulp recovery process to produce doré bullion.
Updated metallurgical testwork that has demonstrated the potential
for significantly improved gold and silver recoveries was included
along with updated operating and capital cost estimates. The
mineral resource calculations provided in the 2019 Springpole Gold
Project PEA were not impacted and remain the same as were stated in
the 2017 Springpole Gold Project PEA. A copy of the 2019 Springpole Gold
Project PEA technical report entitled “Preliminary Economic
Assessment Update for the Springpole Gold Project, Ontario,
Canada”, which has an effective date of September 1, 2019,
was filed by the Company on SEDAR on November 7, 2019. Under the
2019 Springpole Gold Project PEA, capital costs for the processing
facility were estimated to be USD$519 million, inclusive of a
USD$104 million contingency. No major plant re-build or expansion
was considered during the LOM, with sustaining capital set to
maintain the equipment in operating condition. No allowance for
salvage value was made.
Readers are cautioned that the 2019 Springpole Gold Project PEA is
preliminary in nature, and as such includes inferred mineral
resources that are considered too speculative geologically to have
the economic considerations applied to them that would enable them
to be categorized as mineral reserves, and there is no certainty
that the 2019 Springpole Gold Project PEA will be realized. Mineral
resources that are not mineral reserves do not have demonstrated
economic viability.
Note: Base case parameters assume a gold price of USD$1,300/oz and
a silver price of USD$20/oz (the same prices used in the 2017
Springpole Gold Project PEA), and an exchange rate (C$ to USD$) of
0.75. NPV is calculated as of the commencement of construction and
excludes all pre-construction costs.
6
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless otherwise
indicated)
|
For the three and nine months ended September 30,
2020
|
Highlights
of the 2019 Springpole Gold Project PEA as compared to the 2017
Springpole Gold Project PEA are as follows:
|
Parameters
|
2019
PEA
|
2017
PEA
|
|
Mine
life
|
12
years
|
12
years
|
|
Pre-production
period
|
2.5
years
|
3
years
|
|
Initial
capital cost
|
USD$809
million
|
USD$586
million
|
|
Base
case gold price
|
USD$1,300
per oz
|
USD$1,300
per oz
|
|
Base
case silver price
|
USD$20
per oz
|
USD$20
per oz
|
|
Exchange
rate (CAD/USD)
|
0.75
|
0.75
|
|
Gold
processing recovery
|
88%
|
80%
|
|
Silver
processing recovery
|
93%
|
85%
|
|
Average
annual payable production
|
353,900
oz Au and 1,937,000 oz Ag
|
296,500
oz Au and 1,632,000 oz Ag
|
|
Economic
Results
|
2019
PEA
|
2017
PEA
|
|
Pre-tax
NPV at 5% discount rate
|
USD$1,233
million
|
USD$1,159
million
|
|
Pre-tax
Internal rate of return
|
25.5%
|
32.3%
|
|
Post-tax
NPV at 5% discount rate
|
USD$841
million
|
USD$792
million
|
|
Post-tax
Internal rate of return
|
21.8%
|
26.2%
|
|
Non-discounted
post-tax payback period
|
3.4
years
|
3.2
years
|
|
Direct
operating cash costs
|
USD$575
per oz of Au equivalent (USD$514/oz of gold on a by-product
basis)
|
USD$619
per oz of Au equivalent (USD$561/oz of gold on a by-product
basis)
|
|
“All-in
Sustaining” cash costs
|
USD$611
per oz of Au equivalent
|
USD$655
per oz of Au equivalent
|
|
Sustaining
capital costs
|
USD$124
million, plus USD$26 million for closure costs
|
USD$117
million, plus USD$20 million for closure costs
|
7
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless otherwise
indicated)
|
For the three and nine months ended September 30,
2020
|
Environmental Assessment Processes
Drilling to support the ongoing metallurgical, hydrogeological, and
geotechnical programs at the Springpole Gold Project has been
completed, for a total of 5,700 m. A 6,300 m condemnation drilling
program has also recently commenced and is scheduled to be
completed over the winter. The Company’s goal is to prepare a
synchronized Environmental Impact Statement
(“EIS”) that meets the federal and provincial
Environmental Assessment requirements. The Springpole permitting
timeline is as follows:
8
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless otherwise
indicated)
|
For the three and nine months ended September 30,
2020
|
The ongoing priority at the Springpole Gold Project is to continue
to advance the project through the federal and provincial EA
processes, both of which are currently underway. The goal is to
prepare a synchronized EIS that satisfies both the federal and
provincial requirements.
●
The federal EA process was initiated through the
submission of a Project Description (“PD”) to the Canadian Environmental Assessment
Agency (the “Agency”) in February 2018. The PD was used by the
Agency to determine whether an EA was required for the Springpole
Gold Project and to prepare guidelines regarding the completion of
an EA. On April 20, 2018, the Agency determined that a federal EA
is required for the Springpole Gold Project, and EIS guidelines for
the federal EA were issued to First Mining on June 19, 2018. The
EIS is expected to be submitted to the Impact Assessment Agency of
Canada during 2021, and project approval is expected to take
approximately 24 months, after which permitting for construction
can commence.
●
For the provincial process, First Mining entered
into a Voluntary Agreement with the Ontario Ministry of
Environment, Conservation and Parks (“MECP”) (formerly MOECC) in April 2018 to conduct
an EA for the Springpole Gold project. There are two main stages in
the provincial EA process, namely the development of Terms of
Reference (“ToR”) and the development of the EA Report. The
ToR is a work plan which will outline how the EA will be prepared.
The ToR will address the community consultation and engagement
plan, key components of the project, and the range of alternatives
that will be considered by First Mining. First Mining submitted a
draft ToR to MECP on August 21, 2020, and is currently engaged in
consultation and review of that document.
●
First
Mining commenced community consultation and engagement with the
communities of interest in July 2018 and has held consultation
meetings with Indigenous communities and other stakeholders. First
Mining continues with community consultations and engagement and
submitted the second draft of the ToR to MECP on January 21, 2020
and the third draft on August 21, 2020. First Mining anticipates
completing another round of consultation and receiving final
approval of the ToR in Q1 2021.
●
While
the permitting process is ongoing, the Company completed a
“data gap assessment” on the environmental baseline
work required at Springpole Gold Project to identify any remaining
work requirements. Data collection programs to further advance the
EA processes in 2020 included aquatic environs, hydrology, surface
water quality monitoring, hydrogeology, geotechnical investigation,
and tailings and mine rock geochemical characterization. The
Company will continue undertaking these studies.
The
final EIS guidelines outline federal information requirements for
the preparation of an EIS and were prepared after taking into
consideration comments received from federal departments, the
Ontario provincial ministry, Indigenous groups and the general
public. To meet the requirements of the EIS, the Company has
already undertaken a broad range of environmental baseline studies
at the Springpole Gold Project to collect biophysical data, which
includes fish community and habitat surveys, species at risk
surveys, atmospheric environment surveys as well as surface,
groundwater and hydrology surveys. Currently, the Company is
collecting environmental baseline data and other information to
prepare an EIS for Springpole Gold Project. The Company chose to
continue to stay in the Canadian
Environmental Assessment Act, 2012 permitting process and not
move to the newly enacted Impact
Assessment Act process.
Goldlund Gold Project, Ontario (owned by Treasury Metals as of
August 7, 2020)
Goldlund
Gold Project is an advanced exploration stage project located in
northwestern Ontario, approximately 60 km northeast of the town of
Dryden. It consists of 1,349 mining claims (totaling 27,255
hectares), 27 patented claims (totaling 433 hectares), 1 mining
lease (48.56 hectares), and 1 License of Occupation (74.84
hectares). Goldlund Gold Project currently hosts 809,200 ounces of
gold in the Indicated category and 876,954 ounces of gold in the
Inferred category. Drilling in 2019 and early 2020 was completed on
the project to better define both the extension of the existing
resource area and the regional scale potential. The large land
package has considerable exploration potential, with the property
extending over a strike-length of over 50 km with multiple
exploration targets identified, including the Miller Prospect
(“Miller”) which
was most recently drilled in late 2019. The project is in an area
with excellent infrastructure and is accessible from a provincial
highway.
A
technical report titled “Technical Report Re-Issue, Goldlund
Gold Project, Sioux Lookout, Ontario”, which has an effective
date of July 22, 2020, was prepared by WSP for Treasury Metals and
was filed by Treasury Metals on SEDAR on August 7, 2020, and is
available under their SEDAR profile at www.sedar.com
and on their website at
https://treasurymetals.com/projects/goldlund/
Mining
at the Goldlund Gold Project in the 1980s produced approximately
90,700 tonnes of ore grading 4.23 g/t Au from underground and
39,000 tonnes of ore grading 4.80 g/t from a small open pit. The
project has year-round road access from Ontario Highway 72, which
is 2 km to the south, and regional power lines are located 15 km to
the north.
During the nine months ended September 30, 2020, the most
significant expenditures at the Goldlund Gold Project were
$1,179,000 in connection with the 2020 drill campaign of
approximately 6,500 m. In contrast, in the prior year period the
most significant expenditure was $564,000 in connection with the
2019 drill campaign of approximately 4,200 m.
Transaction with Treasury Metals Inc.
On
August 7, 2020, First Mining completed its transaction with
Treasury Metals, pursuant to which Treasury Metals acquired all of
the issued and outstanding shares of Tamaka. Under the terms of the
Share Purchase Agreement, First Mining received total consideration
comprised of (i) 43.33 million common shares of Treasury Metals;
(ii) 11.67 million Treasury Metals Warrants with an exercise price
of $1.50 for a 3-year term; (iii) a 1.5% NSR royalty on Goldlund
Gold Project (0.5% of which can be bought back by Treasury Metals
for $5 million in cash); and (iv) the right to certain contingent
milestone payments totaling $5 million, payable in cash, on certain
key advancements at Goldlund Gold Project.
Details
of the contingent milestone payments are as follows:
●
$2.5 million
payable upon receipt of a mining lease to extract material from an
open pit mine at Goldlund; and
●
$2.5 million
payable upon 300,000 tonnes of ore that can form the basis of a
mineral reserve being extracted from a mine at
Goldlund.
The
Company applied equity accounting for the investment in the
Treasury Metals Shares. The fair value of the Treasury Metals
Shares at closing of $78,000,000 was determined using the quoted
price of Treasury Metals common shares on August 7, 2020. The
warrants of Treasury Metals have been accounted for as FVTPL. The
Company uses the Black-Scholes option pricing model to calculate
the fair value of the warrants held in Treasury Metals both as at
August 7, 2020 and on an ongoing basis. The 1.5% NSR royalty on
Goldlund was measured at fair value of $3,709,000 and recorded in
“Disposal, impairment or reclassification” under
“Mineral Properties”.
Upon
closing First Mining held approximately 40% of the issued and
outstanding common shares of Treasury Metals (on an undiluted
basis) and had the right to appoint three nominees to the board of
directors of Treasury Metals. In August 2020, the Company exercised
this right and nominated (and Treasury Metals subsequently
appointed) three individuals to the board of directors of Treasury
Metals.
In
accordance with the terms of an Investor Rights Agreement signed in
connection with the transaction, First Mining is required to
distribute approximately 20.94 million Treasury Metals Shares and
all of the Treasury Metals Warrants to its shareholders (the
“Distribution”)
within 12 months of closing of the transaction. Following the
Distribution, First Mining will retain approximately 22.39 million
Treasury Metals Shares, leaving the Company with a 19.9% interest.
As at September 30, 2020, the Company accrued a liability for the
obligation to distribute investments of $37,222,000 with a
corresponding entry booked into equity.
As at June 30, 2020, the Company recorded an impairment of Goldlund
project amounting to $22,498,000 (2019 - $nil), based on facts and
circumstances applicable at the time. On closing of the disposition
of the project on August 7, 2020 the Company recorded an impairment
reversal of $13,262,000. On August 7, 2020, as a result of closing
the Share Purchase Agreement with Treasury Metals, the Company
derecognized the Goldlund project mineral property costs with the
exception of the retained NSR royalty interest, now recorded under
“Other” mineral properties. The Company also recorded
an equity income from investment in Treasury Metals of $467,000
(2019 - $nil) during the three months ended September 30, 2020. In
addition, as at September 30, 2020, the Company recorded an
impairment of the equity investment in Treasury Metals amounting to
$15,634,000 (2019 - $nil), based
on the recoverable amount of the investment, which was indicated by
the publicly quoted market price of Treasury Metals
Shares.
9
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless otherwise
indicated)
|
For the three and nine months ended September 30,
2020
|
First Mining’s 2020 “Main Zone” Drill Program
(prior to the acquisition by Treasury Metals on August 7,
2020)
Following
completion of the 2019 Miller zone drilling at the Goldlund Gold
Project, the exploration program moved to the Goldlund Gold Project
Main Zone area (“Main
Zone”) in Q4 2019 and continued there in 2020 to
fulfill flow-through requirements from the Company’s December
18, 2019 private placement up until the closing date of the
transaction with Treasury Metals.
The
initial phase of this drill program was completed in March 2020
(prior to a temporary field program shutdown at Goldlund due to
COVID-19, which coincided with the scheduled mid-March break), and
consisted of 39 holes (approximately 7,300 m), with the overall
program’s focus being to define and extend mineralization in
the eastern and western portions of Zones 1, 2, 3 and 4. Fourteen
of these holes (approximately 2,500 m) were drilled in 2019, with a
further 25 holes (approximately 4,800 m) drilled in Q1 2020, with
holes primarily targeting the Zone 2 and 3 areas. A further 9 holes
(approximately 1,600 m) were completed when the program restarted
in May after the COVID-19 shutdown. In total, 48 holes (totalling
8,958 m) were completed at the Main Zone as part of the 2019
– 2020 drill program. Drilling at the Main Zone was focused
on delineating mineralization between the currently defined zones
of the Goldlund Gold Project deposit.
Pickle Crow Gold Project, Ontario
The
Pickle Crow Gold Project covers an area of 19,033 hectares and
comprises 104 patented claims and 932 mining claims. The area is
located in northwestern Ontario and is covered by the Treaty Nine
First Nations Agreement. A technical report titled “An
Updated Mineral Resource Estimate for the Pickle Crow Property,
Patricia Mining Division, Northwestern Ontario, Canada”,
prepared by Micon International and dated June 15, 2018, was filed
by the Company on SEDAR on August 23, 2018, and is available under
the Company’s SEDAR profile at www.sedar.com
and on the Company’s website at www.firstmininggold.com.
Extensive infrastructure in place or proximal to the Pickle Crow
Gold Project includes a 200 tonne per day gravity mill on site,
generators and fuel storage and gravel road access to the property,
and the property is within 10 km of a regional airport at Pickle
Lake. The Pickle Crow Gold Project was a former high-grade
operating mine until the late 1960s. The Pickle Crow Gold Project
is owned by PC Gold, a wholly-owned subsidiary of the
Company.
During
the nine months ended September 30, 2020, the most significant
expenditures at the Pickle Crow Gold Project were $679,000 in
connection with drilling, $36,000 in mineral land taxes and
$1,750,000 in capitalized exploration expenditures incurred by
Auteco. In the prior year period, the Company incurred $31,000 in
mineral land taxes.
Earn-In Agreement
On March 12, 2020, the Company and Auteco executed a definitive
Earn-In Agreement, pursuant to which Auteco may complete the
Earn-In relating to the Pickle Crow Gold Project. Under the terms
of the Earn-In Agreement, Auteco can earn a full 80% equity
interest in PC Gold by (a) incurring a total of $10,000,000 in
exploration expenditures over five years, (b) making cash payments
to First Mining totaling $4,100,000 (of which the Company has
received $100,000 to date), and (c) issuing 125 million shares of
Auteco to First Mining (of which the Company has received 25
million shares to date). First Mining will also retain a 2% NSR
royalty, 1% of which can be purchased by Auteco for USD$2,500,000.
During the term of the Earn-In Agreement, Auteco will incur all
program costs and manage Pickle Crow exploration
activity.
During the nine months ended September 30, 2020, the Company
received the scheduled cash consideration of $100,000 and 25
million shares of Auteco with a fair value on receipt of $740,000
under the terms of the Earn-in Agreement. Auteco incurred a total
of $1,750,000 in exploration expenditures during the nine months
ended September 30, 2020.
Pursuant to the Earn-In Agreement, the Earn-In is comprised of two
stages:
●
Stage
1 Earn-In (51% earn-in) – Three-year initial earn-in period
to acquire a 51% equity interest in PC Gold by:
o
Spending
$5,000,000 on exploration and $1,000,000 on environmental matters
at the Pickle Crow Gold Project (or cash payments in lieu), of
which $750,000 must be incurred within the first 12 months;
and
o
Issuing
100 million shares of Auteco to First Mining.
●
Stage
2 Earn-In (additional 19% to earn-in to 70%) – Upon
completion of the Stage 1 Earn-In, Auteco will have a two-year
follow-on period to acquire an additional 19% equity interest in PC
Gold by:
o
Spending
a further $5,000,000 on exploration at the Pickle Crow Gold Project
(or cash payments in lieu);
o
Making
a $1,000,000 cash payment to First Mining within 90 days of
completing the additional exploration spend; and
o
Issuing
First Mining a 2% NSR royalty on the Pickle Crow Gold Project (1%
of which can be bought back by Auteco for USD$2,500,000) (this NSR
will be issued to First Mining upon completion of the Stage 2
Earn-In).
In addition, upon completion of the Stage 2 Earn-In, Auteco will
have an option to acquire an additional 10% equity interest in PC
Gold, exercisable any time following completion of the Stage 2
Earn-In, by paying First Mining $3,000,000 in cash. First
Mining’s residual 20% interest in the project is carried
until a construction decision at Pickle Crow, which is to be made
after a final feasibility study and following Auteco having
arranged sufficient financing to achieve commercial
production. If Auteco should fail to meet such requirements
within the applicable time periods, the Earn-In Agreement will
terminate and Auteco will be entitled to retain any interest which
it has earned-in to prior to the date of termination. Further
details regarding the Earn-In are set out in the Company’s
March 12, 2020 news release. In May 2020 and July 2020, Auteco
raised $5.1M Australian dollars and $30.4M Australian dollars,
respectively, in private placements from Australian and overseas
institutions.
On February 28, 2019, the Company received a letter from the Acting
Director, Mine Rehabilitation, at the Ontario Ministry of Energy,
Northern Development and Mines (“MENDM”), which required the Company to submit a
schedule for the development of a closure plan amendment for the
Pickle Crow Gold Project. The Company complied with the requirement
and submitted the schedule for the development of a closure plan
amendment on March 29, 2019. The submission of a closure plan
amendment complete with cost estimates was initially due on
November 1, 2019. The Company has been granted an extension and is
required to submit the closure plan amendment and cost estimates to
the MENDM by January 31, 2021. The Company has engaged consultants
to assist with developing this plan. Pursuant to the Earn-In
Agreement, Auteco is required to reimburse the Company for a pro
rata amount of its expenses with respect to any related bond
requirements for the mine closure plan once it has completed the
first stage of the Earn-In.
Hope Brook Gold Project, Newfoundland
The
Hope Brook Gold Project covers an area of 26,650 hectares in
Newfoundland, including six mineral licenses, with a deposit hosted
by pyritic silicified zones occurring within a deformed,
strike-extensive advanced argillic alteration zone. A technical
report titled “2015 Mineral Resource Estimate Technical
Report for the Hope Brook Gold Project, Newfoundland and Labrador,
Canada”, prepared by Mercator Geological Services Limited,
was filed by the Company on SEDAR on November 27, 2015, and is
available under the Company’s SEDAR profile at www.sedar.com
and on the Company’s website at www.firstmininggold.com.
The
resource covers 1.5 km of an 8 km mineralized structure.
Substantial infrastructure at the property includes a ramp to 350
metres (“m”)
below surface with vent raise, line-power to site, commercial barge
and landing craft ramp, air strip, and a strong local labour force.
The Hope Brook Gold Project was a former operating gold mine that
produced 752,163 oz Au from 1987 to 1997.
In Q3
2020, the Company continued with its waste rock characterization
and economic study of marketable aggregates at the Hope Brook Gold
Project site. In addition, the Company
continues to collect environmental baseline data for permitting and
the understanding of site environmental
conditions.
During
the nine months ended September 30, 2020, the most significant
expenditures at the Hope Brook Gold Project were $87,000 for an
aggregate study and annual advanced royalty payment of $20,000. In
the prior year period, the Company made its annual advanced royalty
payment on the Hope Brook Gold Project and conducted aquatic
environmental baseline studies.
10
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless otherwise
indicated)
|
For the three and nine months ended September 30,
2020
|
Cameron Gold Project, Ontario
The
Cameron Gold Project covers an area of 49,574 hectares in northern
Ontario and comprises 24 patented claims, 1,790 mining claims, 4
mining leases, and 7 Licenses of Occupation. The Cameron Gold
Project deposit is a greenstone‐hosted gold deposit and the
mineralization is mainly hosted in mafic volcanic rocks within a
northwest trending shear zone (Cameron Lake Shear Zone) which dips
steeply to the northeast. A technical report titled
“Technical Report on the Cameron Gold Deposit, Ontario,
Canada”, prepared by Optiro Pty Limited, was filed by the
Company on SEDAR on March 22, 2017, and is available under the
Company’s SEDAR profile at www.sedar.com
and on the Company’s website at www.firstmininggold.com.
There is year-round road access to the property from the nearby
highway and power lines within 20 km.
During
2019, the Company conducted environmental studies, including
surface and groundwater quality monitoring programs to support a
potential environmental assessment or permitting applications in
the future. In addition, the Company undertook an ore sorting test
program on selected core samples, along with low cost maintenance
of site infrastructure.
During
the nine months ended September 30, 2020, the most significant
expenditures at the Cameron Gold Project were $61,000 for salary
allocations and $18,000 for ore sorting test work program. In the
prior year period, the most significant expenditures were $51,000
for economic evaluation and $45,000 for salary
allocations.
Tier 2 and 3 Projects
The
following table sets out the Company’s Tier 2 and 3 projects
by region. These projects are 100%-owned by the Company with the
exception of the Duparquet Gold Project. The Company has a 10%
indirect ownership interest in the Duparquet Gold Project and a
100% interest in the Central Duparquet Property.
|
Canada
|
USA
|
|
Duquesne,
Québec
|
Turquoise
Canyon, Nevada(1)
|
|
Pitt,
Québec
|
|
|
Duparquet,
Québec
|
|
|
Joutel,
Québec
|
|
|
Morris,
Québec
|
|
|
Horseshoe
Island, Ontario
|
|
|
Lac
Virot, Newfoundland
|
|
(1)
Property under option to a third
party.
For further information on the Company’s Tier 2 and 3
projects, see the Company’s Annual Information Form for the
year ended December 31, 2019 which is available under the
Company’s SEDAR profile at www.sedar.com,
as an exhibit to the Company’s Form 40-F on EDGAR at
www.sec.gov,
and on the Company’s website at www.firstmininggold.com.
NSR on the Duquesne Gold Project, Québec
In
connection with an agreement entered into by Clifton Star Resources
Inc. ("Clifton Star") on
July 31, 2012, prior to its acquisition by First Mining, Clifton
Star purchased 0.5% of a 3% NSR royalty on the Duquesne Gold
Project for $1,000,000 in cash. Per the terms of this agreement,
beginning June 2019, the remaining 2.5% NSR must be purchased over
the ensuing five years in tranches of 0.5% for $1,000,000 for each
tranche. Management is currently in discussions with the royalty
owners regarding potential amendments to the timing and amount of
any future payments related to this royalty
repurchase.
Sale of Mexican Exploration Projects
On April 28, 2020, the Company entered into a share purchase
agreement with a third-party private company (the
“Purchaser”) pursuant to which the Purchaser acquired
all of the issued and outstanding shares of 0924682 B.C. Ltd. and
1089568 B.C. Ltd., two wholly-owned subsidiaries of the Company
that hold all of the shares of two Mexican subsidiaries that owned
all of the Company’s Mexican mineral properties.
Consideration consisted of nominal cash, and the grant to the
Company of a 2% NSR on 10 of the 11 mineral properties. The
Purchaser has the right to buy-back 1% of each of these 10 NSRs by
paying US$1 million to the Company for each NSR in respect of which
the buy-back right is exercised. From the date of this sale
transaction, First Mining no longer holds any mineral properties in
Mexico, and this sale will allow the Company to focus its capital
and resources on its Canadian mineral properties. The transaction
resulted in a $303,000 loss on disposal of subsidiaries recorded on
the statement of net loss and comprehensive loss for the nine
months ended September 30, 2020, and recycling of currency
translation adjustment on disposal of Mexican subsidiaries
amounting to $630,000.
|
Financial Results (in $000s Except for per Share
Amounts):
|
||||||||
|
|
2020-Q3
|
2020-Q2
|
2020-Q1
|
2019-Q4
|
2019-Q3
|
2019-Q2
|
2019-Q1
|
2018-Q4
|
|
Net
Loss
|
$(12,352)
|
$(19,531)
|
$(1,462)
|
$(2,274)
|
$(1,643)
|
$(1,315)
|
$(1,727)
|
$(5,658)
|
|
Impairment of
non-current assets
|
2,372
|
22,498
|
-
|
-
|
341
|
-
|
-
|
4,181
|
|
Net Loss Excluding
Certain Non-cash Items(1)(2)
|
(989)
|
(884)
|
(990)
|
(1,402)
|
(970)
|
(840)
|
(1,153)
|
(1,085)
|
|
Basic and Diluted
Net Loss Per Share (in dollars) (3)
|
(0.02)
|
(0.03)
|
(0.00)
|
(0.00)
|
(0.01)
|
(0.00)
|
(0.00)
|
(0.01)
|
|
Financial
Position (in $000s):
|
||||||||
|
Cash and Cash
Equivalents
|
32,477
|
6,475
|
10,497
|
5,902
|
5,687
|
8,396
|
3,059
|
5,115
|
|
Working
Capital(1)
|
14,324
|
8,596
|
9,946
|
5,780
|
8,360
|
10,627
|
5,491
|
7,536
|
|
Investments
|
24,016
|
5,601
|
1,398
|
1,775
|
3,503
|
2,979
|
2,669
|
2,597
|
|
Mineral
Properties
|
168,188
|
159,630
|
256,532
|
252,815
|
248,509
|
246,411
|
245,169
|
244,129
|
|
Investment in
Treasury Metals Inc.
|
62,833
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Non-current Assets
Held for Sale
|
-
|
77,993
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
296,343
|
258,044
|
276,776
|
268,020
|
263,470
|
263,381
|
256,463
|
257,532
|
|
Total Non-Current
Liabilities
|
$15,332
|
$1,959
|
$3,306
|
$3,139
|
$-
|
$-
|
$-
|
$-
|
(1)
These
are non-IFRS measures with no standardized meaning under IFRS. For
further information and a detailed reconciliation, please refer to
the section in this MD&A titled “Non-IFRS
Measures”.
(2)
“The
certain non-cash items excluded” refers to the
“Share-based payments expense”, “Impairment of
non-current assets”, “Investments fair value
loss”, “Loss on disposal of subsidiaries”,
“Fair value loss on Silver Stream derivative
liability”, “Deferred income tax expense
(recovery)” and “Equity income from investment in
Treasury Metals”.
(3)
The
basic and diluted loss per share calculations result in the same
amount due to the anti‐dilutive effect of outstanding stock
options and warrants in all periods.
11
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless otherwise
indicated)
|
For the three and nine months ended September 30,
2020
|
Quarterly results are discussed relative to the preceding
quarter’s results in the following paragraphs
The
most significant variances in net loss quarter to quarter is
typically due to non-cash items per MD&A section titled
“Non-IFRS Measures”. One of the non-cash items
recurring every quarter is share-based payments expense, which
fluctuates due to the timing of stock option grants and associated
vesting, the number of underlying options granted, and the
associated fair value dollar amount calculated at the time of the
grant.
In
2020-Q3 there was a $15,634,000 non-cash impairment of the equity
investment in Treasury Metals. In 2020‐Q2 there was a
$22,498,000 non‐cash impairment of the Goldlund Gold Project,
of which $13,262,000 was reversed in 2020-Q3 when the project was
sold. In 2020-Q2 a deferred tax recovery of $1,385,000 was recorded
as a result of the impairment while in 2020-Q3 a deferred tax
recovery of $171,000 was recorded as a result of flow-through share
premium reversal. In addition, in 2020-Q2 an investments fair value
gain of $3,013,000 on Auteco shares was recorded through profit or
loss. In 2020-Q3 an investments fair value loss of $3,439,000 on
Auteco shares, First Majestic shares, and Treasury Metals warrants
was recorded. Lastly, as a result of the sale of the Mexican
properties during 2020-Q2, the Company recorded a $303,000 loss on
disposal of subsidiaries, and recycled currency translation
adjustments on disposal amounting to $630,000. In 2020-Q3 the
Company recorded $467,000 in equity income from investment in
Treasury Metals.
In
2020-Q3 there was an increase in marketing expenses compared to
2020-Q2 due to an increase in virtual conference attendance and
marketing campaigns. In 2020-Q2 there was an increase in
professional and consulting fees compared to 2020-Q1 due to fees
incurred in relation to the Auteco and Treasury Metals
transactions. In 2020-Q1 there was a decrease in marketing expenses
compared to 2019-Q4 due to a reduction in marketing campaigns. In
2019-Q4 a bonus accrual was recorded as at December 31, 2019,
resulting in an increase in salaries when compared to 2019-Q3. In
2019-Q3 there was an increase in professional fees in connection
with the base shelf prospectus and the establishment of an ATM
facility. In 2019-Q2 there was a decrease in marketing expenses
compared to 2019-Q1 due to fewer conferences attended and fewer
marketing campaigns. In 2019-Q1 there was an increase in marketing
expenses compared to 2018-Q4 due to an increase in conference
attendance and marketing campaigns. Furthermore, in 2018-Q4 there
was a $4,181,000 non-cash impairment of the Company’s Mexican
mineral properties and a non-recurring severance payment of
$300,000.
In
terms of cash and cash equivalents, variances between quarters
depend on the amount, type and timing of work being performed on
the Company’s mineral property portfolio, classified under
investing activities in the statements of cash flows. In 2020-Q3,
the Company completed a bought deal financing, which provided net
cash inflows of $26,647,000, classified under financing activities
in the statements of cash flows, and incurred $3,280,000 in mineral
property expenditures, classified under investing activities in the
statements of cash flows. In addition, in 2020-Q3 the Company
received net cash of $3,263,000 from First Majestic in relation to
the Silver Purchase Agreement, classified under financing
activities in the statements of cash flows. In 2020-Q2, the Company
sold 532,000 common shares of the Company under the ATM program for
net proceeds of $125,000, classified under financing activities in
the statements of cash flows, and incurred $2,939,000 in mineral
property expenditures, classified under investing activities in the
statements of cash flows. In 2020-Q1, the Company completed a
non-brokered private placement financing including the issuance of
flow-through common shares, which provided net cash inflows of
$9,124,000, classified under financing activities in the statements
of cash flows. In 2020-Q1, the Company incurred $3,255,000 in
mineral property expenditures, classified under investing
activities in the statements of cash flows.
The
fluctuation in total assets from one quarter to the next is
primarily a function of decreases in cash used to fund operating
activities, increases in cash from private placements, public
offerings and the exercise of options and warrants, changes in the
fair value of investments and mineral property investments, and
additions to or impairment of mineral property balances. In
addition, in 2020-Q3, the Company recorded an investment in
Treasury Metals as a result of closing the Transaction with
Treasury Metals. It is worth noting that cash used in investing
activities for the purposes of exploration and development work
being performed on the Company’s mineral properties remains
within total assets, given that these amounts are capitalized in
connection with the Company’s accounting
policies.
The
fluctuation in total non-current liabilities from one quarter to
the next is primarily a function of classification of the lease
liability and environmental reclamation provision between current
and non-current liabilities, changes in deferred tax liabilities as
a result of an impairment of mineral properties and incurring
eligible flow-through expenditures. In addition, in 2020-Q3, the
Company recorded a Silver Stream derivative liability in relation
to the Silver Purchase Agreement entered into with First
Majestic.
For the three and nine months ended September 30, 2020 and
2019
Unless
otherwise stated, the following financial data was prepared on a
basis consistent with IFRS and extracted from the unaudited
Condensed Interim Consolidated Financial Statements:
|
(in
$000s)
|
Three months
ended September 30
|
Nine
months ended September 30
|
||
|
|
2020
|
2019
|
2020
|
2019
|
|
|
|
|
|
|
|
EXPENDITURES
|
|
|
|
|
|
General and
administration
|
$367
|
$759
|
$2,014
|
$1,835
|
|
Exploration and
evaluation
|
169
|
168
|
455
|
545
|
|
Investor relations
and marketing communications
|
336
|
163
|
760
|
680
|
|
Corporate
development and due diligence
|
59
|
53
|
191
|
135
|
|
Share-based
payments expense (non-cash)
|
128
|
332
|
777
|
1,381
|
|
Impairment of
non-current assets (non-cash)
|
2,372
|
341
|
24,870
|
341
|
|
Loss from
operational activities
|
(3,431)
|
(1,816)
|
(29,067)
|
(4,917)
|
|
|
|
|
|
|
|
OTHER
ITEMS
|
|
|
|
|
|
Foreign exchange
(loss) gain
|
(64)
|
13
|
543
|
9
|
|
Other
expenses
|
(25)
|
(9)
|
(71)
|
(70)
|
|
Interest and other
income
|
31
|
28
|
85
|
151
|
|
Investments fair
value loss (non-cash)
|
(3,439)
|
-
|
(426)
|
-
|
|
Loss on disposal of
subsidiaries (non-cash)
|
-
|
-
|
(303)
|
-
|
|
Fair value loss on
Silver Stream derivative liability (non-cash)
|
(6,112)
|
-
|
(6,112)
|
-
|
|
Loss
before income taxes and equity income
|
$(13,040)
|
$(1,784)
|
$(35,351)
|
$(4,827)
|
|
Deferred income tax
recovery (non-cash)
|
221
|
141
|
1,539
|
141
|
|
Equity income from
investment in Treasury Metals (non-cash)
|
467
|
-
|
467
|
-
|
|
Net
loss for the period
|
$(12,352)
|
$(1,643)
|
$(33,345)
|
$(4,686)
|
|
|
|
|
|
|
|
Other comprehensive
income
|
2,061
|
1,049
|
2,442
|
1,152
|
|
|
|
|
|
|
|
Net
loss and comprehensive income for the period
|
$(10,291)
|
(594)
|
(30,903)
|
(3,534)
|
12
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless otherwise
indicated)
|
For the three and nine months ended September 30,
2020
|
Third Quarter 2020 Compared to Third Quarter 2019
For the
three months ended September 30, 2020, net loss for the period has
increased by $10,709,000 compared to the three months ended
September 30, 2019. This change was explained by the
following:
General and Administration
General
and administration decreased by $392,000 during the three months
ended September 30, 2020 compared to the same period in 2019. This
decrease is predominantly due to incurring additional professional
fees in connection with the filing of a base shelf prospectus and
arrangement of an ATM facility in 2019.
Investor Relations and Marketing Communications
Investor
relations and marketing communications increased by $173,000 during
the three months ended September 30, 2020 compared to the same
period in 2019. This increase is predominantly due to an increase
in virtual conference attendance, marketing campaigns and the
timing of expenditures during the third quarter of
2020.
Other Functional Expenses
The
amounts in exploration and evaluation and corporate development and
due diligence were comparable between periods.
Share-based Payments Expense (non-cash)
Share-based
payments expense decreased by $204,000 during the three months
ended September 30, 2020 compared to the same period in 2019,
primarily due to a lower fair value per option in 2020 ($0.12 per
option in 2020 compared to $0.20 per option in 2019).
Impairment of non-current assets (non-cash)
Impairment
of non-current assets increased by $2,031,000 during the three
months ended September 30, 2020 compared to the same period in
2019. The Company recorded a $2,372,000 impairment of non-current
assets, which included $13,603,000 in Goldlund impairment reversal
and $15,634,000 in impairment of the equity investment in Treasury
Metals during the three months ended September 30, 2020. In the
three months ended September 30, 2020, the impairment of
non-current assets was driven by the recoverable amounts of the
Goldlund mineral property and equity investment in Treasury Metals.
In the three months ended September 30, 2019, the impairment of
non-current assets was driven by the recoverable amount of the
Turquoise Canyon property.
Investments fair value loss
(non-cash)
Investments
fair value loss increased by $3,013,000 during the three months
ended September 30, 2020 compared to the same period in
2019. The
Company received the 25.00 million shares of Auteco in connection
with its right to Earn-In to PC Gold, 0.81 million shares of First
Majestic in connection with the Silver Purchase Agreement, and
11.67 million Treasury Metals Warrants in connection with the Share
Purchase Agreement. These shares and warrants are classified as
fair value through profit and loss (“FVTPL”). Based on changes in the
fair values of Auteco shares, First Majestic Shares and Treasury
Metals Warrants from the date of receipt to September 30, 2020, an
investments fair value loss was recorded in net income
(loss).
Fair value loss on Silver Stream derivative liability
(non-cash)
In
connection with the Silver Purchase Agreement with First Majestic
the Company recorded a Silver Stream derivative liability which is
classified as FVTPL. Based on changes in fair value of Silver
Stream derivative liability from the inception date to September
30, 2020, a fair value loss on Silver Stream derivative liability
was recorded in net income (loss). During the three months ended
September 30, 2020, the Company recorded a fair value loss on
Silver Stream derivative liability of $6,112,000.
Deferred income tax recovery
(non-cash)
Deferred
income tax recovery increased by $80,000 during the three months
ended September 30, 2020 compared to the same period in 2019, as a
result of the increase in eligible flow-through expenditures
incurred.
Equity income from investment in Treasury Metals
(non-cash)
During
the three months ended September 30, 2020, the Company recorded an
equity income from investment in Treasury Metals of $467,000. The
Company received 43.33 million Treasury Metals Shares in connection
with the Share Purchase Agreement and applied equity accounting for
the investment in the Treasury Metals Shares.
Nine Months Ended September 30, 2020 Compared to Nine Months Ended
September 30, 2019
For the
nine months ended September 30, 2020, net loss for the period has
increased by $28,659,000 compared to the nine months ended
September 30, 2019. This change was explained by the
following:
General and Administration
General
and administration increased by $179,000 during the nine months
ended September 30, 2020 compared to the same period in 2019. This
increase is predominantly due to incurring professional and
consulting fees in connection with the Auteco and Treasury Metals
transactions.
Investor Relations and Marketing Communications
Investor
relations and marketing communications increased by $80,000 during
the nine months ended September 30, 2020 compared to the same
period in 2019. This increase is predominantly due to increase in
marketing campaigns.
Other Functional Expenses
The
amounts in exploration and evaluation and corporate development and
due diligence were comparable between periods.
Share-based Payments Expense (non-cash)
Share-based
payments expense decreased by $604,000 during the nine months ended
September 30, 2020 compared to the same period in 2019, primarily
due to a lower fair value per option in 2020 ($0.12 per option in
2020 compared to $0.20 per option in 2019).
Impairment of non-current assets
(non-cash)
Impairment
of non-current assets increased by $24,529,000 during the nine
months ended September 30, 2020 compared to the same period in
2019. The Company recorded a $24,870,000 impairment of non-current
assets, which included $9,236,000 in Goldlund impairment and
$15,634,000 in impairment of the equity investment in Treasury
Metals during the nine months ended September 30, 2020. In the nine
months ended September 30, 2020, the impairment of non-current
assets was driven by the recoverable amounts of the Goldlund
mineral property and equity investment in Treasury Metals. In the
nine months ended September 30, 2019, the impairment of non-current
assets was driven by the recoverable amount of the Turquoise Canyon
property.
13
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless otherwise
indicated)
|
For the three and nine months ended September 30,
2020
|
Investments fair value loss
(non-cash)
Investments
fair value loss increased by $426,000 during the nine months ended
September 30, 2020 compared to the same period in 2019. The
Company received the 25.00 million shares of Auteco in connection
with its right to Earn-In to PC Gold, 0.81 million shares of First
Majestic in connection with the Silver Purchase agreement, and
11.67 million Treasury Metals Warrants in connection with the Share
Purchase Agreement. These shares warrants are classified as FVTPL.
Based on changes in fair value of Auteco shares, First Majestic
Shares and Treasury Metals Warrants from the date of receipt to
September 30, 2020, an investments fair value loss was recorded in
net income (loss).
Fair value loss on Silver Stream derivative liability
(non-cash)
In
connection with the Silver Purchase Agreement with First Majestic
the Company recorded a Silver Stream derivative liability which is
classified as FVTPL. Based on changes in fair value of Silver
Stream derivative liability from the inception date to September
30, 2020, a fair value loss on Silver Stream derivative liability
was recorded in net loss. During the nine months ended September
30, 2020, the Company recorded a fair value loss on Silver Stream
derivative liability of $6,112,000.
Deferred income tax recovery
(non-cash)
Deferred
income tax recovery increased by $1,398,000 during the nine months
ended September 30, 2020 compared to the same period in 2019, as a
result of the Goldlund Gold Project impairment.
Equity income from investment in Treasury Metals
(non-cash)
Equity
income from investment in Treasury Metals increased by $467,000
during the nine months ended September 30, 2020 compared to the
same period in 2019. The Company received 43.33 million Treasury
Metals Shares in connection with the Share Purchase Agreement and
applied equity accounting for the investment in the Treasury Metals
Shares.
|
(in
$000s)
|
Nine months
ended September 30,
|
|
|
|
2020
|
2019
|
|
CASH PROVIDED BY (USED IN)
|
|
|
|
Operating
activities
|
$(3,497)
|
$(3,163)
|
|
Investing
activities
|
(9,641)
|
(3,578)
|
|
Financing
activities
|
39,757
|
7,313
|
|
Foreign exchange
effect on cash
|
(44)
|
-
|
|
CHANGE IN CASH AND CASH
EQUIVALENTS
|
26,575
|
572
|
|
Working
capital(1)
|
14,324
|
8,360
|
|
Cash and cash
equivalents, beginning
|
5,902
|
5,115
|
|
Cash and cash
equivalents, ending
|
$32,477
|
$5,687
|
(1)
Working capital is a non-IFRS measurement with no
standardized meaning under IFRS and may not be comparable to
similar financial measures presented by other issuers. For further
information and a detailed reconciliation, please see the section
“Non-IFRS Measures –
Working Capital”.
Cash and Cash Equivalents
The
increase of $26,575,000 in cash and cash equivalents from
$5,902,000 at December 31, 2019 to $32,477,000 at September 30,
2020 was primarily due to cash raised from the March Offering and
the August Offering, offset by cash used in operating activities
and investing activities which comprised technical analysis,
drilling, environmental and permitting activities at Springpole
Gold Project and drilling at Goldlund Gold Project, in addition to
General and Administration expenditures.
Operating Activities
Cash
used in operating activities increased by $334,000 during the nine
months ended September 30, 2020 compared to the same period in
2019. This increase was driven by higher loss from operational
activities excluding certain non-cash items, in particular an
increase in professional and consulting fees during the nine months
ended September 30, 2020.
Investing Activities
For the
period ended September 30, 2020, the cash used in investing
activities of $9,641,000 was primarily a result of Canadian mineral
property expenditures including the completion of metallurgical and
geotechnical drilling and further hydrogeological studies for the
Springpole Gold Project, completion of the 2019 drill program and
initial phase of the drill program at the Main Zone at the Goldlund
Gold Project. In the prior year period, the cash used in investing
activities of $3,578,000 was primarily a result of Canadian mineral
property expenditures including the updated mineral resource
estimate for the Goldlund Gold Project and completion of
metallurgical tests for the Springpole Gold Project.
Financing Activities
Cash
raised from financing activities during the nine months ended
September 30, 2020 was $39,757,000, of which $26,647,000 related to
the funds raised from the August Offering (the bought deal
financing), $8,374,000 related to the funds raised from the March
Offering, $750,000 related to the funds raised from the Ausenco
Offering, and $125,000 related to the sale of shares under the ATM
program. In addition, in 2020-Q3 the Company received net proceeds
of $3,263,000 from First Majestic in relation to the Silver
Purchase Agreement, and $706,000 from the exercise of stock options
and warrants. Cash raised from financing activities in the prior
year period was $7,313,000, of which $7,270,000 related to the
funds raised from a private placement offering, and $43,000 was
related to the exercise of stock options and warrants.
Trends in Liquidity, Working Capital, and Capital
Resources
As at
September 30, 2020, the Company has working capital of $14,324,000
(September 30, 2019 - $8,360,000). The Company has no history of
revenues from its operating activities. The Company is not in
commercial production on any of its mineral properties and
accordingly does not generate cash from operations. During the nine
months ended September 30, 2020, the Company had negative cash flow
from operating activities. The Company anticipates it will have
negative cash flow from operating activities in future
periods.
The
Company has, in the past and during the nine months ended September
30, 2020, financed its activities by raising capital through
issuances of new shares or other means such as Silver Stream. In
addition to adjusting spending, disposing of assets and seeking
other non-equity sources of financing, the Company will remain
reliant on equity markets for raising capital until it can generate
positive cash flow from operations to finance its exploration and
development programs.
The
Company believes it has sufficient cash resources to maintain its
mineral properties in good standing for the next twelve
months.
14
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless otherwise
indicated)
|
For the three and nine months ended September 30,
2020
|
FINANCIAL LIABILITIES AND COMMITMENTS
The
Company’s financial liabilities as at September 30, 2020 are
summarized as follows:
|
(in
$000s)
|
Carrying Amount
|
Contractual Cash
Flows
|
Less than 1
year
|
1 – 3
years
|
4 – 5
years
|
After 5
years
|
|
Accounts payable and accrued
liabilities
|
$2,080
|
$2,080
|
$2,080
|
$-
|
$-
|
$-
|
|
Obligation to distribute
investments
|
37,222
|
37,222
|
37,222
|
-
|
-
|
-
|
|
Lease liability
|
581
|
719
|
163
|
332
|
224
|
-
|
|
Total
|
$39,883
|
$40,021
|
$39,465
|
$332
|
$224
|
$-
|
Other
material financial commitments as at September 30, 2020 consist of
flow-through expenditure commitments of $321,000 (September 30,
2019 - $1,336,000) to be incurred prior to December 31, 2021 to
fulfill flow-through requirements from the Company’s December
18, 2019 private placement, and $nil (September 30, 2019 - $nil) to
be incurred prior to December 31, 2021 to fulfill flow-through
requirements from the Company’s February 14, 2020 private
placement. In July 2020, the Government proposed to extend by 12
months the period to incur eligible flow-through share expenses due
to COVID-19, and the deadlines above were adjusted for the proposed
extension. Management is of the view that the above financial
liabilities and commitments will be sufficiently funded by current
working capital.
First
Mining is a Canadian gold developer focused on development and
permitting of the Springpole Gold Project in northwestern Ontario.
The Springpole Gold Project is one of the largest undeveloped gold
assets in Canada, currently hosting a mineral resource base of 4.67
million ounces of gold in the Indicated category and 0.23 million
ounces of gold in the Inferred category. A PFS is underway, with
completion targeted in early 2021, and permitting is on-going with
submission of the EIS targeted for 2021. In Q3 2020 the Company
closed its transaction with Treasury Metals and as at September 30,
2020 has an equity position of approximately 40% in Treasury Metals
which is advancing the Goliath-Goldlund gold projects towards a
construction decision. First Mining’s eastern Canadian
property portfolio also includes the Pickle Crow (being advanced in
partnership with Auteco), Cameron, Hope Brook, Duquesne, Pitt and a
10% interest in Duparquet.
The Company continues its Indigenous community consultations
related to its core Canadian mineral properties, and has been
engaged in significant consultation efforts with local Indigenous
communities in the Springpole Gold Project area since 2018 to
support the ongoing federal and provincial EA processes, and in
preparation for the Springpole Gold Project EIS submission in
2021.
The following is a summary of ongoing activities planned for the
remainder of 2020 and into 2021:
●
The Company has
submitted its ToR to MECP for the Springpole Gold Project. The ToR
will provide a framework for the preparation of a provincial EA,
and it will set out the Company’s work plan for addressing
the legislated requirements of the Ontario Environmental Assessment Act when
preparing the provincial EA. The Company is also working on the
federal EA under the Canadian
Environmental Assessment Act.
●
The Company is
continuing to advance the Springpole Gold Project PFS, which is
targeted for completion in Q1 2021, and data collection and
compilation of the EIS, which is targeted for submission in 2021 as
well.
●
Ongoing
technical and economic evaluations are underway at the Hope Brook
Gold Project, the Cameron Gold Project and at the Québec
projects to gain a better understanding of the potential of these
projects.
●
Auteco
produced an updated resource estimate and commenced drilling at the
Pickle Crow Gold Project, and in order to fulfill the first part of
the Stage 1 Earn-In under the Earn-In Agreement, Auteco is required
to spend $750,000 on exploration expenditures at the Pickle Crow
Gold Project within the first 12 months of the date of the Earn-In
Agreement (by Q1 2021). As at September 30, 2020, Auteco had spent
$1,750,000 on exploration expenditures at the Pickle Crow Gold
Project and thus satisfied the first part of the Stage 1 Earn-In.
The Company expects that Auteco will continue to incur the
remaining exploration expenditures at Pickle Crow that are
necessary to complete the Stage 1 Earn-In.
FINANCIAL INSTRUMENTS
Cash and Cash Equivalents
Cash
and cash equivalents include cash and short-term deposits that are
readily convertible to known amounts of cash and which are subject
to an insignificant risk of changes in value. The carrying amounts
approximate fair value due to the short-term maturities of these
instruments.
Cash and cash equivalents are mainly held in interest bearing
accounts at large Canadian financial institutions.
Investments
The
Company holds marketable securities of publicly traded companies as
strategic investments and has less than a 10% equity interest in
each of these investees below, with the exception of Treasury
Metals. During the nine months ended September 30, 2020, the
Company received 25 million shares of Auteco in connection
with its
option to acquire PC Gold Inc. and 805,698 First Majestic Shares in
connection with the Silver Purchase Agreement. Auteco and First
Majestic Silver Corp. marketable securities were designated as
FVTPL. Other marketable securities are recorded as fair value
through other comprehensive income (loss) (“FVTOCI”) in
accordance with the Company’s accounting policy.
During
the nine months ended September 30, 2020, the Company also received
the 11.67 million Treasury Metals Warrants in connection with the
Share Purchase Agreement which were designated as
FVTPL.
|
(in
$000s)
|
Marketable
Securities (FVTPL)
|
Marketable
Securities (FVTOCI)
|
Warrants
(FVTPL)
|
Total
Investments
|
|
Balance
as at December 31, 2019
|
$-
|
$1,775
|
-
|
$1,775
|
|
Additions
(Disposals)
|
11,134
|
-
|
9,812
|
20,946
|
|
Gain recorded in
other comprehensive loss
|
-
|
1,721
|
-
|
1,721
|
|
Gain (loss)
recorded in net loss
|
2,526
|
-
|
(2,952)
|
(426)
|
|
Balance
as at September 30, 2020
|
$13,660
|
$3,496
|
6,860
|
$24,016
|
|
(in
$000s)
|
Marketable
Securities (FVTPL)
|
Marketable
Securities (FVTOCI)
|
Warrants
(FVTPL)
|
Total
Investments
|
|
Balance
as at December 31, 2018
|
$-
|
$2,597
|
$-
|
$2,597
|
|
Additions
(Disposals)
|
-
|
(1,527)
|
-
|
(1,527)
|
|
Gain recorded in
other comprehensive loss
|
-
|
705
|
-
|
705
|
|
Balance
as at December 31, 2019
|
$-
|
$1,775
|
$-
|
$1,775
|
15
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless otherwise
indicated)
|
For the three and nine months ended September 30,
2020
|
Option – PC Gold
Auteco’s
right to earn an interest in PC Gold pursuant to the Earn-In
Agreement is a financial liability of First Mining. As a
derivative, the Option – PC Gold liability is classified as
FVTPL.
As
there is no observable market data which can be used to determine
the fair value of the Option – PC Gold liability, management
uses property specific and market-based information to determine
whether a significant change in the fair value of the option
liability has occurred. Factors that are considered
include:
●
Performance of the
Auteco share price;
●
The amount or
timing of Pickle Crow exploration expenditures
incurred;
●
Updates to the NI
43-101 resource report (or Australian equivalent);
●
Milestone payment
probability assumptions; and
●
Gold spot prices
over the period from the Earn-In Agreement closing to September 30,
2020.
As at
September 30, 2020, management has estimated a fair value for the
Option – PC Gold liability of $2,590,000. Management has
concluded that there were no developments in the period since
inception that would indicate a material change in fair value and,
accordingly, the Option – PC Gold liability remains recorded
at the amount received from the counterparty. These amounts include
cash, exploration expenditures incurred and the value, at the time
of receipt, of the Auteco shares received.
Mineral Property Investments
The
Company, through its subsidiary Clifton Star, has a 10% equity
interest in the shares of Beattie Gold Mines Ltd., 2699681 Canada
Ltd., and 2588111 Manitoba Ltd., which are private companies which
directly or indirectly own various mining concessions and surface
rights, collectively known as the Duparquet Gold
Project.
As
there is no observable market data which can be used to determine
the fair value of the Company’s mineral property investments,
management uses property specific and market-based information to
determine whether a significant change in the fair value of these
investments has occurred. Factors that are considered
include:
●
Changes
in the economic and regulatory environment for the jurisdiction in
which the Duparquet Gold project is located;
●
Gold
spot prices over the period from the acquisition of the investment
to September 30, 2020;
●
The
Company’s market capitalization per in-situ ounce which are
attributable to the Duparquet Gold project; and
●
Recent
transactions involving mineral properties located in
Québec.
As at
September 30, 2020, management determined, as a function of the
rising gold price environment, that there was an increase in the
fair value of mineral property investments and a fair value gain of
$1,326,000 was recorded (nine months ended September 30, 2019 -
$nil). As at September 30, 2020, the fair value of the
Company’s mineral property investments was $6,724,000
(December 31, 2019 – $5,398,000).
Silver Stream Derivative Liability
The
Company has concluded that the Silver Stream is a standalone
derivative measured at FVTPL. The Company considered whether the
Silver Stream would qualify as an ‘own use contract’,
whereby it would not require fair value accounting under IFRS. An
‘own use contract’ is one that results in the physical
delivery of a company’s own non-financial asset. The Silver
Stream failed to qualify under the ‘own use exemption’
as a result of the silver substitution provisions within the Silver
Purchase Agreement. In addition, the Company has an unavoidable
obligation to repay the Advance Payment or deliver the silver to
First Majestic.
As of
the acquisition date, the estimated fair value of the Silver Stream
derivative liability was determined using a discounted cash flow
model which incorporated a Monte Carlo simulation. The fair value
of Silver Stream derivative liability is a Level 3 measurement. The
key inputs to calculate the fair value of the silver stream
derivative liability at each reporting date include:
●
COMEX
spot silver price;
●
COMEX
silver forward curve;
●
COMEX
5-year at-the-money silver implied volatility;
●
USD
3-month LIBOR discount curve;
●
First
Mining’s estimated credit spread;
●
Probability
of receiving future advanced payments; and
●
Quarterly
delivery schedule of payable Silver.
The
fair value of the Silver Stream derivative liability is calculated
at each reporting date as the net of the future Advance Payment
tranches receivable (an asset for the Company) and the Silver
Stream obligation (a liability to the company), with gains and
losses recorded in the statement of net income (loss) and
comprehensive income (loss). The fair value of the Silver Stream
derivative liability at July 2, 2020 was determined to be
US$5,431,000 ($7,378,000), which consisted of the fair value of the
Advance Payment tranches receivable of US$8,473,000 ($11,512,000),
net of the fair value of future Silver Stream obligation of
US$13,904,000 ($18,890,000). At September 30, 2020, the fair value
of the Silver Stream is US$10,115,483 ($13,490,000), which
consisted of fair value of the Advance Payment tranches receivable
of US$8,506,000 ($11,346,000) net of the fair value of the Silver
Stream obligation of US$18,621,000 ($24,836,000).
The
fair value of the 30 million common share purchase warrants issued
to First Majestic as part of the transaction was calculated using
the Black-Scholes option pricing model. At inception, the fair
value of the warrants was $6,278,000.
Amounts
paid to related parties were incurred in the normal course of
business and measured at the exchange amount, which is the amount
agreed upon by the transacting parties and on terms and conditions
similar to non-related parties. There were no significant
transactions with related parties outside of the ordinary course of
business during the period ended September 30, 2020.
The Company has no off-balance sheet arrangements that have, or are
reasonably likely to have, a current or future effect on the
results of operations or financial condition of the Company
including, without limitation, such considerations as liquidity and
capital resources.
The
Company has included a non-IFRS measure for “net loss
excluding impairment of non-current assets (non-cash)”,
“net loss excluding share-based payments expense, investments
fair value loss, loss on disposal of subsidiaries, fair value loss
on Silver Stream derivative liability, deferred income tax expense
(recovery) and equity income from investment in Treasury
Metals”, and “working capital” in this MD&A
which should be read in conjunction with its financial statements
which are prepared in accordance with IFRS as applicable to the
preparation of interim financial statements, including
International Accounting Standard IAS 34 Interim Reporting. The
Company believes that these measures provide investors with an
improved ability to evaluate the performance of the Company.
Non-IFRS measures do not have any standardized meaning prescribed
under IFRS. Therefore, such measures may not be comparable to
similar measures employed by other companies. The data is intended
to provide additional information and should not be considered in
isolation or as a substitute for measures of performance prepared
in accordance with IFRS.
16
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless otherwise
indicated)
|
For the three and nine months ended September 30,
2020
|
The
Company determines working capital and net loss excluding certain
non-cash items excluded as follows:
Quarterly Reconciliations:
|
Reconciliation
as of the end of the period (in
$000s)
|
2020-Q3
|
2020-Q2
|
2020-Q1
|
2019-Q4
|
|
Current
assets
|
$57,379
|
$12,863
|
$12,977
|
$8,329
|
|
Less current
liabilities
|
(43,055)
|
(4,267)
|
(3,031)
|
(2,549)
|
|
Working capital
|
$14,324
|
$8,596
|
$9,946
|
$5,780
|
|
Reconciliation
as of the end of the period (in
$000s)
|
2019-Q3
|
2019-Q2
|
2019-Q1
|
2018-Q4
|
|
Current
assets
|
$9,713
|
$11,747
|
$6,018
|
$8,118
|
|
Less current
liabilities
|
(1,353)
|
(1,120)
|
(527)
|
(582)
|
|
Working capital
|
$8,360
|
$10,627
|
$5,491
|
$7,536
|
|
Reconciliation
for the three months ended (in
$000s)
|
2020-Q3
|
2020-Q2
|
2020-Q1
|
2019-Q4
|
|
Net
loss
|
$(12,352)
|
$(19,531)
|
$(1,462)
|
$(2,274)
|
|
Excluding
share-based payments expense
|
128
|
244
|
405
|
215
|
|
Excluding
impairment of non-current assets
|
2,372
|
22,498
|
-
|
-
|
|
Excluding
investments fair value loss (gain)
|
3,439
|
(3,013)
|
-
|
-
|
|
Excluding loss on
disposal of subsidiaries
|
-
|
303
|
-
|
-
|
|
Excluding fair
value loss on Silver Stream derivative liability
|
6,112
|
-
|
-
|
-
|
|
Excluding deferred
income tax (recovery) expense
|
(221)
|
(1,385)
|
67
|
657
|
|
Excluding equity
income from investment in Treasury Metals
|
(467)
|
-
|
-
|
-
|
|
Net loss excluding
certain non-cash items(1)
|
$(989)
|
$(884)
|
$(990)
|
$(1,402)
|
|
Reconciliation
for the three months ended (in
$000s)
|
2019-Q3
|
2019-Q2
|
2019-Q1
|
2018-Q4
|
|
Net
loss
|
$(1,643)
|
$(1,315)
|
$(1,727)
|
$(5,658)
|
|
Excluding
share-based payments expense
|
332
|
475
|
574
|
392
|
|
Excluding
impairment of non-current assets
|
341
|
-
|
-
|
4,181
|
|
Excluding
investments fair value loss (gain)
|
-
|
-
|
-
|
-
|
|
Excluding loss on
disposal of subsidiaries
|
-
|
-
|
-
|
-
|
|
Excluding fair
value loss on Silver Stream derivative liability
|
-
|
-
|
-
|
-
|
|
Excluding deferred
income tax expense (recovery)
|
(141)
|
-
|
-
|
-
|
|
Excluding equity
income from investment in Treasury Metals
|
-
|
-
|
-
|
-
|
|
Net loss excluding
certain non-cash items(1)
|
$(1,111)
|
$(840)
|
$(1,153)
|
$(1,085)
|
Annual Reconciliations:
|
Reconciliation
as of the end of the period (in
$000s)
|
September
30,
2020
|
December
31,
2019
|
December
31,
2018
|
|
Current
assets
|
$57,379
|
$8,329
|
$8,118
|
|
Less current
liabilities
|
(43,055)
|
(2,549)
|
(582)
|
|
Working capital
|
$14,324
|
$5,780
|
$7,536
|
|
Reconciliation
for the nine months ended September 30 (in
$000s)
|
2020
|
2019
|
2018
|
|
Net
loss
|
$(33,345)
|
$(4,686)
|
$(5,987)
|
|
Excluding
share-based payments expense
|
777
|
1,381
|
2,640
|
|
Excluding
impairment of non-current assets
|
24,870
|
341
|
-
|
|
Excluding
investments fair value loss
|
426
|
-
|
-
|
|
Excluding loss on
disposal of subsidiaries
|
303
|
-
|
-
|
|
Excluding fair
value loss on Silver Stream derivative liability
|
6,112
|
-
|
-
|
|
Excluding deferred
income tax (recovery) expense
|
(1,539)
|
(141)
|
-
|
|
Excluding equity
income from investment in Treasury Metals
|
(467)
|
-
|
-
|
|
Net loss excluding
certain non-cash items(1)
|
$(2,863)
|
$(3,105)
|
$(3,347)
|
(1)
“The certain
non-cash items excluded” refers to the “Share-based
payments expense”, “Impairment of non-current
assets”, "Investments fair value loss”, “Loss on
disposal of subsidiaries", “Fair value loss on Silver Stream
derivative liability”, “Deferred income tax expense
(recovery)” and “Equity income from investment in
Treasury Metals”.
17
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless otherwise
indicated)
|
For the three and nine months ended September 30,
2020
|
In
preparing the Company’s unaudited condensed interim
consolidated financial statements for the three and nine months
ended September 30, 2020, the Company used the same accounting
policies and methods of computation as in the annual consolidated
financial statements for the year ended December 31, 2019, except
for the following policies adopted as a result of the new
transactions which occurred in the period:
Investment in associate
An
associate is an entity over which the Company has significant
influence and which is neither a subsidiary nor a joint
arrangement.
The
Company has significant influence over an entity when it has the
power to participate in the financial and operating policy
decisions of the associate but does not have control or joint
control.
The
Company’s investment in the common shares of Treasury Metals
(Note 3) has been treated as an investment in associate and
accounted for using the equity method.
Under
the equity method, the Company’s investment in the common
shares of the associate is initially recognized at cost and
subsequently increased or decreased to recognize the
Company’s share of net income and losses of the associate,
after any adjustments necessary to give effect to uniform
accounting policies, any other movement in the associate’s
reserves, and for impairment losses after the initial recognition
date. The Company’s share of income and losses of the
associate is recognized in net income during the
period.
Dividends
and repayment of capital received from an associate are accounted
for as a reduction in the carrying amount of the Company’s
investment.
At the
end of each reporting period, the Company assesses whether there is
any objective evidence that an investment in an associate is
impaired. Objective evidence includes observable data indicating
there is a measurable decrease in the estimated future cash flows
of the investee’s operations. A significant or prolonged
decline in the fair value of an equity investment below its cost is
also objective evidence of impairment. When there is objective
evidence that an investment is impaired, the carrying amount of
such investment is compared to its recoverable amount, being the
higher of its fair value less costs of disposal and value-in-use.
If the recoverable amount of an investment is less than its
carrying amount, the carrying amount is reduced to its recoverable
amount and an impairment loss, being the excess of carrying amount
over the recoverable amount, is recognized in the period in which
the relevant circumstances are identified. When an impairment loss
reverses in a subsequent period, the carrying amount of the
investment is increased to the revised estimate of recoverable
amount to the extent that the increased carrying amount does not
exceed the carrying amount that would have been determined had an
impairment loss not been previously recognized. A reversal of an
impairment loss is recognized in net income in the period in which
the reversal occurs.
The
following critical accounting estimates require assumptions which
are highly uncertain, and different estimates could have been used,
or changes in the estimate from period to period are material to
the financial statements:
Classification and fair value of silver stream derivative
liability
The
Company has concluded that the Silver Stream is a standalone
derivative measured at FVTPL. The Silver Stream failed to qualify
under the ‘own use exemption’ as a result of the silver
substitution provisions within the Silver Purchase Agreement. In
addition, the Company has an unavoidable obligation to repay the
Advance Payment or deliver the silver to First Majestic. The
primary factors affecting the fair value of the Silver Stream
derivative are changes in forecasted silver prices, which are
volatile and can result in material changes in the fair value
measurements reported in the Company’s consolidated financial
statements in the future.
The
determination of the fair value is also an area of significant
estimation uncertainty. The fair value is calculated by utilising a
Monte Carlo simulation valuation model. A Monte Carlo valuation
model relies on random sampling and is often used when modeling
cash flows with many inputs and where there is significant
uncertainty in the future value of inputs and where the movement of
the inputs can be independent of each other.
The key
inputs used in its fair value calculation are further disclosed in
Note 4 to the condensed interim financial statements for the period
ended September 30, 2020. Changes in the inputs to the valuation
model could impact the carrying value of the silver stream
derivative liability and the amount of fair value gains or losses
recognized in the statement of net income (loss) and comprehensive
income.
Impairment of investment in associate
With
respect to its investment in associate, the Company is required to
make estimates and judgments about future events and circumstances
and whether the carrying amount of the asset exceeds its
recoverable amount. Recoverability depends on various factors,
including the discovery of economically recoverable reserves at
Treasury Metals’ exploration properties, the ability of
Treasury Metals to obtain the necessary financing to complete the
development, and future profitable production or proceeds from the
disposition of the Treasury Metals shares themselves. The publicly
quoted share price of Treasury Metals is also a source of objective
evidence about the recoverable amount of the equity
investment.
Fair value of the Option – PC Gold
The
company has made assumptions when estimating the fair value of this
option liability which arises under the terms of the Earn-In
Agreement described in Note 6(a). As there is no observable market
data which can be used to determine the fair value of the Option
– PC Gold liability, management uses property specific and
market-based information to determine whether a significant change
in the fair value of the option liability has occurred. The
specific assumptions made are disclosed in Note 6(a). Changes in
these assumptions can significantly affect the fair value
estimate.
Determining amount and timing of reclamation
provisions
A
reclamation provision represents the present value of estimated
future costs for the reclamation of the Company’s mineral
properties. These estimates include assumptions as to the future
activities, cost of services, timing of the reclamation work to be
performed, inflation rates, exchange rates and interest rates. The
actual cost to reclaim a mine or project may vary from the
estimated amounts because there are uncertainties with respect to
the extent of required future remediation activities, as studies
are currently ongoing, and uncertainties in factors used to
estimate the cost and potential changes in regulations or laws
governing the reclamation of a mineral property. Management
periodically reviews the reclamation requirements and adjusts the
liability, if any, as new information becomes available and will
assess the impact of new regulations and laws as they are
enacted.
Valuation of mineral property investments
The
Company makes estimates and assumptions that affect the carrying
value of its mineral property investments, which are comprised of
equity interests in the shares of private companies. These
financial assets are designated as fair value through other
comprehensive income (loss), and Management needs to determine the
fair value as at each period end. As there is no observable market
data which can be used to determine this fair value, management
uses property specific and market-based information to determine
whether a significant change in the fair value of these investments
has occurred. Changes to the property specific and market-based
variables could result in the fair value being less than or greater
than the amount recorded.
18
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless otherwise
indicated)
|
For the three and nine months ended September 30,
2020
|
There
are no IFRS or International Financial Reporting Interpretations
Committee interpretations that are not yet effective that would be
expected to have a material impact on the Company’s
consolidated financial statements.
The
Company is subject to a number of risks and uncertainties, each of
which could have an adverse effect on its business operations or
financial results. Some of these risks and uncertainties are
detailed below. For a comprehensive list of the Company’s
risks and uncertainties, see the Company’s Annual Information
Form for the year ended December 31, 2019 under the heading
“Risks that can affect our business”, which is
available under our SEDAR profile at www.sedar.com,
and on EDGAR as an exhibit to Form 40-F.
Global Financial Conditions
Global
financial conditions have, at various times in the past and may, in
the future, experience extreme volatility. Many industries,
including the mining industry, are impacted by volatile market
conditions. Global financial conditions may be subject to sudden
and rapid destabilizations in response to economic shocks or other
events, such as developments concerning COVID-19. A slowdown in the
financial markets or other economic conditions, including but not
limited to consumer spending, employment rates, business
conditions, inflation, fluctuations in fuel and energy costs,
consumer debt levels, lack of available credit, the state of the
financial markets, interest rates and tax rates, may adversely
affect the Company’s growth and financial condition. Future
economic shocks may be precipitated by a number of causes,
including government debt levels, fluctuations in the price of oil
and other commodities, volatility of metal prices, geopolitical
instability, changes in laws or governments, war, terrorism, the
volatility of currency exchanges inflation or deflation, the
devaluation and volatility of global stock markets, pandemics and
natural disasters. Any sudden or rapid destabilization of global
economic conditions could impact the Company’s ability to
obtain equity or debt financing in the future on terms favourable
to the Company or at all. In such an event, the Company’s
operations and financial condition could be adversely
impacted.
Public Health Crises
The
Company's business, operations and financial condition could be
materially adversely affected by the outbreak of epidemics,
pandemics or other health crises, such as COVID-19, and by
reactions by government and private actors to such outbreaks. As at
the date of this MD&A, the global reactions to the spread of
COVID-19 have led to, among other things, significant restrictions
on travel, quarantines, temporary business closures and a general
reduction in consumer activity. While these effects are expected to
be temporary, the duration of the disruptions to business
internationally and the related financial impact cannot be
estimated with any degree of certainty at this time. Such public
health crises can result in disruptions and extreme volatility in
financial markets and global supply chains as well as declining
trade and market sentiment and reduced mobility of people, all of
which could impact commodity prices, interest rates, credit
ratings, credit risk, availability of financing and inflation. The
risks to the Company of such public health crises also include
risks to employee health and safety and may result in a slowdown or
temporary suspension of operations at some or all of the Company's
mineral properties as well as its head office. Although the Company
has the capacity to continue certain administrative functions
remotely, many other functions, including the conduct of
exploration and development programs, cannot be conducted remotely
and may be impacted or delayed if the Company experiences
limitations on employee mobility.
As a result of COVID-19, the province of Ontario is currently
subject to a number of emergency orders (the “Emergency Orders”) which impose
various restrictions on workplaces in the province. Our exploration
properties in Ontario are at present not directly affected by the
Emergency Orders. However, there can be no guarantee that that it
will not be in the future or that governments in other provinces in
which we have mineral properties will not pass orders reducing or
preventing access to our properties. Any such orders may have a
material adverse effect upon ongoing exploration programs at our
properties and, ultimately, on our business and financial
condition. At this point, the extent to which COVID-19 may impact
the Company remains uncertain; however, it is possible that
COVID-19 could have a material adverse effect on the Company's
business, results of operations and financial
condition.
Although
activities have recommenced at the Springpole Gold Project, there
can be no assurance that the Company will not be required to
demobilize its personnel and contractors due to the ongoing
COVID-19 pandemic. Any demobilization may have an adverse impact on
the Company’s ability to conduct exploration and further
advance its work programs on the affected properties.
Risks related to Financial Instruments
The
Company thoroughly examines the various financial instruments and
risks to which it is exposed and assesses the impact and likelihood
of those risks. These risks include market risk, equity price risk,
foreign currency risk, interest rate risk, credit risk, liquidity
risk, and capital risk. Where material, these risks are reviewed
and monitored by the Company’s Board of Directors (the
“Board”).
The
Board has overall responsibility for the determination of the
Company’s risk management objectives and policies. The
overall objective of the Board is to set policies that seek to
reduce risk as much as possible without unduly affecting the
Company’s competitiveness and flexibility.
a)
Market
Risk
Market risk is the risk that the fair value of future cash flows of
a financial instrument will fluctuate due to changes in market
prices. Market risk includes equity price risk, foreign currency
risk and interest rate risk.
Equity Price Risk
The Company is exposed to equity price risk as a result of holding
investments in equity securities, which are comprised of
investments and mineral property investments, in other mineral
property exploration companies.
If the fair value of our investments in equity instruments had been
10% higher or lower as at September 30, 2020, total net loss and
comprehensive loss for the nine months ended September 30, 2020
would have decreased or increased, respectively, by approximately
$3,074,000 (2019 - $740,000), as a result of changes in the fair
value of equity investments.
Foreign Currency Risk
The Company is exposed to the financial risk related to the
fluctuation of foreign exchange rates. During the first half of
2020, the Company operated in Canada, the United States, and
Mexico, and a portion of the Company’s expenses were incurred
in Canadian dollars (“CAD”), US dollars (“USD”), and Mexican Pesos. A significant change
in the currency exchange rates between the Canadian, US and Mexican
currencies, could have an effect on the Company’s results of
operations, financial position or cash flows. The Company has not
hedged its exposure to currency fluctuations.
In the second quarter of 2020, the Company disposed of its Mexican
subsidiaries, and is no longer exposed to the change in the
exchange rates between the Canadian and Mexican currencies. As at
September 30, 2020, the Company was exposed to currency risk on the
following certain financial instruments denominated in USD. The
sensitivity of the Company’s net loss due to changes in the
exchange rate between the USD against the Canadian dollar is
included in the table below in Canadian dollar
equivalents:
|
Cash and cash
equivalents
|
$3,081
|
|
Fair value of
Silver Stream derivative liability
|
$13,490
|
|
Net
exposure
|
$(10,409)
|
|
Effect
of +/- 10% change in currency
|
$(1,041)
|
19
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless otherwise
indicated)
|
For the three and nine months ended September 30,
2020
|
Interest Rate Risk
Interest rate risk is the risk that future cash flows will
fluctuate as a result of changes in market interest rates. The
Company does not have any borrowings that are subject to
fluctuations in market interest rates. Interest rate risk is
limited to potential decreases on the interest rate offered on cash
and cash equivalents held with chartered Canadian financial
institutions. The Company manages its interest rate risk by
maximizing the interest income earned on excess funds while
maintaining the necessary liquidity to conduct its day-to-day
operations. The Company considers this risk to be
immaterial.
b)
Credit
Risk
Credit risk is the risk of financial loss to the Company if a
counterparty to a financial instrument fails to meet its
contractual obligations. Financial instruments which are
potentially subject to credit risk for the Company consist
primarily of cash and cash equivalents, accounts and other
receivables, and the reclamation deposit. The Company considers
credit risk with respect to its cash and cash equivalents to be
immaterial as cash and cash equivalents are mainly held through
high credit quality major Canadian financial institutions as
determined by ratings agencies. As a result, the Company does not
expect any credit losses.
c)
Liquidity
Risk
Liquidity
risk is the risk that the Company will not be able to meet its
financial obligations as they become due. The Company’s
policy is to ensure that it will have sufficient cash to allow it
to meet its liabilities when they become due, under both normal and
stressed conditions, without incurring unacceptable losses or
risking damage to the Company’s reputation. The Company
manages its liquidity risk by preparing annual estimates of
exploration and administrative expenditures and monitoring actual
expenditures compared to the estimates to ensure that there is
sufficient capital on hand to meet ongoing
obligations.
See the
section of this MD&A titled "Financial Liabilities and
Commitments" for a summary of the maturities of the Company’s
financial liabilities as at September 30, 2020 based on the
undiscounted contractual cash flows.
As at
September 30, 2020, the Company had cash and cash equivalents of
$32,477,000 (December 31, 2019 – $5,902,000).
Hazel
Mullin, P.Geo, Director of Data Management and Technical Services
at First Mining, is a Qualified Person as defined by National
Instrument 43-101 Standards of
Disclosure for Mineral Projects (“NI 43-101”), and is responsible
for the review and verification of the scientific and technical
information in this MD&A.
Authorized
share capital: The Company can issue an unlimited number of common
shares with no par value and an unlimited number of preferred
shares with no par value. No preferred shares have been issued as
at November 13, 2020.
The
following table sets out all outstanding securities of the Company
as of November 13, 2020.
|
|
Number
|
Weighted Average
Exercise Price
|
Expiry
Date
|
|
Common shares
– issued
|
693,541,453
|
|
|
|
Stock
options(1)
|
47,960,000
|
$0.52
|
December 30, 2020
– October 30, 2025
|
|
Warrants(2)
|
93,085,657
|
$0.48
|
June 16, 2021
– July 2, 2025
|
|
Common shares -
fully diluted
|
834,587,110
|
|
|
(1)
Each
stock option is exercisable for one common share of the
Company.
(2)
Each
warrant is exercisable for one common share of the
Company.
DISCLOSURE CONTROLS AND PROCEDURES
The
Company’s Management, with the participation of its Chief
Executive Officer (“CEO”) and its Chief Financial
Officer (“CFO”),
have evaluated the effectiveness of the Company’s disclosure
controls and procedures. Based upon the results of that evaluation,
the Company’s CEO and CFO have concluded that, as of
September 30, 2020, the Company’s disclosure controls and
procedures were effective to provide reasonable assurance that the
information required to be disclosed by the Company in reports it
files is recorded, processed, summarized and reported, within the
appropriate time periods and is accumulated and communicated to
Management, including the CEO and CFO, as appropriate to allow
timely decisions regarding required disclosure.
The
Company’s Management, with the participation of its CEO and
CFO, is responsible for establishing and maintaining adequate
internal control over financial reporting as such term is defined
in the SEC’s rules and the rules of the Canadian Securities
Administrators. The Company’s internal control over financial
reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of annual financial statements for external purposes in
accordance with IFRS as issued by the IASB. The Company’s
internal control over financial reporting includes policies and
procedures that:
●
address
maintaining records that accurately and fairly reflect, in
reasonable detail, the transactions and dispositions of assets of
the Company;
●
provide
reasonable assurance that transactions are recorded as necessary
for preparation of financial statements in accordance with
IFRS;
●
provide
reasonable assurance that the Company’s receipts and
expenditures are made only in accordance with authorizations of
Management and the Company’s Directors; and
●
provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
Company’s assets that could have a material effect on the
Company’s consolidated financial statements.
The
Company’s internal control over financial reporting may not
prevent or detect all misstatements because of inherent
limitations. Additionally, projections of any evaluation of
effectiveness for future periods are subject to the risk that
controls may become inadequate because of changes in conditions or
deterioration in the degree of compliance with the Company’s
policies and procedures.
In the
first quarter of 2020, the Company’s employees began to work
remotely from home. Since then, the Company has reopened its
offices and its employees have performed their duties through a
combination of working remotely and in the office. This change has
required certain processes and controls that were previously done
or documented manually to be completed and retained in electronic
form. Despite the changes required by the current environment,
there have been no significant changes in our internal controls
during the quarter ended September 30, 2020 that have materially
affected, or are likely to materially affect, the Company’s
internal control over financial reporting.
20
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless otherwise
indicated)
|
For the three and nine months ended September 30,
2020
|
LIMITATIONS OF CONTROLS AND PROCEDURES
The
Company’s Management, including the CEO and CFO, believes
that any disclosure controls and procedures or internal control
over financial reporting, no matter how well conceived and
operated, may not prevent or detect all misstatements because of
inherent limitations. Further, the design of a control system must
reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs.
Because of the inherent limitations in all control systems, they
cannot provide absolute assurance that all control issues and
instances of fraud, if any, within the Company have been prevented
or detected. These inherent limitations include the realities that
judgments in decision-making can be faulty, and that breakdowns can
occur because of a simple error or mistake. Additionally, controls
can be circumvented by the individual acts of some persons, by
collusion of two or more people, or by unauthorized override of the
control. The design of any control system is also based in part
upon certain assumptions about the likelihood of future events, and
there can be no assurance that any design will succeed in achieving
its stated goals under all potential future conditions.
Accordingly, because of the inherent limitations in a
cost-effective control system, misstatements due to error or fraud
may occur and may not be detected.
This
MD&A is based on a review of the Company’s operations,
financial position and plans for the future based on facts and
circumstances as of September 30, 2020. This MD&A contains
“forward-looking statements” within the meaning of
applicable Canadian securities regulations (collectively,
“forward-looking
statements”). Any statements that express or involve
discussions with respect to predictions, expectations, beliefs,
plans, projections, objectives, assumptions or future events or
performance (often, but not always, using words or phrases such as
“seek”, “anticipate”, “plan”,
“continue”, “estimate”,
“expect”, “may”, “will”,
“project”, “predict”,
“forecast”, “potential”,
“targeting”, “intend”, “could”,
“might”, “should”, “believe”
and similar expressions) are not statements of historical fact and
may be “forward-looking statements”. These statements
relate to future events or the Company’s future performance,
business prospects or opportunities. Forward-looking statements
include, but are not limited to: statements regarding the
advancement of the Company’s mineral assets towards
production; statements regarding the potential for the Company to
acquire additional mineral assets in the future; statements
regarding the next stages and anticipated timing of the
metallurgical study or the environmental, permitting at the
Springpole Gold Project; statements regarding opportunities to
enhance project economics identified under the 2019 Springpole Gold
Project PEA; statements regarding the targeted completion date of
the Springpole Gold Project PFS; statements regarding the targeted
submission date for the Environmental Impact Statement in relation
to the Springpole Gold Project; statements regarding the potential
increase in gold and silver recoveries at the Springpole Gold
Project; statements regarding the anticipated receipt, timing and
use of proceeds received by First Mining pursuant to the Silver
Purchase Agreement; statements regarding the Company distributing
approximately 20.94 million Treasury Metals Shares and all of the
Treasury Metals Warrants to the Company’s shareholders within
12 months of the closing date of the transaction with Treasury
Metals; statements regarding the Company’s intentions and
expectations regarding exploration, infrastructure and production
potential of any of its mineral properties; statements relating to
the Company's working capital, capital expenditures and ability and
intentions to raise capital; statements regarding the potential
effects of financing on the Company's capitalization, financial
condition and operations; statements regarding future share
issuances under the ATM facility; forecasts relating to mining,
development and other activities at the Company’s operations;
forecasts relating to market developments and trends in global
supply and demand for gold; statements relating to future global
financial conditions and the potential effects on the Company;
statements relating to future work on the Company’s
non-material properties; statements relating to the Company’s
mineral reserve and mineral resource estimates; statements
regarding regulatory approval and permitting including, but not
limited to, EA approval for the Springpole Gold Project and the
expected timing of such EA approval; statements regarding the
Company’s anticipated timing to receive final approval from
the MECP of the ToR for the Springpole Gold Project, and
consultations in respect thereof; statements regarding the
Company's compliance with laws and regulations including, but not
limited to environmental laws and regulations; statements regarding
the Pickle Crow Gold Project Earn-In Agreement and payouts, share
issuances and exploration expenditure commitments thereunder;
statements regarding the Company continuing to conduct a waste rock
characterization and economic study of marketable aggregates at the
Hope Brook Gold Project, and continuing to collect environmental baseline data for permitting
and the understanding of site environmental conditions at the
project; statements regarding the Company’s plans to
complete low-spend, incremental work on its broader gold asset
portfolio; statements regarding the Company’s engagement with
local stakeholders; statements regarding the Company's ability to
enter into agreements with local stakeholders including, but not
limited to, local Indigenous groups; statements regarding the
potential impact of the COVID-19 pandemic; statements regarding key
personnel; statements regarding non-IFRS measures and changes in
accounting standards; statements relating to the limitation of the
Company's internal controls over financial reporting; and
statements regarding the preparation or conduct of studies and
reports and the expected timing of the commencement and completion
of such studies and reports.
There
can be no assurance that such statements will prove to be accurate,
and future events and actual results could differ materially from
those anticipated in such statements. Important factors that could
cause actual results to differ materially from the Company’s
expectations are disclosed under the heading “Risks that can
affect our business” in the Company’s Annual
Information Form for the year ended December 31, 2019 and other
continuous disclosure documents filed from time to time via SEDAR
with the applicable Canadian securities regulators. Forward-looking
statements are based on the estimates and opinions of Management on
the date the statements are made, and the Company does not
undertake any obligation to update forward-looking statements
should conditions or our estimates or opinions change, except as
required by applicable laws. Actual results may differ materially
from those expressed or implied by such forward-looking statements.
These statements involve known and unknown risks, uncertainties,
and other factors that may cause the Company’s actual
results, levels of activity, performance or achievements to be
materially different from any future results, levels of activity,
performance or achievement expressed or implied by these
forward-looking statements.
The
Company believes that the expectations reflected in any such
forward-looking statements are reasonable, but no assurance can be
given that these expectations will prove to be correct and such
forward-looking statements included herein this MD&A should not
be unduly relied upon.
This
MD&A has been prepared in accordance with the requirements of
Canadian securities laws, which differ in certain material respects
from the disclosure requirements of United States securities laws.
The terms “mineral reserve”, “proven mineral
reserve” and “probable mineral reserve” are
Canadian mining terms as defined in accordance with NI 43-101 and
the Canadian Institute of Mining, Metallurgy and Petroleum
(“CIM”) 2014
Definition Standards on Mineral Resources and Mineral Reserves,
adopted by the CIM Council, as amended. These definitions differ
from the definitions in the disclosure requirements promulgated by
the United States Securities and Exchange Commission (the
“SEC”) and
contained in SEC Industry Guide 7 (“Industry Guide 7”). Under Industry
Guide 7 standards, a “final” or “bankable”
feasibility study is required to report mineral reserves, the
three-year historical average price is used in any mineral reserve
or cash flow analysis to designate mineral reserves and the primary
environmental analysis or report must be filed with the appropriate
governmental authority.
In
addition, the terms “mineral
resource”, “measured mineral resource”,
“indicated mineral
resource” and “inferred mineral resource” are
defined under the 2014 CIM definition standards, and are required
to be disclosed by NI 43-101. However, these terms are not defined
under Industry Guide 7 and are not permitted to be used in reports
and registration statements of United States companies filed with
the SEC. Investors are cautioned not to assume that any part or all
of the mineral deposits in these categories will ever be converted
into mineral reserves. “Inferred mineral resources”
have a great amount of uncertainty as to their existence, and great
uncertainty as to their economic and legal feasibility. It cannot
be assumed that all or any part of an inferred mineral resource
will ever be upgraded to a higher category. Under Canadian rules,
estimates of inferred mineral resources may not form the basis of
feasibility or pre-feasibility studies, except in rare cases.
Investors are cautioned not to assume that all or any part of an
inferred mineral resource exists or is economically or legally
mineable. Disclosure of “contained ounces” in a mineral
resource is permitted disclosure under Canadian regulations. In
contrast, the SEC only permits U.S. companies to report
mineralization that does not constitute “mineral
reserves” by SEC standards as in place tonnage and grade
without reference to unit measures.
Accordingly,
information contained in this MD&A may not be comparable to
similar information made public by U.S. companies subject to the
reporting and disclosure requirements under the United States
federal securities laws and the rules and regulations of the SEC
thereunder.
21
Exhibit 99.3
FORM
52-109F2
CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE
I,
Daniel W. Wilton, Chief Executive Officer of First Mining Gold
Corp., certify the following:
1.
Review: I have
reviewed the interim financial report and interim MD&A
(together, the “interim
filings”) of First Mining Gold Corp. (the
“issuer”) for
the interim period ended September 30, 2020.
2.
No
misrepresentations: Based on my knowledge, having exercised
reasonable diligence, the interim filings do not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated or that is necessary to make a statement not
misleading in light of the circumstances under which it was made,
for the period covered by the interim filings.
3.
Fair presentation:
Based on my knowledge, having exercised reasonable diligence, the
interim financial report together with the other financial
information included in the interim filings fairly present in all
material respects the financial condition, financial performance
and cash flows of the issuer, as of the date of and for the periods
presented in the interim filings.
4.
Responsibility: The
issuer’s other certifying officer(s) and I are responsible
for establishing and maintaining disclosure controls and procedures
(DC&P) and internal control over financial reporting (ICFR), as
those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’
Annual and Interim Filings, for the issuer.
5.
Design: Subject to
the limitations, if any, described in paragraphs 5.2 and 5.3, the
issuer’s other certifying officer(s) and I have, as at the
end of the period covered by the interim filings:
(a)
designed DC&P,
or caused it to be designed under our supervision, to provide
reasonable assurance that
(i)
material
information relating to the issuer is made known to us by others,
particularly during the period in which the interim filings are
being prepared; and
(ii)
information
required to be disclosed by the issuer in its annual filings,
interim filings or other reports filed or submitted by it under
securities legislation is recorded, processed, summarized and
reported within the time periods specified in securities
legislation; and
(b)
designed ICFR, or
caused it to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with the issuer’s GAAP.
5.1
Control framework:
The control framework the issuer’s other certifying
officer(s) and I used to design the issuer’s ICFR is the 2013
Internal Control –
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).
5.2
N/A.
5.3
N/A.
6.
Reporting changes in
ICFR: The issuer has disclosed in its interim MD&A any
change in the issuer’s ICFR that occurred during the period
beginning on July 1, 2020 and ended on September 30, 2020 that has
materially affected, or is reasonably likely to materially affect,
the issuer’s ICFR.
Date:
November 16, 2020.
/s/ Daniel W.
Wilton
Daniel
W. Wilton
Chief
Executive Officer
Exhibit 99.4
FORM
52-109F2
CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE
I,
Andrew Marshall, the Chief Financial Officer of First Mining Gold
Corp., certify the following:
1.
Review: I have
reviewed the interim financial report and interim MD&A
(together, the “interim
filings”) of First Mining Gold Corp. (the
“issuer”) for
the interim period ended September 30, 2020.
2.
No
misrepresentations: Based on my knowledge, having exercised
reasonable diligence, the interim filings do not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated or that is necessary to make a statement not
misleading in light of the circumstances under which it was made,
for the period covered by the interim filings.
3.
Fair presentation:
Based on my knowledge, having exercised reasonable diligence, the
interim financial report together with the other financial
information included in the interim filings fairly present in all
material respects the financial condition, financial performance
and cash flows of the issuer, as of the date of and for the periods
presented in the interim filings.
4.
Responsibility: The
issuer’s other certifying officer(s) and I are responsible
for establishing and maintaining disclosure controls and procedures
(DC&P) and internal control over financial reporting (ICFR), as
those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’
Annual and Interim Filings, for the issuer.
5.
Design: Subject to
the limitations, if any, described in paragraphs 5.2 and 5.3, the
issuer’s other certifying officer(s) and I have, as at the
end of the period covered by the interim filings:
(a)
designed DC&P,
or caused it to be designed under our supervision, to provide
reasonable assurance that
(i)
material
information relating to the issuer is made known to us by others,
particularly during the period in which the interim filings are
being prepared; and
(ii)
information
required to be disclosed by the issuer in its annual filings,
interim filings or other reports filed or submitted by it under
securities legislation is recorded, processed, summarized and
reported within the time periods specified in securities
legislation; and
(b)
designed ICFR, or
caused it to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with the issuer’s GAAP.
5.1
Control framework:
The control framework the issuer’s other certifying
officer(s) and I used to design the issuer’s ICFR is the 2013
Internal Control –
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).
5.2
N/A.
5.3
N/A.
6.
Reporting changes in
ICFR: The issuer has disclosed in its interim MD&A any
change in the issuer’s ICFR that occurred during the period
beginning on July 1, 2020 and ended on September 30, 2020 that has
materially affected, or is reasonably likely to materially affect,
the issuer’s ICFR.
Date:
November 16, 2020.
/s/ Andrew
Marshall
Andrew
Marshall
Chief
Financial Officer