First Mining Gold Corp 6-K/A, filed Aug 5, 2020
First Mining Gold Corp. (FFMGF)
6-K/A
2020-08-05
For: 2020-08-04
View Original
Added on
August 22, 2026
About this 6-K/A
First Mining Gold Corp filed this 6-K/A on August 5, 2020.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K/A
REPORT OF FOREIGN
PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE
SECURITIES EXCHANGE ACT OF 1934
For the month of
August 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): [ ]
EXPLANATORY
NOTE
First Mining Gold
Corp. (the “Company”) hereby
furnishes this amended Report of Foreign Private Issuer on Form
6-K/A (this “Amended
Form 6-K”) to amend the Form 6-K furnished by the
Company to the Securities and Exchange Commission earlier on August
4, 2020 (the “Original Form 6-K”). The
sole purpose of this Amended Form 6-K is to reflect the correction
of the following documents that were inadvertently filed in draft
form, and prior to them being finalized: the Company’s
Condensed Interim Consolidated Financial Statements – Second
Quarter 2020 (Q2) (“Interim Financial
Statements”); the Management’s Discussion and
Analysis of Financial Condition and Results of Operations –
Second Quarter 2020 (Q2) (“MD&A”); the CEO
Certification of Interim Filings and the CFO Certification of
Interim Filings, which were attached as Exhibits 99.1 99.2, 99.3
and 99.4, respectively, to the Original Form
6-K.
Corrected versions
of the Interim Financial Statements, MD&A and CEO/CFO
Certifications are attached to this Amended Form 6-K as Exhibits
99.1, 99.2, 99.3 and 99.4, respectively, and the company notes
there aren’t any substantive changes between the two
forms.
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
|
Exhibits
|
Description
|
|
Condensed Interim Consolidated
Financial Statements for the period ended June 30,
2020
|
|
|
Management’s Discussion &
Analysis for the period ended June 30, 2020
|
|
|
CEO Certification of Interim
Filings
|
|
|
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: August 4, 2020
|
|
/s/ Samir
Patel
|
|
|
|
Samir Patel
|
|
|
|
General Counsel and Corporate
Secretary
|
|
|
|
|
EXHIBIT INDEX
|
Exhibits
|
Description
|
|
Condensed Interim Consolidated
Financial Statements for the period ended June 30,
2020
|
|
|
Management’s Discussion &
Analysis for the period ended June 30,
2020
|
|
|
CEO Certification of Interim
Filings
|
|
|
CFO Certification of Interim
Filings
|
First Mining Gold Corp.
Condensed Interim Consolidated Financial Statements
For the three and six months ended June 30, 2020 and
2019
(Expressed in thousands of Canadian dollars unless otherwise
noted)
(Unaudited)
1
FIRST MINING GOLD CORP.
INTERIM
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
AS AT
JUNE 30, 2020 AND DECEMBER 31, 2019
(Expressed
in thousands of Canadian dollars unless otherwise noted, except per
share amounts)
(Unaudited)
|
|
June
30,
2020
|
December
31,
2019
|
|
|
|
|
|
ASSETS
|
|
|
|
Current
|
|
|
|
Cash and cash
equivalents
|
$6,475
|
$5,902
|
|
Accounts and other
receivables
|
427
|
303
|
|
Prepaid
expenditures
|
278
|
349
|
|
Marketable
securities (Note 3)
|
5,601
|
1,775
|
|
Current assets held
for sale (Note 4(b))
|
82
|
-
|
|
Total
current assets
|
12,863
|
8,329
|
|
|
|
|
|
Non-current
|
|
|
|
Mineral properties
(Note 4)
|
159,630
|
252,815
|
|
Mineral property
investments (Note 5)
|
6,300
|
5,398
|
|
Property and
equipment
|
544
|
608
|
|
Right-of-use
asset
|
594
|
648
|
|
Reclamation
deposit
|
120
|
119
|
|
Other
receivables
|
-
|
103
|
|
Non-current assets
held for sale (Note 4(b))
|
77,993
|
-
|
|
Total
non-current assets
|
245,181
|
259,691
|
|
TOTAL
ASSETS
|
$258,044
|
$268,020
|
|
|
|
|
|
LIABILITIES
|
|
|
|
Current
|
|
|
|
Accounts payable
and accrued liabilities (Note 7)
|
$1,162
|
$1,398
|
|
Flow-through share
premium liability (Note 10)
|
268
|
341
|
|
Current portion of
lease liability
|
107
|
94
|
|
Current portion of
environmental reclamation provision (Note 8)
|
908
|
716
|
|
Option – PC
Gold (Note 4(a))
|
1,621
|
-
|
|
Current liabilities
held for sale (Note 4(b))
|
201
|
-
|
|
Total
current liabilities
|
4,267
|
2,549
|
|
|
|
|
|
Non-current
|
|
|
|
Lease
liability
|
499
|
554
|
|
Environmental
reclamation provision (Note 8)
|
1,460
|
1,639
|
|
Deferred tax
liabilities
|
-
|
946
|
|
Total
non-current liabilities
|
1,959
|
3,139
|
|
TOTAL
LIABILITIES
|
6,226
|
5,688
|
|
SHAREHOLDERS’
EQUITY
|
|
|
|
Share capital (Note
9)
|
290,800
|
282,666
|
|
Warrant and
share-based payment reserve (Note 9)
|
35,294
|
33,330
|
|
Accumulated other
comprehensive loss
|
(3,268)
|
(3,649)
|
|
Accumulated
deficit
|
(71,008)
|
(50,015)
|
|
Total
shareholders’ equity
|
251,818
|
262,332
|
|
TOTAL
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$258,044
|
$268,020
|
Subsequent
events (Note 14)
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.
2
FIRST MINING GOLD CORP.
INTERIM
CONSOLIDATED STATEMENTS OF NET LOSS AND COMPREHENSIVE
LOSS
FOR THE
THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019
(Expressed
in thousands of Canadian dollars unless otherwise noted, except per
share amounts)
(Unaudited)
|
|
Three
months ended
June
30,
|
Six
months ended
June
30,
|
||
|
|
2020
|
2019
|
2020
|
2019
|
|
|
|
|
|
|
|
OPERATING EXPENSES (Note
11)
|
|
|
|
|
|
General and
administration
|
$1,251
|
$774
|
$2,008
|
$1,641
|
|
Exploration and
evaluation
|
156
|
245
|
359
|
444
|
|
Investor relations
and marketing communications
|
246
|
199
|
545
|
733
|
|
Corporate
development and due diligence
|
94
|
138
|
226
|
283
|
|
Write-down of
mineral properties (Note 4)
|
22,498
|
-
|
22,498
|
-
|
|
Loss from
operational activities
|
(24,245)
|
(1,356)
|
(25,636)
|
(3,101)
|
|
|
|
|
|
|
|
OTHER
ITEMS
|
|
|
|
|
|
Foreign exchange
gain (loss)
|
629
|
(2)
|
607
|
(4)
|
|
Other
expenses
|
(26)
|
(7)
|
(46)
|
(61)
|
|
Interest and other
income
|
16
|
50
|
54
|
124
|
|
Marketable
securities fair value gain (Note 3)
|
3,013
|
-
|
3,013
|
-
|
|
Loss on disposal of
subsidiaries (Note 4)
|
(303)
|
-
|
(303)
|
-
|
|
Loss
before income taxes
|
$(20,916)
|
$(1,315)
|
$(22,311)
|
$(3,042)
|
|
Deferred income tax
recovery
|
1,385
|
-
|
1,318
|
-
|
|
Net
loss for the period
|
$(19,531)
|
$(1,315)
|
$(20,993)
|
$(3,042)
|
|
|
|
|
|
|
|
OTHER
COMPREHENSIVE INCOME (LOSS)
|
|
|
|
|
|
Items that will not be reclassified to net income or
(loss):
|
|
|
|
|
|
Marketable
securities fair value gain (Note 3)
|
450
|
139
|
73
|
151
|
|
Mineral property
investments fair value gain (Note 5)
|
567
|
-
|
903
|
-
|
|
|
|
|
|
|
|
Items that are or may be reclassified to net income or
(loss):
|
|
|
|
|
|
Currency
translation adjustment of foreign subsidiaries
|
(29)
|
(24)
|
35
|
(48)
|
|
Recycling of
currency translation adjustment on disposal of foreign subsidiaries
(Note 4(c))
|
(630)
|
-
|
(630)
|
-
|
|
Other comprehensive
income
|
358
|
115
|
381
|
103
|
|
|
|
|
|
|
|
Net
loss and comprehensive loss for the period
|
$(19,173)
|
$(1,200)
|
$(20,612)
|
$(2,939)
|
|
Basic and diluted
loss per share
|
$(0.03)
|
$(0.00)
|
$(0.03)
|
$(0.01)
|
|
Weighted
average number of shares outstanding – Basic and
Diluted
|
633,042,052
|
571,232,990
|
621,006,471
|
564,810,633
|
The
accompanying notes are an integral part of these condensed interim
consolidated financial statements.
3
FIRST
MINING GOLD CORP.
INTERIM
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE
SIX MONTHS ENDED JUNE 30, 2020 AND 2019
(Expressed in
thousands of Canadian dollars unless otherwise noted, except per
share amounts)
(Unaudited)
|
|
Six
months ended June 30,
|
|
|
|
2020
|
2019
|
|
|
|
|
|
Cash
flows from operating activities
|
|
|
|
Net loss for the
period
|
$(20,993)
|
$(3,042)
|
|
Adjustments
for:
|
|
|
|
Depreciation
|
164
|
87
|
|
Marketable
securities fair value gain (Note 3)
|
(3,013)
|
-
|
|
Loss on sale of
subsidiaries (Note 4(c))
|
303
|
-
|
|
Unrealized
foreign exchange gain
|
(659)
|
(6)
|
|
Share-based
payments (Note 9(d))
|
649
|
1,049
|
|
Accrued
interest receivable and other income
|
(1)
|
(45)
|
|
Other
expenses
|
40
|
65
|
|
Write-down
of mineral properties (Note 4(b))
|
22,498
|
-
|
|
Deferred
income tax recovery
|
(1,318)
|
-
|
|
Operating
cash flows before movements in working capital
|
(2,330)
|
(1,892)
|
|
Changes in non-cash
working capital items:
|
|
|
|
Increase
in accounts and other receivables
|
(43)
|
(52)
|
|
Decrease
(increase) in prepaid expenditures
|
64
|
(3)
|
|
(Decrease)
increase in accounts payables and accrued liabilities
|
(132)
|
133
|
|
Total
cash used in operating activities
|
(2,441)
|
(1,814)
|
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
Property and
equipment purchases
|
(169)
|
(39)
|
|
Mineral property
expenditures (Note 4)
|
(6,194)
|
(2,245)
|
|
Option payments and
expenditures recovered (Note 4)
|
100
|
67
|
|
Total
cash used in investing activities
|
(6,263)
|
(2,217)
|
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
Proceeds from
private placements (Note 9(b))
|
9,282
|
7,411
|
|
Proceeds from ATM
program (Note 9(b))
|
125
|
-
|
|
Shares issuance
costs (Note 9(b))
|
(128)
|
(141)
|
|
Proceeds from
exercise of warrants and stock options
|
116
|
43
|
|
Repayment of lease
liability
|
(42)
|
-
|
|
Finance costs
paid
|
(26)
|
-
|
|
Total
cash provided by financing activities
|
9,327
|
7,313
|
|
|
|
|
|
Foreign exchange
effect on cash
|
2
|
(1)
|
|
|
|
|
|
Change
in cash and cash equivalents
|
625
|
3,281
|
|
Cash
and cash equivalents, beginning
|
5,902
|
5,115
|
|
Cash
and cash equivalents, ending
|
$6,527
|
$8,396
|
|
|
|
|
|
Less cash and cash
equivalents classified in current assets held for sale
|
$(52)
|
$-
|
|
Cash
and cash equivalents as presented on consolidated statements of
financial position
|
$6,475
|
$8,396
|
|
|
|
|
The
accompanying notes are an integral part of these condensed interim
consolidated financial statements.
4
FIRST MINING GOLD CORP.
INTERIM
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE
SIX MONTHS ENDED JUNE 30, 2020 AND 2019
(Expressed in
thousands of Canadian dollars unless otherwise noted, except 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 9(b))
|
25,690,772
|
6,393
|
1,018
|
-
|
-
|
-
|
7,411
|
|
Flow-through
share premium liability (Note 9(b))
|
-
|
(475)
|
-
|
-
|
-
|
-
|
(475)
|
|
Shares
issuance costs (Note 9(b))
|
-
|
(120)
|
(21)
|
-
|
-
|
-
|
(141)
|
|
Exercise
of warrants (Note 9(c))
|
214,200
|
108
|
(65)
|
-
|
-
|
-
|
43
|
|
Share-based
payments
|
-
|
-
|
-
|
1,412
|
-
|
-
|
1,412
|
|
Loss
for the period
|
-
|
-
|
-
|
-
|
-
|
(3,042)
|
(3,042)
|
|
Other
comprehensive income
|
-
|
-
|
-
|
-
|
103
|
-
|
103
|
|
Balance
as at June 30, 2019
|
584,221,888
|
$280,974
|
$14,532
|
$18,042
|
$(5,189)
|
$(46,098)
|
$262,261
|
|
Balance
as at December 31, 2019
|
591,997,138
|
$282,666
|
$14,532
|
$18,798
|
$(3,649)
|
$(50,015)
|
$262,332
|
|
Proceeds
from private placements (Note 9(b))
|
40,198,095
|
8,160
|
1,122
|
-
|
-
|
-
|
9,282
|
|
Flow-through
share premium liability (Note 9(b))
|
-
|
(300)
|
-
|
-
|
-
|
-
|
(300)
|
|
Shares
issuance costs (Note 9(b))
|
-
|
(110)
|
(18)
|
-
|
-
|
-
|
(128)
|
|
At-the-market
distributions (Note 9(b))
|
532,000
|
125
|
-
|
-
|
-
|
-
|
125
|
|
Exercise
of options (Note 9(d))
|
625,000
|
255
|
-
|
(139)
|
-
|
-
|
116
|
|
Shares
issued for prior mineral property acquisition
|
24,220
|
4
|
-
|
-
|
-
|
-
|
4
|
|
Share-based payments
|
-
|
-
|
-
|
999
|
-
|
-
|
999
|
|
Loss
for the period
|
-
|
-
|
-
|
-
|
-
|
(20,993)
|
(20,993)
|
|
Other
comprehensive income
|
-
|
-
|
-
|
-
|
381
|
-
|
381
|
|
Balance
as at June 30, 2020
|
633,376,453
|
$290,800
|
$15,636
|
$19,658
|
$(3,268)
|
$(71,008)
|
$251,818
|
The
accompanying notes are an integral part of these condensed interim
consolidated financial statements.
5
FIRST MINING GOLD CORP.
NOTES
TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
(Expressed in
thousands of Canadian dollars unless otherwise noted, except per
share amounts)
(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 in Canada 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 is in the process of closing its announced transaction
with Treasury Metals Inc. (“Treasury Metals”) (TSX:
TML) (Note 4(b)). First Mining’s eastern Canadian property
portfolio also includes the Pickle Crow (being advanced in
partnership with Auteco Minerals Ltd. (“Auteco”),
Cameron, Hope Brook, Duparquet, Duquesne, and Pitt gold
projects.
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
|
|
Goldlund
Resources Inc.
|
100%
|
Goldlund
Gold Project (“Goldlund”) (Note 4(b))
|
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
4(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 thousands of Canadian
dollars, unless otherwise noted.
6
FIRST MINING GOLD CORP.
NOTES
TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
(Expressed in
thousands of Canadian dollars unless otherwise noted, except per
share amounts)
(Unaudited)
2. BASIS OF PRESENTATION (Continued)
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. The use
of judgments, estimates and assumptions affects the application of
accounting policies and the reported amounts of assets and
liabilities, income and expense. Actual results may differ from
these estimates. In preparing these condensed interim consolidated
financial statements, the significant judgements made by management
in applying the Company’s accounting policies and the key
sources of estimation uncertainty were substantially the same as
those that applied to the audited annual consolidated financial
statements with the exception of considerations arising from
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. There may be
heightened risk of mineral property impairment and liquidity or
going concern uncertainty.
These
condensed interim consolidated financial statements were approved
by the Board of Directors on August 4, 2020.
3. MARKETABLE SECURITIES
The
movements in marketable securities during the six months ended June
30, 2020, and year ended December 31, 2019 are summarized as
follows:
|
|
Silver
One Resources Inc.
|
Gainey
Capital Corp.
|
Auteco
|
Other
Marketable Securities
|
Total
|
|
Balance
as at December 31, 2019
|
$-
|
$74
|
$-
|
$1,701
|
$1,775
|
|
Additions
|
-
|
-
|
740
|
-
|
740
|
|
(Loss) gain
recorded in other comprehensive loss
|
-
|
(24)
|
-
|
97
|
73
|
|
Gain recorded in
net loss
|
-
|
-
|
3,013
|
-
|
3,013
|
|
Balance
as at June 30, 2020
|
$-
|
$50
|
$3,753
|
$1,798
|
$5,601
|
|
|
Silver
One Resources Inc.
|
Gainey
Capital Corp.
|
Auteco
|
Other
Marketable Securities
|
Total
|
|
Balance
as at December 31, 2018
|
$990
|
$-
|
$-
|
$1,607
|
$2,597
|
|
Additions
|
60
|
171
|
-
|
-
|
231
|
|
Dispositions
|
(1,758)
|
-
|
-
|
-
|
(1,758)
|
|
Gain (loss)
recorded in other comprehensive loss
|
708
|
(97)
|
-
|
94
|
705
|
|
Balance
as at December 31, 2019
|
$-
|
$74
|
$-
|
$1,701
|
$1,775
|
The
Company holds marketable securities of publicly traded companies as
strategic investments and has less than a 10% equity interest in
each of the investees. During the six months ended June 30, 2020,
the Company received the 25 million shares of Auteco in connection
with its option to acquire PC Gold Inc. (Note 4(a)). These shares
are classified as fair value through profit and loss
(“FVTPL”).
7
FIRST MINING GOLD CORP.
NOTES
TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
(Expressed in
thousands of Canadian dollars unless otherwise noted, except per
share amounts)
(Unaudited)
4. MINERAL PROPERTIES
As at
June 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, assets held for sale reclassification or write-down of
mineral properties
|
Balance June 30, 2020
|
|
Springpole
|
$76,775
|
$244
|
$539
|
$2,195
|
$1,221
|
$507
|
$-
|
$-
|
$-
|
$81,481
|
|
Goldlund
|
98,894
|
2
|
393
|
733
|
228
|
115
|
-
|
-
|
(100,365)
|
-
|
|
Hope
Brook
|
20,071
|
20
|
27
|
4
|
92
|
23
|
-
|
-
|
-
|
20,237
|
|
Cameron
|
27,374
|
7
|
40
|
19
|
6
|
10
|
-
|
-
|
-
|
27,456
|
|
Pickle
Crow
|
19,263
|
19
|
43
|
787
|
6
|
3
|
-
|
-
|
-
|
20,121
|
|
Duquesne
|
5,133
|
2
|
1
|
4
|
-
|
-
|
-
|
-
|
-
|
5,140
|
|
Pitt
|
2,084
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
2,084
|
|
Others(1)
|
2,615
|
7
|
3
|
6
|
1
|
6
|
-
|
-
|
-
|
2,638
|
|
Canada Total
|
$252,209
|
$301
|
$1,046
|
$3,748
|
$1,554
|
$664
|
$-
|
$-
|
$(100,365)
|
$159,157
|
|
Mexico Total
|
154
|
5
|
-
|
-
|
-
|
-
|
-
|
8
|
(167)
|
-
|
|
USA
|
452
|
-
|
-
|
-
|
-
|
-
|
-
|
21
|
-
|
473
|
|
Total
|
$252,815
|
$306
|
$1,046
|
$3,748
|
$1,554
|
$664
|
$-
|
$29
|
$(100,532)
|
$159,630
|
|
|
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, assets held for sale reclassification or write-down of
mineral properties
|
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 June 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.
The
Company has various underlying agreements and commitments with
respect to its Canadian mineral properties, which define annual or
future payments in connection with royalty buy-backs or maintenance
of property interests.
8
FIRST MINING GOLD CORP.
NOTES
TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
(Expressed in
thousands of Canadian dollars unless otherwise noted, except per
share amounts)
(Unaudited)
4. MINERAL PROPERTIES (Continued)
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 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 on
exploration and $1,000 on environmental matters on the Pickle Crow
Gold Project (or cash payments in lieu), of which $750 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 on exploration on the Pickle Crow Gold Project (or cash
payments in lieu);
o
Making a $1,000
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 in cash. 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 the Pickle Crow exploration
activity.
During
the six months ended June 30, 2020, the Company received the
scheduled consideration in cash of $100 and 25 million shares of
Auteco with a fair value on receipt of $740 under the terms of the
Earn-in Agreement. In addition, Auteco incurred a total of $781 in
exploration expenditures during the six months ended June 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 June 30,
2020.
As at
June 30, 2020, management has estimated a fair value for the Option
– PC Gold liability of $1,621. 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.
9
FIRST MINING GOLD CORP.
NOTES
TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
(Expressed in
thousands of Canadian dollars unless otherwise noted, except per
share amounts)
(Unaudited)
4. MINERAL PROPERTIES (Continued)
b)
Goldlund
Gold Project
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
wholly-owned subsidiary of the Company. Under the terms of the
Share Purchase Agreement, First Mining will receive total
consideration comprised of (i) 130 million common shares of
Treasury Metals (“TML Shares”); (ii) 35 million common
share purchase warrants of Treasury Metals (“TML
Warrants”) with an exercise price of $0.50 for a 3-year term;
(iii) a 1.5% NSR royalty on Goldlund (0.5% of which can be bought
back by Treasury Metals for $5 million in cash); and (iv) milestone
payments totaling $5 million, payable in cash, on certain key
advancements at Goldlund. Upon closing of the Transaction, First
Mining will hold approximately 40% of Treasury Metals (on an
undiluted basis) and will also have the right to appoint three
nominees to the board of directors of Treasury Metals.
Details
of the 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 defining 300,000 tonnes of ore that can form the basis
of a mineral reserve being extracted from a mine at
Goldlund.
Within
12 months of closing of the Transaction, First Mining intends to
distribute up to 70 million of the TML Shares and all the TML
Warrants to its shareholders (the “Distribution”),
retaining 60 million TML Shares following the Distribution, leaving
the Company with a significant 19.9% holding of TML.
Entering
into the Share Purchase Agreement was considered an indicator of
impairment and evidence of conditions that existed at June 30,
2020. Therefore, during the six months ended June 30, 2020, the
Company completed an impairment test and recorded an impairment of
the Goldlund project amounting to $22,498 (2019 - $nil), based on
the recoverable amount (the fair value less costs to sell
(“FVLCS”)) indicated by the Share Purchase Agreement.
In determining the recoverable amount, management estimated the
fair value of the 130 million TML Shares based on quoted market
prices, the fair value of the 35 million TML Warrants based on a
Black-Scholes option valuation and the fair value of the 1.5%
royalty and milestone payments totaling $5 million based on a
probability weighted discounted cash flow model. The recoverable
amount estimate is sensitive to changes in the milestone payment
probability assumptions and the discount rate applied to the
associated cash flows of 6.50%. The impairment fair value estimate
is a Level 3 fair value measurement.
Upon
signing of the Share Purchase Agreement on June 3, 2020, the
disposal group for Goldlund was considered to be a disposal group
held for sale. Upon classification of the Goldlund disposal group
as held for sale during the period ended June 30, 2020, the Company
remeasured Goldlund at the lower of its carrying value and FVLCS.
The Company calculated the FVLCS based on the consideration
contained within the Share Purchase Agreement. As the FVLCS
exceeded the carrying value, no additional impairment charge was
recorded. Upon classification of the Goldlund disposal group as
held for sale, the Company reclassified $77,867 from the Goldund
mineral property to non-current assets held for sale. In addition
to the mineral property balances, non-current assets held for sale
include property and equipment. Current assets and liabilities held
for sale relate to the minimal working capital.
10
FIRST MINING GOLD CORP.
NOTES
TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
(Expressed in
thousands of Canadian dollars unless otherwise noted, except per
share amounts)
(Unaudited)
4. MINERAL PROPERTIES (Continued)
c)
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 hold all of the shares of two
Mexican subsidiaries which own 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. From the date of this sale transaction, First Mining no
longer holds any mineral properties in Mexico. The transaction
resulted in a $303 loss on disposal of subsidiaries recorded on the
statement of net loss and comprehensive loss for the six months
ended June 30, 2020, and recycling of currency translation
adjustment on disposal of Mexican subsidiaries amounting to
$630.
5. 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 designated as fair value
through other comprehensive income (loss) (“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 June 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 six months ended June 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 $903 was recorded during the six months ended
June 30, 2020 (six months ended June 30, 2019 - $nil) (Note 13). As
at June 30, 2020, the fair value of the Company’s mineral
property investments is $6,300 (December 31, 2019 -
$5,398).
11
FIRST MINING GOLD CORP.
NOTES
TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
(Expressed in
thousands of Canadian dollars unless otherwise noted, except per
share amounts)
(Unaudited)
6. RELATED PARTY TRANSACTIONS
Key
management includes the Directors and Officers of the Company. The
compensation paid or payable to key management for services during
the three and six months ended June 30, 2020 and 2019 is as
follows:
|
Service
or Item
|
Three
months ended June 30,
|
Six
months ended June 30,
|
||
|
|
2020
|
2019
|
2020
|
2019
|
|
Directors’
fees
|
$126
|
$50
|
$143
|
$84
|
|
Salaries and
consultants’ fees
|
288
|
238
|
556
|
512
|
|
Share-based
payments (non-cash)
|
246
|
474
|
641
|
1,042
|
|
Total
|
$660
|
$762
|
$1,340
|
$1,638
|
7. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
|
Category
|
June
30, 2020
|
December
31, 2019
|
|
Accounts
payable
|
$478
|
$768
|
|
Other accrued
liabilities
|
684
|
630
|
|
Total
|
$1,162
|
$1,398
|
8. 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 June 30, 2020, the Company
estimates that the environmental reclamation provision for the
Pickle Crow Gold Project is $2,368 (December 31, 2019 - $2,355).
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.
|
|
June
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
|
13
|
-
|
|
Balance,
end of period
|
$2,368
|
$2,355
|
|
Statements
of Financial Position Presentation
|
June
30, 2020
|
December
31, 2019
|
|
|
|
Current portion of
environmental reclamation provision
|
$908
|
$716
|
|
|
|
Non-current
environmental reclamation provision
|
1,460
|
1,639
|
|
|
|
Total
|
$2,368
|
$2,355
|
|
|
12
FIRST MINING GOLD CORP.
NOTES
TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
(Expressed in
thousands of Canadian dollars unless otherwise noted, except per
share amounts)
(Unaudited)
9. 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: 633,376,453 (December 31, 2019 –
591,997,138).
Preferred
shares: nil (December 31, 2019 – nil).
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 six months ended
June 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, or net proceeds of $125
after deducting the commission of $4 paid to Cantor in respect of
these ATM sales.
Private Placement Equity Financing with Ausenco
First
Mining has entered into an agreement with Ausenco Engineering
Canada Inc. (“Ausenco”) to complete a Pre-Feasibility
Study (“PFS”) for the Company’s Springpole Gold
Project. Ausenco or an
affiliate will be entitled to receive approximately $1,600 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 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 to Ausenco for the first tranche of work under the
PFS. During the six months ended June 30, 2020, PFS services valued
at $750 were provided to the Company.
13
FIRST MINING GOLD CORP.
NOTES
TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
(Expressed in
thousands of Canadian dollars unless otherwise noted, except per
share amounts)
(Unaudited)
9. SHARE CAPITAL (Continued)
Non-Brokered Private Placement Financing
On
March 6, 2020, the Company completed a non-brokered private
placement raising aggregate gross proceeds of $8,532 (the
“2020 Offering”). Pursuant to the 2020 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 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. In connection with the 2020 Offering, the
Company paid issuance costs of $128 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 $7,300 ($7,410
net of allocated issuance costs of $110) was recorded in share
capital. The Warrants were valued at $1,104 ($1,122 net of
allocated issuance costs of $18) using the relative fair value
method, and the remaining $300, representing the implied premium,
was recorded as a flow-through share premium liability (Note
10).
c) Warrants
The
movements in warrants during the six months ended June 30, 2020 and
year ended December 31, 2019 are summarized as
follows:
|
|
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
|
18,710,159
|
0.33
|
|
Balance
as at June 30, 2020
|
34,583,157
|
$0.37
|
The
following table summarizes information about warrants outstanding
as at June 30, 2020:
|
Exercise
price
|
Number
of warrants outstanding
|
Weighted
average exercise price ($ per share)
|
Weighted
average remaining life (years)
|
|
$0.33
|
18,710,159
|
$0.33
|
2.66
|
|
$0.40
|
12,845,383
|
$0.40
|
1.88
|
|
$0.44
|
3,027,615
|
$0.44
|
0.96
|
|
|
34,583,157
|
$0.37
|
2.22
|
14
FIRST MINING GOLD CORP.
NOTES
TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
(Expressed in
thousands of Canadian dollars unless otherwise noted, except per
share amounts)
(Unaudited)
9. SHARE CAPITAL (Continued)
The
Warrants issued during the six months ended June 30, 2020 and year
ended December 31, 2019 have been valued using the Black-Scholes
option pricing model with the following weighted average
assumptions:
|
|
Six
months ended
|
Year
ended
|
|
|
June
30, 2020
|
December
31, 2019
|
|
Risk-free interest
rate
|
1.75%
|
1.55%
|
|
Expected life
(years)
|
3.00 years
|
3.00 years
|
|
Expected
volatility(1)
|
65.78%
|
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 six months ended June 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
|
(625,000)
|
0.19
|
|
Options
expired
|
(1,700,000)
|
0.40
|
|
Options
forfeited
|
(4,100,000)
|
0.56
|
|
Balance
as at June 30, 2020
|
50,352,500
|
$0.51
|
The
weighted average closing share price at the date of exercise for
the six months ended June 30, 2020 was $0.28 (June 30, 2019 –
$nil). 625,000 stock options were exercised during the six months
ended June 30, 2020 (June 30, 2019 – Nil).
15
FIRST MINING GOLD CORP.
NOTES
TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
(Expressed in
thousands of Canadian dollars unless otherwise noted, except per
share amounts)
(Unaudited)
9. SHARE CAPITAL (Continued)
The
following table summarizes information about the stock options
outstanding as at June 30, 2020:
|
|
Options
Outstanding
|
Options
Exercisable
|
||||
|
Exercise
price
|
Number
of options
|
Weighted
average exercise price ($ 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
|
30,067,500
|
$0.35
|
3.60
|
21,267,500
|
$0.38
|
3.28
|
|
$0.51 – 1.00
|
20,285,000
|
0.75
|
1.80
|
20,285,000
|
0.75
|
1.61
|
|
|
50,352,500
|
$0.51
|
2.80
|
41,552,500
|
$0.56
|
2.48
|
During
the six months ended June 30, 2020, there were 9,850,000 (June 30,
2019 – 7,750,000) stock options granted with an aggregate
fair value of $1,170 (June 30, 2020 – $1,550), or a weighted
average fair value of $0.12 per option (June 30, 2020 –
$0.20). As at June 30, 2020, 8,800,000 (June 30, 2019 –
12,068,750) stock options remain unvested with an aggregate grant
date fair value of $520 (June 30, 2019 - $1,155).
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 June 30, 2020 and June 30, 2019 was classified within the
financial statements as follows:
|
|
For
the three months ended June 30,
|
For
the six months ended June 30,
|
||
|
Statements
of Net Loss:
|
2020
|
2019
|
2020
|
2019
|
|
General and
administration
|
$124
|
$235
|
$361
|
$565
|
|
Exploration and
evaluation
|
29
|
56
|
73
|
67
|
|
Investor relations
and marketing communications
|
58
|
96
|
121
|
216
|
|
Corporate
development and due diligence
|
33
|
88
|
94
|
201
|
|
Subtotal
|
$244
|
$475
|
$649
|
$1,049
|
|
Statements
of Financial Position:
|
|
|
|
|
|
Mineral
Properties
|
126
|
212
|
350
|
363
|
|
Total
|
$370
|
$687
|
$999
|
$1,412
|
16
FIRST MINING GOLD CORP.
NOTES
TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
(Expressed in
thousands of Canadian dollars unless otherwise noted, except per
share amounts)
(Unaudited)
9. SHARE CAPITAL (Continued)
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:
|
|
Six
months
ended
|
Year
ended
|
|
|
June 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
|
0
|
0
|
(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.
10. 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
|
May
16, 2019
|
December
18, 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
|
$-
|
$45
|
$296
|
$341
|
|
Liability incurred
for flow-through shares issued February 14, 2020
|
300
|
-
|
-
|
300
|
|
Settlement of
flow-through share premium liability upon incurring eligible
expenditures
|
(195)
|
(45)
|
(133)
|
(373)
|
|
Balance,
June 30, 2020
|
$105
|
$-
|
$163
|
$268
|
As at
June 30, 2020, the Company had $1,976 (December 31, 2019 - $2,178)
of unspent flow-through expenditure commitments.
17
FIRST MINING GOLD CORP.
NOTES
TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
(Expressed in
thousands of Canadian dollars unless otherwise noted, except per
share amounts)
(Unaudited)
11. OPERATING EXPENSES
Components
by nature of the Company’s significant functional operating
expense categories are as follows:
|
|
For
the three months ended June 30, 2020
|
For
the three months ended June 30, 2019
|
||
|
|
General
and administration
|
Investor
relations and marketing communications
|
General
and administration
|
Investor
relations and marketing communications
|
|
Administrative and
office
|
$47
|
$8
|
$103
|
$2
|
|
Consultants
|
121
|
-
|
4
|
6
|
|
Depreciation
|
38
|
-
|
4
|
-
|
|
Directors
fees
|
126
|
-
|
50
|
-
|
|
Investor relations
and marketing communications
|
-
|
106
|
-
|
48
|
|
Professional
fees
|
525
|
-
|
155
|
-
|
|
Salaries
|
222
|
58
|
185
|
43
|
|
Share-based
payments (non-cash) (Note 9(d))
|
124
|
58
|
235
|
96
|
|
Transfer agent and
filing fees
|
45
|
16
|
25
|
1
|
|
Travel and
accommodation
|
3
|
-
|
13
|
3
|
|
Total
|
$1,251
|
$246
|
$774
|
$199
|
|
|
For
the six months ended June 30, 2020
|
For
the six months ended June 30, 2019
|
||
|
|
General
and administration
|
Investor
relations and marketing communications
|
General
and administration
|
Investor
relations and marketing communications
|
|
Administrative and
office
|
$105
|
$16
|
$201
|
$7
|
|
Consultants
|
142
|
10
|
30
|
29
|
|
Depreciation
|
64
|
-
|
7
|
-
|
|
Directors
fees
|
143
|
-
|
84
|
-
|
|
Investor relations
and marketing communications
|
3
|
268
|
-
|
411
|
|
Professional
fees
|
667
|
-
|
241
|
-
|
|
Salaries
|
385
|
103
|
389
|
61
|
|
Share-based
payments (non-cash) (Note 9(d))
|
361
|
121
|
565
|
216
|
|
Transfer agent and
filing fees
|
122
|
16
|
99
|
1
|
|
Travel and
accommodation
|
16
|
11
|
25
|
8
|
|
Total
|
$2,008
|
$545
|
$1,641
|
$733
|
18
FIRST MINING GOLD CORP.
NOTES
TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
(Expressed in
thousands of Canadian dollars unless otherwise noted, except per
share amounts)
(Unaudited)
12. 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 June 30, 2020 and December 31, 2019 is as
follows:
|
Non-current
assets
|
June
30, 2020
|
December
31, 2019
|
|
Canada
|
$238,405
|
$253,587
|
|
Mexico
|
-
|
252
|
|
USA
|
476
|
454
|
|
Total
|
$238,881
|
$254,293
|
13. 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).
The
carrying values of cash and cash equivalents, current accounts and
other 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 marketable equity securities was based on the
quoted market prices of the shares as at June 30, 2020 and was
therefore considered to be Level 1. Changes in fair value of
marketable equity securities designated as FVTPL for the six months
ended June 30, 2020 totaling $3,013 (June 30, 2019 - $nil) (Note 3)
are recorded through profit or loss. Changes in fair value of
marketable equity securities designated as FVTOCI for the six
months ended June 30, 2020 was $73 (June 30, 2019 - $151) (Note 3)
and was recorded through other comprehensive income and will not be
transferred into profit or loss upon disposition or
impairment.
19
FIRST MINING GOLD CORP.
NOTES
TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
(Expressed in
thousands of Canadian dollars unless otherwise noted, except per
share amounts)
(Unaudited)
13. FAIR VALUE (Continued)
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. Subsequently, the fair value has been reassessed at
each period end. Scenarios which may result in a significant change
in fair value include, among others, a change in the performance of
the investee, a change in the performance of comparable entities, a
change in gold price, a change in the economic environment, or
evidence from external transactions in the investee’s equity.
During the six months ended June 30, 2020, management concluded
that there was an increase in the fair value of the mineral
property investments, and a fair value gain of $903 (June 30, 2019
- $nil) was recorded (Note 5).
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, 25 million shares of Auteco
with a fair value upon receipt of $740 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 six months ended June 30, 2020, management
concluded that there was no change in the fair value of the Option
– PC Gold liability.
The
following table presents the Company’s fair value hierarchy
for financial assets and liabilities that are measured at fair
value:
|
|
June
30, 2020
|
December
31, 2019
|
||||
|
|
|
Fair
value measurement
|
|
Fair
value measurement
|
||
|
|
Carrying
value
|
Level
1
|
Level
3
|
Carrying
value
|
Level
1
|
Level
3
|
|
Financial
assets:
|
|
|
|
|
|
|
|
Marketable
securities (Note 3)
|
$5,601
|
$5,601
|
$-
|
$1,775
|
$1,775
|
$-
|
|
Mineral property
investments (Note 5)
|
6,300
|
-
|
6,300
|
5,398
|
-
|
5,398
|
|
Financial
liabilities:
|
|
|
|
|
|
|
|
Option – PC
Gold (Note 4(a))
|
$1,621
|
-
|
$1,621
|
-
|
-
|
-
|
During
the six months ended June 30, 2020 there have been no transfers of
amounts between Level 1, Level 2, and Level 3 of the fair value
hierarchy.
20
FIRST MINING GOLD CORP.
NOTES
TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
(Expressed in
thousands of Canadian dollars unless otherwise noted, except per
share amounts)
(Unaudited)
14. SUBSEQUENT EVENTS
Exercise and Expiry of Stock Options and Warrants
Subsequent
to June 30, 2020, 100,000 stock options expired and 817,500 stock
options were exercised for gross proceeds of $299. In addition,
147,500 warrants were exercised for gross proceeds of
$49.
Silver Stream on the Springpole Gold project
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), 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, over three stages,
for the right to 50% of the payable silver produced from Springpole
for the life of the Project (the “Stream”) and 30
million common share purchase warrants of First Mining. Each share
purchase warrant will entitle 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
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, 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 commercial production at the Project. First Mining
has the right to repurchase 50% of the Stream for US$22.5 million
at any time prior to the commencement of commercial production at
Springpole.
As initial upfront consideration, First Majestic paid US$10 million
to First Mining on closing, 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 shares) which
are subject to a statutory hold period of four months plus one day
from the closing date.
Additional consideration payable for the Stream includes two
further payments (in cash and First Majestic shares) based on
Project-related milestones. Upon completion of a positive PFS for
Springpole, First Mining will receive US$7.5 million from First
Majestic, with a further US$5 million payable upon First Mining
receiving approval of a Federal or Provincial Environmental
Assessment for the Project.
21
TSX:
FF | OTCQX: FFMGF | FRANKFURT: FMG
MANAGEMENT’S
DISCUSSION & ANALYSIS
FOR
THE THREE AND SIX MONTHS ENDED JUNE 30, 2020
Suite
2070 – 1188 West Georgia Street, Vancouver, British Columbia
V6E 4A2
www.firstmininggold.com |
1-844-306-8827
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless
otherwise indicated)
|
For the three and six months ended June 30,
2020
|
TABLE OF CONTENTS
|
COMPANY OVERVIEW AND STRATEGY
|
2
|
|
2020 HIGHLIGHTS
|
3
|
|
SELECTED FINANCIAL INFORMATION
|
8
|
|
CANADIAN MINERAL PROPERTY PORTFOLIO LOCATIONS (1)(2)
|
9
|
|
MINERAL PROPERTY PORTFOLIO GOLD RESOURCES
|
10
|
|
MINERAL PROPERTY PORTFOLIO REVIEW
|
11
|
|
SELECTED QUARTERLY FINANCIAL INFORMATION
|
18
|
|
MINERAL PROPERTY BALANCES
|
19
|
|
RESULTS OF CONTINUING OPERATIONS
|
22
|
|
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
|
25
|
|
OUTLOOK
|
26
|
|
FINANCIAL INSTRUMENTS
|
27
|
|
RELATED PARTY TRANSACTIONS
|
28
|
|
OFF-BALANCE SHEET ARRANGEMENTS
|
28
|
|
NON-IFRS MEASURES
|
29
|
|
CHANGES IN ACCOUNTING POLICIES
|
30
|
|
ACCOUNTING STANDARDS ISSUED BUT NOT YET APPLIED
|
30
|
|
CRITICAL ACCOUNTING JUDGMENTS AND ESTIMATES
|
30
|
|
RISKS AND UNCERTAINTIES
|
31
|
|
QUALIFIED PERSONS
|
34
|
|
SECURITIES OUTSTANDING
|
34
|
|
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING
|
35
|
|
FORWARD-LOOKING INFORMATION
|
36
|
|
CAUTIONARY NOTE TO U.S. INVESTORS REGARDING MINERAL RESOURCE AND
MINERAL RESERVE ESTIMATES
|
37
|
Page 1
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless
otherwise indicated)
|
For the three and six months ended June 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 six months ended June 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 37 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
August 4, 2020 and all
information contained in this MD&A is current as of
July 31,
2020.
First
Mining was incorporated in Canada 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 has also entered into an
agreement with Treasury Metals Inc. (“Treasury Metals”) (TSX: TML) for
the indirect sale of its Goldlund property, after which it will
hold a large equity position in Treasury Metals who will be
advancing the Goliath-Goldlund gold project. First Mining’s
eastern Canadian property portfolio also includes the Pickle Crow
(being advanced in partnership with Auteco Minerals Ltd.
(“Auteco”)),
Cameron, Hope Brook, Duparquet, Duquesne, and Pitt gold
projects.
Page 2
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless
otherwise indicated)
|
For the three and six months ended June 30,
2020
|
The
following table highlights the Company’s material
projects:
|
Project
|
Location
|
|
Springpole
Gold Project
|
Northwestern
Ontario, Canada
|
|
Goldlund Gold Project (1)
|
Northwestern
Ontario, Canada
|
|
Hope
Brook Gold Project
|
Newfoundland,
Canada
|
|
Cameron
Gold Project
|
Northwestern
Ontario, Canada
|
|
Pickle Crow Gold Project (2)
|
Northwestern
Ontario, Canada
|
(1)
The Company has
entered into a share purchase agreement Treasury Metals pursuant to
which Treasury Metals will acquire all of the issued and
outstanding shares of Tamaka Gold Corporation (“Tamaka”), a wholly-owned
subsidiary of First Mining that owns Goldlund Gold Project Subject
to satisfaction or waiver of all applicable conditions, this
transaction is expected to close in Q3 2020 and the Goldlund Gold
Project will cease to be under First Mining’s direct
control.
(2)
Pickle Crow Gold
Project is subject to an Earn-In Agreement (described below)
pursuant to which Auteco is the operator of the property and may
acquire up to an 80% interest in the property.
2020 HIGHLIGHTS
The
following highlights the Company’s developments during the
first six months of 2020 (including subsequent events up to
July 31, 2020). For
further information, please refer to the “News” section
on the Company’s website at www.firstmininggold.com.
COVID-19 Response
On March 24, 2020, the Company announced that it had commenced the
demobilization of employees and contractors at the Springpole Gold
Project and the Goldlund Gold Project. 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 number one 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 current 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 current environment, First Mining
decided to demobilize the remaining contractors and staff and keep
Springpole Gold Project on care and maintenance until it is able to
restart its work programs. At the Goldlund Gold Project, drill
crews went on a scheduled break in mid-March and were subsequently
demobilized.
On May 28, 2020, the Company announced the restart of field
operations at the Springpole Gold Project and the Goldlund 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
Springpole and Goldlund will be subject to heightened health and
safety standards in accordance with precautions put in place by the
Government of Ontario and the Company.
Management continues to monitor the COVID-19 situation very closely
and will adapt technical work programs as the situation
evolves.
Page 3
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless
otherwise indicated)
|
For the three and six months ended June 30,
2020
|
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), 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, over three stages, for the right to purchase 50% of the
payable silver produced from Springpole for the life of the Project
(the “Stream”)
and 30 million common share purchase warrants of First Mining. Each
warrant will entitle 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 is payable in three stages:
●
US$10 million was
paid on closing of the Silver Purchase Agreement, with US$2.5
million paid in cash and the remaining $7.5 million satisfied by
issue 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, with US$3.75 million payable in cash
and US$3.75 million payable in First Majestic Shares based on
20-day volume-weighted average trading price (“VWAP”) of the First Majestic
Shares on the Toronto Stock Exchange (the “TSX”); and
●
US$5 million is
payable upon First Mining receiving approval of a Federal or
Provincial Environmental Assessment for the Springpole Project,
with US$2.5 million payable in cash and the balance in First
Majestic Shares (based on 20-day VWAP).
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, 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
commercial production at the Project. First Mining has the right to
repurchase 50% of the Stream for US$22.5 million at any time prior
to the commencement of commercial production at
Springpole.
It is
anticipated that the proceeds received by First Mining will be used
to advance Springpole through the PFS and the Environmental
Assessment processes, and to fund general corporate
expenses.
Commencement of Pre-Feasibility Study
On
November 14, 2019, the Company announced that it had 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 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. Pricing will be based on the 30-day volume weighted
average price (“VWAP”) at that time less the
maximum discount allowed under Toronto Stock Exchange
(“TSX”) rules,
subject to the minimum pricing rules of the TSX.
Upon
completion of the PFS and the announcement by First Mining of the
PFS results, First Mining will satisfy the remaining amount owing
for completion of the PFS by issuing a final tranche of common
shares to Ausenco. This final tranche of common shares will be
issued to Ausenco at least five trading days have passed after the
date of the Company’s news release announcing the results of
the PFS, with pricing of the common shares based on the 30-day VWAP
as of the news release date, subject to the minimum pricing rules
of the TSX.
Page 4
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless
otherwise indicated)
|
For the three and six months ended June 30,
2020
|
Ausenco
will issue separate monthly statements to the Company for total
labour and other direct costs to assist with tracking against the
initial budget proposal. Any additional costs represented by a
change order will either be paid in cash or through the issuance of
additional common shares to Ausenco in satisfaction of the costs in
the change order. If the Company chooses to pay the amounts in
common shares, these common shares will be issued once the PFS has
been delivered to First Mining. The shares issued for such purposes
will be based on the 30-day VWAP less the maximum discount allowed
under TSX rules (with the last day of the 30-day period being the
date on which the PFS is delivered to the Company).
Goldlund Gold Project
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 will acquire all of the issued and outstanding
shares of Tamaka Gold Corporation, a wholly-owned subsidiary of the
Company (the “Transaction”). Under the terms of
the Share Purchase Agreement, upon closing First Mining will
receive total consideration comprised of (i) 130 million common
shares of Treasury Metals (“TML Shares”); (ii) 35
million common share purchase warrants of Treasury Metals
(“TML Warrants”) with an exercise price of $0.50 for a
3-year term; (iii) a 1.5% NSR royalty on Goldlund (0.5% of which
can be bought back by Treasury Metals for $5 million in cash); and
(iv) milestone payments totaling $5 million, payable in cash, on
certain key advancements at Goldlund. Upon closing First Mining
will hold approximately 40% of Treasury Metals (on an undiluted
basis) and will also have the right to appoint three nominees to
the board of directors of Treasury Metals.
Details
of the 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 from the basis of a
mineral reserve being extracted from a mine at
Goldlund.
Entering
into the Share Purchase Agreement was considered an indicator of
impairment and evidence of conditions that existed at June 30,
2020. Therefore, during the six months ended June 30, 2020, the
Company completed an impairment test and recorded an impairment of
the Goldlund project amounting to $22,498,000 (2019 - $nil), based
on the recoverable amount (the fair value less costs to sell
(“FVLCS”))
indicated by the Share Purchase Agreement. In determining the
recoverable amount, management estimated the fair value of the 130
million TML Shares based on quoted market prices, the fair value of
the 35 million TML Warrants based on a Black-Scholes option
valuation and the fair value of the 1.5% royalty and milestone
payments totaling $5 million based on a probability weighted
discounted cash flow model. The recoverable amount estimate is
sensitive to changes in the milestone payment probability
assumptions and the discount rate applied to the associated cash
flows of 6.50%. The impairment fair value estimate is a Level 3
fair value measurement.
First
Mining intends to distribute up to 70 million TML Shares received
under the Transaction, along with all 35 million TML Warrants, to
First Mining shareholders within 12 months of closing. Completion
of the Transaction is subject to customary closing conditions,
including approval of a majority of the votes cast by the
shareholders of Treasury Metals at a shareholder meeting, and
approval of the Toronto Stock Exchange in connection with the 130
million TML Shares and the 35 million TML Warrants being issued
under the Transaction. Treasury Metals has called an annual general
and special meeting of its shareholders to be held August 5, 2020,
and at such meeting, the shareholders of Treasury Metals will be
asked to approve the Transaction. If the Transaction is approved by
the shareholders of Treasury Metals, closing of the Transaction is
expected to occur on August
7, 2020.
Upon
signing of the Share Purchase Agreement on June 3, 2020, the
disposal group for Goldlund was considered to be a disposal group
held for sale. Upon classification of the Goldlund disposal group
as held for sale, the Company reclassified $77,867,000 from the
Goldund Gold Project balance to non-current assets held for
sale.
Page 5
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless
otherwise indicated)
|
For the three and six months ended June 30,
2020
|
“Main Zone” Drill Program
Following
completion of the 2019 drilling at its Miller prospect
(“Miller”) 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 until a scheduled break in mid-March. On
May 31, 2020, the Company recommenced its 2020 drill program with a
plan to drill a further 2,000 metres (“m”) to fulfill flow-through
requirements from the Company’s December 18, 2019 private
placement.
The
initial phase of this Main Zone drill program commenced in November
2019 and was completed in March 2020 (prior to a temporary field
program shutdown at Goldlund Gold Project 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 during 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. To date, a total of 48 holes
(approximately 8,958 m) have been completed at the Main Zone as
part of the 2019 – 2020 drill program.
Drilling
at the Main Zone is focused on delineating mineralization between
the currently-defined zones of the Goldlund Gold Project
deposit.
The
main Goldlund Gold Project deposit that hosts the current mineral
resource estimate remains open along strike to the northeast, to
the southwest, and at depth.
Pickle Crow Gold Project, Ontario
On January 27, 2020, the Company entered into a binding term sheet
(the “Term Sheet”) with Auteco Minerals Ltd
(“Auteco”) (ASX: AUT) whereby Auteco may earn up to
an 80% interest in the Pickle Crow Gold Project (the
“Earn-In”). On March 12, 2020, the Company and
Auteco executed a definitive Earn-In Agreement (the
“Earn-In
Agreement”), which
replaced the Term Sheet. Pursuant to the Earn-In Agreement, Auteco
can earn a full 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% Net
Smelter Returns (“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 be responsible for all program costs. During
the six months ended June 30, 2020, the Company received the
scheduled consideration in cash of $100,000 and 25 million shares
of Auteco under the terms of the Earn-in Agreement. In addition,
Auteco incurred a total of $781,000 in exploration expenditures
during the six months ended June 30, 2020.
Cash,
exploration expenditures incurred and the initial valuation of
Auteco shares on the date of receipt were recorded as a liability
(Option - PC Gold liability) on the consolidated statements of
financial position, representing the Company’s obligation to
deliver the shares of PC Gold Inc., owner of the Pickle Crow Gold
Project, to Auteco at its option. The obligation to deliver shares
of PC Gold Inc. to Auteco at its option is considered to be a
derivative financial liability as it relates to shares of the
Company’s subsidiary rather than a direct interest in the
Pickle Crow Gold Project. The option liability is measured at fair
value through profit and loss (“FVTPL”). During the six months
ended June 30, 2020, management concluded that there was no change
in the fair value of the Option – PC Gold liability. A
marketable securities fair value gain of $3,013,000 was recorded,
based on changes in fair value of Auteco shares from the date of
receipt to June 30, 2020. As at June 30, 2020, the carrying value
of the Pickle Crow Gold Project is $20,121,000 (December 31, 2019 -
$19,263,000).
Page 6
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless
otherwise indicated)
|
For the three and six months ended June 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 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. 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, Auteco raised $5.1M Australian dollars in a private placement
from Australian and overseas institutions.
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 “2020
Offering”). Pursuant to the 2020 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
2020 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 2020 Offering, the Company paid issuance costs of $128,000
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 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 six months ended June 30, 2020, First Mining did not sell any
common shares of the Company under the ATM facility. As at the date
of this MD&A, 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.
Page 7
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless
otherwise indicated)
|
For the three and six months ended June 30,
2020
|
SELECTED FINANCIAL INFORMATION
|
Financial
Results (in $000s Except for per Share Amounts):
|
For the
six months ended June 30,
|
||
|
|
2020
|
2019
|
2018
|
|
Mineral Property
Expenditures(1)
|
$6,194
|
$2,245
|
$4,736
|
|
Net
Loss
|
(20,993)
|
(3,042)
|
(5,050)
|
|
Net Loss Excluding
Certain Non-cash items(2)(3)
|
(1,874)
|
(1,993)
|
(2,437)
|
|
Basic and Diluted
Net Loss Per Share
(in
Dollars)(4)
|
$(0.03)
|
$(0.01)
|
$(0.01)
|
|
Financial
Position (in $000s):
|
June
30,
|
December
31,
|
December
31,
|
|
|
2020
|
2019
|
2018
|
|
Cash and Cash
Equivalents
|
$6,475
|
$5,902
|
$5,115
|
|
Working Capital(2)
|
8,596
|
5,780
|
7,536
|
|
Marketable
Securities
|
5,601
|
1,775
|
2,597
|
|
Mineral
Properties
|
159,630
|
252,815
|
244,129
|
|
Non-current Assets
Held for Sale
|
77,993
|
-
|
-
|
|
|
|
|
|
|
Total
Assets
|
258,044
|
268,020
|
257,532
|
|
Total Non-current
Liabilities
|
$1,959
|
$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”, “Write-down of mineral properties”,
“Marketable securities fair value gain”, “Loss on
disposal of subsidiaries” and “Deferred income tax
expense (recovery)”.
(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.
Page 8
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless
otherwise indicated)
|
For the three and six months ended June 30,
2020
|
CANADIAN MINERAL PROPERTY PORTFOLIO
LOCATIONS (1)(2)
(1)
The Company has
entered into a share purchase agreement with Treasury Metals
pursuant to which Treasury Metals will acquire all of the issued
and outstanding shares of Tamaka, a wholly-owned subsidiary of
First Mining that owns Goldlund Gold Project. Subject to
satisfaction or waiver of all applicable conditions, this
transaction is expected to close in Q3 2020 and the Goldlund Gold
Project will cease to be under First Mining’s direct
control.
(2)
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.
Page 9
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless
otherwise indicated)
|
For the three and six months ended June 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
|
|
Goldlund Gold
Project(8)
|
12,860,000
|
1.96
|
-
|
809,200
|
-
|
|
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
|
|
Goldlund Gold
Project(8)
|
18,362,000
|
1.49
|
-
|
876,954
|
-
|
|
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
|
168,611,270
|
1.30
|
5.40
|
7,085,495
|
24,190,000
|
|
Total
Measured and Indicated Resources
|
171,989,740
|
1.33
|
5.40
|
7,383,396
|
24,190,000
|
|
Total
Inferred Resources
|
53,290,384
|
2.21
|
3.10
|
3,760,409
|
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.
(8)
Resources are
stated as contained within a conceptual pit shell using a gold
price of USD$1,350/oz, mining costs of USD$2.00 per tonne,
processing plus G&A costs of USD$15.40 per tonne, 93%
recoveries and an average pit slope of 48 degrees.
Page
10
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless
otherwise indicated)
|
For the three and six months ended June 30,
2020
|
MINERAL PROPERTY PORTFOLIO REVIEW
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.
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-man 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.
Silver Stream
On July
2, 2020, the Company closed a silver purchase agreement with First
Majestic. Under the terms of the Silver Purchase Agreement, First
Majestic has agreed to pay First Mining total consideration of
US$22.5 million, over three stages, for the right to purchase 50%
of the payable silver produced from Springpole for the life of the
Project and 30 million common share purchase warrants of First
Mining. Each warrant will entitle First Majestic to purchase one
common share of First Mining at an exercise price of $0.40 for a
period of five years.
As
initial upfront consideration, subsequent to June 30, 2020, First
Majestic paid US$10 million to First Mining on closing, 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 shares).
First
Majestic will make ongoing 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, 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 commercial production at the Project.
First Mining has the right to repurchase 50% of the Stream for
US$22.5 million at any time prior to the commencement of commercial
production at Springpole.
The
proceeds received by First Mining will be used to advance
Springpole through the PFS and the Environmental Assessment
processes, and to fund general corporate expenses.
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.
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
|
1
Source: S&P Market Intelligence database as of November 6,
2019. Ranking among undeveloped primary gold resources per
jurisdiction.
Page
11
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless
otherwise indicated)
|
For the three and six months ended June 30,
2020
|
|
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
|
Environmental Assessment Process
The Springpole permitting timeline is as follows:
The ongoing priority at Springpole Gold Project is to continue to
advance the project through the provincial and federal
environmental assessment (“EA”) processes, both of which are currently
underway. The goal is to prepare a synchronized Environmental
Impact Statement (“EIS”) that satisfies both the federal and
provincial requirements.
Page
12
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless
otherwise indicated)
|
For the three and six months ended June 30,
2020
|
●
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 Q2 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 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 commenced community consultation and engagement with the
communities of interest in July 2018 and has held consultation
meetings with Indigenous communities and other stakeholders. The
Company is now in its second round of consultation in readiness for
the preparation of the ToR. First Mining continues with community
consultations and engagement and submitted the second draft of the
ToR to MECP on January 21, 2020. First Mining anticipates
completing another round of consultation and receiving final
approval of the ToR by Q4 2020.
●
While
the permitting process is ongoing, the Company continued to
undertake 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 for the summer of 2020 will include
aquatic environs, hydrology, surface water quality monitoring,
hydrogeology, geotechnical investigation, and tailings and mine
rock geochemical characterization.
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 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
Goldlund
Gold Project is an advanced exploration stage asset 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 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 and Resource
Estimation Update, Goldlund Gold Project, Sioux Lookout,
Ontario”, which has an effective date of March 15, 2019, was
prepared by WSP and was filed by the Company on SEDAR on April 1,
2019, and is available under the Company’s SEDAR profile at
www.sedar.com
and on the Company’s website at www.firstmininggold.com.
Page
13
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless
otherwise indicated)
|
For the three and six months ended June 30,
2020
|
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.
Transaction with Treasury Metals
On June
3, 2020, First Mining entered into a definitive share purchase
agreement with Treasury Metals, pursuant to which Treasury Metals
will acquire all of the issued and outstanding shares of Tamaka.
Under the terms of the Share Purchase Agreement, upon closing First
Mining will receive total consideration comprised of (i) 130
million common shares of Treasury Metals; (ii) 35 million TML
Warrants with an exercise price of $0.50 for a 3-year term; (iii) a
1.5% NSR royalty on Goldlund (0.5% of which can be bought back by
Treasury Metals for $5 million in cash); and (iv) milestone
payments totaling $5 million, payable in cash, on certain key
advancements at Goldlund. Upon closing First Mining will hold
approximately 40% of the issued and outstanding shares of Treasury
Metals (on an undiluted basis) and will also have the right to
appoint three nominees to the board of directors of Treasury
Metals.
Details
of the 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.
First
Mining intends to distribute up to 70 million TML Shares received
under the Transaction, along with all 35 million TML Warrants, to
First Mining shareholders within 12 months of closing. Completion
of the Transaction is subject to customary closing conditions,
including approval of a majority of the votes cast by the
shareholders of Treasury Metals at a shareholder meeting, and
approval of the Toronto Stock Exchange in connection with the 130
million TML Shares and the 35 million TML Warrants being issued
under the Transaction. Treasury Metals has called an annual general
and special meeting of its shareholders to be held August 5, 2020,
and at such meeting, the shareholders of Treasury Metals will be
asked to approve the Transaction. If the transaction is approved by
the shareholders of Treasury Metals, closing of the Transaction is
expected to occur on August
7, 2020.
Entering
into the Share Purchase Agreement was considered an indicator of
impairment and evidence of conditions that existed at June 30,
2020. Therefore, during the six months ended June 30, 2020, the
Company completed an impairment test and recorded an impairment of
the Goldlund project amounting to $22,498,000 (2019 - $nil), based
on the recoverable amount (FVLCS) indicated by the Share Purchase
Agreement. In determining the recoverable amount, management
estimated the fair value of the 130 million TML Shares based on
quoted market prices, the fair value of the 35 million TML Warrants
based on a Black-Scholes option valuation and the fair value of the
1.5% royalty and milestone payments totaling $5 million based on a
probability weighted discounted cash flow model. The recoverable
amount estimate is sensitive to changes in the milestone payment
probability assumptions and the discount rate applied to the
associated cash flows of 6.50%. The impairment fair value estimate
is a Level 3 fair value measurement.
Upon
signing of the Share Purchase Agreement on June 3, 2020, the
disposal group for Goldlund was considered to be a disposal group
held for sale. Upon classification of the Goldlund disposal group
as held for sale, the Company reclassified $77,867,000 from the
Goldund Gold Project balance to non-current assets held for sale.
As at June 30, 2020, the carrying value of Goldlund is $77,867,000
(December 31, 2019 - $98,894,000).
Updated Mineral Resource Estimate
On
March 27, 2019, the Company announced the results of an updated
mineral resource estimate for the Goldlund Gold Project, which has
an effective date of March 15, 2019 and was prepared by WSP Canada
Inc. (“WSP”) of
Sudbury, Ontario (the “2019
Goldlund Gold Project Resource Estimate”). A summary
of the overall changes detailed in the 2019 Goldlund Gold Project
Resource Estimate is as follows:
Page
14
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless
otherwise indicated)
|
For the three and six months ended June 30,
2020
|
●
In total, indicated
resource Au ounces (“oz”) increased by 248,700 oz. This
increase in oz corresponds to an increase in tonnage of 3,535,900
tonnes from 9,324,100 tonnes at an average grade of 1.87 g/t Au to
12,860,000 tonnes at an average grade of 1.96 g/t Au.
●
In total, inferred
resource Au oz decreased by 628,400 oz, after adjusting for the
proportion of Inferred resource tonnes removed due to the upgrade
of certain tonnes to the indicated resource category. This
represents an overall reduction in tonnage of 22,533,000 tonnes
from 40,895,000 tonnes at an average grade of 1.33 g/t Au to
18,362,000 tonnes at an average grade of 1.49 g/t Au.
In
summary, the 2019 Goldlund Gold Project Resource Estimate
incorporated approximately 40,000 m of incremental drilling, the
bulk of which was focused on Zone 7. While the increased data
density and geological understanding of the deposits resulted in
increased confidence of the resource, adding 3,535,900 tonnes at an
average grade of 1.96 g/t Au, it also resulted in a large reduction
in the number of tonnes and ounces in the inferred resource
category.
Further
details can be found in the technical report for the 2019 Goldlund
Gold Project Resource Estimate entitled “Technical Report and
Resource Estimation Update, Goldlund Gold Project, Sioux Lookout,
Ontario”, which was prepared by WSP and filed by the Company
on SEDAR on April 1, 2019.
“Main Zone” 2019/2020 Drill Program
After
the completion of the 2019 drilling at Miller, the exploration
program moved to the Goldlund Gold Project Main Zone area, and a
new drill program is currently underway, due for completion later
in 2020.
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. To date, a total of 48 holes
(approximately 8,958 m) have been completed at the Main Zone as
part of the 2019 – 2020 drill program. Drilling at the Main
Zone is focused on delineating mineralization between the currently
defined zones of the Goldlund Gold Project deposit. The main
Goldlund Gold Project deposit that hosts the current mineral
resource estimate remains open along strike to the northeast, to
the southwest, and at depth.
2019 Regional drill program
In
2019, the Company completed a 32-hole drill program at its Miller
prospect on the Goldlund Gold Project, for a total of 6,130 m.
Miller is located approximately 10 km northeast and along strike of
the current resource area at the Goldlund Gold Project. Work
consisted of infill drilling of the area tested in 2018, as well as
step-out drilling to the northeast and southwest along strike. The
2019 drilling tested a total strike length of up to 900 m, with
drill spacing largely between 25 m and 50 m, and followed on the
strong results achieved in 2018, which included 108 m of 2.43 g/t
Au, and frequent occurrences of visible gold within the drill
core.
Since
drilling first commenced on the Miller prospect in 2018, a total of
40 holes (7,386 m) have been drilled, successfully outlining
mineralization over a strike length of approximately 450 m. Low
grade gold mineralization encountered in gabbro in hole MI-19-037
(0.17 g/t Au over 15.0 m), which was drilled to test a possible
northeast extension of Miller, demonstrates that this northeast
area may still be a viable target for follow-up soil and rock
sampling.
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.
Page
15
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless
otherwise indicated)
|
For the three and six months ended June 30,
2020
|
The
resource covers 1.5 km of an 8 km mineralized structure.
Substantial infrastructure at the property includes a ramp to 350 m
below surface with vent raise, line-power to site, commercial barge
and landing craft ramp, air strip, and a strong local labour force.
Hope Brook Gold Project was a former operating gold mine that
produced 752,163 oz Au from 1987 to 1997.
The Company continues to collect environmental baseline data for
permitting and the understanding of site environmental
conditions.
In Q3
2019, the Company commenced a waste rock characterization and
economic study of marketable aggregates at the Hope Brook Gold
Project site. In addition, low cost geological mapping, soil
sampling, surface and groundwater quality programs will continue
for environmental data collection purposes.
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 minimal environmental studies,
including surface and groundwater quality monitoring programs to
support a potential environmental assessment or permitting
application 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.
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 Inc., a wholly-owned subsidiary of the
Company.
On January 27, 2020, the Company entered into a binding term sheet
with Auteco whereby Auteco may earn up to an 80% interest in the
Pickle Crow Gold Project. On March 12, 2020, the Company and Auteco
executed a definitive Earn-In Agreement, which replaced the Term
Sheet. Pursuant to 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 the Pickle Crow exploration
activity.
During the six months ended June 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. In addition, Auteco incurred a total of
$781,000 in exploration expenditures during the six months ended
June 30, 2020.
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 6, 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.
Page
16
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless
otherwise indicated)
|
For the three and six months ended June 30,
2020
|
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 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. Please see further
discussion below.
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 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 six months ended June 30, 2020, and
recycling of currency translation adjustment on disposal of Mexican
subsidiaries amounting to $630,000.
Page
17
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless
otherwise indicated)
|
For the three and six months ended June 30,
2020
|
SELECTED QUARTERLY FINANCIAL INFORMATION
|
2020-Q2
|
2020-Q1
|
2019-Q4
|
2019-Q3
|
2019-Q2
|
2019-Q1
|
2018-Q4
|
2018-Q3
|
|
|
Net
Loss
|
$(19,531)
|
$(1,462)
|
$(2,274)
|
$(1,643)
|
$(1,315)
|
$(1,727)
|
(5,658)
|
$(937)
|
|
Write-down of
Mineral Properties
|
22,498
|
-
|
-
|
341
|
-
|
-
|
4,181
|
-
|
|
Net Loss Excluding
Certain Non-cash Items(1)(2)
|
(884)
|
(990)
|
(1,402)
|
(970)
|
(840)
|
(1,153)
|
(1,085)
|
(910)
|
|
Basic and Diluted
Net Loss Per Share (in dollars)(3)
|
(0.03)
|
(0.00)
|
(0.00)
|
(0.01)
|
(0.00)
|
(0.00)
|
(0.01)
|
(0.00)
|
|
Financial
Position (in $000s):
|
||||||||
|
Cash and Cash
Equivalents
|
6,475
|
10,497
|
5,902
|
5,687
|
8,396
|
3,059
|
5,115
|
6,950
|
|
Working
Capital(1)
|
8,596
|
9,946
|
5,780
|
8,360
|
10,627
|
5,491
|
7,536
|
9,688
|
|
Marketable
Securities
|
5,601
|
1,398
|
1,775
|
3,503
|
2,979
|
2,669
|
2,597
|
2,651
|
|
Mineral
Properties
|
159,630
|
256,532
|
252,815
|
248,509
|
246,411
|
245,169
|
244,129
|
246,652
|
|
Non-current Assets
Held for Sale
|
77,993
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
258,044
|
276,776
|
268,020
|
263,470
|
263,381
|
256,463
|
257,532
|
262,146
|
|
Total Non-Current
Liabilities
|
$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”, “Write-down of mineral
properties”, “Marketable securities fair value
gain”, “Loss on disposal of subsidiaries” and
“Deferred income tax expense (recovery)”.
(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.
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 expenses such as share-based payments
expense, write-down of mineral properties, marketable securities
fair value gain recorded in net loss, loss on disposal of
subsidiaries and deferred income tax recovery (expense).
Share-based payments fluctuate 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‐Q2 there was a $22,498,000
non‐cash write‐down of the Goldlund Gold Project, and a
deferred tax recovery of $1,385,000 was recorded as a result of the
write-down. In addition, a marketable securities fair value gain on
Auteco shares, which were received in 2020-Q2, was recorded through
profit or loss. Lastly, as a result of sale of Mexican properties
during 2020-Q2, the Company recorded a $303,000 loss on disposal of
subsidiaries, and recycled currency translation adjustment on
disposal amounting to $630,000.
In
2020-Q2 there was an increase in professional and consulting fees
compared to 2020-Q1 due to the Auteco and Treasury Metals
transactions closing costs. 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 the 2019-Q3. In 2019-Q3 there was an increase in
professional fees in connection with the base shelf prospectus and
arrangement 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 write-down
of the Company’s Mexican mineral properties and a
non-recurring severance payment of $300,000. In 2018-Q3 there was a
decrease in marketing expenses as compared to 2018-Q2, due to a
reduction in marketing activities by the Company.
Page
18
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless
otherwise indicated)
|
For the three and six months ended June 30,
2020
|
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-Q2,
the Company sold 532,000 common shares of the Company under the ATM
program for net proceeds of $129,000, 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 $9,154,000, 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, changes in
the fair value of marketable securities and mineral property
investments, and additions to or write-down of mineral property
balances. 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 a write-down of mineral properties and incurring
eligible flow-through expenditures.
In
2020-Q2, upon classification of the Goldlund disposal group as held
for sale, the Company reclassified $77,867,000 from the Goldund
Gold Project balance to non-current assets held for sale. In
addition to the mineral property balances, non-current assets held
for sale include property and equipment.
MINERAL PROPERTY BALANCES
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 and the Goldlund Gold Project. At the Springpole Gold
Project, the goal in 2020 is to continue to advance permitting and
to substantially complete the PFS. The Company also expects in Q3
2020 to close its announced transaction with Treasury Metals, after
which it will hold a large equity position in Treasury Metals who
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 above mineral property balances, $6,300,000
(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 six
months ended June 30, 2020, management determined that there was an
increase in the fair value of mineral property investments and a
fair value gain of $903,000 (six months ended June 30, 2019 - $nil)
was recorded.
The
Company’s $7,318,000 expenditures on mineral properties
during the six months ended June 30, 2020 (six months ended June
30, 2019 - $2,546,000) are primarily related to the
following:
Springpole Gold Project
During
the six months ended June 30, 2020, the Company incurred
expenditures of $711,000 in connection with geotechnical drilling,
$836,000 in connection with pre-feasibility work, and $347,000 in
connection with the continuation of environmental fieldwork. In the
prior year period, the Company incurred expenditures of $200,000 in
connection with the completion of metallurgical testwork and
$111,000 in connection with the continuation of environmental
fieldwork.
Page
19
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless
otherwise indicated)
|
For the three and six months ended June 30,
2020
|
Goldlund Gold Project
During
the six months ended June 30, 2020, the Company incurred $1,078,000
in connection with the 2020 drill campaign of approximately 6,500
m. In contrast, in the prior year period the Company incurred
$43,000 in connection with the reporting of an updated mineral
resource estimate for the Goldlund Gold Project, which incorporated
management salary allocations.
Entering
into the Share Purchase Agreement with Treasury Metals during the
six months ended June 30, 2020, was considered an indicator of
impairment and evidence of conditions that existed at June 30,
2020. Therefore, during the six months ended June 30, 2020, the
Company completed an impairment test and recorded an impairment of
the Goldlund Gold Project amounting to $22,498,000 (2019 - $nil),
based on the FVLCS indicated by the Share Purchase Agreement. In
addition, Goldlund was considered to be a disposal group held for
sale. Upon classification of the Goldlund disposal group as held
for sale, the Company reclassified $77,867,000 from the Goldund
Gold Project balance to non-current assets held for
sale.
Hope Brook Gold Project
During
the six months ended June 30, 2020, the Company incurred
expenditures of $87,000 for an aggregate study and made its annual
advanced royalty payment of $20,000 on the Hope Brook Gold Project.
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.
Pickle Crow Gold Project
During
the six months ended June 30, 2020, the Company incurred $20,000 in
mineral land taxes, and capitalized $781,000 in exploration
expenditures incurred by Auteco on the Pickle Crow Gold Project. In
the prior year period, the Company incurred $16,000 in mineral land
taxes.
Other Mineral Properties
Net
expenditures on the Company's other mineral properties were
$117,000 in the first half of 2020, compared with net recoveries of
$2,000 in the first half of 2019. The main increase in expenditures
was due to the Company receiving initial consideration from Gainey
Capital Corp. (“Gainey”) pursuant to the option
agreement on the Company’s Las Margaritas gold project, which
was recorded as a recovery in 2019.
Share-based Payments (non-cash)
During
the six months ended June 30, 2020, the Company capitalized
$350,000 in share-based payments compared to $363,000 in 2019,
which is predominantly a function of the lower fair value per
option in 2020 ($0.12 per option in 2020 compared to $0.20 per
option in 2019).
Page
20
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless
otherwise indicated)
|
For the three and six months ended June 30,
2020
|
As at
June 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 expenditures
|
Option payments received and expenditures recovered
|
Currency translation adjustments
|
Disposal, assets held for sale reclassification or write-down of
mineral properties
|
Balance June 30, 2020
|
|
Springpole
Gold Project
|
$76,775
|
$4,706
|
$-
|
$-
|
$-
|
$81,481
|
|
Goldlund
Gold Project
|
98,894
|
1,471
|
|
-
|
(100,365)
|
-
|
|
Hope
Brook Gold Project
|
20,071
|
166
|
|
-
|
-
|
20,237
|
|
Cameron
Gold Project
|
27,374
|
82
|
|
-
|
-
|
27,456
|
|
Pickle
Crow Gold Project
|
19,263
|
858
|
-
|
-
|
-
|
20,121
|
|
Duquesne
Gold Project
|
5,133
|
7
|
|
-
|
-
|
5,140
|
|
Pitt
Gold Project
|
2,084
|
-
|
|
-
|
-
|
2,084
|
|
Others
|
2,615
|
23
|
|
-
|
-
|
2,638
|
|
Canada Total
|
$252,209
|
$7,313
|
$-
|
$-
|
$(100,365)
|
$159,157
|
|
Mexico
|
154
|
5
|
-
|
8
|
(167)
|
-
|
|
USA
|
452
|
-
|
-
|
21
|
-
|
473
|
|
Total
|
$252,815
|
$7,318
|
$-
|
$29
|
$(100,532)
|
$159,630
|
|
|
|
|
|
|
|
|
|
(in $000s)
|
||||||
|
|
Balance December 31, 2018
|
2019 expenditures
|
Option payments received and expenditures recovered
|
Currency translation adjustments
|
Disposal, assets held for sale reclassification or write-down of
mineral properties
|
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
|
2,559
|
(50)
|
-
|
-
|
19,263
|
|
Duquesne
Gold Project
|
5,091
|
42
|
|
-
|
-
|
5,133
|
|
Pitt
Gold Project
|
2,082
|
2
|
|
-
|
-
|
2,084
|
|
Others
|
2,559
|
56
|
|
-
|
-
|
2,615
|
|
Canada Total
|
$243,081
|
$9,178
|
$(50)
|
$-
|
$-
|
$252,209
|
|
Mexico
|
244
|
99
|
(179)
|
(10)
|
-
|
154
|
|
USA
|
804
|
46
|
(25)
|
(32)
|
(341)
|
452
|
|
Total
|
$244,129
|
$9,323
|
$(254)
|
$(42)
|
$(341)
|
$252,815
|
Page
21
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless
otherwise indicated)
|
For the three and six months ended June 30,
2020
|
RESULTS OF CONTINUING OPERATIONS
For the three and six months ended June 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 June 30
|
Six months ended June 30
|
||
|
|
2020
|
2019
|
2020
|
2019
|
|
|
|
|
|
|
|
EXPENDITURES
|
|
|
|
|
|
General and
administration
|
$1,127
|
$539
|
$1,647
|
$1,076
|
|
Exploration and
evaluation
|
127
|
189
|
286
|
377
|
|
Investor relations
and marketing communications
|
188
|
103
|
424
|
517
|
|
Corporate
development and due diligence
|
61
|
50
|
132
|
82
|
|
Share-based
payments (non-cash)
|
244
|
475
|
649
|
1,049
|
|
Write-down of
mineral properties (non-cash)
|
22,498
|
-
|
22,498
|
-
|
|
Loss from
operational activities
|
(24,245)
|
(1,356)
|
(25,636)
|
(3,101)
|
|
|
|
|
|
|
|
OTHER
ITEMS
|
|
|
|
|
|
Foreign exchange
gain (loss)
|
629
|
(2)
|
607
|
(4)
|
|
Other
expenses
|
(26)
|
(7)
|
(46)
|
(61)
|
|
Interest and other
income
|
16
|
50
|
54
|
124
|
|
Marketable
securities fair value gain
|
3,013
|
-
|
3,013
|
-
|
|
Loss on disposal of
subsidiaries
|
(303)
|
-
|
(303)
|
-
|
|
Loss
before income taxes
|
$(20,916)
|
$(1,315)
|
$(22,311)
|
$(3,042)
|
|
Deferred income tax
recovery (non-cash)
|
1,385
|
-
|
1,318
|
-
|
|
Net
loss for the period
|
$(19,531)
|
$(1,315)
|
$(20,993)
|
$(3,042)
|
|
|
|
|
|
|
|
Other
comprehensive income (loss)
|
|
|
|
|
|
Items that will not be reclassified to net loss:
|
|
|
|
|
|
Marketable
securities fair value gain
|
450
|
139
|
73
|
151
|
|
Mineral property
investments fair value gain
|
567
|
-
|
903
|
-
|
|
Items that are or may be reclassified to net income or
(loss):
|
|
|
|
|
|
Currency
translation adjustment of foreign subsidiaries
|
(29)
|
(24)
|
35
|
(48)
|
|
Recycling of
currency translation adjustment on disposal of foreign
subsidiaries
|
(630)
|
-
|
(630)
|
-
|
|
Other comprehensive
income
|
358
|
115
|
381
|
103
|
|
|
|
|
|
|
|
Net
loss and comprehensive loss for the period
|
$(19,173)
|
$(1,200)
|
$(20,612)
|
$(2,939)
|
Second Quarter 2020 Compared to Second Quarter 2019
For the
three months ended June 30, 2020, net loss for the period
(excluding write-down of mineral properties) has decreased by
$4,282,000 compared to the three months ended June 30, 2019. This
change was explained by the following:
Page
22
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless
otherwise indicated)
|
For the three and six months ended June 30,
2020
|
Write-down of mineral properties
Write-down
of mineral properties increased by $22,498,000 during the three
months ended June 30, 2020 compared to the same period in 2019.
This increase is due to the Company recording an impairment of the
Goldlund Gold Project, based on the recoverable amount (FVLCS)
indicated by the Share Purchase Agreement with Treasury
Metals.
Marketable securities fair value gain
Marketable
securities fair value gain increased by $3,013,000 during the three
months ended June 30, 2020 compared to the same period in
2019. The
Company received the 25 million shares of Auteco in connection with
its option to acquire PC Gold Inc., and classified Auteco shares as
FVTPL. Based on changes in fair value of Auteco shares from the
date of receipt to June 30, 2020, a marketable securities fair
value gain was recorded in net loss.
Deferred income tax recovery
Deferred
income tax recovery increased by $1,385,000 during the three months
ended June 30, 2020 compared to the same period in 2019, as a
result of the Goldlund Gold Project write-down.
General and Administration
General
and administration increased by $588,000 during the three months
ended June 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.
Share-based Payments (non-cash)
Share-based
payments decreased by $231,000 during the three months ended June
30, 2020 compared to the same period in 2019, primarily due to a
lower number of incentive stock options granted in the second
quarter of 2020 (1,100,000 options granted in the three months
ended June 30, 2020 as compared to 2,750,000 granted in the three
months ended June 30, 2019), and due to a lower fair value per
option in 2020 ($0.12 per option in 2020 compared to $0.20 per
option in 2019).
Investor Relations and Marketing Communications
Investor
relations and marketing communications increased by $85,000 during
the three months ended June 30, 2020 compared to the same period in
2019. This increase is predominantly due to increase in marketing
campaigns during the second quarter of 2020.
Other Functional Expenses
The
amounts in exploration and evaluation and corporate development and
due diligence were comparable between periods.
Six Months Ended June 30, 2020 Compared to Six Months Ended June
30, 2019
For the
six months ended June 30, 2020, net loss for the period (excluding
write-down of mineral properties) has decreased by $4,547,000
compared to the six months ended June 30, 2019. This change was
explained by the following:
Page
23
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless
otherwise indicated)
|
For the three and six months ended June 30,
2020
|
Write-down of mineral properties
Write-down
of mineral properties increased by $22,498,000 during the six
months ended June 30, 2020 compared to the same period in 2019.
This increase is due to the Company recording an impairment of the
Goldlund Gold project, based on the recoverable amount (FVLCS)
indicated by the Share Purchase Agreement with Treasury
Metals.
Marketable securities fair value gain
Marketable
securities fair value gain increased by $3,013,000 during the six
months ended June 30, 2020 compared to the same period in
2019. The
Company received the 25 million shares of Auteco in connection with
its option to acquire PC Gold Inc., and classified Auteco shares as
FVTPL. Based on changes in fair value of Auteco shares from the
date of receipt to June 30, 2020, a marketable securities fair
value gain was recorded in net loss.
Deferred income tax recovery
Deferred
income tax recovery increased by $1,318,000 during the six months
ended June 30, 2020 compared to the same period in 2019, as a
result of the Goldlund Gold Project write-down.
General and Administration
General
and administration increased by $571,000 during the six months
ended June 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.
Share-based Payments (non-cash)
Share-based
payments decreased by $400,000 during the six months ended June 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).
Investor Relations and Marketing Communications
Investor
relations and marketing communications decreased by $93,000 during
the six months ended June 30, 2020 compared to the same period in
2019. This decrease is due to Company attending fewer conferences
in 2020.
Other Functional Expenses
The
amounts in exploration and evaluation and corporate development and
due diligence were comparable between periods.
Page
24
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless
otherwise indicated)
|
For the three and six months ended June 30,
2020
|
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
|
(in
$000s)
|
Six
months ended June 30,
|
|
|
|
2020
|
2019
|
|
CASH PROVIDED BY (USED IN)
|
|
|
|
Operating
activities
|
$(2,441)
|
$(1,814)
|
|
Investing
activities
|
(6,263)
|
(2,217)
|
|
Financing
activities
|
9,327
|
7,313
|
|
Foreign exchange
effect on cash
|
2
|
(1)
|
|
CHANGE IN CASH AND CASH
EQUIVALENTS
|
625
|
3,281
|
|
Working
capital(1)
|
8,596
|
10,627
|
|
Cash and cash
equivalents, beginning
|
5,902
|
5,115
|
|
Cash and cash
equivalents, ending
|
$6,527
|
$8,396
|
(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 $625,000 in cash and cash equivalents from $5,902,000
at December 31, 2019 to $6,527,000 at June 30, 2020 was primarily
due to cash raised from the 2020 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 $627,000 during the six
months ended June 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 six months ended June
30, 2020.
Investing Activities
For the
period ended June 30, 2020, the cash used in investing activities
of $6,263,000 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 $2,217,000 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 six months ended June
30, 2020 was $9,327,000, of which $8,404,000 related to the funds
raised from the private placements, $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, $116,000 was related
to 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 the private
placements, and $43,000 was related to the exercise of stock
options and warrants.
Trends in Liquidity, Working Capital, and Capital
Resources
As at
June 30, 2020, the Company has working capital of $8,596,000. 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 six months ended June 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 six months ended June 30,
2020, financed its activities by raising capital through issuances
of new shares. 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.
Page
25
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless
otherwise indicated)
|
For the three and six months ended June 30,
2020
|
The
Company believes it has sufficient cash resources to maintain its
mineral properties in good standing for the next twelve
months.
FINANCIAL LIABILITIES AND COMMITMENTS
The
Company’s financial liabilities as at June 30, 2020 are
summarized as follows:
|
(in $000s)
|
Contractual Cash Flows
|
Less than 1 year
|
1 – 3 years
|
4 – 5 years
|
After 5 years
|
|
Accounts payable
and accrued liabilities
|
$1,162
|
$1,162
|
$-
|
$-
|
$-
|
|
Current liabilities
held for sale
|
201
|
201
|
-
|
-
|
-
|
|
Lease
liability
|
759
|
163
|
330
|
266
|
-
|
|
Total
|
$2,122
|
$1,526
|
$330
|
$266
|
$-
|
Other
material financial commitments as at June 30, 2020 consist of
flow-through expenditure commitments of $1,100,000 (2019 -
$1,900,000) to be incurred prior to December 31, 2021 to fulfill
flow-through requirements from the Company’s December 18,
2019 private placement, and $876,000 (2019 - $nil) to be incurred
prior to December 31, 2021 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.
OUTLOOK
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 Environmental Impact Statement targeted for 2021.
The Company also expects in Q3 2020 to close its announced
transaction with Treasury Metals, after which it will hold a large
equity position in Treasury Metals who will be advancing the
Goliath-Goldlund gold project towards construction. First
Mining’s eastern Canadian property portfolio also includes
the Pickle Crow (being advanced in partnership with Auteco),
Cameron, Hope Brook, Duparquet, Duquesne, and Pitt gold
projects.
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.
The
following is a summary of ongoing activities planned for the
remainder of 2020:
●
The Company is
planning to submit a final ToR to MECP for 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 is produced
an updated resource estimate and commenced drilling at the Pickle
Crow Gold Project, and are required to spend $750,000 on
exploration expenditures within the first 12 months of the Earn-In
Agreement, by Q1 2021. As at June 30, 2020, $781,000 was spent on
exploration expenditures and thus satisfied this contractual
requirement.
Page
26
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless
otherwise indicated)
|
For the three and six months ended June 30,
2020
|
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.
Marketable Securities
During
the six months ended June 30, 2020, the Company received the 25
million shares of Auteco in connection with its option to acquire
PC Gold Inc. These shares are classified as FVTPL. During the six
months ended June 30, 2020, the Company also held shares in Gainey,
which the Company received pursuant to the option agreement with
Gainey on the Las Margaritas gold project, and other investments in
publicly traded companies within the mining industry for strategic
purposes.
|
(in $000s)
|
Silver One Resources Inc.
|
Gainey
|
Auteco
|
Other Marketable Securities
|
Total
|
|
Balance
as at December 31, 2019
|
$-
|
$74
|
$-
|
$1,701
|
$1,775
|
|
Additions
|
-
|
-
|
740
|
-
|
740
|
|
(Loss) gain
recorded in other comprehensive loss
|
-
|
(24)
|
-
|
97
|
73
|
|
Gain recorded in
net loss
|
|
|
3,013
|
-
|
3,013
|
|
Balance
as at June 30, 2020
|
$-
|
$50
|
$3,753
|
$1,798
|
$5,601
|
|
(in $000s)
|
Silver One Resources Inc.
|
Gainey
|
Auteco
|
Other Marketable Securities
|
Total
|
|
Balance
as at December 31, 2018
|
$990
|
$-
|
$-
|
$1,607
|
$2,597
|
|
Additions
|
60
|
171
|
-
|
-
|
231
|
|
Dispositions
|
(1,758)
|
-
|
-
|
-
|
(1,758)
|
|
Gain (loss)
recorded in other comprehensive loss
|
708
|
(97)
|
-
|
94
|
705
|
|
Balance
as at December 31, 2019
|
$-
|
$74
|
$-
|
$1,701
|
$1,775
|
The
Company holds marketable securities of publicly traded companies as
strategic investments and has less than a 10% equity interest in
each of the investees. During the year ended December 31, 2019, the
Company sold 6,250,000 common shares of Silver One Resources Inc.
for net proceeds of $1,750,000 with original cost of $6,360,000,
and realized a cumulative loss on sale of $4,610,000 in other
comprehensive loss.
In
addition, subsequent to the end of the period, the Company received
805,698 shares of First Majestic Silver in partial consideration
under the Silver Purchase Agreement at an aggregate deemed price of
US$7,500,000.
Page
27
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless
otherwise indicated)
|
For the three and six months ended June 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 June 30,
2020.
As at
June 30, 2020, management has estimated a fair value for the Option
– PC Gold liability of $1,621,000. 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 June 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.
As at
June 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
$903,000 was recorded (six months ended June 30, 2019 - $nil). As
at June 30, 2020, the fair value of the Company’s mineral
property investments was $6,300,000 (December 31, 2019 –
$5,398,000).
RELATED PARTY TRANSACTIONS
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 June 30, 2020.
OFF-BALANCE SHEET ARRANGEMENTS
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.
Page
28
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless
otherwise indicated)
|
For the three and six months ended June 30,
2020
|
NON-IFRS MEASURES
The
Company has included a non-IFRS measure for “net loss
excluding write-down of mineral properties (non-cash)”,
“net loss excluding share-based payments, write-down of
mineral properties (non-cash), marketable securities fair value
gain, loss on disposal of subsidiaries and deferred income tax
expense (recovery) (non-cash)” 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.
The
Company determines working capital and net loss excluding
share-based payments (non-cash), write-down of mineral properties
(non-cash) and deferred income tax expense (recovery) (non-cash) as
follows:
Quarterly Reconciliations:
|
Reconciliation
as of the end of the period (in $000s)
|
2020-Q2
|
2020-Q1
|
2019-Q4
|
2019-Q3
|
|
Current
assets
|
$12,863
|
$12,977
|
$8,329
|
$9,713
|
|
Less current
liabilities
|
(4,267)
|
(3,031)
|
(2,549)
|
(1,353)
|
|
Working
capital
|
$8,596
|
$9,946
|
$5,780
|
$8,360
|
|
Reconciliation
as of the end of the period (in $000s)
|
2019-Q2
|
2019-Q1
|
2018-Q4
|
2018-Q3
|
|
Current
assets
|
$11,747
|
$6,018
|
$8,118
|
$10,166
|
|
Less current
liabilities
|
(1,120)
|
(527)
|
(582)
|
(478)
|
|
Working
capital
|
$10,627
|
$5,491
|
$7,536
|
$9,688
|
|
Reconciliation
for the three months ended (in $000s)
|
2020-Q2
|
2020-Q1
|
2019-Q4
|
2019-Q3
|
|
Net
loss
|
$(19,531)
|
$(1,462)
|
$(2,274)
|
$(1,643)
|
|
Excluding
share-based payments (non-cash)
|
244
|
405
|
215
|
332
|
|
Excluding
write-down of mineral properties (non-cash)
|
22,498
|
-
|
-
|
341
|
|
Excluding
marketable securities fair value gain
|
(3,013)
|
-
|
-
|
-
|
|
Excluding loss on
disposal of subsidiaries
|
303
|
-
|
-
|
-
|
|
Excluding deferred
income tax expense (recovery)
|
(1,385)
|
67
|
657
|
(141)
|
|
Net loss excluding
certain non-cash items(1)
|
$(884)
|
$(990)
|
$(1,402)
|
$(1,111)
|
|
Reconciliation
for the three months ended (in $000s)
|
2019-Q2
|
2019-Q1
|
2018-Q4
|
2018-Q3
|
|
Net
loss
|
$(1,315)
|
$(1,727)
|
$(5,658)
|
$(937)
|
|
Excluding
share-based payments (non-cash)
|
475
|
574
|
392
|
27
|
|
Excluding
write-down of mineral properties (non-cash)
|
-
|
-
|
4,181
|
-
|
|
Excluding
marketable securities fair value gain
|
-
|
-
|
-
|
-
|
|
Excluding loss on
disposal of subsidiaries
|
-
|
-
|
-
|
-
|
|
Excluding deferred
income tax expense (recovery)
|
-
|
-
|
-
|
-
|
|
Net loss excluding
certain non-cash items(1)
|
$(840)
|
$(1,153)
|
$(1,085)
|
$(910)
|
Page
29
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless
otherwise indicated)
|
For the three and six months ended June 30,
2020
|
Annual Reconciliations:
|
Reconciliation
as of the end of the period (in $000s)
|
June
30,2020
|
December
31,
2019
|
December
31,
2018
|
|
Current
assets
|
$12,863
|
$8,329
|
$8,118
|
|
Less current
liabilities
|
(4,267)
|
(2,549)
|
(582)
|
|
Working
capital
|
$8,596
|
$5,780
|
$7,536
|
|
Reconciliation
for the six months ended June 30 (in $000s)
|
2020
|
2019
|
2018
|
|
Net
loss
|
$(20,993)
|
$(3,042)
|
$(5,050)
|
|
Excluding
share-based payments (non-cash)
|
649
|
1,049
|
2,613
|
|
Excluding
write-down of mineral properties (non-cash)
|
22,498
|
-
|
-
|
|
Excluding
marketable securities fair value gain
|
(3,013)
|
-
|
-
|
|
Excluding loss on
disposal of subsidiaries
|
303
|
-
|
-
|
|
Excluding deferred
income tax expense (recovery) (non-cash)
|
(1,318)
|
-
|
-
|
|
Net loss excluding
certain non-cash items(1)
|
$(1,874)
|
$(1,993)
|
$(2,437)
|
(1)
“The certain
non-cash items excluded” refers to the “Share-based
payments”, “Write-down of mineral properties”,
"Marketable securities fair value gain”, “Loss on
disposal of subsidiaries" and “Deferred income tax expense
(recovery)”.
CHANGES IN ACCOUNTING POLICIES
The
unaudited condensed interim consolidated financial statements for
the six months ended June 30, 2020 were prepared using accounting
policies consistent with those used in the audited annual
consolidated financial statements for the year ended December 31,
2019.
ACCOUNTING STANDARDS ISSUED BUT NOT YET APPLIED
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.
CRITICAL ACCOUNTING JUDGMENTS AND ESTIMATES
The
preparation of financial statements requires the use of accounting
estimates. It also requires management to exercise judgment in the
process of applying its accounting policies. Estimates and
judgments are regularly evaluated and are based on
management’s experience and other factors, including
expectations about future events that are believed to be reasonable
under the circumstances. The use of judgments, estimates and
assumptions affects the application of accounting policies and the
reported amounts of assets and liabilities, income and expense.
Actual results may differ from these estimates.
The
following discusses accounting policy judgment that may result in
material changes in estimates used in the financial
statements:
Impairment of mineral properties:
In
accordance with the Company’s accounting policy for its
mineral properties, exploration and evaluation expenditures on
mineral properties are capitalized. There is no certainty that the
expenditures made by the Company in the exploration of its property
interests will result in discoveries of commercial quantities of
minerals. The Company applies judgment to determine whether
indicators of impairment exist for these capitalized
costs.
Management
uses several criteria in making this assessment, including the
period for which the Company has the right to explore, expected
renewals of exploration rights, whether substantive expenditures on
further exploration and evaluation of mineral properties are
budgeted, and evaluation of the results of exploration and
evaluation activities up to the reporting date. Based on the
proposed transaction with Treasury Metals management identified an
indicator of impairment as at June 30, 2020.
The
following are key assumptions concerning the future and other key
sources of estimation uncertainty that have a significant risk of
causing a material adjustment to the carrying value of assets and
liabilities within the next financial period:
Page
30
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless
otherwise indicated)
|
For the three and six months ended June 30,
2020
|
Impairment Testing
As at
June 30, 2020, an impairment test was performed for the Goldlund
Gold Project. A market approach was taken whereby a discounted cash
flow model was used to determine the recoverable amount of
Goldlund, based on the consideration outlined by the Share Purchase
Agreement with Treasury Metals. Aspects of the model were prepared
internally with assistance from third-party advisors. Both
observable and unobservable inputs were used in the model. The
significant inputs used when performing the mineral property
impairment test are based on management’s best estimates of
what an independent market participant would consider appropriate.
Changes in these inputs may alter the results of impairment
testing, the amount of the impairment charges or reversals recorded
in the statement of comprehensive loss and the resulting carrying
values of assets. In determining the recoverable amount, management
estimated the fair value of the 130 million TML Shares based on
quoted market prices, the fair value of the 35 million TML Warrants
based on a Black-Scholes option valuation and the fair value of the
1.5% royalty and milestone payments totaling $5 million based on a
probability weighted discounted cash flow model.
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.
RISKS AND UNCERTAINTIES
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.
Page
31
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless
otherwise indicated)
|
For the three and six months ended June 30,
2020
|
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.
On
March 24, 2020, the province of Ontario implemented an emergency
order (the “Emergency
Order”) mandating the closure of all non-essential
workplaces in the province. The Emergency Order has since been
extended and remains in effect, although most parts of the province
are in varying stages of re-opening, and our exploration properties
in Ontario are at present not directly affected by the Emergency
Order. However, there can be no guarantee that re-opening process
will not be reversed in the future or that governments in other
provinces in which we have mineral properties will not pass similar
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.
As
discussed above under “2020 Highlights”, the Company
has temporarily demobilized the contractors and staff at its
Springpole Gold Project and Goldlund Gold Project properties for a
period. Although exploration activities have recommenced at those
properties, there can be no assurance that the Company will not be
required to demobilize its personnel and contractors again in the
future. Any additional 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.
Page
32
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless
otherwise indicated)
|
For the three and six months ended June 30,
2020
|
Equity Price Risk
The
Company is exposed to equity price risk as a result of holding
investments in equity securities, which are comprised of marketable
securities 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 June 30, 2020, total net loss and
comprehensive loss for the six months ended June 30, 2020 would
have decreased or increased, respectively, by approximately
$1,190,000 (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.
During
the six months ended June 30, 2020, the Company disposed of its
Mexican subsidiaries, and is no longer exposed to the change in the
currency exchange rates between the Canadian and Mexican
currencies. As at June 30, 2020, the Company was exposed to
currency risk on certain financial instruments denominated in USD.
The Company does not have significant transactions or hold
significant cash or other financial instruments denominated in USD
currency. Therefore, the Company considers this risk to be
immaterial.
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.
Page
33
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless
otherwise indicated)
|
For the three and six months ended June 30,
2020
|
The
following table summarizes the maturities of the Company’s
financial liabilities as at June 30, 2020 based on the undiscounted
contractual cash flows:
|
(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
|
$1,162
|
$1,162
|
$1,162
|
$-
|
$-
|
$-
|
|
Current liabilities
held for sale
|
201
|
201
|
201
|
-
|
-
|
-
|
|
Lease
liability
|
606
|
759
|
163
|
330
|
266
|
-
|
As at
June 30, 2020, the Company had cash and cash equivalents of
$6,527,000 (December 31, 2019 – $5,902,000), of which $52,000
(December 31, 2019 - $nil) were classified in current assets held
for sale.
d)
Capital
Risk Management
The
Company’s objectives when managing capital are to safeguard
the Company’s ability to continue as a going concern in order
to pursue the exploration and retention of its mineral properties.
The Company has historically demonstrated the ability to raise new
capital through equity issuances and/or through surplus cash as
part of its acquisitions. In the management of capital, the Company
includes the components of shareholders’ equity as well as
cash. The Company prepares annual estimates of exploration and
administrative expenditures and monitors actual expenditures
compared to the estimates to ensure that there is sufficient
capital on hand to meet ongoing obligations.
QUALIFIED PERSONS
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.
SECURITIES OUTSTANDING
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 July 31,
2020.
The
following table sets out all outstanding securities of the Company
as of July 31,
2020.
|
|
Number
|
Weighted
Average Exercise Price
|
Expiry
Date
|
|
Common shares
– issued
|
634,341,453
|
|
|
|
Stock
options(1)
|
49,435,000
|
$0.52
|
September 9, 2020
– April 1, 2025
|
|
Warrants(2)
|
64,485,657
|
$0.38
|
June 16, 2021
– July 2, 2025
|
|
Common shares -
fully diluted
|
748,212,110
|
|
|
(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 June 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.
Page
34
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless
otherwise indicated)
|
For the three and six months ended June 30,
2020
|
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING
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 June 30, 2020 that have materially
affected, or are likely to materially affect, the Company’s
internal control over financial reporting.
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.
Page
35
|
FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless
otherwise indicated)
|
For the three and six months ended June 30,
2020
|
FORWARD-LOOKING INFORMATION
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 June 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 potential
increase in gold and silver recoveries at 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 anticipated timing of closing
of the Transaction with Treasury Metals and the Company's
intentions to distribute up to 70 Million TML Shares received under
the Transaction and 35 million TML Warrants to First Mining
shareholders; 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 the Company's belief that the increased understanding of
the Goldlund Gold Project deposit will assist the Company in better
targeting subsequent drill programs to potentially grow the current
resource body at the Goldlund Gold Project; 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 Gainey's
anticipated adherence to required payment and expenditure
obligations pursuant to the Gainey Option Agreement; statements
regarding anticipated completion of the “Main Zone”
drill program and any subsequent phase of the work program;
statements regarding the Company’s intention and proposed
timing to conduct a waste rock characterization and economic study
of marketable aggregates at the Hope Brook Gold Project, as well as
geological mapping and soil sampling; statements regarding improved
efficiency as a result of building new access roads to mineral
properties; 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.
Page
36
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FIRST MINING GOLD CORP.
|
Management’s Discussion & Analysis
|
|
(Expressed in Canadian dollars, unless
otherwise indicated)
|
For the three and six months ended June 30,
2020
|
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.
CAUTIONARY NOTE TO U.S. INVESTORS REGARDING MINERAL RESOURCE AND
MINERAL RESERVE ESTIMATES
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.
Page
37
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 June 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 April 1, 2020 and ended on June 30, 2020 that has
materially affected, or is reasonably likely to materially affect,
the issuer’s ICFR.
Date:
August 4,
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 June 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 April 1, 2020 and ended on June 30, 2020 that has
materially affected, or is reasonably likely to materially affect,
the issuer’s ICFR.
Date:
August 4,
2020.
/s/ Andrew Marshall
Andrew
Marshall
Chief
Financial Officer