Frontier Nuclear & Minerals Inc 20-F/A for FY2023
Frontier Nuclear & Minerals Inc. (FNUC)
About this 20-F/A
Frontier Nuclear & Minerals Inc filed this 20-F/A on March 25, 2024, covering the fiscal year ended June 30, 2023 (FY2023).
Headline figures
Fiscal year ended June 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net income
- 15.46M CAD
- up 63.7% from net income of 9.45M CAD a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Amendment No. 1)
(Mark one)
OR
For the fiscal year ended
OR
For the transition period from __________ to _________
OR
Date of event requiring this shell company report __________
Commission file number
|
|
(Exact name of the Registrant as specified in its charter)
|
|
(Jurisdiction of incorporation or organization)
|
|
(Address of principal executive offices)
Tel: (204) 815-5806
Email:
|
|
(Name, Telephone, E-mail and/or
Facsimile number and Address
of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol |
| Name of each exchange on which registered |
|
|
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
(Title of Class)
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
| ☐ Yes | ☒ |
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
| ☐ Yes | ☒ |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
| ☒ | ☐ No |
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
| ☒ | ☐ No |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
☐ Large Accelerated filer | ☐ Accelerated filer | ☒ |
|
|
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
☐ US GAAP | ☒ | ☐ Other |
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
| ☐ Item 17 | ☐ Item 18 |
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
| ☒ No |
Explanatory Note
The purpose of this Amendment No. 1 to Snow Lake Resources Ltd.’s Annual Report on Form 20-F for the year ended June 30, 2023, filed with the Securities and Exchange Commission on October 31, 2023 (the "Form 20-F"), is to (i) respond to the comments present in the Securities and Exchange Commission’s letter received on February 23, 2024, (ii) to update the Form 20-F to include the amended and restated audited financial statements for the year ended June 30, 2023, to reclassify an overstated balance for reserve for restricted share units by $735,268, an understated balance for other liabilities by $820,612, and an understated stock-based compensation amount of $85,344, which caused the net loss and comprehensive loss for the year ended June 30, 2023 to be misstated. As a result of the corrections, certain balances on the consolidated statement of financial position as at June 30, 2023, and the consolidated statement of loss and comprehensive loss, changes in shareholders’ equity and cash flows for the year ended June 30, 2023 were also affected. Details of the corrections are fully described in Note 2 to the Company’s Amended and Restated Consolidated Financial Statements as filed on EDGAR on March 25, 2024, and (iii) to update the Form 20-F to include the corresponding revised management’s discussion and analysis for the financial period in question. The previously filed consolidated financial statements and management’s discussion and analysis for the financial period in question were originally filed by the Company on EDGAR on October 31, 2023. Each of the Amended and Restated Consolidated Financial Statements and Revised Management’s Discussion and Analysis replaces and supersedes the respective previously filed original consolidated financial statements and related management’s discussion and analysis. Changes have been made to Item 3.D. – Risk Factors, Item 4.A. – History and Development of the Company, Item 4.B. – Business Overview, Item 4.D. – Plants, Property and Equipment, Item 5.A. – Operating and Financial Review and Prospects, Item 5.B. – Liquidity and Capital Resources, Item 6.A. – Directors and Senior Management, Item 10.D. – Exchange Controls, Item 10.E. – Taxation, Item 10.F. – Dividends and Paying Agents, Item 10.G. – Statement by Experts, Item 10.H. – Documents on Display, Item 18 – Financial Statements, and Item 19 - Exhibits. All other information remains the same.
.
Annual Report on Form 20-F
Year Ended June 30, 2023
TABLE OF CONTENTS
|
| Page |
|
| |
Item 1. | 3 | |
|
|
|
Item 2. | 3 | |
|
|
|
Item 3. | 3 | |
A. | 3 | |
B. | 3 | |
C. | 3 | |
D. | 3 | |
|
|
|
Item 4. | 19 | |
A. | 19 | |
B. | 22 | |
C. | 81 | |
D. | 82 | |
|
|
|
Item 4A. | 82 | |
|
|
|
Item 5. | 82 | |
A. | 82 | |
B. | 88 | |
C. | 90 | |
D. | 90 | |
E. | 91 | |
|
|
|
Item 6. | 93 | |
A. | 93 | |
B. | 95 | |
C. | 98 | |
D. | 102 | |
E. | 102 | |
|
|
|
Item 7. | 104 | |
A. | 104 | |
B. | 104 | |
C. | 105 | |
|
|
|
Item 8. | 106 | |
A. | 106 | |
B. | 106 | |
|
|
|
Item 9. | 107 | |
A. | 107 | |
B. | 107 | |
C. | 107 | |
D. | 107 | |
E. | 107 | |
F. | 107 |
i
Item 10. | 107 | |
A. | 107 | |
B. | 107 | |
C. | 107 | |
D. | 107 | |
E. | 108 | |
F. | 115 | |
G. | 115 | |
H. | 115 | |
I. | 115 | |
|
|
|
Item 11. | 116 | |
|
|
|
Item 12. | 116 | |
A. | 116 | |
B. | 116 | |
C. | 116 | |
D. | 116 | |
|
|
|
|
| |
|
|
|
Item 13. | 117 | |
|
| 117 |
Item 14. | Material Modifications to The Rights Of Security Holders And Use Of Proceeds | 117 |
|
|
|
Item 15. | 118 | |
|
|
|
Item 16 | 119 | |
|
|
|
Item 16A | 119 | |
|
|
|
Item 16B | 119 | |
|
|
|
Item 16C | 119 | |
|
|
|
Item 16D | 120 | |
|
|
|
Item 16E | — Purchases of Equity Securities by the Issuer and Affiliated Purchasers | 120 |
|
|
|
Item 16F | 120 | |
|
|
|
Item 16G | 120 | |
|
|
|
Item 16H | 121 | |
|
|
|
Item 16I | — Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 121 |
|
|
|
|
| |
|
|
|
Item 17. | 122 | |
|
|
|
Item 18. | 122 | |
|
|
|
Item 19. | 122 |
ii
CERTAIN INFORMATION
As used in this Annual Report on Form 20-F (the “Annual Report”), unless otherwise indicated or the context otherwise requires, references to
●“we,” “Snow Lake,” “us,” “our,” “the Company,” or “our company” are to Snow Lake Resources Ltd., including its subsidiaries;
●“common shares” are to our common shares, no par value; and
●“NASDAQ” are to the Nasdaq Capital Market.
In this Annual Report on Form 20-F, references to “Canada” are to Canada and its provinces and territories and references to “$,” “USD,” “dollars,” “USD$” or “U.S. dollars” are to the legal currency of the United States and references to “C$,” or “Canadian dollar” are to the legal currency of Canada.
Solely for the convenience of the reader, this Annual Report on Form 20-F contains translations of certain Canadian dollar amounts into U.S. dollars at specified rates. Except as otherwise stated in this Annual Report on Form 20-F, all translations from Canadian dollar to U.S. dollars are based on the closing rate of C$1.3240 per $1.00 for cable transfers of Canadian dollars, as certified by Bank of Canada on June 30, 2023. On October 30, 2023, the closing rate for Canadian dollar was C1.3833 per US$1.00. No representation is made that such Canadian dollar amounts referred to in this Annual Report on Form 20-F could have been or could be converted into U.S. dollars at such rates or any other rates. Any discrepancies in any table between totals and sums of the amounts listed are due to rounding.
The audited consolidated financial statements and notes thereto as of and for fiscal 2023, 2022 and 2021 included elsewhere in this Annual Report on Form 20-F have been prepared in accordance with International Financial Reporting Standards, or IFRS. Our fiscal year end is June 30.
Share Consolidation (“Reverse Split”)
On October 7, 2021, we effectuated a one-for-five reverse stock split of our common shares, or the Reverse Split. The Reverse Split combined each five of our common shares into one common share. Fractional shares were not issued to any existing shareholder in connection with the Reverse Split, but the Company purchased from each existing shareholder the right to such fractional share that would have been issued, at a price based on our initial public offering price. The right to fractional shares which the Company purchased resulting from the Reverse Split, in the aggregate, was less than ten (10) common shares. The historical audited financial statements included elsewhere in this Annual Report on Form 20-F have been adjusted for the Reverse Split. Unless otherwise indicated, all other share and per share data in this Annual Report on Form 20-F have been retroactively adjusted, where applicable, to reflect the Reverse Split as if it had occurred as at the June 30, 2019 fiscal year end. References to “post-consolidation” below are references to the number of our common shares after giving effect to this share consolidation.
1
FORWARD-LOOKING STATEMENTS
This Annual Report contains forward-looking statements that are based on our management’s beliefs and assumptions and on information currently available to us. All statements other than statements of historical facts are forward-looking statements. The forward-looking statements are contained principally in, but not limited to, the sections entitled “Risk Factors”, “Information on the Company”, “Operating and Financial Review and Prospects,” and elsewhere in this Annual Report. These statements relate to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements include, but are not limited to, statements about:
●our goals and strategies;
●expectations regarding revenue, expenses and operations;
●our having sufficient working capital and be able to secure additional funding necessary for the continued exploration of our property interests;
●expectations regarding the potential mineralization, geological merit and economic feasibility of our projects;
●expectations regarding exploration results at the Snow Lake Lithium™ Project;
●mineral exploration and exploration program cost estimates;
●expectations regarding any environmental issues that may affect planned or future exploration programs and the potential impact of complying with existing and proposed environmental laws and regulations;
●receipt and timing of exploration permits and other third-party approvals;
●government regulation of mineral exploration and development operations;
●expectations regarding any social or local community issues that may affected planned or future exploration and development programs; and
●key personnel continuing their employment with us.
In some cases, you can identify forward-looking statements by terms such as “may,” “could,” “will,” “should,” “would,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “project” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under the heading “Risk Factors” and elsewhere in this Annual Report. If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance.
2
PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3. KEY INFORMATION
3.A. [Reserved]
3.B. Capitalization and Indebtedness
Not applicable.
3.C. Reasons for the Offer and Use of Proceeds
Not applicable.
3.D. Risk Factors
You should carefully consider all of the information in this Annual Report, including various changing regulatory, competitive, economic, political and social risks and conditions described below, before making an investment in our common shares. One or more of a combination of these risks could materially impact our business, results of operations and financial condition. In any such case, the market price of our common shares could decline, and you may lose all or part of your investment.
Our Risks and Challenges
Our prospects should be considered in light of the risks, uncertainties, expenses and difficulties frequently encountered by similar companies. Our ability to realize our business objectives and execute our strategies is subject to risks and uncertainties, including, among others, the following summary risk factors set forth in more detail below:
●We have a limited operating history and have not yet generated any revenues;
●Our financial statements have been prepared on a going concern basis and our financial status creates a doubt whether we will continue as a going concern;
●If we do not obtain additional financing, our business may be at risk or execution of our business plan may be delayed;
●Future pandemics, such as the recent coronavirus pandemic may cause a material adverse effect on our business;
●We have obtained an S-K 1300 compliant mineral resource report which represented only estimates and no assurance can be given that any anticipated tonnages and grades will be achieved, or that the indicated level of recovery will be realized. Further drilling will be required to determine whether the Snow Lake Lithium™ Project contains proven or probable mineral reserves and there can be no assurance that we will be successful in our efforts to prove our resource.
●Mineral exploration and development are subject to extraordinary operating risks. We currently do not insure against these risks. In the event of a cave-in or similar occurrence, our liability may exceed our resources, which could have an adverse impact on us;
3
●Our business operations are exposed to a high degree of risk associated with the mining industry;
●We may not be able to obtain or renew licenses or permits that are necessary to our operations;
●Our Snow Lake Lithium™ Project may face indigenous land claims;
●Volatility in lithium prices and lithium demand may make it commercially unfeasible for us to develop our Snow Lake Lithium™ Project;
●The future market demand for lithium is and will be heavily dependent on the growth and development and continuing market acceptance and growth in market share of EVs with the overall North American and worldwide auto industry. Any reduction in the rate of growth of the EV industry may adversely affect lithium prices and the commercial feasibility of our Snow Lake Lithium™ Project;
●There can be no guarantee that our interest in the Snow Lake Lithium™ Project is free from any title defects;
●Our mining operations are dependent on the adequate and timely supply of water, electricity or other power supply, chemicals and other critical supplies;
●We currently report our financial results under International Financial Reporting Standards, or IFRS, which differs in certain significant respect from U.S. generally accepted accounting principles;
●Our directors and officers are engaged in other business activities and accordingly may not devote sufficient time to our business affairs, which may affect our ability to conduct operations and generate revenue; and
●In the event that key personnel leave our company, we would be harmed since we are heavily dependent upon them for all aspects of our activities.
Risks Related to Our Business and Industry
Risks and uncertainties related to our business and industry include, but are not limited to, the following:
All of our business activities are now in the exploration stage and there can be no assurance that our exploration efforts will result in the commercial development of lithium concentrate.
All of our operations are at the exploration and development stage and there is no guarantee that any such activity will result in commercial production of lithium mineral deposits. We have an S-K 1300 mineral resource estimate based on drilling to date. We intend to engage in additional exploratory drilling with proceeds from potential subsequent financings, in order to upgrade the resource classification of the Snow Lake Lithium™ Project, and to eventually upgrade the resource into proven and probable reserves. The exploration for lithium deposits involves significant risks which even a combination of careful evaluation, experience and knowledge may not eliminate such risks. While the discovery of an ore body may result in substantial rewards, few properties which are explored are ultimately developed into producing mines. Major expenses may be required to locate and establish proven mineral reserves, to develop metallurgical processes and to construct mining and processing facilities at a particular site. It is impossible to ensure that the exploration programs planned by us or any future development programs will result in a profitable commercial mining operation. There is no assurance that our mineral exploration activities will result in any discoveries of commercial quantities of lithium. There is also no assurance that, even if commercial quantities of ore are discovered, a mineral property will be brought into commercial production. Whether a mineral deposit will be commercially viable depends on a number of factors, some of which are: the particular attributes of the deposit, such as size, grade and proximity to infrastructure, metal prices which are highly cyclical; and government regulations, including regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of minerals and environmental protection. The exact effect of these factors cannot be accurately predicted. Our long-term profitability will be in part directly related to the cost and success of our exploration programs and any subsequent development programs.
4
Our mineral resources or reserves may be significantly lower than expected or as currently published.
We are in the exploration and development stage and our planned principal operations have not commenced. There is currently no commercial production on the Snow Lake Lithium™ Project and we have not yet completed a pre-feasibility study (“PFS”). As such, our estimated proven or probable mineral reserves, expected mine life and lithium pricing cannot be determined as the exploration program, drilling, feasibility studies and pit (or mine) design optimizations have not yet been undertaken, and the actual mineral reserves may be significantly lower than expected. You should not rely on the past or any future S-K 1300 compliant technical report, or PFS, if and when completed and published, as indications that we will have successful commercial operations in the future. Even if we prove reserves on the Snow Lake Lithium™ Project, we cannot guarantee that we will be able to develop and market them, or that such production will be profitable.
The estimation of lithium reserves is not an exact science and depends upon a number of subjective factors. Any measured, indicated or inferred resource figures presented in this Annual Report are estimates from the written reports of technical personnel and mining consultants who were contracted to assess the mining prospects. Resource estimates are a function of geological and engineering analyses that require us to forecast production costs, recoveries, and metals prices. The accuracy of such estimates depends on the quality of available data and of engineering and geological interpretation, judgment, and experience. Estimated indicated or inferred lithium resources may not be upgraded to measured or indicated, or to probable or proved reserves, and any reserves may not be realized in actual production and our operating results may be negatively affected by inaccurate estimates. Additionally, resource estimates do not determine the economics of a mining project and, although we are planning to prepare a PFS, even once the PFS is produced, we cannot guarantee that it will reflect positive economics for our mining resources or that we will be able to execute our plans to create an economically viable mining operation.
Our mineral resources described in our most recent S-K 1300 compliant measured, indicated and inferred mineral resource report are only estimates and no assurance can be given that the anticipated tonnages and grades will be achieved, or that the indicated level of recovery will be realized.
We intend to continue exploration on our Snow Lake Lithium™ Project and we may or may not acquire additional interests in other mineral properties. The search for mineral deposits as a business is extremely risky. We can provide investors with no assurance that exploration on our current properties, or any other property that we may acquire, will establish that any commercially exploitable quantities of mineral deposits exist. Additional potential problems may prevent us from discovering any mineral deposits. These potential problems include unanticipated problems relating to exploration and additional costs and expenses that may exceed current estimates. If we are unable to establish the presence of viable lithium mineral deposits on our properties, our ability to fund future exploration activities will be impeded, we will not be able to operate profitably, and investors may lose all of their investment in our company.
We have no history of mineral production.
We are an exploration and development stage company and we have no history of mining mineral products from our properties. As such, any future revenues and profits are uncertain. There can be no assurance that our Snow Lake Lithium™ Project will be successfully placed into production, produce minerals in commercial quantities or otherwise generate operating earnings. Advancing projects from the exploration stage into development and commercial production requires significant capital and time and will be subject to further technical studies, permitting requirements and construction of mines, processing plants, roads and related works and infrastructure. We will continue to incur losses until mining-related operations successfully reach commercial production levels and generate sufficient revenue to fund continuing operations. There is no certainty that we will generate revenue from any source, operate profitably or provide a return on investment in the future.
Lithium mining and production is relatively new to the Province of Manitoba and the Snow Lake area.
If and when our lithium resources on the Snow Lake Lithium™ Project are proven, we intend to work towards entering the production stage of our operations. Lithium mining has occurred at the Tanco mine located north east of Winnipeg, but the mining and processing of lithium ore has not previously been undertaken in or near the Snow Lake region of Manitoba. Locating the necessary experts and work force that are familiar with and trained in this particular mining process may be a challenge and our success may be hindered by the lack of historical familiarity with the processes and challenges faced in lithium mining and production.
5
Mineral exploration and development are subject to extraordinary operating risks. We currently do not insure against these risks. In the event of a cave-in or similar occurrence, our liability may exceed our resources, which could have an adverse impact on us.
Exploration and mining operations generally involve a degree of risk. Our operations are subject to all of the hazards and risks normally encountered in the exploration, development and production of lithium, including, without limitation, unusual and unexpected geologic formations, seismic activity, rock bursts, cave-ins, flooding and other conditions involved in the drilling and removal of material, any of which could result in damage to, or destruction of, mines and other producing facilities, personal injury or loss of life and damage to property and environmental damage, all of which may result in possible legal liability. Although we expect that adequate precautions to minimize risk will be taken, mining operations are subject to hazards such as fire, rock falls, geo-mechanical issues, equipment failure or failure of retaining dams around tailings disposal areas which may result in environmental pollution and consequent liability. The occurrence of any of these events could result in a prolonged interruption of our operations that would have a material adverse effect on our business, financial condition, results of operations and prospects.
The exploration for and development of mineral deposits involves significant risks, which even a combination of careful evaluation, experience and knowledge may not eliminate. While the discovery of a mineral deposit may result in substantial rewards, few properties that are explored are ultimately developed into producing mines. Major expenses may be required to locate and establish mineral resources and reserves, to develop metallurgical processes and to construct mining and processing facilities and infrastructure at a particular site. It is impossible to ensure that the exploration or development programs planned by us will result in a profitable commercial mining operation. Whether a mineral deposit will be commercially viable depends on a number of factors, some of which are: the particular attributes of the deposit, such as size, grade and proximity to infrastructure, metal prices that are highly cyclical, and government regulations, including regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of minerals and environmental protection. The exact effect of these factors cannot be accurately predicted, but the combination of these factors may result in our company not receiving an adequate return on invested capital. There is no certainty that the expenditures made towards the search and evaluation of mineral deposits will result in the discovery of mineral resources or the development of commercial quantities of mineral reserves.
Our development projects have no operating history upon which to base estimates of future capital and operating costs. Mineral resource and reserve estimates and estimates of capital and operating costs are, to a large extent, based upon the interpretation of geologic data obtained from drill holes and other sampling techniques, and feasibility studies, which derive estimates of capital and operating costs based upon anticipated tonnage and grades to be mined and processed, ground conditions, the configuration of the deposit, expected recovery rates of minerals from ore, estimated operating costs, and other factors. As a result, actual production, cash operating costs and economic returns could differ significantly from those estimated.
There are numerous risks associated with the development of the Snow Lake Lithium™ Project.
Our future success will largely depend upon our ability to successfully explore, develop and manage the Snow Lake Lithium™ Project. In particular, our success is dependent upon management’s ability to implement our strategy, to develop the project and to maintain ongoing lithium production from the mines that we expect to develop.
Development of the Snow Lake Lithium™ Project could be delayed, experience interruptions, incur increased costs or be unable to complete due to a number of factors, including but not limited to:
●changes in the regulatory environment including environmental compliance requirements;
●non-performance by third party consultants and contractors;
●inability to attract and retain a sufficient number of qualified workers;
●unforeseen escalation in anticipated costs of exploration and development, or delays in construction, or adverse currency movements resulting in insufficient funds being available to complete planned exploration and development;
●increases in extraction costs including energy, material and labor costs;
6
●lack of availability of mining equipment and other exploration services;
●shortages or delays in obtaining critical mining and processing equipment;
●catastrophic events such as fires, storms or explosions;
●the breakdown or failure of equipment or processes;
●construction, procurement and/or performance of the processing plant and ancillary operations falling below expected levels of output or efficiency;
●civil unrest in and/or around the mine site and supply routes, which would adversely affect the community support of our operations;
●changes to anticipated levels of taxes and imposed royalties; and/or
●a material and prolonged deterioration in lithium market conditions, resulting in material price erosion.
It is not uncommon for new mining developments to experience these factors during their exploration or development stages or during construction, commissioning and production start-up, or indeed for such projects to fail as a result of one or more of these factors occurring to a material extent. There can be no assurance that we will complete the various stages of exploration and development necessary in order to achieve our strategy in the timeframe pre-determined by us or at all. Any of these factors may have a material adverse effect on our business, results of operations and activities, financial condition and prospects.
Changes in technology and future demand may result in an adverse effect on our results of operation.
Currently lithium is a key metal used in batteries, including those used in electric vehicles. However, the technology pertaining to batteries, electric vehicles and energy creation and storage is changing rapidly and there is no assurance lithium will continue to be used to the same degree as it is now, or that it will be used at all. Any decline in the use of lithium-ion batteries or technologies utilizing such batteries may result in a material and adverse effect on our future profitability, results of operation and financial condition.
Our business operations are exposed to a high degree of risk associated with the mining industry.
Our business operations are exposed to a high degree of risk inherent in the mining sector. Risks which may occur during the exploration and development of mineral resources include environmental hazards, industrial accidents, equipment failure, import/customs delays, shortage or delays in installing and commissioning plant and equipment, metallurgical and other processing problems, seismic activity, unusual or unexpected formations, formation pressures, rock bursts, wall failure, cave ins or slides, burst dam banks, flooding, fires, explosions, power outages, opposition with respect to mining activities from individuals, communities, governmental agencies and non-governmental organizations, interruption to or the increase in costs of services, cave-ins and interruption due to inclement or hazardous weather conditions.
Commencement of mining can also reveal mineralization or geologic formations, including higher than expected content of other minerals that can be difficult to separate from lithium metals, which can result in unexpectedly low recovery rates.
Such occurrences could cause damage to, or destruction of properties, personal injury or death, environmental damage, pollution, delays, increased production costs, monetary losses and potential legal liabilities. Moreover, these factors may result in a mineral deposit, which has been mined profitably in the past to become unprofitable. They are also applicable to sites not yet in production and to expanded operations. Successful mining operations will be reliant upon the availability of processing and refining facilities and secure transportation infrastructure at the rate of duty over which we may have limited or no control. Any liabilities that we incur for these risks and hazards could be significant and the costs of rectifying the hazard may exceed our asset value.
7
Infrastructure required to carry on our business may be affected by unusual or infrequent weather phenomena, sabotage, government or other interference in the maintenance or provision of such infrastructure.
Exploitation of the Snow Lake Lithium™ Project will depend to a significant degree on adequate infrastructure. In the course of developing our expected operations, assuming our exploration efforts will be successful, we may need to construct and support the construction of infrastructure, which includes permanent gas pipelines, water supplies, power, transport and logistics services which affect capital and operating costs. Unusual or infrequent weather phenomena, sabotage, government or other interference in the maintenance or provision of such infrastructure or any failure or unavailability in such infrastructure could materially adversely affect our operations, financial condition and results of operations.
We may not be able to obtain or renew licenses or permits that are necessary to our operations.
In the ordinary course of business, we will be required to obtain and renew governmental licenses or permits for exploration, development, construction and commencement of mining at the Snow Lake Lithium™ Project. Obtaining or renewing the necessary governmental licenses or permits is a complex and time-consuming process involving public hearings and costly undertakings on the part of our company. The duration and success of our efforts to obtain and renew licenses or permits are contingent upon many variables not within our control, including the interpretation of applicable requirements implemented by the licensing and/or permitting authorities. We may not be able to obtain or renew licenses or permits that are necessary to our operations, including, without limitation, an exploitation license, or the cost to obtain or renew licenses or permits may exceed what we believe we can recover from the Snow Lake Lithium™ Project. Any unexpected delays or costs associated with the licensing or permitting process could delay the development or impede the operation of a mine, which could adversely impact our operations and profitability.
Our financial statements have been prepared on a going concern basis and our financial status creates a doubt whether we will continue as a going concern.
Our financial statements have been prepared on a going concern basis under which an entity is considered to be able to realize its assets and satisfy its liabilities in the ordinary course of business. Our future operations are dependent upon the identification and successful completion of equity or debt financing and the achievement of profitable operations at an indeterminate time in the future. There can be no assurances that we will be successful in completing an equity or debt financing or in achieving or maintaining profitability. The financial statements do not give effect to any adjustments relating to the carrying values and classification of assets and liabilities that would be necessary should we be unable to continue as a going concern.
The Snow Lake Lithium™ Project may face indigenous land claims.
The Snow Lake Lithium™ Project may now or in the future be the subject of indigenous land claims. The legal nature of land claims is a matter of considerable complexity. The impact of any such claim on our ownership interest in the Snow Lake Lithium™ Project cannot be predicted with any degree of certainty and no assurance can be given that a broad recognition of indigenous rights in the area in which the Snow Lake Lithium™ Project is located, by way of a negotiated settlement or judicial pronouncement, would not have an adverse effect on our operations. Even in the absence of such recognition, we may at some point be required to negotiate with, and seek the approval of holders of, such interests in order to facilitate exploration and development work on the Snow Lake Lithium™ Project. There is no assurance that we will be able to establish a practical working relationship with the indigenous groups in the area which would allow us to ultimately develop the Snow Lake Lithium™ Project.
Volatility in lithium prices and lithium demand may make it commercially unfeasible for us to develop our Snow Lake Lithium™ Project.
The development of our Snow Lake Lithium™ Project is dependent on the continued growth of the lithium market, and the continued increased demand for lithium chemicals by emerging producers of electric vehicles and other users of lithium-ion batteries. These producers and the related technologies are still under development and a continued sustained increase in demand is not certain. To the extent that such demand does not manifest itself, and the lithium market does not continue to grow, or existing producers increase supply to satisfy this demand, then our ability to develop our Snow Lake Lithium™ Project will be adversely affected. Our lithium exploration and development activities may be significantly adversely affected by volatility in the price of lithium. Mineral prices fluctuate widely and are affected by numerous factors beyond our control such as global and regional supply and demand, interest rates, exchange rates, inflation or deflation, fluctuation in the value of the United States dollar and foreign currencies, and the political and
8
economic conditions of mineral-producing countries throughout the world. The exact effect of these factors cannot be accurately predicted, but the combination of these factors may result in our lithium activities not producing an adequate return on invested capital to be profitable or viable.
There can be no guarantee that our interest in the Snow Lake Lithium™ Project is free from any title defects.
We have taken all reasonable steps to ensure it has proper title to the Snow Lake Lithium™ Project. However, there can be no guarantee that our interest in the Snow Lake Lithium™ Project is free from any title defects, as title to mineral rights involves certain intrinsic risks due to the potential problems arising from the unclear conveyance history characteristic of many mining projects. There is also the risk that material contracts between us and relevant government authorities will be substantially modified to the detriment of us or be revoked. There can be no assurance that our rights and title interests will not be challenged or impugned by third parties.
Our mining operations are dependent on the adequate and timely supply of water, electricity or other power supply, chemicals and other critical supplies.
Our exploration programs are dependent on the adequate and timely supply of water, electricity or other power supply, chemicals and other critical supplies. If we are unable to obtain the requisite critical supplies in time and at commercially acceptable prices or if there are significant disruptions in the supply of electricity, water or other inputs to the mine site, our business performance and results of operations may experience material adverse effects.
We may experience an inability to attract or retain qualified personnel.
Our success depends to a large degree upon our ability to attract, retain and train key management personnel, as well as other technical personnel. If we are not successful in retaining or attracting such personnel, our business may be adversely affected. Furthermore, the loss of our key management personnel could materially and adversely affect our business and operations.
As our business becomes more established, it will also be required to recruit additional qualified key financial, administrative, operations and marketing personnel. There will be no guarantee that we will be able to attract and keep such qualified personnel and if we are not successful, it could have a material and adverse effect on our business and results from operations.
Failure to comply with federal, provincial and/or local laws and regulations could adversely affect our business.
Our mining operations are subject to various laws and regulations governing exploration, development, production, taxes, labor standards and occupational health, mine safety, protection of endangered and protected species, toxic substances and explosives use, reclamation, exports, price controls, waste disposal and use, water use, forestry, land claims of local people, and other matters. This includes periodic review and inspection of the Snow Lake Lithium™ Project that may be conducted by applicable regulatory authorities.
Although the exploration activities on the Snow Lake Lithium™ Project have been and, we expect, will continue to be carried out in accordance with all applicable laws and regulations, there is no guarantee that new laws and regulations will not be enacted or that existing laws and regulations will not be applied in a way which could limit or curtail exploration or in the future, production. New laws and regulations or amendments to current laws and regulations governing the operations and activities of mining or more stringent implementation of existing laws and regulations could have a material adverse effect on us and cause increases in capital expenditures costs, or reduction in levels of exploration, development and/or production.
Failure to comply with applicable laws and regulations, even if inadvertent, may result in enforcement actions thereunder, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment or remedial actions. We may also be required to reimburse any parties affected by loss or damage caused by our mining activities and may have civil or criminal fines and/or penalties imposed against us for infringement of applicable laws or regulations.
9
Failure to comply with environmental regulation could adversely affect our business.
All phases of our operations with respect to the Snow Lake Lithium™ Project will be subject to environmental regulation. Environmental legislation involves strict standards and may entail increased scrutiny, fines and penalties for non-compliance, stringent environmental assessments of proposed projects and a high degree of responsibility for companies and their officers, directors and employees. Changes in environmental regulation, if any, may adversely impact our operations and future potential profitability. In addition, environmental hazards may exist on the Snow Lake Lithium™ Project that are currently unknown. We may be liable for losses associated with such hazards, or may be forced to undertake extensive remedial cleanup action or to pay for governmental remedial cleanup actions, even in cases where such hazards have been caused by previous or existing owners or operators of the properties, or by the past or present owners of adjacent properties or by natural conditions. The costs of such cleanup actions may have a material adverse impact on our operations and future potential profitability.
Failure to comply with applicable laws, regulations, and permitting requirements may result in enforcement actions thereunder, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions. Parties engaged in mining operations may be required to compensate those suffering loss or damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations and, in particular, environmental laws.
We currently report our financial results under IFRS, which differs in certain significant respects from U.S. generally accepted accounting principles.
We report our financial statements under IFRS. There have been and there may in the future be certain significant differences between IFRS and United States generally accepted accounting principles, or U.S. GAAP, including differences related to revenue recognition, intangible assets, share-based compensation expense, income tax and earnings per share. As a result, our financial information and reported earnings for historical or future periods could be significantly different if they were prepared in accordance with U.S. GAAP. In addition, we do not intend to provide a reconciliation between IFRS and U.S. GAAP unless it is required under applicable law. As a result, you may not be able to meaningfully compare our financial statements under IFRS with those companies that prepare financial statements under U.S. GAAP.
Our assets and operations are subject to economic, geopolitical and other uncertainties.
Economic, geopolitical and other uncertainties may negatively affect our business. Economic conditions globally are beyond our control. In addition, the outbreak of hostilities and armed conflicts between countries can create geopolitical uncertainties that may affect both local and global economies. Downturns in the economy or geopolitical uncertainties may cause future customers to delay or cancel projects, reduce their overall capital or operating budgets or reduce or cancel orders which could have a material adverse effect on our business, results of operations and financial condition.
Our operations may be affected in varying degrees by government regulations with respect to, but not limited to, restrictions on production, price controls, export controls, currency remittance, income taxes, foreign investment, maintenance of claims, environmental legislation, land use, land claims of local people, water use and mine safety. Failure to comply strictly with applicable laws, regulations and local practices relating to mineral rights, could result in loss, reduction or expropriation of entitlements.
In addition, the financial markets can experience significant price and value fluctuations that can affect the market prices of equity securities and other companies in ways that are unrelated to the operating performance of these companies. Broad market fluctuations, as well as economic conditions generally, may adversely affect the market price of our common shares.
As we face intense competition in the mineral exploration and exploitation industry, there can be no assurance that we will be able to compete effectively with other companies.
The mining industry, and the lithium mining sector in particular, is very competitive. Our competition is from larger, established mining companies with greater liquidity, greater access to credit and other financial resources, newer or more efficient equipment, lower cost structures, more effective risk management policies and procedures and/or a greater ability than us to withstand losses. Our competitors may be able to respond more quickly to new laws or regulations or emerging technologies, or devote greater resources to the expansion or efficiency of their operations than we can. In
10
addition, current and potential competitors may make strategic acquisitions or establish cooperative relationships among themselves or with third parties. Accordingly, it is possible that new competitors or alliances among current and new competitors may emerge and gain significant market share to our detriment.
As a result of this competition, we may have to compete for financing and be unable to acquire financing on terms we consider acceptable. We may also have to compete with the other mining companies for the recruitment and retention of qualified managerial and technical employees. If we are unable to successfully compete for financing or for qualified employees or we may not be able to compete successfully against current and future competitors, and any failure to do so could have a material adverse effect on our business, financial condition, results of operations and future prospects as well as our exploration programs may be slowed down or suspended, which may cause us to cease operations as a company.
Our executive officers are engaged in other business activities and, accordingly, may not devote sufficient time to our business affairs, which may affect our ability to conduct operations.
Our Chief Executive Officer is an employee and devotes substantially all of his time to our business. Some of our other executive officers are engaged as consultants under independent contractor agreements rather than as employees and, as such, they have been and are involved in other business activities and have consulting clients in addition to working for us. Although we expect that as our business operations ramp up such executive officers will devote substantially all of their time to our business, as a result of the other business endeavors that they are currently engaged in, such executive officers may not be able to devote sufficient time to our business affairs, which may negatively affect our ability to conduct our ongoing operations. In addition, management of our company may be periodically interrupted or delayed as a result of these officers’ other business interests.
We may be subject to potential conflicts of interest.
We may be subject to potential conflicts of interests, as certain directors of our company are, and may continue to be, engaged in the mining industry through their participation in corporations, partnerships or joint ventures, which are potential competitors of our company. Situations may arise in connection with potential acquisitions in investments where the other interests of these directors and officers may conflict with the interests of our company. Our directors and officers with conflicts of interest will be subject to the procedures set out in the related Canadian law and regulations.
We may not meet cost estimates.
A change in the timing of any projected cash flows due to capital funding or, once in production, production shortfalls or labor disruptions would result in delays in receipt of such cash flows and in using such cash to fund operating activities and, as applicable, reduce debt levels. This could result in additional loans to finance capital expenditures in the future.
The level of capital and operating cost estimates which are used for determining and obtaining financing and other purposes are based on certain assumptions and are fundamentally subject to considerable uncertainties. It is very likely that actual results for the Snow Lake Lithium™ Project will differ from our current projections, estimates and assumptions, and these differences may be significant. Moreover, experience from actual mining may identify new or unexpected conditions that could decrease operational activities, and/or increase capital and/or operating costs above, the current estimates. If actual results are less favorable than we currently estimate, our business, results from operations, financial condition and liquidity could be materially adversely affected.
We may pursue opportunities to acquire complementary businesses, which could dilute our shareholders’ ownership interests, incur expenditure and have uncertain returns.
We may seek to expand through future acquisitions of either companies or properties, however, there can be no assurance that we will locate attractive acquisition candidates, or that we will be able to acquire such candidates on economically acceptable terms, if at all, or that we will not be restricted from completing acquisitions pursuant to contractual arrangements. Future acquisitions may require us to expend significant amounts of cash, resulting in our inability to use these funds for other business or may involve significant issuances of equity. Future acquisitions may also require substantial management time commitments, and the negotiation of potential acquisitions and the integration of acquired operations could disrupt our business by diverting management and employees’ attention away from day-to-day operations. The difficulties of integration may be increased by the necessity of coordinating geographically diverse organizations, integrating personnel with disparate backgrounds and combining different corporate cultures.
11
Any future acquisition involves potential risks, including, among other things: (i) mistaken assumptions and incorrect expectations about mineral properties, mineral resources and costs; (ii) an inability to successfully integrate any operation our company acquires; (iii) an inability to recruit, hire, train or retain qualified personnel to manage and operate the operations acquired; (iv) the assumption of unknown liabilities; (v) limitations on rights to indemnity from the seller; (vi) mistaken assumptions about the overall cost of equity or debt; (vii) unforeseen difficulties operating acquired projects, which may be in geographic areas new to us; and (viii) the loss of key employees and/or key relationships at the acquired project.
At times, future acquisition candidates may have liabilities or adverse operating issues that we may fail to discover through due diligence prior to the acquisition. If we consummate any future acquisitions with unanticipated liabilities or that fail to meet expectations, our business, results of operations, cash flows or financial condition may be materially adversely affected. The potential impairment or complete write-off of goodwill and other intangible assets related to any such acquisition may reduce our overall earnings and could negatively affect our balance sheet.
Legal proceedings may arise from time to time in the course of our business.
Legal proceedings may arise from time to time in the course of our business. Such litigation may be brought from time to time in the future against us. Defense and settlement costs of legal claims can be substantial, even with respect to claims that have no merit. Other than as disclosed elsewhere in this report, we are not currently subject to material litigation, nor have we received an indication that any material claims are forthcoming. However, due to the inherent uncertainty of the litigation process, we could become involved in material legal claims or other proceedings with other parties in the future. The results of litigation or any other proceedings cannot be predicted with certainty. The cost of defending such claims may take away from management’s time and effort and if we are incapable of resolving such disputes favorably, the resultant litigation could have a material adverse impact on our financial condition, cash flow and results from operation.
Adverse outcomes in litigation matters that arise in the future, could negatively affect our business, results of operations, financial condition and cash flows.
The outcome of litigation and other legal proceedings that the Company may be involved in the future, is difficult to assess or quantify. Defense and settlement costs can be substantial, even with respect to claims that have no merit. Due to the inherent uncertainty of the litigation process, the litigation process could take away from the time and effort of the Company’s management and could force the Company to pay substantial legal fees. Any conclusion of these matters in a manner adverse to us could have a material adverse effect on our business, results of operation, financial condition and cash flows. For example, we may be required to pay substantial damages, incur payments of fines and penalties, suffer a significant adverse impact on our reputation, and management’s attention and resources may be diverted from other priorities, including the execution of business plans and strategies that are important to our ability to grow our business, any of which could have a material adverse effect on our business. If we do not have sufficient funds to settle or pay any damages and costs with respect to any lawsuits, this would have a material adverse effect on our business, financial condition and results of operation.
Land reclamation requirements may be burdensome.
Land reclamation requirements are generally imposed on companies with mining operations or mineral exploration companies in order to minimize long term effects of land disturbance. Reclamation may include requirements to control dispersion of potentially deleterious effluents or reasonably re-establish pre-disturbance landforms and vegetation. In order to carry out reclamation obligations imposed on us in connection with exploration, potential development and production activities, we must allocate financial resources that might otherwise be spent on exploration and development programs. If we are required to carry out unanticipated reclamation work, our financial position could be adversely affected.
In the event that key personnel leave our company, we would be harmed since we are heavily dependent upon them for all aspects of our activities.
We are heavily dependent on our officers and directors, the loss of whom could have, in the short-term, a negative impact on our ability to conduct our activities and could cause additional costs from a delay in the exploration and development of our Snow Lake Lithium™ Project.
12
The obligations associated with being a public company require significant resources and management attention, and we incur significant costs as a result of being a public company.
As a public company, we face increased legal, accounting, administrative and other costs and expenses that we did not incur as a private company. We are subject to the reporting requirements of the Exchange Act, which requires that we file annual and other reports with respect to our business and financial condition, as well as the rules and regulations implemented by the SEC, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the Public Company Accounting Oversight Board, and the continued listing requirements of Nasdaq, each of which imposes additional reporting and other obligations on public companies. As a public company, we are required to, among other things:
●prepare and file annual and other reports in compliance with the federal securities laws;
●expand the roles and duties of our board of directors and committees thereof and management;
●hire additional financial and accounting personnel and other experienced accounting and finance staff with the expertise to address complex accounting matters applicable to public companies;
●institute more comprehensive financial reporting and disclosure compliance procedures;
●involve and retain, outside counsel and accountants to assist us with the activities listed above;
●build and maintain an investor relations function;
●establish new internal policies, including those relating to trading in our securities and disclosure controls and procedures;
●comply with the initial listing and maintenance requirements of Nasdaq; and
●comply with the Sarbanes-Oxley Act.
We expect these rules and regulations, and any future changes in laws, regulations and standards relating to corporate governance and public disclosure, which have created uncertainty for public companies, to continue to incur legal and financial compliance costs and make some activities more time consuming and costly than for private companies. These laws, regulations and standards are subject to varying interpretations, in many cases, due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. Our investment in compliance with existing and evolving regulatory requirements will result in increased administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities, which could have a material adverse effect on our business, financial condition and results of operations.
Risks Related to Ownership of Our Common Shares
Risks and uncertainties related to our common shares include, but are not limited to, the following:
●We have a limited operating history and have not yet generated any revenues;
●Our financial statements have been prepared on a going concern basis and our financial status creates a doubt whether we will continue as a going concern;
●If we do not obtain additional financing, our business may be at risk or execution of our business plan may be delayed;
Our continued development may require us to raise additional financing in the future through the issuance of additional equity securities or convertible debt securities.
Our continued development may require the Company to raise additional financing in the future through the issuance of additional equity securities or convertible debt securities. If we raise additional funding by issuing
13
additional equity securities or convertible debt securities such financings may substantially dilute the interests of our shareholders and reduce the value of their investment. Additional financings and share issuances may result in a substantial dilution to our shareholders of the Company and decrease the value of our securities.
The failure to raise or procure such additional funds as required could result in the delay or indefinite postponement of business objectives. There can be no assurance that additional capital or other types of financing will be available if needed or that, if available, will be on terms acceptable to the Company.
The market prices for securities of mining companies, including our securities, historically have been and may continue to be volatile.
The market prices for securities of mining companies, including our securities, historically have been and may continue to be volatile. Future developments concerning us or our industry, including downward fluctuations in the price of lithium, may have a significant impact on the market price of the common shares.
There may not be an active liquid market for the common shares and there is no guarantee that an active trading market for the common shares will be maintained on Nasdaq.
There may not be an active liquid market for the common shares. There is no guarantee that an active trading market for the common shares will be maintained on Nasdaq. Investors may not be able to sell their common shares quickly or at the latest market price if trading in the common shares is not active.
Management will have discretion in the use of available funds.
Management will have broad discretion concerning the use of available funds, as well as the timing of their expenditures. Depending on fluctuations in lithium prices and other factors, the intended use of available funds may change. As a result, an investor will be relying on the judgment of management for the application of the net proceeds from the offering of any securities and use of available funds. Management may use the net proceeds from the offering of any securities and available funds in ways that an investor may not consider desirable if they believe it would be in our best interests to do so. The results and the effectiveness of the application of proceeds from an offering of any securities and available funds are uncertain. If the proceeds and available funds are not applied effectively, our results of operations may suffer.
●If through additional drilling we are not able to prove our resource according to the SEC’s new Mining Modernization Rules, your investment in our common shares could become worthless;
●You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions against us or our management named in this Annual Report based on foreign laws;
●We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to U.S. domestic public companies;
●As a foreign private issuer, we are permitted to rely on exemptions from certain Nasdaq corporate governance standards applicable to domestic U.S. issuers. This may afford less protection to holders of our shares;
●A major shareholder, Nova Minerals, Ltd (“Nova”) owns a significant interest in our outstanding common shares. As a result, it will have the ability to influence all matters submitted to our shareholders for approval; and
●Future issuances of debt securities, which would rank senior to our common shares upon our bankruptcy or liquidation, and future issuances of preferred shares, which could rank senior to our common shares for the purposes of dividends and liquidating distributions, may adversely affect the level of return you may be able to achieve from an investment in our common shares.
In addition, we face other risks and uncertainties that may materially affect our business prospects, financial condition, and results of operations. You should consider the risks discussed here and elsewhere in this Annual Report before investing in our common shares.
14
An active market in which investors can resell their common shares may not be available.
Our common shares were listed and began trading on the Nasdaq Capital Market on November 19, 2021 under the symbol “LTIM.” Prior to the listing, there was no public market for our common shares. A liquid public market for our common shares may not sufficiently develop. The prices at which our securities are traded may decline, meaning that you may experience a decrease in the value of your common shares regardless of our operating performance or prospects.
The market price of our common shares may fluctuate, and you could lose all or part of your investment.
The market price for our common shares has been volatile, in part because our shares do not have a substantial history of trading publicly. In addition, the market price of our common shares may fluctuate significantly in response to several factors, most of which we cannot control, including:
●actual or anticipated variations in our operating results;
●increases in market interest rates that lead investors of our common shares to demand a higher investment return;
●changes in earnings estimates;
●changes in market valuations of similar companies;
●actions or announcements by our competitors;
●adverse market reaction to any increased indebtedness we may incur in the future;
●additions or departures of key personnel;
●actions by shareholders;
●announcements by governments, or general market confidence; and
●our ability to maintain the listing of our common shares on Nasdaq.
●speculation in the media, online forums, or investment community;
Volatility in the market prices of our securities may prevent investors from being able to sell their securities at or above their purchase price. As a result, you may suffer a loss on your investment.
We may not be able to maintain a listing of our common shares on Nasdaq.
Although our common shares are listed on Nasdaq, we must meet certain financial and liquidity criteria to maintain such listing. If we violate Nasdaq’s listing requirements, or if we fail to meet any of Nasdaq’s listing standards, our common shares may be delisted. In addition, our board of directors may determine that the cost of maintaining our listing on a national securities exchange outweighs the benefits of such listing. A delisting of our common shares from Nasdaq may materially impair our shareholders’ ability to buy and sell our common shares and could have an adverse effect on the market price of, and the efficiency of the trading market for, our common shares. The delisting of our common shares could significantly impair our ability to raise capital and the value of your investment.
We do not expect to declare or pay dividends in the foreseeable future.
We do not expect to declare or pay dividends in the foreseeable future, as we anticipate that we will invest future earnings in the development and growth of our business. Therefore, holders of our common shares will not receive any return on their investment unless they sell their securities, and holders may be unable to sell their securities on favorable terms or at all.
15
If securities industry analysts do not publish research reports on us, or publish unfavorable reports on us, then the market price and market trading volume of our common shares could be negatively affected.
Any trading market for our common shares may be influenced in part by any research reports that securities industry analysts publish about us. We may not obtain further research coverage by securities industry analysts. If no further securities industry analysts commence coverage of us, the market price and market trading volume of our common shares could be negatively affected. In the event we are covered by more analysts, and one or more of such analysts downgrade our shares, or otherwise reports on us unfavorably, or discontinues coverage of us, the market price and market trading volume of our common shares could be negatively affected.
You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions against us or our management named in the report based on foreign laws.
We are incorporated in the Province of Manitoba, Canada under The Corporations Act (Manitoba). We conduct our operations outside the United States and substantially all of our assets are located outside the United States. In addition, a majority of our directors and executive officers and the experts named in this report reside outside the United States, and a significant amount of their assets are located outside the United States. As a result, service of process upon such persons may be difficult or impossible to effect within the United States. Furthermore, because a substantial portion of our assets, and substantially all the assets of our directors and officers and the Canadian experts named herein, are located outside of the United States, any judgment obtained in the United States, including a judgment based upon the civil liability provisions of United States federal securities laws, against us or any of such persons may not be collectible within the United States. In Canada, provincial and territorial reciprocal enforcement of judgments legislation sets out the procedure for registering foreign judgments and this procedure varies depending on the province or territory of the enforcing court. If a foreign judgment originates from a jurisdiction not captured by the applicable provincial or territorial reciprocal enforcement of judgments or enforcement of foreign judgments legislation, the foreign judgment may be capable of enforcement at common law and the party seeking to enforce the foreign judgment must commence new proceedings in the domestic or enforcing court.
We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to U.S. domestic public companies.
Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers, including:
●the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q or current reports on Form 8-K;
●the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registered under the Exchange Act;
●the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and
●the selective disclosure rules by issuers of material nonpublic information under Regulation FD.
We are required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we intend to publish our results on a semi-annual basis as press releases, distributed pursuant to the rules and regulations of Nasdaq Press releases relating to financial results and material events will also be furnished to the SEC on Form 6-K. However, the information we are required to file with or furnish to the SEC will be less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. As a result, you may not be afforded the same protections or information that would be made available to you were you investing in a U.S. domestic issuer.
We are subject to ongoing public reporting requirements that are less rigorous than Exchange Act rules for companies that are not emerging growth companies and our shareholders could receive less information than they might expect to receive from more mature public companies.
16
We qualify as an “emerging growth company” under the JOBS Act. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002 in the assessment of the emerging growth company’s internal control over financial reporting. In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.
We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year during which we have total annual gross revenues of at least US$1.07 billion; (ii) the last day of our fiscal year following the fifth anniversary of the completion of our initial public offering; (iii) the date on which we have, during the preceding three year period, issued more than US$1.0 billion in non-convertible debt; or (iv) the date on which we are deemed to be a “large accelerated filer” under the Exchange Act, which could occur if the market value of our common shares that are held by non-affiliates exceeds US$700 million as of the last business day of our most recently completed second fiscal quarter. Once we cease to be an emerging growth company, we will not be entitled to the exemptions provided in the JOBS Act discussed above.
Because we will be subject to ongoing public reporting requirements that are less rigorous than Exchange Act rules for companies that are not emerging growth companies, our shareholders could receive less information than they might expect to receive from more mature public companies. We cannot predict if investors will find our common shares less attractive if we elect to rely on these exemptions, or if taking advantage of these exemptions would result in less active trading or more volatility in the price of our common shares.
As a foreign private issuer, we are permitted to rely on exemptions from certain Nasdaq corporate governance standards applicable to domestic U.S. issuers. This may afford less protection to holders of our shares.
We are exempted from certain corporate governance requirements of Nasdaq by virtue of being a foreign private issuer. As a foreign private issuer, we are permitted to follow the governance practices of our home country in lieu of certain corporate governance requirements of Nasdaq. Certain corporate governance practices in Canada, which is our home country, may differ significantly from the Nasdaq corporate governance listing standards. For instance, we are not required to:
●have a compensation committee and a nominating/corporate governance committee to be comprised solely of “independent directors;” or
●hold an annual meeting of shareholders no later than one year after the end of its fiscal year.
We currently follow our home country practice that (i) does not require us to seek shareholder approval for amending our share incentive plans; (ii) does not require us to hold an annual meeting of shareholders no later than one year after the end of its fiscal year; (iii) does not require us to have a nominating/corporate governance committee composed entirely of independent directors; and (iv) does not require us to have a compensation committee composed entirely of independent directors. Consequently, we are exempt from independent director requirements of Rule 5605 (d) and (e) of Nasdaq Capital Market listing standards, except for the requirements under subsection (b)(2) thereof pertaining to executive sessions of independent directors. Accordingly, our investors may not be provided with the benefits of certain corporate governance requirements of Nasdaq.
Nova as a major shareholder owns a significant amount of our common shares. As a result, although less than a majority of our outstanding common shares, it will have the ability to significantly influence all matters submitted to our shareholders for approval.
A major shareholder, Nova, owns approximately 32.48% of our outstanding common shares. Although Nova does not own a majority of our outstanding common shares, it may have the ability to significantly influence all matters submitted to our shareholders for approval including:
●election of our board of directors;
●removal of any of our directors;
17
●any amendments to our certificate or articles of incorporation; and
●adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination involving us.
In addition, this concentration of ownership may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, which in turn could reduce our share price or prevent our shareholders from realizing a premium over our share price.
Future issuances of our common shares or securities convertible into, or exercisable or exchangeable for, our common shares, or the expiration of lock-up agreements that restrict the issuance of new common shares or the trading of outstanding common shares, could cause the market price of our common shares to decline and would result in the dilution of your holdings.
Future issuances of our common shares or securities convertible into, or exercisable or exchangeable for, our common shares, or the expiration of lock-up agreements that restrict the issuance of new common shares or the trading of outstanding common shares, could cause the market price of our common shares to decline. We cannot predict the effect, if any, of future issuances of our securities, or the future expirations of lock-up agreements, on the price of our common shares. In all events, future issuances of our common shares would result in the dilution of your holdings. In addition, the perception that new issuances of our securities could occur, or the perception that locked-up parties will sell their securities when the lock-ups expire, could adversely affect the market price of our common shares. In addition to any adverse effects that may arise upon the expiration of any such lock-up agreements, it is likely that the lock-up provisions in such agreements will include a provision that the lock-up terms may be waived, at any time and without notice. If the restrictions under the lock-up agreements are waived, our common shares may become available for resale, subject to applicable law, including without notice, which could reduce the market price for our common shares. In connection with our initial public offering, Nova agreed to lock up its holdings of our common shares until May 17, 2022; provided, however, that Nova obtained a waiver from the underwriter in our initial public offering to sell the common shares covered under the resale prospectus. On March 21, 2022, in consideration for such waiver, the underwriter required Nova to amend the original lock up to extend the period of such lock up until March 21, 2023 with respect to its 6,600,000 common shares. As of the date of this Annual Report, all of our shareholders’ lock up agreements have expired.
Future issuances of debt securities, which would rank senior to our common shares upon our bankruptcy or liquidation, and future issuances of preferred shares, which could rank senior to our common shares for the purposes of dividends and liquidating distributions, may adversely affect the level of return you may be able to achieve from an investment in our common shares.
In the future, we may attempt to increase our capital resources by offering debt securities. Upon bankruptcy or liquidation, holders of our debt securities, and lenders with respect to other borrowings we may make, would receive distributions of our available assets prior to any distributions being made to holders of our common shares. Moreover, if we issue preferred shares, the holders of such preferred shares could be entitled to preferences over holders of common shares in respect of the payment of dividends and the payment of liquidating distributions. Because our decision to issue debt or preferred shares in any future offering, or borrow money from lenders, will depend in part on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of any such future offerings or borrowings. Holders of our common shares must bear the risk that any future offerings we conduct or borrowings we make may adversely affect the level of return, if any, they may be able to achieve from an investment in our common shares.
There is a risk that we will be a passive foreign investment company for any taxable year, which could result in adverse U.S. federal income tax consequences to U.S. investors in our shares.
In general, a non-U.S. corporation is a passive foreign investment company, or PFIC, for any taxable year in which (i) 75% or more of its gross income consists of passive income or (ii) 50% or more of the average quarterly value of its assets consists of assets that produce, or are held for the production of, passive income. For purposes of the above calculations, a non-U.S. corporation that owns at least 25% by value of the shares of another corporation is treated as if it held its proportionate share of the assets of the other corporation and received directly its proportionate share of the income of the other corporation. Passive income generally includes dividends, interest, rents, royalties and certain gains. Cash is a passive asset for these purposes.
18
Based on the expected composition of our income and assets and the value of our assets, including goodwill, we do not expect to be a PFIC for our current taxable year. However, the proper application of the PFIC rules to a company with a business such as ours is not entirely clear. Because the proper characterization of certain components of our income and assets is not entirely clear, because we will hold a substantial amount of cash as the result of our initial public offering, and because our PFIC status for any taxable year will depend on the composition of our income and assets and the value of our assets from time to time (which may be determined, in part, by reference to the market price of our shares, which could be volatile), there can be no assurance that we will not be a PFIC for our current taxable year or any future taxable year.
If we were a PFIC for any taxable year during which a U.S. investor holds shares, certain adverse U.S. federal income tax consequences could apply to such U.S. investor.
ITEM 4. INFORMATION ON THE COMPANY
4.A. History and Development of the Company.
Our Corporate History
We were incorporated in the Province of Manitoba, Canada under the Corporations Act (Manitoba) on May 25, 2018. We have two wholly owned subsidiaries, Snow Lake Exploration Ltd. (“Snow Lake Exploration”) and Snow Lake Crowduck Ltd. (“Snow Lake Crowduck”) A former wholly owned subsidiary, Thompson Bros Lithium (Proprietary) Limited (“TBL”), has been deregistered in Australia and Manitoba.
Snow Lake Exploration was incorporated by us on May 25, 2018 in Manitoba, Canada. Snow Lake Exploration is an operating company formed to conduct the exploration and development of mineral resources.
Snow Lake Crowduck was incorporated by us on May 25, 2018 in Manitoba, Canada. Snow Lake Crowduck is an asset holding company that holds all of the ownership interests in 133 mineral claims on the Snow Lake Lithium™ Project.
TBL was incorporated by our major shareholder, Nova, on May 11, 2016 under the name Manitoba Minerals Pty Ltd., or MMPL, in Melbourne, Australia. On March 8, 2019, we acquired all of the outstanding common shares of TBL from Nova by agreeing to exchange with Nova 47,999,900 of our common shares for all of the issued common shares of TBL. On July 14, 2019, we changed the name of MMPL to TBL. The claims held by TBL have been transferred to Snow Lake Crowduck. TBL has been deregistered in Australia and Manitoba.
Corporate Information
Our corporate address is, 360 Main St 30th Floor, Winnipeg, MB R3C 4G1, Canada. Our company email address is info@snowlakelithium.com.
Our registered office is located at 360 Main St 30th Floor, Winnipeg, MB R3C 4G1, Canada.
Our agent for service of process in the United States is Cogency Global Inc., located at 122 East 42nd Street, 18th Floor, New York, N.Y. 10168.
Our website can be found at https://snowlakelithium.com. The information contained on our website is not a part of this Annual Report, nor is such content incorporated by reference herein, and should not be relied upon in determining whether to make an investment in our common shares.
Recent Developments
On September 22, 2022, the Company signed a non-binding memorandum of understanding (“MOU”) with LG Energy Solution (“LGES”). The non-binding MOU with LGES represents a next step towards building the domestic supply chain for the North American EV market. LGES, a split-off from LG Chem, is a leading global manufacturer of lithium-ion batteries for EVs, mobility, IT, and energy storage systems. With 30 years of experience in revolutionary battery technology and extensive research and development, LGES is the top battery-related patent holder in the world with over 24,000 patents. Its robust global network, which spans North America, Europe, Asia, and Australia, includes battery manufacturing facilities established through joint ventures with major automakers such as General Motors, Stellantis N.V. and Hyundai Motor Group. Together with LGES, the Company will collaborate to explore the opportunity to create
19
one of Canada’s first lithium hydroxide processing plants in CentrePort, Manitoba. Under the terms of the MOU, Snow Lake will supply LGES with lithium over a 10-year period once production starts in 2025. The MOU and contemplated partnership will be subject to a number of conditions, including the completion of due diligence from both parties. A scoping study, in partnership with Primero, has been completed to identify the technologies, innovations and skills required to deliver a world-class lithium hydroxide plant within the Province of Manitoba. There has been no substantial progress yet on implementing the goals of the MOU, and there is no assurance that the proposed collaboration contemplated by the MOU will in fact occur.
On January 6, 2023, the Company announced that it has acquired additional land claims in the historic mining district of Snow Lake, Manitoba. The Company staked a total of nine claims covering an area of 1,728 hectares near Dion Creek, Lost Frog Lake, and the Grass River East. These claims are located in areas known for their pegmatite occurrences as mapped by the Ministry of Northern Development and Mines. With the acquisition of additional land claims in and around Snow Lake Lithium’s current resource block, the Company’s total land position now stands at 24,515 hectares (60,577-acres), an increase of approximately 8% as compared to the prior land position.
On January 16, 2023, the Company announced the resignation of Philip Gross, Hadassah Slater and Allan Engel, as directors of Snow Lake, effective immediately prior to the commencement of the Company’s annual general and special meeting held at 9:00 a.m. (Central Time) on January 17, 2023 (the “Meeting”).
On January 17, 2023, the Company announced the results of the Meeting, during which Peretz Shapiro, Nachum Labkowski, Brian Imrie, Shlomo Kievman and Kathleen Skerrett were elected to the board of directors (the “Board”) of Snow Lake, in addition to Dale Schultz. Following the Meeting, the Company also announced the resignation of Philip Gross and Derek Knight, as Chief Executive Officer (“CEO”) and Chief Operating Officer (“COO”)/Secretary of Snow Lake, respectively. As a result of the changes, Mr. Labkowski was appointed Chairman of the Board. Mr. Shapiro was also appointed as Interim COO, as the Board appointed a special committee to retain an advisor to search for a permanent CEO.
On January 29, 2023, the Company announced that it was moving forward on a PEA which will focus on outlining a pathway to accelerating revenues from the Company’s flagship projects; the Thomson Brothers and Grass River lithium projects (together the “Snow Lake Lithium™ Project”). The PEA considered the feasibility of a direct shipping ore (“DSO”) operation, which will enable the company to fund a significant portion of future development out of cash flow. Additionally, the Company announced its intentions to release an updated Resource Estimate for the Thomson Brothers project, a maiden resource estimate for the Grass River lithium project, as well as the results from a metallurgical study from the Grass River lithium project in Q2 of 2023.
On March 16, 2023, the Company announced the results of a metallurgical testwork program conducted for its Grass River lithium project. SGS Canada were engaged to conduct the study on behalf of the Company, with a metallurgical target of producing a spodumene concentrate grading >6% Li20 and <1.0% Fe2O3 while maximizing recovery. The Company announced that these targets were achieved with the developed flowsheet showing an overall processing recovery of 80%.. For a summary of the metallurgical testwork program results, please refer to the press release dated March 16, 2023, which can be found on EDGAR under the Company’s profile.
On June 30, 2023, the Company provided an update and analysis on the recently completed Grass River lithium project resource drilling campaign. For a summary of the update, please refer to the press release dated June 30, 2023, which can be found on EDGAR under the Company’s profile.
On July 17, 2023, the Company announced the appointment of Frank Wheatley as CEO with immediate effect. Mr. Wheatley brings more than 35 years of mining and resource industry experience. He also has extensive domestic and international experience with development and operating gold, copper and lithium companies, including project development, project financing, environmental permitting in accordance with all international best practice and ESG standards, as well as mergers and acquisitions.
On August 9, 2023, we obtained a report dated August 9, 2023 with an effective date of July 12, 2023 (the “IA”) compliant with Regulation S-K 1300 (“S-K 1300”) assessing the potential mineral resources of the Snow Lake Lithium™ Project. The IA was prepared by ABH Engineering Inc. (“ABH”) of Vancouver, BC in accordance with the United States Securities and Exchange Commission requirements under S-K 1300. The IA is preliminary in nature and is intended to provide an initial, high-level review of the Snow Lake Lithium™ Project's economic potential and design options. The projected economic results include numerous assumptions and are based on measured, indicated and inferred mineral resource estimates for the Snow Lake Lithium™ Project, as specified in the IA. Inferred resources are
20
considered to be too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the IA will be realized. Unlike mineral reserves, mineral resource estimates do not have demonstrated economic viability.
On September 21, 2023, the Company closed its best-efforts flow-through financing through the issuance of 2,133,979 common shares at a price of $3.6117 (USD $2.67) per common share, for gross proceeds of $7,707,292 (USD $5,697,710) (the “Offering”). The proceeds of the Offering will be used exclusively to further the Company’s lithium exploration and development programs in Manitoba. The shares were offered for purchase and sale to purchasers in the province of Manitoba on a private placement basis under Canadian law. The Offering was registered under applicable U.S. securities laws pursuant to a registration statement on Form F-3 filed with, and previously declared effective by, the United States Securities and Exchange Commission under the United States Securities Act of 1933, as amended.
On October 5, 2023, the Company announced the final set of results from the 2022/2023 winter-spring drill program at its 100% owned Grass River lithium project. For a summary of the update, please refer to the press release dated October 5, 2023, which can be found on EDGAR under the Company’s profile.
Our Claims History
On April 21, 2016, an agreement between Strider Resources Ltd, or Strider Resources, and Ashburton Ventures Inc., or Ashburton Ventures (now known as Progressive Planet Solutions Inc., or PPSL), was entered into pursuant to which Ashburton Ventures acquired the right to earn up to a 100% interest in the Snow Lake Lithium™ Project then owned by Strider Resources and consisting, at that time, of the 20 claims, subject to a 2% net smelter royalty payable to Strider Resources, by meeting certain cash and share requirements to Strider Resources and certain expenditure requirements on the Snow Lake Lithium™ Project exploration project.
On September 26, 2016, Ashburton Ventures entered into an agreement with MMPL, pursuant to which MMPL acquired the right to earn up to a 95% interest in the Snow Lake Lithium™ Project, subject to the 2% net smelter royalty payable to Strider Resources, by funding the option requirements of Ashburton Ventures in its agreement with Strider Resources of April 21, 2016. This agreement was amended on April 12, 2017, to reduce the maximum MMPL could earn to an 80% interest in the Snow Lake Lithium™ Project.
In the fall of 2016, to meet the expenditure requirements of the previously mentioned agreements, a modest program of prospecting and soil sampling was completed on the Snow Lake Lithium™ Project, followed by a five-hole (1,007 m) drill program on the Snow Lake Lithium™ Project.
In March to April of 2018, Snow Lake Crowduck staked 18 mineral claims.
On November 14, 2018, PPSL entered into a separate agreement with us pursuant to which we agreed to purchase the remaining 20% interest in the Snow Lake Lithium™ Project from PPSL, subject to the 2% net smelter royalty payable to Strider Resources, in exchange for 2,400,000 (post consolidation) of our common shares. 300,000 (post consolidation) of these shares were issued to Strider Resources.
On November 15, 2018, an agreement among Strider Resources, PPSL and us was entered into to enable us to purchase of 100% of the Snow Lake Lithium™ Project from Strider Resources.
On March 8, 2019, as amended on April 1, 2019, we entered into an agreement with Nova and MMPL to purchase MMPL from Nova in exchange for 9,599,980 of our common shares.
On April 12, 2019 we fulfilled our contractual obligations with Strider Resources and exercised our option to acquire the 100% ownership interest in the Snow Lake Lithium™ Project, subject to the 2% net smelter royalty payable to Strider Resources, 80% of which was in the name of MMPL at that time. In consideration of this acquisition, we issued 2,100,000 (post consolidation) of our common shares to PPSL and 300,000 (post consolidation) shares Strider Resources.
On February 11, 2020 we purchased from TBL (formerly MMPL) the 80% interest in the Snow Lake Lithium™ Project held by TBL. After this transaction, we owned 100% of the Snow Lake Lithium ™ Project interest.
On February 25, 2020 we transferred our 100% interest in the Snow Lake Lithium™ Project to our wholly owned subsidiary, Snow Lake Crowduck. This interest remains subject to a 2% net smelter royalty payable to Strider Resources.
21
On May 22, 2020, we changed the recordation of the Snow Lake Lithium™ Project claims so that the entire Snow Lake Lithium™ Project made up of 38 claims covering 5596 hectares of land became registered in the name of Snow Lake Crowduck. Claim credits that we were entitled to were used to extend the expiry of all of the Snow Lake Lithium™ Project claims to 2023 and beyond.
From May 21, 2021 through June 9, 2021 an additional 22 claims covering 3,187 hectares of land were staked by SL Crowduck, bringing the total claim package to 60 claims covering 8,783 hectares. From December 2021 through January 2022 an additional 13,603.30 hectares of land were staked by Snow Lake Crowduck.
To date, we have invested a limited amount of capital in the Snow Lake Lithium™ Project and historical drilling on the Snow Lake Lithium™ Project has been limited as well. To prove our lithium resource on the Snow Lake Lithium™ Project, we will need to engage in a drilling program that will require additional capital expenditure. We believe that the funds raised in our initial public offering and the recent offering of our common shares provided us with the funds needed to complete our planned exploration drilling program, to generate the required data to prove our resources.
4.B. Business Overview
INDUSTRY
Information included in this Annual Report on Form 20-F relating to our industry consists of estimates based on reports compiled by professional third-party organizations and analysts, data from external sources, our knowledge of the industry in which we operate, and our own calculations based on such information. While we have compiled, extracted, and reproduced industry data from external sources, including third-party, industry, or general publications, we have not independently verified the data. Similarly, while we believe our management estimates to be reasonable, they have not been verified by any independent sources. Forecasts and other forward-looking information with respect to industry and ranking are subject to the same qualifications and additional uncertainties regarding the other forward-looking statements in this Annual Report on Form 20-F.
This Overview reports the Company’s activities through October 25, 2023, unless otherwise indicated. All figures are expressed in Canadian dollars, unless otherwise noted.
During the year ended June 30, 2023, the Company remained at the exploration and development stage, had not placed any of its mineral properties into production, and has not generated any revenues. It intends to proceed with the development of the Snow Lake Lithium™ Project through economic studies such as a PFS and provided the results are positive, through to mine development. The Company intends, in the longer term, to derive substantial revenues from becoming a strategic supplier of lithium concentrate to the growing electric vehicle and battery storage markets. The Company is not expected to start generating revenues until 2028 at the earliest. Our planned exploration and development of mineral resources, primarily lithium, will require significant investment prior to commercial introduction and may never be successfully developed or commercially successful.
Business Outlook and Strategy
The Company’s primary focus is currently conducting exploration for lithium at our 100% owned Snow Lake Lithium™ Project. Our objective is to develop a world-class lithium mine in the Province of Manitoba and to become a lithium concentrate producer in North America, strategically located to supply the United States (“U.S.”) “Auto Alley,” from Michigan to the southern U.S., with direct rail access running south via Winnipeg. With our commitment to the environment, corporate social responsibility and sustainability, we aim to derive substantial revenues from the sale of lithium to the growing electric vehicle, or EV and battery storage markets in the U.S. and abroad. With access to renewable energy produced in Manitoba, we expect to become the first supplier in North America of lithium mined exclusively with the benefit of power produced from fully sustainable, renewable, local sources.
The Snow Lake Lithium™ Project
Our 100% owned Snow Lake Lithium™ Project covers a 24,515 hectares (60,577-acre) site that has only been 1% explored and contains an identified-to-date 8.2 million metric tonnes of measured, indicated and inferred resource at between 0.99% and 1.13% Li2O. The Snow Lake Lithium™ Project is strategically located in Manitoba, ideally situated to economically deliver mined and processed lithium products to the EV battery industry serving North America’s “Auto Alley”. With direct rail access running north to the Port of Churchill, which supplies access to Europe by ship, we would potentially expect to be able to economically deliver our future lithium output to the markets of Europe as well.
22
Preliminary exploration of our Snow Lake Lithium™ Project indicates a substantial S-K 1300 compliant measured, indicated and inferred resource of lithium ore, and we have only explored 1% of the Snow Lake Lithium™ Project. We expect to prove this measured, indicated and inferred resource in the near future through further exploration and technical analysis and reporting, although we can provide no guarantee that our measured, indicated and inferred resource will be confirmed as proven or probable reserves. With expected to be proven mineral resources and our prime location, successful completion of a PFS, obtaining of the required permitting and building of a mine and ore concentrator, we expect to be able to produce economically significant amounts of marketable lithium ore concentrate in a socially responsible and environmentally friendly way while utilizing renewable energy to power our mining operations.
Market overview
Global Lithium Demand
As part of a legislated (Paris Agreement, 2015) commitment to limit greenhouse gas (GHG) emissions, various countries have begun to implement zero-emission vehicle mandates. This has been one of three primary drivers for electric vehicle (EV) uptake, alongside improved and most recently, lower prices. The combined effects are gradual but compounding.
Prior to 2018 lithium was still used primarily in ceramics and glass, grease, air treatment, metallurgical and medical uses (often generalised to “industrial” end uses). Many of these end uses may use any one or a combination of spodumene, mica, or lithium chemicals depending on their cost and availability. Lithium has numerous remarkable properties which make it suitable for these end uses; its addition to grease imparts thermal stability, in glassmaking it decreases melting temperatures and viscosity, in steelmaking it reduces mould viscosity and crystallisation temperatures and it is used as a mood stabiliser in pharmaceuticals.
In 2018, lithium ion battery (LiB) demand emerged as the dominant end use for lithium, making up 51% of the 268kt LCE of global demand that year, increasing to 88% of demand in 2022. The growth of LiB demand is primarily attributable to EVs, which now form a significant part of the global vehicle market (Figure 1, LHS). Global EV penetration was 0.6% in 2015, rising to 13% in 2022 (Figure 1, RHS).
Figure 1: Global vehicle sales (LHS) and PC & LDV BEV Penetration Rate (RHS)
Source: Benchmark Mineral Intelligence, Q4 2023 Lithium Forecast
Lithium’s innate characteristics have played a primary role in its usefulness in LiBs. Li has the smallest ionic radius and lowest density of all the alkali metals, the highest specific heat capacity of any solid element and has a very high electrochemical potential. This, alongside dedicated research and development (R&D) efforts pointed towards LiB have led to the emergence of batteries with high levels of safety & performance, including a high voltage and charge storage per unit mass and unit volume. The characteristics of LiBs mean that they are highly suitable for EVs. LiBs are also well-suited for portable devices (e.g. laptops, mobile phones), and energy storage systems (ESS). This is demonstrated in Figure 2, showing that the deployment of LiB is primarily into EVs (90% of LiB demand by 2040). Also shown in figure 2, high case demand, reflects automaker targets and government policies. This scenario quickly deviates from our base case demand forecast, and demonstrates that demand is already somewhat constrained by current cathode, cell and
23
EV production capabilities and plans. On the other hand, raw material constrained case reflects demand destruction, where lithium supply is the limiting factor for demand growth.
Focusing on base-case demand, various battery chemistries are used according to their intended performance. Generally speaking, the ESS market is forecast to become dominated by lithium-iron-phosphate (LFP) cathodes due to long cycle life and increased safety properties. Lithium-cobalt-oxide (LCO) has a high specific energy that makes it an ideal choice for portable applications.
For EVs, nickel-cobalt-manganese (NCM) has become the preferred technology for a majority of Western EVs in recent years, largely due to the high-nickel chemistry variants’ greater energy density and therefore longer range. LFP technologies, which are unable to match the gravimetric and volumetric energy densities of high-nickel NCMs, have made significant headway in recent year, notably in the Chinese market. Western OEMs have implied a willingness to use the technology for mass market EVs in future; but for the time being the LFP supply chain is still overwhelming dominated by Chinese companies.
All of this results in a generally diverse LiB cathode landscape, but with LFP and high-nickel NCM cathodes generally dominating throughout the forecast period (Figure 3).
Figure 2 and Figure 3: LiB Demand by end-use | LiB demand by cathode type
Source: Benchmark Mineral Intelligence, Q4 2023 Lithium Forecast
As far as overall lithium demand is concerned, the balance between end use (EV vs portables, vs ESS), and the split between NCM and LFP cathode types, is of secondary importance—lithium intensity per KWh of LiB cells produced differs somewhat but not hugely (Figure 4). LiB cathode chemistry does however determine the required form of lithium chemical consumed (Figure 5); to that extent is critically important, however it should be noted that demand on a global scale is forecast to remain relatively balanced.
24
Figure 4: Global lithium demand by end-use Figure 5: Global Demand by Li Chemistry
Source: Benchmark Mineral Intelligence, Q4 2023 Lithium Forecast
Global Lithium Supply
2.1 Mined Supply
Global lithium supply was estimated at 728 kt LCE (thousand tonnes of lithium carbonate equivalent) in 2022. By 2040, supply is expected to have originated in roughly equal parts from secondary (recycled) sources, greenfield projects, and brownfield projects and their expansions (figure 6).
Figure 6: Lithium Mined Production by Status
Source: Benchmark Mineral Intelligence, Q4 2023 Lithium Forecast
25
Lithium is currently exclusively extracted from igneous pegmatitic rocks and brines. Spodumene was estimated to be the dominant source of mined lithium in 2022, accounting for 45% of total supply, while brine accounted for 44%. Both spodumene and brine will lose market share to clay, mica, others, as well as secondary supply (recycling) over the forecast period (figure 7).
Figure 7: Lithium Mined Production by Deposit Type
Source: Benchmark Mineral Intelligence, Q4 2023 Lithium Forecast
2.1 Global Resources vs Supply
The dominance of brine and spodumene production is partly due to geological availability, and geographical distribution. Global brine and spodumene resources account for 59% (supply: 45%) and 22% (supply 44%) respectively (figure 8). The apparent resource/supply incongruence is partly explained by the fact that time-to-market for spodumene is faster than brine, since many were known to geologists as tantalum mines (e.g. Wodgina, Greenbushes), and also because their capital intensity is generally lower. On the other hand, some brine remains unexploited, particularly in Bolivia, where political constraints and brine-quality have thus far prohibited meaningful development.
Notably, clay hosted lithium micas makes up 16% of resources, but is not currently mined; while hard-rock Mica, which makes up just 1% of global resources, accounted for >
26
Figure 8: Global distribution of (announced) lithium resources
As of Nov. 2023 (Benchmark Mineral Intelligence)
2.2 Chemical Supply
Lithium chemical supply differs from mined-supply in that chemical-supply represents the final chemical produced (figure 9) before end-use (whereas mined supply represents spodumene concentrate or LiCl concentrate). Chemical supply therefore represents an anhydrous lithium chloride, carbonate or hydroxide, suitable for end-use. It is important to note that while lithium sulfate appears in figure 9, this will eventually be converted to carbonate, hydroxide or chloride. These plants are simply those that have announced plans to convert spodumene into sulfate, but will on-sell it as a mid-stream product.
Figure 9: Global Lithium Production by Chemical
Source: Benchmark Mineral Intelligence, Q4 2023 Lithium Forecast
27
Various spodumene converters are non-integrated and will rely on yet-to-be-defined sources of feedstock, and as such, future lithium chemical supply may be slightly higher than mined-supply in this model; these converters have been captured for sake of completeness. In addition, a large number of projects exist that convert carbonate to hydroxide, or to chloride, or vice-versa, or in some cases convert technical-grade to battery-grade; for simplicity and to avoid double-counting, these have not been included here. In terms of the chemical supply output, this is partly determined by demand, but partly determined by geology and geography.
It should be noted that the operating portion of chemical supply is significantly higher than mined supply, and that supply increases over the short-medium term. This is due to currently-low capacity utilisation of Chinese spodumene converters. Brownfield expansions form a larger part of chemical supply compared to mined-supply owing to the large contribution from Chinese spodumene converters building expansions despite low capacity utilisation in existing plants.
Figure 10: Lithium chemical market supply by status
Source: Benchmark Mineral Intelligence, Q4 2023 Lithium Forecast
Global and North American chemical balance
In late 2021, the lithium market entered a deficit position with inventories quickly worked-through. Throughout 2022, inventories began to increase throughout the Chinese supply chain, despite still being in a deficit.
Figure 11: Lithium mined supply vs end-use demand, market balance
Source: Benchmark Mineral Intelligence, Q4 2023 Lithium Forecast
28
In terms of global lithium chemical balances, it is important to note the interchangeability of lithium hydroxide and carbonate, particularly in China, where there are flexible lines in operation that are able to produce either chemical from brine or spodumene, depending on supply and demand. This means that individual balances of carbonate and hydroxide (figure 12) are of less importance than the overall picture, when viewed from a global perspective. I.e. carbonate and hydroxide balance out, as spodumene converters may selectively, with short-notice, produce either carbonate or hydroxide; similarly it is common practice to convert carbonate to hydroxide and vice versa.
Figure 12: Global supply and end-use demand, by chemical (Hydroxide LHS, Carbonate RHS)
Source: Benchmark Mineral Intelligence, Q4 2023 Lithium Forecast
Individual chemical balances on a regional basis do however provide a useful perspective; particularly as onshoring trends increase. These trends are particularly strong for Europe and North America, where countries wish to ensure supply chain continuity against disruption caused by Chinese supply chain dominance. Additionally, Chinese automaker efforts to scale up and take market-share from incumbent automakers in overseas markets has produced an existential crises for North American and European carmakers, which are not only significant sources of government-revenue, but also a source of jobs and national identity.
As a response to this, and in line with GHG mitigation efforts, the United States of America (USA) has passed the Inflation Reduction Act (IRA) of 2022. This significant piece of legislation extends consumer tax credits to incentivize the purchase of EVs, and it also provides tax credits for domestic production of battery cells, battery packs, and critical minerals. These incentives are meant to encourage onshoring and friend-shoring of the EV supply chain, reducing reliance on other countries for essential battery materials and securing the nation's position in the rapidly evolving EV market.
To receive these credits, a certain percentage of critical minerals in the EV battery must be extracted or processed in the USA or a country with a free trade agreement (FTA) with the USA, or recycled in North America. This percentage starts at 40% in 2024 and increases to 80% by 2027. The IRA also requires a certain percentage of battery components to be manufactured or assembled in North America. This percentage starts at 50% in 2024 and increases to 100% by 2029. The IRA also requires that the final assembly of the EV must take place in North America. This requirement is effective immediately.
Additionally, in order for an EV to be eligible for an EV tax credit under the IRA, it must not contain critical minerals or battery components that have been sourced from/produced by a Foreign Entity of Concern (FEOC). The proposed guidelines, which will have to provide guidance until the final rules are released in 2024, leave some ambiguity around the treatment of firms for which non-state Chinese firms control a 25% or greater interest.
By setting these requirements, the IRA incentivizes companies to invest in domestic production and onshoring of the EV supply chain, making them eligible for tax credits and other benefits.
29
There are therefore several financial rewards on offer for automakers that incorporate onshoring into their supply chain.
Lithium is a key component of any LiB supply chain, but despite North America’s significant resources, political will and a long history of extraction (e.g. Kings Mountain and Silver Peak), supply has been unable to keep up with end-use demand (Figure 13)
Figure 13: North American supply and end-use demand, by chemical (Hydroxide RHS, Carbonate LHS)
Source: Benchmark Mineral Intelligence, Q4 2023 Lithium Forecast & Rho Motion data
North American demand is skewed towards lithium hydroxide over carbonate due to an existing NCM focus in the region. High nickel chemistries are favoured due to their higher energy densities, as well as R&D potential to further improve performance, while LFP offers little upside. That said, demand for LFP has potential to grow in North America as the low- to mid- range EV demand grows. In any case, the choice between carbonate and hydroxide in North America is currently of secondary importance when the North American market is forecast to remain in a deficit for the foreseeable future.
Pricing
Lithium has experienced significant volatility in pricing over the last 10-12 years. In 2012, spodumene pricing was >
Methodology
In order to determine market prices, Benchmark undertakes price assessments and market analysis (for CIF Asia, EXW China, CIF EU, FOB South America, CIF North America, FOB North America, and FOB Australia markets) by contacting and recording primary inputs received by primary market participants. Over time, Benchmark has observed the lithium market moving away from multi-year fixed price contracts towards variably-priced index-linked contracts. Benchmark forecasts CIF Asia, spot prices, utilising separate methodologies for short, medium and long term periods. Benchmark’s short-term outlook is broken down into a quarters. Developments are guided by the aforementioned primary price research conducted by analysts to ascertain the current direction of market pricing. The medium term outlook is primarily based on supply and demand, and is informed by our detailed understanding of the pipeline of new greenfield and brownfield capacity. Benchmark’s long term price methodology is based on an incentive price calculation; this assumes that there will be an ongoing requirement for new greenfield capacity over the course of the forecast period. Benchmark’s long-term incentive price is used in the assessment of project economics and reflects the fact that there will be a need for the development of higher capex projects over time.
30
Figure 14: Quarterly price forecast for spodumene (6% concentrate) (LHS) and carbonate (RHS)
Source: Benchmark Mineral Intelligence, Q4 2023 Lithium Forecast
Figure 15: Annual price forecast for lithium carbonate
Source: Benchmark Mineral Intelligence, Q4 2023 Lithium Forecast
Ideal Location
The Snow Lake Lithium™ Project is ideally located in North America’s “Auto Alley.” With the Hudson Bay Railway having a railhead 65 km from our project, the Snow Lake Lithium™ Project has access to means of transportation to bring our lithium product north to the Port of Churchill, for shipment to Europe, or South to Auto Alley. The map below shows the extended reach of CN’s rail lines into the US Auto Alley.
Additionally, Manitoba is a green province, with 97%38 of electricity derived from renewable sources.
37Ibid.
31
CN’s network of rail lines. Source: CN website
If one compares the map above to the map of the North American auto industry below, it can be seen that Snow Lake’s Snow Lake Lithium™ Project is strategically situated to access and address this market.
U.S “AutoAlley”.
Source: Global Infrastructure Connectivity Alliance39
38https://www.hydro.mb.ca/your_home/electric_vehicles/
39https://www.gica.global/initiative/north-americas-super-corridor-coalition-nasco
32
The maps below present a more detailed depiction of the location of U.S. automotive plants, primarily in the “Auto Alley.”
Source: MarkLines – Automotive Industry Portal
33
Operational Overview
We are an emerging lithium company focused on the development of our 100% owned Snow Lake Lithium™ Project in the historic and preeminent mining center of Snow Lake, Manitoba, Canada. Our goal is to become a strategic supplier of lithium concentrate to the growing electric vehicle battery and battery storage markets. Our primary asset is the Snow Lake Lithium™ Project, which consists of 133 mining claims located 20 km from Snow Lake, Manitoba. To capitalize on the fast-growing lithium market, our main focus is to monetize the resources and reserves held in the Snow Lake Lithium™ Project. This Project has an S-K 1300 compliant measured, indicated and inferred mineral resource estimate of approximately 8.2 million tonnes of lithium bearing ore consisting of a measured resource of 748,632 tonnes grading 1.13%Li2O, an indicated resource of 6,560,006 tonnes grading 1.10% Li2O, and an inferred resource of 1,007,119 tonnes grading 0.99% Li2O.
The Snow Lake Lithium™ Project is ideally located in the Province of Manitoba, Canada, where 97% of the electrical energy supply is from hydro-electric renewable sources. The region of Snow Lake, where the Snow Lake Lithium™ Project is situated, is mining friendly, and the Hudson Bay Railway is 65 km to the south of the Snow Lake Lithium™ Project. The Hudson Bay rail runs north to the Port of Churchill which supplies access to Europe by ship, or south to the EV manufacturing markets in Michigan and the southern US.
We are exploring our Snow Lake Lithium™ Project expecting that following exploration we will be in a position to move towards the development of our mineral resources, and, ultimately to the establishing of commercial operations. We are planning to complete a preliminary feasibility study, or PFS, which will be used to seek additional funding for the development of the Snow Lake Lithium™ Project. The studies will review the test work, process design, vendor furnished equipment packages and other mine development requirements as well as cost estimates for the possible development of a commercial spodumene processing plant. In addition, the studies will examine permitting and potential environmental issues for the proposed concentrate plant locations as well as operational expenditures and capital expenditures, which will be inputted into a general economic model.
We engage in our exploration of lithium mineral resources through two subsidiaries: Snow Lake Exploration and Snow Lake Crowduck. Snow Lake Exploration is our operating company and S Crowduck is our asset holding company. The Snow Lake Lithium™ Project is located in north central Manitoba, measuring about 15 km by 6 km, comprises 133 mineral claims covering 24,515 hectares (approximately 60,577 acres) and straddles Crowduck Bay at the northeastern end of Lake Wekusko.
Our Exploration Target – Snow Lake Lithium™ Project – Mineral Resources
We recently obtained a report dated August 9, 2023 with an effective date of July 12, 2023 (the “IA”) compliant with Regulation S-K 1300 (“S-K 1300”) assessing the potential mineral resources. The IA was prepared by ABH Engineering Inc. (“ABH”) of Vancouver, BC in accordance with the United States Securities and Exchange Commission requirements under S-K 1300. The IA is preliminary in nature and is intended to provide an initial, high-level review of the Project's economic potential and design options. The projected economic results include numerous assumptions and are based on measured, indicated and inferred mineral resource estimates for the Snow Lake Lithium™ Project, as specified in the IA. Inferred resources are considered to be too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the IA will be realized. Unlike mineral reserves, mineral resource estimates do not have demonstrated economic viability.
Some of the highlights of the IA are as follows:
·The post-tax economics result for all mineral resources (including inferred resources) shows a net present value (“NPV”) using a seven percent discount rate of US$1.19 billion and projected post-tax internal rate of return (“IRR”) of 170%, with a payback period of 14 months. The inferred mineral resources used in the cash flow represent 12.6% of all mineral resources.
·The post-tax economics result for measured and indicated mineral resources (no inferred resources) shows a net present value (“NPV”) using a seven percent discount rate of US$1.03 billion and projected post-tax internal rate of return (“IRR”) of 143%, with a payback period of 15 months.
34
Table 1: Pre-Tax Key Economic Results for All Mineral Resource Estimate and for Measured and Indicated Resources only.
Pre-Tax Economic Results | |||
All Mineral Resources (With Inferred Resources) | Measured and Indicated Resources (Without Inferred Resources) | ||
Net Present Value | $1.76 Billion | Net Present Value | $1.52 Billion |
Internal Rate of Return | 208 % | Internal Rate of Return | 175 % |
Payback Period | 14 Months | Payback Period | 15 Months |
Table 2: Post-Tax Key Economic Results for All Mineral Resource Estimate and for Measured and Indicated Resources only.
Post-Tax Economic Results | |||
All Mineral Resources (With Inferred Resources) | Measured and Indicated Resources (Without Inferred Resources) | ||
Net Present Value | $1.19 Billion | Net Present Value | $1.03 Billion |
Internal Rate of Return | 170 % | Internal Rate of Return | 143 % |
Payback Period | 14 Months | Payback Period | 15 Months |
The inferred mineral resources used in the cash flow analysis represent 12.6% of all mineral resources.
·Updated mineral resource estimate for the Project in accordance with S-K 1300 of:
oMeasured resource of 748,632 tonnes grading 1.13% Li2O
oIndicated resource of 6,560,006 tonnes grading 1.11% Li2O
oInferred resource of 1,007,119 tonnes grading 0.99% Li2O
·Projected total initial capital expenditure of US$50 million in year 0, US$96 million over the balance of the 9-year mine life, with the majority of the US$96 million being spent in year 1, and with US$10 million of the US$96 million being spent in closure costs, for a total projected capital expenditure of US$146 million.
·Initial mine plan contemplates open pit and underground mining, with direct shipping ore (“DSO”) in year 0 to fund capital expenditures in year 1 to complete the construction of the processing facility to produce a 6% spodumene concentrate.
·Metallurgical test-work to date confirms the amenability of the deposit to conventional dense media separation (“DMS”) and flotation for production of a 6% spodumene concentrate.
We note that the ranges of potential tonnage and grade (or quality) of the lithium resource at our Snow Lake Lithium™ Project are conceptual in nature.. This Mineral Resource Estimate is preliminary in nature, it includes inferred mineral resources that are considered too speculative geologically to have modifying factors applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that this economic assessment will be realized.
Grass River and Thompson Brothers Underground- Summary of Lithium Mineral Resources at the End of the Fiscal Year Ended June 30,2023 based on a 6% Li2O Lithium Concentrate Price of $3,500
| Resources |
|
| |
| Amount (Tonnes) | Grades (%Li2O) | Cut-off Grade | Metallurgical Recovery |
Measured Mineral Resources | 664,540 | 1.15 | 0.3 | 77 |
Indicated Mineral Resources | 6,275,985 | 1.11 | 0.3 | 77 |
Measured + Indicated Mineral Resources | 6,940,525 | 1.13 | 0.3 | 77 |
Inferred Mineral Resources | 774,657 | 1.03 | 0.3 | 77 |
35
Grass River Open Pit- Summary of Lithium Mineral Resources at the End of the Fiscal Year Ended June 30,2023 based on a 6% Li2O Concentrate Price of $3,500
| Resources |
|
| |
| Amount (Tonnes) | Grades (%Li2O) | Cut-off Grade | Metallurgical Recovery |
Measured Mineral Resources | 84,092 | 0.98 | 0.05 | 91 |
Indicated Mineral Resources | 284,021 | 1.03 | 0.05 | 91 |
Measured + Indicated Mineral Resources | 368,113 | 1.01 | 0.05 | 91 |
Inferred Mineral Resources | 232,462 | 0.87 | 0.05 | 91 |
The underground and open pit resources are additional with respect to each other, the near-surface parts of Grass River lithium pegmatite dykes are conceptualized as being mined with open pit method; mining then continuing with underground methods to depth.
The price of $3,500/tonne for spodumene at 6% Li2O used in this assessment is considered reasonable and justifiable, since it lies 20% below the Benchmark Mineral Intelligence real pricing (Australia FOB) reported for Quarter 2 2023, and 40% below the real pricing (Australia FOB) reported for Quarter 1 2023.
Cut-Off Grade
The calculations for the cut-off grade for the open pit mineral resources and the cut-off grade for the underground mineral resources along with the unit operating costs and recoveries used are shown below:
Open pit cut-off grade calculation:
Price of 6% Li2O: $3,500 per tonne
Mining cost: $4.85 per tonne mined
Processing Cost: $10.44 per tonne mined ($15.82 per tonne milled)
Sorting Cost: $1.50 per tonne mined
G&A Cost: $0.99 per tonne mined ($1.50 per tonne milled)
Transportation Cost: $1.50 per tonne mined ($15 per tonne of product transported)
Sorter Recovery: 83%
Processing Recovery for Open pit material: 91%
Underground cut-off grade calculation:
Price of 6% Li2O: $3,500 per tonne
Mining cost: $33.46 per tonne mined
Processing Cost: $10.44 per tonne mined ($15.82 per tonne milled)
Sorting Cost: $1.50 per tonne mined
G&A Cost: $0.99 per tonne mined ($1.50 per tonne milled)
Transportation Cost: $1.50 per tonne mined ($15 per tonne of product transported)
Sorter Recovery: 83%
Processing Recovery for underground material: 77%
36
A conservative cut-off grade of 0.05% Li2O was chosen for open pit mining and 0.3% Li2O for underground mining. These numbers were chosen to ensure that there is sufficient consideration for the inherent risks of mining and the costs associated. A higher cut-off grade decreases the risks due to uncertain market conditions and fluctuating commodity prices.
Mineral Resource Estimate Comparison Between 2022 and 2023
Table 3: Mineral Resource Comparison Between 2022 Fiscal Year and 2023 Fiscal Year
| 2022 Fiscal Year | 2023 fiscal year |
| ||||
| Amount (tonnes) | Grade (%Li2O) | Contained Li2O | Amount (tonnes) | Grade (%Li2O) | Contained Li2O | % Change in |
Measured Mineral Resources | - | - | - | 748,632 | 1.13 | 8,473 | 100% |
Indicated Mineral Resources | 9,082,600 | 1.00 | 90,826 | 6,560,006 | 1.11 | 72,417 | -20% |
Inferred Mineral Resources | 1,967,900 | 0.98 | 19,285 | 1,007,119 | 0.99 | 10,006 | -48% |
|
|
|
|
| Overall Resource Change | -17% | |
The table shows the comparison between resources disclosed at the end of the 2022 fiscal year and at the end of the 2023 fiscal year. Mineral resources have decreased by 17% between 2022 and 2023. It is worth noting that the 2023 resources include open pit material that was not part of the 2022 resource estimate. Additionally, the 2023 mineral resources now include measured classified resources, and the resource estimation method has been updated to optimize and better represent the actual resources within the mineralized blocks and the grade shell was strictly controlled by lithium grade at the intercepts.
Despite the change in lithium price between 2022 and 2023, the cut-off grades used for underground mining of 0.3% Li2O is kept the same as it was deemed to be a very conservative estimate. Factors leading to changes between 2022 and 2023 lithium resources:
·Based on additional drilling between fiscal year end of 2022 and 2023, Grass River pegmatite dykes were added to the resource estimation for the 2023 fiscal year. The prior estimate was based solely on the Thompson Brothers pegmatite dyke.
·Grass River mine plan in 2023 includes near-surface open pits, with underground mining to depth as the conceptual mining method.
·Infill drilling conducted between the two fiscal years allowed for drill spacing of sufficient density to now classify a portion of the 2023 resource estimation as Measured Mineral Resource.
Despite the incorporation of additional drill holes into the 2023 resource model, there is a significant reduction of estimated total lithium content between fiscal year 2022 and 2023. A review of estimation methodologies indicates the 2022 resource estimation appears to have been based on looser geological modelling bounds.
The 2023 resource estimate was made utilizing a more precise (most notably, narrower) interpretation of the true width of the ore body; geologic modelling in Leapfrog Geo included generation of grade shells respecting mineralized intercepts (based on composited drill core sampling lithium analysis) with cut-off grade of 0.3% for underground and 0.05% for open pit. Utilizing Leapfrog Edge software, Ordinary Kriging, with dynamic anisotropy settings was used for resource estimation; a reduced block size was utilized to prevent overestimation of high-grade blocks in areas lacking adequate data support. Implicit modeling was applied to optimize the fit of the deposit's morphology.
In conclusion, it is notable that, although there has been a decrease in the contained Li2O, the 2023 resource estimate is a conservative resource model, aligning with industry best practices, providing a robust foundation for future project evaluations and development planning.
37
The mineral resource is classified into measured, indicated and inferred resources in accordance with S-K 1300 when taking into consideration, data density, deposit geometry, likely extensions and possible interpretation alternatives. We have not completed any economic modelling or reporting and, therefore, the available, historical drilling information is considered early stage, and the risk of the failure of additional drilling to provide confirmation of our mineral resource is great. To date, a limited amount of capital has been invested in the Snow Lake Lithium™ Project and the future success of the project will rely heavily on the availability of additional capital which may not be available to us on favorable terms, if at all. Future capital investment in us may result in dilution of your investment in our common shares and a failure to confirm our resource may result in a failure of our business and the complete loss of your investment.
Geology and Interpretation
The Thompson Brothers dykes in the Snow Lake Lithium™ Project have been modelled as intrusions into pebble to clast rich metaconglomerates and greywackes of host sediments. The dyke has been interpreted as sub vertical, dipping between 2.5 – 8.5 towards 130 azimuth. The strike of the body has minor variations around a general trend azimuth of 040° and an interpreted plunge of 5° to the north based on visual trends seen from drill core. The dyke carries both mineralized and unmineralized pegmatite as identified by the presence of spodumene as the lithium bearing mineral. Spodumene is considered the most important lithium ore mineral due to its high lithium content. Only the lithium bearing pegmatite has been previously modelled in this instance, which at the time of the previous report extended for a total length of 1,012 m ranging in true thickness from a maximum of 18 m to a minimum of 1.8 m.
The dyke is generally orientated between 20 and 40 offset from the apparent foliation in the surrounding country rock and there is outcropping evidence of additional mineralized and unmineralized pegmatite in the area that is yet to be defined in terms of size and or orientation.
Drilling
All holes were drilled with diamond drill bits providing NQ sized core. The total number of meters drilled during our 2022 exploration program was 19,703 m from 113 holes with a maximum depth of 532 m. This includes 29 holes drilled for metallurgical and geotechnical assessment totaling 1,693 m. Holes were drilled at varying angles to allow multiple intersections and multiple holes to be drilled from single drill locations to minimize earthworks and clearing.
Sampling
Core was logged by professional consulting geologists and sampled on a geological basis. Sample lengths were typically 1 m intervals, but some samples were as small as 0.14 m or as large as 1.75 m. Core was halved with a diamond saw and placed into plastic sample bags for delivery to SRC Geoanalytical Laboratories in Saskatoon, Canada for sample preparation and analysis. QA/QC sampling consisted of the regular insertion of blanks, reject duplicates, and Certified Reference Standards within each 20 sample batch.
Sample Analysis
Core samples were crushed to better than 70% -2 mm and a 1 kg split was pulverized to better than 85% passing 75μm. All samples were analyzed using SRC procedure code ICP1 using total and partial digestions and ICP analysis. SRC uses Internal QA/QC procedures to monitor the accuracy and precision of their work.
Internal Controls Disclosure
Part of the verification process includes the Qualified Person analyzing the Quality Assurance/Quality Control (QAQC) protocols that were used by Nova/SLR. Another part of the verification process is to analyze the QAQC protocols that are in place at the lab.
The historical drilling (1942-1997) on the TBL property could not be validated. This is because the locations of the holes weren’t surveyed, the logging records are poor and incomplete, assay certificates are unavailable, and no QAQC data is available. This data was useful for geological and exploration purposes; however, this data is not suitable for inclusion in the resource estimate in accordance with SK-1300 regulations.
38
Previous Site Visit by Canmine Consultants
The former Qualified Person (Frank Hrdy) had visited the site several times while the drilling campaign was ongoing. He personally discussed core logging and handling procedures. He also had the logging geologist lay out some example core so that the former Qualified Person could verify that the procedures used were industry standard, and acceptable for the purposes of SK- 1300. A follow-up re-logging and re-sampling program was suggested by the Qualified Person. This was to ensure that mineralized sections at the margins of the dike contacts and into the host rock that were missed the first-time logging, were logged to an acceptable standard.
The Qualified Person also conducted a DGPS survey of many of the drill holes but could not locate all of them because drilling was done on frozen ground, and some were under deeper water during his sight visit. He also visited the SGS Laboratory in Saskatoon for a tour of the facilities.
The former Qualified Person’s site visit covered up to hole TBL-024 but did not include any of the 2022 drilling.
Quality Assurance and Quality Control
QAQC are the major components of quality management. Quality Assurance is “The assembly of all planned and systematic actions necessary to provide adequate confidence that a product, process, or service will satisfy given quality requirements”. Quality control is defined as “The system of activities to verify if the quality control activities are effective”. These systems are designed to monitor precision and accuracy of assay data. Checks for contamination are also performed using these procedures. QAQC checks can also disclose overall sampling-assay variability of the sampling method itself. The QA are checks and procedures which are followed before a batch of samples are sent to the laboratory. This involves the insertion of check samples which include blanks, duplicates, and Certified Reference Standards. QC is the process that is used to check precision of the assay data on returning from the laboratory. This is critical for determining the quality of the data as well as any deviation that exists from the norms. The checks can also be used determine if any re-sampling needs to be performed.
The 2017 drilling program was managed by Dahrouge Geological Consulting Ltd. During the site visit in 2019, the previous Qualified Person was not shown the core handling, logging, sampling, shipping, assaying, security protocols from the 2017 program at the time that he wrote the report. However, he was shown the QAQC program during the, however, the re-logging and re-sampling in August 2019, that was conducted to industry accepted QAQC protocols. In addition, all drill core that was analyzed by Actlabs from the 2017 drilling campaign was re-assayed by SRC.
QAQC protocols consist of the regular insertion of blanks, duplicates, and Certified Reference Standards (OREAS 147, 148, 149 and 999) with every 20-sample batch. Drill core samples that were a part of the TBL Project were sent to SRC labs in Saskatoon for preparation and analyses and the duplicates and check samples were sent to SGS Laboratories in Lakefield, Ontario.
Core boxes were inventoried, meterage blocks were verified, core recoveries and RQD were estimated, and bulk densities were determined. The core was logged and relevant data on lithologies, mineralogy, and structures were documented, and sampling intervals designated. An experienced logging geologist and technician followed standard core logging, cutting and sampling protocols.
Sampling Method and Approach
Sampling of mineralized core was done on a geological basis, as determined by the person responsible for logging the core. The logging geologist was responsible for marking sample intervals and drawing a cut line down the core to visually aid the core cutters on where to make their cut. Photos of the drill core were digitally taken before being sampled. Sampling intervals were typically 1.0 m, with samples as short as .07 m. and as long as 1.75 m.
39
Summary Statistics for Sampled Drill Core Intervals in the Database
TBL and GR Database – Sampling Interval Statistics | |
Count | 1967 |
Minimum | 0.07 |
Maximum | 1.75 |
Range | 1.68 |
Average | 1.06 |
Standard Deviation | 0.034 |
Median | 1 |
Mode | 1 |
The cutting of the core was done using a diamond saw. Half of the cut core was placed in plastic sample bags, and the remaining half left in the core box. For consistency, the same half of core was collected for each sample. Sample intervals were marked with a red grease pencil and a metal tab was stapled into the core box at the beginning of each sample interval as a visual aid to know where the last sample ends and the next sample starts. Another sample tag was placed in the sample bag which was sealed with a plastic bar lock tie and placed into woven rice bags to prepare them for shipping. A third tag was kept with the geologist for records of the sample, in case these need to be looked at again or resampled in the future.
Histogram of sample interval width.
Bulk Density Determinations
Bulk density measurements were made on a continuing basis during both drill programs. Sections of core were trimmed perpendicular to the core axis, and the average length and diameter of each was measured using a caliper. Each core sample was then weighed. These data were used to calculate the average bulk density of 2.71 t/m3 based on 48 individual measurements.
40
Summary Statistics for Bulk Density Determinations
TBL Database – Specific Gravity Statistics | |
Count | 37 |
Minimum | 2.59 |
Maximum | 2.83 |
Range | 0.24 |
Average | 2.71 |
Standard Deviation | 0.064 |
Median | 2.72 |
Mode | 2.76 |
Bulk density Determinations in t/m3.
Blanks
Certified Reference Blanks were inserted into the sample stream at SRC and SGS for analysis. This was done at a frequency of 1 for every 20 samples. The reasoning behind inserting blanks is that the blanks should not contain any lithium. If lithium is detected, this alerts the person doing the analysis that there is most likely cross-contamination during sample preparation and assaying. This can be due to several factors.
41
Snow Lake Quality Assurance and Quality Control Performance
From Figure 9-3, blanks 22 and 23 are shown to have values of 0.144% and 0.088% Li2O respectively. These blanks are above the acceptance line which is determined by taking the detection limit and multiplying by 10. In the Author’s opinion, the blanks are acceptable for this report and support the use of the analytical results for continued interpretation, evaluation, and the resource estimate.
Certified Reference Materials (Standards)
Standards are used to monitor analytical accuracy and to identify potential problems with specific batches of samples. Four standards were chosen for the analysis and named Oreas 147, 148, 149 and 999. One standard was inserted into the sample stream for every 20 samples taken.
42
Certified Lithium Values for Certified Reference Standards
When analyzing CRM data, there are two situations that make the sample fail. A sample that has a concentration that is greater than 3 standard deviations from the mean is a failure. Also, two adjacent standards that are greater than two standard deviations from the mean, on the same side of the mean are failures due to bias. With CRM 148, both bias and failures are apparent.
43
44
45
SRC and SGS Internal Duplicates
Duplicate samples are used to monitor and assess variability of grade as a function of sample homogeneity and laboratory error. In total, 104 duplicates were submitted for the analysis based on a sampling frequency of 1 for every 20 samples.
46
Internal duplicates for SRC and SGS laboratories
Item | Original | Duplicate |
Count | 104 | 104 |
Mean | 1.042 | 1.029 |
Minimum | 0.003 | 0.003 |
Maximum | 3.796 | 3.336 |
Range | 3.793 | 3.333 |
Median | 0.935 | 0.951 |
Sample variance | 0.814 | 0.748 |
Standard Deviation | 0.902 | 0.865 |
Correlation Coefficient | 0.988 |
|
The sample data displays a high correlation coefficient and very close means. It is the author’s opinion; the duplicate reject samples indicate that both labs are achieving good analytical precision.
Qualified Person’s Samples from Site Visit
The current Qualified Person took samples while he was on site and are listed in the table below. Samples from TB and GR were re-taken for validation using ¼ core and then sending them to SGS Lakefield for assay preparation.
47
2 sets of blanks were sent to SGS laboratories for analysis. 2 sets of blanks were also inserted internally by the lab to check for their own QAQC standards. Results are shown below.
The data show that all the samples had passed by being below 10 times the detection limit for Li. In the Qualified Person’s opinion, the resampling of the blanks is suitable for use on the project indicating that there aren’t any contamination issues.
48
There was only 1 standard available for sampling by the Qualified Person. The standard shows that the sample passed as it is between the median and the median minus two standard deviations.
CRM 999 does show some biases; however, the samples have passed and are sufficient for this report.
The lab had also tested their standards for analysis using OREAS 148 and 753 to check for precision and bias. The performance charts are shown below.
49
50
The duplicate pairs that were sent by the Qualified Person to Lakefield for analysis showed a close correlation with the 1:1 trend line within ±10% as an industry accepted standard.
The lab had also re-run some of the samples to check for accuracy of duplicated materials which is shown in the figure below. The trendlines are overlapping showing excellent accuracy between the lab’s resampling for duplicates.
The Qualified Person while on site, had taken some of the already cut core and cut it again to produce ¼ core and sent these samples to Lakefield for preparation. The duplicates should follow a 1:1 trendline, however, the Qualified Person has sampled ¼ core.
51
Variations in grade can also occur due to the large crystal size of the lithium bearing spodumene. The large crystals may have an effect on lithium values if the whole sample doesn’t catch an entire crystal, or if half of the core contains more of the crystal than the other half.
Samples that had Li grades that were below cut-off grade were initially included and then filtered out to decrease the variation percentage between ½ and ¼ core. The difference between the samples was calculated to be 20% before leaving out samples that were below cut off grade and 15% after leaving them out, which is shown below.
Grade Distribution
The lithium grade in the deposits is largely controlled by the presence or absence of spodumene. The highest grade encountered was 5.88% Li2O in DH GRP-014 from 198.22-198.87 m.
Database Verification
The TBL and GR databases are well structured and complete. The personnel in the core shack maintained a digital library of all hand-written source data sheets (drill logs, core inventory, RQDs, sampling sheets, bulk density),
The Qualified Person performed a random audit of the assay certificates for holes TBL-007 and TBL-031. Hole TBL-007 was analyzed by SRC while hole 31 was assayed by SGS. When the database was compared to the assay certificates, no errors were found.
In the Qualified Person’s opinion all drill holes on the TB and GR deposits drilled by Nova, Quantum and Snow Lake Lithium are suitable for this resource estimate, while historic holes were not included. Industry best practices have been observed and followed, and the data sets are current.
Drill Hole Collar Verification During Site Visit
Drill hole locations for 32 holes were located by the Qualified Person during his site visit and can be found in the appendix section of this report.
52
Photo of drill pad with casing left in and a picket labelled TBL 054
Close up view of wooden picket for DH TBL-054 with flagging tape
53
Drill hole location marked by metal flag
Opinion of the Author
The QP is satisfied with regards to data verification, the database and QAQC protocols that were in place for the project.
It was noted that there was a fair amount of scatter for the Certified Reference Materials especially for OREAS 148 and 149. The standards showed a low to high migrating bias between insertions. This level of error is acceptable for this Initial Assessment. The QP has suggested that a QAQC remediation program to be conducted which is already underway. This remediation program is essential going forward to the pre-feasibility stage.
Estimation Methodology
Leapfrog Geo and Leapfrog Edge were instrumental in the geological modeling and resource estimation of a lithium project, employing a block model with dimensions of 4x4x4 meters to ensure a precise representation of the mineral deposit. The use of Ordinary Kriging, coupled with a 0.3% Li2O cut-off and without imposing an upper grade cap, accurately captured the deposit's natural grade variability.
For the Thompson Brothers site, the estimation framework was anchored by two search ellipsoids: the primary with an orientation of 305°, complemented by a secondary, larger ellipsoid to expand the search in mineral-rich areas. Classification criteria specified distances of 175 meters for Inferred, 105 meters for Indicated, and 65 meters for Measured resources. The site utilized 219 composite samples, each 2.0 meters in length, ensuring detailed and accurate resource estimation.
54
At the Grass River site, a customized approach was adopted for each dike:
Dike 1 featured three search ellipsoids, with maximum search distances of 155 meters for Inferred, 50 meters for Indicated, and 35 meters for Measured categories.
Dike 2 was evaluated using an intermediate ellipsoid (90 m by 60 m) and a larger one (165 m by 85 m), oriented at 216° and 219°, respectively.
Dike 3 incorporated a single ellipsoid with dimensions of 160 m by 80 m and an orientation of 226°.
Dike 4 employed one ellipsoid, sized at 150 m by 60 m, with an orientation of 205°.
Grade estimation for the Grass River site was refined using 1-meter composites for Dikes 3 & 4, and 2-meter composites for Dikes 1 & 2, with all Thompson Brothers composites uniformly set at 2.0 meters. A total of 99 composite samples, approximately 2 meters in length, were utilized at the Grass River site, complementing the comprehensive estimation approach.
A specific gravity of 2.7 g/cm³ was consistently applied across the project for tonnage calculations. The strict adherence to a principle requiring each block to contain a minimum of two and a maximum of 15-20 composite samples within the search radius contributed to the enhancement of the estimation process's precision and reliability.
1% Li2O DSO Price |
|
| $504/ per tonne |
|
6% Li2O Concentrate Price |
|
| $3500/per tonne |
|
Open Pit Mining Cost/tonne |
|
| $4.85 |
|
Underground Mining Cost/tonne |
|
| $33.46 |
|
Overall Sorter Recovery |
|
| 83% |
|
Overall Process Recovery |
|
| 80% |
|
Overall Recovery |
|
| 66% |
|
Processing Cost/tonne processed |
|
| $15.82 |
|
Open pit G&A Cost per tonne processed |
|
| $0.50 |
|
Underground G&A Cost per tonne processed |
|
| $1.50 |
|
1% Li2O DSO Haulage Cost/tonne |
|
| $100 |
|
6% Li2O Concentrate Haulage Cost/tonne |
|
| $15 |
|
Classification
The resource is classified entirely as a combination of measured, indicated and inferred in accordance with the S-K 1300 when taking into consideration, data density, deposit geometry, likely extensions and possible interpretation alternatives.
Other Modifying Factors
A preliminary metallurgical test was conducted to determine possible concentrate grade recoverable from the Snow Lake Lithium™ Project. The test returned a concentrate grade of 6.37% Li2O from a composite sample of 1.4% Li2O indicating the potential to make a commercial product from the Thompson Brothers pegmatite. No engineering studies have been conducted however, given the sub vertical nature of the deposit, underground mining is anticipated to be the method of extraction.
Economic Analysis
Economic analysis has been performed to show the annual cash flow and economic outcomes are showcased inclusive of all mineral resources.
This economic assessment and the results disclosed are preliminary in nature and include inferred mineral resources that are considered too speculative geologically to have modifying factors applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that this economic assessment will be realized.
55
Economic Analysis of All Mineral Resources (Including Inferred Mineral Resources)
When economic analysis considers all mineral resources, with the inclusion of inferred mineral resources, the 9 years cash flow is estimated to be:
Description | Unit | Total |
|
|
|
|
| Year |
|
|
|
|
|
|
|
| 0 |
| 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 |
| Production Schedule | ||||||||||||
Ore Mined (with Dilution) | tonne | 9,776,271 |
|
| 624,038 | 932,074 | 1,352,585 | 1,361,634 | 1,326,821 | 1,282,814 | 1,237,191 | 1,248,537 | 410,579 |
Waste Mined |
| 3,379,805 | 289,270 |
| 2,997,320 | 260,187 | 22,490 | 22,640 | 22,061 | 21,330 | 20,571 | 13,206 | - |
Lithium Mined | tonne | 82,045 |
|
| 5,655 | 7,391 | 10,430 | 10,315 | 11,054 | 10,440 | 12,558 | 11,663 | 2,538 |
Average Mined Grade |
| 0.008392 |
|
| 0.009062 | 0.007930 | 0.007711 | 0.007575 | 0.008331 | 0.008139 | 0.010150 | 0.009341 | 0.006183 |
Average Mined grade | % Li2O | 0.84% |
|
| 0.91% | 0.79% | 0.77% | 0.76% | 0.83% | 0.81% | 1.02% | 0.93% | 0.62% |
Mill Feed tonnage | tonne | 6,470,443 |
|
|
| 791,114 | 912,370 | 912,464 | 912,424 | 912,421 | 912,438 | 912,500 | 204,712 |
Mill Feed contained Lithium | tonne | 67,694 |
|
|
| 7,574 | 8,907 | 8,784 | 9,524 | 9,144 | 11,242 | 10,382 | 2,138 |
Average Mill feed grade |
| 0.01046 |
|
|
| 0.00957 | 0.00976 | 0.00963 | 0.01044 | 0.01002 | 0.01232 | 0.01138 | 0.01044 |
Average Mill feed grade | % Li2O | 1.05% |
|
|
| 0.96% | 0.98% | 0.96% | 1.04% | 1.00% | 1.23% | 1.14% | 1.04% |
Sorter Mass Pull to Product | % | 66% |
|
|
| 64% | 67% | 67% | 69% | 71% | 74% | 73% | 50% |
Li2O Sorter Recovery | % | 84% |
|
|
| 85% | 85% | 85% | 86% | 88% | 90% | 89% | 84% |
overall mill recovery | % | 80% |
|
| 81% | 91% | 77% | 77% | 77% | 77% | 77% | 82% | 91% |
Lithium Mass (mill Product) | tonne | 53,955 |
|
|
| 6,854 | 6,858 | 6,764 | 7,333 | 7,041 | 8,656 | 8,513 | 1,934 |
Overall Recovery |
| 66% |
|
|
|
|
|
|
|
|
|
|
|
1.3% Saleable Product Mass | tonne | 312,863 |
|
| 312,863 |
|
|
|
|
|
|
|
|
6% Saleable Product Mass | tonne | 899,248 |
|
|
| 114,240 | 114,306 | 112,728 | 122,225 | 117,348 | 144,275 | 141,886 | 32,241 |
| Revenue and Royalty | ||||||||||||
Revenue | $ | 3,305,051,903 |
|
| 157,682,700 | 399,841,398 | 400,071,107 | 394,548,000 | 427,786,333 | 410,718,000 | 504,962,128 | 496,599,351 | 112,842,886 |
Revenue | Million $ | 3,305 |
|
| 157.7 | 399.8 | 400.1 | 394.5 | 427.8 | 410.7 | 505.0 | 496.6 |
|
1% Royalty | $ | 33,050,519 |
|
| 1,576,827.00 | 3,998,413.98 | 4,000,711.07 | 3,945,480.00 | 4,277,863.33 | 4,107,180.00 | 5,049,621.28 | 4,965,993.51 | 1,128,428.86 |
Post-Royalty Revenue | $ | 3,272,001,384 |
|
| 156,105,873 | 395,842,984 | 396,070,396 | 390,602,520 | 423,508,470 | 406,610,820 | 499,912,506 | 491,633,357 | 111,714,457 |
Post-Royalty Revenue | M$ | 3,272 |
|
| 156 | 396 | 396 | 391 | 424 | 407 | 500 | 492 | 112 |
| CAPEX | ||||||||||||
Underground Development | $ | 18,746,400 | 18,746,400 |
|
|
|
|
|
|
|
|
|
|
Mill + Infrastructure | $ | 42,201,000 |
|
| 42,201,000 |
|
|
|
|
|
|
|
|
Powerline + Substation |
| 18,420,000 |
|
| 18,420,000 |
|
|
|
|
|
|
|
|
Mining Equipment | $ | 32,198,230 | 17,083,830 |
| 15,114,400 |
|
|
|
|
|
|
|
|
Ore Sorters | $ | 7,150,000 |
|
| 7,150,000 |
|
|
|
|
|
|
|
|
Bridge Construction | $ | 15,500,000 | 12,400,000 |
| 3,100,000 |
|
|
|
|
|
|
|
|
Road Construction |
| 800,000 | 800,000 |
|
|
|
|
|
|
|
|
|
|
Royalty CAPEX |
| 1,000,000 | 1,000,000 |
|
|
|
|
|
|
|
|
|
|
Reclamation | $ | 10,000,000 |
|
|
|
|
|
|
|
|
|
| 10,000,000 |
Total CAPEX | $ | 146,015,630 | 50,030,230 |
| 85,985,400 |
|
|
|
|
|
|
| 10,000,000 |
Total CAPEX | M$ | 146 | 50 |
| 86 |
|
|
|
|
|
|
| 10 |
| Unit OPEX | ||||||||||||
Mine | $/t mined |
|
|
| 4.85 | 33.46 | 33.46 | 33.46 | 33.46 | 33.46 | 33.46 | 33.46 | 33.46 |
Sorting + Crushing | $/t mined |
|
|
|
| 1.50 | 1.50 | 1.50 | 1.50 | 1.50 | 1.50 | 1.50 | 1.50 |
1st DMS | $/t milled |
|
|
|
| 3.95 | 3.95 | 3.95 | 3.95 | 3.95 | 3.95 | 3.95 | 3.95 |
2nd DMS _mag separation | $/t milled |
|
|
|
| 5.10 | 5.10 | 5.10 | 5.10 | 5.10 | 5.10 | 5.10 | 5.10 |
Ball Mill Grinding | $/t milled |
|
|
|
| 3.50 | 3.50 | 3.50 | 3.50 | 3.50 | 3.50 | 3.50 | 3.50 |
Mica Flotation | $/t milled |
|
|
|
| 15.25 | 15.25 | 15.25 | 15.25 | 15.25 | 15.25 | 15.25 | 15.25 |
Spodumene Flotation | $/t milled |
|
|
|
| 19.25 | 19.25 | 19.25 | 19.25 | 19.25 | 19.25 | 19.25 | 19.25 |
Tailings cost | $/t milled |
|
|
|
| 2.50 | 2.50 | 2.50 | 2.50 | 2.50 | 2.50 | 2.50 | 2.50 |
Transportation DSO | $/t |
|
|
| 100.00 |
|
|
|
|
|
|
|
|
Transportation of 6% Li2O | $/t |
|
|
|
| 15.00 | 15.00 | 15.00 | 15.00 | 15.00 | 15.00 | 15.00 | 15.00 |
Stockpiling Open pit | $/t mined |
|
|
|
| 0.20 |
|
|
|
|
|
|
|
G&A | $/t |
|
|
| 0.50 | 1.50 | 1.50 | 1.50 | 1.50 | 1.50 | 1.50 | 1.50 | 1.50 |
56
Description | Unit | Total |
|
|
|
|
| Year |
|
|
|
|
| |
|
|
| 0 |
| 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | |
| OPEX | |||||||||||||
Underground Development | $ | 119,543,240 |
|
| 21,899,500 | 29,017,664 | 10,558,471 | 10,629,104 | 10,357,348 | 10,013,826 | 9,657,684 | 12,088,132 | 5,321,511 | |
Mine | $ | 322,165,276 |
|
| 15,931,543 | 31,187,188 | 45,257,502 | 45,560,261 | 44,395,414 | 42,922,952 | 41,396,398 | 41,776,048 | 13,737,969 | |
Sorting + Crushing | $ | 13,728,350 |
|
|
| 1,398,111 | 2,028,878 | 2,042,450 | 1,990,231 | 1,924,221 | 1,855,786 | 1,872,806 | 615,868 | |
1st DMS | $ | 22,644,609 |
|
|
| 2,768,663 | 3,193,020 | 3,193,350 | 3,193,210 | 3,193,200 | 3,193,258 | 3,193,477 | 716,430 | |
2nd DMS +mag separation | $ | 12,077,729 |
|
|
| 1,476,694 | 1,703,029 | 1,703,205 | 1,703,131 | 1,703,125 | 1,703,156 | 1,703,273 | 382,115 | |
Ball Mill Grinding | $ | 5,163,413 |
|
|
| 631,309 | 728,071 | 728,146 | 728,114 | 728,112 | 728,125 | 728,175 | 163,360 | |
Mica Flotation | $ | 22,497,730 |
|
|
| 2,750,705 | 3,172,309 | 3,172,637 | 3,172,498 | 3,172,488 | 3,172,546 | 3,172,763 | 711,783 | |
Spodumene Flotation | $ | 26,057,121 |
|
|
| 3,185,897 | 3,674,204 | 3,674,584 | 3,674,423 | 3,674,411 | 3,674,478 | 3,674,730 | 824,395 | |
Tailings cost | $ | 13,927,986 |
|
|
| 1,692,185 | 1,995,159 | 1,999,340 | 1,975,498 | 1,987,683 | 1,920,407 | 1,926,537 | 431,178 | |
Transportation DSO | $ | 31,286,250 |
|
| 31,286,250 |
|
|
|
|
|
|
|
| |
Transportation of 6% Li2O | $ | 13,488,725 |
|
|
| 1,713,606 | 1,714,590 | 1,690,920 | 1,833,370 | 1,760,220 | 2,164,123 | 2,128,283 | 483,612 | |
Stockpiling Open Pit | $ | 62,235 |
|
|
| 62,235 |
|
|
|
|
|
|
| |
G&A | $ | 10,017,683 |
|
| 312,019 | 1,186,672 | 1,368,554 | 1,368,696 | 1,368,636 | 1,368,632 | 1,368,657 | 1,368,750 | 307,068 | |
Total OPEX | $ | 612,660,347 |
|
| 69,429,312 | 77,070,928 | 75,393,788 | 75,762,694 | 74,391,873 | 72,448,868 | 70,834,619 | 73,632,974 | 23,695,291 | |
Total OPEX | Million $ | 613 | 0 |
| 69 | 77 | 75 | 76 | 74 | 72 | 71 | 74 | 24 | |
| Pre-Tax Cash Flow | |||||||||||||
Net Cash Flow | $ | 2,513,325,407 | -50,030,230 |
| 691,161 | 318,772,056 | 320,676,608 | 314,839,826 | 349,116,597 | 334,161,952 | 429,077,888 | 418,000,383 | 78,019,166 | |
Cumulative Cash Flow | $ |
| -50,030,230 |
| -49,339,069 | 269,432,988 | 590,109,596 | 904,949,421 | 1,254,066,018 | 1,588,227,970 | 2,017,305,858 | 2,435,306,241 | 2,513,325,407 | |
Net Cash Flow | Million $ | 2,513 | -50 |
| 1 | 319 | 321 | 315 | 349 | 334 | 429 | 418 | 78 | |
Cumulative Cash flow | Million $ |
| -50 |
| -49 | 269 | 590 | 905 | 1,254 | 1,588 | 2,017 | 2,435 | 2,513 | |
NPV Discount rate | % |
| 7 | |||||||||||
| Pre-Tax Key Economic Results
| |||||||||||||
Pre-Tax NPV | $ | 1,755,507,961 | ||||||||||||
Pre-Tax IRR | % | 208 | ||||||||||||
Payback Period | Months | 13.9 | ||||||||||||
| Post-Tax Cash Flow | |||||||||||||
Federal Taxes 15% |
| 376,998,811 |
|
|
| 40,414,948 | 48,101,491 | 47,225,974 | 52,367,490 | 50,124,293 | 64,361,683 | 62,700,057 | 11,702,875 | |
Provincial Taxes 17% |
| 425,704,936 |
|
|
| 45,803,608 | 54,515,023 | 53,522,770 | 59,349,821 | 56,807,532 | 72,943,241 | 71,060,065 | 11,702,875 | |
Total Taxes | $ | 802,703,747 |
|
|
| 86,218,556 | 102,616,515 | 100,748,744 | 111,717,311 | 106,931,825 | 137,304,924 | 133,760,122 | 23,405,750 | |
Post-Tax Net Cash Flow | $ | 1,710,621,659 | -50,030,230 |
| 691,161 | 232,553,500 | 218,060,094 | 214,091,081 | 237,399,286 | 227,230,127 | 291,772,964 | 284,240,260 | 54,613,416 | |
Cumulative Cash Flow | $ |
| -50,030,230 |
| -49,339,069 | 183,214,432 | 401,274,525 | 615,365,607 | 852,764,893 | 1,079,995,020 | 1,371,767,983 | 1,656,008,244 | 1,710,621,660 | |
Net Cash Flow | Million $ | 1,711 | -50 |
| 1 | 233 | 218 | 214 | 237 | 227 | 292 | 284 | 55 | |
| Post-Tax Key Economic Results | |||||||||||||
Post-Tax NPV | $ | 1,192,581,476 | ||||||||||||
Post-Tax IRR | % | 170 | ||||||||||||
Payback Period | Months | 13.9 | ||||||||||||
A sensitivity analysis is undertaken to examine the fluctuations in pre-tax NPV when essential economic inputs are altered. The economic parameters subject to variation and their corresponding points of adjustment are detailed as follows:
·Spodumene price: ± 15% and ± 30% variation points.
·Project LOM capital cost: ± 15% and ± 30% variation points.
·Project LOM operating cost: ± 15% and ± 30% variation points.
·Mill recovery: A change of ± 2 to the mill recovery percentage.
·NPV discount rate: A change ± 2 to the NPV discount rate percentage.
57
The figures below show the sensitivity analysis results for all mineral resources in the form of a spider chart and tornado chart:
58
Economic Analysis of Measured and Indicated Mineral Resources Only
When economic analysis considers only measured and indicated mineral resources (without inferred mineral resources), the 9 years cash flow is estimated to be:
Description | Unit | Total |
|
|
|
| Year |
|
|
|
|
|
|
|
| 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 |
Production Schedule | ||||||||||||
Ore Mined (with Dilution) | tonne | 8,580,015 |
| 556,875 | 733,450 | 1,104,750 | 1,319,650 | 1,011,160 | 1,221,790 | 1,237,100 | 1,124,020 | 271,220 |
Waste Mined |
| 2,660,817 |
| 2,660,817 |
|
|
|
|
|
|
|
|
Lithium Mined | tonne | 82,045 |
| 5,655 | 7,391 | 10,430 | 10,315 | 11,054 | 10,440 | 12,558 | 11,663 | 2,538 |
Average Mined Grade |
| 0.009562 |
| 0.010155 | 0.010077 | 0.009441 | 0.007816 | 0.010932 | 0.008545 | 0.010151 | 0.010376 | 0.009359 |
Average Mined grade | % Li2O | 0.96% |
| 1.02% | 1.01% | 0.94% | 0.78% | 1.09% | 0.85% | 1.02% | 1.04% | 0.94% |
Mill Feed tonnage | tonne | 5,703,446 |
|
| 640,457 | 745,195 | 884,330 | 695,352 | 869,017 | 912,371 | 821,496 | 135,229 |
Mill Feed contained Lithium | tonne | 59,995 |
|
| 6,095 | 7,216 | 8,533 | 7,228 | 8,758 | 11,244 | 9,489 | 1,431 |
Average Mill feed grade |
| 0.01052 |
|
| 0.00952 | 0.00968 | 0.00965 | 0.01040 | 0.01008 | 0.01232 | 0.01155 | 0.01059 |
Average Mill feed grade | % Li2O | 1.05% |
|
| 0.95% | 0.97% | 0.96% | 1.04% | 1.01% | 1.23% | 1.16% | 1.06% |
Sorter Mass Pull to Product | % | 66% |
|
| 64% | 67% | 67% | 69% | 71% | 74% | 73% | 50% |
Li2O Sorter Recovery | % | 84% |
|
| 85% | 85% | 85% | 86% | 88% | 90% | 89% | 84% |
overall mill recovery | % | 80% |
|
| 91% | 77% | 77% | 77% | 77% | 77% | 82% | 91% |
Lithium Mass (mill Product) | t | 47,687 |
|
| 5,516 | 5,556 | 6,570 | 5,566 | 6,744 | 8,658 | 7,781 | 1,295 |
Overall Recovery |
| 66% |
|
|
|
|
|
|
|
|
|
|
1.3% Saleable Product Mass | tonne | 312,863 |
| 312,863 |
|
|
|
|
|
|
|
|
6% Saleable Product Mass | tonne | 794,784 |
|
| 91,932 | 92,603 | 109,505 | 92,766 | 112,398 | 144,302 | 129,687 | 21,592 |
Revenue and Royalty | ||||||||||||
Revenue | $ | 2,924,798,145 |
| 143,054,100 | 321,761,548 | 324,109,735 | 383,267,591 | 324,679,653 | 393,394,644 | 505,056,859 | 453,903,512 | 75,570,503 |
Revenue | Million $ | 2,925 |
| 143 | 322 | 324 | 383 | 325 | 393 | 505 | 454 | 76 |
1% Royalty | $ | 29,247,981 |
| 1,430,541.00 | 3,217,615.48 | 3,241,097.35 | 3,832,675.91 | 3,246,796.53 | 3,933,946.44 | 5,050,568.59 | 4,539,035.12 | 755,705.03 |
Post-Royalty Revenue | $ | 2,895,550,164 |
| 141,623,559 | 318,543,933 | 320,868,638 | 379,434,915 | 321,432,856 | 389,460,697 | 500,006,291 | 449,364,476 | 74,814,798 |
Post-Royalty Revenue | Million $ | 2,896 |
| 142 | 319 | 321 | 379 | 321 | 389 | 500 | 449 | 75 |
CAPEX | ||||||||||||
Underground Development | $ | 18,746,400 | 18,746,400 |
|
|
|
|
|
|
|
|
|
Mill + Infrastructure | $ | 42,201,000 |
| 42,201,000 |
|
|
|
|
|
|
|
|
Powerline + Substation |
| 18,420,000 |
| 18,420,000 |
|
|
|
|
|
|
|
|
Mining Equipment | $ | 32,198,230 | 17,083,830 | 15,114,400 |
|
|
|
|
|
|
|
|
Ore Sorters | $ | 7,150,000 |
| 7,150,000 |
|
|
|
|
|
|
|
|
Bridge Construction | $ | 15,500,000 | 12,400,000 | 3,100,000 |
|
|
|
|
|
|
|
|
Road Construction |
| 800,000 | 800,000 |
|
|
|
|
|
|
|
|
|
Royalty CAPEX |
| 1,000,000 | 1,000,000 |
|
|
|
|
|
|
|
|
|
Reclamation | $ | 10,000,000 |
|
|
|
|
|
|
|
|
| 10,000,000 |
Total CAPEX | $ | 146,015,630 | 50,030,230 | 85,985,400 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 10,000,000 |
Total CAPEX | M$ | 146 | 50 | 86 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 10 |
Unit OPEX | ||||||||||||
Mine | $/t mined |
|
| 4.85 | 33.46 | 33.46 | 33.46 | 33.46 | 33.46 | 33.46 | 33.46 | 33.46 |
Sorting + Crushing | $/t mined |
|
|
| 1.50 | 1.50 | 1.50 | 1.50 | 1.50 | 1.50 | 1.50 | 1.50 |
1st DMS | $/t milled |
|
|
| 3.95 | 3.95 | 3.95 | 3.95 | 3.95 | 3.95 | 3.95 | 3.95 |
2nd DMS _mag separation | $/t milled |
|
|
| 5.10 | 5.10 | 5.10 | 5.10 | 5.10 | 5.10 | 5.10 | 5.10 |
Ball Mill Grinding | $/t milled |
|
|
| 3.50 | 3.50 | 3.50 | 3.50 | 3.50 | 3.50 | 3.50 | 3.50 |
Mica Flotation | $/t milled |
|
|
| 15.25 | 15.25 | 15.25 | 15.25 | 15.25 | 15.25 | 15.25 | 15.25 |
Spodumene Flotation | $/t milled |
|
|
| 19.25 | 19.25 | 19.25 | 19.25 | 19.25 | 19.25 | 19.25 | 19.25 |
Tailings cost | $/t milled |
|
|
| 2.50 | 2.50 | 2.50 | 2.50 | 2.50 | 2.50 | 2.50 | 2.50 |
Transportation DSO | $/t |
|
| 100.00 |
|
|
|
|
|
|
|
|
Transportation of 6% Li2O | $/t |
|
|
| 15.00 | 15.00 | 15.00 | 15.00 | 15.00 | 15.00 | 15.00 | 15.00 |
Stockpiling Open pit | $/t mined |
|
|
| 0.20 |
|
|
|
|
|
|
|
G&A | $/t |
|
| 0.50 | 1.50 | 1.50 | 1.50 | 1.50 | 1.50 | 1.50 | 1.50 | 1.50 |
59
Description | Unit | Total | Year | |||||||||
|
|
| 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 |
OPEX | ||||||||||||
Underground Development | $ | 119,543,240 |
| 21,899,500 | 29,017,664 | 10,558,471 | 10,629,104 | 10,357,348 | 10,013,826 | 9,657,684 | 12,088,132 | 5,321,511 |
Mine | $ | 284,385,807 |
| 15,931,543 | 24,541,237 | 36,964,935 | 44,155,489 | 33,833,414 | 40,881,093 | 41,393,366 | 37,609,709 | 9,075,021 |
Sorting + Crushing | $ | 12,034,710 |
|
| 1,100,175 | 1,657,125 | 1,979,475 | 1,516,740 | 1,832,685 | 1,855,650 | 1,686,030 | 406,830 |
1st DMS | $ | 19,960,349 |
|
| 2,241,406 | 2,607,960 | 3,094,889 | 2,433,522 | 3,041,298 | 3,193,024 | 2,874,991 | 473,259 |
2nd DMS +mag separation | $ | 10,646,052 |
|
| 1,195,476 | 1,390,982 | 1,650,690 | 1,297,943 | 1,622,107 | 1,703,031 | 1,533,405 | 252,418 |
Ball Mill Grinding | $ | 4,551,350 |
|
| 511,084 | 594,666 | 705,695 | 554,891 | 693,475 | 728,072 | 655,554 | 107,912 |
Mica Flotation | $ | 19,830,881 |
|
| 2,226,867 | 2,591,044 | 3,074,815 | 2,417,737 | 3,021,572 | 3,172,313 | 2,856,343 | 470,190 |
Spodumene Flotation | $ | 22,968,346 |
|
| 2,579,182 | 3,000,977 | 3,561,284 | 2,800,250 | 3,499,618 | 3,674,209 | 3,308,248 | 544,579 |
Tailings cost | $ | 12,271,654 |
|
| 1,371,312 | 1,631,482 | 1,937,062 | 1,506,465 | 1,891,546 | 1,920,172 | 1,729,524 | 284,092 |
Transportation DSO | $ | 28,383,750 |
| 28,383,750 |
|
|
|
|
|
|
|
|
Transportation of 6% Li2O | $ | 11,921,760 |
|
| 1,378,978 | 1,389,042 | 1,642,575 | 1,391,484 | 1,685,977 | 2,164,529 | 1,945,301 | 323,874 |
Stockpiling Open Pit | $ | 54,608 |
|
| 54,608 |
|
|
|
|
|
|
|
G&A | $ | 8,833,606 |
| 278,438 | 960,685 | 1,117,793 | 1,326,495 | 1,043,027 | 1,303,525 | 1,368,556 | 1,232,244 | 202,843 |
Total OPEX | $ | 555,386,112 |
| 66,493,230 | 67,178,674 | 63,504,477 | 73,757,572 | 59,152,820 | 69,486,722 | 70,830,608 | 67,519,481 | 17,462,528 |
Total OPEX | Million $ | 555 |
| 66 | 67 | 64 | 74 | 59 | 69 | 71 | 68 | 17 |
Pre-Tax Cash Flow | ||||||||||||
Net Cash Flow | $ | 2,194,148,421 | -50,030,230 | -10,855,071 | 251,365,259 | 257,364,161 | 305,677,343 | 262,280,036 | 319,973,975 | 429,175,683 | 381,844,996 | 47,352,270 |
Cumulative Cash Flow | $ |
| -50,030,230 | -60,885,301 | 190,479,958 | 447,844,119 | 753,521,462 | 1,015,801,498 | 1,335,775,473 | 1,764,951,156 | 2,146,796,151 | 2,194,148,421 |
Net Cash Flow | Million $ | 2,194 | -50 | -11 | 251 | 257 | 306 | 262 | 320 | 429 | 382 | 47 |
Cumulative Cash flow | Million $ |
| -50 | -61 | 190 | 448 | 754 | 1,016 | 1,336 | 1,765 | 2,147 | 2,194 |
NPV Discount rate | % | 7 | ||||||||||
Pre-Tax Key Economic Results
| ||||||||||||
Pre-Tax NPV | $ | 1,518,139,613 | ||||||||||
Pre-Tax IRR | % | 175 | ||||||||||
Payback Period | Months | 14.9 | ||||||||||
Post-Tax Cash Flow | ||||||||||||
Federal Taxes 15% |
| 329,122,263 |
|
| 28,571,994 | 38,604,624 | 45,851,601 | 39,342,005 | 47,996,096 | 64,376,352 | 57,276,749 | 7,102,840 |
Provincial Taxes 17% |
| 372,058,186 |
|
| 32,381,593 | 43,751,907 | 51,965,148 | 44,587,606 | 54,395,576 | 72,959,866 | 64,913,649 | 7,102,840 |
Total Taxes | $ | 701,180,449 |
|
| 60,953,586 | 82,356,532 | 97,816,750 | 83,929,611 | 102,391,672 | 137,336,218 | 122,190,399 | 14,205,681 |
Post-Tax Net Cash Flow | $ | 1,492,967,972 | -50,030,230 | -10,855,071 | 190,411,673 | 175,007,630 | 207,860,593 | 178,350,424 | 217,582,303 | 291,839,464 | 259,654,597 | 33,146,589 |
Cumulative Cash Flow | $ |
| -50,030,230 | -60,885,301 | 129,526,371 | 304,534,001 | 512,394,594 | 690,745,018 | 908,327,322 | 1,200,166,786 | 1,459,821,383 | 1,492,967,972 |
Net Cash Flow | Million $ | 1,493 | -50 | -11 | 190 | 175 | 208 | 178 | 218 | 292 | 260 | 33 |
Post-Tax Key Economic Results | ||||||||||||
Post-Tax NPV | $ | 1,030,611,483 | ||||||||||
Post-Tax IRR | % | 143 | ||||||||||
Payback Period | Months | 14.9 | ||||||||||
Similarly, a sensitivity analysis for pre-tax NPV is performed solely considering measured and indicated mineral resources, illustrated in the spider chart and tornado chart provided below:
60
Location and Description of Snow Lake Lithium™ Project
The Snow Lake Lithium™ Project is located in north central Manitoba, approximately 20 km (12.4 miles) east of the mining community of Snow Lake.
61
The Snow Lake Lithium™ Project comprises 133 mineral claims covering 24,515 hectares (60,577-acres) and is nearly four times the size of Manhattan. It straddles Crowduck Bay at the northeastern end of Lake Wekusko. The Snow Lake Lithium™ Project is centered on UTM coordinates 455,000 E 6,080,000 N (NAD83, Zone 14) and lies within the National Topographic System map sheet 63JSE13.
62
63
Snow Lake is located some 684 km north of Winnipeg, a 7-hour (700 km) drive on well maintained, paved roadways. Daily flights are available from Winnipeg to both Flin Flon and Thompson. Flin Flon is a 2 hour (200 km) drive west on paved highway to Snow Lake. Thompson is a 2.5 hour (260 km) drive northeast from Snow Lake on paved highway.
The Snow Lake Lithium™ Project is located in the Churchill geological province at the eastern end of the Flin Flon Belt. The Flin Flon Belt (1.92-1.88 Ga) is one of the largest Proterozoic volcanic-hosted massive sulphide districts in the world. The east-trending Flin Flon Volcanic Belt (230 X 50 km) is interpreted to be remnant of a Paleoproterozoic orogenic mountain belt which developed as new ocean basin and arc crust interacted with Archean rocks of the Hearne and Superior cratons along complex convergent plate boundaries.
The Snow Lake Lithium™ Project is bisected by the regional Crowduck Bay Fault. The rocks on the eastern side of this fault consist of folded Missi Group sandstones (greywackes) and conglomerates, part of the Eastern Missi Block. To the west, across the fault, the Snow Lake Lithium™ Project is underlain by plutonic rocks intruding turbidites of the Burntwood Group, part of the Wekusko Lake Block.
There are two main clusters of spodumene-bearing pegmatite dykes on the Snow Lake Lithium™ Project are known as the Thompson Brothers and Grass River lithium pegmatites. These dyke clusters occur on either side of the Crowduck Bay Fault. The dykes are all tabular in form, but each cluster has a distinct orientation. Additional north-northeast trending pegmatite dykes have been mapped along the Crowduck Bay Fault corridor towards the north.
64
Thompson Brothers Lithium Pegmatites
The Thompson Brothers dykes are located on the east shore of Grass River linking Wekusko Lake with Crowduck Bay. Here, three mineralized dykes, the TB-1, 2 and 3, intrude Missi Group pebble to cobble conglomerates and greywackes. The Thompson Brothers dykes were drilled by Nova in 2017 and 2018.
Dyke TB-1 strikes 040° and dips about 85° SE. The Thompson Brothers deposit has been drill tested over a 1km strike and to a vertical depth of 1/2 km. The deposit averages 7 to 10m in true width. The mineralized dyke remains open to depth and along strike. Dyke TB-2 occurs to the north of TB-1 has been traced for about 400 m along strike. Based on limited drilling, dyke TB-2 is up to 2.8 m thick and its orientation is interpreted to be sub-parallel to dyke TB-1. Dyke TB-2 could represent the faulted northern extension of dyke TB-1 or an en-echelon, dilational structure. Dyke TB-2 remains open along strike to the north and to depth. Dyke TB-3 is located about 250 m to the northwest of dykes TB-1 and 2. TB-3 has been traced for about 150 m along strike. The TB-3 pegmatite is up to 2.0 m thick, strikes 040° and dips about 080° towards the northwest. In general, the Thompson Brothers dykes appear concordant with the northeast-trending foliation and strata.
Grass River Lithium Pegmatites
On April 10, 2018, we announced the discovery of a second pegmatite cluster on the Snow Lake Lithium™ Project. As part of our compilation of historical data, our consulting geologists discovered details on a cluster of spodumene-bearing pegmatite dykes located about 2 km southwest of the recently drilled Thompson Brothers lithium pegmatite. This cluster, known as the Grass River lithium pegmatites, intrudes the outermost quartz diorite phase of the Rex Lake Pluton and was traced about 600 m along strike by Sherritt Gordon Mines Limited in the 1940s. Dyke SG-1 ranges from 1.5 to 5 m in width and dips 80o to the southwest. Dyke SG-2 is thinner and located about 70 m to the northeast of SG-1 and dips 50o – 70o southwest.
The Grass River dykes intrude the outermost quartz diorite phase of the compositional zoned Rex Lake Pluton on the west side of the Grassy River narrows. Both dykes display some pinch and swell structures along strike, as well as slight changes in strike. Dyke SG-1 has been traced for about 500 meters, striking 1200 and dipping 80o to the southwest. Dyke SG-1 ranges from 10 cm to 5 meters in width and splits into 3 thinner subparallel dykes at its southeastern end. Dyke SG-2 has been traced for almost 400 m, striking parallel to SG-1 at about 70 m towards the east. The dyke dips 50o-70o to the southwest and its width varies between 1.5 cm and 4 meters.
A third outcropping pegmatite dyke (Grassy River pegmatite) is located about 150 meters south of Dyke SG-1 and SG-2. Here, three spodumene bearing outcrops have been mapped more than a 150 m strike length, trending east.
History of Snow Lake Lithium™ Project and Exploration Status
No records documenting the original discovery of lithium enriched pegmatite dykes on the Snow Lake Lithium™ Project have been located. Since the early 1940s various portions of the current Snow Lake Lithium™ Project have been explored by several companies. Certain target areas on the Snow Lake Lithium™ Project have been known as the “Sherritt Gordon Property,” the “Violet Property”, the “Strider Lithium Property.” and the “Thompson Brothers Lithium Property” and now the “Snow Lake Lithium™ Project”.
The highlights of the exploration history are summarized as follows:
In 1931, while working a gold showing near Crowduck Narrows on Wekusko Lake the Kobar brothers discovered a lithium deposit. After a good amount of trenching and clearing the property was optioned to Sherritt Gordon in 1942.
In 1942, Sherritt Gordon Mines drilled and cored 20 holes (632 meters), testing one of 2 spodumene bearing pegmatite dykes on the east side of the narrows linking Wekusko Lake to Crowduck Bay. These dykes were originally staked in 1931 by Peer Kobar.
In 1956, Combined Developments Ltd. explored parts of the property. The area was prospected, mapped and 26 cored drill holes were completed on the TB-1 pegmatite (2,356 meters).
65
From 1976 until 1987, the Thompson brothers explored part of the property. They completed several trenches and sampling. In 1978, they cored their first drill hole to a depth of 28.2 meters in 1979, hole #1 was deepened to 58.6 meters. In 1981, the Thompson brothers cored their second drill hole. Hole #2 was drilled to a depth of 61 meters.
In 1989, Lakefield Research metallurgical test work produced a spodumene concentrate from a sample taken from a trench on claim ADD 13. The assay head grade of the rock sample was 2.93% Li2O. The resulting concentrate was 5.19% Li2O.
In 1995, minor trenching and sampling of the TB-1 dyke was completed by Strider Resources. In 1996, a 1,600-meter by 400-meter grid was cut by Strider Resources with lines spaced at 50 meter intervals. In 1997, a three-hole drill program, totaling 930 meters, was completed.
In April 2016, Ashburton Ventures (now known as Progressive Planet Solutions Inc.) optioned the Snow Lake Lithium™ Project, at that time consisting of the 20 claims, from Strider Resources and entered into an option financing agreement with TBL (then known as MMPL), at that time Nova”s wholly-owned subsidiary. Through financing provided by MMPL, parts of the property were prospected, and an attempt was made to locate the historical drill holes. Nine surface samples of pegmatite were assayed. In the fall of 2016, a modest program of prospecting and soil sampling was completed. In the winter of 2017, five drill holes targeting the TB-1 pegmatite totaling 1,007 meters were cored.
In March and April 2018, Snow Lake Crowduck staked an additional 18 mineral claims (3,319 hectares, approximately 8,201.43 acres) contiguous with the original Snow Lake Lithium™ Project (20 claims, 2,277 hectares, approximately 5626.59 acres).
During the winter of 2018, TBL (then MMPL) cored 18 drill holes totaling 3,798 meters focusing on the Thompson Brothers pegmatite cluster. Drill sections and plans were prepared, and interpretations of the geology and mineralization were completed. A project data base was created and a model for the deposit has been developed.
In July 2021, we completed an S-K 1300 compliant resource estimate of an Indicated Resource of 9,082,600 tonnes of lithium bearing ore grading 1.00% Li2O, for 91,200 Li2O tonnes, and an Inferred Resource of 1,967,900 tonnes of lithium bearing ore grading 0.98% Li2O, for 19,300 Li2O tonnes. This S-K 1300 Report was prepared by Canmine Consultants and Nuterra Geoscience, each of whom served as Qualified Persons as that term is defined in S-K 1300. This estimate was prepared taking into consideration data density, deposit geometry, likely extensions and interpretive alternatives. A density factor of 2.70 t/m3 was used. Surpac version 6.4.1 was the software used to create the geological model and to estimate the resources.
Historical Mineral Processing and Metallurgical Testing
The Saskatchewan Research Council (“SRC”) completed a preliminary metallurgical testing program on the Snow Lake Lithium™ Project (Xia, L. and Adeoye, A., 2018). The primary objective of this preliminary testing program was to produce a spodumene concentrate with +6.0 % Li2O.
Test work was completed on a 55 kg composite sample of 67 individual assay reject samples crushed to -2.0 mm (10 mesh) received from SRC Geoanalytical Laboratories. All of the 67 individual assay rejects were combined and homogenized to create a composite feed sample. A head assay sample was taken from the homogenized composite sample for ICP analysis. The ICP analysis OLD indicated that the composite graded 1.43% Li2O.
The composite sample was ground to 100% passing 300 μm before being classified into two fractions: coarse fraction (53-300 μm) and fine fraction (-53 μm). Before flotation, de-sliming and magnetic separation were performed to minimize the interference of ultra fines (-38 μm) and magnetic (iron) materials on the flotation.
Preliminary flotation tests indicated that a spodumene concentrate with +6.0 % Li2O could be readily produced from the samples provided. The flotation process included one stage mica flotation, one stage spodumene rougher flotation, and five stages of cleaner flotations. H2SO4 was used to adjust the flotation pH in mica flotation. ArmacHT was used as the mica collector. Oleic acid was used as the spodumene collector. Vanofroth was used as the frother in all flotations. The reagent conditioning and dosages were not optimized.
66
Good spodumene concentrate can be produced from both coarse fraction (53-300 μm) and fine fraction (38-53 μm). A 43.3 % coarse recovery and a 22.9 % fine flotation recovery were achieved with concentrate grade of 6.35 % Li2O and 6.37% Li2O, respectively. A total 1905.5 g coarse spodumene concentrate with 6.35 % Li2O and 377.9 g fine spodumene concentrate with 6.37 % Li2O were produced. Mass balance and flotation optimization were not considered.
Xia and Adeoye recommend a second stage of test work including:
●Detailed mineralogy analysis including mineral association, liberation, grain size, etc.;
●Comminution test to determine crushing index and mill work index;
●Pre-concentration test to increase the feed grade such as sorting, gravity separation and magnetic separation;
●Flotation tests to determine the optimal reagent scheme and to maximize the Li2O recovery;
●Locked cycle flotation tests to validate the flotation performance and to establish mass balance; and,
●Further hydrometallurgical testing to produce better grade Li2CO3.
Currently, more advanced metallurgical testing is being conducted. We cannot be sure, however, when new test results will be available or what they will show.
A Metallurgical Investigation into the Potential Gravity and Flotation Recovery of Spodumene
In June 2022 we received the final report from PMC Laboratory Ltd of a 150kg sample sent from SGS-Lakefield.
The program's purpose was to conduct a metallurgical investigation into the potential for gravity and flotation recovery of spodumene. The information previously provided indicated the presence of coarse spodumene grains. The primary focus was to evaluate different processing methods with the goal of producing a saleable spodumene concentrate at an acceptable recovery rate.
This sample was determined to have a value of approximately 0.54% Li (1.16 Li2O) with good agreement between direct assays, calculated assays, SQ-XRD and TIMA/EDS measurements.
Heavy liquid separation tests achieved products with Li2O grades ranging between 3.7 and 7.0% in the specific gravity ranges of >2.8 <3.2, with a cumulative Li2O recovery of 57.7% into 10.4% of the HLS feed mass.
The Flotation feed material was prepared by crushing and grinding the as-received sample, followed by removing the fines and magnetic fractions.
Mineralogical findings support the major metallurgical observations and performance witnessed. Final flotation tailings spodumene is very coarse and recovery-limiting characteristics may include a combination of size, shape factor, interlocking of quartz and a surface expression of micas.
Further Metallurgical Testing of the Grass River Deposit Samples
The most recent metallurgical testwork was completed March 2023, SGS Lakefield has completed a scoping level metallurgical testwork program on the Grass River Lithium Deposit samples. The samples were crushed and screened at ½'’. The oversize fraction was sent for ore sorting testing with Steinert, and the passing fraction was stored for future testwork.
The objective of the tests was to achieve a final production of spodumene concentrate exceeding 6% and containing less than 1% Fe2O3, all while optimizing lithium recovery.
The Bond Ball Mill Work Index for the ore was determined to be 16.4 kWh/t. Magnetic separation effectively removed iron impurities, achieving less than 1.2% Fe2O3 after Dense Media Separation (DMS). The loss of lithium due to
67
magnetic separation was less than 0.4% for Grass River ore. Dense Media Separation tests for the Grass River deposit showed a concentrate grade of 6.45% Li2O, at 67% Li2O recovedry. Mid-sizes and fines were collected and further processed in a series of flotation, resulting in spodumene concentrate collected at 6.17% Li2O with a recovery of 91%. The combined Li2O recovery of the process is approximately 83.5%.
Ownership of the Snow Lake Lithium™ Project
The Snow Lake Lithium™ Project comprises 133 mineral claims, covering 24,515 hectares (approximately 60,577 acres).
Below is a list of the claim names, numbers, areas ownership and expiry dates. All claims are registered with the Manitoba Mineral Resources Division. Property surface rights are held by the Crown.
Number | Name | Disposition | Issue Date | Good To Date | Expiry Date | Area (ha) | Status | Note: |
MB1052 | ADD 1052 | Mining Claim | 2001-07-20 | 2030-07-20 | 2030-09-18 | 235 | GOOD STANDING | 1 |
MB1053 | ADD 1053 | Mining Claim | 2001-07-20 | 2030-07-20 | 2030-09-18 | 83 | GOOD STANDING | 1 |
MB12130 | BAZ 12130 | Mining Claim | 2017-12-05 | 2029-12-05 | 2030-02-03 | 192 | GOOD STANDING | 2 |
MB12132 | BAZ 12132 | Mining Claim | 2017-12-05 | 2030-12-05 | 2031-02-03 | 256 | GOOD STANDING | 2 |
MB12631 | PGB12631 | Mining Claim | 2022-10-12 | 2024-10-12 | 2024-12-11 | 240 | GOOD STANDING | 6 |
MB12632 | PGB12632 | Mining Claim | 2022-10-12 | 2024-10-12 | 2024-12-11 | 192 | GOOD STANDING | 6 |
MB12633 | PGB12633 | Mining Claim | 2022-10-12 | 2024-10-12 | 2024-12-11 | 240 | GOOD STANDING | 6 |
MB12634 | PGB12634 | Mining Claim | 2022-10-12 | 2024-10-12 | 2024-12-11 | 240 | GOOD STANDING | 6 |
MB12635 | PGB12635 | Mining Claim | 2022-10-12 | 2024-10-12 | 2024-12-11 | 240 | GOOD STANDING | 6 |
MB12900 | PGB2900 | Mining Claim | 2022-01-20 | 2024-01-20 | 2024-03-20 | 256 | GOOD STANDING | 5 |
MB12901 | PGB2901 | Mining Claim | 2022-01-20 | 2024-01-20 | 2024-03-20 | 256 | GOOD STANDING | 5 |
MB12902 | PGB2902 | Mining Claim | 2022-01-20 | 2024-01-20 | 2024-03-20 | 256 | GOOD STANDING | 5 |
MB12903 | PGB2903 | Mining Claim | 2022-01-21 | 2024-01-21 | 2024-03-21 | 256 | GOOD STANDING | 5 |
MB12904 | PGB2904 | Mining Claim | 2022-01-21 | 2024-01-21 | 2024-03-21 | 256 | GOOD STANDING | 5 |
MB12905 | PGB2905 | Mining Claim | 2022-01-21 | 2024-01-21 | 2024-03-21 | 256 | GOOD STANDING | 5 |
MB12906 | PGB2906 | Mining Claim | 2022-01-21 | 2024-01-21 | 2024-03-21 | 256 | GOOD STANDING | 5 |
MB12907 | PGB2907 | Mining Claim | 2022-01-21 | 2024-01-21 | 2024-03-21 | 256 | GOOD STANDING | 5 |
MB12908 | PGB2908 | Mining Claim | 2022-01-21 | 2024-01-21 | 2024-03-21 | 256 | GOOD STANDING | 5 |
MB12909 | PGB2909 | Mining Claim | 2022-01-21 | 2024-01-21 | 2024-03-21 | 112 | GOOD STANDING | 5 |
MB12910 | PGB2910 | Mining Claim | 2022-01-21 | 2024-01-21 | 2024-03-21 | 112 | GOOD STANDING | 5 |
MB12911 | PGB2911 | Mining Claim | 2022-01-21 | 2024-01-21 | 2024-03-21 | 256 | GOOD STANDING | 5 |
MB12912 | PGB2912 | Mining Claim | 2022-01-21 | 2024-01-21 | 2024-03-21 | 256 | GOOD STANDING | 5 |
MB12913 | PGB2913 | Mining Claim | 2022-01-21 | 2024-01-21 | 2024-03-21 | 256 | GOOD STANDING | 5 |
MB12914 | PGB2914 | Mining Claim | 2022-01-21 | 2024-01-21 | 2024-03-21 | 256 | GOOD STANDING | 5 |
MB12915 | PGB2915 | Mining Claim | 2022-01-21 | 2024-01-21 | 2024-03-21 | 256 | GOOD STANDING | 5 |
MB12916 | PGB2916 | Mining Claim | 2022-01-21 | 2024-01-21 | 2024-03-21 | 256 | GOOD STANDING | 5 |
MB12917 | PGB2917 | Mining Claim | 2022-01-21 | 2024-01-21 | 2024-03-21 | 256 | GOOD STANDING | 5 |
MB12918 | PGB2918 | Mining Claim | 2022-01-21 | 2024-01-21 | 2024-03-21 | 256 | GOOD STANDING | 5 |
MB12919 | PGB2919 | Mining Claim | 2022-01-21 | 2024-01-21 | 2024-03-21 | 256 | GOOD STANDING | 5 |
MB12920 | PGB2920 | Mining Claim | 2022-01-21 | 2024-01-21 | 2024-03-21 | 144 | GOOD STANDING | 5 |
MB12921 | PGB2921 | Mining Claim | 2022-01-21 | 2024-01-21 | 2024-03-21 | 174 | GOOD STANDING | 5 |
MB12922 | PGB2922 | Mining Claim | 2022-01-21 | 2024-01-21 | 2024-03-21 | 152 | GOOD STANDING | 5 |
MB12923 | PGB2923 | Mining Claim | 2022-01-21 | 2024-01-21 | 2024-03-21 | 256 | GOOD STANDING | 5 |
MB12924 | PGB2924 | Mining Claim | 2022-01-21 | 2024-01-21 | 2024-03-21 | 256 | GOOD STANDING | 5 |
MB12925 | PGB2925 | Mining Claim | 2022-01-21 | 2024-01-21 | 2024-03-21 | 256 | GOOD STANDING | 5 |
MB12926 | PGB2926 | Mining Claim | 2022-01-21 | 2024-01-21 | 2024-03-21 | 212 | GOOD STANDING | 5 |
MB12927 | PGB2927 | Mining Claim | 2022-01-21 | 2024-01-21 | 2024-03-21 | 202 | GOOD STANDING | 5 |
MB12928 | PGB2928 | Mining Claim | 2022-01-21 | 2024-01-21 | 2024-03-21 | 256 | GOOD STANDING | 5 |
MB12929 | PGB2929 | Mining Claim | 2022-01-21 | 2024-01-21 | 2024-03-21 | 256 | GOOD STANDING | 5 |
MB12934 | PGB2934 | Mining Claim | 2022-01-21 | 2024-01-21 | 2024-03-21 | 256 | GOOD STANDING | 5 |
MB12935 | PGB2935 | Mining Claim | 2022-01-21 | 2024-01-21 | 2024-03-21 | 256 | GOOD STANDING | 5 |
MB12936 | PGB2936 | Mining Claim | 2022-01-21 | 2024-01-21 | 2024-03-21 | 136 | GOOD STANDING | 5 |
MB12937 | PGB2937 | Mining Claim | 2022-01-21 | 2024-01-21 | 2024-03-21 | 64 | GOOD STANDING | 5 |
MB12938 | PGB2938 | Mining Claim | 2022-01-21 | 2024-01-21 | 2024-03-21 | 178 | GOOD STANDING | 5 |
MB12939 | PGB2939 | Mining Claim | 2022-01-21 | 2024-01-21 | 2024-03-21 | 256 | GOOD STANDING | 5 |
MB12940 | PGB2940 | Mining Claim | 2022-01-21 | 2024-01-21 | 2024-03-21 | 256 | GOOD STANDING | 5 |
MB12941 | PGB2941 | Mining Claim | 2022-01-25 | 2024-01-25 | 2024-03-25 | 256 | GOOD STANDING | 5 |
MB12942 | PGB2942 | Mining Claim | 2022-01-25 | 2024-01-25 | 2024-03-25 | 256 | GOOD STANDING | 5 |
MB12943 | PGB2943 | Mining Claim | 2022-01-25 | 2024-01-25 | 2024-03-25 | 256 | GOOD STANDING | 5 |
MB12944 | PGB2944 | Mining Claim | 2022-01-25 | 2024-01-25 | 2024-03-25 | 256 | GOOD STANDING | 5 |
MB12945 | PGB2945 | Mining Claim | 2022-01-25 | 2024-01-25 | 2024-03-25 | 256 | GOOD STANDING | 5 |
MB12946 | PGB2946 | Mining Claim | 2022-01-25 | 2024-01-25 | 2024-03-25 | 256 | GOOD STANDING | 5 |
MB12947 | PGB2947 | Mining Claim | 2022-01-25 | 2024-01-25 | 2024-03-25 | 256 | GOOD STANDING | 5 |
68
MB12954 | PGB2954 | Mining Claim | 2022-01-25 | 2024-01-25 | 2024-03-25 | 128 | GOOD STANDING | 5 |
MB12955 | PGB2955 | Mining Claim | 2022-01-25 | 2024-01-25 | 2024-03-25 | 256 | GOOD STANDING | 5 |
MB12956 | PGB2956 | Mining Claim | 2022-01-25 | 2024-01-25 | 2024-03-25 | 256 | GOOD STANDING | 5 |
MB12957 | PGB2957 | Mining Claim | 2022-01-25 | 2024-01-25 | 2024-03-25 | 256 | GOOD STANDING | 5 |
MB12958 | PGB2958 | Mining Claim | 2022-01-25 | 2024-01-25 | 2024-03-25 | 256 | GOOD STANDING | 5 |
MB12959 | PGB2959 | Mining Claim | 2022-01-25 | 2024-01-25 | 2024-03-25 | 128 | GOOD STANDING | 5 |
MB12960 | PGB2960 | Mining Claim | 2022-01-25 | 2024-01-25 | 2024-03-25 | 256 | GOOD STANDING | 5 |
MB12961 | PGB2961 | Mining Claim | 2022-01-25 | 2024-01-25 | 2024-03-25 | 256 | GOOD STANDING | 5 |
MB12962 | PGB2962 | Mining Claim | 2022-01-25 | 2024-01-25 | 2024-03-25 | 128 | GOOD STANDING | 5 |
MB12963 | PGB2963 | Mining Claim | 2022-01-25 | 2024-01-25 | 2024-03-25 | 256 | GOOD STANDING | 5 |
MB12964 | PGB2964 | Mining Claim | 2022-01-25 | 2024-01-25 | 2024-03-25 | 256 | GOOD STANDING | 5 |
MB12965 | PGB2965 | Mining Claim | 2022-01-25 | 2024-01-25 | 2024-03-25 | 128 | GOOD STANDING | 5 |
MB12967 | ROCH2967 | Mining Claim | 2022-01-30 | 2024-01-30 | 2024-03-30 | 72 | GOOD STANDING | 5 |
MB12968 | ROCH2968 | Mining Claim | 2022-01-30 | 2024-01-30 | 2024-03-30 | 256 | GOOD STANDING | 5 |
MB12969 | ROCH2969 | Mining Claim | 2022-01-30 | 2024-01-30 | 2024-03-30 | 139 | GOOD STANDING | 5 |
MB12970 | ROCH2970 | Mining Claim | 2022-01-30 | 2024-01-30 | 2024-03-30 | 248 | GOOD STANDING | 5 |
MB12972 | ROCH2972 | Mining Claim | 2022-01-30 | 2024-01-30 | 2024-03-30 | 99 | GOOD STANDING | 5 |
MB12973 | ROCH2973 | Mining Claim | 2022-01-30 | 2024-01-30 | 2024-03-30 | 75 | GOOD STANDING | 5 |
MB12974 | ROCH2974 | Mining Claim | 2022-10-12 | 2024-10-12 | 2024-12-11 | 89 | GOOD STANDING | 6 |
MB12975 | ROCH2975 | Mining Claim | 2022-10-12 | 2024-10-12 | 2024-12-11 | 148 | GOOD STANDING | 6 |
MB12976 | ROCH2976 | Mining Claim | 2022-10-12 | 2024-10-12 | 2024-12-11 | 104 | GOOD STANDING | 6 |
MB12977 | PGB12977 | Mining Claim | 2022-10-12 | 2024-10-12 | 2024-12-11 | 216 | GOOD STANDING | 6 |
MB12978 | PGB12978 | Mining Claim | 2022-10-12 | 2024-10-12 | 2024-12-11 | 192 | GOOD STANDING | 6 |
MB12979 | PGB2979 | Mining Claim | 2022-10-12 | 2024-10-12 | 2024-12-11 | 192 | GOOD STANDING | 6 |
MB13493 | TBL 001 | Mining Claim | 2018-04-06 | 2025-04-06 | 2025-06-05 | 256 | GOOD STANDING | 3 |
MB13494 | TBL 002 | Mining Claim | 2018-04-06 | 2025-04-06 | 2025-06-05 | 243 | GOOD STANDING | 3 |
MB13495 | TBL 003 | Mining Claim | 2018-04-06 | 2025-04-06 | 2025-06-05 | 78 | GOOD STANDING | 3 |
MB13496 | TBL 004 | Mining Claim | 2018-04-06 | 2025-04-06 | 2025-06-05 | 151 | GOOD STANDING | 3 |
MB13497 | TBL 005 | Mining Claim | 2018-04-06 | 2025-04-06 | 2025-06-05 | 67 | GOOD STANDING | 3 |
MB13498 | TBL 006 | Mining Claim | 2018-04-06 | 2025-04-06 | 2025-06-05 | 230 | GOOD STANDING | 3 |
MB13499 | TBL 007 | Mining Claim | 2018-04-06 | 2025-04-06 | 2025-06-05 | 185 | GOOD STANDING | 3 |
MB13500 | TBL 008 | Mining Claim | 2018-04-06 | 2025-04-06 | 2025-06-05 | 78 | GOOD STANDING | 3 |
MB13501 | TBL 009 | Mining Claim | 2018-04-06 | 2025-04-06 | 2025-06-05 | 206 | GOOD STANDING | 3 |
MB13502 | TBL 010 | Mining Claim | 2018-04-06 | 2025-04-06 | 2025-06-05 | 173 | GOOD STANDING | 3 |
MB13503 | TBL 011 | Mining Claim | 2018-04-06 | 2025-04-06 | 2025-06-05 | 72 | GOOD STANDING | 3 |
MB13504 | TBL 012 | Mining Claim | 2018-04-06 | 2025-04-06 | 2025-06-05 | 250 | GOOD STANDING | 3 |
MB13505 | TBL 013 | Mining Claim | 2018-04-06 | 2025-04-06 | 2025-06-05 | 237 | GOOD STANDING | 3 |
MB13506 | TBL 014 | Mining Claim | 2018-04-06 | 2025-04-06 | 2025-06-05 | 121 | GOOD STANDING | 3 |
MB13507 | TBL 015 | Mining Claim | 2018-04-06 | 2025-04-06 | 2025-06-05 | 256 | GOOD STANDING | 3 |
MB13508 | TBL 016 | Mining Claim | 2018-04-06 | 2025-04-06 | 2025-06-05 | 220 | GOOD STANDING | 3 |
MB13509 | TBL 017 | Mining Claim | 2018-04-06 | 2025-04-06 | 2025-06-05 | 240 | GOOD STANDING | 3 |
MB13510 | TBL 018 | Mining Claim | 2018-04-06 | 2025-04-06 | 2025-06-05 | 256 | GOOD STANDING | 3 |
MB13784 | HERB 15 | Mining Claim | 2021-06-23 | 2024-06-23 | 2024-08-22 | 60 | GOOD STANDING | 4 |
MB13785 | HERB 5 | Mining Claim | 2021-06-24 | 2024-06-24 | 2024-08-23 | 64 | GOOD STANDING | 4 |
MB13851 | HERB 1 | Mining Claim | 2021-06-19 | 2024-06-19 | 2024-08-18 | 240 | GOOD STANDING | 4 |
MB13852 | HERB 2 | Mining Claim | 2021-06-19 | 2024-06-19 | 2024-08-18 | 256 | GOOD STANDING | 4 |
MB13853 | HERB 3 | Mining Claim | 2021-06-19 | 2024-06-19 | 2024-08-18 | 189 | GOOD STANDING | 4 |
MB13854 | HERB 4 | Mining Claim | 2021-06-19 | 2024-06-19 | 2024-08-18 | 82 | GOOD STANDING | 4 |
MB13855 | HERB 21 | Mining Claim | 2021-06-24 | 2024-06-24 | 2024-08-23 | 50 | GOOD STANDING | 4 |
MB13856 | HERB 6 | Mining Claim | 2021-06-19 | 2024-06-19 | 2024-08-18 | 163 | GOOD STANDING | 4 |
MB13857 | HERB 7 | Mining Claim | 2021-06-19 | 2024-06-19 | 2024-08-18 | 88 | GOOD STANDING | 4 |
MB13858 | HERB 8 | Mining Claim | 2021-06-22 | 2024-06-22 | 2024-08-21 | 174 | GOOD STANDING | 4 |
MB13859 | HERB 9 | Mining Claim | 2021-06-22 | 2024-06-22 | 2024-08-21 | 246 | GOOD STANDING | 4 |
MB13860 | HERB 10 | Mining Claim | 2021-06-22 | 2024-06-22 | 2024-08-21 | 252 | GOOD STANDING | 4 |
MB13861 | HERB 11 | Mining Claim | 2021-06-20 | 2024-06-20 | 2024-08-19 | 250 | GOOD STANDING | 4 |
MB13862 | HERB 12 | Mining Claim | 2021-06-20 | 2024-06-20 | 2024-08-19 | 138 | GOOD STANDING | 4 |
MB13863 | HERB 13 | Mining Claim | 2021-06-23 | 2024-06-23 | 2024-08-22 | 138 | GOOD STANDING | 4 |
MB13864 | HERB 14 | Mining Claim | 2021-06-23 | 2024-06-23 | 2024-08-22 | 219 | GOOD STANDING | 4 |
MB13865 | HERB 22 | Mining Claim | 2021-06-24 | 2024-06-24 | 2024-08-23 | 56 | GOOD STANDING | 4 |
MB13866 | HERB 16 | Mining Claim | 2021-06-23 | 2024-06-23 | 2024-08-22 | 40 | GOOD STANDING | 4 |
MB13867 | HERB 17 | Mining Claim | 2021-06-23 | 2024-06-23 | 2024-08-22 | 106 | GOOD STANDING | 4 |
MB13868 | HERB 18 | Mining Claim | 2021-06-24 | 2024-06-24 | 2024-08-23 | 32 | GOOD STANDING | 4 |
MB13869 | HERB 19 | Mining Claim | 2021-06-24 | 2024-06-24 | 2024-08-23 | 124 | GOOD STANDING | 4 |
MB13870 | HERB 20 | Mining Claim | 2021-06-24 | 2024-06-24 | 2024-08-23 | 220 | GOOD STANDING | 4 |
MB5735 | CRO 5735 | Mining Claim | 2010-02-11 | 2030-02-11 | 2030-04-12 | 216 | GOOD STANDING | 2 |
MB5736 | CRO 5736 | Mining Claim | 2010-02-11 | 2030-02-11 | 2030-04-12 | 202 | GOOD STANDING | 2 |
MB5737 | CRO 5737 | Mining Claim | 2010-02-11 | 2030-02-11 | 2030-04-12 | 250 | GOOD STANDING | 2 |
MB6301 | ADD 6301 | Mining Claim | 2006-03-24 | 2030-03-24 | 2030-05-23 | 110 | GOOD STANDING | 1 |
MB6303 | ADD 6303 | Mining Claim | 2008-03-17 | 2030-03-17 | 2030-05-16 | 180 | GOOD STANDING | 1 |
MB6305 | ADD 6305 | Mining Claim | 2009-02-11 | 2030-02-11 | 2030-04-12 | 224 | GOOD STANDING | 1 |
69
MB9830 | ADD 9830 | Mining Claim | 2018-03-06 | 2030-03-06 | 2030-05-05 | 40 | GOOD STANDING | 1 |
P2818F | ADD 13 | Mining Claim | 1994-09-30 | 2030-09-30 | 2030-11-29 | 16 | GOOD STANDING | 1 |
P3033F | ADD 3033 | Mining Claim | 1995-04-21 | 2031-04-21 | 2031-06-20 | 32 | GOOD STANDING | 1 |
P3035F | ADD 3035 | Mining Claim | 1995-04-21 | 2030-04-21 | 2030-06-20 | 53 | GOOD STANDING | 1 |
P3203F | ADD 3203 | Mining Claim | 1995-09-11 | 2030-09-11 | 2030-11-10 | 82 | GOOD STANDING | 1 |
P7463B | THOMPSON #2 | Mining Claim | 1964-11-05 | 2032-11-05 | 2031-01-04 | 21 | GOOD STANDING | 1 |
P7464B | THOMPSON #3 | Mining Claim | 1964-11-05 | 2032-11-05 | 2031-01-04 | 21 | GOOD STANDING | 1 |
W47378 | THOMPSON 7 | Mining Claim | 1982-07-08 | 2030-07-08 | 2030-09-06 | 16 | GOOD STANDING | 1 |
W47380 | THOMPSON 6 | Mining Claim | 1982-07-08 | 2033-07-08 | 2031-09-06 | 16 | GOOD STANDING | 1 |
W49853 | ADD 49853 | Mining Claim | 1996-04-22 | 2033-04-22 | 2031-06-21 | 32 | GOOD STANDING | 1 |
1 -These claims were optioned 100% from Strider Resources, by Progressive Planet Solutions (PLAN) (formerly named Ashburton Ventures) April 21, 2016. September 26, 2016 Thompson Bros (Lithium) Pty Ltd (TBL) (formerly named Manitoba Minerals PTY Ltd) optioned 100% rights of them from PLAN by funding the requirements of the Strider Option. April 12, 2017 the PLAN / TBL Option was amended to reduce the right to just 80% option purchase. November 14, 2018 PLAN optioned the rights to the remaining 20% option to Snow Lake. November 15, 2018 PLAN and Strider amended their option to allow the sale of 100% of the project to Snow Lake via TBL. March 08, 2019 Snow Lake purchased TBLPL from Nova (TBL had 80% rights to the project). At this time Snow Lake held 20% from PLAN, and the remaining 80% through their purchase of TBL from Nova. April 12, 2019 all option requirements were fulfilled and the property was 100% held by Snow Lake (subject to 2% NSR)
2 -These two claims were added to the Option agreement as they were staked within the area of material interest. Snow Lake paid the staking costs to Strider and they were added to the option.
3 -These claims were staked by the Company on or around April 4, 2018
4 -These claims were staked by the Company during May and June, 2021
5 -These claims were staked by the Company during December 2021 and January 2022.
6 -These claims were staked by the Company in September 2022.
Permitting in Manitoba
All mineral claims in good standing on Crown land in Manitoba are entitled to be explored without any permitting, except as indicated below. All mineral exploration programs in Manitoba require work permits for timber removal, shoreland alteration and road construction that are issued annually by the provincial Department of Conservation and Climate. For more intrusive explorations, such as line cutting (using chain saws), overburden stripping, blasting and/or diamond drilling, a work permit granted under Section 7(1)(c) of The Crown Lands Act or Section 23 (1) of The Wildfires Act, Province of Manitoba would be required. Permits address conditions for exploration that must be adhered to in a given work area based on the planned exploration activities.
The type and duration of the camp infrastructure required for exploration also dictates the type of permit required in Manitoba. Temporary camps established for less than one year are covered by a work permit, whereas a separate permit issued by the Manitoba Department of Labor - Fire Commissioners Office is required for exploration camps on Crown land established for periods longer than one year.
For advanced exploration and exploitation (also known as mining), we will need to consult with government officials in order to determine the necessary permits. Permitting processes will be included in the scope of our PFS.
We currently hold the following exploration or exploitation permits from the Manitoba government:
Company |
| License/Permit |
| Issuing Authority |
| Issuance Date |
| Term |
Snow Lake Resources Ltd. |
| Work Permit to drill program on Crown (Manitoba) lands |
| Manitoba Mineral Resources Department |
| April 29, 2022 |
| April 30, 2025 |
Snow Lake Resources Ltd. |
| Work Permit to drill program on Crown (Manitoba) lands |
| Manitoba Mineral Resources Department |
| June 13, 2022 |
| April 30, 2025 |
70
Climate, Local Resources, Infrastructure and Physiography
Climate
The Snow Lake region is marked by short, cool summers and long, cold winters. The region has a sub-humid high boreal climate.
The mean summer temperature is 12.5°C (54.5°F ) and the mean winter temperature is -18.5°C (-1.3°F ). The temperatures are highest on average in July, at around 17.0°C. January is the coldest month, averaging -23.3°C. The mean annual temperature is approximately -2.5°C. The area is generally clear of snow cover between the beginning of June and the end of September.
The mean annual precipitation is about 450 mm, 35% as snow. The least amount of precipitation occurs in February, averaging 16 mm. The most rainfall occurs in July, averaging 74 mm. Average monthly winds for the area range from 10 km/hr to 13 km/hr, with 40% of the winds originating from the NW, NE or N. Exploration activities can be carried out all year around.
Local vegetation consists of closed stands of black spruce and jack pine, with lesser aspen, white birch, white spruce and balsam fir. Permafrost may occur locally in organic deposits. Wildlife includes moose, black bear, lynx, wolf, barren-ground caribou, beaver, muskrat, snowshoe hare and red-backed vole. Bird species include raven, common loon, spruce grouse, bald eagle, grey jay, hawk owl and waterfowl, including ducks and geese.
Local Resources
Snow Lake is the closest community to the Snow Lake Lithium™ Project . Snow Lake had a permanent resident population of 1,088 in 2021 and has 604 private dwellings. There are two small residential subdivisions located on Wekusko Lake along Highway 392, as well as cottages at Herb Lake and Cotes Landings. There are also a small number of seasonal remote cabins located on Wekusko Lake. The Wekusko Falls Provincial Park (88 ha) is located on the east side of Wekusko Lake and offers camping. The Wekusko Falls Lodge provides accommodations and meals.
Snow Lake is an established mining community and has the infrastructure in place to support exploration and mining operations in the region. Services include a health facility staffed with one doctors, an ambulance, three fire truck, a 3-person RCMP detachment, an RBC bank branch, grocery and hardware stores, one hotels/motel, two service stations, a kindergarten to grade 12 school, a hockey arena, a five-sheet curling rink and a nine-hole golf course. A small-craft charter service operates out of the community of Snow Lake, where small planes and helicopters can be chartered. There is a 1,100 m by 20 m municipal gravel airstrip located approximately 8.5 km northwest of the Snow Lake Lithium™ Project. The nearest rail access is at the Wekusko siding, approximately 65 km southeast of the Snow Lake Lithium™ Project.
71
The nearest larger population centres include Flin Flon (208 km) and Thompson (260 km), both accessible by paved highway. Flin Flon, with a population of 7,000, is a nearby provincial regional government centre and a major service and supply centre for the region. The nearest full-service commercial airport is located at Baker’s Narrows, near Flin Flon. The nearest international airport is located in Winnipeg.
The Snow Lake region has a history of virtually continuous production from a series of base and precious metal mines since 1949. Hudbay Minerals Inc., or Hudbay, currently operates the Lalor gold mine, located about 8 km west of Snow Lake. Hudbay also operates a 2,700 tonne per day zinc and copper concentrator in Snow Lake.
Infrastructure
Gridding, trenching, stripping and road building in the target areas on the Snow Lake Lithium™ Project, we expect, should be easily accomplished. Ample water is available for drilling purposes.
There are no permanent or temporary structures on the Snow Lake Lithium™ Project, and we have not established any exploration infrastructure on the property.
The area of the Snow Lake Lithium™ Project is sufficiently large to host a mining operation. A power line traverses the southern extremity of the property. The valley located directly east of the property could serve as a potential tailing storage area. Winter access roads to the Snow Lake Lithium™ Project can be used for hauling purposes.
Physiography
The Snow Lake Lithium™ Project is located along the southern edge of the Precambrian Shield within the Wekusko Eco-district, Churchill River Upland Eco-region, Boreal Shield Eco-zone.
The Snow Lake Lithium™ Project straddles Crowduck Bay at the northeastern end of Lake Wekusko. Wekusko Lake is a large, shallow body of water covering an area of approximately 25 km long by 3 to 10 km wide. Crowduck Bay is part of a long (12 km) narrow channel leading to the Grass River that continues towards the northeast. Most of the shoreline of Crowduck Bay is flanked by steep, 15 to 20 m slopes. The lake elevation is approximately 257.5 m above sea level and the highest topographical point on the Snow Lake Lithium™ Project is approximately 305 m above sea level. Most ridges and low-lying areas trend towards the northeast.
The dominant soils are well to excessively drained dystic brunisols that have developed on shallow, sandy and stony veneers of water-worked glacial till overlying bedrock. Significant areas consist of peat-filled depressions with very poorly drained Typic and Terric Fibrisolic and Mesisolic Organic soils overlying loamy to clayey glaciolacustrine sediments.
Geological Setting and Mineralization
Regional Geological Setting
The Snow Lake Lithium™ Project is located in the Churchill geological province at the eastern end of the Flin Flon Belt. The Flin Flon Belt (1.92-1.88 Ga) is one of the largest Proterozoic volcanic-hosted massive sulphide districts in the world. More than 118.7 Mt have been mined from 25 distinct deposits and a further 64.3 Mt are contained in 43 sub-economic or pre-production deposits.
The east-trending Flin Flon Volcanic Belt (230 X 50 km) is interpreted to be remnant of a Paleoproterozoic orogenic mountain belt, which developed as new ocean basin and arc crust interacted with Archean rocks of the Hearnne and Superior cratons along complex convergent plate boundaries. To the north of the Flin Flon belt lies the east-trending Kisseynew Sedimentary Gneiss Belt. Located to the south of the Flin Flon belt are the flat-lying Paleozoic rocks of the Western Canada Sedimentary Basin.
72
Local Geological Setting and Lithium Mineralization
The bedrock geology to the east of Wekusko Lake consists of several fault-bounded blocks of juvenile ocean floor, arc related volcanic rocks and fluvial–alluvial and turbiditic sedimentary rocks. The Western Missi Block is bounded by the Crowduck Bay fault to the east and the Herb Lake Fault the west and the strata are folded into a tight syncline. The Missi Group rocks (1.85-1.83 Ga), are dominantly sedimentary, but do contain rare, thin units of interbedded felsic volcanic rocks. The sedimentary rocks consist of polymictic conglomerates, greywackes and sandstones interpreted to have been deposited in an alluvial-fluvial environment. Across the Herb Lake Fault towards the southeast, the Herb Lake Block consists of a folded sequence of mafic to felsic volcanic rocks. Basalts dominate in the core of the fold, with basaltic andesites and andesites becoming more prevalent as the contact with the felsic volcanic rocks is approached. The Herb Lake Volcanic Assemblage is intruded by quartz porphyritic granites, which are themselves cut by the faults bounding the Herb Lake Block. To the northeast, the North Roberts Lake Block is characterized by mafic volcanic rocks (1.92-1.87) interpreted as ocean floor. Towards the west, across the Crowduck Bay Fault, the Central Wekusko Block consists of sedimentary strata dominated by turbidites of the Burntwood Group (1.85-1.84 Ga) and intruded by plutonic rocks.
To the east of Wekusko Lake there are three main clusters of spodumene-bearing pegmatite dykes known as the Thompson Brothers, Sherritt Gordon and Zoro pegmatites. The Thompson Brothers and Sherritt Gordon pegmatites both occur on the Snow Lake Lithium™ Project. The Zoro pegmatites are located about 5 km east of the Snow Lake Lithium™ Project and are not part of the project. The Zoro property is being explored by Foremost Lithium Ltd. Commonalities in mineralogy, textures and form exist between all 3 dyke clusters; however, they each occur in separate fault bounded crustal blocks and have different orientations. All 3 dyke clusters are interpreted to have been emplaced into fracture systems during the latest regional D5 structural event recognized in the area.
73
Project Geology and Lithium Mineralization
The Snow Lake Lithium™ Project is bisected by the regional Crowduck Bay Fault. The rocks on the eastern side of this fault consist of folded Missi Group sandstones (greywackes) and conglomerates, part of the Eastern Missi Block. To the west, across the fault, the Snow Lake Lithium™ Project is underlain by plutonic rocks intruding turbidites of the Burntwood Group, part of the Wekusko Lake Block.
The Thompson Brothers (TBL) and Grass River Swarm (GRS) spodumene bearing, lithium-enriched pegmatite dyke clusters occur on either side of the Crowduck Bay Fault. The dykes are all tabular in form, but each cluster has a distinct orientation. Additional north-northeasterly trending pegmatite dykes have been mapped along the Crowduck Bay fault corridor towards the north.
Mineralogy
No detailed mineralogical studies have been completed by us. Cerny et al., (1980) reports that the mineralogy of the Thompson Brothers and Sherritt Gordon pegmatite clusters are similar and composed of spodumene, quartz, microcline, with lesser muscovite, biotite, garnet, beryl and apatite. Modal spodumene abundance ranges between 10 and 20% and commonly occurs as large, well formed, columnar crystals raging between 1 and 35 cm in length. The spodumene crystals are commonly in planar alignment and may be oriented obliquely to the dyke contacts. These
74
textures have been interpreted to be the result of continuous crystallization in slowly opening fractures. Mineralogical and geochemical characterization studies have been initiated with Dr. Mostafa Fayek at the Department of Geological Sciences, University of Manitoba with support from Snow Lake Lithium.
Thompson Brothers (TBL) Dykes
The TBL spodumene-bearing dykes are located on the east shore of Grass River linking Wekusko lake with Crowduck Bay. Here, three mineralized dykes, the TB-1, 2 and 3, intrude Missi Group pebble to cobble conglomerates and greywackes. The Thompson Bros spodumene-bearing lithium rich dykes were drilled by Nova in 2017 and 2018.
Pegmatite TB-1 is illustrated in plan, longitudinal section and cross-section. The TB-1 dyke was intersected by 24 drill holes during the 2017-2018 season, and an additional 30 drill holes in 2022. Dyke TB-1 strikes 040° and dips about 85o SE. The Thompson Brothers deposit has now been drill tested to over a 1km strike length and to a vertical depth of 1/2 Km. The deposit averages 7 to 10m in true width. Dyke TB-1 has two drill intercepts at a vertical depth of about 350 m. The mineralized dyke remains open to depth and along strike to the north and south. The Li2O grades are typically consistent across the width of the dyke; however, locally, the margins of the dyke fall below the cut-off grade of 0.30 % Li2O.
Dyke TB-2 occurs to the north of TB-1 has been traced for about 400 m along strike. This dyke has not been located in surface outcrops. Based on limited drilling, dyke TB-2 is up to 2.8 m thick and its orientation is interpreted to be sub-parallel to dyke TB-1. Dyke TB-3 is located about 250 m to the northwest of dykes TB-1 and 2. TB-3 has been traced for about 150 m along strike. The TB-3 pegmatite is up to 2.0 m thick, strikes 040° and dips about 080° towards the northwest.
All the TBL dykes are sub-parallel to the northeast-trending foliation and strata in general. Dyke TB-2 could represent the faulted northern extension of dyke TB-1 or an en-echelon, dilational structure. Dyke TB-2 remains open along strike to the north and to depth.
Bannatyne (1985) noted 2 additional spodumene bearing pegmatites about 500 m south of the TBL-1. Both dykes are exposed along the steep east shore of Grass River Narrows. These dykes have not been mapped or sampled to date.
75
76
Grass River (GR) Dykes
Following drilling done in 2022 the third dyke was confirmed yet it needs further drilling to prove if this is two over lapping dykes or it stepover to offset it.
The GR dykes intrude the outermost quart diorite phase of the compositional zoned Rex Lake Pluton on the west side of the Grassy River Narrows. Both dykes display some pinch and swell structures along strike, as well as slight changes in strike.
Dyke SG-1 has been traced for about 500 m, striking 1200 and dipping 800 SW. Dyke SG-1 ranges from 10 cm to 5 m in width and splits into 3 thinner subparallel dykes at its southeastern end. Dyke SG-1 is asymmetric, with the grain size increasing to the hanging-wall contact, and some accumulation of the spodumene, quartz and blocky K-feldspar along this contact.
Dyke SG-2 has been traced for almost 400 m, striking parallel to SG-1 at about 70 m towards the east. The dyke dips 500-700 SW and its width ranges between 1.5 cm and 4 m. Dyke SG-2 seems to be homogeneous in mineral distribution, and it shows only some coarsening of grain size inwards.
In 1942, the SG-1 pegmatite was drill tested by Sherritt Gordon Mines Limited (now known as Sherritt Inc.). Some 21 shallow drill holes were cored (632 m). Rather than reporting assays for lithium, results in the historical drill logs are reported in “Gravitational Determination Percent Spodumene” which are qualitative in nature and should not be
77
relied upon. The historical drilling results yielded average estimated spodumene contents ranging from 7.22 – 31.9% over widths ranging from 1.52 - 5.79 m. One 2018 reconnaissance grab sample from the SG-1 dyke graded 2.15 % Li2O. The SG-1 pegmatite was drill tested to a depth of 50 m and remains open to depth.
The Grass River pegmatites are interpreted to have intruded sub-parallel late stage, en-echelon fractures that were subsequently deformed and locally displaced. If both dykes continue to depth, they could merge or intersect at a depth of about 160 m.
A third outcropping pegmatite dyke was discovered in during field reconnaissance in 2018. The Grass River pegmatite is located about 150 m south of the GR dykes. Here, three spodumene bearing outcrops were mapped over a 150 m strike length, trending east. One grab sample from the GR dyke graded 3.78 % Li2O.
2022 Exploration Activities for Snow Lake Lithium™ Project
We have concluded an exploration and resource development drilling program that included resource definition drilling of the TB-1 pegmatite as well as exploration drilling of the SG pegmatite cluster targets. The preliminary details are discussed below.
TBL Pegmatite Dyke
During the 2022 winter, spring and summer months, the TBL pegmatite dyke was drilled to further define and extend the resource previously announced. An additional 30 drill holes were completed on the TBL dyke along with a further 8 holes on a northeast extension to the TBL dyke denoted as the BYP drill holes. A total of 7,688 m of drilling on the TBL dyke and 1,136 m of drilling on the BYP extension was completed. Geological logging and sampling of the spodumene-bearing pegmatite intersections showed strong continuation of the mineralization, both along strike and at depth.
GR Pegmatite and Related Dykes
The GR dykes to the southwest of the TBL dyke were the target of further exploration and drilling during the last year. Ground exploration and drilling further defined the GR dykes and defined two additional sets of related dykes, denoted “Crowduck Bay Pegmatite’ (CBP) and “Grass River Pegmatite” (GRP). These dyke sets pinch and swell as they intrude the host country rock, and are mineralogically similar to the TBL dyke. Spodumene crystals in these dykes are noted to be coarser grained than their counterparts in the TBL dyke. Preliminary survey data indicates an overall southeast strike and southwest azimuth dip to the dykes.
Analysis of ongoing surveys will further define the strike and dip of the SGP, CBP and GRP dykes. A total of 46 drill holes were completed on these dyke sets, resulting in 9,186 meters of rock drilled.
Development Activities
Drilling was performed to obtain samples for metallurgical and geotechnical evaluation of the pegmatites and host rocks. The completion of 15 drill holes yielded a one-ton sample of pegmatite ore for the TBL main dyke and 14 drill holes for the GR dyke set. The contract for the metallurgical work was awarded to SGS Laboratories Canada Inc. of Lakefield, Ontario. From both the TBL and GR dikes, geotechnical holes were drilled to collect wall and ore rock samples for geotechnical investigations. A total of 10 geotechnical holes were drilled, providing 556 meters of rock for sampling. The geotechnical analyses have been outsourced to the University of Saskatchewan.
We contracted with SLR Consulting (Canada) Ltd. to conduct a two-year baseline environmental study that includes water, soil, and acoustic studies. The study is presently in progress. Furthermore, Western Heritage Ltd. is conducting an archaeological survey and evaluation of the Snow Lake Lithium™ Project.
In the summer of 2022, we conducted a Lidar survey, and it will be utilized to map road construction to the Grass River outcrop and drilling region.
78
In spring of 2023, we conducted a large helicopter borne magnetometer survey to analyze the geophysical trace of the non-magnetic pegmatite dykes. We recently received the results of this extensive survey over our newest claim area to the east of the original claim block. We look forward to analyzing this data in greater depth.
An updated mineral resource estimate is expected by the end of 2024 once drilling is completed in winter 2023/24 and all of the assays have been received and detailed surveys of the drill collars has been completed.
Our Competitive Strengths
We believe that the following competitive strengths contribute to our success and differentiate us from our competitors:
●Our initial metallurgical test work has yielded a spodumene concentrate grading 6.37% Li2O. Initial metallurgical test work demonstrates the Snow Lake Lithium™ Project can produce a concentrate material of 6.37% Li2O using standard metallurgical laboratory test techniques, indicating the likelihood that industry relevant amounts of concentrate can be produced.
●Our Snow Lake Lithium™ Project is large and, we believe, is host to valuable lithium resources. Our Snow Lake Lithium™ Project comprises 24,515 hectares (approximately 60,577 acres) and is host to spodumene bearing, lithium-enriched pegmatite dykes and other targets that could potentially contribute to a future lithium resource. Our Snow Lake Lithium™ Project hosts several identified spodumene pegmatite dykes with high-grade lithium found to date. With only 1% of the Snow Lake Lithium™ Project explored to date, we believe that there are many additional lithium bearing pegmatites on the Snow Lake Lithium™ Project yet to be explored.
●Historic flotation tests indicate that a spodumene concentrate with +6.0% Li2O may be readily produced from the deposit. We announced in 2018 outstanding new high-grade drill results at the Snow Lake Lithium™ Project, with release of the complete data set from the recent phase of drilling. The results confirm a high-grade and consistent lithium bearing pegmatite dyke in the Snow Lake Lithium™ Project that appears open at depth and along strike at both ends. Additional dykes were also identified and require further follow up expected as part of the next field program as weather conditions permit.
●No significant technical challenges related to exploration and development of the deposits have been identified. We expect, although we cannot guarantee, that our drill hole database and their interpretation will be used to support the planning of future drilling programs. No significant technical challenges related to exploration and development of these deposits have been identified to date.
●We are strategically located in the North American market. Our Snow Lake Lithium™ Project is located in proximity to major downstream lithium processing facilities as well as to major US battery customers including General Motors, BMW, Nissan, Mercedes and Tesla automobile manufactures. With Snow Lake’s access to the Hudson Bay railway just 65 km from the Snow Lake Lithium™ Project, our project is strategically located close to the CN rail lines to deliver lithium product to the entire Auto Alley market.
●Leadership team of experienced mining executives and operators, with a track record of de-risking and delivering. We believe that our management team’s background and experience in the mining industry will enable us to achieve growth. Our management team consists of members with extensive experience in the mining industry.
Our Growth Strategies
We have developed a strategic plan for further exploration and development of the Snow Lake Lithium™ project that includes the following milestones:
● Complete preliminary feasibility study. We are planning to undertake a PFS on the Snow Lake Lithium™ Project. This represents the next step in the process of moving from exploration towards the potential to establish commercial operations. The study will review the test work, process design, vendor furnished equipment packages and preliminary design in addition to cost estimates for the development of a commercial spodumene processing plant.
79
●Complete next stage of resource exploration drilling leading to an updated mineral resource estimate We intend to continue drilling to both upgrade our mineral resources, as well as to explore for extensions to the existing mineral resources.
●Acquisitions of additional lithium properties and projects. In addition to our organic growth strategy of developing the Snow Lake Lithium™ Project, we intend to engage in strategic acquisitions of additional lithium properties and projects of merit.
Marketing and Advertising
We intend to sell the lithium concentrate that we expect to produce to lithium refiners under long term offtake agreements. This is in line with the wider industry requirements for battery-grade lithium chemicals, where users typically require long-term supply contracts. We therefore feel our company is perfectly situated in the province of Manitoba that generates 97% of its energy from Hydroelectric, and 3% from wind.
Our Customers
Major lithium refiners would be the primary customers. We believe that, assuming we prove our lithium resources and proceed to build and operate a functioning lithium ore mining and processing facility, we will be well positioned to be a supplier of choice to these lithium refiners, based on the competitive economics enabled by our well situated geographical location, renewable energy sources, and mining friendly government regime.
Competition
We face intense competition in the mineral exploration and exploitation industry on an international, national and local level. We compete with other mining and exploration companies, many of which possess greater financial resources and technical facilities than we do, in connection with the exploration and mining of suitable properties and in connection with the engagement of qualified personnel. The lithium exploration and mining industry is fragmented, and we are a very small participant in this sector. Many of our competitors explore for a variety of minerals and control many different properties around the world. Many of them have been in business longer than we have and have established more strategic partnerships and relationships and have greater financial accessibility than we have.
Intellectual Property
We do not have any registered intellectual property rights.
Facilities
Our corporate address is 360 Main St 30th Floor, Winnipeg, MB R3C 0V1 Canada. Currently, we do not maintain any office or operational facilities other than an off-site storage facility for our core samples, which we lease at a nominal fee. We believe that we will be able to obtain adequate facilities, principally through leasing, to accommodate our future expansion plans.
Employees
We have one employee at this time, our Chief Executive Officer Frank Wheatley. Other of our executive officers and advisers work for us as independent contractors under consulting agreements. These agreements, and the employment agreement with our Chief Executive Officer, typically include a confidentiality covenant that requires consultants to protect our confidential information during their engagement with us. In addition, these consulting agreements include typical non-compete clauses that prohibit the consultants from entering into competitive consulting or employment relationships while they are working for us.
80
Insurance
We currently insure our directors and officers through a D&O insurance policy with Lloyds of London and an excess liability coverage insurance policy with Xl Specialty Insurance Co. We currently do not insure against mine exploration and development risks.
Legal Proceedings
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to time that may harm our business.
A group of concerned shareholders, including Nova, our largest shareholder, at the time holding approximately 37% of our issued and outstanding common shares, filed a Notice of Motion (the “Motion”) in the Court of King’s Bench (Manitoba) (the “Manitoba Court”) seeking to prevent the Company from effecting the follow-on offering contemplated by the registration statement on F-1 (File No. 333-267600), initially filed with the SEC on September 19, 2022, as thereafter amended. Nova claimed that the offering was oppressive and was made for the improper purpose of diluting Nova’s shareholdings and entrenching the current management of the Company. On Thursday, September 29, 2022, at the request of the concerned shareholders of the Company, the Manitoba Court issued an order enjoining the Company from issuing any securities prior to October 27, 2022, the record date for the determination of the shareholders entitled to vote at the Company’s annual shareholder meeting set for December 15, 2022. The order also had the effect of forcing the Registrant to withdraw its public offering of common shares pursuant to the Registration Statement filed publicly on September 26, 2022. Accordingly, we withdrew the F-1 (File No. 333-267600) on October 3, 2022.
Government Regulation
Our business is subject a variety of laws and regulations applicable to companies conducting business in the mining industry. In Canada, mining law is divided between the federal and provincial governments. Ownership of lands and minerals generally belongs to the province in which they are located. Within the Province of Manitoba, mining activity is regulated by the Department of Agriculture and Resource Development and is governed primarily by provisions of The Mines and Minerals Act (Manitoba) together with its accompanying regulations and guidelines. The provinces have jurisdiction over mineral exploration, development, conservation and management. The federal government shares jurisdiction with the provinces on some related matters (taxation and the environment) and has exclusive jurisdiction over areas such as exports and foreign investment controls. Federal and provincial legislation affecting mining activities tends to fall into two main categories: (a) private matters of title and taxation; and (b) economic, social and environmental policies.
4.C. Organizational structure
The chart below presents our corporate structure:
Thompson Bros (Lithium) Pty Ltd. has been deregistered in Australia and Manitoba.
81
4.D. Plants, Property and Equipment
Our corporate address is 360 Main St 30th Floor, Winnipeg, MB R3C 0V1 Canada.. Currently, we do not maintain any office or operational facilities other than an off-site storage facility for our core samples, which we lease at a nominal fee. We believe that we will be able to obtain adequate facilities, principally through leasing, to accommodate our future expansion plans. For a description of the real property owned by us, please see ”Location and Description of Snow Lake Lithium™ Project” herein.
ITEM 4A. UNRESOLVED STAFF COMMENTS
None.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and the related notes included elsewhere in this annual report on Form 20-F. This discussion may contain forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements because of various factors, including those set forth under Item 3 “Key Information—D. Risk Factors” or in other parts of this annual report on Form 20-F. See also “Introductory Notes—Forward-looking Information.”
5.A. Operating Results
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) of Snow Lake Resources Ltd., d/b/a Snow Lake Lithium Ltd. (“Snow Lake”, “we” or the “Company”) was revised on March 19, 2024, and summarizes the significant factors affecting the Company’s operating results, financial condition, liquidity and cash flows as of and for the years ended June 30, 2023, 2022 and 2021. This MD&A should be read in conjunction with the Company’s amended and restated consolidated financial statements and the related notes thereto for the years ended June 30, 2023 (the “Restated 2023 Financials”). Amounts are expressed in Canadian dollars unless otherwise stated. This MD&A contains forward-looking statements that are based on the beliefs of management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors.
The 2023 Financials and the financial information contained in this MD&A are prepared pursuant to International Financial Reporting Standards (“IFRS”) and in accordance with the standards of the United States Public Company Accounting Oversight Board. As permitted by the rules of the United States Securities and Exchange Commission for foreign private issuers, we do not reconcile our financial statements to United States generally accepted accounting principles.
This MD&A reports the Company’s activities through October 25, 2023, unless otherwise indicated. All figures are expressed in Canadian dollars, unless otherwise noted.
During the year ended June 30, 2023, the Company remained at the exploration stage, had not placed any of its mineral properties into production, and has not generated any revenues. It intends to proceed with the development of the Snow Lake Lithium™ property through economic studies such as a pre-feasibility study (“PFS”) and provided the results are positive, through to mine development. The Company intends, in the longer term, to derive substantial revenues from becoming a strategic supplier of battery-grade lithium hydroxide to the growing electric vehicle and battery storage markets. The Company is not expected to start generating revenues until the fourth quarter of 2024, at the earliest. Our planned exploration and development of mineral resources, primarily lithium, will require significant investment prior to commercial introduction and may never be successfully developed or commercially successful.
Business Outlook and Strategy
The Company’s primary focus is currently conducting exploration for lithium at our 100% owned Snow Lake Lithium™ Project. Our objective is to develop a world-class lithium mine in the Province of Manitoba and to become the first fully energy renewable lithium concentrate and lithium hydroxide producer in North America, strategically
82
located to supply the United States (“U.S.”) “Auto Alley,” from Michigan to the southern U.S., with direct rail access running south via Winnipeg. With our commitment to the environment, corporate social responsibility and sustainability, we aim to derive substantial revenues from the sale of lithium to the growing electric vehicle, or EV and battery storage markets in the U.S. and abroad. With access to renewable energy produced in Manitoba, we expect to become the first supplier in North America of lithium mined exclusively with the benefit of power produced from fully sustainable, local sources.
The Snow Lake Lithium™ Project
Our 100% owned Snow Lake Lithium™ Project covers a 59,587-acre site that has only been 1% explored and contains an identified-to-date 8.2 million metric tonnes measured, indicated and inferred resource at between 0.99% and 1.13% Li2O. The Snow Lake Lithium™ Project is strategically located in Manitoba, ideally situated to economically deliver mined and processed lithium products to the EV battery industry serving North America’s “Auto Alley”. With direct rail access running north to the Port of Churchill, which supplies access to Europe by ship, we would potentially expect to be able to economically deliver our future lithium output to the markets of Europe as well. Preliminary exploration of our Snow Lake Lithium™ property indicates a substantial S-K 1300 compliant measured, indicated and inferred resource of lithium ore, and we have only explored 1% of the Snow Lake Lithium™ property. We expect to prove this measured, indicated and inferred resource in the near future through further exploration and technical analysis and reporting, although we can provide no guarantee that our measured, indicated and inferred resource will be confirmed as proven or probable reserves. With expected to be proven mineral resources and our prime location, successful completion of a PFS, obtaining of the required permitting and building of a mine and ore concentrator, we expect to be able to produce economically significant amounts of marketable lithium ore concentrate in a socially responsible and environmentally friendly way while utilizing renewable energy to power our mining operations. Assuming our successful execution of the required exploration and development steps and operating in accordance with our ESG corporate principals, we expect to be in a strong position to be able to exploit, through offtake agreements with OEM manufacturers, the anticipated rising demand for lithium hydroxide to meet the burgeoning needs of the EV battery and related markets in North America and beyond.
The Historical Setting for the Growth of Lithium Demand
The unprecedented prosperity of the 20th century is very much attributable to the discovery of oil in Western Pennsylvania in the mid-1800s and the subsequent invention of the internal combustion engine. The symbiotic relationship between oil and the internal combustion engine has been the underpinning of world economic growth, expansion and, most importantly, the empowerment of millions of people to whom mobility and freedom have become a way of life. The interstate highways that flourished in the U.S. over the past century have enabled commercial fluidity across the globe that capitalized exponentially on the gilded age of rail.
Until recently, a world without oil and the internal combustion engine was inconceivable and environmentalists protesting the high price being paid for our economic way of life, were brandished unrealistic luddites. The paradox of environmental sensitivity and the irreversible progress of a polluting population seemed permanently juxtaposed, until it wasn’t.
Today, we have reached the confluence where economic reality and social responsibility can finally meet. Thanks to technological innovation, through the development of the lithium battery, we can now create an electric fleet of vehicles that not only delivers luxury and economy but is also ecologically friendly to our planet. We are now on the precipice of the next great economic age - preceded by the steam engine, the railroad, the combustion engine and the internet, we are now ready to be catapulted into the electric age. With the advent of the lithium battery, no longer will we have to rely on fossil fuel to power our economy or our cars as we embark into the next great age and, more importantly, we can limit and ultimately reverse the damage caused to our planet by the rapid economic expansion of the past century.
The Coming Commodity Supercycle and Growth in Lithium Demand
From the Company’s perspective, indications suggest that we are currently on the verge of a commodity supercycle fueled by pent up demand, infrastructure spending and post-COVID-19 economic exuberance. We expect that lithium,
83
in particular, will benefit not only from a general rise in commodity demand but, specifically, from what we see as the tipping point for vehicle fleet electrification.
We believe that the journey now to the full electrification of our global automobile fleet has begun. Demand for EVs is being driven by conscious consumers who take the threat of global warming seriously and who have forced a universal commitment from the manufacturing industry to produce cars to match their environmentally conservative outlook. During the coming years, the achievement of this fleet conversion will be the primary challenge for the worldwide automobile industry and the determining factor will not be design or engineering, but batteries. Batteries will be the fuel and gold of the 21st century. Based on today’s predictions of the trajectory of future EV growth, the world will not have sufficient battery capacity to match growing demand.
Lithium is the key mineral ingredient in the power storage component of the EV revolution and the global demand growth curve for lithium consumption over the next decade is expected to be exponential. While normal commodity cycles are affected by incremental and organic growth, it is only once in a century that we witness new, previously nonexistent demand grow to accommodate a new economic, social and cultural reality.
We believe that current global lithium production cannot cover a fraction of the projected exponential growth anticipated in the coming EV growth cycle and we intend to position the Company to become a significant lithium supplier to the North American automotive industry and beyond.
Corporate Developments
On September 22, 2022, the Company signed a non-binding memorandum of understanding (“MOU”) with LG Energy Solution (“LGES”). The non-binding MOU with LGES represents a next step towards building the domestic supply chain for the North American EV market. LGES, a split-off from LG Chem, is a leading global manufacturer of lithium-ion batteries for EVs, mobility, IT, and energy storage systems. With 30 years of experience in revolutionary battery technology and extensive research and development, LGES is the top battery-related patent holder in the world with over 24,000 patents. Its robust global network, which spans North America, Europe, Asia, and Australia, includes battery manufacturing facilities established through joint ventures with major automakers such as General Motors, Stellantis N.V. and Hyundai Motor Group. Together with LGES, the Company will collaborate to explore the opportunity to create one of Canada’s first lithium hydroxide processing plants in CentrePort, Manitoba. Under the terms of the MOU, Snow Lake will supply LGES with lithium over a 10-year period once production starts in 2025. The MOU and contemplated partnership will be subject to a number of conditions, including the completion of due diligence from both parties. A scoping study, in partnership with Primero, has been completed to identify the technologies, innovations and skills required to deliver a world-class lithium hydroxide plant within the Province of Manitoba.
On January 6, 2023, the Company announced that it has acquired additional land claims in the historic mining district of Snow Lake, Manitoba. The Company staked a total of nine claims covering an area of 1,728 hectares near Dion Creek, Lost Frog Lake, and the Grass River East. These claims are located in areas known for their pegmatite occurrences as mapped by the Ministry of Northern Development and Mines. With the acquisition of additional land claims in and around Snow Lake Lithium’s current resource block, the Company’s total land position now stands at 24,114 hectares (59,587-acres), an increase of approximately 8% as compared to the prior land position.
On January 16, 2023, the Company announced the resignation of Philip Gross, Hadassah Slater and Allan Engel, as directors of Snow Lake, effective immediately prior to the commencement of the Company’s annual general and special meeting held at 9:00 a.m. (Central Time) on January 17, 2023 (the “Meeting”).
On January 17, 2023, the Company announced the results of the Meeting, during which Peretz Shapiro, Nachum Labkowski, Brian Imrie, Shlomo Kievman and Kathleen Skerrett were elected to the board of directors (the “Board”) of Snow Lake, in addition to Dale Schultz. Following the Meeting, the Company also announced the resignation of Philip Gross and Derek Knight, as Chief Executive Officer (“CEO”) and Chief Operating Officer (“COO”)/Secretary of Snow Lake, respectively. As a result of the changes, Mr. Labkowski was appointed Chairman of the Board. Mr. Shapiro was also appointed as Interim COO, as the Board appointed a special committee to retain an advisor to search for a permanent CEO.
84
On January 29, 2023, the Company announced that it was moving forward on a PEA which will focus on outlining a pathway to accelerating revenues from the Company’s flagship projects; the Thomson Brothers and Grass River Lithium Projects. The PEA will consider the feasibility of a DSO operation, which will enable the company to fund a significant portion of future development out of cash flow. Additionally, the Company announced its intentions to release an updated Resource Estimate for the Thomson Brothers Project, a Maiden Resource Estimate for the Grass River Project, as well as the results from a metallurgical study from the Grass River Project in Q2 of 2023.
On March 16, 2023, the Company announced the results of a metallurgical testwork program conducted for its Grass River Lithium Project. SGS Canada were engaged to conduct the study on behalf of the Company, with a metallurgical target of producing a spodumene concentrate grading >6% Li20 and <1.0% Fe2O3 while maximising recovery. The Company is pleased to announce that these targets have been achieved with the developed flowsheet showing an 83.5% lithium recovery. For a summary of the merallurgical testwork program results, please refer to the press release dated March 16, 2023, which can be found on EDGAR under the Company’s profile.
On June 30, 2023, the Company provided an update and analysis on the recently completed Grass River Project (GRP) Resource Drilling campaign. For a summary of the update, please refer to the press release dated June 30, 2023, which can be found on EDGAR under the Company’s profile.
On July 17, 2023, the Company announced the appointment of Frank Wheatley as CEO with immediate effect. Mr. Wheatley brings more than 30 years of mining and resource industry experience. He also has extensive domestic and international experience with development and operating gold, copper and lithium companies, including project development, project financing, environmental permitting in accordance with all international best practice and ESG standards, as well as mergers and acquisitions.
On September 21, 2023, the Company closed its best-efforts flow-through financing through the issuance of 2,133,979 common shares at a price of $3.6117 (USD $2.67) per common share, for gross proceeds of $7,707,292 (USD $5,697,710) (the “Offering”). The proceeds of the Offering will be used exclusively to further the Company’s lithium exploration and development programs in Manitoba. The shares were offered for purchase and sale to purchasers in the province of Manitoba on a private placement basis under Canadian law. The Offering was registered under applicable U.S. securities laws pursuant to a registration statement on Form F-3 filed with, and previously declared effective by, the United States Securities and Exchange Commission under the United States Securities Act of 1933, as amended.
On October 5, 2023, the Company announced the final set of results from the 2022/2023 winter-spring drill program at its 100% owned Grass River lithium project. For a summary of the update, please refer to the press release dated October 5, 2023, which can be found on EDGAR under the Company’s profile.
85
Results of Operations
The following table sets forth a summary of the Company’s consolidated results of operations for the periods indicated. The information should be read together with our consolidated financial statements and related notes included elsewhere in this annual report. Our historical results presented below are not necessarily indicative of the results that may be expected for any future period.
| 2023 | 2022 | 2021 |
| $ | $ | $ |
Expenses |
|
|
|
Professional fees | 6,971,520 | 698,209 | 174,211 |
Directors’ and officers’ consulting fees | 3,840,915 | 687,585 | 200,858 |
Stock-based compensation | 2,630,249 | 8,035,506 | - |
Insurance expense | 924,834 | 681,504 | - |
Consulting fees | 858,517 | 220,890 | 34,399 |
General and administrative expenses | 518,824 | 129,415 | 8,254 |
Travel expenses | 248,746 | 112,074 | - |
Transfer agent and regulatory fees | 141,446 | 236,926 | 22,244 |
Bank fees and interest | 13,577 | 9,343 | 2,084 |
Research expenses | 12,000 | 33,733 | - |
Depreciation on right-of-use assets | 2,640 | - | - |
Interest on loan and debentures | 1,193 | 167,873 | 140,264 |
Amortization of transaction costs | - | 56,512 | 13,284 |
Accretion expense | 654 | - | - |
| (16,165,115) | (11,069,570) | (595,598) |
| 2023 | 2022 | 2021 |
| $ | $ | $ |
Other Income |
|
|
|
(Loss) gain on change in fair value of derivative liabilities | (246,460) | 1,103,839 | 32,676 |
Loss on shares-for-debt settlement | (157,502) | - | - |
Grant income | 109,750 | 109,745 | - |
Recovery of accounts payable | - | - | 10,740 |
Foreign exchange gain (loss) | 996,382 | 409,532 | (254) |
| 702,170 | 1,623,116 | 43,162 |
Net Loss and Comprehensive Loss | (15,462,945) | (9,446,454) | (552,436) |
During Fiscal 2023, the Company incurred total operating expenses of $16,165,115, as compared to total operating expenses of $11,069,570 in 2022 and $595,598 in 2021. The substantial increase in operating expenses in Fiscal 2023 is primarily due to increases in professional fees and directors’ and officers’ consulting fees, of which key components of Snow Lake’s results of operations during the years ended June 30, 2023, 2022 and 2021 are discussed as follows:
·Professional fees totalled $6,971,520 (2022 – $698,209; 2021 – $174,211), for an increase of $6,273,311 from 2022. Part of the increase is due to expenses incurred in relation to the Company’s status as a public company as it had to rely on the services of outside consultants in areas such as legal counsel, accountants and auditors, which remain critical to the Company’s operations post-listing. On the other hand, the Company also incurred substantial expenses in relation to the proxy requisition among certain shareholders and the old management, which culminated with the restructure which took place upon completion of the Meeting.
·Directors’ and officers’ consulting fees totalled $3,840,915 (2022 – $687,585; 2021 – $200,858), for an increase of $3,153,330 from 2022. The substantial increase is primarily due to certain addendum payments made to the former executives during the period. On November 1, 2022, the Company purported to amend the consulting agreements with the entities controlled by the former CEO and COO, with an addendum which amended the termination clause of their respective agreements. As a result of the addendum, the Company recorded fees of $1,672,988 (USD $1,224,040) and $881,842 (USD $648,020), respectively, of which the payout was made to the respective entities controlled by the former CEO and COO.
86
·Non-cash stock-based compensation totalled $2,630,249 (2022 – $8,035,506; 2021 – $nil), for a decrease of $5,405,257 from 2022. In January 2023, the Company granted restricted share units (“RSUs”) and stock options to certain officers and directors, where yielded fair values which were valued at a much lower amount as compared to 2022. The value of stock-based compensation is dependent on the valuation of the grant date fair value of these securities, which is subject to various estimates, based on the application of the Black-Scholes valuation model which requires management to make various assumptions and estimates which are susceptible to uncertainty, including the expected volatility of the share price, expected forfeitures, expected dividend yield, expected term of the warrants or options, and expected risk-free interest rate. Changes in these input assumptions can significantly affect the fair value estimate.
·Insurance expense from directors’ and officers’ (“D&O”) insurance coverage totalled $924,834 (2022 –$681,504; 2021 – $nil), for an increase of $243,330 from 2022. Upon listing, the Company was required to obtain D&O insurance for its officers and directors. The higher insurance expense amount for Fiscal 2023 is also a reflection of the coverage used up for the current year in question. Going forward, management expects to obtain D&O insurance coverage at possibly lower premiums.
·Consulting fees totalled $858,517 (2022 – $220,890; 2021 – $34,399), for an increase of $637,627 from 2022. Consulting fees comprised of third-party work primarily for marketing, investor relations and information technology. These fees are primarily related to promotional activities related to costs associated with the Company building its marketing strategy.
·General and administrative (“G&A”) expenses totalled $518,824 (2022 – $129,415; 2021 – $8,254), for an increase of $389,409 from 2022. The increase in G&A expenses is directly correlated to the increased scope of activities as the Company continued expansion from its drilling program.
·Travel expenses totalled $248,746 (2022 – $112,074; 2021 – $nil), for an increase of $136,672 from 2022. Since travel restrictions from COVID began lifting in 2022, management had resumed travelling for business purposes as COVID restrictions began lifting.
·Transfer agent and regulatory fees totalled $141,446 (2022 – $236,926; 2021 – $22,244), for a decrease of $95,480 from 2022. Similar to D&O insurance, it was essential for the Company to appoint a transfer agent upon listing to assist in recording changes of ownership and maintaining security holder records. Regulatory fees comprised of filing in conjunction of the listing and ensuing filing requirements, are also included in transfer agent and regulatory fees. As there were little financing activities undertaken during the current year, a relative decrease in such expenses was incurred.
·The Company also recorded other income of $702,170 (2022 – $1,623,116; 2021 – $43,162), comprised primarily of a foreign exchange translation gain of $996,382 (2022 – $409,532; 2021 – loss of $254) recorded due to the translation of certain balances into the functional and presentation currency of the Company, and grant income of $109,745 (2022 – $109,745; 2021 – $nil) received from the Manitoba Mineral Development Fund. These increases were partially offset by an increase in loss on change in fair value of derivative liabilities of $1,350,299, to a loss of $246,460 (2022 – gain of $1,103,839; 2021 – gain of $32,676), and a loss on shares-for-debt settlement of $157,502 (2022 and 2021 – $nil) entered during the year.
As a result of the above items, net loss for the year ended June 30, 2023 was $15,462,945 (2022 – $9,446,454; 2021 – $552,436). Net loss per share for Fiscal 2023 was $0.85 per basic and diluted share (2022 – $0.60; 2021 – $0.04 per basic and diluted share).
87
5.B. Liquidity and Capital Resources
The following table sets forth a summary of the Company’s consolidated cash flows for the periods indicated. The information should be read together with our consolidated financial statements and related notes included elsewhere in the 2023 Financials. Our historical results presented below are not necessarily indicative of cash flows that may be expected for any future period.
| 2023 | 2022 | 2021 |
| $ | $ | $ |
Operating Activities |
|
|
|
Net loss for the year | (15,462,945) | (9,446,454) | (552,436) |
Adjustments for non-cash items | 4,426,669 | 7,122,585 | 110,132 |
Net change in non-cash working capital items | 737,485 | (775,103) | 78,828 |
Cash Flows (used in) Operating Activities | (10,298,791) | (3,098,972) | (363,476) |
|
|
|
|
Financing Activities |
|
|
|
Proceeds from issuance of convertible debentures | - | - | 805,000 |
Proceeds from issuance of shares on IPO | - | 34,988,520 | - |
Share issuance costs | - | (2,995,448) | - |
Proceeds received from loan | - | 873,253 | - |
Repayment on loan | (201,532) | (679,617) | - |
Proceeds from exercise of warrants | 31,578 | 365,114 | 4,883 |
Payments made on lease deposit | (18,367) | - | - |
Lease payments | (2,986) | - | - |
Cash Flows provided by (used in) Financing Activities | (191,307) | 32,551,822 | 809,883 |
|
|
|
|
Investing Activities |
|
|
|
Payments for exploration and evaluation assets | (9,461,430) | (5,979,286) | (270,652) |
Cash Flows (used by) Investing Activities | (9,461,430) | (5,979,286) | (270,652) |
|
|
|
|
(Decrease) increase | (19,951,528) | 23,473,564 | 175,755 |
Cash, beginning of year | 23,792,408 | 318,844 | 143,089 |
Cash, end of year | 3,840,880 | 23,792,408 | 318,844 |
During Fiscal 2023, net cash used in the Company’s operating activities was $10,298,791 (2022 – $3,098,972; 2021 – $363,476). The substantial increase for Fiscal 2023 in operating spending is a direct reflection of the increased scope of activities as the Company continued to evolve as a public company and expand its drilling program, and it also included the purported addendum payments of $1,672,988 (USD $1,224,040) and $881,842 (USD $648,020), which had been made to the respective entities controlled by the former CEO and COO as noted in the “Results of Operations” section. With a healthy cash position on hand, the Company made several advances to secure the services of certain vendors for the next 12 months, in order to assist its growth strategy.
During Fiscal 2023, net cash used in financing activities was $191,307 (2022 – net cash provided of $32,551,822; 2021 – net cash provided of $809,883). In the current year, the Company did not participate in much financing activities other than having repaid a loan for $201,532, and a deposit and payments made on leases. In November 2021, the Company closed the IPO for gross proceeds raised of almost $35 million, with issuance cost of $2,995,448 paid on closing. The Company also received a loan of $873,253 to finance its D&O insurance, of which $679,617 had been repaid up to June 30, 2022, as well as total proceeds of $365,114 on exercises of warrants. In 2021, the Company raised funds of $805,000 through the issuance of certain convertible debentures, and it also received proceeds of $4,883 through exercises of warrants.
During Fiscal 2023, the Company also incurred investing cash outflows of $9,461,430 (2022 – $5,979,286; 2021 – $270,652) through payments made for the Company’s exploration and evaluation (“E&E”) assets on the Snow Lake Lithium™ Project. The substantial increase in the use of cash for investing activities is directly tied to the increased exploration activities as drilling programs commenced in Snow Lake, Manitoba.
88
As the Company has yet to generate any revenues to date, it currently has no regular cash flows from operations, and the level of operations is principally a function of availability of capital resources. The primary source of funding has historically been through private placement financing of equity securities and convertible debentures. Subsequent to year-end, the Company was able to raise about $7.7 million through the Offering. Going forward, the Company will likely have to continue to rely on equity or debt financing in order to maintain its working capital and expenditures requirements. There is no guarantee that the Company will be able to successfully complete such financing, as market conditions and business performance may dictate availability and interest.
As at June 30, 2023, the Company had current assets of $4,916,236 (2022 – $25,029,009; 2021 –$397,461), including cash of $3,840,880 (June 30, 2022 – $23,792,408; June 30, 2021 – $318,844) to settle current liabilities of $3,883,529 (June 30, 2022 – $1,780,877; June 30, 2021 – $1,374,819), for a working capital of $1,032,707 (June 30, 2022 –$23,248,132; June 30, 2021 – working capital deficiency of $977,358).
Management is actively monitoring cash forecasts and managing performance against its forecasts. In the past year, the Company had substantially built up financial position through the raising of funds from the IPO and by conversion certain outstanding debentures and was able to raise additional funds from the Offering subsequent to year-end. Nevertheless, management will remain cautious in its capital management approach, and continue to look for new sources of financing in the next 12 months, to fund its working capital to advance the Company’s operations.
Significant Accounting Judgments, Estimates and Assumptions
The preparation of the Company’s consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, revenue and expenses. These are described in greater detail in Note 3(e) to the Restated 2023 Financials.
Summary of Significant Accounting Policies
The significant accounting policies used by the Company are described in greater detail in Note 4 to the Restated 2023 Financials.
Off Balance Sheet Arrangements
As at June 30, 2023 and the date of this MD&A, the Company does not have any 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.
Contingencies
The Company’s E&E activities are subject to various laws and regulations governing the protection of the environment. These laws and regulations are continually changing and generally becoming more restrictive. As at June 30, 2023, the Company believes its operations are materially in compliance with all applicable laws and regulations. The Company expects to make future expenditures to comply with such laws and regulations.
As of June 30, 2023, Snow Lake has also made a claim against certain former directors of the Company and their holding companies for, among other things, breach of fiduciary duty as a result of, amongst other matters, of those directors approving changes to the consulting agreements between the former CEO and COO and their holding companies, for termination payments of USD $1,392,000 (to USD $1,872,000) during a time where it was clear that a change of control of the Company was imminent and increased the range of instances where they would be eligible for those payments. The Company takes the position that the amendments are void and that the former CEO and COO were not entitled to any payments under their consulting agreements. Snow Lake seeks to recover the payments made to the former CEO and COO.
89
As of the date of approval of these consolidated financial statements, all defendants have now filed Statements of Defence. All defendants have made counterclaims seeking indemnification for legal fees incurred in responding to this claim in relation to directors’ indemnity agreements they have with the Company. The Company takes the position that the defendants are not eligible for indemnity payments as a result of their breaches of fiduciary duties. The next step will be for the Company to file its Replies and Defences to Counterclaims, and then proceed to discovery. As at June 30, 2023, as the outcome of the claims remains uncertain, the Company had not recognized any contingent assets on the consolidated statements of financial position.
Subsequent Events
On July 13, 2023, the Company filed an application against its former Manitoba law firm seeking to assess for reasonableness certain invoices of the law firm rendered between May 2022 and January 2023, as well as the repayment of any fees paid to the law firm which the Court finds to be unreasonable. This application is at the early stages.
On July 17, 2023, the Company granted 250,000 options and 200,000 RSUs to its new CEO. 25% of the options will vest six months from the grant date, 25% will vest 12 months from the grant date, with the remainder to vest 18 months from the grant date. The RSUs, on the other hand, will vest at various stages depending on the Company’s volume weighted average price exceeding certain thresholds.
On July 29, 2023, a former director resigned from the Company, resulting in 50,000 options and 10,000 RSUs being cancelled.
On September 21, 2023, the Company closed the Offering through the issuance of 2,133,979 common shares at a price of $3.6117 (USD $2.67) per common share, for gross proceeds of $7,707,292 (USD $5,697,710). In connection with the Offering, the Company issued 86,000 warrants at USD $2.67 per share with an expiry of five years and paid fees and expenses to various agents in the amount of $215,376.
On September 21, 2023, the Company also issued 21,276 common shares to a third-party pursuant to a letter agreement between the parties.
As of August 9, 2023 160,000 RSUs out of the 470,000 RSUs awarded on January 30, 2023 had met the milestones required to vest, on September 26, 2023, the Company paid $546,476 (USD $400,000) to redeem 160,000 of the vested RSUs at USD $2.50 each.
On October 20, 2023, the Company issued 40,000 common shares to a third-party pursuant to a marketing services agreement (the “Marketing Agreement”) between the parties for a term of six months from October 2, 2023 to April 2, 2024. Upon execution of the agreement, the Company also paid a cash payment of USD $62,500 upon execution, The Company also issued 300,000 Warrants to the third-party pursuant to the Marketing Agreement, whereby each Warrant is exercisable for a period of 12 months at an exercise price of: (i) USD $2 for 100,000 Warrants; (ii) USD $2.50 for 100,000 Warrants; and (iii) USD $3 for 100,000 Warrants.
Trend Information
5.C. Research and Development, Patents and Licenses, Etc.
The Company has no significant research and development plans at present, other than certain work through a collaboration with the University of Manitoba to strengthen the understanding of the lithium deposits in Snow Lake, Manitoba, which are recorded as research expenses in the years ended June 30, 2023, 2022 and 2021.
5.D. Trend Information
Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demand, commitments or events that are reasonably likely to have a material effect on our net revenues and income from operations, profitability, liquidity, capital resources, or would cause reported financial information not to be indicative of future operation results or financial condition.
90
5.E. Critical Accounting Estimates
The preparation of the Company’s consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, revenue, and expenses. On an ongoing basis, management evaluates its judgments and estimates in relation to assets, liabilities, revenue, and expenses. Management uses historical experience and various other factors it believes to be reasonable under the given circumstances as the basis for its judgments and estimates. Actual outcomes may differ from these estimates under different assumptions and conditions. These estimates are reviewed periodically, and adjustments are made as appropriate in the period they become known. Items for which actual results may differ materially from these estimates are described as follows:
Going concern
At each reporting period, management exercises judgment in assessing the Company’s ability to continue as a going concern by reviewing the Company’s performance, resources, and future obligations. The conclusion that the Company will be able to continue as a going concern is subject to critical judgments of management with respect to assumptions surrounding the short and long-term operating budgets, expected profitability, investment and financing activities and management’s strategic planning. The assumptions used in management’s going concern assessment are derived from actual operating results along with industry and market trends. Management believes there is sufficient capital to meet the Company’s business obligations for at least the next 12 months, after taking into account expected cash flows and the Company's cash position at year-end.
Fair value of financial assets and financial liabilities
Fair value of financial assets and financial liabilities on the consolidated statements of financial position that cannot be derived from active markets, are determined using a variety of techniques including the use of valuation models. The inputs to these models are derived from observable market data where possible, but where observable market data are not available, judgment is required to establish fair values. Judgments include, but are not limited to, consideration of model inputs such as volatility, estimated life and discount rates.
Economic recoverability of future economic benefits of exploration and evaluation assets
Management has determined that E&E assets and related costs incurred, which have been recognized on the consolidated statements of financial position, are economically recoverable. Management uses several criteria in its assessments of economic recoverability and probability of future economic benefit including geological data, scoping studies, accessible facilities, and existing and future permits.
Technical feasibility and commercial viability
Management exercises judgment, in accordance with IFRS 6 – Exploration for and Evaluation of Mineral Resources, to determine an accounting policy specifying which expenditures, if any, are capitalized as E&E assets, and to apply the policy consistently. E&E expenditures not capitalized as E&E assets are expensed as incurred. Once the technical feasibility and commercial viability of extracting a mineral resource are demonstrable, an entity stops recording E&E expenditures for that mineral project, tests capitalized E&E assets (if any) for impairment and reclassifies those E&E assets to other applicable development-stage accounts. An assessment of technical feasibility and commercial viability is conducted on a project-by-project basis with regard to all relevant facts and circumstances. The nature and status of the mineral project is determined on the merits of the mineral project itself.
Provisions
Provisions recognized in the consolidated financial statements involve judgments on the occurrence of future events, which could result in a material outlay for the Company. In determining whether an outlay will be material, the Company considers the expected future cash flows based on facts, historical experience and probabilities associated with such future events. Uncertainties exist with respect to estimates made by management and as a result, the actual expenditure may differ from amounts currently reported.
91
Income taxes
Income taxes and tax exposures recognized in the consolidated financial statements reflect management’s best estimate of the outcome based on facts known at the reporting date. When the Company anticipates a future income tax payment based on its estimates, it recognizes a liability. The difference between the expected amount and the final tax outcome has an impact on current and deferred taxes when the Company becomes aware of this difference.
In addition, when the Company incurs losses that cannot be associated with current or past profits, it assesses the probability of taxable profits being available in the future based on its budgeted forecasts. These forecasts are adjusted to take account of certain non-taxable income and expenses and specific rules on the use of unused credits and tax losses. When the forecasts indicate the sufficient future taxable income will be available to deduct the temporary differences, a deferred tax asset is recognized for all deductible temporary differences.
In addition, future changes in tax laws could limit the ability of the Company to obtain tax deductions in future periods. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the Company to realize the net deferred tax assets recorded at the reporting date could be impacted.
Options, restricted share units and warrants
Options, restricted share units (“RSUs”) and warrants, including finders’ warrants, are initially recognized at fair value using market-based valuation techniques. The fair value of the market-based and performance-based share awards are determined at the date of grant using generally accepted valuation techniques. Assumptions are made and judgments are used in applying the valuation techniques. These assumptions and judgments include the expected volatility of the share price, expected forfeitures, expected dividend yield, expected term of the warrants or options, and expected risk-free interest rate. Such assumptions and judgments are inherently uncertain. Changes in these assumptions can affect the fair value estimates of stock-based compensation.
Expected credit losses on financial assets
Determining an allowance for expected credit losses for amounts receivable and all debt financial assets not held at fair value through profit or loss requires management to make assumptions about the historical patterns for the probability of default, the timing of collection and the amount of incurred credit losses, which are adjusted based on management’s judgment about whether economic conditions and credit terms are such that actual losses may be higher or lower than what the historical patterns suggest.
Functional currency
The functional currency for the Company and its subsidiaries is the currency of the primary economic environment in which they operate. Determination of functional currency involves significant judgments and other entities may make different judgments based on similar facts. Periodically, the Company reconsiders the functional currency of its business if there is a change in the underlying transactions, events or conditions which determine its primary economic environment.
Shares issued for non-cash consideration
The Company is required to recognize these transactions at fair value which requires judgment in selecting valuation techniques and other factors.
92
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
6.A. Directors and Senior Management
The following table sets forth certain information regarding our directors and executive officers.
NAME |
| AGE |
| POSITION |
Frank Wheatley |
| 65 |
| Chief Executive Officer |
Peretz Schapiro |
| 43 |
| Interim Chief Operating Officer and Director |
Keith Li |
| 43 |
| Chief Financial Officer |
Brian Youngs |
| 71 |
| Vice President, Exploration |
Nachum Labkowski |
| 37 |
| Director and Chairman of the Board |
Kathleen Skerrett |
| 53 |
| Independent Director |
Brian Imrie |
| 61 |
| Independent Director |
Shlomo Kievman |
| 38 |
| Independent Director |
On July 14, 2023, our Board of Directors appointed Mr. Frank Wheatley, 65, as our Chief Executive Officer (“CEO”), effective July 17, 2023. Effective August 2, 2023, Dale Schultz resigned as VP of Resource Development.
Frank Wheatley. Prior to joining us, Mr. Wheatley has, for the past 35 years, been a senior executive and independent director of a number of Canadian public mining companies operating globally in precious, base and industrial metals. Mr. Wheatley was an independent director Teranga Gold Corporation from 2010 to 2021, when it was acquired by Endeavour Mining, and was appointed an independent director of Endeavour Mining upon the closing of the acquisition. He was the Executive Director of Talison Lithium Limited from 2010 to 2013, until its acquisition by Tianqui Lithium. Mr. Wheatley served as the CEO of Yellowhead Mining Inc. from 2013 to 2018 and as the CEO of and Karnalyte Resources Inc. from 2018 to 2019. From 2019 until present, Mr. Wheatley has been CEO of Wheatley Advisors Inc., providing bespoke advice on ESG matters to Canadian public mining companies in the battery metals space. Mr. Wheatley has extensive domestic and international experience with development and operating gold, copper, lithium and potash companies, including mergers and acquisitions, project financing, project development, and environmental permitting in accordance with all international best practice, environmental and corporate social responsibility standards. Mr. Wheatley has a BComm (Finance) and an LLB from the University of British Columbia. Mr. Wheatley has also been a member of the Law Society of British Columbia since 1985.
No family relationship exists between Mr. Wheatley and any of our other directors and executive officers. There are no arrangements or understandings with major shareholders, customers, suppliers or others pursuant to which Mr. Wheatley was selected as CEO.
Peretz Schapiro. Mr. Schapiro has served as our interim Chief Operating Officer and as a director since January 17, 2023 . Mr. Schapiro holds a Masters degree in Applied Finance and has been a global investor for more than a decade, with a particular focus in the resources sector. He understands the fundamental parameters, strategic drivers, market requirements and what it takes for a high growth business. Mr Schapiro has a diverse professional background, with deep experience in resource exploration, corporate finance, management consulting, marketing and fundraising. Mr Schapiro is also the founding Chairman of Loyal Lithium Ltd (ASX:LLI) Founding Chairman of Summit Minerals (ASX:SUM), and has previously held directorships Asra Minerals Limited (ASX:ASR) and Okapi Resources (ASX:OKR).
Keith Li. Mr. Li has served as our Chief Financial Officer since June 30, 2022. Mr. Li has over 15 years of experience in accounting, audit and executive level financial management. Prior to joining Snow Lake, Mr. Li has been serving as the Chief Financial Officer at Branson Corporate Services Ltd., providing outsourced fractional CFO functions and executive level financial services to public companies, including preparation of IFRS-compliant financial statements and MD&A since November 2017. Prior to joining our company, Mr. Li was a senior auditor with McGovern Hurley LLP from September 2011 to August 2016. From August 2016 to November 2017, he held the role of External Reporting Manager for Sears Canada Inc., and was responsible in overseeing the financial reporting functions of the company. Since joining Branson, Mr. Li had assumed the roles of Chief Financial Officer for many of Branson’s
93
publicly-listed clients, including Pharmadrug Inc. from December 2017 to October 2023, Quinsam Capital Corporation from March 2018 to present, Psyched Wellness Ltd. since January 2020 to present, Jubilee Gold Exploration Ltd. since January 2020 to present, Universal PropTech Inc. from June 2020 to August 2023, Corcel Exploration Inc. since March 2021 to present, US Critical Metals Corp. since August 2021 to present, and Hercules Silver Corp. since November 2022 to present. Mr. Li is responsible in overseeing the financial reporting and accounting functions of these companies. Mr. Li is a Chartered Professional Accountant and holds a Bachelor of Commerce in Finance from McGill University.
Brian Youngs. Mr. Youngs joined our company in January 2018 and has served as our Vice President of Exploration since November 2018. Mr. Youngs has more than 25 years of experience in mining exploration. In a number of private and publicly traded junior mining companies, including Randsburg International Gold Corp. from May 2003 to June 2005, Wabana Exploration Inc. from 1999 to 2001 and Meegwich Consultants from 1996 to 2003. He has worked throughout Canada and internationally, as senior airborne geophysics technician with Geotech Ltd. Inc., from June 2008 to December 2017. Mr. Youngs graduated from Northern College – Haileybury School of Mines, Mining Engineering Technician program and is a member of the Ontario Association of Certified Engineering Technicians and Technologists. He has also received a GIS Specialist Diploma from Sault College and a Computer Graphics Design Diploma from Sheridan College.
Nachum Labkowski. Mr. Labkowski has served as a member of our board of directors since November 2018. He is currently the Chief Executive Officer and principal investor in Halevi Enterprises, a private equity firm which Mr. Labkowski founded in 2010 that holds equity in more than 30 private companies and invests in real estate worldwide. Mr. Labkowski’s unique approach to investing has provided significant returns from those companies he has invested in to date.
Brian Imrie. Mr. Imrie is a retired investment banker with over 30 years of experience, primarily with global firms, providing advice and raising capital for companies in multiple industries. He was with Morgan Stanley in New York and Toronto from 1983-1997, Credit Suisse First Boston from 1997-2001, ran Mergers & Acquisitions for National Bank Financial from 2001-2008 and built and ran a global M&A business for KPMG Corporate Finance from 2009-2012. He was previously the Chairman/owner of Debro Inc., a chemical distribution company and serves on several other public and private boards. He received his MBA from Harvard University in 1987 and his BA in Economics from the University of Toronto in 1983.
Shlomo Kievman. Mr. Kievman is an experienced director bringing his extensive experience as a leader in the procurement of ideas and concepts which exemplify American innovation. Mr. Kievman, who has managed and founded several ventures and businesses over the past two decades, has an in-depth understanding and operational capacity for planning and analysis, business plan development, forecasting, financial analysis, and capital commitment planning, as well as competitive analysis and bench marking, providing the tools required to succeed. His work in public and private sectors in the USA and abroad has included business development, financial modeling, action planning, and conceptual design. Mr. Kievman graduated university with honors with a BA in Liberal Arts. He is the principal of Crown Equities, an investment firm transforming the global resources sector, leading several global organizations.
Kathleen Skerrett. Ms. Skerrett is the Chair of the Securities Group at Gardiner Roberts LLP, specializing in advising clients on forming, financing, maintaining and reorganizing public companies. Ms. Skerrett was called to the Bar in Ontario in 1996 after earning a Bachelor of Laws from the University in Toronto in 1994. She also earned a Bachelor of Commerce degree from Trinity College, University of Toronto in 1991 and has completed the Canadian Securities Course. Ms. Skerrett advises clients on all aspects of compliance with corporate and securities laws, including structuring of financing transactions, mergers and acquisitions, corporate governance and continuous disclosure reporting. Ms. Skerrett has a broad breadth of industry experience including advising clients in the manufacturing, technology, financial and health and wellness sectors. In particular, she has developed a strong practice in the resource sector with expertise in both structuring mining related contracts and advising on additional public company compliance matters for this sector. Ms. Skerrett also provides advice on a variety of corporate matters to private entities. Ms. Skerrett has acted as a director and/or officer of a number of public companies listed on all of the Canadian stock exchanges and is currently on the board of directors of the Canada’s National Ballet School Foundation.
94
No family relationship exists between any of our directors and executive officers, except that Nachum Labkowski is Peretz Schapiro’s brother-in-law. There are no arrangements or understandings with major shareholders, customers, suppliers or others pursuant to which any person referred to above was selected as a director or member of senior management.
6.B. Compensation of Board Members and Executives
The following table presents in the aggregate all compensation we paid to all of our directors and senior management as a group for the year ended June 30, 2023. The table does not include any amounts we paid to reimburse any of such persons for costs incurred in providing us with services during this period. We are not required to provide the compensation, on an individual basis, of our executive officers and directors under Canadian law.
All amounts reported in the table below reflect the cost to the Company, in thousands of Canadian dollars, for the year ended June 30, 2023.
Name: |
| Salary or Fees |
|
| Option |
|
| Common |
|
| Cash Bonus |
| Total |
|
| Outstanding |
| |||||
All directors and senior management as a group, consisting of 8 persons |
|
| 3,921,502 |
|
|
| 1,515,266 |
|
|
| 907,250 |
|
| 334,738 |
|
| 6,678,756 |
|
|
| 1,462,407 |
|
For the fiscal year ended June 30, 2023, we paid aggregate cash compensation of C$3,921,502 (approximately US$2,961,860 based on the average exchange rate of 1.3240), to our directors and executive officers as a group. We did not pay any other cash compensation or benefits in kind to our directors and executive officers. We have not set aside or accrued any amount to provide pension, retirement or other similar benefits to our directors and executive officers. Our board of directors may determine compensation to be paid to the directors and the executive officers. The compensation committee will assist the directors in reviewing and approving the compensation structure for the directors and the executive officers. For information regarding share awards granted to our directors and executive officers, see “—Stock Option Plan.”
We plan to pay aggregate cash compensation of US$346,654 and US$371,886 per fiscal year, respectively, to our directors and executive officers as a group.
Stock Option Plan
On May 1, 2019, we established the Snow Lake Resources Ltd. Stock Option Plan, which, as amended and restated on October 26, 2021, is referred to herein as the “Plan”). The purpose of the Plan is to grant stock options, or Options, to encourage eligible persons to remain with our Company and to attract new directors, officers, employees and consultants. The aggregate number of common shares that may be reserved for issuance pursuant to Options under the Plan shall not exceed 2,406,732 common shares. On September 7, 2022, the Plan was purported to be further amended and restated (the “Purported 2022 Plan”) to add cashless exercise of the Options under the Plan. On May 17, 2023, the Board determined that the September 7, 2022 meeting was neither properly called nor held and accordingly the Purported 2022 Plan, including the cashless exercise feature, was never adopted and the Plan remained the stock option plan in effect prior to the September 7, 2022 meeting. In addition, on May 17, 2023, the Board determined that in the event that it is determined by a court of competent jurisdiction in a final, non-appealable judgement that the Purported 2022 Plan were validly approved, the Board approved the removal of the cashless exercise feature from the Purported 2022 Plan and revert back to the Plan.
95
Options give the option holder the right to acquire from us a designated number of common shares at a purchase price that is fixed upon the grant of the option. The exercise price shall not be lower than the greater of the closing market prices of the underlying securities on: (a) the trading day prior to the date of grant of the Options; and (b) the date of grant of the Options.
The following summary briefly describes the principal features of the Plan and is qualified in its entirety by reference to the full text of the Plan.
Purposes of Plan: The purpose of the Plan is to advance the interests of our Company, through the grant of Options, by providing an incentive mechanism to foster the interest of Eligible Persons in the success of our Company and our Affiliates; encouraging Eligible Persons to remain with our Company; and attracting new directors, officers, employees and consultants.
Administration of the Plan: The Plan is currently administered by the Board of Directors, or the Board. The Board shall have the authority to determine the Eligible Persons to whom Options are granted, to grant such Options, and to determine any terms and conditions, limitations and restrictions in respect of any particular Option grant, including but not limited to the nature and duration of the restrictions, if any, to be imposed upon the acquisition, sale or other disposition of common shares acquired upon exercise of the Option, and the nature of the events and the duration of the period, if any, in which any Participant’s rights in respect of an Option or common shares acquired upon exercise of an Option may be forfeited; and to interpret the terms of the Plan, to make all such determinations and take all such other actions in connection with the implementation, operation and administration of the Plan, and to adopt, amend and rescind such administrative guidelines and other rules and regulations relating to the Plan. The Board’s interpretations, determinations, guidelines, rules and regulations shall be conclusive and binding upon our Company, Eligible Persons, Participants and all other persons.
Eligible Persons: Eligible Persons include Directors, Officers, Employees or Consultants. An Eligible Person may receive Options on more than one occasion and may receive separate Options, with differing terms, on any one or more occasions.
Shares Available Under the Plan: The aggregate number of common shares that may be reserved for issuance pursuant to Options under the Plan shall not exceed 10% of the outstanding common shares at the time of the granting of Options, less the aggregate number of common shares then reserved for issuance pursuant to any other share compensation arrangement.
As of the date of this Annual Report, 694,325 of our common shares are reserved for future issuance under the Plan, 952,407 of our common shares are currently potentially issuable upon the exercise of outstanding options at an exercise price of US$7.50 per share, 160,000 of our common shares are potentially issuable upon the exercise of outstanding options currently issued and outstanding at an exercise price of C$2.50 (approximately US$2.02) per share, 350,000 of our common shares are currently potentially issuable upon the exercise of outstanding options issued and outstanding at an exercise price of US$2.50 per share and 250,000 of our common shares are currently potentially issuable upon the exercise of outstanding options issued and outstanding at an exercise price of US$2.25 per share.
Stock Options:
General. Subject to the provisions of the Plan, the Board has the authority to determine all grants of stock options. That determination will include: (i) the number of shares subject to any option; (ii) the exercise price per share; (iii) the expiration date of the option; (iv) the manner, time and date of permitted exercise; (v) other restrictions, if any, on the option or the shares underlying the option; and (vi) any other terms and conditions as the administrator may determine. No fractional common shares shall be reserved for issuance under the Plan and the Board may determine the manner in which an Option, insofar as it relates to the acquisition of a fractional Common Share, shall be treated.
Option Price. Our Company must not grant Options with an exercise price lower than the greater of the closing market prices of the underlying securities on: (a) the trading day prior to the date of grant of the Options; and (b) the date of grant of the Options.
96
Exercise of Options. An option may be exercised only in accordance with the terms and conditions for the option agreement as established by the administrator at the time of the grant. The option must be exercised by notice to us, accompanied by payment of the exercise price. Payments may be made in cash or, at the option of the administrator, by actual or constructive delivery of shares of Common Stock to the holder of the option based upon the fair market value of the shares on the date of exercise.
Expiration of Options. if not previously exercised, an Option will expire on the expiration date established by the administrator at the time of grant. In the case of stock options, such term cannot exceed ten years.
Blackout Period. The expiration date of an Option shall automatically extend if such expiration date falls within a period, or the blackout period, during which our company prohibits Optionees from exercising their Options to the extent that: (i) the blackout period is formally imposed by our company pursuant to its internal trading policies as a result of the bona fide existence of undisclosed material information. For greater certainty, in the absence of our company formally imposing a blackout period, the expiration date of any Options will not be automatically extended in any circumstances; (ii) the blackout period must expire upon the general disclosure of the undisclosed material information. The expiration date of the affected Options can be extended to no later than ten business days after the expiry of the blackout period; and (iii) the automatic extension of an Optionee’s Options will not be permitted where the Optionee or our company is subject to a cease trade order (or similar order under securities laws) in respect of our common shares.
Vesting Schedule. Options shall vest as determined by the Board. Options that may be granted to Eligible Persons performing investor relations activities shall vest over a minimum of 12 months with no more than 1/4 of such Options vesting in any three month period.
No Rights as a Shareholder. Nothing in the Plan or any Option shall confer upon a Participant any rights as a shareholder of our company with respect to any of the common shares underlying an Option unless and until such Participant shall have become the holder of such common shares upon exercise of such Option in accordance with the terms of the Plan.
Amendment, Suspension and Termination. The Board may amend, subject to the approval of any regulatory authority whose approval is required, suspend or terminate the Plan or any portion thereof. No such amendment, suspension or termination shall alter or impair any outstanding unexercised Options or any rights without the consent of the Participant holding such outstanding Options. If the Plan is suspended or terminated, the provisions of the Plan and any administrative guidelines, rules and regulations relating to the Plan shall continue in effect for the duration of such time as any Option remains outstanding.
Non-Assignability. Options may not be assigned or transferred.
Governing Law. The Plan, all Option Agreements, the grant and exercise of Options thereunder, and the sale, issuance and delivery of common shares thereunder upon exercise of Options are governed by the laws of the Province of Manitoba and the federal laws of Canada. The Courts of the Province of Manitoba shall have the exclusive jurisdiction to hear and decide any disputes or other matters arising under the Plan.
Other Material Provisions: Every Option shall be evidenced by an Option Agreement executed by us and the Participant, which shall, if the participant is an employee, consultant or management company employee, contain a representation and warranty by us and such Participant. In the event of changes in our outstanding common shares by reason of any share consolidation or split, reclassification or other capital reorganization, or a stock dividend, arrangement, amalgamation, merger or combination, or any other change to, event affecting, exchange of or corporate change or transaction affecting the common shares, the Board shall make, as it shall deem advisable and subject to the requisite approval of the relevant regulatory authorities, appropriate substitution and/or adjustment in: (i) the number and kind of shares or other securities or property reserved or to be allotted for issuance pursuant to the Plan; (ii) the number and kind of shares or other securities or property reserved or to be allotted for issuance pursuant to any outstanding unexercised Options, and in the exercise price for such shares or other securities or property; and (iii) the vesting of any Options.
97
6.C. Board Practices
Nasdaq’s listing rules generally require that a majority of an issuer’s board of directors must consist of independent directors. Our board of directors currently consists of five directors, Peretz Schapiro, Nachum Labkowski, Brian Imrie, Shlomo Kievman and Kathleen Skerrett, three of whom, Mr. Imrie, Mr. Kievman and Ms. Skerrett are independent within the meaning of Nasdaq’s rules.
A director is not required to hold any shares in our company to qualify to serve as a director. Our board of directors may exercise all the powers of our company to borrow money, mortgage or charge its undertaking, property and uncalled capital, and to issue debentures, bonds and other securities, subject to applicable stock exchange limitations, if any, whenever money is borrowed or as security for any debt, liability or obligation of our company or of any third-party.
Board Committees
We have a standing audit committee, a compensation committee and a nominating and corporate governance committee of our board of directors. We have adopted a charter for each of the three committees. Each committee’s members and functions are described below.
Audit Committee
Our audit committee consists of Brian Imrie, Shlomo Kievman and Kathleen Skerrett, each of whom satisfies the “independence” requirements of Rule 10A-3 under the Exchange Act and Rule 5605(c)(2) of the Nasdaq Marketplace Rules. Brian Imrie serves as chairman of the audit committee. Our board has determined that each of Brian Imrie, Shlomo Kievman and Kathleen Skerrett qualifies as an “audit committee financial expert.” The audit committee oversees our accounting and financial reporting processes and the audits of the financial statements of our company.
The audit committee is responsible for, among other things: (i) retaining and overseeing our independent accountants; (ii) assisting the board in its oversight of the integrity of our financial statements, the qualifications, independence and performance of our independent auditors and our compliance with legal and regulatory requirements; (iii) reviewing and approving the plan and scope of the internal and external audit; (iv) pre-approving any audit and non-audit services provided by our independent auditors; (v) approving the fees to be paid to our independent auditors; (vi) reviewing with our chief executive officer and chief financial officer and independent auditors the adequacy and effectiveness of our internal controls; (vii) reviewing hedging transactions; and (viii) reviewing and assessing annually the audit committee’s performance and the adequacy of its charter.
Compensation Committee
Our compensation committee consists of Nachum Labkowski, Peretz Schapiro and Shlomo Kievman. Shlomo Kievman satisfies the “independence” requirements of Rule 10A-3 under the Exchange Act and Rule 5605(c)(2) of the Nasdaq Marketplace Rules. Nachum Labkowski serves as chairman of the compensation committee. The compensation committee assists the board in reviewing and approving the compensation structure, including all forms of compensation, relating to our directors and executive officers.
The compensation committee is responsible for, among other things: (i) reviewing and approving the remuneration of our executive officers; (ii) making recommendations to the board regarding the compensation of our independent directors; (iii) making recommendations to the board regarding equity-based and incentive compensation plans, policies and programs; and (iv) reviewing and assessing annually the compensation committee’s performance and the adequacy of its charter.
98
Nominating and Corporate Governance Committee
Our Nominating and Corporate Governance Committee consists of Nachum Labkowski, Peretz Schapiro and Kathleen Skerrett. Kathleen Skerrett serves as chairman of the nominating and corporate governance committee. The nominating and corporate governance committee assists the board of directors in selecting individuals qualified to become our directors and in determining the composition of the board and its committees.
The nominating and corporate governance committee is responsible for, among other things: (i) identifying and evaluating individuals qualified to become members of the board by reviewing nominees for election to the board submitted by shareholders and recommending to the board director nominees for each annual meeting of shareholders and for election to fill any vacancies on the board; (ii) advising the board with respect to board organization, desired qualifications of board members, the membership, function, operation, structure and composition of committees (including any committee authority to delegate to subcommittees), and self-evaluation and policies; (iii) advising on matters relating to corporate governance and monitoring developments in the law and practice of corporate governance; (iv) overseeing compliance with the our code of ethics; and (v) approving any related party transactions.
The nominating and corporate governance committee’s methods for identifying candidates for election to our board of directors will include the solicitation of ideas for possible candidates from a number of sources - members of our board of directors, our executives, individuals personally known to the members of our board of directors, and other research. The nominating and corporate governance committee may also, from time-to-time, retain one or more third-party search firms to identify suitable candidates.
In making director recommendations, the nominating and corporate governance committee may consider some or all of the following factors: (i) the candidate’s judgment, skill, experience with other organizations of comparable purpose, complexity and size, and subject to similar legal restrictions and oversight; (ii) the interplay of the candidate’s experience with the experience of other board members; (iii) the extent to which the candidate would be a desirable addition to the board and any committee thereof; (iv) whether or not the person has any relationships that might impair his or her independence; and (v) the candidate’s ability to contribute to the effective management of our company, taking into account the needs of our company and such factors as the individual’s experience, perspective, skills and knowledge of the industry in which we operate.
Duties of Directors
Under Canadian law, directors have fiduciary obligations to our company. Under the MCA, directors, when exercising the powers and discharging their duties, must act honestly and in good faith with a view to the best interests of our company and exercise the care, diligence and skill that a reasonably prudent individual would exercise in comparable circumstances.
Under Manitoba corporate law, the MCA imposes specific statutory liabilities on directors of corporations in certain situations. In certain circumstances, directors can be held liable, for example, for the authorization of share issues for a consideration other than money at less than fair market value, or for all debts not exceeding six months’ wages payable to each of the employees for services performed for the corporation while they are directors, or for the payment of a dividend if there were reasonable grounds for believing that the corporation is, or would after the payment be, unable to pay its liabilities as they become due, or the realizable value of the corporation’s assets would thereby be less than the aggregate of its liabilities and stated capital. Under numerous other provisions in federal and provincial statutes, directors may also face personal liability for, among other things, environmental offences, source deductions from payrolls, and tax remittances. Corporate directors have a number of defenses to legal actions in which it is alleged that they have breached their statutory or fiduciary duties, including:
·dissenting from a resolution passed or action taken at a board meeting, which may relieve the director of any liability for the results of that decision;
·raising a “good faith reliance” defense to an accusation of breach of a fiduciary duty, whereby the director is entitled to rely in good faith on financial statements or reports made by an officer of the
99
corporation, the corporation’s auditor, or by other professionals, such as a lawyer, an accountant, or an engineer; and
·availing themselves of a due diligence defense that permits directors to avoid a number of statutory liabilities, including breach of fiduciary duty, where the directors exercise the same degree of care, diligence and skill as a reasonably prudent person in comparable circumstances.
Conflicts of Interest
There are potential conflicts of interest to which the directors, officers, insiders and promoters of our company will be subject in connection with the operations of our company. Some of the directors, officers, insiders and promoters are engaged in and will continue to be engaged in corporations or businesses which may be in competition with the business of our company. Accordingly, situations may arise where the directors, officers, insiders and promoters will be in direct competition with our company. The directors and officers of our company have a fiduciary obligation to act in the best interests of our company, avoid conflicts of interest and to disclose to all other board members any relevant information about potential conflicts. They have the same obligations to the other companies in respect of which they act as directors and officers. Discharge by the directors and officers of their obligations to our company may result in a breach of their obligations to the other companies, and in certain circumstances this could expose our company to liability to those companies. Similarly, discharge by the directors and officers of their obligations to the other companies could result in a breach of their obligation to act in the best interests of our company. Such conflicting legal obligations may expose our company to liability to others and impair our ability to achieve our business objectives. All of the directors or officers of our company have entered into non-competition or non-disclosure agreements with our company. Conflicts, if any, will be subject to the procedures and remedies as provided under the MCA and applicable securities laws, regulations and policies.
Terms of Directors and Officers
Our officers are appointed by and serve at the discretion of our board of directors. Unless the shareholders, by ordinary resolution, elect directors to hold office for a term expiring later than the close of the next annual meeting of shareholders, the term of office of a director upon election or appointment, subject to Section 103 of the MCA, shall cease at the close of the first annual meeting of shareholders following his or her election or appointment, provided that if no directors are elected at such annual meeting, he or she shall continue in office until his or her successor is elected or appointed. The following persons are disqualified by the MCA from being a director of the Company: (i) anyone who is less than 18 years of age; (ii) a person who is not an individual; and (iii) a person who has the status of a bankrupt.
Employment and Indemnification Agreements
The Company has entered into an employment agreement with Frank Wheatley. The employment agreement can be terminated by the Company without cause upon the payment of between three and twelve months of base salary depending on when such termination occurs.
The Company has entered into consulting agreements with entities owned by Peretz Schapiro and Brian Youngs. They are employed as consultants. Each consulting agreement can be terminated by the Company without cause upon the payment of ninety days’ service fees in lieu of such notice.
Each executive officer has agreed to hold, both during and after the employment agreement expires or is earlier terminated, in strict confidence and not to use or disclose to any person, corporation or other entity without written consent, any confidential information. In addition, certain of our executive officers have agreed to be bound by non-solicitation restrictions set forth in their agreements.
Although as independent contractors certain of our executive officers have been involved in other business activities, we expect that as our business operations ramp up such executive officers will devote substantially all of their time to our business operations.
100
We have entered into a indemnification agreement with all of our directors and officers, pursuant to which we agree to indemnify them against certain liabilities and expenses incurred by them in connection with claims made by reason of their being a director or officer.
Differences between Canadian Laws and Nasdaq Requirements
The Sarbanes-Oxley Act, as well as related rules subsequently implemented by the SEC, requires foreign private issuers, such as us, to comply with various corporate governance practices. In addition, following the listing of the common shares on Nasdaq, we are required to comply with the Nasdaq Stock Market Rules. Under those rules, we may elect to follow certain corporate governance practices permitted under Canadian law in lieu of compliance with corresponding corporate governance requirements otherwise imposed by the Nasdaq Stock Market Rules for U.S. domestic registrants.
In accordance with Canadian law and practice and subject to the exemption set forth in Rule 5615 of the Nasdaq Stock Market Rules, as a foreign private issuer, we have elected to rely on home country governance requirements and certain exemptions thereunder rather than the Nasdaq Stock Market Rules, with respect to the following requirements:
| ● | Annual Shareholder Meeting - Nasdaq Rule 5620(a) |
|
|
|
|
| The Company is currently following Home Country Practices in lieu of Nasdaq Rule 5620(a), which requires a company to hold an annual meeting of shareholders no later than one year after the end of its fiscal year. |
|
|
|
| ● | Compensation Committee Composition - Nasdaq Rule 5605(d)(2) |
|
|
|
|
| The Company does not intend to follow Nasdaq Rule 5605(d)(2), which requires a compensation committee to compose entirely of independent directors. The Company intends to follow the Home Country Practices instead. |
|
|
|
| ● | Nominating and Corporate Governance Committee Composition – Nasdaq Rule 5605(e)(1) |
|
|
|
|
| The Company does not intend to follow Nasdaq Rule 5605(e)(1), which requires a nominating and corporate governance committee to compose entirely of independent directors. The Company intends to follow the Home Country Practices instead. |
|
|
|
| ● | Executive Sessions - Nasdaq Rule 5605(b)(2) |
|
|
|
|
| The Company’s independent directors may not have regularly scheduled meetings at which only independent directors are present. |
|
|
|
| ● | Shareholder Approval for Issuance of Securities - Nasdaq Rule 5635(d) |
|
|
|
|
| The Company will not seek shareholders’ approval of any issuance of securities in connection with a transaction, other than a public offering, where such transaction involves the issuance of 20% or more of the Company’s total outstanding common shares (or securities exercisable for the Company’s common shares) at a price less than the minimum price as defined in Nasdaq Rule 5635(d)(1)(A). |
|
|
|
| ● | Shareholder Approval for Equity Compensation – Nasdaq Rule 5635(c) |
|
|
|
|
| The Company will not seek shareholders’ approval for the establishment of or any material amendments to equity compensation or purchase plans or other equity compensation arrangements. |
101
6.D. Employees
We have one employee at this time, our Chief Executive Officer Frank Wheatley.
Currently, all of our other executive officers and advisers work for us as independent contractors under consulting agreements. These agreements and the employment agreement with our Chief Executive Officer, typically include a confidentiality covenant that requires consultants to protect our confidential information during their engagement with us. In addition, these consulting agreements include typical non-compete clauses that prohibit the consultants from entering into competitive employment relationships while they are working for us.
6.E. Share Ownership
The following table sets forth information with respect to beneficial ownership of our share capital as of the date of this report by:
| ● | Each of our directors and named executive officers; |
|
|
|
| ● | All directors and named executive officers as a group; and |
|
|
|
| ● | Each person who is known by us to beneficially own 5% or more of each class of our voting securities. |
|
| Common Shares |
| |||||
Directors and Executive Officers |
| Number of Shares |
|
| Percent of Class (%) |
| ||
Frank Wheatley, Chief Executive Officer (2) |
|
| 200,000 |
|
|
| 0.97 | % |
Peretz Schapiro, Interim Chief Operating Officer and Director(3) |
|
| 0 |
|
|
| 0 | % |
Brian Youngs, Vice President, Exploration(4) |
|
| 72,000 |
|
|
| * | % |
Nachum Labkowski, Director(5) |
|
| 252,882 |
|
|
| 1.23% |
|
Kathleen Skerrett, Director(3) |
|
| 0 |
|
|
| 0% |
|
Brian Imrie, Director(3) |
|
| 0 |
|
|
| 0% |
|
Shlomo Kievman, Director(3) |
|
| 0 |
|
|
| 0% |
|
All executive officers and directors (8 persons) |
|
| 524,882 |
|
|
| 2.49 | % |
Nova Minerals Limited(6) |
|
| 6,600,000 |
|
|
| 32.48 | % |
Derek Knight(7) |
|
| 1,136,313 |
|
|
| 5.51 | % |
*Less than 1%
(1)As of the date of this report, a total of 20,319,789 common shares are considered to be outstanding pursuant to SEC Rule 13d-3(d)(1). For each beneficial owner above, any securities that are exercisable or convertible within 60 days have been included in the denominator.
(2)Consists of 200,000 restricted stock units (“RSUs”) none of which are currently exercisable within 60 days and options for the purchase of 250,000 common shares, none of which are exercisable within 60 days. The RSUs are exercisable for the corresponding number of common shares and vest as follows: 33,000 RSUs shall vest upon the volume weighted average price (“VWAP”) of the Corporation’s common shares exceeding the greater of each of these thresholds for a period of 20 consecutive trading days: (i) US$3.00; (ii) US$3.50; (iii) US$4.50; and (iv) US$5.50, and 34,000 RSUs shall vest upon the “VWAP of the Corporation’s common shares exceeding the greater of each of these thresholds for a period of 20 consecutive trading days: (i) US$6.50; and (ii) US$7.50. The options have an exercise price of US$2.25 per share and a term of three years. They are subject to vesting over 18 months with 25% of such Options vesting on January 17, 2024, an additional 25% vesting on July 17, 2024 and the remaining 50% vesting on January 17, 2025. None of the options are exercisable within 60 days of the date of this Annual Report. Mr. Wheatley’s address is c/o our company, Snow Lake Resources Ltd., 360 Main St 30th Floor, Winnipeg, Manitoba R3C 4G1 Canada.
102
(3)Currently holds no shares or options
(4)Consists of 8,000 restricted common shares, warrants for the purchase of 4,000 common shares exercisable within 60 days and options for the purchase of 60,000 common shares exercisable within 60 days.
(5) Consists of options for the purchase of 252,882 common shares exercisable within 60 days. Mr. Labkowski was granted options to purchase 160,000 common shares on May 25, 2019, and options to purchase 97,771 common shares on November 21, 2021. The May 25, 2019 options have a weighted average exercise price of C$2.50 per share and a term of five years. The options issued on November 21, 2021 have a weighted average exercise price of US$7.50 per share and a term of five years. They are subject to vesting over a minimum of 12 months with no more than 1/4 of such Options vesting in any three-month period. 97,771 of the options are exercisable within 60 days of the date of this report.
(6)Christopher Gerteisen is the Chief Executive Officer of Nova and has voting and investment power over the securities held by it. Mr. Gerteisen disclaims beneficial ownership of the shares held by Nova except to the extent of his pecuniary interest, if any, in such shares. The address of Nova is Suite 602, 566 St Kilda Road, Melbourne, Victoria 3004 Australia.
(7)Consists of 681,738 restricted common shares, warrants for the purchase of 84,285 common shares exercisable within 60 days and options for the purchase of 228,489 common shares exercisable within 60 days. Mr. Knight was granted an option to purchase 140,000 common shares on May 25, 2019 at a weighted average exercise price of C$2.50 for five years. Surge Wealth Inc., an Ontario corporation (“Surge Wealth”) was granted options to purchase 228,489 common shares on November 21, 2021. Mr. Knight, in his capacity as the President and Director of Surge Wealth, has the power to vote and the power to direct the disposition of all of the securities held by Surge Wealth. The address of Surge Wealth is 522 Ryerse Blvd, Simcoe, ON, CA. The options have a weighted average exercise price of US$7.50 per share and a term of five years. They are subject to vesting over a minimum of 12 months with no more than 1/4 of such Options vesting in any three-month period. All 228,489 of the options are exercisable within 60 days of the date of this report.
None of our major shareholders have different voting rights from other shareholders. As noted in the table above, Nova holds approximately 32.48% of our outstanding common shares. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company.
103
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
7.A. Major shareholders
Please refer to Item 6 “Directors, Senior Management and Employees—E. Share Ownership.”
7.B. Related Party Transactions
In accordance with IAS 24 – Related Party Disclosures, key management personnel, including companies controlled by them, are those persons having authority and responsibility for planning, directing and controlling the activities of the Company directly or indirectly, including any directors (executive and non-executive) of the Company. The remuneration of directors and key executives is determined by the compensation committee of the Board. The remuneration of directors and other members of key management personnel during the years ended June 30, 2023, 2022 and 2021 were as follows:
|
| 2023 |
|
| 2022 |
|
| 2021 |
| |||
|
| C$ |
|
| C$ |
|
| C$ |
| |||
Directors’ and officers’ consulting fees |
|
| 492,377 |
|
|
| 585,615 |
|
|
| 200,858 |
|
Cash Payment |
|
| 334,738 |
|
|
| - |
|
|
| - |
|
Exploration and evaluation expenditures |
|
| 415,325 |
|
|
| 220,765 |
|
|
| 48,000 |
|
Total |
|
| 1,242,440 |
|
|
| 806,380 |
|
|
| 248,858 |
|
Directors’ and officers’ consulting fees
During the year ended June 30, 2023, fees of C$492,377 (2022 – C$585,615; 2021 – C$200,858) included in directors’ and officers’ consulting fees had been paid to companies controlled by all former and current officers of the Company.
Cash payment
During the year ended June 30, 2023, a payment of USD $250,000 ($334,738) (2022 and 2021 – $nil) had been paid to a director of the Company.
Exploration and evaluation expenditures
During the year ended June 30, 2023, fees of C$415,325 (2022 – C$220,765; 2021 – C$48,000) for services rendered by the Company’s former VP of Resources Development, and the current VP of Exploration, had been capitalized as E&E assets on the consolidated statements of financial position.
Addendum payments
On November 1, 2022, the Company purported to amend the consulting agreements with the entities controlled by the former Chief Executive Officer and the former Chief Operating Officer of Snow Lake, with an addendum which amended the termination clause of their respective agreements. As a result of the addendum, the Company recorded fees of C$1,672,988 (USD $1,224,040) and C$881,842 (USD $648,020), respectively, which are included in directors’ and officers’ consulting fees during the year ended June 30, 2023. On December 5, 2022, payout was made to the respective entities controlled by the former CEO and COO.
As of June 30, 2023, the Company has made a claim against these former officers (see Note 23 to the financial statements for more details).
Share-based compensation
During the year ended June 30, 2023, the Company had granted certain restricted share units and options to various directors and officers. Total stock-based compensation of C$$2,422,516 (2022 – C$8,035,506; 2021 – $nil) was recorded in connection with the vesting of these securities.
104
Related party balances
All related party balances payable, for services and business expense reimbursements rendered as at June 30, 2023, 2022 and 2021, are non-interest bearing and payable on demand, and are comprised of the following:
|
| 2023 |
|
| 2022 |
|
| 2021 |
| |||
|
| C$ |
|
| C$ |
|
| C$ |
| |||
Payable to officers and directors |
|
| 86,616 |
|
|
| 110,274 |
|
|
| 236,402 |
|
(Receivable) payable to Nova Minerals Ltd. |
|
| (10,287 | ) |
|
| (10,287) |
|
|
| 43,240 |
|
|
|
| 76,329 |
|
|
| 99,987 |
|
|
| 279,6428 |
|
On March 8, 2019, we entered into a deed of assignment of debt with Nova Minerals Ltd. and Thompson Bros to facilitate the reassignment of the related party loan from Nova Minerals Ltd. to our company. Thereby, we are now a party to an amount owing from Thompson Bros of C$1,519,013 (approximately US$1,115,773) as of June 30, 2020. In consideration for the assignment, we issued one of our common shares to Nova Minerals Ltd. The related party loan is non-interest bearing and with no fixed repayment date or terms.
As of June 30, 2023, 2022 and 2021, we had C$10,287 (approximately US$7,982) due from our major shareholder, Nova Minerals Ltd., C$10,287 due from Nova Minerals Ltd., and C$43,240 due to Nova Minerals Ltd. This money was lent to us by Nova Minerals Ltd. to fund our startup as well as ongoing accounting, legal and general corporate costs. This loan has since been paid off.
During the years ended June 30, 2023, 2022 and 2021, the Company incurred C$951,347 (approximately US$718,540) C$687,585 and C$200,858, respectively in directors & officers consulting fees.
Debenture Sales
In February 2021, the Company issued convertible debts (the “Debentures”) for a total of C$865,263 (US$697,568) (the “Subscribed Amount”). The Debentures were sold at a discount of approximately 5% for proceeds of C$805,000 (US$648,984), net of a C$15,000 (US$12,093) cash commission.
Under the terms of the Agreement, the Subscribed Amount plus interest accrued, at a rate which should be the higher of (i) 12% per annum or (ii) Wall Street Prime Rate + 7%, is convertible, at the option of the Debenture holder, into common shares of the Company at a price that is the lesser of (i) C$1.25 per share or (ii) a 20% discount to the price of a Liquidity Transaction (defined below). The conversion feature expires (the “Expiry Date”) on the earlier of twenty-four months from execution, or the closing of a registered public offering (the “Liquidity Transaction”).
In the event of a default, interest accrues at the lesser of (i) 24% per annum or (ii) the maximum legally authorized rate. The Company has the right to repay the note prior to maturity at 110% of the then outstanding principal and interest. The Company must provide 30 days’ notice and the Lender shall have the right to convert prior to the 30-day notice expiration.
On November 23, 2021, all debt holders exercised their conversion rights at a price of C$1.25 per common share. As a result of the conversion, 751,163 common shares were issued.
7.C. Interests of Experts and Counsel
Not Applicable.
105
ITEM 8. FINANCIAL INFORMATION
8.A. Consolidated Statements and Other Financial Information.
The Company’s consolidated financial statements are stated in Canadian dollars and are prepared in accordance with IFRS.
Audited Financial Statements
Our consolidated financial statements for the 2023, 2022 and 2021 fiscal years as required under Item 17 are included immediately following the text of this Annual Report. The audit reports of the Company are included herein immediately preceding the financial statements.
Policy on Dividend Distributions
The Company has not paid any dividends on its outstanding common shares since its incorporation and does not anticipate that it will do so in the foreseeable future. The payment of dividends in the future, if any, is within the discretion of the Board of Directors and will depend upon our earnings, our capital requirements and financial condition and other relevant factors. We do not anticipate declaring or paying any dividends in the foreseeable future.
8.B. Significant Changes
Except for the following or as disclosed elsewhere in this annual report, no significant change has occurred since the date of our consolidated financial statements filed as part of this annual report.
On July 13, 2023, the Company filed an application against its former Manitoba law firm seeking to assess for reasonableness certain invoices of the law firm rendered between May 2022 and January 2023, as well as the repayment of any fees paid to the law firm which the Court finds to be unreasonable. This application is at the early stages.
On July 17, 2023, the Company granted 250,000 options and 200,000 RSUs to its new CEO. 25% of the options will vest six months from the grant date, 25% will vest 12 months from the grant date, with the remainder to vest 18 months from the grant date. The RSUs, on the other hand, will vest at various stages depending on the Company’s volume weighted average price exceeding certain thresholds.
On July 29, 2023, a former director resigned from the Company, resulting in 50,000 options and 10,000 RSUs being cancelled.
As of August 9, 2023 160,000 RSUs out of the 470,000 RSUs awarded on January 30, 2023 had met the milestones required to vest, and on September 26, 2023, the Company paid $546,476 (USD$400,000) to redeem 160,000 of the vested RSUs at USD $2.50 each.
On September 21, 2023, the Company closed its best-efforts flow-through financing of common shares through the issuance of 2,133,979 common shares at a price of $3.6117 (USD $2.67) per common share, for gross proceeds of $7,707,292 (USD $5,697,710). In connection with the Offering, the Company issued 86,000 warrants at USD $2.67 per share with an expiry of five years and paid fees and expenses to various agents in the amount of $215,376.
On September 21, 2023, the Company also issued 21,276 common shares to a third-party pursuant to a letter agreement between the parties.
On October 20, 2023, the Company issued 40,000 common shares to a third-party pursuant to a marketing services agreement (the “Marketing Agreement”) between the parties for a term of six months from October 2, 2023 to April 2, 2024. Upon execution of the agreement, the Company also paid a cash payment of USD $62,500 upon execution, The Company also issued 300,000 Warrants to the third-party pursuant to the Marketing Agreement, whereby each Warrant is exercisable for a period of 12 months at an exercise price of: (i) USD $2 for 100,000 Warrants; (ii) USD $2.50 for 100,000 Warrants; and (iii) USD $3 for 100,000 Warrants.
106
ITEM 9. THE OFFER AND LISTING
9.A. Offer and Listing Details
Not Applicable.
9.B. Plan of Distribution
Not Applicable.
9.C. Markets
Our common shares have been listed on the Nasdaq Capital Market since November 19, 2021, under the symbol “LITM.”
9.D. Selling Shareholders
Not Applicable.
9.E. Dilution
Not Applicable.
9.F. Expenses of the Issue
Not Applicable.
ITEM 10. ADDITIONAL INFORMATION
10.A. Share Capital
Not applicable.
10.B. Memorandum and Articles of association
The description of certain terms and provisions of our articles of incorporation, as amended, and certain related sections of the Corporations Act (Manitoba) is incorporated by reference to our Registration Statement filed on Form F-1 (File No. 333-264098) filed with the SEC and as declared effective on April 7, 2022.
10.C. Material Contracts
All material contracts governing the business of the Company are described elsewhere in this annual report on Form 20-F or in the information incorporated by reference herein.
10.D. Exchange Controls
Canada has no system of exchange controls. We are not aware of any governmental laws, decrees, regulations or other legislation in Canada that restrict the export or import of capital, including the availability of cash and cash equivalents for use by our affiliated companies, or that affect the remittance of dividends, interest, royalties or similar payments to non-resident holders of Company securities, although there may be Canadian and other foreign tax considerations. See Item 10(E) — “Taxation.”
107
10.E. Taxation
Canadian Income Tax Considerations
The following summary describes, as of the date hereof, the material Canadian federal income tax considerations generally applicable to a purchaser who acquires, as a beneficial owner, common shares pursuant to this report and who, at all relevant times, for the purposes of the application of the Income Tax Act (Canada) and the Income Tax Regulations (which we collectively refer to as the Canadian Tax Act), (i) is not, and is not deemed to be, resident in Canada for purposes of the Canadian Tax Act and any applicable income tax treaty or convention; (ii) deals at arm’s length with us; (iii) is not affiliated with us; (iv) does not use or hold, and is not deemed to use or hold, common shares in a business or part of a business carried on in Canada; (v) has not entered into, with respect to the common shares, a “derivative forward agreement”, as that term is defined in the Canadian Tax Act and (vi) holds the common shares as capital property (which we refer to as a Non-Canadian Holder). This summary does not apply to a Non-Canadian Holder that is an insurer carrying on an insurance business in Canada and elsewhere or an “authorized foreign bank”, as that term is defined in the Canadian Tax Act. Such Non-Canadian Holders should consult their tax advisors for advice having regards to their particular circumstances.
This summary is based on the current provisions of the Canadian Tax Act, and an understanding of the current administrative policies of the Canada Revenue Agency published in writing prior to the date hereof. It takes into account all specific proposals to amend the Canadian Tax Act and the Canada-United States Tax Convention (1980), as amended, or the Canada-U.S. Tax Treaty, publicly announced by or on behalf of the Minister of Finance (Canada) prior to the date hereof (which we refer to as the Proposed Amendments) and assumes that all Proposed Amendments will be enacted in the form proposed. However, no assurances can be given that the Proposed Amendments will be enacted as proposed, or at all. This summary does not otherwise take into account or anticipate any changes in law or administrative policy or assessing practice whether by legislative, regulatory, administrative or judicial action nor does it take into account tax legislation or considerations of any province, territory or foreign jurisdiction, which may differ from those discussed herein.
This summary is of a general nature only and is not, and is not intended to be, legal or tax advice to any particular shareholder, and no representations with respect to the income tax consequences to any particular shareholder are made. This summary is not exhaustive of all Canadian federal income tax considerations. Accordingly, you should consult your own tax advisor with respect to your particular circumstances.
Generally, for purposes of the Canadian Tax Act, all amounts relating to the acquisition, holding or disposition of the common shares must be converted into Canadian dollars based on the exchange rates as determined in accordance with the Canadian Tax Act. The amount of any dividends, capital gains or capital losses realized by a Non-Canadian Holder may be affected by fluctuations in the Canadian exchange rate.
Dividends
Dividends paid or credited on the common shares or deemed to be paid or credited on the common shares to a Non-Canadian Holder will be subject to Canadian withholding tax at the rate of 25%, subject to any reduction in the rate of withholding to which the Non-Canadian Holder is entitled under any applicable income tax treaty or convention between Canada and the country in which the Non-Canadian Holder is resident. For example, under the Canada-U.S. Tax Treaty, where dividends on the common shares are considered to be paid to or derived by a Non-Canadian Holder that is a beneficial owner of the dividends and is a U.S. resident for the purposes of, and is entitled to benefits of, the Canada-U.S. Tax Treaty, the applicable rate of Canadian withholding tax is generally reduced to 15% (or 5% in the case of a U.S. Holder that is a corporation beneficially owning at least 10% of all of the issued voting shares). We will be required to withhold the applicable withholding tax from any dividend and remit it to the Canadian government for the Non-Canadian Holder’s account. Non-Canadian Holders are urged to consult their own tax advisors to determine their entitlement to relief under an applicable income tax treaty.
108
Dispositions
A Non-Canadian Holder will not be subject to tax under the Canadian Tax Act on any capital gain realized on a disposition or deemed disposition of a common share, nor will capital losses arising therefrom be recognized under the Canadian Tax Act, unless (i) the common shares are “taxable Canadian property” to the Non-Canadian Holder for purposes of the Canadian Tax Act at the time of disposition; and (ii) the Non-Canadian Holder is not entitled to relief under an applicable income tax treaty or convention between Canada and the country in which the Non-Canadian Holder is resident.
Generally, the common shares will not constitute “taxable Canadian property” to a Non-Canadian Holder at a particular time provided that the common shares are listed at that time on a “designated stock exchange” (as defined in the Canadian Tax Act), which includes Nasdaq unless at any particular time during the 60-month period that ends at that time:
●at least 25% of the issued shares of any class or series of our capital stock was owned by or belonged to any combination of (a) the Non-Canadian Holder, (b) persons with whom the Non-Canadian Holder does not deal at arm’s length, and (c) partnerships in which the Non-Canadian Holder or a person described in (b) holds a membership interest directly or indirectly through one or more partnerships, and
●more than 50% of the fair market value of the common shares was derived, directly or indirectly, from one or any combination of : (i) real or immoveable property situated in Canada, (ii) “Canadian resource properties” (as that term is defined in the Canadian Tax Act), (iii) “timber resource properties” (as that term is defined in the Canadian Tax Act) and (iv) options in respect of, or interests in, or for civil law rights in, property in any of the foregoing whether or not the property exists.
Notwithstanding the foregoing, in certain circumstances, common shares could be deemed to be “taxable Canadian property.”
A Non-Canadian Holder’s capital gain (or capital loss) of a disposition or deemed disposition of common shares that constitute or are deemed to constitute taxable Canadian property (and are not “treaty-protected property” as defined in the Canadian Tax Act) generally will be computed and taxed as though the Canadian Holder were a Resident Holder. Such Non-Canadian Holder may be required to report the disposition or deemed disposition of common shares by filing a tax return in accordance with the Canadian Tax Act. Non-Canadian Holders whose common shares may be taxable Canadian property should consult their own tax advisors regarding the tax and compliance considerations that may be relevant to them.
U.S. Federal Income Taxation Considerations
The following discussion describes the material U.S. federal income tax consequences relating to the ownership and disposition of common shares by U.S. Holders (as defined below). This discussion applies to U.S. Holders that purchase our common and hold such common shares as capital assets. This summary does not deal with all possible tax consequences relating to an investment in our common shares, such as the tax consequences under state, local or other tax laws.
The discussion below of the U.S. federal income tax consequences to “U.S. Holders” will apply to a beneficial owner of our common shares that is for U.S. federal income tax purposes:
●an individual citizen or resident of the United States;
●a corporation (or other entity treated as a corporation) that is created or organized (or treated as created or organized) in or under the laws of the United States, any state thereof or the District of Columbia;
●an estate whose income is includible in gross income for U.S. federal income tax purposes regardless of its source; or
●a trust if (i) a U.S. court can exercise primary supervision over the trust’s administration and one or more U.S. persons are authorized to control all substantial decisions of the trust, or (ii) it has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.
109
A beneficial owner of our common shares that is described above is referred to herein as a “U.S. Holder”. If a beneficial owner of our common shares is not described as a U.S. Holder and is not an entity treated as a partnership or other pass-through entity for U.S. federal income tax purposes, such owner will be considered a “Non-U.S. Holder”. The material U.S. federal income tax consequences applicable specifically to Non-U.S. Holders of owning and disposing of our common shares are described below under the heading “Non-U.S. Holders”.
This discussion is based on the U.S. Internal Revenue Code of 1986, as amended (the “Code”), U.S. Treasury regulations promulgated thereunder and administrative and judicial interpretations thereof, all as in effect on the date hereof and all of which are subject to change, possibly with retroactive effect.
This discussion does not address all of the U.S. federal income tax consequences that may be relevant to specific U.S. Holders in light of their particular circumstances.. In particular, this discussion considers only holders that own and hold our common shares as capital assets within the meaning of Section 1221 of the Code, and does not address the potential application of the alternative minimum tax. In addition, this discussion does not address the U.S. federal income tax consequences to holders that are subject to special rules, including:
●financial institutions or financial services entities;
●insurance companies;
●currency or securities dealers and traders in securities or other persons that generally mark their securities to market for U.S. federal income tax purposes;
●tax-exempt entities;
●governments or agencies or instrumentalities thereof;
●retirement plans;
●regulated investment companies;
●real estate investment trusts;
●certain expatriates or former long-term residents of the United States;
●persons who hold our common shares as part of a “straddle”, “hedge”, “conversion transaction”, “synthetic security” or integrated investment;
●persons that have a “functional currency” other than the U.S. dollar;
●persons that own directly, indirectly or through attribution 5% or more of the voting power of our shares;
●corporations that accumulate earnings to avoid U.S. federal income tax;
●persons subject to special tax accounting rules under Section 451(b) of the Code; or
●partnerships and other pass-through entities, and investors in such pass-through entities.
This discussion does not address any aspect of U.S. federal non-income tax laws, such as gift or estate tax laws, or state, local or non-U.S. tax laws or, except as discussed herein, any tax reporting obligations applicable to a holder of our common shares. Additionally, this discussion does not consider the tax treatment of partnerships or other pass-through entities or persons who hold our common shares through such entities. If a partnership (or other entity classified as a partnership for U.S. federal income tax purposes) is the beneficial owner of our common shares, the U.S. federal income tax treatment of a partner in the partnership will generally depend on the status of the partner and the activities of the partnership. This discussion also assumes that any distribution made (or deemed made) by us on
110
our common shares and any consideration received (or deemed received) by a holder in consideration for the sale or other disposition of our common shares will be in U.S. dollars.
We have not sought, and will not seek, a ruling from the Internal Revenue Service, or the IRS or an opinion of counsel as to any U.S. federal income tax consequence described herein. The IRS may disagree with the description herein, and its determination may be upheld by a court. Moreover, there can be no assurance that future legislation, regulations, administrative rulings or court decisions will not adversely affect the accuracy of the statements in this discussion.
THIS DISCUSSION IS ONLY A SUMMARY OF THE MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF OUR COMMON SHARES. IT IS NOT TAX ADVICE. EACH HOLDER OF OUR COMMON SHARES IS URGED TO CONSULT ITS OWN TAX ADVISOR IN RESPECT TO THE PARTICULAR TAX CONSEQUENCES TO SUCH HOLDER OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF OUR COMMON SHARES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL, AND NON-U.S. TAX LAWS, AS WELL AS U.S. FEDERAL TAX LAWS AND ANY APPLICABLE TAX TREATIES.
Passive Foreign Investment Company Consequences
In general, a corporation organized outside the United States will be treated as a passive foreign investment company, or PFIC, for any taxable year in which either (1) at least 75% of its gross income is “passive income” or (2) on average at least 50% of its assets, determined on a quarterly basis, are assets that produce passive income or are held for the production of passive income. Passive income for this purpose generally includes, among other things, dividends, interest, royalties, rents (other than certain rents or royalties derived from the active conduct of a trade or business), and gains from the sale or exchange of property that gives rise to passive income. Assets that produce or are held for the production of passive income generally include cash, even if held as working capital or raised in a public offering, marketable securities, and other assets that may produce passive income. Generally, in determining whether a non-U.S. corporation is a PFIC, a proportionate share of the income and assets of each corporation in which it owns, directly or indirectly, at least a 25% interest (by value) is taken into account.
Although we do not believe that we were a PFIC for the year ending June 30, 2023, our determination is based on an interpretation of complex provisions of the law, which are not addressed in a significant number of administrative pronouncements or rulings by the Internal Revenue Service, or IRS. Accordingly, there can be no assurance that our conclusions regarding our status as a PFIC for the 2023 taxable year will not be challenged by the IRS and, if challenged, upheld in appropriate proceedings. In addition, because PFIC status is determined on an annual basis and generally cannot be determined until the end of the taxable year, there can be no assurance that we will not be a PFIC for the current taxable year. Because we may continue to hold a substantial amount of cash and cash equivalents, and because the calculation of the value of our assets may be based in part on the value of our common shares, which may fluctuate considerably, we may be a PFIC in future taxable years. Even if we determine that we are not a PFIC for a taxable year, there can be no assurance that the IRS will agree with our conclusion and that the IRS would not successfully challenge our position. Our status as a PFIC is a fact-intensive determination made on an annual basis.
If we are determined to be a PFIC in any taxable year (or portion thereof) during which a U.S. Holder owns our common shares, the U.S. Holder could be liable for additional taxes and interest charges under the “PFIC excess distribution regime” upon (1) a distribution paid during a taxable year that is greater than 125% of the average annual distributions paid in the three preceding taxable years, or, if shorter, the U.S. Holder’s holding period for our common shares, and (2) any gain recognized on a sale, exchange or other disposition, including a pledge, of our common shares, whether or not we continue to be a PFIC. Under the PFIC excess distribution regime, the tax on such distribution or gain would be determined by allocating the distribution or gain ratably over the U.S. Holder’s holding period for our common shares. The amount allocated to the current taxable year (i.e., the year in which the distribution occurs or the gain is recognized) and any year prior to the first taxable year in which we are a PFIC will be taxed as ordinary income earned in the current taxable year. The amount allocated to other taxable years will be taxed at the highest marginal rates in effect for individuals or corporations, as applicable, to ordinary income for each such taxable year, and an interest charge, generally applicable to underpayments of tax, will be added to the tax.
111
If we are determined to be a PFIC for any year during which a U.S. Holder holds our common shares, we must generally continue to be treated as a PFIC by that holder for all succeeding years during which the U.S. Holder holds our common shares, unless we cease to meet the requirements for PFIC status and the U.S. Holder makes a “deemed sale” election with respect to our common shares. If the election is made, the U.S. Holder will be deemed to sell our common shares it holds at their fair market value on the last day of the last taxable year in which we qualified as a PFIC, and any gain recognized from such deemed sale would be taxed under the PFIC excess distribution regime. After the deemed sale election, the U.S. Holder’s common shares would not be treated as shares of a PFIC unless we subsequently become a PFIC.
If we are determined to be a PFIC for any taxable year during which a U.S. Holder holds our common shares and one of our non-U.S. corporate subsidiaries is also a PFIC (i.e., a lower-tier PFIC), such U.S. Holder would be treated as owning a proportionate amount (by value) of the shares of the lower-tier PFIC and would be taxed under the PFIC excess distribution regime on distributions by the lower-tier PFIC and on gain from the disposition of shares of the lower-tier PFIC even though such U.S. Holder would not receive the proceeds of those distributions or dispositions. Each U.S. Holder is advised to consult its tax advisors regarding the application of the PFIC rules to our non-U.S. subsidiaries.
If we are a PFIC, a U.S. Holder will not be subject to tax under the PFIC excess distribution regime on distributions or gain recognized on our common shares if such U.S. Holder makes a valid “mark-to-market” election for our common shares. A mark-to-market election is available to a U.S. Holder only for “marketable stock”.
Our common shares will be marketable stock so long as they remain listed on Nasdaq and are regularly traded, other than in de minimis quantities, on at least 15 days during each calendar quarter. If a mark-to-market election is in effect, a U.S. Holder generally would take into account, as ordinary income each year, the excess of the fair market value of our common shares held at the end of such taxable year over the adjusted tax basis of such common shares. The U.S. Holder would also take into account, as an ordinary loss each year, the excess of the adjusted tax basis of such our common shares over their fair market value at the end of the taxable year, but only to the extent of the excess of amounts previously included in income over ordinary losses deducted as a result of the mark-to-market election. The U.S. Holder’s tax basis in our common shares would be adjusted to reflect any income or loss recognized as a result of the mark-to-market election. Any gain from a sale, exchange or other disposition of our common shares in any taxable year in which we are a PFIC would be treated as ordinary income and any loss from such sale, exchange or other disposition would be treated first as ordinary loss (to the extent of any net mark-to-market gains previously included in income) and thereafter as capital loss.
A mark-to-market election will not apply to our common shares for any taxable year during which we are not a PFIC, but will remain in effect with respect to any subsequent taxable year in which we become a PFIC. Such election will not apply to any non-U.S. subsidiaries that we may organize or acquire in the future. Accordingly, a U.S. Holder may continue to be subject to tax under the PFIC excess distribution regime with respect to any lower-tier PFICs that we may organize or acquire in the future notwithstanding the U.S. Holder’s mark-to-market election for our common shares.
The tax consequences that would apply if we are a PFIC would also be different from those described above if a U.S. Holder were able to make a valid qualified electing fund, or QEF, election (or a QEF election along with a purging election). Pursuant to the QEF election, a U.S. Holder generally will be required to include in income its pro rata share of our net capital gains (as long-term capital gain) and other earnings and profits (as ordinary income), on a current basis, in each case whether or not distributed, in the taxable year of the U.S. Holder in which or with which our taxable year ends if we qualified as a PFIC in that taxable year. At this time, we do not expect to provide U.S. Holders with the information necessary for a U.S. Holder to make a QEF election. Consequently, prospective investors should assume that a QEF election will not be available.
Each U.S. person that is an investor of a PFIC is generally required to file an annual information return on IRS Form 8621 containing such information as the U.S. Treasury Department may require. The failure to file IRS Form 8621 could result in the imposition of penalties and the extension of the statute of limitations with respect to U.S. federal income tax.
112
The U.S. federal income tax rules relating to PFICs and mark-to-market elections are very complex and are affected by various factors in addition to those described above. Prospective U.S. investors are strongly urged to consult their own tax advisors with respect to the impact of PFIC status on the purchase, ownership and disposition of our common shares, the consequences to them of an investment in a PFIC, any elections available with respect to our common shares and the IRS information reporting obligations with respect to the purchase, ownership and disposition of the common shares of a PFIC.
Distributions
Subject to the discussion above under “—Passive Foreign Investment Company Consequences”, a U.S. Holder that receives a distribution with respect to our common shares generally will be required to include the gross amount of such distribution in gross income as a dividend when actually or constructively received to the extent of the U.S. Holder’s pro rata share of our current and/or accumulated earnings and profits (as determined under U.S. federal income tax principles). To the extent a distribution received by a U.S. Holder is not a dividend because it exceeds the U.S. Holder’s pro rata share of our current and accumulated earnings and profits, it will be treated first as a tax-free return of capital and reduce (but not below zero) the adjusted tax basis of the U.S. Holder’s common shares. To the extent the distribution exceeds the adjusted tax basis of the U.S. Holder’s common shares, the remainder will be taxed as capital gain. Because we may not account for our earnings and profits in accordance with U.S. federal income tax principles, U.S. Holders should expect all distributions to be reported to them as dividends. Distributions on our common shares that are treated as dividends generally will constitute income from sources outside the United States for foreign tax credit purposes and generally will constitute passive category income. Such dividends will not be eligible for the “dividends received” deduction generally allowed to corporate shareholders with respect to dividends received from U.S. corporations.
A U.S. Holder receiving a distribution from which the 25% Canadian withholding tax (as described above in “Canadian Income Tax Considerations – Dividends”) has been deducted may be entitled to a foreign tax credit in determining the U.S. Holder’s federal income tax liability for the year in which the distribution is received. The availability of a full or partial foreign tax credit in respect of such Canadian withholding tax is determined under rules of considerable complexity, and the foreign tax credit may not be available in all cases. Prospective U.S. investors are strongly urged to consult their own tax advisors with respect to the availability of the foreign tax credit with respect to distributions received from which Canadian tax has been withheld at source.
Dividends paid by a “qualified foreign corporation” are eligible for taxation for certain non-corporate U.S. Holders at a reduced capital gains rate rather than the marginal tax rates generally applicable to ordinary income provided that certain requirements are met. However, if we are a PFIC for the taxable year in which the dividend is paid or the preceding taxable year (see discussion above under “—Passive Foreign Investment Company Consequences”), we will not be treated as a qualified foreign corporation, and therefore the reduced capital gains tax rate described above will not apply. Each U.S. Holder is advised to consult its tax advisors regarding the availability of the reduced tax rate on dividends with regard to its particular circumstances.
A non-United States corporation (other than a corporation that is classified as a PFIC for the taxable year in which the dividend is paid or the preceding taxable year) generally will be considered to be a qualified foreign corporation (a) if it is eligible for the benefits of a comprehensive tax treaty with the United States which the Secretary of Treasury of the United States determines is satisfactory for purposes of this provision and which includes an exchange of information provision, or (b) with respect to any dividend it pays on our common shares that are readily tradable on an established securities market in the United States. We believe that we qualify as a resident of Canada for purposes of, and are eligible for the benefits of, the U.S.-Canada Treaty, although there can be no assurance in this regard. Further, the IRS has determined that the U.S.-Canada Treaty is satisfactory for purposes of the qualified dividend rules and that it includes an exchange of information provision. Therefore, subject to the discussion above under “—Passive Foreign Investment Company Consequences”, if the U.S.-Canada Treaty is applicable, such dividends will generally be “qualified dividend income” in the hands of individual U.S. Holders, provided that certain conditions are met, including holding period and the absence of certain risk reduction transactions.
113
Sale, Exchange or Other Disposition of our Common Shares
Subject to the discussion above under “—Passive Foreign Investment Company Consequences”, a U.S. Holder generally will recognize capital gain or loss for U.S. federal income tax purposes upon the sale, exchange or other taxable disposition of our common shares in an amount equal to the difference, if any, between the amount realized (i.e., the amount of cash plus the fair market value of any property received) on the sale, exchange or other disposition and such U.S. Holder’s adjusted tax basis in our common shares. Such capital gain or loss generally will be long-term capital gain taxable at a reduced rate for noncorporate U.S. Holders or long-term capital loss if, on the date of sale, exchange or other disposition, our common shares were held by the U.S. Holder for more than one year. Any capital gain of a non-corporate U.S. Holder that is not long-term capital gain is taxed at ordinary income rates. The deductibility of capital losses is subject to limitations.
If Canadian income tax applies to any gain from the disposition of our common shares by a U.S. Holder, such tax may be treated as a foreign tax eligible for a deduction from such holder’s U.S. federal taxable income or a foreign tax credit against such holder’s U.S. federal income tax liability (subject to applicable conditions and limitations). In addition, if such Canadian tax applies to any gain, such U.S. Holder may be entitled to certain benefits under the U.S.-Canada Tax Treaty if such holder is considered a resident of the United States for purposes of, and otherwise meets the requirements of, the U.S.-Canada Tax Treaty. U.S. Holders should consult their own tax advisors regarding the deduction or credit for any such Canadian tax and their eligibility for the benefits of the U.S.-Canada Tax Treaty.
Medicare Tax
Under current law, U.S. Holders that are individuals, estates or trusts and whose income exceeds certain thresholds generally are subject to a 3.8% Medicare contribution tax on unearned income, including, without limitation, dividend on, and gains from the sale or other taxable disposition of our common shares, subject to certain limitations and exceptions. U.S. Holders should consult their own tax advisors regarding the effect, if any, of such tax on their ownership and disposition of our common shares.
Non-U.S. Holders
Cash dividends paid to a Non-U.S. Holder in respect to our common shares generally will not be subject to U.S. federal income tax, unless such dividends are effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, are attributable to a permanent establishment or fixed base that such holder maintains or maintained in the United States).
In addition, a Non-U.S. Holder generally will not be subject to U.S. federal income tax on any gain attributable to a sale or other taxable disposition of our common shares unless such gain is effectively connected with its conduct of a trade or business in the United States (and, if required by an applicable income tax treaty is attributable to a permanent establishment or fixed base that such holder maintains or maintained in the United States) or the Non-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable year of sale or other disposition and certain other conditions are met (in which case such gain from U.S. sources generally is subject to U.S. federal income tax at a 30% rate or a lower applicable tax treaty rate).
Cash dividends and gains that are effectively connected with the Non-U.S. Holder’s conduct of a trade or business in the United States (and, if required by an applicable income tax treaty, are attributable to a permanent establishment or fixed base that such holder maintains or maintained in the United States) generally will be subject to regular U.S. federal income tax at the same regular U.S. federal income tax rates applicable to a comparable U.S. Holder and, in the case of a Non-U.S. Holder that is a corporation for U.S. federal income tax purposes, may also be subject to an additional branch profits tax at a 30% rate or a lower applicable tax treaty rate.
Information Reporting
In general, information reporting for U.S. federal income tax purposes should apply to cash distributions made on our common shares within the United States to a U.S. Holder (other than an exempt recipient) and to the proceeds from sales and other dispositions of our common shares by a U.S. Holder (other than an exempt recipient) to or through a U.S. office of a broker. Payments made (and sales and other dispositions effected at an office) outside the United
114
States will be subject to information reporting in limited circumstances. In addition, certain information concerning a U.S. Holder’s adjusted tax basis in its common shares and adjustments to that tax basis and whether any gain or loss with respect to such common shares is long-term or short-term also may be required to be reported to the IRS, and certain holders may be required to file an IRS Form 8938 (Statement of Specified Foreign Financial Assets) to report their interest in our common shares.
Moreover, backup withholding of U.S. federal income tax, at a rate of 24%, generally will apply to cash dividends paid on our common shares to a U.S. Holder (other than an exempt recipient) and the proceeds from sales and other dispositions of our common shares by a U.S. Holder (other than an exempt recipient), in each case who:
●fails to provide an accurate taxpayer identification number;
●is notified by the IRS that backup withholding is required; or
●in certain circumstances fails to comply with applicable certification requirements.
A Non-U.S. Holder generally may eliminate the requirement for information reporting and backup withholding by providing certification of its foreign status, under penalties of perjury, on a duly executed applicable IRS Form W-8 or by otherwise establishing an exemption.
Backup withholding is not an additional tax. Rather, the amount of any backup withholding will be allowed as a credit against a U.S. Holder’s or a Non-U.S. Holder’s U.S. federal income tax liability and may entitle such holder to a refund, provided that certain required information is timely furnished to the IRS. Holders are urged to consult their own tax advisors regarding the application of backup withholding and the availability of and procedures for obtaining an exemption from backup withholding in their particular circumstances.
EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT ITS OWN TAX ADVISOR ABOUT THE TAX CONSEQUENCES TO IT OF AN INVESTMENT IN COMMON SHARES IN LIGHT OF THE INVESTOR’S OWN CIRCUMSTANCES.
10.F. Dividends and Paying Agents
Not applicable.
10.G. Statement by Experts
Not applicable.
10.H. Documents on Display
We have filed this Annual Report on Form 20-F with the SEC under the Exchange Act. Statements made in this report as to the contents of any document referred to are not necessarily complete. With respect to each such document filed as an exhibit to this report, reference is made to the exhibit for a more complete description of the matter involved, and each such statement shall be deemed qualified in its entirety by such reference.
We are subject to the informational requirements of the Exchange Act as a foreign private issuer and file reports and other information with the SEC. Reports and other information filed by us with the SEC, including this report, may be viewed from the SEC’s Internet site at http://www.sec.gov. In addition, we will provide hardcopies of our annual report free of charge to shareholders upon request.
As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of quarterly reports and proxy statements, and officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act.
10.I. Subsidiary Information
Not required.
115
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Snow Lake’s activities expose it to a variety of financial risks: market risk (including foreign currency risk and interest rate risk), credit risk and liquidity risk. The overall risk management strategy focuses on the unpredictability of the finance markets and seeks to minimize the potential adverse effects on the financial performance. Snow Lake uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate, foreign exchange and other price risks, ageing analysis for credit risk and beta analysis in respect of investment portfolios to determine market risk. Risk management is carried out under the direction of the Board. Please see note 19 to our audited consolidated financial statements for further information with respect to certain of these risks.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
12.A. Debt Securities
Not applicable.
12.B. Warrants and Rights
Not applicable.
12.C. Other Securities
Not applicable.
12.D. American Depositary Shares
We do not have any American Depositary Shares.
116
PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
Not applicable
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
14.A.-D. Material Modifications to the Rights of Security Holders.
There have been no material modifications to the rights of our security holders.
14.E. Use of Proceeds.
The following “Use of Proceeds” information relates to the registration statement on Form F-1 (File Number 333-254755) (the “F-1 Registration Statement”) in relation to our initial public offering of 3,680,000 common shares at a public offering price of US$7.50 per share.
The F-1 Registration Statement became effective on November 18, 2021. For the period from the effective date of the F-1 Registration Statement to June 30, 2022, the total expenses incurred for our company’s account in connection with our IPO was approximately $2.46 million, which included $2.07 million in underwriting discounts and commissions for the IPO and approximately $0.39 million in other costs and expenses. We received net proceeds of approximately $25.13 million from our initial public offering. None of the transaction expenses included payments to directors or officers of our company or their associates, persons owning more than 10% or more of our equity securities or our affiliates. None of the net proceeds from the initial public offering were paid, directly or indirectly, to any of our directors or officers or their associates, persons owning 10% or more of our equity securities or our affiliates.
For the period from July 1, 2021, to June 30, 2023, the following is our reasonable estimate of the uses of the proceeds from the IPO:
●Approximately C$4.74 million was used for resource development activities such as drilling, soil sampling, as well as potential project acquisition;
●Approximately C$1.56 million was used for technical studies and reports such as preliminary economic assessment, preliminary feasibility study, resource modelling and/or technical reports such as an S-K 1300 compliant report;
●Approximately $C2.04 million was used for corporate purposes such as salaries, office, public company fees, audit fees, director and officer insurance premium payments or other similar uses; and
●Approximately C$0.1 million was used for general corporate expenses.
There has not been, and we do not expect, any material change in the planned use of proceeds from the initial public offering as described in the prospectus filed with the SEC pursuant to Rule 424(b)(4) under the Securities Act dated November 18, 2021. As of the date of this Annual Report on Form 20-F, we have allocated a portion of the net proceeds of the offering for additional exploratory drilling, the preparation of a preliminary feasibility study, other technical studies and reports, possible strategic project acquisitions, marketing and general corporate purposes.
117
ITEM 15. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in reports filed or submitted under the Securities Exchange Act of 1934 (“Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls include, without limitation, controls and procedures designed to ensure that information required to be disclosed under the Exchange Act is accumulated and communicated to management, including principal executive and financial officers, as appropriate, to allow timely decisions regarding required disclosure. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.
Our management carried out an evaluation, under the supervision of our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures as such term is defined under Rule 13a-15(e) promulgated under the Exchange Act as of June 30, 2023. Based on that evaluation, our management, including our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this annual report.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements in accordance with U.S. GAAP and includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of a company’s assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that a company’s receipts and expenditures are being made only in accordance with authorizations of a company’s management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of a company’s assets that could have a material effect on the consolidated financial statements.
Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance with respect to consolidated financial statements preparation and presentation and may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management evaluated the effectiveness of our internal control over financial reporting as of June 30, 2023. In making this evaluation, management used the framework established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). The COSO framework summarizes each of the components of a company’s internal control system, including the control environment, risk assessment, control activities, information and communication, and monitoring activities. Based on this evaluation, our management determined that our internal control over financial reporting was effective as of June 30, 2023.
Attestation Report of Independent Registered Public Accounting Firm
Not required.
118
Changes in Internal Controls over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act, as amended) that occurred during the year ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
It should be noted that while our management believes that our disclosure controls and procedures provide a reasonable level of assurance, our management does not expect that our disclosure controls and procedures or internal financial controls will prevent all errors or fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
ITEM 16. [RESERVED]
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT.
Our Board of Directors has determined that each of Brian Imrie, Shlomo Kievman and Kathleen Skerrett qualifies as an “Audit Committee Financial Expert” as such term is defined in Item 407(d) of Regulation S-K promulgated by the SEC and also meets NASDAQ’s financial sophistication requirements. She is an “independent director” as defined by the rules and regulations of NASDAQ.
ITEM 16B. CODE OF ETHICS.
Our code of conduct and business ethics conforms to the rules and regulations of NASDAQ. The code of conduct and business ethics applies to all of our directors, officers and employees, including our principal executive officer, principal financial officer and principal accounting officer, and addresses, among other things, honesty and ethical conduct, conflicts of interest, compliance with laws, regulations and policies, including disclosure requirements under the federal securities laws, confidentiality, trading on inside information, and reporting of violations of the code. A copy of our Code of Conduct is available at our website. Any future changes to the Code of Conduct will be posted on the Company’s website or filed as an exhibit to a report filed with the SEC within five business days of the change being effective.
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The following table represents aggregate fees billed to the Company for fiscal years ended June 30, 2023, 2022 and 2021 by DeVisser Gray LLP, the Company’s principal accounting firm.
Accountant Fees and Services |
| 2023 |
|
| 2022 |
|
| 2021 |
| |||
|
| C$ |
|
| C$ |
|
| C$ |
| |||
Audit Fees |
|
| 45,000 |
|
|
| 45,000 |
|
|
| 33,000 |
|
Audit Related Fees (F1 review) |
|
| 9,500 |
|
|
| 9,500 |
|
|
| 30,000 |
|
Tax Fees |
|
| - |
|
|
| - |
|
|
| - |
|
All Other Fees |
|
| 8,000 |
|
|
| 8,000 |
|
|
| - |
|
|
|
| 62,000 |
|
|
| 62,000 |
|
|
| 63,000 |
|
Audit Fees
The audit fees for the years ended June 30, 2023, 2022 and 2021, are C$45,000 (approximately US$33,988), C$45,000 (approximately US$34,922) and C$33,000 (approximately US$25,609) respectively, were paid for professional services rendered for the audits of our consolidated financial statements. Other fees of C$17,500 (approximately US$13,218), C$17,500 (approximately USD$13,581) and C$30,000 (approximately $23,381) were paid for other services including half year reviews, consents, and assistance with review of documents filed with the SEC.
“Audit-related fees” means fees billed for professional services rendered by our principal auditors associated with certain due diligence projects.
119
Tax Fees
“Tax Fees” consisted of the aggregate fees billed for professional services rendered for tax compliance, tax advice and tax planning. Included in such Tax Fees were fees for tax consultancy and advice on other tax planning matters.
Our Board of Directors pre-approves all auditing services and permitted non-audit services to be performed for us by our independent auditor, including the fees and terms thereof (subject to the de minimums exceptions for non-audit services described in Section 10A(i)(l)(B) of the Exchange Act that are approved by our Board of Directors prior to the completion of the audit). The percentage of services provided for which we paid audit-related fees, tax fees, or other fees that were approved by our Board of Directors pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X promulgated by the SEC was 100%.
Other Fees
Not applicable.
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES.
Not applicable.
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.
There were no purchases of equity securities made by or on behalf of us or any “affiliated purchaser” as defined in Rule 10b-18 of the Exchange Act during the period covered by this Annual Report.
ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT.
Not applicable.
ITEM 16G. CORPORATE GOVERNANCE.
We are incorporated in Manitoba, Canada and our corporate governance practices are governed by applicable laws of Manitoba and our certificate of incorporation and amendments. In addition, because our common shares are listed on the Nasdaq Stock Market, or Nasdaq, we are subject to Nasdaq’s corporate governance requirements.
Prior to April 7, 2022, we were a “controlled company” within the meaning of the Nasdaq Listing Rules, where more than 50% of the voting power of our securities for the election of directors was held by an individual, group or another company and, as a result, qualified for and relied on exemptions from certain Nasdaq corporate governance requirements, including, without limitation (i) the requirement that to hold an annual meeting of shareholders no later than one year after the end of its fiscal year; (ii) the requirement that the compensation of our officers be determined or recommended to our board of directors by a compensation committee that is comprised solely of independent directors, and (iii) the requirement that director nominees be selected or recommended to the board of directors by a majority of independent directors or a nominating and corporate governance committee comprised solely of independent directors. Since we relied on the “controlled company” exemption, we were not required to have either a compensation committee or a nominating and corporate governance committee composed solely of independent directors.
On April 7, 2022, we ceased to be a “controlled company” under the rules of Nasdaq due to a resale offering conducted by our largest shareholder Nova. However, as a foreign private issuer, Nasdaq Listing Rule 5615(a)(3) permits us to follow home country practices in lieu of certain requirements of Listing Rule 5600, provided that we disclose in our annual report filed with the SEC each requirement of Rule 5600 that we do not follow and describe the home country practice followed in lieu of such requirement.
120
We are currently following some Canadian corporate governance practices in lieu of Nasdaq corporate governance listing standards as follows:
●We are currently following Canadian corporate governance practice in lieu of Nasdaq Rule 5605(d)(2), which requires a compensation committee to compose entirely of independent directors. Nachum Labkowski and Peretz Schapiro serve as non-independent directors in the compensation committee.
●We are currently following Canadian corporate governance practice in lieu of Nasdaq Rule 5605(e)(1)(B), which requires a nominating and corporate governance committee to compose entirely of independent directors. Nachum Labkowski and Peretz Schapiro serve as non-independent directors in our nominating and corporate governance committee.
●We are currently following Canadian corporate governance practice in lieu of Nasdaq Rule 5635(a), which requires shareholder approval prior to the issuance of securities in connection with the acquisition of the stock or assets of another company in certain circumstances.
●We are currently following Canadian corporate governance practice in lieu of Nasdaq Rule 5635(c), which requires shareholder approval for the establishment of or any material amendments to equity compensation or purchase plans or other equity compensation arrangements.
●We are currently following Canadian corporate governance practice in lieu of Nasdaq Rule 5635(d), which requires shareholder approval in order to enter into any transaction, other than a public offering, involving the sale, issuance or potential issuance by the Company of common shares (or securities convertible into or exercisable for common shares) equal to 20% or more of the outstanding share capital of the Company or 20% or more of the voting power outstanding before the issuance for less than the greater of book or market value of the common shares.
●We are currently following Canadian corporate governance practice in lieu of Nasdaq Rule 5605(b)(2) which requires the Company’s independent directors to have regularly scheduled meetings at which only independent directors are present.
Our Canadian counsel has provided relevant letters to Nasdaq certifying that under Canadian law, we are not required to seek shareholders’ approval in the above circumstances.
ITEM 16H. MINE SAFETY DISCLOSURE.
Not applicable.
ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
Not applicable.
121
PART III
ITEM 17. FINANCIAL STATEMENTS
The Company has elected to provide financial statements pursuant to Item 18.
ITEM 18. FINANCIAL STATEMENTS
Our audited Financial Statements are included as the “F” pages attached to this report.
All financial statements in this Annual Report, unless otherwise stated, are presented in accordance with IFRS.
ITEM 19. EXHIBITS
Exhibit No. |
| Description |
1.1 |
| |
1.2 |
| |
1.3 |
| |
1.4 |
| |
1.5 |
| |
2.1* |
| Description of Securities Pursuant to Section 12 of the Exchange Act as of June 30, 2022 |
4.1 |
| |
4.2 |
| |
4.3 |
| |
4.4 |
| |
4.5 |
| |
4.6 |
| |
4.7 |
| |
4.8 |
| |
4.9 |
|
122
123
12.2** |
| |
13.1*** |
| |
15.1** |
| |
96.1 |
| Technical Report Summary – Initial Assessment of the Snow Lake Lithium Project – Manitoba, Canada, dated August 9, 2023 (incorporated by reference to Exhibit 96.1 to Form 6-K filed on August 11,,2023) |
101.INS |
| Inline XBRL Instance Document |
101.SCH |
| Inline XBRL Taxonomy Extension Schema Document. |
101.CAL |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
101.DEF |
| Inline XBRL Taxonomy Extension Definition Linkbase Document. |
101.LAB |
| Inline XBRL Taxonomy Extension Label Linkbase Document. |
101.PRE |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
104 |
| Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
*Previously filed on Form 20-F on October 31, 2023 (SEC File No. 001-41085) and incorporated herein by reference.
**Filed herewith.
***Furnished herewith.
124
SIGNATURES
The Registrant hereby certifies that it meets all of the requirements for filing this Amendment No. 1 to Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
SNOW LAKE RESOURCES LTD. |
|
|
| |
|
|
|
| |
By: | /s/ Frank Wheatley |
| By: | /s/ Keith Li |
Name: | Frank Wheatley |
| Name: | Keith Li |
Title: | Chief Executive Officer |
| Title: | Chief Financial Officer |
Date: | March 25, 2024 |
| Date: | March 25, 2024 |
125
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| Page |
|
|
Report of Independent Registered Public Accounting Firm (PCAOB ID: 01054) | F-3 |
F-5 | |
F-6 | |
F-7 | |
F-8 | |
F-9 – F-36 |
F-1
Snow Lake Resources Ltd.
Amended and Restated Consolidated Financial Statements
For the Years Ended June 30, 2023, 2022 and 2021
(Expressed in Canadian Dollars)
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of Snow Lake Resources Ltd.,
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated financial statements of Snow Lake Resources Ltd. (the “Company”), which comprise the consolidated statements of financial position as at June 30, 2023 and 2022 and the consolidated statements of loss and comprehensive loss, changes in shareholders’ equity and cash flows for each of the years in the three year period ended June 30, 2023, and a summary of significant accounting policies and other explanatory information (collectively referred to as the “financial statements”).
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as at June 30, 2023 and 2022 and its financial performance and its cash flows for each of the years in the three year period ended June 30, 2023, in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Going Concern
Without modifying our opinion, we draw attention to Note 1 in the consolidated financial statements which indicates that there are material uncertainties that cast significant doubt about the going concern assumption. The Company has no current source of revenue, has incurred losses from inception and is dependent upon its ability to secure new sources of financing. These conditions, along with other matters as set forth in Note 1, indicate the existence of a material uncertainty that casts significant doubt about the Company's ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free of material misstatement, whether due to fraud or error. The Company is not required to have, nor were we engaged to perform, an audit of internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
F-3
Other Matters
Subsequent to the issuance of the previously reported consolidated financial statements for the year ended June 30, 2023, it was determined that the grant of certain restricted share units (“RSUs”) was incorrectly classified under equity as at June 30, 2023. The correct treatment of these RSUs should be a classification as liability on the consolidated statements. See Note 2.
CHARTERED PROFESSIONAL ACCOUNTANTS
Vancouver, Canada
October 25, 2023, except for Note 2, as to which the date is March 19, 2024
We have served as the Company’s auditor since 2019.
F-4
Snow Lake Resources Ltd. |
Amended and Restated Consolidated Statements of Financial Position |
(Expressed in Canadian Dollars) |
As at June 30, 2023 | As at June 30, 2022 | |
| $ | $ |
Assets |
|
|
Current Assets |
|
|
Cash | ||
Sales tax receivable (Note 5) | ||
Prepaids and deposits (Note 6) | ||
Due from related party (Note 20) | ||
Total Current Assets | ||
Exploration and evaluation assets (Note 7) | ||
Right-of-use assets (Note 8) | ||
Total Assets | ||
Liabilities |
|
|
Current Liabilities |
|
|
Accounts payable and accrued liabilities (Note 9) | ||
Due to related parties (Note 20) | ||
Loan payable (Note 10) | ||
Lease liabilities – current portion (Note 12) | ||
Derivative liabilities (Note 13) | ||
Other liabilities (Note 14) | ||
Total Current Liabilities | ||
Lease liabilities (Note 12) | ||
Total Liabilities | ||
Shareholders’ Equity |
|
|
Share capital (Note 15) | ||
Reserve for restricted share units (Note 16) | ||
Reserve for share-based payments (Note 17) | ||
Reserve for warrants (Note 18) | ||
Accumulated deficit | ( | ( |
Total Shareholders’ Equity | ||
Total Liabilities and Shareholders’ Equity | ||
|
|
|
Nature of operations and going concern (Note 1) |
|
|
Commitments and contingencies (Note 25) |
|
|
Subsequent events (Note 26) |
|
|
Approved on behalf of the Board of Directors: |
| |
|
|
|
“Brian Imrie” (signed) |
| “Nochum Labkowski” (signed) |
Director |
| Director |
F-5
Snow Lake Resources Ltd. |
Amended and Restated Consolidated Statements of Loss and Comprehensive Loss |
For the Years Ended June 30, 2023, 2022 and 2021 |
(Expressed in Canadian Dollars) |
2023 | 2022 | 2021 | |
| $ | $ | $ |
Expenses |
|
|
|
Professional fees (Note 13) | |||
Directors’ and officers’ consulting fees (Note 19) | |||
Stock-based compensation (Notes 14, 16, 17 and 20) | |||
Insurance expense | |||
Consulting fees (Note 13) | |||
General and administrative expenses | |||
Travel expenses | |||
Transfer agent and regulatory fees | |||
Bank fees and interest | |||
Research expenses | |||
Depreciation on right-of-use assets (Note 9) | |||
Interest on loan and debentures (Notes 10 and 11) | |||
Amortization of transaction costs (Note 11) | |||
Accretion expense (Note 12) | |||
( | ( | ( | |
Other Items |
|
|
|
(Loss) gain on change in fair value of derivative liabilities (Note 13) | ( | ||
Loss on shares-for-debt settlement (Note 15(f)) | ( | ||
Grant income (Note 14) | |||
Recovery of accounts payable | |||
Foreign exchange gain (loss) | ( | ||
Net Loss and Comprehensive Loss | ( | ( | ( |
Weighted Average Number of Outstanding Shares |
|
|
|
Basic and diluted (Note 19) | |||
Net Loss per Share |
|
|
|
Basic and diluted (Note 19) | ( | ( | ( |
|
|
|
|
F-6
Snow Lake Resources Ltd. |
Amended and Restated Consolidated Statements of Changes in Shareholders’ Equity |
For the Years Ended June 30, 2023, 2022 and 2021 |
(Expressed in Canadian Dollars) |
| Number of Shares | Share Capital | Share-Based Payments Reserve | Restricted Share Units Reserve | Warrants Reserve | Accumulated Deficit | Total | |
|
| # | $ | $ | $ | $ | $ | $ |
Balance, June 30, 2020 | ( | |||||||
Exercise of warrants (Notes 15 and 18) | - | - | - | - | ||||
Issuance of warrants from convertible debentures (Notes 11 and 18) | - | - | - | - | - | |||
Issuance of finder's warrants from convertible debentures (Notes 11 and 18) | - | - | - | - | - | |||
Net loss for the year | - | - | - | - | - | ( | ( | |
Balance, June 30, 2021 | ( | |||||||
|
|
|
|
|
|
|
|
|
Issuance of shares on IPO (Note 15) | - | - | - | - | ||||
Share issue costs (Note 15) | - | ( | - | - | - | - | ( | |
Issuance of conversion of debentures (Notes 11, 13 and 15) | - | - | - | |||||
Issuance of shares on vesting of RSUs (Notes 15 and 16) |
| ( | - | - | ||||
Stock-based compensation (Note 17) | - | - | - | - | ||||
Cancellation of stock options (Note 17) | - | - | ( | - | - | |||
Exercise of warrants (Notes 15 and 18) | - | - | ( | - | ||||
Net loss for the year | - | - | - | - | - | ( | ( | |
Balance, June 30, 2022 | ( | |||||||
|
|
|
|
|
|
|
|
|
Issuance of shares on debt settlement (Note 15(f)) | - | - | - | - | ||||
Stock-based compensation (Notes 16 and 17) | - | - | - | - | ||||
Cancellation of stock options (Note 17) | - | - | ( | - | - | |||
Exercise of warrants (Notes 15 and 17) | - | - | ( | - | ||||
Net loss for the year | - | - | - | - | - | ( | ( | |
Balance, June 30, 2023 | ( | |||||||
F-7
Snow Lake Resources Ltd. |
Amended and Restated Consolidated Statements of Cash Flows |
For the Years Ended June 30, 2023, 2022 and 2021 |
(Expressed in Canadian Dollars) |
2023 | 2022 | 2021 | |
| $ | $ | $ |
Operating Activities |
|
|
|
Net loss for the year | ( | ( | ( |
Adjustments for non-cash items: |
|
|
|
Depreciation on right-of-use assets (Note 8) | |||
Interest expenses and accretion (Notes 10 and 11) | |||
Amortization of transaction costs (Note 11) | |||
Issuance of warrants for investor relations services (Note 13) | |||
Issuance of warrants for claims settlement (Note 13) | |||
Loss (gain) on change in fair value of derivative liabilities (Note 13) | ( | ( | |
Loss on shares-for-debt settlement (Note 15(f)) | |||
Stock-based compensation (Notes 14, 16 and 17) | |||
Recovery of accounts payable | ( | ||
Foreign exchange gain | ( | ( | |
( | ( | ( | |
Net change in non-cash working capital items: |
|
|
|
Sales tax receivable | ( | ( | |
Prepaids and deposits | ( | ( | |
Accounts payable and accrued liabilities (Note 9) | |||
Due to related party | ( | ( | |
Cash Flows (used in) Operating Activities | ( | ( | ( |
|
|
|
|
Financing Activities |
|
|
|
Proceeds from issuance of convertible debentures (Note 11) | |||
Proceeds from issuance of shares on IPO (Note 15) | |||
Share issuance costs (Note 15) | ( | ||
Proceeds received from loan (Note 10) | |||
Repayment on loan (Note 10) | ( | ( | |
Proceeds from exercise of warrants (Note 15) | |||
Payments made on lease deposit | ( | ||
Lease payments (Note 8) | ( | ||
Cash Flows provided by (used in) Financing Activities | ( | ||
|
|
|
|
Investing Activities |
|
|
|
Payments for exploration and evaluation assets | ( | ( | ( |
Cash Flows (used by) Investing Activities | ( | ( | ( |
|
|
|
|
(Decrease) increase | ( | ||
Cash, beginning of year | |||
Cash, end of year | |||
|
|
|
|
Supplemental Information |
|
|
|
Exploration and evaluation assets in accounts payable |
F-8
Snow Lake Resources Ltd. |
Notes to the Amended and Restated Consolidated Financial Statements |
For the Years Ended June 30, 2023, 2022 and 2021 |
(Expressed in Canadian Dollars) |
1.Nature of Operations and Going Concern
Snow Lake Resources Ltd., d/b/a Snow Lake Lithium Ltd. (“Snow Lake” or the “Company”) was incorporated in the Province of Manitoba, Canada, under the Corporations Act (Manitoba) on May 25, 2018. The Company is a Canadian natural resource exploration company engaged in the exploration and development of mineral resources through its subsidiaries: Snow Lake Exploration Ltd. and Snow Lake (Crowduck) Ltd. The corporate and registered office of the Company is 360 Main St, 30th Floor, Winnipeg, Manitoba, R3C 4G1, Canada.
On November 22, 2021, the Company was listed for trading under the NASDAQ Composite under the ticker symbol “LITM”.
On November 23, 2021, the Company closed its initial public offering (“IPO”) through the issuance of
Although the Company has taken steps to verify title to the mineral properties in which it has an interest, in accordance with industry standards for the current stage of exploration of such properties, these procedures do not guarantee the Company’s title. Property title may be subject to government licensing requirements or regulations, unregistered prior agreements, undetected defects, unregistered claims, native land claims, and non-compliance with regulatory and environmental requirements.
For the year ended June 30, 2023, the Company incurred a net loss of $
These consolidated financial statements have been prepared on the basis that the Company will continue as a going concern, and do not reflect the adjustments to the carrying values of assets and liabilities and the reported revenues and expenses, and classifications of statements of financial position that would be necessary if the Company were unable to realize its assets and settle its liabilities as a going concern in the normal course of operations. Such adjustments could be material.
2.Restatement of Previously Reported Consolidated Financial Statements
Subsequent to the issuance of the previously reported consolidated financial statements for the year ended June 30, 2023 (filed on EDGAR on October 31, 2023), it was determined that the grant of certain restricted share units (“RSUs”) was incorrectly classified under equity as at June 30, 2023. The correct treatment of these RSUs should be a classification as liability on the consolidated statements of financial position, to be measured at fair value at the end of each reporting period (see Note 14 for details).
The incorrect classification caused an overstated balance for reserve for RSUs by $735,268, an understated balance for other liabilities by $820,612, and an understated stock-based compensation amount of $85,344, which caused the net loss and comprehensive loss for the year ended June 30, 2023 to be misstated As a result of the corrections, certain balances on the consolidated statement of financial position as at June 30, 2023, and the consolidated statement of loss and comprehensive loss, changes in shareholders’ equity and cash flows for the year ended June 30, 2023 were also affected.
F-9
Snow Lake Resources Ltd. |
Notes to the Amended and Restated Consolidated Financial Statements |
For the Years Ended June 30, 2023, 2022 and 2021 |
(Expressed in Canadian Dollars) |
2.Restatement of Previously Reported Consolidated Financial Statements (continued)
Line items on the amended and restated consolidated statement of financial position as at June 30, 2023, and the consolidated statement of loss and comprehensive loss, changes in shareholders’ equity and cash flows are as follows:
Consolidated Statement of Financial Position and Changes in Shareholders’ Equity
Previously reported | Adjustments | Restated | |
| $ | $ | $ |
Liabilities |
|
|
|
Other liabilities | |||
Total Current Liabilities | |||
Total Liabilities | |||
|
|
|
|
Shareholders’ Equity |
|
|
|
Reserve for restricted share units | ( | ||
Accumulated deficit | ( | ( | ( |
Total Shareholders’ Equity | ( |
Consolidated Statement of Loss and Comprehensive Loss
Previously reported | Adjustments | Restated | |
| $ | $ | $ |
Expenses |
|
|
|
Stock-based compensation | |||
Total Expenses | ( | ( | ( |
Net Loss and Comprehensive Loss | ( | ( | ( |
Consolidated Statement of Cash Flows
Previously reported | Adjustments | Restated | |
| $ | $ | $ |
Operating Activities |
|
|
|
Net loss for the year | ( | ( | ( |
Stock-based compensation |
3.Basis of Presentation
(a)Statement of Compliance
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The accounting policies set out below were consistently applied to all periods presented unless otherwise noted.
These consolidated financial statements were reviewed, approved and authorized for issuance by the Board of Directors (the “Board”) of the Company on March 19, 2024.
F-10
Snow Lake Resources Ltd. |
Notes to the Amended and Restated Consolidated Financial Statements |
For the Years Ended June 30, 2023, 2022 and 2021 |
(Expressed in Canadian Dollars) |
3.Basis of Presentation (continued)
(b)Basis of Measurement
These consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments carried at fair value, as explained in the accounting policies as set out in Note 4. In addition, these consolidated financial statements have been prepared using the accrual basis of accounting, except for cash flow information.
(c)Basis of Consolidation
Subsidiaries consist of entities over which the Company is exposed to, or has rights to, variable returns as well as the ability to affect those returns through the power to direct the relevant activities of the entity. Subsidiaries are fully consolidated from the date control is transferred to the Company and are-deconsolidated from the date control ceases. The consolidated financial statements include all the assets, liabilities, revenues, expenses and cash flows of the Company and its subsidiaries after eliminating inter-entity balances and transactions.
(d)Functional Currency
These consolidated financial statements are presented in Canadian dollars (“$” or “CAD”), which is the Company’s functional currency. The functional currency is the currency of the primary economic environment in which the Company operates.
(e)Significant Accounting Judgments and Estimates
The preparation of these consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, revenue, and expenses. On an ongoing basis, management evaluates its judgments and estimates in relation to assets, liabilities, revenue, and expenses. Management uses historical experience and various other factors it believes to be reasonable under the given circumstances as the basis for its judgments and estimates. Actual outcomes may differ from these estimates under different assumptions and conditions. These estimates are reviewed periodically, and adjustments are made as appropriate in the period they become known.
Items for which actual results may differ materially from these estimates are described as follows:
Going concern
At each reporting period, management exercises judgment in assessing the Company’s ability to continue as a going concern by reviewing the Company’s performance, resources, and future obligations. The conclusion that the Company will be able to continue as a going concern is subject to critical judgments of management with respect to assumptions surrounding the short and long-term operating budgets, expected profitability, investment and financing activities and management’s strategic planning. The assumptions used in management’s going concern assessment are derived from actual operating results along with industry and market trends. Management believes there is sufficient capital to meet the Company’s business obligations for at least the next 12 months, after taking into account expected cash flows and the Company's cash position at year-end.
Fair value of financial assets and financial liabilities
Fair value of financial assets and financial liabilities on the consolidated statements of financial position that cannot be derived from active markets, are determined using a variety of techniques including the use of valuation models. The inputs to these models are derived from observable market data where possible, but where observable market data are not available, judgment is required to establish fair values. Judgments include, but are not limited to, consideration of model inputs such as volatility, estimated life and discount rates.
F-11
Snow Lake Resources Ltd. |
Notes to the Amended and Restated Consolidated Financial Statements |
For the Years Ended June 30, 2023, 2022 and 2021 |
(Expressed in Canadian Dollars) |
3.Basis of Presentation (continued)
(e)Significant Accounting Judgments and Estimates (continued)
Economic recoverability of future economic benefits of exploration and evaluation assets
Management has determined that exploration and evaluation (“E&E”) assets and related costs incurred, which have been recognized on the consolidated statements of financial position, are economically recoverable. Management uses several criteria in its assessments of economic recoverability and probability of future economic benefit including geological data, scoping studies, accessible facilities, and existing and future permits.
Technical feasibility and commercial viability
Management exercises judgment, in accordance with IFRS 6 – Exploration for and Evaluation of Mineral Resources (“IFRS 6”), to determine an accounting policy specifying which expenditures, if any, are capitalized as E&E assets, and to apply the policy consistently. E&E expenditures not capitalized as E&E assets are expensed as incurred. Once the technical feasibility and commercial viability of extracting a mineral resource are demonstrable, an entity stops recording E&E expenditures for that mineral project, tests capitalized E&E assets (if any) for impairment and reclassifies those E&E assets to other applicable development-stage accounts. An assessment of technical feasibility and commercial viability is conducted on a project-by-project basis with regard to all relevant facts and circumstances. The nature and status of the mineral project is determined on the merits of the mineral project itself.
Provisions
Provisions recognized in the consolidated financial statements involve judgments on the occurrence of future events, which could result in a material outlay for the Company. In determining whether an outlay will be material, the Company considers the expected future cash flows based on facts, historical experience and probabilities associated with such future events. Uncertainties exist with respect to estimates made by management and as a result, the actual expenditure may differ from amounts currently reported.
Income taxes
Income taxes and tax exposures recognized in the consolidated financial statements reflect management’s best estimate of the outcome based on facts known at the reporting date. When the Company anticipates a future income tax payment based on its estimates, it recognizes a liability. The difference between the expected amount and the final tax outcome has an impact on current and deferred taxes when the Company becomes aware of this difference.
In addition, when the Company incurs losses that cannot be associated with current or past profits, it assesses the probability of taxable profits being available in the future based on its budgeted forecasts. These forecasts are adjusted to take account of certain non-taxable income and expenses and specific rules on the use of unused credits and tax losses. When the forecasts indicate the sufficient future taxable income will be available to deduct the temporary differences, a deferred tax asset is recognized for all deductible temporary differences.
Options, restricted share units and warrants
Options, RSUs and warrants, including finders’ warrants, are initially recognized at fair value using market-based valuation techniques. The fair value of the market-based and performance-based share awards are determined at the date of grant using generally accepted valuation techniques. Assumptions are made and judgments are used in applying the valuation techniques. These assumptions and judgments include the expected volatility of the share price, expected forfeitures, expected dividend yield, expected term of the warrants or options, and expected risk-free interest rate. Such assumptions and judgments are inherently uncertain. Changes in these assumptions can affect the fair value estimates of stock-based compensation.
F-12
Snow Lake Resources Ltd. |
Notes to the Amended and Restated Consolidated Financial Statements |
For the Years Ended June 30, 2023, 2022 and 2021 |
(Expressed in Canadian Dollars) |
3.Basis of Presentation (continued)
(e)Significant Accounting Judgments and Estimates (continued)
Expected credit losses on financial assets
Determining an allowance for expected credit losses (“ECL”) for amounts receivable and all debt financial assets not held at fair value through profit or loss (“FVTPL”) requires management to make assumptions about the historical patterns for the probability of default, the timing of collection and the amount of incurred credit losses, which are adjusted based on management’s judgment about whether economic conditions and credit terms are such that actual losses may be higher or lower than what the historical patterns suggest.
Functional currency
The functional currency for the Company and its subsidiaries is the currency of the primary economic environment in which they operate. Determination of functional currency involves significant judgments and other entities may make different judgments based on similar facts. Periodically, the Company reconsiders the functional currency of its business if there is a change in the underlying transactions, events or conditions which determine its primary economic environment.
Shares issued for non-cash consideration
The Company is required to recognize these transactions at fair value which requires judgment in selecting valuation techniques and other factors.
4.Summary of Significant Accounting Policies
(a)Current and Non-Current Classification
Assets and liabilities are presented in the consolidated statements of financial position based on current and non-current classification.
An asset is classified as current when it is either expected to be realized or intended to be sold or consumed in the normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realized within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current.
A liability is classified as current when it is either expected to be settled in the normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current.
(b)Cash
Cash in the consolidated statements of financial position comprises cash at a chartered bank in Canada and funds held in trust with the Company’s legal counsels which is available on demand.
(c)Exploration and Evaluation Assets
Title to E&E assets including mineral properties involves certain inherent risks due to the difficulties of determining the validity of certain claims as well as the potential for problems arising from the frequently ambiguous conveyancing historical characteristic of many properties. The Company has investigated title to all its mineral properties and, to the best of its knowledge, titles to all its mineral properties are in good standing.
F-13
Snow Lake Resources Ltd. |
Notes to the Amended and Restated Consolidated Financial Statements |
For the Years Ended June 30, 2023, 2022 and 2021 |
(Expressed in Canadian Dollars) |
4.Summary of Significant Accounting Policies (continued)
(c)Exploration and Evaluation Assets (continued)
The Company accounts for E&E assets in accordance with IFRS 6. Once the legal right to explore a property has been acquired, costs directly related to exploration and evaluation are recognized and capitalized, in addition to acquisition costs. These expenditures include but are not limited to acquiring licenses, researching and analyzing existing exploration data, conducting geological studies, exploration drilling and sampling and payments made to contractors and consultants in connection with the exploration and evaluation of the property. Costs not directly attributable to E&E activities, including general administrative overhead costs, are expensed in the period in which they occur.
Acquisition costs incurred in obtaining legal right to explore a mineral property are deferred until the legal right is granted and thereon reclassified to mineral properties. Transaction costs incurred in acquiring an asset are deferred until the transaction is completed and then included in the purchase price of the asset acquired.
When a project is deemed to no longer have commercially viable prospects to the Company, E&E expenditures in respect of that project are deemed to be impaired. As a result, those E&E expenditure costs, in excess of the estimated recoverable amount, are written off to the consolidated statements of loss and comprehensive loss.
The Company assesses E&E assets for impairment when facts and circumstances suggest that the carrying amount of the asset may exceed its recoverable amount. The recoverable amount is the higher of the asset’s fair value less costs to sell (“FVLCS”) and value-in-use (“VIU”).
Once the technical feasibility and commercial viability of extracting the mineral resource has been determined, the property is considered a mine under development. E&E assets are also tested for impairment before the assets are transferred to development properties.
As the Company currently has no operational income, any incidental revenues earned in connection with exploration activities are applied as a reduction to capitalized exploration costs.
(d)Financial Instruments
The Company classifies and measures financial instruments in accordance with IFRS 9 – Financial Instruments (“IFRS 9”). A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. The Company recognizes financial assets and financial liabilities on the consolidated statements of financial position when it becomes a party to the financial instrument or derivative contract.
Classification
The Company classifies its financial assets in the following measurement categories: (a) those to be measured subsequently at FVTPL; (b) those to be measured subsequently at fair value through other comprehensive income (loss) (“FVTOCI”); and (c) those to be measured at amortized cost. The classification of financial assets depends on the business model for managing the financial assets and the contractual terms of the cash flows. Financial liabilities are classified as those to be measured at amortized cost unless they are designated as those to be measured subsequently at FVTPL (irrevocable election at the time of recognition). The Company reclassifies financial assets when and only when its business model for managing those assets changes. Financial liabilities are not reclassified.
The Company’s financial assets include cash, other receivables excluding any sales tax amounts, and due from related party. The Company’s financial liabilities include its accounts payable, due to related parties, loan payable, lease liabilities, derivative liabilities and other liabilities.
F-14
Snow Lake Resources Ltd. |
Notes to the Amended and Restated Consolidated Financial Statements |
For the Years Ended June 30, 2023, 2022 and 2021 |
(Expressed in Canadian Dollars) |
4.Summary of Significant Accounting Policies (continued)
(d)Financial Instruments (continued)
Classification (continued)
Fair value through profit or loss
This category includes derivative instruments as well as quoted equity instruments which the Company has not irrevocably elected, at initial recognition or transition, to classify at FVTOCI. This category would also include debt instruments whose cash flow characteristics do not meet the solely payment of principal and interest (“SPPI”) criterion or are not held within a business model whose objective is either to collect contractual cash flows, or to both collect contractual cash flows and sell. Financial assets in this category are recorded at fair value with changes recognized in the consolidated statements of loss and comprehensive loss.
Financial assets at fair value through other comprehensive income
Debt and equity instruments that are held for collection of contractual cash flows and for sale, and where the assets’ cash flows represent solely payments of principal and interest, are classified as FVTOCI. Movements in fair values are recognized in other comprehensive income (“OCI”) and accumulated in fair value reserve, except for the recognition of impairment gains or losses, interest income and foreign exchange gains and losses, which are recognized in profit and loss.
When the financial asset is derecognized, the cumulative gain or loss recognized in OCI is reclassified from equity to profit or loss and presented in “other gains and losses”. Interest income from these financial assets is recognized using the effective interest rate method and presented in “interest income”. As at June 30, 2023 and 2022, the Company did not have any financial assets at FVTOCI.
Amortized cost
Debt and equity instruments that are held for collection of contractual cash flows where those cash flows represent SPPI are measured at amortized cost. Interest income from these financial assets is included in interest income using the effective interest rate method.
The Company’s classification of financial assets and financial liabilities is summarized below:
Cash | |
Due to/from related parties | |
Accounts payable | |
Loan payable | |
Lease liabilities | |
Derivative liabilities | |
Other liabilities | FVTPL |
Measurement
All financial instruments are required to be measured at fair value on initial recognition, plus, in the case of a financial asset or financial liability not at FVTPL, transaction costs that are directly attributable to the acquisition or issuance of the financial asset or financial liability. Transaction costs of financial assets and financial liabilities carried at FVTPL are expensed in profit or loss. Financial assets and financial liabilities with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.
F-15
Snow Lake Resources Ltd. |
Notes to the Amended and Restated Consolidated Financial Statements |
For the Years Ended June 30, 2023, 2022 and 2021 |
(Expressed in Canadian Dollars) |
4.Summary of Significant Accounting Policies (continued)
(d)Financial Instruments (continued)
Measurement (continued)
Financial assets that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortized cost at the end of the subsequent accounting periods. All other financial assets, including equity investments, are measured at their fair values at the end of subsequent accounting periods, with any changes taken through profit and loss or OCI (irrevocable election at the time of recognition). For financial liabilities measured subsequently at FVTPL, changes in fair value due to credit risk are recorded in OCI.
Expected credit loss impairment model
Under IFRS 9, the Company recognizes a provision for ECL on financial assets that are measured on amortized cost. The Company assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due. The Company considers a financial asset to be in default when the borrower is unlikely to pay its credit obligations to the Company in full or when the financial asset is more than 90 days past due.
The carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. This is generally the case when the Company determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts.
Derecognition
The Company derecognizes financial assets only when the contractual rights to cash flow from the financial assets expire, or when it transfers the financial assets and substantially all of the associated risks and rewards of ownership to another entity.
The Company derecognizes a financial liability when its contractual obligations are discharged, cancelled, or expire. The Company also derecognizes a financial liability when the terms of the liability are modified such that the terms and/or cash flows of the modified instrument are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value.
Gains or losses on derecognition are generally recognized in profit or loss.
Determination of fair value
The determination of fair value requires judgment and is based on market information, where available and appropriate. The Company classifies fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements.
(e)Impairment of Assets
At each reporting date, the Company reviews the carrying amounts of its assets to determine whether there are any indicators of impairment. If any such indicator exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any.
Where the asset does not generate cash inflows that are independent from other assets, the Company estimates the recoverable amount of the cash-generating unit (“CGU”) to which the asset belongs. Any intangible asset with an indefinite useful life is tested for impairment annually and whenever there is an indication that the asset may be impaired. An asset’s recoverable amount is the higher of FVLCS and VIU. In assessing VIU, the estimated future cash flows are discounted to their present value, using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which estimates of future cash flows have not been adjusted.
F-16
Snow Lake Resources Ltd. |
Notes to the Amended and Restated Consolidated Financial Statements |
For the Years Ended June 30, 2023, 2022 and 2021 |
(Expressed in Canadian Dollars) |
4.Summary of Significant Accounting Policies (continued)
(e)Impairment of Assets (continued)
If the recoverable amount of an asset or CGU is estimated to be less than its carrying amount, the carrying amount is reduced to the recoverable amount and an impairment loss is recognized immediately in the consolidated statements of loss and comprehensive loss. Where an impairment subsequently reverses, the carrying amount is increased to the revised estimate of recoverable amount but only to the extent that this does not exceed the carrying value that would have been determined if no impairment had previously been recognized. A reversal of impairment is recognized in the consolidated statements of loss and comprehensive loss.
(f)Impairment of Non-Financial Assets
Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount.
Recoverable amount is the higher of an asset’s FVLCS and VIU. The VIU is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or CGU to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a CGU.
(g)Leased Assets
The Company is party to a lease of a mining analyzer which is used for its E&E activities. The Company assesses service arrangements to determine if an asset is explicitly or implicitly specified in the agreement and if it has the right to control the use of the identified asset.
At inception of a contract, the Company assesses whether a contract is, or contains, a lease based on whether the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The Company then recognizes a right-of-use (“ROU”) asset and a lease liability at the lease commencement date. The ROU asset is initially measured based on the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received. The assets are depreciated to the earlier of the end of the useful life of the ROU asset or the lease term using the straight-line method. The lease term includes periods covered by an option to extend if the Company is reasonably certain to exercise that option. The Company elected to recognize expenses for leases with a term of 12 months or less on a straight-line basis over the lease term and lease of assets of low value, and not to recognize these short-term leases on the consolidated statements of financial position.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the Company’s incremental borrowing rate, which was determined to be about 14%. The lease liability is measured at amortized cost using the effective interest method. It is remeasured when there is a change in the Company’s estimate of the amount expected to be payable under a residual value guarantee, if there is a change in future lease payments arising from a change in an index or rate, or if the Company changes its assessment whether it will exercise a purchase, extension or termination option.
When the lease liability is remeasured, the amount of the remeasurement is recognized as a corresponding adjustment to the carrying amount of the ROU asset or is recorded in profit or loss if the carrying amount of the ROU asset has been reduced to zero.
F-17
Snow Lake Resources Ltd. |
Notes to the Amended and Restated Consolidated Financial Statements |
For the Years Ended June 30, 2023, 2022 and 2021 |
(Expressed in Canadian Dollars) |
4.Summary of Significant Accounting Policies (continued)
(h)Provisions
A provision is recognized when the Company has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation, and the amount of the obligation can be reliably estimated. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.
A provision for onerous contracts is recognized when the expected benefits to be derived by the Company from a contract are lower than the unavoidable cost of meeting its obligations under the contract.
(i)Income Taxes
Income tax expense consists of current and deferred tax expense. Current and deferred tax are recognized in profit or loss except to the extent that it relates to items recognized directly in equity or OCI.
Current income tax is recognized and measured at the amount expected to be recovered from, or payable to, the taxation authorities based on the income tax rates enacted or substantively enacted at the end of the reporting period and includes any adjustment to taxes payable in respect of previous years.
Deferred tax is recorded for temporary differences at the date of the consolidated statements of financial position between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. The carrying amount of a deferred tax asset is reviewed at the end of the reporting period and is reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are reassessed at the end of the reporting period and are recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the end of the reporting period.
Deferred tax assets and deferred tax liabilities are offset if, and only if, they relate to income taxes levied by the same taxation authority and the Company has the legal rights and intent to offset.
Estimates
Provisions for taxes are made using the best estimate of the amount expected to be paid based on a qualitative assessment of all relevant factors. The Company reviews the adequacy of these provisions at the end of the reporting period. However, it is possible that at some future date an additional liability could result from audits by taxing authorities. Where the final outcome of these tax-related matters is different from the amounts that were initially recorded, such differences will affect the tax provisions in the period in which such determination is made.
(j)Share Capital
Common shares are classified as share capital. Costs directly attributable to the issue of common shares are recognized as a deduction from share capital, net of any tax effects.
F-18
Snow Lake Resources Ltd. |
Notes to the Amended and Restated Consolidated Financial Statements |
For the Years Ended June 30, 2023, 2022 and 2021 |
(Expressed in Canadian Dollars) |
4.Summary of Significant Accounting Policies (continued)
(k)Share-Based Payments Transactions
The Company operates a stock option plan (the “Option Plan”). Share-based payments to employees are measured at the fair value of the instruments issued and amortized over the vesting periods. Share-based payments to non-employees are measured at the fair value of goods or services received, or at the fair value of the equity instruments issued, if it is determined the fair value of the goods or services cannot be reliably measured and are recorded at the date the goods or services are received. The fair value of options is determined based on the application of the Black-Scholes valuation model (“Black-Scholes”). The fair value of equity-settled stock-based compensation transactions is recognized as an expense with a corresponding increase in the share-based payments reserve.
If share-settled awards are modified, as a minimum an expense is recognized as if the modification has not been made. An additional expense is recognized, over the remaining vesting period, for any modification that increases the total fair value of the share-based compensation benefit as at the date of modification.
Amounts recorded for cancelled or expired unexercised options are transferred to accumulated deficit in the period of which the cancellation or expiry occurs.
The Company also operates a RSUs Plan, where RSUs are granted to directors, employees and consultants from time to time. RSUs are measured at the fair value of the date of grant, based on the closing price of the Company’s common shares on the date of grant. The fair value of stock-based compensation on RSUs is recognized as an expense with a corresponding increase in the reserve for RSUs over the vesting period.
From time to time, the Company may also grant RSUs with a put right option, which provides the grantee with the right (the “Put Right Option”), but not the obligation to cause the Company to purchase all or a portion of the vested RSUs at a put purchase price (the “Put Purchase Price”). As the grantee has the choice of settlement through cash or in shares, these RSUs with the Put Right Option are considered to be a compound financial instrument that includes both a liability component and an equity component. At the measurement date, the Company accounts for the two components separately i.e. applying the requirements for cash-settled share-based payments to the liability component and applying the requirements for equity-settled share-based payments to the equity component, if that component has a recognized value. Applying the requirements for equity-settled share-based payments, the value of the equity component is not remeasured subsequently. Applying the requirements for cash-settled share-based payments, the liability is remeasured at each reporting date and on settlement date to its fair value.
If the grantee chooses cash settlement, then the cash payment settles the liability. Any equity component previously recognized in equity remains in equity. If the grantee employee chooses settlement in equity instruments, then the liability is transferred to equity as consideration for issuing the equity instruments.
(l)Warrants
Share purchase warrants (each a “Warrant”) are classified as a component of equity. Warrants issued along with shares in an equity unit financing are measured using the residual approach, whereby the fair value of the Warrant is determined after deducting the fair value of the shares from the unit price less applicable financing costs. Warrants issued for broker/financing compensation, are recognized at the fair value using Black-Scholes at the date of issuance. Warrants are initially recorded as a part of the reserves in warrant in equity at the recognized fair value.
Upon exercise of the Warrants, the previously recognized fair value of the Warrants exercised is reallocated to share capital from warrants reserve. Proceeds generated from the payment of the exercise price are also allocated to share capital. Amounts recorded for expired unexercised warrants are transferred to accumulated deficit in the period of which the expiry occurs.
F-19
Snow Lake Resources Ltd. |
Notes to the Amended and Restated Consolidated Financial Statements |
For the Years Ended June 30, 2023, 2022 and 2021 |
(Expressed in Canadian Dollars) |
4.Summary of Significant Accounting Policies (continued)
(m)Flow-Through Shares
Proceeds received from the issuance of flow-through shares are restricted to be used only for Canadian resource property exploration expenditures within a two-year period. The portion of the proceeds received but not yet expended at the end of the year is disclosed separately.
The issuance of flow-through common shares results in the tax deductibility of the qualifying resource expenditures funded from the proceeds of the sales of such common shares being transferred to the purchasers of the shares. On the issuance of such shares, the Company bifurcates the flow-through shares into a flow-through share premium, equal to the estimated fair value of the premium that investors pay for the flow-through tax feature, which is recognized as a liability, and equity values of share capital and/or warrants. As related exploration expenditures are incurred, the Company derecognizes the premium liability and recognizes the related recovery.
(n)Loss Per Share
Basic loss per share is computed by dividing the net loss available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted loss per share is calculated by the treasury stock method. Under the treasury stock method, the weighted average number of common shares outstanding for the calculation of diluted (loss) earnings per share assumes that the proceeds to be received on the exercise of dilutive share options and warrants are used to repurchase common shares at the average market price during the period.
(o)Foreign Currency Translation
Monetary assets and liabilities denominated in currencies other than CAD are translated into CAD at the rate of the consolidated financial statements of the Company are prepared in its functional currency, determined on the basis of the primary economic environment in which the entity operates. Given that operations are in Canada, the presentation and functional currency of the Company is the Canadian dollar.
Transactions in currencies other than the functional currency are recorded at the rates of exchange prevailing at the transaction dates. At each reporting date, monetary items denominated in foreign currencies are translated into the entity’s functional currency at the then prevailing rates and non-monetary items measured at historical cost are translated into the entity’s functional currency at rates in effect at the date the transaction took place.
Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous financial statements are included in the consolidated statements of loss and comprehensive loss for the period in which they arise.
(p)Related Party Transactions
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence. Related parties may be individuals or corporate entities. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.
(q)Adoption of New Accounting Standards and Amendments
The Company adopted the following amendments, effective July 1, 2022. The changes were made in accordance with the applicable transitional provisions. The Company had assessed that no material impact is expected upon the adoption of the following amendments on its consolidated financial statements:
F-20
Snow Lake Resources Ltd. |
Notes to the Amended and Restated Consolidated Financial Statements |
For the Years Ended June 30, 2023, 2022 and 2021 |
(Expressed in Canadian Dollars) |
4.Summary of Significant Accounting Policies (continued)
(q)Adoption of New Accounting Standards and Amendments (continued)
Amendments to IAS 37 – Provisions, Contingent Liabilities and Contingent Assets (“IAS 37”)
In May 2020, the IASB issued amendments to update IAS 37. The amendments specify that in assessing whether a contract is onerous under IAS 37, the cost of fulfilling a contract includes both the incremental costs and an allocation of costs that relate directly to contract activities. The amendments also include examples of costs that do, and do not, relate directly to a contract.
Amendments to IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors (“IAS 8”)
In February 2021, the IASB issued Definition of Accounting Estimates, which amended IAS 8. The amendments clarify how companies should distinguish changes in accounting policies from changes in accounting estimates. That distinction is important because changes in accounting estimates are applied prospectively only to future transactions and other future events, but changes in accounting policies are generally also applied retrospectively to past transactions and other past events. The amendments to IAS 8 are effective for annual periods beginning on or after January 1, 2023. The Company early-adopted these amendments as permitted.
5.Sales Tax Receivable
The Company’s sales tax receivable balance represents amounts due from government taxation authorities in respect of the Good and Services Tax/Harmonized Sales Tax. The Company anticipates full recovery of these amounts and therefore no ECL has been recorded against these receivables, which are due in less than one year.
6.Prepaid Expenses
June 30, 2023 | June 30, 2022 | June 30, 2021 | |
| $ | $ | $ |
Prepaid insurance | |||
Advances made to suppliers and deposits | |||
7.Exploration and Evaluation Assets
The following summarizes the movement of the Company’s E&E assets for the years ended June 30, 2023, 2022 and 2021:
| $ |
Balance, June 30, 2020 | |
Exploration and evaluation expenditures | |
Balance, June 30, 2021 | |
Exploration and evaluation expenditures | |
Balance, June 30, 2022 | |
Exploration and evaluation expenditures | |
Balance, June 30, 2023 |
F-21
Snow Lake Resources Ltd. |
Notes to the Amended and Restated Consolidated Financial Statements |
For the Years Ended June 30, 2023, 2022 and 2021 |
(Expressed in Canadian Dollars) |
8.Right-of-Use Assets
Effective June 15, 2023, the Company entered into a lease agreement for mining equipment used in its E&E activities, for a term of two years. As at June 30, 2023, the Company’s ROU assets are as follows:
| $ |
Cost |
|
Balance, June 30, 2022 and 2021 | - |
Additions for right-of-use assets | |
Balance, June 30, 2023 | 63,360 |
Accumulated Amortization |
|
Balance, June 30, 2022 and 2021 | - |
Depreciation | |
Balance, June 30, 2023 | 2,640 |
Net Book Value |
|
June 30, 2022 and 2021 | |
June 30, 2023 |
9.Accounts Payable and Accrued Liabilities
June 30, 2023 | June 30, 2022 | June 30, 2021 | |
| $ | $ | $ |
Trade payables | |||
Accrued liabilities | |||
Accounts payable of the Company are principally comprised of amounts outstanding for trade purchases incurred in the normal course of business.
10.Loan Payable
On November 29, 2021, the Company entered into a loan agreement for USD $
11.Convertible Debentures
In February 2021, the Company issued convertible debts (the “Debentures”) for a total of $
Under the terms of the Agreement, the Subscribed Amount plus interest accrued, at a rate which should be the higher of
F-22
Snow Lake Resources Ltd. |
Notes to the Amended and Restated Consolidated Financial Statements |
For the Years Ended June 30, 2023, 2022 and 2021 |
(Expressed in Canadian Dollars) |
11.Convertible Debentures (continued)
During the year ended June 30, 2022, the Company amortized $
On November 23, 2021, all debt holders exercised their conversion rights at a price of $
The following table reflects the continuity of the Debentures for the years ended June 30, 2022 and 2021:
| $ |
Balance, June 30, 2020 | |
Principal value of convertible debentures | |
Discount on proceeds received | ( |
Cash commission | ( |
Allocation to conversion feature | ( |
Allocation to warrant | ( |
Value at initial recognition | |
Accretion expense | |
Interest expense | |
Amortization of transaction costs | |
Balance, June 30, 2021 | |
Accretion expense | |
Interest expense | |
Amortization of transaction costs | |
Conversion of Debentures | ( |
Balance, June 30, 2022 | - |
F-23
Snow Lake Resources Ltd. |
Notes to the Amended and Restated Consolidated Financial Statements |
For the Years Ended June 30, 2023, 2022 and 2021 |
(Expressed in Canadian Dollars) |
12.Lease Liabilities
The movements and carrying amounts of the Company’s ROU assets under lease as per disclosed in Note 8, are summarized as follows:
| $ |
Balance, June 30, 2022 and 2021 | |
Additions of lease | |
Lease payments | ( |
Accretion on lease liabilities | |
Balance, June 30, 2023 |
| $ |
Current | |
Non-current | |
|
13.Derivative Liabilities
Conversion feature of Debentures
Upon issuance of the Debentures in February 2021, the Company allocated the conversion feature component valued at $
During the year ended June 30, 2021, a gain on change in fair value on the conversion feature of $
During the year ended June 30, 2022, a gain on change in fair value on the conversion feature of $
IPO Finders’ Warrants
In connection with the IPO which closed on November 23, 2021, the Company issued 184,000 Finders’ Warrants exercisable at USD $9.375 before November 19, 2026. The fair value of these Finders’ Warrants was estimated at $1,237,681 using Black-Scholes with the following assumptions: expected volatility of 100% based on comparable companies, expected dividend yield of 0%, risk-free interest rate of 1.58%, and an expected life of five years.
As at June 30, 2022, the derivative liability related to the Finders’ Warrants was measured at a fair value of $286,997 using Black-Scholes with the following assumptions: share price of USD $2.40, exercise price of USD $9.375, expected volatility of 100% based on comparable companies, expected dividend yield of 0%, risk-free interest rate of 3.10% and an estimated remaining life of 4.40 years. During the year ended June 30, 2022, the Company recorded a fair value decrease of $950,684 on the derivative liability related to the Finders’ Warrants.
As at June 30, 2023, the derivative liability related to the Finders’ Warrants was measured at a fair value of $379,025 using Black-Scholes with the following assumptions: share price of USD $2.27, exercise price of USD $9.375, expected volatility of 146% based on comparable companies, expected dividend yield of 0%, risk-free interest rate of 3.77% and an estimated remaining life of 3.40 years. During the year ended June 30, 2023, the Company recorded a fair value increase of $92,028 on the derivative liability related to the Finders’ Warrants.
F-24
Snow Lake Resources Ltd. |
Notes to the Amended and Restated Consolidated Financial Statements |
For the Years Ended June 30, 2023, 2022 and 2021 |
(Expressed in Canadian Dollars) |
13.Derivative Liabilities (continued)
Incentive Warrants
On February 17, 2023, the Company issued 225,000 incentive warrants (each a “Incentive Warrant”) to a third-party pursuant to an engagement agreement between the parties, whereby each Incentive Warrant is exercisable for a period of two years at an exercise price of: (i) USD $3 for 75,000 Warrants; (ii) USD $4 for 75,000 Warrants; and (iii) USD $5 for 75,000 Warrants. On initial recognition, the fair value of these Incentive Warrants was estimated at $409,496 using Black-Scholes with the following assumptions: expected volatility of 148% based on comparable companies, expected dividend yield of 0%, risk-free interest rate of 4.15%, and an expected life of two years. The fair value of the Incentive Warrants was recorded as consulting fees on the consolidated statements of loss and comprehensive loss.
As at June 30, 2023, the derivative liability related to the Incentive Warrants was measured at a fair value of $401,544 using Black-Scholes with the following assumptions: share price of USD $2.27, exercise price ranging from USD $3 to $5, expected volatility of 154% based on comparable companies, expected dividend yield of 0%, risk-free interest rate of 4.54% and an estimated remaining life of 1.64 years. During the year ended June 30, 2023, the Company recorded a fair value decrease of $7,952 on the derivative liability related to the Incentive Warrants.
Settlement Warrants
On March 31, 2023, the Company issued 500,000 settlement warrants (each a “Settlement Warrant”) to two additional third-parties pursuant to an agreement for release and settlement of claims advanced against the Company, whereby each Settlement Warrant is exercisable for a period of three years at an exercise price of USD $2.50. On initial recognition, the fair value of these Settlement Warrants was estimated at $979,294 using Black-Scholes with the following assumptions: expected volatility of 140% based on comparable companies, expected dividend yield of 0%, risk-free interest rate of 3.51%, and an expected life of three years. The fair value of the Settlement Warrants was recorded as professional fees on the consolidated statements of loss and comprehensive loss.
As at June 30, 2023, the derivative liability related to the Settlement Warrants was measured at a fair value of $1,141,677 using Black-Scholes with the following assumptions: share price of USD $2.27, exercise price of USD $2.50, expected volatility of 140% based on comparable companies, expected dividend yield of 0%, risk-free interest rate of 4.21% and an estimated remaining life of 2.75 years. During the year ended June 30, 2023, the Company recorded a fair value increase of $162,383 on the derivative liability related to the Settlement Warrants.
The changes to the derivative liabilities for the years ended June 30, 2023, 2022 and 2021 are as follows:
| $ |
Balance, June 30, 2020 | |
Fair value of derivative liability on date of issuance | |
Fair value changes of derivative liability – conversion feature | ( |
Balance, June 30, 2021 | |
Fair value changes of derivative liability – conversion feature | ( |
Fair value allocated on conversion of Debentures | ( |
Fair value of derivative liability – Finders’ Warrants | |
Fair value changes of derivative liability – Finders’ Warrants | ( |
Balance, June 30, 2022 | |
Fair value of derivative liabilities on date of issuance | |
Fair value changes of derivative liability – Finders’ Warrants | |
Fair value changes of derivative liability – Incentive Warrants | ( |
Fair value changes of derivative liability – Settlement Warrants | |
Balance, June 30, 2023 |
F-25
Snow Lake Resources Ltd. |
Notes to the Amended and Restated Consolidated Financial Statements |
For the Years Ended June 30, 2023, 2022 and 2021 |
(Expressed in Canadian Dollars) |
14.Other Liabilities
On January 30, 2023, the Company granted 470,000 RSUs to various directors, of which 400,000 RSUs contained the Put Right Option where the directors can elect to settle in cash or in equity. These RSUs vest at various stages pending conditions of certain milestones. These RSUs with the Put Right Option are classified as other liabilities on the consolidated statements of financial position.
As at June 30, 2023, these RSUs were measured at a fair value of $
15.Share Capital
Authorized share capital
The Company is authorized to issue an unlimited number of common shares without par value.
Common shares issued and outstanding as at June 30, 2023, 2022 and 2021 are as follows:
| Number of common shares |
Amount |
| # | $ |
Balance, June 30, 2020 | ||
Shares issued from exercise of warrants (a) | ||
Balance, June 30, 2021 | ||
Shares issued on initial public offering (b) | ||
Shares issue costs (b) | - | ( |
Shares issued on conversion of debentures (c) | ||
Shares issued on vesting of restricted share units (d) | ||
Shares issued from exercise of warrants (e) | ||
Balance, June 30, 2022 | ||
Shares issued on debt settlement (f) | ||
Shares issued from exercises of warrants (g) | ||
Balance, June 30, 2023 |
Share capital transactions for the year ended June 30, 2021
(a)During the year ended June 30, 2021, 2,170 common shares were issued as a result of the exercise of Warrants for cash proceeds of $4,883.
Share capital transactions for the year ended June 30, 2022
(b)On November 23, 2021, the Company completed the IPO through the issuance of 3,680,000 common shares, including 480,000 common shares issued under the underwriters’ over-allotment option, at a price of $9.51 (USD $7.50) per share for gross proceeds of $34,988,520 (USD $27,600,000). In connection with the IPO, the Company granted the underwriters 184,000 Finders’ Warrants with each Finders’ Warrant exercisable into one common share of the Company at the price of USD $9.375 until November 19, 2026 (see Notes 13 and 18). In addition, the Company paid total issuance costs of $2,995,448 comprised of (i) a cash commission of $2,624,139 to the underwriters, (ii) underwriters’ fees of $304,248, and (iii) other closing expenses of $67,061.
F-26
Snow Lake Resources Ltd. |
Notes to the Amended and Restated Consolidated Financial Statements |
For the Years Ended June 30, 2023, 2022 and 2021 |
(Expressed in Canadian Dollars) |
15.Share Capital (continued)
Share capital transactions for the year ended June 30, 2022 (continued)
(c)On November 23, 2021, the Company also issued 751,163 common shares for the conversion of all outstanding Debentures at a conversion price of $1.25 per common share. The total amount of $863,294 was transferred from derivative liabilities to share capital.
(d)On January 9, 2022, the Company issued 240,000 common shares as a result of the vesting of RSUs. These common shares were valued at an amount of $1,950,645. See Note 16 for more details.
(e)During the year ended June 30, 2022, 243,419 common shares were issued as a result of the exercise of Warrants for cash proceeds of $365,114.
Share capital transactions for the year ended June 30, 2023
(f)On January 25, 2023, the Company issued 240,000 common shares with a fair value of $800,366 to settle a debt (the “Shares-for-Debt Settlement”) of USD $480,000 owed by a director to a third-party, in relation to services provided by the third-party related to the requisitioning of a shareholders’ meeting, which the Company had agreed to complete the settlement on behalf of the director. As a result of the Shares-for-Debt Settlement, the Company recorded a loss on settlement of $157,501 on the consolidated statements of loss and comprehensive loss.
(g)During the year ended June 30, 2023, 21,052 common shares were also issued as a result of the exercise of Warrants for cash proceeds of $31,578.
16.Reserve for RSUs
On January 9, 2022, the Company granted
On January 30, 2023, the Company granted
The other RSUs vest at various stages pending conditions of certain milestones and are classified under other liabilities (see Note 14 for details).
As at June 30, 2023, the Company had 470,000 RSUs outstanding (June 30, 2022 and 2021 – nil).
17.Reserve for Share-Based Payments
The Company maintains the Option Plan whereby certain key officers, directors and consultants may be granted stock options for common shares of the Company. The maximum number of common shares that are issuable under the Option Plan is limited to 2,406,732 common shares. Under the Option Plan, the exercise price of each option may not be lower than the greater of the closing price of the Company’s shares on the trading day prior to the grant date or the grant date itself, whichever is higher. Vesting of options is determined at the discretion of the Board. As at June 30, 2023, the Company had 944,325 common shares available for issuance under the Option Plan.
F-27
Snow Lake Resources Ltd. |
Notes to the Amended and Restated Consolidated Financial Statements |
For the Years Ended June 30, 2023, 2022 and 2021 |
(Expressed in Canadian Dollars) |
17.Reserve for Share-Based Payments (continued)
The following summarizes the stock option activity for the years ended June 30, 2023, 2022 and 2021:
| 2023 | 2022 | 2021 | |||
|
Number of options | Weighted average exercise price |
Number of options | Weighted average exercise price |
Number of options | Weighted average exercise price |
| # | $ | # | $ | # | $ |
Outstanding, beginning of year | ||||||
Granted | USD | USD | ||||
Cancelled | ( | ( | ( | |||
Cancelled | ( | USD | ( | USD | ||
Reinstated | - | - | 2.50 | |||
Outstanding, end of year | ||||||
Exercisable, end of year | ||||||
(1)
Option activities for the year ended June 30, 2021
No options were granted during the year ended June 30, 2021.
Option activities for the year ended June 30, 2022
On November 18, 2021, the Company granted
On June 29, 2022,
Option activities for the year ended June 30, 2023
On January 30, 2023, the Company granted 350,000 options to various directors. The options are exercisable at a price of USD $2.50 per common share for a period of five years and vested immediately on grant. The options were valued using Black-Scholes with the following assumptions: expected volatility of 113% based on comparable companies, expected dividend yield of 0%, risk-free interest rate of 3.04%, forfeiture rate of 20% and an expected life of five years. The grant date fair value attributable to these options of $666,746 was recorded as stock-based compensation in connection with the vesting of these options during the year ended June 30, 2023.
On May 17, 2023, the Board extended the date of expiry of the remaining 160,000 options previously granted in May 25, 2019, from May 24, 2023 to May 24, 2029. The extension constituted a modification in accordance with the guidance of IFRS 2 – Share-Based Payments. As the modification increases the fair value of the options, measured immediately before and after the modification, the Company recorded the incremental fair value, the difference between the fair value of the modified options and that of the original grant. As a result, the Company recorded an additional stock-based compensation of $207,733, which is included in share-based payments reserve.
F-28
Snow Lake Resources Ltd. |
Notes to the Amended and Restated Consolidated Financial Statements |
For the Years Ended June 30, 2023, 2022 and 2021 |
(Expressed in Canadian Dollars) |
17.Reserve for Share-Based Payments (continued)
Option activities for the year ended June 30, 2023 (continued)
During the year ended June 30, 2023, 148,082 options exercisable at USD $7.50 and 360,000 options exercisable at $2.50, were cancelled. As a result of these cancellations, an amount of $
The following table summarizes information of stock options outstanding and exercisable as at June 30, 2023:
Date of expiry | Number of options outstanding | Number of options exercisable |
Exercise price | Weighted average remaining |
| # | # | $ | Years |
November 18, 2026 | USD | |||
January 30, 2028 | USD | |||
May 24, 2029 | USD | |||
|
18.Reserve for Warrants
The following summarizes the warrant activity for the years ended June 30, 2023, 2022 and 2021:
| 2023 | 2022 | 2021 | |||
|
Number of warrants | Weighted average exercise price |
Number of warrants | Weighted average exercise price |
Number of warrants | Weighted Average exercise price |
| # | $ | # | $ | # | $ |
Outstanding, beginning of year | ||||||
Issued from debentures financing | - | - | ||||
Issued as Finders’ Warrants from IPO | - | USD | - | |||
Issued as Incentive Warrants | USD | - | - | - | - | |
Issued as Incentive Warrants | USD | - | - | - | - | |
Issued as Incentive Warrants | USD | - | - | - | - | |
Issued as Settlement Warrants | USD | - | - | - | - | |
Exercised | ( | ( | ( | |||
Expired | - | - | - | - | ( | |
Outstanding, end of year | ||||||
Warrant issuances for the year ended June 30, 2021
As part of the Debentures issuance in February 2021,
F-29
Snow Lake Resources Ltd. |
Notes to the Amended and Restated Consolidated Financial Statements |
For the Years Ended June 30, 2023, 2022 and 2021 |
(Expressed in Canadian Dollars) |
18.Reserve for Warrants (continued)
Warrant issuances for the year ended June 30, 2021 (continued)
The Debenture Warrants were valued using Black-Scholes based on the following assumptions: expected life of 2.5 years, expected volatility of 70%, expected dividend yield of nil, risk-free interest rate of 0.18% - 0.22%, market price of $1.50, and an exercise price of $1.50. $
15,000 Debenture Finders’ Warrants exercisable on the same terms as the Debenture Warrants were also issued, and they were valued at $9,480 using Black-Scholes based on the following assumptions: expected life of 2.5 years, expected volatility of 70%, expected dividend yield of nil, risk-free interest rate of 0.18%, market price of $1.50, and an exercise price of $1.50. The value of these warrants allocated to loan liability transaction costs is being amortized in the statement of loss and comprehensive loss in accreting up the carrying value of the Debenture loan liability to its principal balance and the value allocated to Debenture warrants transaction costs is being amortized to the warrants reserve over the term of the Debentures.
Warrant issuances for the year ended June 30, 2022
As part of the IPO which closed on November 23, 2021, the Company issued
Warrant issuances for the year ended June 30, 2023
As part of an engagement agreement, the Company issued 225,000 Incentive Warrants exercisable at USD $3, $4 and $5, respectively, up to February 17, 2025, and as part of settlement 500,000 Settlement Warrants exercisable at USD $2.50 up to March 31, 2026. As the Incentive Warrants and Settlement Warrants are denominated in USD, they are considered derivative liabilities hence classified as such (see Note 13 for details).
The following table summarizes information of warrants outstanding as at June 30, 2023:
Date of expiry | Number of warrants outstanding |
Exercise price | Weighted average remaining |
| # | $ | Years |
November 19, 2023 | |||
November 19, 2023 | |||
November 19, 2023 | |||
February 17, 2025 | USD | ||
February 17, 2025 | USD | ||
February 17, 2025 | USD | ||
March 31, 2026 | USD | ||
November 19, 2026 | USD | ||
|
F-30
Snow Lake Resources Ltd. |
Notes to the Amended and Restated Consolidated Financial Statements |
For the Years Ended June 30, 2023, 2022 and 2021 |
(Expressed in Canadian Dollars) |
19.Basic and Diluted Loss per Share
The calculations of basic and diluted loss per share for the year ended June 30, 2023 were based on the net loss of $
The details of the computation of basic and diluted loss per share are as follows:
2023 | 2022 | 2021 | |
| $ | $ | $ |
Net Loss | ( | ( | ( |
| # | # | # |
Basic weighted-average number of shares outstanding | |||
Assumed conversion of dilutive stock options and warrants | |||
Diluted weighted-average number of shares outstanding | |||
| $ | $ | $ |
Basic and diluted loss per share | ( | ( | ( |
20.Related Party Transactions
In accordance with IAS 24 – Related Party Disclosures, key management personnel, including companies controlled by them, are those persons having authority and responsibility for planning, directing and controlling the activities of the Company directly or indirectly, including any directors (executive and non-executive) of the Company. The remuneration of directors and key executives is determined by the compensation committee of the Board.
The remuneration of directors and other members of key management personnel during the years ended June 30, 2023, 2022 and 2021 were as follows:
2023 | 2022 | 2021 | |
| $ | $ | $ |
Directors’ and officers’ consulting fees | |||
Cash payment | |||
Exploration and evaluation expenditures | |||
Addendum payments | |||
Directors’ and officers’ consulting fees
During the year ended June 30, 2023, fees of $
Cash payment
During the year ended June 30, 2023, a payment of USD $
Exploration and evaluation expenditures
During the year ended June 30, 2023, fees of $
F-31
Snow Lake Resources Ltd. |
Notes to the Amended and Restated Consolidated Financial Statements |
For the Years Ended June 30, 2023, 2022 and 2021 |
(Expressed in Canadian Dollars) |
20.Related Party Transactions (continued)
Addendum payments
On November 1, 2022, the Company purported to amend the consulting agreements with the entities controlled by the former Chief Executive Officer and the former Chief Operating Officer of Snow Lake, with an addendum which amended the termination clause of their respective agreements. As a result of the addendum, the Company recorded fees of $
As of June 30, 2023, the Company has made a claim against these former officers (see Note 25 for more details).
Share-based compensation
During the year ended June 30, 2023, the Company had granted certain RSUs and options to various directors and officers. Total stock-based compensation of $
Other related party transactions
On January 25, 2023, the Company issued
Related party balances
All related party balances payable, for services and business expense reimbursements rendered as at June 30, 2023, 2022 and 2021, are non-interest bearing and payable on demand, and are comprised of the following:
2023 | 2022 | 2021 | |
| $ | $ | $ |
Payable to officers and directors | |||
(Receivable) payable to Nova Minerals Ltd. | ( | ( | |
21.Income Taxes
The reconciliation of the combined Canadian federal and provincial statutory income tax rate of 27% (2022 – 27%) to the effective tax rate is as follows:
2023 | 2022 | 2021 | |
| $ | $ | $ |
Net loss before income tax | ( | ( | ( |
Combined federal and provincial statutory income tax rates | |||
Expected income tax recovery at statutory rates | |||
Non-deductible differences | ( | ( | ( |
Change in unrecognized deductible temporary differences | ( | ( | ( |
Total income tax recovery |
F-32
Snow Lake Resources Ltd. |
Notes to the Amended and Restated Consolidated Financial Statements |
For the Years Ended June 30, 2023, 2022 and 2021 |
(Expressed in Canadian Dollars) |
21.Income Taxes (continued)
Unrecognized deductible temporary differences
The income tax benefit of the following deductible temporary differences has not been recorded in these financial statements because of the uncertainly of their recovery:
2023 | 2022 | 2021 | |
| $ | $ | $ |
Non-capital losses carried forward | |||
Exploration and evaluation assets | ( | ( | ( |
Other items | |||
Non-capital losses carried forward
The Company has non-capital tax losses available to reduce taxes in future years of approximately $
Tax attributes are subject to review, and potential adjustment, by tax authorities
22.Capital Management
The Company’s objective when managing capital is to safeguard its ability to continue as a going concern such that it can provide returns for shareholders and benefits for other stakeholders. The management of the capital structure is based on the funds available to the Company in order to support the acquisition, exploration and development of mineral properties and to maintain the Company in good standing with the various regulatory authorities. In order to maintain or adjust its capital structure, the Company may issue new shares, sell assets to settle liabilities, issue debt instruments or return capital to its shareholders. The Company monitors its capital structure and makes adjustments in light of changes in economic conditions and the risk characteristics of the underlying assets.
23.Financial Risks
The Company is exposed to various risks as it relates to financial instruments. Management, in conjunction with the Board, mitigates these risks by assessing, monitoring and approving the Company’s risk management process. There have not been any changes in the nature of these risks or the process of managing these risks from the previous reporting periods.
Credit risk
Credit risk is the risk of loss associated with a counterparty’s inability to fulfill its payment obligations. The Company’s credit risk is primarily attributable to cash, other receivable (excluding sales tax receivable), and due from related party, which expose the Company to credit risk should the borrower default on maturity of the instruments. Cash is held with reputable chartered bank in Canada, which is closely monitored by management. Management believes that the credit risk concentration with respect to financial instruments included in cash, other receivables, and due from related party is minimal.
Liquidity risk
Liquidity risk is the risk that the Company will not have sufficient cash resources to meet its financial obligations as they come due. The Company’s liquidity and operating results may be adversely affected if the Company’s access to the capital market is hindered, whether as a result of a downturn in stock market conditions generally or related to matters specific to the Company. The Company generates cash flow primarily from its financing and investing activities.
F-33
Snow Lake Resources Ltd. |
Notes to the Amended and Restated Consolidated Financial Statements |
For the Years Ended June 30, 2023, 2022 and 2021 |
(Expressed in Canadian Dollars) |
23.Financial Risks (continued)
Liquidity risk (continued)
As at June 30, 2023, the Company had a cash balance of $
As at June 30, 2023, the Company had the following contractual obligations:
| Less than 1 |
1 to 3 years |
3 to 5 years |
Total |
| $ | $ | $ | $ |
Accounts payable and accrued liabilities | ||||
Due to related parties | ||||
Lease liabilities | ||||
Derivative liabilities | ||||
Other liabilities | ||||
Total | 3,883,529 | 31,107 | - | 3,914,636 |
The Company manages liquidity risk by maintaining adequate cash reserves and by continuously monitoring forecasts and actual cash flows for a rolling period of 12 months to identify financial requirements. Where insufficient liquidity may exist, the Company may pursue various debt and equity instruments for short or long-term financing of its operations. Management believes there is sufficient capital to meet short-term business obligations, after taking into account cash flow requirements from operations and the Company’s cash position as at June 30, 2023.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company’s loans payable and convertible debentures have fixed interest rates. As at June 30, 2023, the Company had no hedging agreements in place with respect to floating interest rates. Management believes that the interest rate risk concentration with respect to financial instruments is minimal.
Foreign exchange risk
Foreign exchange risk is the risk that the Company will be subject to foreign currency fluctuations in satisfying obligations related to its foreign activities. The Company has from time to time, financial instruments and transactions denominated in foreign currencies, notably in USD. The Company’s primary exposure to foreign exchange risk is that transactions denominated in foreign currency may expose the Company to the risk of exchange rate fluctuations. Based on its current operations, management believes that the foreign exchange risk remains minimal.
Fair value
Fair value estimates of financial instruments are made at a specific point in time based on relevant information about financial markets and specific financial instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot be determined with precision. Changes in assumptions can significantly affect estimated fair values.
As at June 30, 2023, the Company’s financial instruments consisted of cash, other receivables (excluding sales tax recoverable), due from related party, accounts payable, due to related parties, lease liabilities, derivative liabilities and other liabilities. The fair value of other receivables (excluding sales tax recoverable), due from related party, accounts payable and due to related parties are approximately equal to their carrying value due to their short-term nature. The fair values of the lease liabilities approximate their carrying amounts as they were measured taking into consideration comparable instruments with similar risks in determining the rates at which to discount their amount in applying their respective measurement models.
F-34
Snow Lake Resources Ltd. |
Notes to the Amended and Restated Consolidated Financial Statements |
For the Years Ended June 30, 2023, 2022 and 2021 |
(Expressed in Canadian Dollars) |
23.Financial Risks (continued)
Fair value (continued)
The Company classifies fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:
·Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.
·Level 2 – Inputs other than quoted prices included in 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 – Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
| Level 1 | Level 2 | Level 3 | Total |
| $ | $ | $ | $ |
Cash | ||||
Derivative liabilities | ( | ( | ||
Other liabilities | - | (820,612) | - | (820,612) |
As at June 30, 2023, the Company’s financial instruments carried at fair value consisted of its cash, which is classified as Level 1, and its derivative liabilities and other liabilities, which have been classified as Level 2, respectively. There were no transfers between Levels 2 and 3 for recurring fair value measurements during the years ended June 30, 2023, 2022 and 2021.
24.Grant Income
During the year ended June 30, 2023, the Company received a grant for $
25.Contingencies
The Company’s E&E activities are subject to various laws and regulations governing the protection of the environment. These laws and regulations are continually changing and generally becoming more restrictive. As at June 30, 2023, the Company believes its operations are materially in compliance with all applicable laws and regulations. The Company expects to make future expenditures to comply with such laws and regulations.
As of June 30, 2023, Snow Lake has also made a claim against certain former directors of the Company and their holding companies for, among other things, breach of fiduciary duty as a result of, amongst other matters, of those directors approving changes to the consulting agreements between the former CEO and COO and their holding companies, for termination payments of USD $
As of the date of approval of these consolidated financial statements, all defendants have now filed Statements of Defence. All defendants have made counterclaims seeking indemnification for legal fees incurred in responding to this claim in relation to directors’ indemnity agreements they have with the Company. The Company takes the position that the defendants are not eligible for indemnity payments as a result of their breaches of fiduciary duties. The next step will be for the Company to file its Replies and Defences to Counterclaims, and then proceed to discovery. As at June 30, 2023, as the outcome of the claims remains uncertain, the Company had not recognized any contingent assets on the consolidated statements of financial position.
F-35
Snow Lake Resources Ltd. |
Notes to the Amended and Restated Consolidated Financial Statements |
For the Years Ended June 30, 2023, 2022 and 2021 |
(Expressed in Canadian Dollars) |
26.Subsequent Events
On July 13, 2023, the Company filed an application against its former Manitoba law firm seeking to assess for reasonableness certain invoices of the law firm rendered between May 2022 and January 2023, as well as the repayment of any fees paid to the law firm which the Court finds to be unreasonable. This application is at the early stages.
On July 17, 2023, the Company granted 250,000 options and 200,000 RSUs to its new CEO. 25% of the options will vest six months from the grant date, 25% will vest 12 months from the grant date, with the remainder to vest 18 months from the grant date. The RSUs, on the other hand, will vest at various stages depending on the Company’s volume weighted average price exceeding certain thresholds.
On July 29, 2023, a former director resigned from the Company, resulting in 50,000 options and 10,000 RSUs being cancelled.
On September 21, 2023, the Company closed its best-efforts flow-through financing through the issuance of 2,133,979 common shares at a price of $3.6117 (USD $2.67) per common share, for gross proceeds of $7,707,292 (USD $5,697,710) (the “Offering”). In connection with the Offering, the Company issued 86,000 Warrants at USD $2.67 per share with an expiry of five years and paid fees and expenses to various agents in the amount of $215,376.
On September 21, 2023, the Company also issued 21,276 common shares to a third-party pursuant to a letter agreement between the parties.
As of August 9, 2023 160,000 RSUs out of the 470,000 RSUs awarded on January 30, 2023 had met the milestones required to vest. On September 26, 2023, the Company paid $546,476 (USD $400,000) to redeem 160,000 of the vested RSUs at USD $2.50 each.
On October 20, 2023, the Company issued 40,000 common shares to a third-party pursuant to a marketing services agreement (the “Marketing Agreement”) between the parties for a term of six months from October 2, 2023 to April 2, 2024. Upon execution of the agreement, the Company also paid a cash payment of USD $62,500 upon execution, The Company also issued 300,000 Warrants to the third-party pursuant to the Marketing Agreement, whereby each Warrant is exercisable for a period of 12 months at an exercise price of: (i) USD $2 for 100,000 Warrants; (ii) USD $2.50 for 100,000 Warrants; and (iii) USD $3 for 100,000 Warrants.
F-36
Certification Pursuant to Rule 13a-14(a) of the Exchange Act
I, Frank Wheatley, certify that:
1.I have reviewed this Amendment No. 1 to the annual report on Form 20-F of Snow Lake Resources Ltd.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
4.The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and
5.The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.
Date: March 25, 2024
By: | /s/ Frank Wheatley |
|
| Name: Frank Wheatley |
|
| Title: Chief Executive Officer |
|
Certification Pursuant to Rule 13a-14(a) of the Exchange Act
I, Keith Li, certify that:
1.I have reviewed this Amendment No. 1 to the annual report on Form 20-F of Snow Lake Resources Ltd.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
4.The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and
5.The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.
Date: March 25, 2024
By: | /s/ Keith Li |
|
| Name: Keith Li |
|
| Title: Chief Financial Officer |
|
Certification Pursuant to 18 U.S.C. Section 1350
Pursuant to U.S.C. Section 1350 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), each of the undersigned officers of Snow Lake Resources Ltd. (the “Company”), does hereby certify, to such officer’s knowledge, that:
Amendment No. 1 to the Annual Report on Form 20-F for the year ended June 30, 2023 of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form 20-F fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
| |
Date: March 25, 2024 |
| |
|
| |
|
| |
By: | /s/ Frank Wheatley |
|
| Name: Frank Wheatley |
|
| Title: Chief Executive Officer (Principal Executive Officer) |
|
Date: March 25, 2024
By: | /s/ Keith Li |
|
| Name: Keith Li |
|
| Title: Chief Financial Officer (Principal Financial and Accounting Officer) |
|
CONSENT OF INDEPENDENT AUDITOR
We hereby consent to the incorporation by reference in Snow Lake Resources Ltd.’s Registration Statements on Form S-8 (File No. 333-261358) of our report dated March 19, 2024, relating to the amended and restated consolidated financial statements of Snow Lake Resources Ltd, which appears in this Amendment No. 1 to the annual report on Form 20-F.
March 25, 2024
/s/ De Visser Gray LLP
De Visser Gray LLP
CHARTERED PROFESSIONAL ACCOUNTANTS