Fury Gold Mines Ltd 6-K, filed Aug 12, 2020
Fury Gold Mines Ltd (FURY)
6-K
2020-08-12
For: 2020-08-11
View Original
Added on
April 10, 2026
About this 6-K
Fury Gold Mines Ltd filed this 6-K on August 12, 2020.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO
RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF
1934
For the month of August 2020
Commission File No.
001-38145
Auryn Resources
Inc.
(Translation of registrant's name into English)
(Translation of registrant's name into English)
Suite 600, 1199 West Hastings
Street
Vancouver, British Columbia, V6E 3T5 Canada
(Address of principal executive office)
Vancouver, British Columbia, V6E 3T5 Canada
(Address of principal executive office)
Indicate by check mark
whether the registrant files or will file annual reports under
cover of Form 20-F or Form 40-F
Form
20-F [ ] Form
40-F [X]
Indicate by check mark
if the registrant is submitting the Form 6-K in paper as permitted
by Regulation S-T Rule 101(b)(1) [ ]
Indicate by check mark
if the registrant is submitting the Form 6-K in paper as permitted
by Regulation S-T Rule 101(b)(7) [ ]
SUBMITTED
HEREWITH
Exhibits
Condensed consolidated interim consolidated
financial statements for the six months ended June 30,
2020
Management’s Discussion & Analysis
for the six months ended June 30, 2020
CEO certification of interim
filings
CFO certification of interim
filings
SIGNATURE
Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
|
|
AURYN RESOURCES INC.
|
|
|
|
|
|
|
|
|
Date: August 11,
2020
|
By:
|
/s/ Elizabeth
Senez
|
|
|
|
|
Elizabeth
Senez
|
|
|
|
|
Interim
Chief Financial Officer
|
|
Exhibit
99.1
.
|
|
|
|
|
|
|
(An
exploration stage company)
|
|
|
|
|
|
|
|
CONDENSED
CONSOLIDATED INTERIM FINANCIAL STATEMENTS
|
|
|
|
|
|
For
the Three and Six Months Ended June 30, 2020 and 2019
|
|
|
|
UNAUDITED
|
|
_______________________
|
|
Auryn
Resources Inc.
|
||
|
Condensed
Consolidated Interim Statements of Financial
Position
|
||
|
|
|
|
|
Unaudited
(Expressed in thousands of Canadian dollars)
|
|
|
|
|
As at
June
30,
|
As at
December
31,
|
|
|
2020
|
2019
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
Cash
|
$11,302
|
$660
|
|
Marketable
securities
|
412
|
346
|
|
Amounts
receivable
|
254
|
55
|
|
Prepaid expenses
and deposits
|
790
|
651
|
|
|
|
|
|
|
12,758
|
1,712
|
|
|
|
|
|
Non-current
assets:
|
|
|
|
Restricted
cash
|
115
|
115
|
|
Prepaid expenses
and deposits
|
135
|
149
|
|
Mineral property
interests (note 3)
|
40,092
|
39,714
|
|
Equipment
|
1,149
|
1,272
|
|
|
41,491
|
41,250
|
|
Total
assets
|
$54,249
|
$42,962
|
|
|
|
|
|
|
|
|
|
Liabilities
and Equity
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts payable
and accrued liabilities
|
$1,280
|
$1,067
|
|
Flow-through share
premium liability (note 4)
|
–
|
7
|
|
Bridge loan (note
5)
|
3,111
|
2,931
|
|
|
|
|
|
|
4,391
|
4,005
|
|
|
|
|
|
Non-current
liabilities:
|
|
|
|
Provision for site
reclamation and closure (note 6)
|
2,337
|
2,134
|
|
Total
liabilities
|
$6,728
|
$6,139
|
|
|
|
|
|
Equity:
|
|
|
|
Share
capital
|
$144,441
|
$129,413
|
|
Share option and
warrant reserve
|
10,589
|
9,992
|
|
Accumulated other
comprehensive income
|
226
|
22
|
|
Deficit
|
(107,735)
|
(102,604)
|
|
|
|
|
|
Total
equity
|
$47,521
|
$36,823
|
|
|
|
|
|
Total
liabilities and equity
|
$54,249
|
$42,962
|
|
|
|
|
|
Subsequent events
(note 3, note 15)
|
|
|
|
|
|
|
|
|
|
|
|
Approved on behalf
of the Board of Directors:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
"Shawn Wallace"
|
|
"Steve Cook"
|
|
|
|
Chief Executive
Officer and Director
|
|
Director
|
|
|
|
|
|
|
|
|
|
The accompanying
notes form an integral part of these condensed consolidated interim
financial statements.
|
||||
Auryn
Resources Inc.
Condensed
Consolidated Interim Statements of Loss and Comprehensive
Loss
|
Unaudited (Expressed
in thousands of Canadian dollars, except per share
amounts)
|
||||
|
|
Three months
ended June 30,
|
Six months ended
June 30,
|
||
|
|
2020
|
2019
|
2020
|
2019
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
Exploration and
evaluation costs (note 7)
|
$893
|
$2,425
|
$1,825
|
$3,200
|
|
Fees, salaries and
other employee benefits
|
849
|
1,868
|
1,303
|
2,401
|
|
Insurance
|
82
|
76
|
163
|
153
|
|
Legal and
professional fees
|
111
|
105
|
187
|
172
|
|
Marketing and
investor relations
|
460
|
442
|
858
|
692
|
|
Office and
administration
|
115
|
133
|
266
|
253
|
|
Regulatory,
transfer agent and shareholder information
|
46
|
77
|
117
|
144
|
|
|
2,556
|
5,126
|
4,719
|
7,015
|
|
|
|
|
|
|
|
Other
expenses (income):
|
|
|
|
|
|
Project
investigation costs
|
120
|
45
|
156
|
86
|
|
Accretion of
provision for site reclamation and closure (note 6)
|
8
|
11
|
17
|
22
|
|
Interest and other
income
|
(19)
|
(19)
|
(51)
|
(20)
|
|
Finance expense
related to loan
|
125
|
–
|
249
|
–
|
|
Amortization of
flow-through share premium (note 4)
|
–
|
(78)
|
(7)
|
(110)
|
|
Gain on marketable
securities
|
(226)
|
(53)
|
(66)
|
(53)
|
|
Loss on
derecognition of bridge loan (note 5)
|
–
|
–
|
159
|
–
|
|
Foreign exchange
loss
|
11
|
13
|
12
|
31
|
|
|
19
|
(81)
|
469
|
(44)
|
|
|
|
|
|
|
|
Net
loss before income taxes
|
2,575
|
5,045
|
5,188
|
6,971
|
|
|
|
|
|
|
|
Deferred income tax
recovery (note 5)
|
–
|
–
|
(57)
|
–
|
|
|
|
|
|
|
|
Loss
for the period
|
$2,575
|
$5,045
|
$5,131
|
$6,971
|
|
|
|
|
|
|
|
Other
comprehensive (income) loss, net of tax
|
|
|
|
|
|
Items that may be
reclassified subsequently to profit or loss:
|
|
|
|
|
|
Unrealized currency
loss (gain) on translation of foreign operations
|
181
|
94
|
(204)
|
168
|
|
|
|
|
|
|
|
Other
comprehensive (income) loss for the period
|
181
|
94
|
(204)
|
168
|
|
|
|
|
|
|
|
Total
comprehensive loss for the period
|
$2,756
|
$5,139
|
$4,927
|
$7,139
|
|
|
|
|
|
|
|
Basic and diluted
loss per share (note 13)
|
$0.02
|
$0.05
|
$0.05
|
$0.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
weighted average number of shares outstanding (note
13)
|
104,688,368
|
94,509,705
|
102,418,794
|
92,755,354
|
|
|
|
|
|
|
The
accompanying notes form an integral part of these condensed
consolidated interim financial statements.
Auryn
Resources Inc.
Condensed
Consolidated Interim Statements of Equity
|
Unaudited (Expressed
in thousands of Canadian dollars, except share
amounts)
|
||||||
|
|
|
|
|
Accumulated
other
|
|
|
|
|
Number
of
|
|
Share option
and
|
comprehensive
|
|
|
|
|
common
shares
|
Share
capital
|
warrant
reserve
|
income
(loss)
|
Deficit
|
Total
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2018
|
90,387,816
|
$121,988
|
$6,937
|
$225
|
$(88,671)
|
$40,479
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
for the period
|
–
|
–
|
–
|
(168)
|
(6,971)
|
(7,139)
|
|
Shares issued
pursuant to offering, net of share issue
|
|
|
|
|
|
|
|
costs and
flow-through liability
|
3,284,375
|
5,120
|
–
|
–
|
–
|
5,120
|
|
Share options
exercised (note 8 (b) iv)
|
864,375
|
934
|
(449)
|
–
|
–
|
485
|
|
Share-based
compensation (note 9 (a))
|
–
|
–
|
2,099
|
–
|
–
|
2,099
|
|
|
|
|
|
|
|
|
|
Balance
at June 30, 2019
|
94,536,566
|
$128,042
|
$8,587
|
$57
|
$(95,642)
|
$41,044
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2019
|
95,231,775
|
$129,413
|
$9,992
|
$22
|
$(102,604)
|
$36,823
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
for the period
|
–
|
–
|
–
|
204
|
(5,131)
|
(4,927)
|
|
Shares issued
pursuant to offering, net of share issue
|
|
|
|
|
|
|
|
costs (note 8
(b) i)
|
9,375,000
|
14,761
|
–
|
–
|
–
|
14,761
|
|
Share options
exercised (note 8 (b) ii)
|
125,000
|
267
|
(94)
|
–
|
–
|
173
|
|
Fair value of
conversion feature, net of tax (note 5)
|
–
|
–
|
154
|
–
|
–
|
154
|
|
Share-based
compensation (note 9 (a))
|
–
|
–
|
537
|
–
|
–
|
537
|
|
|
|
|
|
|
|
|
|
Balance
at June 30, 2020
|
104,731,775
|
$144,441
|
$10,589
|
$226
|
$(107,735)
|
$47,521
|
The
accompanying notes form an integral part of these condensed
consolidated interim financial statements.
Condensed
Consolidated Interim Statements of Cash Flows
|
Unaudited
(Expressed in thousands of Canadian dollars)
|
|
|
Three months
ended
June
30,
|
Six months
ended
June
30,
|
||
|
|
2020
|
2019
|
2020
|
2019
|
|
|
|
|
|
|
|
Cash
(used in) provided by:
|
|
|
|
|
|
|
|
|
|
|
|
Operating
activities:
|
|
|
|
|
|
Loss for the
period
|
$(2,575)
|
$(5,045)
|
$(5,131)
|
$(6,971)
|
|
Items not involving
cash:
|
|
|
|
|
|
Interest
income
|
(19)
|
(19)
|
(51)
|
(20)
|
|
Accretion of
provision for site reclamation and closure (note 6)
|
8
|
11
|
17
|
22
|
|
Finance expense
related to loan
|
125
|
–
|
249
|
–
|
|
Gain on marketable
securities
|
(226)
|
(53)
|
(66)
|
(53)
|
|
Loss on
derecognition of bridge loan (note 5)
|
–
|
–
|
159
|
–
|
|
Amortization of
flow-through share premium (note 4)
|
–
|
(78)
|
(7)
|
(110)
|
|
Unrealized foreign
exchange (gain) loss
|
(4)
|
(7)
|
6
|
(3)
|
|
Share-based
compensation (note 9 (a))
|
217
|
1,890
|
537
|
2,099
|
|
Depreciation of
fixed assets
|
61
|
61
|
123
|
127
|
|
Deferred income tax
recovery (note 5)
|
–
|
–
|
(57)
|
–
|
|
Changes in non-cash
working capital:
|
|
|
|
|
|
Amounts
receivable
|
(185)
|
(44)
|
(201)
|
(33)
|
|
Prepaid expenses
and deposits
|
176
|
155
|
18
|
(2)
|
|
Accounts payable
and accrued liabilities
|
537
|
43
|
23
|
161
|
|
Cash
used in operating activities
|
(1,885)
|
(3,086)
|
(4,381)
|
(4,783)
|
|
|
|
|
|
|
|
Investing
activities:
|
|
|
|
|
|
Interest
received
|
19
|
19
|
51
|
20
|
|
Mineral property
acquisition costs
|
(1)
|
(350)
|
(2)
|
(362)
|
|
Cash
provided by (used in) investing activities
|
18
|
(331)
|
49
|
(342)
|
|
|
|
|
|
|
|
Financing
activities:
|
|
|
|
|
|
Proceeds from
issuance of common shares,
|
|
|
|
|
|
net of cash share
issuance costs
|
(99)
|
(2)
|
14,804
|
5,120
|
|
Transaction costs
on loan amendment
|
–
|
–
|
(5)
|
–
|
|
Proceeds from share
option and warrant exercises (note 8 (b)(ii))
|
66
|
40
|
173
|
485
|
|
Cash
(used in) provided by financing activities
|
(33)
|
38
|
14,972
|
5,605
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of foreign exchange rate changes on cash
|
(6)
|
(3)
|
2
|
(7)
|
|
|
|
|
|
|
|
Decrease
(increase) in cash
|
(1,906)
|
(3,382)
|
10,642
|
473
|
|
|
|
|
|
|
|
Cash,
beginning of the period
|
13,208
|
5,508
|
660
|
1,653
|
|
|
|
|
|
|
|
Cash,
end of the period
|
$11,302
|
$2,126
|
$11,302
|
$2,126
|
Supplemental cash
flow information (note 11)
The
accompanying notes form an integral part of these condensed
consolidated interim financial statements.
Auryn
Resources Inc.
Notes
to the Condensed Consolidated Interim Financial
Statements
Unaudited
(Expressed in thousands of Canadian dollars, except per share
amounts)
Three
and six months ended June 30, 2020 and 2019
1.
Nature
of operations
Auryn
Resources Inc. (the “Company” or “Auryn”)
was incorporated on June 9, 2008, under the British Columbia
Business Corporations Act. The head
office and principal address of Auryn is located at 1199 West
Hastings Street, Suite 600, Vancouver, British Columbia, V6E
3T5.
The
Company is listed on the Toronto Stock Exchange and the
NYSE-American, and its common shares trade under the symbol AUG.TO
and AUG, respectively. The Company’s principal business
activity is the acquisition, exploration and development of
resource properties in Canada and Peru.
The
Company, through its wholly owned subsidiaries, owns the mineral
concessions comprising the Committee Bay and Gibson MacQuoid
mineral properties both located in Nunavut, Canada (note 3 (b)), as
well as the Homestake Ridge Project in northwestern British
Columbia, Canada (note 3 (c)). The Company has also secured rights
to various mining concessions in southern Peru (note 3 (a)) which
include the Sombrero, Curibaya and Huilacollo projects. Although
the Company is an exploration company with no revenue, the Company
does not have a material uncertainty relating to going concern as
it is adequately capitalized with unrestricted cash of $11,302 and,
following the conversion to shares of the Amended Bridge Loan
subsequent to period end, is debt-free and continues to closely
manage discretionary costs.
On
March 15, 2020 the Peruvian government mandated a 15-day lockdown
of the country, which was subsequently extended, in response to the
COVID-19 pandemic. As a result, the Company had recalled all
personnel from the field. On June 17, 2020, the Company resumed
operations after receiving approval from the Peruvian
government.
With respect to the Company’s Canadian
operations, employees have been working remotely since March 18,
2020. Due to travel restrictions into Nunavut and in respect of
local community concerns regarding COVID-19, the Company will not
conduct field operations in Nunavut in 2020. All reporting and
expenditure requirements at Committee Bay and Gibson MacQuoid have
been extended for one year under the Nunavut COVID-19 relief
program. At Homestake, all reporting and expenditure requirements
have been extended until December 31, 2020 under section 66 of the
Mineral Tenure Act.
2.
Basis
of presentation
(a)
Statement of compliance
These
condensed consolidated interim financial statements have been
prepared in accordance with International Accounting Standard
(“IAS”) 34, “Interim Financial Reporting”
using accounting policies consistent with International Financial
Reporting Standards (“IFRS”) as issued by the
International Accounting Standards Board (“IASB”) and
interpretations issued by the IFRS Interpretations Committee
(“IFRIC”). The accounting policies followed in these
condensed consolidated interim financial statements are the same as
those applied in the Company’s most recent audited
consolidated financial statements for the year ended December 31,
2019, except as follows:
●
Amendments
to IAS 1 – Presentation of Financial Statements and IAS 8
– Accounting Policies, Changes in Accounting Estimates and
Errors
The
amendments are intended to clarify the definition of material in
IAS 1 and not intended to alter the underlying concept of
materiality in IFRS standards. The concept of
‘obscuring’ material information with immaterial
information has been included as part of the new definition. The
threshold for materiality influencing users has been changed from
“could influence” to “could reasonably be
expected to influence”.
The
definition of material in IAS 8 has been replaced by a reference to
the definition of material in IAS 1. In addition, the IASB amended
other Standards and the Conceptual Framework that contain a
definition of material or refer to the term “material”
to ensure consistency.
The
Company adopted the amendments to IAS 1 and IAS 8 effective January
1, 2020, which did not have a material impact on the
Company’s interim financial statements.
Auryn
Resources Inc.
Notes
to the Condensed Consolidated Interim Financial
Statements
Unaudited
(Expressed in thousands of Canadian dollars, except per share
amounts)
Three
and six months ended June 30, 2020 and 2019
2.
Basis
of presentation (continued)
●
Amendments
to IFRS 3 - Business Combinations
In
October 2018 the IASB issued narrow-scope amendments to IFRS 3 to
help entities determine whether an acquired set of activities and
assets is a business or not. The amendments, which are effective
for annual reporting periods beginning on or after January 1, 2020,
clarify the minimum requirements to be a business, remove the
assessment of a market participant’s ability to replace
missing elements, narrow the definition of outputs, add guidance to
assess whether an acquired process is substantive and introduce an
optional concentration test to permit a simplified assessment. The
adoption of the amended standard did not have an immediate impact
on the Company’s interim financial statements but will be
applied in assessing any future business combination and asset
acquisition scenarios.
These
condensed consolidated interim financial statements should be read
in conjunction with the Company’s audited consolidated
financial statements for the year ended December 31, 2019, which
were filed under the Company’s profile on SEDAR at
www.sedar.com.
These
condensed consolidated interim financial statements were approved
and authorized for issuance by the Board of Directors of the
Company on August 11, 2020.
(b)
Basis of
preparation and consolidation
These
condensed consolidated interim financial statements have been
prepared on a historical cost basis except for marketable
securities that have been measured at fair value. The presentation
currency is the Canadian dollar; therefore, all amounts, with the
exception of per share amounts, are presented in thousands of
Canadian dollars unless otherwise noted.
These
condensed consolidated interim financial statements incorporate the
financial statements of the Company and entities controlled by the
Company (its subsidiaries). Control exists when the Company has
power over an investee, exposure or rights, to variable returns
from its involvement with the investee and the ability to use its
power over the investee to affect the amount of the Company’s
returns.
|
Subsidiary
|
Place of incorporation
|
Functional Currency
|
Beneficial Interest
|
|
North
Country Gold Corp. (“North Country”)
|
BC,
Canada
|
CAD
|
100%
|
|
Homestake
Resource Corporation (“Homestake”)
|
BC,
Canada
|
CAD
|
100%
|
|
Corisur
Peru, S.A.C. (“Corisur”)
|
Peru
|
USD
|
100%
|
|
Sombrero
Minerales, S.A.C. (“Sombrero Minerales”)
|
Peru
|
USD
|
100%
|
|
Magma
Minerals S.A.C. (“Magma”)
|
Peru
|
USD
|
100%
|
|
Homestake
Royalty Corporation (inactive)
|
BC,
Canada
|
CAD
|
100%
|
All
intercompany balances and transactions have been
eliminated.
(c)
Critical accounting
judgments and estimates
The
preparation of financial statements in conformity with IFRS
requires management to select accounting policies and make
estimates and judgments that may have a significant impact on the
consolidated financial
statements. Estimates are continuously evaluated and are
based on management’s experience and expectations of future
events that are believed to be reasonable under the circumstances.
Actual outcomes may differ from these estimates. The
Company’s critical accounting judgements and estimates were
presented in note 2 of the audited annual consolidated financial
statements for the year ended December 31, 2019 and have been
consistently applied in the preparation of these consolidated
interim financial statements. No new estimates and judgements were
applied for the periods ended June 30, 2020 and 2019 except as
discussed below:
Auryn
Resources Inc.
Notes
to the Condensed Consolidated Interim Financial
Statements
Unaudited
(Expressed in thousands of Canadian dollars, except per share
amounts)
Three
and six months ended June 30, 2020 and 2019
2.
Basis
of presentation (continued)
(c)
Critical accounting
judgments and estimates (continued)
i.
Financial
instruments
Financial
instruments are assessed upon initial recognition to determine
whether they meet the definition of a financial asset, financial
liability or equity instrument depending on the substance of the
contractual arrangement. Judgement is required in making this
determination as the substance of a transaction may differ from its
legal form. Once a determination is made, IFRS requires that
financial instruments be measured at fair value on initial
recognition. For financial instruments that do not have quoted
market prices or observable inputs, judgements are made in
determining what are appropriate inputs and assumptions to use in
calculating the fair value.
IFRS
also requires that an exchange between an existing borrower and
lender of debt instruments with substantially different terms, or a
substantial modification of the terms of an existing financial
liability or a part of it, be treated for as an extinguishment of
the original financial liability and the recognition of a new
financial liability, and as such, judgment is applied in
determining whether a modification is substantial.
Upon
initial recognition of the Bridge Loan (note 5) and then again on
the initial recognition of the Amended Bridge Loan, management had
to estimate the Company’s effective interest rate which was
needed in order to fair value the debt component and determine the
residual amount to be allocated to the equity component. As a
result of the Bridge Loan Amendment, management had to make an
assessment of whether the modification was substantial and thus be
treated for as an extinguishment of the original financial
liability and the recognition of a new financial
liability.
3.
Mineral
property interests
(a)
Peruvian
exploration projects
Sombrero
The
Sombrero copper-gold project, located in southern Peru, covers
approximately 130,000 hectares acquired through a combination of
staking and option agreements which are outlined
below:
i.
Alturas
Option
On June
28, 2016, the Company entered into a letter agreement with Alturas
Minerals Corp (“Alturas”) which outlined the general
terms of the option granted to Auryn to acquire an 80% or 100%
interest in the Sombrero concessions held by Alturas. Under the terms of the subsequent definitive
agreement (the “Alturas Option”), which has an
effective date of April 6, 2018, in order to exercise the
Alturas Option and acquire an 80% interest in the project, the
Company must incur US$2.1 million in work expenditures within a
five-year period. As of June 30, 2020, the Company has incurred
US$1.8 million in work expenditures and made cash payments
totalling US$0.2 million to Alturas. Upon the Company’s
completion of the requirements to earn an 80% interest in the
Sombrero Project, the parties shall form an 80:20 Joint Venture.
For a period of one year after the formation of the Joint Venture,
Alturas’ 20% interest shall be “free carried” and
the Company shall have a right to acquire the Alturas 20% interest
for US$5.0 million.
Auryn
Resources Inc.
Notes
to the Condensed Consolidated Interim Financial
Statements
Unaudited
(Expressed in thousands of Canadian dollars, except per share
amounts)
Three
and six months ended June 30, 2020 and 2019
3.
Mineral
property interests (continued)
(a)
Peruvian
exploration projects (continued)
ii.
Mollecruz
Option
On June
22, 2018 the Company entered into an option agreement (the
“Mollecruz Option”) giving the Company the right to
acquire a 100% interest in the Mollecruz concessions which are
located in the northern area of the Sombrero project. Under the
Mollecruz Option, the Company may acquire a 100% interest, subject
to a 0.5% Net Smelter Royalty (“NSR”), through a
combination of work expenditures and cash payments as detailed
below.
|
Due Dates
|
Payment & Work Expenditure Status
|
Property Payments
(in ‘000 US$)
|
Work Expenditures
(in ‘000 US$)
|
|
Effective
Date (June 22, 2018)
|
Completed
|
50
|
-
|
|
June
22, 2019*
|
Deferred*
|
50
|
150
|
|
June
22, 2020*
|
Deferred*
|
100
|
150
|
|
June
22, 2021*
|
|
200
|
500
|
|
June
22, 2022*
|
|
300
|
700
|
|
June
22, 2023*
|
|
900
|
1,500
|
|
Total
|
|
1,600
|
3,000
|
*
Effective May 20, 2019, the Company formally declared the existence
of a force majeure event under the Mollecruz Option, thereby
deferring the Company’s obligation to make the June 22, 2019
and 2020 property payments and any subsequent property payments and
work expenditures for a maximum of 24 months from the declaration
date. To date, the Company has not been able to reach an access
agreement with the local community in order to commence work in the
region but has continued to have open communications with the
community and continues to negotiate in good faith to obtain access
to the property.
iii)
Aceros
Option
On
December 13, 2018, the Company entered a series of agreements (the
“Aceros Option”) with Corporacion Aceros Arequipa S.A.
(“Aceros”) giving the Company the right to option three
key mineral concessions located within the Company’s Sombrero
project. If the Aceros Option is exercised, a joint venture would
be formed in which the Company would hold an 80% interest (Aceros
– 20%). The joint venture would combine the 530 hectare
Aceros concessions plus 4,600 hectares of Auryn’s Sombrero
land position. Below is a schedule of work expenditures and cash
payments required under the agreement of which US$0.4 million in
work expenditures has been completed to date.
|
Due Dates
|
Payment & Work Expenditure Status
|
Property Payments
(in ‘000 US$)
|
Work Expenditures
(in ‘000 US$)
|
|
Effective
Date (December 13, 2018)
|
Completed
|
140
|
-
|
|
December
13, 2019
|
Completed
|
60
|
150
|
|
December
13, 2020
|
|
250
|
500
|
|
December
13, 2021
|
|
350
|
1,500
|
|
December
13, 2022
|
|
-
|
3,000
|
|
Total
|
|
800
|
5,150
|
Auryn
Resources Inc.
Notes
to the Condensed Consolidated Interim Financial
Statements
Unaudited
(Expressed in thousands of Canadian dollars, except per share
amounts)
Three
and six months ended June 30, 2020 and 2019
3.
Mineral
property interests (continued)
(a)
Peruvian
exploration projects (continued)
Curibaya
On
August 2, 2019, the Company acquired the rights to the Sambalay and
Salvador mineral concessions adjacent to its wholly owned Curibaya
property in southern Peru. Collectively, the Curibaya project now
covers approximately 11,000 hectares and is located 53 km from the
provincial capital, Tacna, and 11 km from the regional Incapuquio
geological fault.
Under
the terms of the mining concession transfer agreement with Wild
Acre Metals (Peru) S.A.C., the Company paid US$250,000 on transfer
of the concessions in favour of Corisur. The Sambalay concessions
are subject to a combined 3% NSR royalty, 0.5% of which is buyable
for US$1.0 million. The Salvador concessions are subject to a 2%
NSR royalty and a US$2.0 million production payment, payable at the
time a production decision is made, and to secure payment of such
consideration a legal mortgage is recorded in the registry files of
the Salvador concessions.
Huilacollo
On June
2, 2016, the Company acquired the rights to the Huilacollo
epithermal property in the Tacna province of southern Peru, which
is comprised of 2,000 hectares of hydrothermal alteration. The
rights were acquired through an option agreement (the
“Huilacollo Option”) with a local Peruvian company,
Inversiones Sol S.A.C., under which the Company may acquire 100%
interest (subject to a 1.5% NSR on precious metals buyable for
US$2.5 million and a 2.5% NSR on base metals buyable for US$7.0
million) through a combination of work expenditures and cash
payments as outlined in the table below. As of May 11, 2019, the
Company had completed US$4.5 million of work expenditures under the
Huilacollo Option and thus did not
satisfy the accumulated work expenditure requirement of US$5.0
million at that date. As permitted by the Huilacollo Option, the
Company instead made a cash payment of US$0.3 million equal to 50%
of the shortfall at the due date to keep the option in good
standing.
|
Due Dates
|
Payment & Work Expenditure Status
|
Property Payments
(in ‘000 US$)
|
Work Expenditures
(in ‘000 US$)
|
|
Effective
Date (May 11, 2016)
|
Completed
|
250
|
-
|
|
May 11,
2018
|
Completed
|
500
|
2,000
|
|
May 11,
2019
|
Completed
|
-
|
3,000
|
|
May 11,
2020
|
Completed
|
250
|
-
|
|
May 11,
2021
|
|
250
|
2,000
|
|
May 11,
2022
|
|
7,500
|
-
|
|
Total
|
|
8,750
|
7,000
|
Effective April 3,
2020, the Company declared force majeure under its Huilacollo
option as a result of the COVID-19 shutdown in Peru which allowed
the Company to defer the option payment that was due May 11, 2020.
Force Majeure was lifted on June 5, 2020, due to the Peruvian
Government easing COVID-19 restrictions. As a result, the option
payment became due in July 2020 and together with the
finder’s fee was paid subsequent to the quarter
end.
During
2017, the Company acquired the rights to certain mineral claims
adjacent to the Huilacollo property known as Andamarca claims and
Tacora claims. Under the terms of the acquisition agreements, the
Company paid US$0.65 million on transfer of the concessions in
favour of Corisur. The Andamarca concession is subject to a 1.5%
NSR of which 50% is buyable for US$2.5 million and the Tacora
concession is subject to a 0.5% NSR of which 50% is buyable for
US$0.5 million.
Auryn
Resources Inc.
Notes
to the Condensed Consolidated Interim Financial
Statements
Unaudited
(Expressed in thousands of Canadian dollars, except per share
amounts)
Three
and six months ended June 30, 2020 and 2019
3.
Mineral
property interests (continued)
(b)
Nunavut exploration
projects
Committee Bay
The
Company, through its wholly owned subsidiary North Country, owns a
100% interest in the Committee Bay project located in Nunavut,
Canada. The Committee Bay project includes approximately 280,000
hectares situated along the Committee Bay Greenstone Belt located
within the Western Churchill Province of Nunavut. The Committee Bay
project is subject to a 1% NSR on gold production, with certain
portions subject to an additional 1.5% NSR. The 1.5% NSR is payable
on only 7,596 hectares and can be purchased by the Company within
two years of commencement of commercial production for $2,000 for
each one-third (0.5%) of the NSR.
Gibson MacQuoid
In
2017, the Company acquired a number of prospecting permits and
mineral claims along the Gibson MacQuoid greenstone belt in
Nunavut, Canada. In 2019, the Company staked additional claims,
which overlapped the Company’s prospecting claims that
expired in February 2020, to maintain a contiguous land package over the Company’s
current areas of interest. The Company’s claims, which
are located between the Meliadine deposit and Meadowbank mine,
cover approximately 120 km of strike length of the prospective
greenstone belt and total 74,000 hectares
collectively.
(c)
Homestake
Ridge
The
Company, through its wholly owned subsidiary Homestake, owns a 100%
interest in the Homestake Ridge project subject to various royalty
interests held by third parties not exceeding 2%. The project
covers approximately 7,500 hectares and is located in the
Iskut-Stewart-Kisault gold belt in northwestern British
Columbia.
(d)
Costs capitalized as mineral property interests:
The
following is a continuity of the Company’s mineral property
acquisition costs:
|
|
Committee Bay & Gibson MacQuoid
|
Homestake Ridge
|
Peru
|
Total
|
|
Balance at December 31, 2018
|
$18,871
|
$16,060
|
$4,141
|
$39,072
|
|
Additions
|
11
|
-
|
949
|
960
|
|
Impairment
of mineral property interests
|
-
|
-
|
(337)
|
(337)
|
|
Change
in estimate of provision for
site
reclamation and closure (note 6)
|
203
|
-
|
-
|
203
|
|
Currency
translation adjustment
|
-
|
-
|
(184)
|
(184)
|
|
Balance at December 31, 2019
|
$19,085
|
$16,060
|
$4,569
|
$39,714
|
|
Additions
|
-
|
-
|
2
|
2
|
|
Change
in estimate of provision for
site
reclamation and closure (note 6)
|
186
|
-
|
-
|
186
|
|
Currency
translation adjustment
|
-
|
-
|
190
|
190
|
|
Balance at June 30, 2020
|
$19,271
|
$16,060
|
$4,761
|
$40,092
|
Auryn
Resources Inc.
Notes
to the Condensed Consolidated Interim Financial
Statements
Unaudited
(Expressed in thousands of Canadian dollars, except per share
amounts)
Three
and six months ended June 30, 2020 and 2019
4.
Flow-through
share premium liability
Flow-through shares
are issued at a premium, calculated as the difference between the
price of a flow-through share and the price of a common share at
that date, as tax deductions generated by the eligible expenditures
are passed through to the shareholders of the flow-through shares
once the eligible expenditures are incurred and
renounced.
The
following table is a continuity of the flow-through share funding
and expenditures along with the corresponding impact on the
flow-through share premium liability:
|
|
Flow-through funding and expenditures
|
|
||
|
|
BC
|
Nunavut
|
Total
|
Flow-through premium liability
|
|
Balance at December 31, 2018
|
$737
|
$433
|
$1,170
|
$317
|
|
Flow-through
funds raised
|
-
|
1,900
|
1,900
|
557
|
|
Flow-through
eligible expenditures
|
(737)
|
(2,309)
|
(3,046)
|
(867)
|
|
Balance at December 31, 2019
|
$-
|
$24
|
$24
|
$7
|
|
Flow-through
eligible expenditures
|
-
|
(24)
|
(24)
|
(7)
|
|
Balance at June 30, 2020
|
$-
|
$-
|
$-
|
$-
|
5.
Bridge
loan
In
2019, the Company entered a bridge loan facility (the “Bridge
Loan”) for $3,000 with a private lender (the
“Lender”). The Bridge Loan originally bore interest at
10%, payable annually or on repayment of the principal, and has a
term of one year from the date of advancement (the “Maturity
Date”). The Bridge Loan is secured by a first charge general
security agreement over all of the Company’s present and
future assets.
In
connection with the Bridge Loan, the Company issued 500,000 bonus
warrants to the Lender which have a term of three years from the
date of issue. Each warrant is exercisable into one common share of
the Company at a price of $2.00 per common share but cannot be
exercised until after the Maturity Date (note 9(b)).
Concurrent with the
closing of the first tranche of the 2020 Offering (see note 8(b)),
on February 5, 2020, the Company entered a loan amendment
(“Bridge Loan Amendment”) which provided mutual
conversion rights to the Lender and the Company, and also reduced
the annual interest rate from 10% to 5% from the date of amendment.
Under the terms of the Bridge Loan Amendment, the Lender has the
right to convert the $3,000 of principal that has been advanced
to-date, and $123 of interest that has accrued to-date (the
“Amended Bridge Loan”), into common shares at the price
of $1.60, while the Company has the right to require conversion if
the Company’s common shares trade on the TSX at a price of
$2.50 or more for any five consecutive trading days prior to the
loan’s maturity date.
In
accordance with IFRS 9, the Company derecognizes a financial
liability when, and only when, its obligations are discharged,
cancelled or have expired, and at that time recognizes a gain or
loss through the consolidated statement of loss calculated as the
difference between the carrying amount of the financial liability
derecognized and the consideration paid.
The
exchange with the existing lender of one debt instrument for
another debt instrument with substantially different terms is
accounted for as an extinguishment of the original financial
liability and the recognition of a new financial liability.
Similarly, if a substantial modification is made to the terms of an
existing liability or part of it, such modification is also treated
as an extinguishment of the original financial liability and the
recognition of a new liability.
The
Company assessed the Bridge Loan Amendment and determined that it
resulted in a substantial modification, being that there was now a
conversion feature for the full amount of the Amended Bridge Loan.
As a result, it was necessary to derecognize the Bridge Loan and
record the Amended Bridge Loan.
Consistent with the
original accounting for the Bridge Loan, the Amended Bridge Loan
has been identified as a compound instrument with separate
components, being the debt and the conversion feature, which have
been classified as a financial liability and an equity instrument,
respectively.
Auryn
Resources Inc.
Notes
to the Condensed Consolidated Interim Financial
Statements
Unaudited
(Expressed in thousands of Canadian dollars, except per share
amounts)
Three
and six months ended June 30, 2020 and 2019
5.
Bridge
loan (continued)
Again
the Company used the residual method to determine the allocation of
the Amended Bridge Loan between the liability and equity component,
by first determining the fair value of the debt, discounted at an
effective interest rate of 18%, and allocating the residual value,
net of deferred taxes, to the equity component.
The
following table reflects the carrying values of the liability and
equity components of the Amended Bridge Loan on initial
recognition:
|
|
Liability Component
|
Equity Component
|
Total
|
|
|
|
|
|
|
Amended
Bridge Loan
|
$2,912
|
$211
|
$3,123
|
|
Deferred
tax impact
|
-
|
(57)
|
(57)
|
|
Impact
on statement of financial position
|
$2,912
|
$154
|
$3,066
|
In
relation to the derecognition of the Bridge Loan and the recording
of the Amended Bridge Loan, a loss was recorded through the
consolidated statement of loss calculated as follows:
|
Carrying
value of Bridge Loan to be derecognized
|
$2,981
|
|
Amended
Bridge Loan assumed, including transaction costs
incurred
|
$3,140
|
|
Loss
on derecognition of Bridge Loan
|
$159
|
The
following is a continuity of the liability component of the Amended
Bridge Loan subsequently measured at amortized cost:
|
Fair
value of Amended Bridge Loan on initial recognition
|
$2,912
|
|
Finance
expense
|
199
|
|
Closing balance at June 30, 2020
|
$3,111
|
On July
7, 2020, the Amended Bridge Loan was converted to 1,952,084 common
shares at a price of $1.60 per share. 1,875,000 of the shares were
issued for the $3,000 principal loan and 77,084 shares for $123 of
interest that accrued at a rate of 10% per annum up to the date of
the loan amendment. The balance of the interest on the loan, that
accrued at a rate of 5% per annum, was then settled in cash to the
Lender (note 15).
Auryn
Resources Inc.
Notes
to the Condensed Consolidated Interim Financial
Statements
Unaudited
(Expressed in thousands of Canadian dollars, except per share
amounts)
Three
and six months ended June 30, 2020 and 2019
6.
Provision
for site reclamation and closure
The
Company recognizes a provision for site reclamation and closure,
which reflects the present value of the estimated amount of cash
flows required to satisfy the asset retirement obligation in
respect of the Committee Bay property. The components of this
obligation are the removal of equipment currently being used at the
site as well as costs associated with the reclamation of the camp
housing and work sites on the property. The estimate of future
asset retirement obligations is subject to change based on
amendments to applicable laws, management’s intentions, and
mining lease renewals.
The key
assumptions on which the present value of the future estimated cash
flows is based are:
●
Undiscounted cash
flow for site reclamation of $2,632 (December 31, 2019 -
$2,658)
●
Expected timing of
future cash flows is based on mining leases expiration, which is
between 2026 and 2035
●
Annual inflation
rate 2% (December 31, 2019 - 2%)
●
Risk-free interest
rate 0.99% (December 31, 2019 - 1.76%)
The
present value of the liability for the site reclamation and closure
provision at Committee Bay project is as follows:
|
|
June 30, 2020
|
December 31, 2019
|
|
|
|
|
|
Opening
balance
|
$2,134
|
$1,891
|
|
Accretion
|
17
|
40
|
|
Change
in estimate
|
186
|
203
|
|
Closing balance
|
$2,337
|
$2,134
|
7.
Exploration
and evaluation costs
For the
three months ended June 30, 2020, the Company’s exploration
and evaluation costs are broken down as follows:
|
|
Committee Bay & Gibson MacQuoid
|
Homestake Ridge
|
Peru
|
Total
|
|
Assaying
|
$10
|
$14
|
$6
|
$30
|
|
Exploration
Drilling
|
14
|
-
|
-
|
14
|
|
Camp
cost, equipment and field supplies
|
61
|
8
|
34
|
103
|
|
Geological
consulting services
|
2
|
69
|
26
|
97
|
|
Permitting,
environmental and community costs
|
20
|
-
|
218
|
238
|
|
Salaries
and wages
|
106
|
40
|
180
|
326
|
|
Aircraft
and travel
|
-
|
-
|
14
|
14
|
|
Share
based compensation
|
17
|
5
|
49
|
71
|
|
Total for the three months ended June 30, 2020
|
$230
|
$136
|
$527
|
$893
|
Auryn
Resources Inc.
Notes
to the Condensed Consolidated Interim Financial
Statements
Unaudited
(Expressed in thousands of Canadian dollars, except per share
amounts)
Three
and six months ended June 30, 2020 and 2019
7.
Exploration
and evaluation costs (continued)
For the
three months ended June 30, 2019, the Company’s exploration
and evaluation costs are broken down as follows:
|
|
Committee Bay & Gibson MacQuoid
|
Homestake Ridge
|
Peru
|
Total
|
|
Assaying
|
$13
|
$3
|
$35
|
$51
|
|
Exploration
Drilling
|
121
|
-
|
-
|
121
|
|
Camp
cost, equipment and field supplies
|
64
|
5
|
92
|
161
|
|
Geological
consulting services
|
31
|
12
|
214
|
257
|
|
Permitting,
environmental and community costs
|
3
|
2
|
722
|
727
|
|
Expediting
and mobilization
|
12
|
2
|
14
|
28
|
|
Salaries
and wages
|
114
|
36
|
165
|
315
|
|
Fuel
and consumables
|
7
|
-
|
10
|
17
|
|
Aircraft
and travel
|
59
|
4
|
63
|
126
|
|
Share
based compensation
|
106
|
57
|
459
|
622
|
|
Total for the three months ended June 30, 2019
|
$530
|
$121
|
$1,774
|
$2,425
|
For the
six months ended June 30, 2020, the Company’s exploration and
evaluation costs are broken down as follows:
|
|
Committee Bay & Gibson MacQuoid
|
Homestake Ridge
|
Peru
|
Total
|
|
Assaying
|
$20
|
$16
|
$10
|
$46
|
|
Exploration
Drilling
|
26
|
-
|
-
|
26
|
|
Camp
cost, equipment and field supplies
|
123
|
16
|
92
|
231
|
|
Geological
consulting services
|
2
|
173
|
93
|
268
|
|
Permitting,
environmental and community costs
|
25
|
7
|
309
|
341
|
|
Expediting
and mobilization
|
5
|
-
|
5
|
10
|
|
Salaries
and wages
|
195
|
81
|
376
|
652
|
|
Fuel
and consumables
|
-
|
-
|
2
|
2
|
|
Aircraft
and travel
|
-
|
2
|
49
|
51
|
|
Share
based compensation
|
38
|
16
|
144
|
198
|
|
Total for the six months ended June 30, 2020
|
$434
|
$311
|
$1,080
|
$1,825
|
Auryn
Resources Inc.
Notes
to the Condensed Consolidated Interim Financial
Statements
Unaudited
(Expressed in thousands of Canadian dollars, except per share
amounts)
Three
and six months ended June 30, 2020 and 2019
7.
Exploration
and evaluation costs (continued)
For the
six months ended June 30, 2019 the Company’s exploration and
evaluation costs are broken down as follows:
|
|
Committee Bay & Gibson MacQuoid
|
Homestake Ridge
|
Peru
|
Total
|
|
Assaying
|
$20
|
$11
|
$49
|
$80
|
|
Exploration
drilling
|
121
|
-
|
-
|
121
|
|
Camp
cost, equipment and field supplies
|
132
|
10
|
164
|
306
|
|
Geological
consulting services
|
31
|
12
|
420
|
463
|
|
Permitting,
environmental and community costs
|
9
|
4
|
873
|
886
|
|
Expediting
and mobilization
|
12
|
2
|
19
|
33
|
|
Salaries
and wages
|
189
|
62
|
232
|
483
|
|
Fuel
and consumables
|
7
|
-
|
15
|
22
|
|
Aircraft
and travel
|
63
|
4
|
73
|
140
|
|
Share
based compensation
|
121
|
63
|
482
|
666
|
|
Total for the six months ended June 30, 2019
|
$705
|
$168
|
$2,327
|
$3,200
|
8.
Share
capital
(a)
Authorized
Unlimited common
shares without par value.
Unlimited preferred
shares - nil issued and outstanding.
(b)
Share
issuances
i.
On February 6,
2020, the Company closed a non-brokered private placement for gross
proceeds of $15,000 (“February
2020 Offering”) which was closed in two tranches and
consisted of 9,375,000 common shares (the “2020
Shares”) priced at CAD$1.60 per 2020
Share.
Share
issue costs related to the 2020 Offering totaled $239, which
included $59 in commissions, and $180 in other issuance costs. A
reconciliation of the impact of the 2020 Offering on share capital
is as follows:
|
|
Number
of common shares
|
Impact
on
share
capital
|
|
Common
shares issued at $1.60 per share
|
9,375,000
|
$15,000
|
|
Cash
share issue costs
|
-
|
(239)
|
|
Proceeds net of
share issue costs
|
9,375,000
|
$14,761
|
ii.
During the six
months ended June 30, 2020, 125,000 shares were issued as a result
of share options being exercised with a weighted average exercise
price of approximately $1.37 for gross proceeds of $173 and $94
attributed to these share options was transferred from the equity
reserves and recorded against share capital.
Auryn
Resources Inc.
Notes
to the Condensed Consolidated Interim Financial
Statements
Unaudited
(Expressed in thousands of Canadian dollars, except per share
amounts)
Three
and six months ended June 30, 2020 and 2019
9.
Share
option and warrant reserves
(a)
Share-based
payments
The
Company maintains a Rolling Share Option Plan providing for the
issuance of share options up to 10% of the Company’s issued
and outstanding common shares at the time of the grant. The Company
may grant share options from time to time to its directors,
officers, employees and other service providers. The share options
vest as to 25% on the date of the grant and 12½% every three
months thereafter for a total vesting period of 18
months.
The
continuity of the number of share options issued and outstanding is
as follows:
|
|
Number
of share options
|
Weighted
average exercise price
|
|
Outstanding,
December 31, 2018
|
6,205,000
|
$1.85
|
|
Granted
|
3,295,000
|
1.91
|
|
Exercised
|
(926,250)
|
0.62
|
|
Expired
|
(230,000)
|
2.33
|
|
Forfeited
|
(51,250)
|
1.89
|
|
Outstanding,
December 31, 2019
|
8,292,500
|
$2.00
|
|
Granted
|
75,000
|
1.83
|
|
Exercised
|
(125,000)
|
1.37
|
|
Expired
|
(30,000)
|
1.96
|
|
Outstanding, June
30, 2020
|
8,212,500
|
$2.01
|
As at
June 30, 2020, the number of share options outstanding and
exercisable was:
|
|
Outstanding
|
Exercisable
|
||||
|
Expiry
date
|
Number of
options
|
Exercise
price
|
Remaining contractual
life (years)
|
Number of
options
|
Exercise
price
|
Remaining contractual
life (years)
|
|
Aug 17,
2020
|
865,000
|
$1.30
|
0.13
|
865,000
|
$1.30
|
0.13
|
|
June 20,
2021
|
2,085,000
|
2.63
|
0.97
|
2,085,000
|
2.63
|
0.97
|
|
Jan 10,
2022
|
440,000
|
3.22
|
1.53
|
440,000
|
3.22
|
1.53
|
|
June 20,
2023
|
651,875
|
1.42
|
2.97
|
651,875
|
1.42
|
2.97
|
|
June 26,
2023
|
900,000
|
1.42
|
2.99
|
900,000
|
1.42
|
2.99
|
|
Feb 7,
2024
|
200,625
|
1.36
|
3.61
|
174,375
|
1.36
|
3.61
|
|
Apr 9,
2024
|
2,755,000
|
1.96
|
3.78
|
2,066,250
|
1.96
|
3.78
|
|
Aug 21,
2024
|
70,000
|
1.82
|
4.15
|
43,750
|
1.82
|
4.15
|
|
Nov 20,
2024
|
170,000
|
1.82
|
4.39
|
85,000
|
1.82
|
4.39
|
|
June 1,
2025
|
75,000
|
1.83
|
4.92
|
18,750
|
1.83
|
4.92
|
|
|
8,212,500
|
$2.01
|
2.43
|
7,330,000
|
$2.02
|
2.25
|
Auryn
Resources Inc.
Notes
to the Condensed Consolidated Interim Financial
Statements
Unaudited
(Expressed in thousands of Canadian dollars, except per share
amounts)
Three
and six months ended June 30, 2020 and 2019
9.
Share
option and warrant reserves (continued)
(a)
Share-based
payments (continued)
The
Company uses the fair value method of accounting for all
share-based payments to directors, officers, employees and other
service providers. During the three and six months ended June 30,
2020 and 2019 the Company recognized share-based compensation
expense as follows:
|
|
Three months ended
|
Six months ended
|
||
|
|
June
30, 2020
|
June
30, 2019
|
June
30, 2020
|
June
30, 2019
|
|
|
|
|
|
|
|
Recognized
in net loss:
|
|
|
|
|
|
Included
in exploration and evaluation costs
|
$71
|
$622
|
$198
|
$666
|
|
Included
in fees, salaries and other employee benefits
|
137
|
1,239
|
324
|
1,396
|
|
Included
in project investigation costs
|
9
|
29
|
15
|
37
|
|
|
$217
|
$1,890
|
$537
|
$2,099
|
During
the three and six months ended June 30, 2020, the Company granted
75,000 and 75,000 share options, respectively, to directors,
officers, employees and other service providers. The weighted
average fair value per option of these share options was calculated
as $0.90 using the Black-Scholes option valuation model at the
grant date.
During
the three and six months ended June 30, 2019, the Company granted
2,785,000 and 2,995,000 share options, respectively, to directors,
officers, employees and other service providers. The weighted
average fair value per option of these share options was calculated
as $1.17 using the Black-Scholes option valuation model at the
grant date.
The
fair value of the share-based options granted during the three and
six months ended June 30, 2020 and 2019 were estimated using the
Black-Scholes option valuation model with the following weighted
average assumptions:
|
|
Three
months ended June 30,
|
Six
months ended June 30,
|
||
|
|
2020
|
2019
|
2020
|
2019
|
|
Risk-free interest
rate
|
0.39%
|
1.59%
|
0.39%
|
1.61%
|
|
Expected dividend
yield
|
Nil
|
Nil
|
Nil
|
Nil
|
|
Share price
volatility
|
58%
|
62%
|
58%
|
63%
|
|
Expected forfeiture
rate
|
0%
|
0%
|
0%
|
0%
|
|
Expected life in
years
|
4.90
|
4.33
|
4.90
|
4.34
|
The
risk-free interest rate assumption is based on the Government of
Canada benchmark bond yields and treasury bills with a remaining
term that approximates the expected life of the share-based
options. The expected volatility assumption is based on the
historical and implied volatility of the Company’s common
shares. The expected forfeiture rate and the expected life in years
are based on historical trends.
(b)
Share purchase
warrants
On
September 12, 2019, the Company issued 500,000 bonus warrants in
connection with the Bridge Loan (note 5). The warrants have a term
of three years from the date of issue and each warrant is
exercisable into one common share of the Company at a price of
$2.00 per common share but cannot be exercised until after the
Maturity Date. As the Bridge Loan was identified as a compound
instrument with debt and equity components, the fair value of the
share purchase warrants was determined as the residual value net of
deferred taxes after the fair value of the debt component was
determined.
Auryn
Resources Inc.
Notes
to the Condensed Consolidated Interim Financial
Statements
Unaudited
(Expressed in thousands of Canadian dollars, except per share
amounts)
Three
and six months ended June 30, 2020 and 2019
10.
Related
party balances and transactions
All
transactions with related parties have occurred in the normal
course of operations. All amounts are unsecured, non-interest
bearing and have no specific terms of settlement, unless otherwise
noted.
(a)
Related
parties
|
|
Three months ended
|
Six months ended
|
||
|
|
June 30, 2020
|
June 30, 2019
|
June 30, 2020
|
June 30, 2019
|
|
Universal Mineral Services Ltd. 1
|
|
|
|
|
|
Exploration
and evaluation costs:
|
|
|
|
|
|
Committee
Bay and Gibson MacQuoid
|
$57
|
$86
|
$117
|
$167
|
|
Homestake
|
27
|
30
|
64
|
53
|
|
Peru
|
41
|
103
|
92
|
129
|
|
Fees,
salaries and other employee benefits
|
78
|
99
|
133
|
191
|
|
Legal
and professional fees
|
4
|
-
|
11
|
-
|
|
Marketing
and investor relations
|
24
|
22
|
61
|
40
|
|
Office
and administration
|
100
|
105
|
187
|
199
|
|
Project
investigation costs
|
31
|
11
|
35
|
15
|
|
Total
transactions for the period
|
$362
|
$456
|
$700
|
$794
|
1.
Universal Mineral
Services Ltd., (“UMS”) is a private company with
certain directors and officers in common with Auryn. Pursuant to an
agreement dated March 30, 2012, and as amended on December 30,
2015, UMS provides geological, financial and transactional advisory
services as well as administrative services to the Company on an
ongoing, cost recovery basis. The agreement has an indefinite term
and can be terminated by either party upon providing due
notice.
The
outstanding balance owing at June
30, 2020, was $136 (December 31, 2019 – $235) and is
included in accounts payable. In addition, the Company had $150 on
deposit with UMS as at June 30,
2020 (December 31, 2019 - $150).
(b)
Compensation of key management personnel
During
the period, compensation to key management personnel, being the
Company’s eight executives (six in 2019) and five
non-executive directors, was as follows:
|
Three months ended June 30,
|
Six months ended June 30,
|
|||
|
|
2020
|
2019
|
2020
|
2019
|
|
Short-term
benefits provided to executives
|
$957
|
$602
|
$1,323
|
$918
|
|
Directors
fees paid to non-executive directors
|
36
|
38
|
73
|
75
|
|
Share-based
payments
|
161
|
1,328
|
380
|
1,467
|
|
|
$1,154
|
$1,968
|
$1,776
|
$2,460
|
Auryn
Resources Inc.
Notes
to the Condensed Consolidated Interim Financial
Statements
Unaudited
(Expressed in thousands of Canadian dollars, except per share
amounts)
Three
and six months ended June 30, 2020 and 2019
11. Supplemental
cash flow information
|
Three months ended June 30,
|
Six months ended June 30,
|
|||
|
|
2020
|
2019
|
2020
|
2019
|
|
Increase
(decrease) in cash related to:
|
|
|
|
|
|
Mineral
property acquisition costs included in
accounts
payable
|
$-
|
$11
|
$-
|
$11
|
|
Deferred
acquisition costs included in accounts
payable
|
129
|
-
|
129
|
-
|
12. Segmented
information
The
Company operates in one reportable operating segment, being the
acquisition, exploration and development of mineral resource
properties.
Geographic
segmentation of non-current assets is as follows:
|
June 30, 2020
|
Canada
|
Peru
|
Total
|
|
|
|
|
|
|
Restricted
cash and cash equivalents
|
$115
|
$-
|
$115
|
|
Prepaid
expenses and deposits, non-current
|
-
|
135
|
135
|
|
Equipment,
net
|
1,106
|
43
|
1,149
|
|
Mineral
property interests
|
35,331
|
4,761
|
40,092
|
|
|
$36,552
|
$4,939
|
$41,491
|
|
December 31, 2019
|
Canada
|
Peru
|
Total
|
|
|
|
|
|
|
Restricted cash and
cash equivalents
|
$115
|
$-
|
$115
|
|
Prepaid expenses
and deposits, non-current
|
-
|
149
|
149
|
|
Equipment,
net
|
1,202
|
70
|
1,272
|
|
Mineral property
interests
|
35,145
|
4,569
|
39,714
|
|
|
$36,462
|
$4,788
|
$41,250
|
13. Loss
per share
|
|
Three months ended June 30,
|
Six months ended June 30,
|
||
|
2020
|
2019
|
2020
|
2019
|
|
|
Net
loss
|
$2,575
|
$5,045
|
$5,131
|
$6,971
|
|
Weighted
average number of shares
outstanding
|
104,688,368
|
94,509,705
|
102,418,794
|
92,755,354
|
|
Basic
and diluted loss per share
|
$0.02
|
$0.05
|
$0.05
|
$0.08
|
All of
the outstanding share options and share purchase warrants at June
30, 2020 and 2019 were anti-dilutive for the periods then ended as
the Company was in a loss position.
Auryn
Resources Inc.
Notes
to the Condensed Consolidated Interim Financial
Statements
Unaudited
(Expressed in thousands of Canadian dollars, except per share
amounts)
Three
and six months ended June 30, 2020 and 2019
14.
Financial
instruments
The
Company’s financial instruments consist of cash, marketable
securities, amounts receivable, deposits, accounts payable and
accrued liabilities, and the Amended Bridge Loan. The fair values
of these financial instruments approximate their carrying values,
unless otherwise noted.
The
following summarizes fair value hierarchy under which the
Company’s financial instruments are valued:
Level 1
– fair values based on unadjusted quoted prices in active
markets for identical assets or liabilities;
Level 2
– fair values based on inputs that are observable for the
asset or liability, either directly or indirectly; and
Level 3
– fair values based on inputs for the asset or liability that
are not based on observable market data.
As at
June 30, 2020 and 2019 the only financial instruments measured at
fair value were the Company’s marketable securities, which
were classified under level 1 of the fair value hierarchy. The
Bridge Loan and then the Amended Bridge Loan, on initial
recognition, were measured at fair value under level 2 of the fair
value hierarchy and subsequently measured at amortized cost. No
transfer occurred between the levels during the
period.
The
Company’s financial instruments are exposed to credit risk,
liquidity risk, and market risks, which include currency risk and
interest rate risk. As at June 30, 2020 the primary risks were as
follows:
Market
risk
This
is the risk that the fair value or future cash flows of a financial
instrument will fluctuate because of changes in market prices.
Significant market risks to which the Company is exposed are as
follows:
(i)
Foreign currency
risk
The
Company is exposed to currency risk by having balances and
transactions in currencies that are different from its functional
currency (the Canadian dollar). As at June 30, 2020 and December
31, 2019, the Company’s foreign currency exposure related to
its financial assets and liabilities held in US dollars as
follows:
|
|
June 30, 2020
|
December 31, 2019
|
|
|
|
|
|
Financial
assets denominated in foreign currencies
|
$22
|
$55
|
|
Financial
liabilities denominated in foreign currencies
|
(26)
|
(80)
|
|
Net
exposure
|
$(4)
|
$(25)
|
A 10%
increase or decrease in the US dollar exchange rate would not have
a material impact on the Company’s net loss.
(ii)
Other price risk
Other
price risk is the risk arising from the effect of changes in market
conditions on the Company’s marketable securities. The
Company is exposed to other price risk through its investment in
Bravada Gold Corporation (“BVA”), which is listed on
the TSX Venture Exchange.
A 10%
increase or decrease in the BVA share price would not have a
material impact on the Company’s net loss.
Auryn
Resources Inc.
Notes
to the Condensed Consolidated Interim Financial
Statements
Unaudited
(Expressed in thousands of Canadian dollars, except per share
amounts)
Three
and six months ended June 30, 2020 and 2019
15.
Subsequent
events
a)
On July 7, 2020,
the Company announced the conversion of the Amended Bridge Loan by
the Lender into common shares. The Company issued a total of
1,952,084 common shares to the Lender at a price of CAD $1.60 per
share in accordance with the loan amendment that was completed on
February 6, 2020. From the total, 1,875,000 shares were issued for
the $3,000 of principal advanced and 77,084 shares for $123 of
interest that accrued at a rate of 10% per annum up to the date of
the loan amendment (note 5). The balance of the interest on the
loan, that accrued at a rate of 5% per annum, was then settled in
cash to the Lender.
b)
On July 9, 2020,
the Company made the option payment for Huilacollo following the
lifting of the Force Majeure on June 5, 2020. The Force Majeure was
declared on April 3, 2020 as a result of the COVID-19 shutdown in
Peru, deferring the option payment that was otherwise due May 11,
2020 (note 3).
c)
On July 29, 2020,
the Company, together with Eastmain Resources Inc. (TSX: ER)
(“Eastmain”) entered into a definitive agreement
pursuant to which the Company will acquire all of the issued and
outstanding shares of Eastmain, immediately following a spin out of
the Company's Peruvian projects to its shareholders and completion
of a concurrent financing (collectively, the
“Transaction”). The Transaction will create Fury Gold
Mines Limited (“Fury Gold”) (the continuance of the
formerly named public company Auryn Resources Inc.) and two
independent spin-out entities which will hold the Company's
Peruvian projects.
Concurrent with the
spin-out of the Peruvian projects, Fury Gold will consolidate its
shares by approximately 10:7 such that approximately 110 million
Fury Gold shares will be outstanding after the Eastmain acquisition
(pre-financing), of which 69% will be owned by current Company
shareholders and 31% will be owned by current Eastmain
shareholders. Fury Gold is expected to remain listed on the TSX and
NYSE American exchanges, and will be led by new President &
CEO, Mike Timmins.
As
promptly as reasonably practicable, and no later than September 4,
2020, the Company will prepare an information Circular (the
“Circular”) together with any other documents required
by applicable laws, and arrange for filing and distribution of
these in accordance with those laws. The Circular shall be placed
before the shareholders at the shareholder meeting expected to be
held in early October. Subject to shareholder approval, the
transaction is expected to close later in the year.
(An exploration stage company)
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF AURYN RESOURCES INC.
FOR THE SIX MONTHS ENDED JUNE 30, 2020
Dated:
August 11, 2020
AURYN RESOURCES INC.
Management’s
Discussion and Analysis of Financial Condition and
Results
of Operations for the six months ended June 30, 2020
(In
thousands of Canadian dollars, unless otherwise noted)
HIGHLIGHTS FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND THE PERIOD UP
TO AUGUST 11, 2020
Corporate highlights
●
On July 29, 2020,
Auryn Resources Inc. (the “Company” or
“Auryn”) together with and Eastmain Resources Inc.
(TSX: ER) (“Eastmain”) announced that they had entered
into a definitive agreement (the “Agreement”) pursuant
to which Auryn will acquire all of the issued and outstanding
shares of Eastmain, immediately following a spin out of Auryn's
Peruvian projects to Auryn shareholders and completion of a
concurrent financing (collectively, the “Transaction”).
The Transaction will create Fury Gold Mines Limited (“Fury
Gold”) and two independent spin-out entities
(“SpinCos”) which will hold Auryn's Peruvian
projects.
Concurrent with the
spin-out of the Peruvian projects, Fury Gold will consolidate its
shares by approximately 10:7 such that approximately 110 million
Fury Gold shares will be outstanding after the Eastmain acquisition
(pre-financing), of which 69% will be owned by current Auryn
shareholders and 31% will be owned by current Eastmain
shareholders. Fury Gold is expected to remain listed on the TSX and
NYSE American exchanges, and will be led by new President &
CEO, Mike Timmins.
After
adjustment for the assumed value of the SpinCo shares based on an
independent valuation report received by Auryn, the C$121M offer
represents approximately C$0.42 per Eastmain share, representing a
premium of 137% to the closing market price of the Eastmain shares
on July 29, 2020, and a premium of 123% based on the 20 day volume
weighted average price of the Eastmain shares.
As
promptly as reasonably practicable, and no later than September 4,
2020, the Company will prepare an information Circular (the
“Circular”) together with any other documents required
by applicable laws, and arrange for filing and distribution of
these in accordance with those laws. The Circular shall contain
sufficient detail to permit Auryn shareholders to form a reasoned
judgement concerning the matters to be placed before them at the
shareholder meeting expected to be held in late September or early
October. Subject to shareholder approval, the transaction is
expected to close later in the year.
●
On July 7, 2020,
the Company announced the conversion of the 2019 bridge loan
(“Bridge Loan”) by the loan holder (the
“Lender”) into common shares, thereby leaving Auryn
debt-free. The Company issued a total of 1,952,084 common shares to
the Lender at a price of CAD $1.60 per Share in accordance with the
loan amendment that was completed on February 6, 2020. 1,875,000
shares were issued for the $3 million principal loan and 77,084
shares were issued for $123 of interest that accrued at a rate of
10% per annum up to the date of the loan amendment. The balance of
the interest on the loan, that accrued at a rate of 5% per annum
from February 6, 2020 to the date of conversion has been paid to
the Lender in cash.
●
On June 26, 2020,
the Company announced the appointment of Elizabeth Senez as Interim
Chief Financial Officer, effective July 1, 2020, for a period of 14
months while Stacy Rowa takes maternity leave.
●
On June 17, 2020,
the Company announced that it was resuming exploration activities
at its Sombrero and Curibaya projects in southern Peru. The Company
has received approval from the Peruvian government to resume work
following restrictions that had been put in place due to
COVID-19.
●
On March 18, 2020,
the Company provided a corporate update and discussed its response
to concerns surrounding the COVID-19 pandemic, and the potential
impact on the Company’s business. The Company advised that
all of its office employees had been given the option to work from
home, while personnel in Peru had been recalled from the field due
to a 15 day government imposed lockdown in the country, which was
subsequently extended. The Company also announced its plans to
release an initial PEA on the Homestake Ridge project (see below)
and revised targets for its Committee Bay project in the coming
weeks.
●
On February 27,
2020, Auryn completed a non-brokered private placement, which
closed in two tranches, for gross proceeds of $15,000, by issuing
9,375,000 common shares priced at $1.60 per share (the “2020
Offering”). A total of $59 was paid in commissions. Proceeds
from the 2020 Offering will be used to fund continued surface
exploration at its Sombrero and Curibaya projects located in
southern Peru and for general working capital (see press release
dated February 27, 2020).
●
On February 6,
2020, concurrent with the closing of the first tranche of the 2020
Offering, the Company completed an amendment to the September 2019
bridge loan (the “Bridge Loan Amendment”) to provide
certain conversion rights to both the lender and the Company, as
well as reducing the interest rate to 5% from the date of the
Bridge Loan Amendment (see press release dated February 6,
2020).
AURYN RESOURCES INC.
Management’s
Discussion and Analysis of Financial Condition and
Results
of Operations for the six months ended June 30, 2020
(In
thousands of Canadian dollars, unless otherwise noted)
Operational highlights
●
On May 20, 2020,
the Company announced a significant advancement in targeting
high-grade gold mineralization at the 100% owned Committee Bay gold
project in Nunavut. Auryn’s technical team analyzed recent
and historical drill results from across the 300-kilometer
greenstone belt and differentiated the geophysical conductivity
responses between high-grade and low-grade mineralization. This led
to revisiting a number of high potential targets across the belt
that are characterized by strong gold-in-till anomalies and
high-grade gold in outcrop or boulder trains, where historical
drilling has not yet explained the extensive high-grade
occurrences. In addition, undrilled targets were identified that
have both high-grade boulder and outcrop rock samples as well as
conductivity responses that are consistent with observed high-grade
mineralization in other areas of the belt.
●
On April 15, 2020,
the Company announced a positive preliminary economic assessment
(“PEA”) for its Homestake Ridge gold project located in
northwestern British Columbia. Under the base case scenario, which
used a gold price of US$1,350 per ounce and a discount rate of 5%,
the project is expected to generate an NPV of US$108 million and an
IRR of 23.6%. The Company has filed the NI43-101 PEA report (see
press release dated April 15, 2020).
●
On February 28,
2020, November 14 and October 28, 2019 the Company announced
results from its initial surface programs at the Curibaya project
in southern Peru. The work included a rock sampling program
completed in Q4 2019 followed up by a geological mapping and
sampling program completed in early 2020. Through geological
mapping, a series of rhyolite to dacite flow dome complexes have
been identified. Auryn’s technical team believes these domes
are the source for the widespread, high-grade precious metal veins
sampled to-date across a 4 x 4 kilometer alteration system.
Highlights from the 2019 sampling include up to 7,990 g/t silver,
17.65 g/t gold and 6.97% copper.
●
On February 10,
2020 Auryn received its environmental permit, the Declaración
de Impacto Ambiental (“DIA”), from the Peruvian
Ministry of Energy and Mines for its Sombrero copper-gold project
in Southern Peru. The DIA covers an area of 1,031 hectares and
allows the Company to drill up to 33 holes from 23 platforms on the
Ccascabamba Sombrero Main target area, where Auryn has completed
the majority of its work to-date within the 130,000 hectare land
package.
●
On January 17, 2020
the Company confirmed the age of the intrusives directly associated
with mineralization at the Sombero copper – gold skarn
project in Southern Peru. Based on results from five uranium
– lead dates taken from zircon crystals obtained from diorite
sills at the Ccascabamba and Nioc targets, ages range from 38.85 to
40.47 million years. This places the mineralization within the same
Eocene-aged metallogenic event that produced several world-class
deposits in the Andahuaylas-Yauri belt.
<
Refer to the page 5 and 26 for cautionary wording concerning
forward-looking information>
This
Management Discussion and Analysis (“MD&A”) of
Auryn has been prepared by management to assist the reader to
assess material changes in the condensed consolidated interim
financial condition and results of operations of the Company as at
June 30, 2020 and for the six months then ended. This MD&A
should be read in conjunction with the condensed consolidated
interim financial statements of the Company and related notes
thereto as at and for the six months ended June 30, 2020 and 2019.
The condensed consolidated interim financial statements have been
prepared in accordance with International Accounting Standard
(“IAS”) 34, “Interim Financial Reporting”
using accounting policies consistent with International Financial
Reporting Standards (“IFRS” or “GAAP”) as
issued by the International Accounting Standards Board
(“IASB”) and Interpretations issued by the
International Financial Reporting Interpretations Committee
(“IFRIC”). The accounting policies followed in these
condensed consolidated interim financial statements are the same as
those applied in the Company’s most recent audited annual
consolidated financial statements for the year ended December 31,
2019, except as outlined in note 2 of the June 30, 2020, condensed
consolidated interim financial statements. All financial
information has been prepared in accordance with IFRS and all
dollar amounts presented are Canadian dollars unless otherwise
stated.
The
effective date of this MD&A is August 11, 2020.
AURYN RESOURCES INC.
Management’s
Discussion and Analysis of Financial Condition and
Results
of Operations for the six months ended June 30, 2020
(In
thousands of Canadian dollars, unless otherwise noted)
1.1.1
Forward-looking
statements and risk factors
This
MD&A may contain “forward-looking statements” which
reflect the Company’s current expectations regarding the
future results of operations, performance and achievements of the
Company, including but not limited to statements with respect to
the Company’s plans or future financial or operating
performance, the estimation of mineral reserves and resources,
conclusions of economic assessments of projects, the timing and
amount of estimated future production, costs of future production,
future capital expenditures, costs and timing of the development of
deposits, success of exploration activities, permitting time lines,
requirements for additional capital, sources and timing of
additional financing, realization of unused tax benefits and future
outcome of legal and tax matters.
The
Company has tried, wherever possible, to identify these
forward-looking statements by, among other things, using words such
as “anticipate”, “believe”,
“estimate”, “expect”, “budget”,
or variations of such words and phrases or state that certain
actions, events or results “may”, “could”,
“would”, “might” or “will be
taken”, “occur” or “be
achieved”.
The
statements reflect the current beliefs of the management of the
Company and are based on currently available information.
Accordingly, these statements are subject to known and unknown
risks, uncertainties and other factors, which could cause the
actual results, performance, or achievements of the Company to
differ materially from those expressed in, or implied by, these
statements. These uncertainties are factors that include but are
not limited to risks related to international operations; general
economic conditions; public health crises such as the COVID-19
pandemic and other uninsurable risks; actual results of current
exploration activities and unanticipated reclamation expenses;
fluctuations in prices of gold and other commodities; fluctuations
in foreign currency exchange rates; increases in market prices of
mining consumables; possible variations in mineral resources, grade
or recovery rates; accidents, labour disputes, title disputes,
claims and limitations on insurance coverage and other risks of the
mining industry; delays in obtaining governmental approvals or
financing or in the completion of development or construction
activities; changes in national and local government regulation of
mining operations, tax rules and regulations, and political and
economic developments in countries in which the Company operates;
as well as other factors.
The
Company’s management periodically reviews information
reflected in forward-looking statements. The Company has and
continues to disclose in its MD&A and other publicly filed
documents, changes to material factors or assumptions underlying
the forward-looking statements and to the validity of the
statements themselves, in the period the changes occur. Historical
results of operations and trends that may be inferred from the
following discussions and analysis may not necessarily indicate
future results from operations.
The
operations of the Company are speculative due to the high-risk
nature of its business which is the exploration of mining
properties. For a comprehensive list of the risks and uncertainties
facing the Company, please see “Risk Factors” in the
Company’s most recent annual information form
(“AIF”). These are not the only risks and uncertainties
that Auryn faces. Additional risks and uncertainties not presently
known to the Company or that the Company currently considers
immaterial may also impair its business operations. These risk
factors could materially affect the Company's future operating
results and could cause actual events to differ materially from
those described in forward-looking statements relating to the
Company. Readers should refer to the risks discussed in the
Company’s AIF and MD&A for the year ended December 31,
2019, and subsequent continuous disclosure filings with the
Canadian Securities Administrators available at www.sedar.com and
the Company’s registration statement on Form 40-F filed with
the United States Securities and Exchange Commission and available
at www.sec.gov. These documents are for information purposes only
and not incorporated by reference in this MD&A. Additional
information relating to the Company and its operations can also be
found on the Company’s web site at www.aurynresources.com.
AURYN RESOURCES INC.
Management’s
Discussion and Analysis of Financial Condition and
Results
of Operations for the six months ended June 30, 2020
(In
thousands of Canadian dollars, unless otherwise noted)
1.2.1
Description
of business
Auryn
Resources is a technically-driven, junior exploration
company focused on finding and advancing globally significant
precious and base metal deposits. The Company has a portfolio
approach to asset acquisition and has six projects, including two
flagships: the Committee Bay high-grade gold project in Nunavut,
Canada and the Sombrero copper-gold project in southern
Peru.
Auryn’s
technical and management teams have an impressive track record of
successfully monetizing assets for all stakeholders and local
communities in which it operates. Auryn conducts itself to the
highest standards of corporate governance and social
responsibility.
The
Company was incorporated under the British Columbia Business
Corporations Act on June 9, 2008, under the name Georgetown Capital
Corp. Subsequently on October 15, 2013, the Company changed its
name to Auryn Resources Inc. and is a reporting issuer in the
provinces of British Columbia, Ontario and Alberta. The Company is
listed on the Toronto Stock Exchange under the symbol AUG and
effective July 17, 2017, the Company’s common shares
commenced trading on the NYSE American under the US symbol
AUG.
The
Company’s principal business activities include the
acquisition, exploration and development of resource properties.
The head office and principal address of the Company are located at
1199 West Hastings Street, Suite 600, Vancouver, British Columbia,
V6E 3T5.
Temporary Suspension of Peru Operations and Other Impacts of
COVID-19
On
March 15, 2020, the Peruvian government mandated a 15-day lockdown
of the country, including prohibiting movements within the country,
in response to the COVID-19 pandemic. As a result, the Company
recalled all personnel from the field. On June 17, 2020, the
Company received approval from the Peruvian government to resume
work activities at Sombrero and Curibaya projects, although certain
travel restrictions remain mostly regarding international travel.
The situation in Peru and Canada with respect to the management of
COVID-19 remains fluid and permitted activities are subject to
change; the Company is continually reviewing the situation along
with government guidelines and allowing tasks to proceed once it is
confident that it is safe for its employees to do so.
While
the disruptions resulting from the pandemic have caused some delay
in the Company’s planned goals for 2020, mainly related to
its inability to conduct field programs in Peru since the lockdown
was mandated, management has still been able to continue with much
of its planned activity. During the second quarter, the Company has
advanced community liaison and progressed survey activities at
Sombrero, as well as moving forward on minor infrastructure
projects at Curibaya. As the situation surrounding COVID-19
continues to develop daily, the Company will continue to monitor
the situation closely and respond appropriately.
AURYN RESOURCES INC.
Management’s
Discussion and Analysis of Financial Condition and
Results
of Operations for the six months ended June 30, 2020
(In
thousands of Canadian dollars, unless otherwise noted)
1.2.2
Peruvian
projects
Sombrero
Figure 1 - Illustrates the
Sombrero North and Sombrero South project areas within the western
extension of the Andahuaylas-Yauri Belt of southern
Peru
The Sombrero Project is located 340 kilometers SE of Lima in
southern Peru and is hosted in the interpreted western extension of
the Andahuaylas-Yauri belt. The project is located on the western
margins of this Eocene-Oligocene aged copper-gold porphyry and
skarn belt that hosts the Las Bambas, Haquira, Los Chancas,
Cotambambas, Constancia, Antapaccay and Tintaya deposits. The
project is characterized by a strong structural control and
significant copper and gold values from surface sampling. The
principal targets at Sombrero are copper-gold skarn and porphyry
systems and precious metal epithermal deposits.
The current project consists of approximately 130,000 hectares of
mineral claims covering a number of coincident gold and copper
geochemical anomalies. Figure 1 above illustrates the Sombrero
project area, which consists of the Sombrero North and Sombrero
South areas. The main project area, where the Company has focused
the majority of its exploration work, has been Sombrero North which is comprised of
75,036.7 hectares; while the Sombrero South concession blocks lie
within approximately 80 km south and east of this main project
area. The land package was assembled through three separate option
agreements, detailed below, and a series of staking campaigns, with
the Company most recently adding 8,500 hectares to the Sombrero
North area in September 2019 (Figure 1) (see full press release
dated October 17, 2019).
The
Company is currently in the process of renewing the surface rights
agreement it has in place with the local community which covers the
Sombrero Main, Chumpi Milpoc, Macha Machay and Fierrazo target
areas. In February 2020 the Company signed an agreement with the
community authorities for another two year period which is now
pending final approval at a public assembly to be convened once the
government mandated COVID-19 lockdown is lifted in
Peru.
AURYN RESOURCES INC.
Management’s
Discussion and Analysis of Financial Condition and
Results
of Operations for the six months ended June 30, 2020
(In
thousands of Canadian dollars, unless otherwise noted)
1.2.2
Peruvian projects (continued)
Sombrero (continued)
During
the shutdown, the Company has continued to have regular
communications with the communities and is actively working towards
securing additional agreements with other local communities and
private land holders in order to expand its access to other parts
of the project area. The Company was also able to provide
much-needed support to the Huanca Sancos and Lucanamarca
communities during the health crisis by providing essential food
and other supplies to which they did not have access during the
shutdown.
Alturas Option
On June 28, 2016, the Company entered into a letter agreement with
Alturas Minerals Corp. which outlined the general terms of the
option granted to Auryn to earn up to a 100% interest in the
central area of the project referred to as Sombrero Main.
Under the terms of the subsequent
definitive agreement, which has an effective date of April 6, 2018,
the Company may earn a 100% interest in the 6 mineral claims by
making option payments of US$0.2 million, completing US$2.1 million
in work expenditures within a five-year period and by making a
final payment of US$5.0 million. As at March 31, 2020, the Company
has satisfied the option payment requirements of the agreement and
has incurred approximately US$1.8 million in exploration work on
the project.
Mollecruz Option
On June 22, 2018, the Company acquired the rights to the Mollecruz
concessions located north of Sombrero Main, which is host to the
Good Lucky prospect. Under the terms of the Mollecruz Option, the
Company may acquire a 100% interest in the concessions by
completing US$3.0 million in work expenditures and by making
payments totaling US$1.6 million to the underlying owner over a
five-year period. At signing, Auryn paid US$50,000 and upon
exercise of the option, the underlying owner will retain a 0.5% Net
Smelter Return (“NSR”) royalty with an advance annual
royalty payment of US$50,000.
Effective May 20, 2019, the Company formally declared the existence
of a force majeure event under the Mollecruz Option as the Company
has been unable to reach an access agreement with the local
community in order to commence work in the region. The declaration
of force majeure has deferred the Company’s obligation to
make the June 22, 2019 property payment and any subsequent property
payments and work expenditures for a maximum of 24 months from the
declaration date. The Company has continued to have active and open
communications with the community in an effort to better inform
community members about work plans and address those concerns that
may be hindering the Company from obtaining access in this
particular area.
Aceros Option
On December 13, 2018, the Company entered into a series of
agreements with Corporacion Aceros Arequipa S.A.
(“Aceros”) to acquire the
rights to three key inlier mineral concessions, which include
Fierrazo and Nioc. If the Aceros Option is fully exercised,
a joint venture would be formed in which the Company would hold an
80% interest (Aceros – 20%). The joint venture would combine
the 530 hectare Aceros concessions plus 4,600 hectares of
Auryn’s Sombrero land position. The Company is required to
make a series of option payments totalling US$800,000, of which
US$200,000 has been paid, as well as completing US$5.15 million in
work expenditures over a five-year period, of which US$0.36 million
has been spent to date.
AURYN RESOURCES INC.
Management’s
Discussion and Analysis of Financial Condition and
Results
of Operations for the six months ended June 30, 2020
(In
thousands of Canadian dollars, unless otherwise noted)
1.2.2
Peruvian projects (continued)
Sombrero (continued)
Exploration
Figure 2 - Illustrates the primary Sombrero project area and the
various Copper-Gold Skarn, Porphyry & Epithermal
Targets
Since obtaining community access in early 2018, the Company has
aggressively conducted surface geochemical and geophysical surveys
across the southern portions of Sombrero Main in anticipation of an
initial drill campaign. Work conducted to date in this area
included 3,814 m of continuous channel samples, 913 rock samples,
261 soil samples and 13,156 XRF samples as well as 87 line-km of IP
and 282 line-km of Mag. The results of this work have further
indicated that Sombrero is host to a significant copper-gold system
which contains porphyry, epithermal and skarn type mineralization.
Auryn geologists completed grade control mapping throughout the
Sombrero Main area with the goal of characterizing the controls on
mineralization throughout the project area. The interpretation of
this work is ongoing and continues to evolve.
In Q1 2019, the surface work was expanded into the newly acquired
Fierrazo area and included continuous channel sampling which
resulted in the extension of the mineralization to a potential 7.5
km target area over the Sombrero Main and Fierrazo areas. The
identified contact zone between the Ferrobamba limestone and the
Cascabamba intrusive body hosting high-grade copper and gold
mineralization will continue to be the primary area of
focus. Highlights from the continuous channel sampling at
the Fierrazo include a combined width of mineralization of 232
meters of 0.55% copper equivalent (0.47% copper and 0.13 g/t
gold) with a higher-grade internal interval of 40 meters of 1.26%
copper equivalent (1.23% copper and 0.05 g/t gold) (Figure 4)
(full results can be found in the Company’s press releases
dated March 12 and April 3, 2019).
AURYN RESOURCES INC.
Management’s
Discussion and Analysis of Financial Condition and
Results
of Operations for the six months ended June 30, 2020
(In
thousands of Canadian dollars, unless otherwise noted)
1.2.2
Peruvian projects (continued)
Sombrero (continued)
The Company has also had the opportunity to make use of past
workings by Aceros including collecting 37 representative grab
samples from the waste dumps and ore stockpiles left at the
formerly producing Fierrazo iron mine. The results of the samples
indicate copper and gold mineralization within the
hematite-magnetite exoskarn mineralization. The average
values of the samples were 0.91% Cu and 0.36 g/t Au. Complete
results of this sampling can be found in the Company’s April
3, 2019 news release.
As announced April 29, 2019 the Company gained access to 988 meters
of historical drill core from drilling conducted by Aceros (Figures
3 and 4). The previous sampling of the core by Aceros was
considered incomplete as only partial sections were sampled
targeting iron skarn mineralization. Additionally, historic
analytical results did not include analysis for gold. On June 13,
2019 Auryn released the results of its sampling of the core.
Highlights included 116 meters of 0.58% CuEq (0.42% Cu and 0.24 g/t
Au), 90.4 meters of 0.51% CuEq (0.48% Cu and 0.05 g/t Au) and 51
meters of 0.53% CuEq (0.43% Cu and 0.16 g/t Au) (Figure 3). These
results confirmed that the copper-gold sulfide mineralization
extends to depth below where the Company had completed its channel
sampling as discussed above (Figure 4). Collectively, the
historical drill holes define a mineralized body totaling 300
meters of strike length with an average width of approximately 150
– 200 meters that is open both to the north and to the
south.
Figure 3 - Illustrates the drill intercepts from the historical
core at the Fierrazo exoskarn target.
AURYN RESOURCES INC.
Management’s
Discussion and Analysis of Financial Condition and
Results
of Operations for the six months ended June 30, 2020
(In
thousands of Canadian dollars, unless otherwise noted)
1.2.2
Peruvian projects (continued)
Sombrero (continued)
Figure 4 - illustrates the location of the 8 historical drill holes
at the Fierrazo target in relation to the surface work Auryn has
completed to date.
The Company’s initial permit application for drilling at
Sombrero Main was submitted in June 2019. The Company recently
received its environmental permit, or DIA, as announced February
10, 2020, which covers an area of 1,031 hectares. The DIA allows
the Company to drill up to 33 holes from 23 platforms on the
Ccascabamba Sombrero Main target area, where the majority of work
to-date has been completed (Figure 5). The next step required in
the permitting process is to obtain the authorization for Inicio de
Actividades (“Start of Activities”), which was filed
with the Peruvian authorities in February 2020 and includes the
Consulta Previa (“Social Consultation”), which will be
the government authority’s confirmation that the community
supports the upcoming drill program as well as future exploration
activities. Auryn has prioritized efforts to achieve excellent
relations within the Huanca Sancos community through a number of
beneficial social programs and is concurrently working through the
renewal of the community access agreement which will grant the
Company access for another two-year period. The Company has also
started to collect baseline data for a semi-detailed environmental
assessment which would allow for up to 700 drill pads and would
supplement the 33 holes allowed under the DIA so that drilling
could be conducted over a larger portion of the Sombrero
project.
On June
17, 2020 the Company received approval from the Peruvian government
to resume work activities at Sombrero. The work plan at Sombrero
consists of continuing the drill permitting process that has been
suspended due to COVID-19 restrictions emplaced by Peruvian
authorities. The Company’s Peruvian community team are
working with the Huanca Sancos community to deliver a positive
outcome for the Consulta Previa process to ensure support of
Auryn’s drill program at the Sombrero Main target
area.
AURYN RESOURCES INC.
Management’s
Discussion and Analysis of Financial Condition and
Results
of Operations for the six months ended June 30, 2020
(In
thousands of Canadian dollars, unless otherwise noted)
1.2.2
Peruvian projects (continued)
Sombrero (continued)
Figure 5: Illustrates the proposed drill plan on the Sombrero Main
target area. The DIA allows Auryn to drill up to 33 holes from 23
platforms.
While the Company’s primary focus has been advancing the
Sombrero Main target to a drill ready state, it has continued to
conduct exploration work across its full land package to identify
other areas of interest. The Good Lucky and Nioc target areas,
which are situated adjacent to and show similar geological and
geophysical signatures as Sombrero Main, are additional prospects
which have produced highly anomalous results and warrant additional
follow-up. The Good Lucky prospect, contained within the Mollecruz
concessions, represents an outcropping copper-gold skarn system
exposed over 600 meters where sampling has returned up to 5.12 g/t
Au and 4.29% Cu. Rock samples from Nioc, contained within the
Aceros option, have returned assays of up to 5.88 g/t Au and 9.09%
Cu. The Company plans to expand its surface program into the Good
Lucky and Nioc target areas once community agreements are obtained
and the Company thereby gains access to the land. Auryn
continues to work towards traditional community agreements with the
Lucanamarca and San Jose de Huarcaya communities such that the Nioc
and Good Lucky targets can be advanced.
AURYN RESOURCES INC.
Management’s
Discussion and Analysis of Financial Condition and
Results
of Operations for the six months ended June 30, 2020
(In
thousands of Canadian dollars, unless otherwise noted)
1.2.2
Peruvian projects (continued)
Sombrero (continued)
In the meantime, surface work programs such as rock sampling, BLEG
surveys and BLEG follow up continue to screen the overall land
package in order to highlight additional mineralized centers. In
2019 the Company conducted first-pass reconnaissance at the Ccello
project in Sombrero South, which consisted of mapping and rock
sampling to follow up on anomalous stream sediment samples from
previously completed screening efforts. The program, which yielded
silver values of up to 981 g/t (see full press release dated
September 30, 2019), identified a previously unrecognized 2 x 1.5
km high sulphidation alteration system.
The
Company is currently advancing the Ccello high sulphidation
precious metal target in the southern region of the Sombrero
district with additional mapping and geochemical surveys in order
to guide a ground-based geophysical induced polarization survey
over the two-by-two-kilometer alteration system that is
characterized by silver mineralization and associated pathfinder
elements of arsenic and antimony. The survey will consist of
approximately 8-line kilometers, enabling the Company’s
technical team to advance to the next phase of targeting in this
newly discovered system.
As announced in a press release dated October 17, 2019, the Company
has also staked the Macha Machay claims as a result of its
previously completed regional exploration program. The new claims,
which contained the highest copper values in stream sediments
observed through the regional program, are located adjacent to the
Company’s Milpoc target and are within the land area where
the Company has an existing community agreement.
See the press releases for complete results from the
Company’s geophysical and geochemical surface programs at
Sombrero.
Curibaya
Figure 6: Illustrates the position of the Curibaya Project with
respect to the large copper porphyry mines in southern
Peru.
AURYN RESOURCES INC.
Management’s
Discussion and Analysis of Financial Condition and
Results
of Operations for the six months ended June 30, 2020
(In
thousands of Canadian dollars, unless otherwise noted)
1.2.2
Peruvian projects (continued)
Curibaya (continued)
On August 2, 2019, the Company acquired the rights to the Sambalay
and Salvador concessions adjacent to the wholly owned Curibaya
porphyry property in southern Peru, which was staked by the Company
in 2016. Under the terms of the mining concession transfer
agreement with Wild Acre Metals (Peru) S.A.C., the Company paid
US$250,000 on transfer of the concessions in favour of Corisur. The
Sambalay concessions are subject to a combined 3% NSR royalty, 0.5%
of which is buyable for US$1.0 million. The Salvador concessions
are subject to a 2% NSR royalty and a US$2.0 million production
payment, payable at the time a production decision is made, and to
secure payment of such consideration a legal mortgage is recorded
in the registry files of the Salvador concessions.
The Sambalay and Salvador concessions together encompass a 4 by 4
kilometer alteration system that shows affinities to precious metal
low to intermediate sulphidation systems. Historical high-grade
sampling includes up to 13.50% copper, 23.6 g/t gold and 14,180 g/t
silver (Figure 6), however despite these results, Auryn is unaware
of any historical systematic exploration or drilling on the
properties.
Collectively, the Curibaya project now covers approximately 11,000
hectares and is located 48 km from the provincial capital of Tacna
and is accessible by road. The project lies 11 km south of the
Incapuquio regional fault, which is viewed as a major control on
the emplacement of mineralized porphyries in the region. The
concessions are outside the 50km border zone and therefore do not
require the Peruvian government to approve the acquisition by
Auryn.
Figure 7: Illustrates the locations of the Sambalay and Salvador
concessions in relation to the Curibaya concessions and other
projects in the region.
AURYN RESOURCES INC.
Management’s
Discussion and Analysis of Financial Condition and
Results
of Operations for the six months ended June 30, 2020
(In
thousands of Canadian dollars, unless otherwise noted)
1.2.2
Peruvian projects (continued)
Curibaya (continued)
2019/2020 Curibaya Exploration
Since acquiring the Sambalay and Salvador concessions in August
2019, the Company completed a first-pass reconnaissance rock
sampling program in Q4 2019 which sampled high-grade mineralization
throughout a 1.5 km by 4.5 km quartz – sericite –
pyrite alteration system. This was followed up with geological
mapping and additional rock and channel sampling in early 2020. In
total, 481 rock samples, 87 channel samples and 9 stream sediment
samples have been taken. The goal of the exploration to date has
been to gain a better understanding the spatial distribution of
high-grade mineralization throughout the alteration system as well
as confirming results from historical rock samples. Highlights from
the 2019 and 2020 sampling include up to 7,990 g/t silver,
17.65 g/t gold and 6.97% copper.
The Company’s ongoing exploration program selectively sampled
veins in previously unsampled areas and in doing so identified a
new zone of mineralization approximately one kilometer to the
northeast of previous sampling extending the alteration system to a
4 km by 4 km area. Through geological mapping a series of rhyolite
to dacite flow dome complexes have been identified which the
Company believes may be the sources of the widespread, high-grade
precious metal veins sampled to date. In addition, a float sample
800 meters to the northeast returned grades of up to 9,180g/t
silver and 42.6g/t gold (Figures 8 and 9) and will be followed up
on in the next round of field work. See press releases dated
February 28, 2020, November 14 and October 28, 2019 for full
results from the Company’s surface programs at
Curibaya.
Figure 8: Illustrates additional silver values from vein samples
taken across the project area and the new north-south trending
corridor of veins over approximately 400 meters that have been
identified.
AURYN RESOURCES INC.
Management’s
Discussion and Analysis of Financial Condition and
Results
of Operations for the six months ended June 30, 2020
(In
thousands of Canadian dollars, unless otherwise noted)
1.2.2
Peruvian projects (continued)
Curibaya (continued)
2019/2020 Curibaya Exploration
Figure 9: Illustrates additional gold values from vein samples
taken across the project area and the new north-south trending
corridor of veins over approximately 400 meters that have been
identified.
On June
17, 2020 the Company received approval from the Peruvian government
to resume work activities at Curibaya. The work plan at Curibaya
consists of:
●
Improvement of road
access, due to previous flood damage, and establishment of an
exploration camp on site (currently underway).
●
450-line-kilometer
airborne magnetics and radiometrics surveys over the
four-by-five-kilometer alteration center that hosts the high-grade
precious metal veins.
●
Up to 2000 meters
of channel sampling along both the defined vein corridors and the
margins of the dome complexes, which Auryn’s technical team
believes are the source of the high-grade veins observed on the
project.
●
30-line kilometers
of ground-based geophysical induced polarization surveys across the
vein corridors and the margins of the dome complexes.
AURYN RESOURCES INC.
Management’s
Discussion and Analysis of Financial Condition and
Results
of Operations for the six months ended June 30, 2020
(In
thousands of Canadian dollars, unless otherwise noted)
Huilacollo
The Huilacollo property, located in the Tacna province of southern
Peru, comprises 2,000 hectares of intense hydrothermal alteration
over a 4 by 6 km area that is consistent with epithermal Au/Ag
mineralization. Historic drilling has identified a continuously
mineralized gold/silver zone open in all directions. Contained
within this area, there appears to be higher grade mineralization
focused along well-defined feeder structures as highlighted by
trench intercepts up to 38m at 6.7 g/t Au and drill holes including
34m at 2.14 g/t. The Company acquired the rights to Huilacollo
through an option agreement with a local Peruvian company,
Inversiones Sol S.A.C., under which the Company may acquire a 100%
interest, subject to an NSR, through a combination of work
expenditures and cash payments totaling US$7.0 million and US$8.75
million respectively. As of May 11, 2019, the Company had spent
US$4.5 million at the Huilacollo project and did not satisfy the accumulated work expenditure
requirement of US$5.0 million at that date. Under the terms of the
Huilacollo option, the Company elected instead to make a cash
payment of US$258,000 equal to 50% of the shortfall at the due date
to keep the option in good standing.
Effective April 3, 2020, the Company declared force majeure under
its Huilacollo option as a result of the COVID-19 shutdown in Peru,
allowing the Company to defer the option payment that was otherwise
due May 11, 2020. Force Majeure was lifted on June 5, 2020, due to
the Peruvian Governments easing of COVID-19 restrictions. As a
result, the option payment became due in July 2020 and together
with the finder’s fee was paid subsequent to the quarter
end.
Huilacollo Exploration
During 2017 and 2018 the Company completed its initial drill
program, comprising five holes, at Huilacollo. Drilling
successfully expanded mineralization to the northwest by 100 meters
with drill hole 17-HUI-002 intersecting 62 meters of 0.45 g/t
Au (including 22 meters of 0.71g/t Au) oxide mineralization from
surface and drill hole 17-HUI-004 intersecting 22 meters of
0.2 g/t Au 100 meters to the southwest from hole 17-HUI-002.
Additional drilling would target
further extensions of mineralization as well as surface
mineralization discovered at the Tacora prospect. The Company is
currently determining its future exploration programs for
Huilacollo.
Baños
del Indio
Despite the Company acting in good faith in its negotiations with
the community, the Company was
unable to reach an access agreement in order to initiate its
exploration program on the Baños del Indio property and as
such the Company chose to terminate the Baños del Indio option
in accordance with the agreement. On February 7, 2020, the Company
formally gave notice to the option holder that it was terminating
the agreement effective March 8, 2020. The Company had previously
incurred a total of $337 (US$256,000) in option fees and other
acquisition costs in relation to the Baños del Indio property,
all of which were fully impaired as at December 31,
2019.
AURYN RESOURCES INC.
Management’s
Discussion and Analysis of Financial Condition and
Results
of Operations for the six months ended June 30, 2020
(In
thousands of Canadian dollars, unless otherwise noted)
1.2.3
Committee
Bay and Gibson MacQuoid projects
Figure 10 – regional map showing the locations of the
Committee Bay and Gibson MacQuoid projects
Committee
Bay
The Committee Bay Project comprises approximately 280,000 hectares
situated along the Committee Bay Greenstone Belt approximately 180
km northeast of the Meadowbank mine operated by Agnico Eagle Mines
Limited.
The Committee Bay belt comprises one of a number of Archean aged
greenstone belts occurring within the larger Western Churchill
province of north-eastern Canada. The character and history of rock
packages, and the timing and nature of mineralization occurring
within the belt is considered to be equivalent to that of other
significant gold bearing Archean greenstones within the Western
Churchill Province, which hosts deposits such as Meadowbank,
Meliadine and Amaruq.
AURYN RESOURCES INC.
Management’s
Discussion and Analysis of Financial Condition and
Results
of Operations for the six months ended June 30, 2020
(In
thousands of Canadian dollars, unless otherwise noted)
1.2.3
Committee
Bay and Gibson MacQuoid projects (continued)
Ownership
The Committee Bay project is held 100% by Auryn subject to a 1% NSR
on the entire project, and an additional 1.5% NSR payable on only
7,596 hectares which is buyable within two years of the
commencement of commercial production for $2,000 for each one-third
(0.5%) of the NSR.
Committee Bay Mineral resources
High-grade gold occurrences are found throughout the 300 km strike
length of the Committee Bay project with the most advanced being
the Three Bluffs deposit that contains the mineral resource as
listed in the table below: *(refer to NI43-101 report dated May 31,
2017, as amended October 23, 2017, filed under Auryn’s
profile at www.sedar.com).
|
Class
|
|
Cut off grade (g/t Au)
|
Tonnes (t)
|
Gold grade (g/t Au)
|
Contained Au (oz)
|
|
Indicated
|
Near SurfaceUnderground
|
3.04.0
|
1,760,000310,000
|
7.728.57
|
437,00086,000
|
|
|
|
|
2,070,000
|
7.85
|
524,000
|
|
Inferred
|
Near SurfaceUnderground
|
3.04.0
|
590,0002,340,000
|
7.567.65
|
144,000576,000
|
|
|
|
|
2,930,000
|
7.64
|
720,000
|
Table 1:
Three Bluffs indicated and inferred resource. See section
1.2.5 for cautionary language concerning mineral
resources.
The
Three Bluffs deposit remains open along strike and at depth. Future
programs will aim to significantly expand upon the current
resource.
Committee Bay 2020 Plans
Analysis of 2019 Data and Targeting at Committee Bay
Through the continued use of geophysics in the Company’s 2019
exploration program, the Company’s technical team made
significant advancements in their understanding of how to interpret
certain geophysical responses to better aid in targeting high-grade
gold mineralization on the property.
During Q2 2020, the Company continued to analyze previous
exploration data focusing on conductivity and chargeability
couplets. The reprocessing and reinterpretation of geophysical data
on a prospect by prospect basis has been instrumental in developing
new exploration concepts and will lead to the development of future
targets. Sufficient fuel remains on site to complete a modest
program and therefore a spring mobilization program was not
necessary.
AURYN RESOURCES INC.
Management’s
Discussion and Analysis of Financial Condition and
Results
of Operations for the six months ended June 30, 2020
(In
thousands of Canadian dollars, unless otherwise noted)
On May 20, 2020 the Company released initial results from the
targeting program at two prospects within the Committee Bay
Project. Re-interpretation of the electro-magnetic conductivity
responses, magnetics and geological data at Anuri has yielded a
flat lying, overturned recumbent fold geometry where the main fold
hinge target zone is buried at depth. Both boulder trains and
previous drill intercepts are interpreted to be associated with the
limbs of this fold that are believed to represent the lower grade
portions of the mineralized system. A second fold hinge target that
has been identified is at the undrilled Amautik prospect, which is
characterized by conductivity responses consistent with other
high-grade drilling on the Committee Bay belt. The geology at this
prospect corresponds with a folded iron formation with strong
geochemistry in rock samples with up to 15.7 g/t gold sourced
from the hinge zone of the fold. Both the Anuri and Amautik
prospect fold hinges will be advanced to drill stage by conducting
ground-based geophysical induced polarization surveys to identify
areas of high chargeability that coincide with high conductivity
responses.
Due to travel restrictions into Nunavut as well as in respect of
the local communities concerns over COVID-19, Auryn has informed
the stakeholders at Committee Bay that the Company will not conduct
field operations in 2020. The Company has initiated a COVID-19
support program in the nearby community of Kugaaruk whereby nine
community members identified through discussions with the Kitikmeot
Inuit Association and Kugaaruk Income Support staff will receive
two monthly credits at the Co-Op for groceries.
The Company was successful in extending all reporting and
expenditure requirements at Committee Bay for one year under the
Nunavut Mining Recorders office COVID-19 relief
program.
Gibson
MacQuoid
The Gibson MacQuoid project is an early stage gold exploration
project situated between the Meliadine deposit and Meadowbank mine
in Nunavut, Canada. The 66 mineral claims that make up the project
encompass approximately 120 km of strike length of the prospective
greenstone belt and total 51,622 hectares
collectively.
The Gibson MacQuoid Greenstone belt is one of a number of Archean
aged greenstone belts located in the Western Churchill province of
north-eastern Canada. These gold bearing Archean greenstone belts
host deposits such as the Three Bluffs, Meadowbank, Amaruq, and
Meliadine deposits. In particular, the highly magnetic signature of
the Gibson MacQuoid Belt is consistent with the other productive
greenstone belts in the eastern Arctic that host large-scale gold
deposits.
The Company was successful in extending all reporting and
expenditure requirements at Gibson MacQuoid for one year under the
Nunavut Mining Recorders office COVID-19 relief
program.
AURYN RESOURCES INC.
Management’s
Discussion and Analysis of Financial Condition and
Results
of Operations for the six months ended June 30, 2020
(In
thousands of Canadian dollars, unless otherwise noted)
1.2.4
Homestake
Ridge project
The Homestake Ridge project is located in the prolific
Iskut-Stewart-Kisault gold belt in
northwestern British Columbia, Canada and covers approximately
7,500 hectares (Figure 11). The project is host to a high-grade
gold, silver, copper, lead resource which remains open at depth and
along strike.
Figure 11: Illustrates the general location and access to
infrastructure at the Homestake Ridge project.
2020 Updated Mineral Resource Estimate and Preliminary Economic
Assessment
On April 15, 2020, the Company announced the results of its initial
PEA prepared in accordance with National Instrument 43-101
(“NI 43-101”) by MineFill Services Inc. of Seattle, WA
with other contributors including Roscoe Postle Associates Inc.
(RPA), now part of SLR Consulting Ltd. (SLR), (QP for updated
mineral resource estimate) and One-Eighty Consulting Group
(environmental, permitting and social). The Company filed the
related PEA on SEDAR at www.sedar.com in July 2020.
AURYN RESOURCES INC.
Management’s
Discussion and Analysis of Financial Condition and
Results
of Operations for the six months ended June 30, 2020
(In
thousands of Canadian dollars, unless otherwise noted)
1.2.4
Homestake Ridge project (continued)
PEA Summary - Base Case
|
Net present value (NPV 5%) after tax and mining duties
|
US$108 million
|
|
Internal rate of return (IRR) after tax
|
23.6%
|
|
Pre-production capital costs
|
US$88 million
|
|
After tax payback period
|
36 months
|
|
All in sustaining costs (AISC) per ounce gold
|
US$670
|
|
PEA life of mine (LOM)
|
13 years
|
|
LOM metal production gold equivalent ounces
|
590,040 AuEq ounces
|
|
LOM average diluted head grade
|
6.42g/t AuEq
|
|
Peak year annual production (year three)
|
88,660 AuEq ounces
|
|
Average LOM payable production
|
45,400 AuEq ounces
|
|
LOM mineralized material mined
|
3.4 Million tonnes
|
|
Mining scenario tonnes per day
|
900 tonnes
|
Table 2: Outlines the key results of the base case PEA which was
based on $1,350/oz gold, $12/oz silver, $3.00/pound copper,
$1.00/pound lead and an exchange rate of 0.70 (US$/C$). See section
1.2.5 regarding technical disclosures and cautionary language
concerning mineral resources.
Updated Mineral Resource Estimate
The PEA is based on an updated mineral resource estimate that was
prepared in-house by Auryn and audited by RPA using block models
constrained to new geological wireframes. Grades for gold, silver,
lead, arsenic and antimony were estimated using Inverse Distance
(ID3) weighting. Two block models were constructed in Leapfrog Geo
Edge software: one for the Homestake Main and Silver deposits and
the other for South Reef.
The updated mineral resource estimate was developed using a revised
geological model based on a complete re-log of the deposits that
defined the geometry of breccia bodies and vein arrays that were
successfully traced both laterally and vertically within the
deposits. These resulting geometries provided additional confidence
in tracing high-grade mineralization within the deposits. The
resource remains open for expansion at depth and along strike
(Figure 12). The updated mineral resource estimate, summarized in
Table 2 below, demonstrates higher grades with a decrease in tonnes
as compared to the previous resource estimate dated September 1,
2017 (detailed in a Canadian National Instrument 43-101 Technical
Report dated September 29, 2017 as amended October 23, 2017 and
filed on SEDAR) with overall metal content largely
unchanged.
|
|
Average Grade
|
Metal Content
|
|||||||
|
Classification
|
TonnageMt
|
Gold g/t
|
Silverg/t
|
Copper %
|
Lead%
|
Goldoz
|
Silver Moz
|
Copper Mlb
|
LeadMlb
|
|
Total Indicated
|
0.736
|
7.02
|
74.8
|
0.18
|
0.077
|
165,993
|
1.8
|
2.87
|
1.25
|
|
Total Inferred
|
5.545
|
4.58
|
100.0
|
0.13
|
0.142
|
816,719
|
17.8
|
15.87
|
17.34
|
Table 3: Combined Main Homestake, Homestake Silver and South Reef
Resources at a 2 g/t AuEq cut-off as of December 31, 2019. See
section 1.2.5 regarding technical disclosures and cautionary
language concerning mineral resources
AURYN RESOURCES INC.
Management’s
Discussion and Analysis of Financial Condition and
Results
of Operations for the six months ended June 30, 2020
(In
thousands of Canadian dollars, unless otherwise noted)
1.2.4
Homestake Ridge project (continued)
|
|
|
Average Grade
|
Metal Content
|
||||||
|
Cut-off g/t AuEq
|
TonnageMt
|
Goldg/t
|
Silverg/t
|
Copper%
|
Lead%
|
Goldoz
|
SilverMoz
|
CopperMlb
|
Lead Mlb
|
|
Total Indicated
|
|||||||||
|
5.0
|
0.372
|
10.99
|
131.3
|
0.20
|
0.120
|
131,463
|
1.6
|
1.7
|
0.99
|
|
4.0
|
0.465
|
9.57
|
111.2
|
0.20
|
0.105
|
142,911
|
1.7
|
2.0
|
1.07
|
|
3.0
|
0.592
|
8.18
|
90.5
|
0.19
|
0.090
|
155,730
|
1.7
|
2.5
|
1.18
|
|
2.0
|
0.736
|
7.02
|
74.8
|
0.18
|
0.077
|
165,993
|
1.8
|
2.9
|
1.25
|
|
1.0
|
0.862
|
6.19
|
65.2
|
0.17
|
0.069
|
171,441
|
1.8
|
3.1
|
1.32
|
|
Total Inferred
|
|||||||||
|
5.0
|
2.158
|
8.25
|
145.7
|
0.21
|
0.216
|
572,444
|
10.1
|
9.8
|
10.26
|
|
4.0
|
2.972
|
6.78
|
133.4
|
0.18
|
0.189
|
648,212
|
12.8
|
11.9
|
12.36
|
|
3.0
|
4.136
|
5.52
|
118.6
|
0.15
|
0.163
|
734,275
|
15.8
|
14.0
|
14.84
|
|
2.0
|
5.545
|
4.58
|
100.0
|
0.13
|
0.142
|
816,719
|
17.8
|
15.9
|
17.34
|
|
1.0
|
6.448
|
4.09
|
90.9
|
0.12
|
0.127
|
847,996
|
18.9
|
17.0
|
18.07
|
Table 4: Mineral Resource Sensitivity by Cut-Off Grade
Figure 12: Illustrates a long section of the Homestake Main and
Homestake Silver deposits demonstrating the deposits are open at
depth and along strike.
PEA Project Overview
To-date the project has been investigated with more than 275 drill
holes, totaling more than 90,000 meters. In addition to the three
known zones of mineralization, multiple exploration targets remain
to be tested. The PEA envisions a 900 tonne per day underground
mining operation spanning a 13-year mine life based on a mine plan
using a gold price of US$1,300/oz. Mining would commence in the
larger Homestake Main zone first, followed by the Homestake Silver
zone around year six and finally the South Reef zone. The material
would be treated in a conventional crushing, grinding and flotation
plant to produce a copper concentrate, a lead/zinc concentrate and
finally Au-Ag dore from cyanide leaching of regrind
tailings.
AURYN RESOURCES INC.
Management’s
Discussion and Analysis of Financial Condition and
Results
of Operations for the six months ended June 30, 2020
(In
thousands of Canadian dollars, unless otherwise noted)
1.2.4
Homestake Ridge project (continued)
Mining and Processing
The mine plan and production schedule were developed in Deswik mine
stope optimizer software (MSO). The principal mining method in the
MSO runs was overhand longhole retreat mining on 20-meter sublevel
intervals. The minimum mining width was 2.5 meters and a mining
cutoff grade of 3.5 g/t AuEq was used to develop the stope
wireframes. An ELOS (equivalent linear overbreak) of 0.25 meters
was added at the hanging-wall and footwall to account for
dilution.
Processing of the Homestake Ridge mineralization is determined by
the difference in metal contents across the three deposits included
in the study. Given that 97% of the metal value is gold and silver,
the realization of the value of the Homestake Ridge deposits will
be dependent on the recovery of precious metals. Based on recent
metallurgical test work, the optimal processing stream appears to
be campaign processing of each deposit in sequence, rather than
blending. The flowsheet thus consists of an initial rougher
flotation to produce a base metal concentrate, followed by
secondary flotation to produce a pyrite concentrate. The pyrite
concentrate is then reground and subjected to cyanide leaching to
recover the remaining gold and silver in rougher
tailings.
The Homestake Main mineralization would be processed first to
produce a copper concentrate rich in gold, then Homestake Silver to
produce a lead/zinc concentrate rich in silver and finally South
Reef to produce a gold concentrate. The metallurgical recoveries
are estimated to be 86% for gold, 74% for silver, 70% for copper
and 66% for lead.
Capital and Operating Costs
The pre-production capital is estimated at US$88 million (CAD$126
million) with US$86 million (CAD$123 million) in sustaining
capital, primarily capitalized development underground. The PEA is
based on owner-operated equipment and manpower. A contingency of
15% has been applied to all direct costs. Details of the
pre-production and sustaining capital are shown on Table 5
below:
|
Expenditure
|
Initial (US$M)
|
Sustaining (US$M)
|
|
Mining Equipment
|
$3.0
|
$2.1
|
|
Surface mobile equipment
|
$3.5
|
$2.5
|
|
Capitalized Underground Development
|
|
$66.4
|
|
Tailings
|
$8.4
|
|
|
Site Development – Roads, Airport
|
$6.3
|
|
|
Camp Facilities
|
$3.2
|
|
|
Site Infrastructure
|
$3.5
|
|
|
Power Supply
|
$8.4
|
|
|
Process Plant
|
$26.2
|
|
|
Access Upgrades – barge landing and roads
|
$2.1
|
|
|
EPCM costs – 15% of directs
|
$8.7
|
|
|
Owner Costs – 10% of directs
|
$5.8
|
|
|
Reclamation – tailings
|
|
$3.5
|
|
Closure
|
|
$3.5
|
|
Water Treatment
|
|
$1.4
|
|
Environmental Permits/Baseline Data
|
$0.6
|
|
|
End of Life Salvage
|
|
($3.5)
|
Table 5: Capital cost summary
AURYN RESOURCES INC.
Management’s
Discussion and Analysis of Financial Condition and
Results
of Operations for the six months ended June 30, 2020
(In
thousands of Canadian dollars, unless otherwise noted)
1.2.4
Homestake Ridge project (continued)
|
Area
|
Unit Cost (US$)
|
Life-of-Mine (US$)
|
|
Mining
($/t mined)
|
$63.50
|
$182.9
million
|
|
Processing
($/t milled)
|
$21.00
|
$71.9
million
|
|
General
and Administration ($/t)
|
$14.00
|
$48.0
million
|
|
Environmental/Water
Treatment
|
$0.82
|
$2.8
million
|
|
Community/Social
|
$0.17
|
$0.6
million
|
|
Total
Operating Costs ($/t milled)
|
$89.39
|
$306.2
million
|
Table 6: Operating Cost Summary. Operating costs were developed
from unit costs for projects of a similar scale in Canada and
translated to USD at an exchange rate of 0.70
(US$/C$).
Project Economics and Sensitivity Analyses
The following tables illustrate the PEA project economics and the
sensitivity of the project to changes in the base case metal
prices, operating costs and capital costs. As is typical with
precious metal projects, the project is most sensitive to metal
prices, followed by operating costs and initial capital
costs.
|
|
NPV at
0% (US$M)
|
NPV at
5% (US$M)
|
NPV at
7% (US$M)
|
IRR
|
Payback
(Mo)
|
|
Before
Tax
|
$278
|
$170
|
$140
|
30.1%
|
26
|
|
After
Tax
|
$184
|
$108
|
$87
|
23.6%
|
36
|
Table 7: Project Economics at $1,350 Gold
|
|
Gold Price (US$/oz)
|
Silver Price (US$/oz)
|
NPV at 0% (US$M)
|
NPV at 5% (US$M)
|
IRR
|
Payback (Mo)
|
|
40%
|
$1,890
|
$16.80
|
$373
|
$239
|
39.4%
|
31
|
|
30%
|
$1,755
|
$15.60
|
$326
|
$206
|
35.8%
|
32
|
|
20%
|
$1,620
|
$14.40
|
$278
|
$173
|
32.0%
|
33
|
|
10%
|
$1,485
|
$13.20
|
$231
|
$141
|
28.0%
|
34
|
|
Base
Case
|
$1,350
|
$12.00
|
$184
|
$108
|
23.6%
|
36
|
|
-10%
|
$1,215
|
$10.80
|
$137
|
$75
|
18.8%
|
40
|
|
-20%
|
$1,080
|
$9.60
|
$90
|
$42
|
13.2%
|
46
|
|
-30%
|
$945
|
$8.40
|
$39
|
$6
|
6.4%
|
75
|
Table 8: Metal Price Sensitivity – After-Tax
|
|
NPV at
0% (US$M)
|
NPV at
5% (US$M)
|
IRR
|
Payback
(Mo)
|
|
20%
|
$145
|
$82
|
20.1%
|
39
|
|
10%
|
$165
|
$95
|
21.9%
|
38
|
|
Base Case
|
$184
|
$108
|
23.6%
|
36
|
|
-10%
|
$203
|
$121
|
25.3%
|
35
|
|
-20%
|
$223
|
$134
|
26.9%
|
35
|
Table 9: Operating Cost Sensitivity – After-Tax
AURYN RESOURCES INC.
Management’s
Discussion and Analysis of Financial Condition and
Results
of Operations for the six months ended June 30, 2020
(In
thousands of Canadian dollars, unless otherwise noted)
1.2.4
Homestake Ridge project (continued)
|
|
NPV at
0% (US$M)
|
NPV at
5% (US$M)
|
IRR
|
Payback
(Mo)
|
|
20%
|
$149
|
$79
|
17.1%
|
43
|
|
10%
|
$167
|
$93
|
20.1%
|
40
|
|
Base
Case
|
$184
|
$108
|
23.6%
|
36
|
|
-10%
|
$201
|
$128
|
27.7%
|
34
|
|
-20%
|
$219
|
$137
|
32.5%
|
33
|
Table 10: Capital Cost Sensitivity – After-Tax
Indigenous and Community Relations
The pursuit of environmentally sound and socially responsible
mineral development guides all of Auryn’s activities as the
Company understands the broad societal benefits that responsible
mining can bring, as well as the risks that must be managed through
the implementation of sustainable development practices. Auryn
strives to maintain the highest standards of environmental
protection and community engagement at all of its
projects.
Auryn considers sustainability to include the pursuit of three
mutually reinforcing pillars: environmental and cultural heritage
protection; social and community development; and, economic growth
and opportunity. The Company assesses the environmental, social and
financial benefits and risks of all our business decisions and
believes this commitment to sustainability generates value and
benefits for local communities and shareholders alike.
Auryn places a priority on creating mutually beneficial, long-term
partnerships with the communities and countries in which it
operates, and with its shareholders, respecting their interests as
its own. At the community level, the Company works to establish
constructive partnerships to address and contribute to local
priorities and interests and ensure that local people benefit both
socially and economically from its activities.
Auryn has undertaken early and ongoing engagement with respect to
the Homestake Ridge gold project since January 2017. Engagement
goals include providing Indigenous groups, residents of nearby
communities and other regional interests with corporate and
project-related information, details of work programs and other
activities being undertaken in the field, project updates and
opportunities for feedback and local involvement in the Homestake
Ridge project.
Auryn’s approach to Indigenous and stakeholder engagement
provides opportunities and benefits through:
●
the
provision of jobs and training programs
● contracting
opportunities
● capacity
funding for Indigenous engagement
● sponsorship
of community events
Members
of local Indigenous groups comprise approximately 40% of
Auryn’s Homestake Ridge project team. Two of our primary
contractors are local Indigenous-owned companies. Auryn and the
Nisga’a Lisims Government entered into a Confidentiality
Agreement in January 2020. The parties look forward to a
collaborative relationship based on mutual respect and a desire for
economic prosperity generated by responsible natural resource
development in British Columbia.
The
Company filed a NI43-101 PEA report on SEDAR on June 24, 2020.
Plans for 2020 are still being developed for the Homestake Ridge
project and will take into consideration the conclusions and
recommendations of the preliminary economic
assessment.
The BC
Chief Gold Commissioner pursuant to section 66 of the Mineral Tenure Act, extended all
reporting and expenditure requirements until December 31, 2020 for
mineral titles.
AURYN RESOURCES INC.
Management’s
Discussion and Analysis of Financial Condition and
Results
of Operations for the six months ended June 30, 2020
(In
thousands of Canadian dollars, unless otherwise noted)
1.2.5
Qualified
persons and technical disclosures
Michael Henrichsen, P. Geo., Chief Operating Officer of Auryn, is
the Qualified Person with respect to the technical disclosures in
this MD&A.
Sombrero Age Dating, 2019
A total of seven samples of magmatic rocks were collected for U-Pb
zircon geochronology analysis. From those, two samples (referred to
above as A and B) were sent to Geolab SHRIMP IIe, Institute of
Geochemistry – University of Sao Paulo, Brazil. They were
analysed through the ‘Sensitive High Resolution Ion
Microprobe IIe’ method, or SHRIMP. The other five samples (C,
D, E, F, and G) were sent to CODES Analytical Laboratory,
University of Tasmania, Australia, where it was found that only
three contained zircon. Those three samples were then analysed with
an ASI RESOLution S-155 ablation system with a Coherent Compex Pro
110 Ar-F excimer laser.
Channel Sampling 2018/2019 (Sombrero, Peru)
Analytical samples were taken from each 1 meter (channels 18SRT-04
through 18SRT-09) or 2 meter (channels 18SRT-10 – 18SRT-20)
interval of channel floor resulting in approximately 2-3kg of rock
chips material per sample. Collected samples were sent to ALS Lab
in Lima, Peru for preparation and analysis. All samples are assayed
using 30g nominal weight fire assay with atomic absorption finish
(Au-AA25) and multi-element four acid digest ICP-AES/ICP-MS method
(ME-MS61). Where MS61 results were greater or near 10,000 ppm Cu,
Zn or Pb the assays were repeated with ore grade four acid digest
method (OG62). QA/QC programs for 2018/2019 channel grab samples
using internal standard and blank samples; field and lab duplicates
indicate good overall accuracy and precision.
Intervals were calculated using a minimum of a 0.1% Cu cut-off at
beginning and end of the interval and allowing for no more than six
consecutive meters of less than 0.1% Cu with a minimum length of
the resulting composite of 5m. Copper and gold equivalent grades (CuEq and AuEq)
were calculated for 2018 using gold price of US$1300/oz and copper
price of US$3.28/lb and for 2019 using gold price of US$1300/oz and
copper price of US$3.00/lb.
Historical Fierrazo Diamond Drill Hole (DDH) Re-Sampling 2019
(Sombrero)
Sample intervals averaged 2 meters where historical sample
intervals taken and otherwise were 2 meters. Where at least half of
HQ diameter core was present it was sawed into equal parts on site.
Otherwise historical crush rejects were used in lieu of the core.
In total 481 quarter core, 20 half core, and 10 crush rejects,
approximately 3-5kg each, were sent to ALS Lab in Lima, Peru for
preparation and analysis. All samples were assayed using 30g
nominal weight fire assay with atomic absorption finish (Au-AA25)
and multi-element four acid digest ICP-AES/ICP-MS method (ME-MS61).
Where MS61 results were near or greater than 10,000 ppm Cu the
assays were repeated with ore grade four acid digest method (OG62).
QA/QC programs using internal standard samples, field and lab
duplicates and blanks indicate good accuracy and precision in a
large majority of standards assayed.
Intervals were calculated using a minimum of a 0.1% Cu cut-off at
beginning and end of the interval and allowing for no more than six
consecutive meters of less than 0.1% Cu with a minimum length of
the resulting composite of 5 meters.
Rocks 2019/2020 (Sombrero & Curibaya, Peru)
Approximately 2-3kg of material was collected for analysis and sent
to ALS Lab in Lima, Peru for preparation and analysis. All samples
are assayed using 30g nominal weight fire assay with ICP finish
(Au-ICP21) and multi-element four acid digest ICP-AES/ICP-MS method
(ME-MS61). Where ICP21 results were > 3 g/t Au the assay
were repeated with 30g nominal weight fire assay with gravimetric
finish (Au-GRA21). Where MS61 results were greater or near 10000
ppm Cu, 10000ppm Pb or 100ppm Ag the assay were repeated with ore
grade four acid digest method (OG62). Where OG62 results were
greater or near 1500ppm Ag the assays were repeated with 30g
nominal weight fire assay with gravimetric finish (Ag-GRA21). QA/QC
programs for 2019/2020 rock samples using company and lab
duplicates, standards and blanks indicate good accuracy and
precision in a large majority of standards assayed. These samples
were collected in a non-representative manner. The mineralization
may not be reflective of the underlying system.
Historical Grab Samples – Sambalay and Salvador
The historical grab samples on Sambalay and Salvador were collected
by Teck (2010-2011), Compania de Exploraciones Orion SAC
(2010-2011) and Wild Acre Metals (2012-2013). Auryn has not
conducted any due diligence on whether appropriate QA/QC protocols
were followed in the collection of these samples, nor can it
confirm their accuracy or repeatability.
AURYN RESOURCES INC.
Management’s
Discussion and Analysis of Financial Condition and
Results
of Operations for the six months ended June 30, 2020
(In
thousands of Canadian dollars, unless otherwise noted)
1.2.5
Qualified persons and technical disclosures
(continued)
Channel Sampling 2020 – Curibaya
Analytical samples were taken from each 1-meter interval of trench
floor resulting in approximately 2-3kg of rock chips material per
sample. Collected samples were sent to ALS Lab in Arequipa, Peru
for preparation and then to Lima, Peru for analysis. All samples
are assayed using 30g nominal weight fire assay with atomic
absorption finish (Au-AA25) and multi-element four acid digest
ICP-AES/ICP-MS method (ME-MS61). Where MS61 results were greater or
near 10000 ppm Cu, 10000ppm Pb or 100ppm Ag the assay were repeated
with ore grade four acid digest method (Cu,Pb,Ag-OG62). Where OG62
results were greater or near 1500ppm Ag the assay were repeated
with 30g nominal weight fire assay with gravimetric finish
(Ag-GRA21). QA/QC programs for 2020 channel samples using internal
standard and blank samples; field and lab duplicates indicate good
overall accuracy and precision.
Committee Bay Resource Estimate and Technical Report
Three Bluffs resource estimations were completed by Roscoe Postle
Associates Inc. (“RPA”) (see the Technical Report on
the Three Bluffs Project, Nunavut Territory, Canada filed on the
SEDAR on May 31, 2017 as amended October 23, 2017).
Homestake Ridge Updated Resource Estimate and Preliminary Economic
Assessment
The Homestake Ridge updated mineral resource estimate was prepared
internally and audited by RPA and is effective December 31, 2019.
Canadian Institute of Mining, Metallurgy and Petroleum (CIM)
Definition Standards for Mineral Resources and Mineral Reserves
dated May 10, 2014 (CIM (2014) definitions), as incorporated by
reference in National Instrument 43-101 (“NI 43-101”),
were followed for Mineral Resource estimation. Mineral Resources
are estimated at a cut-off grade of 2.0 g/t AuEq and AuEq
values were calculated using a long-term gold price of US$1,300 per
ounce, silver price at US$20 per ounce and copper price at US$2.5
per pound and an exchange rate of US$/C$1.20. The AuEq calculation
included provisions for metallurgical recoveries, treatment
charges, refining costs and transportation. Bulk density ranges
from 2.69 t/m3 to 3.03 t/m3, depending on the
domain. Differences may occur in totals due to rounding. The
Qualified Person responsible for this mineral resource estimate is
Philip A. Geusebroek, P. Geo., RPA.
The updated resource estimate is included in the Company’s
PEA which, in accordance with NI 43-101, the Company filed on SEDAR
at www.sedar.com on June 24, 2020. The PEA was prepared in
accordance with NI 43-101 by MineFill Services Inc. of Seattle, WA
with other contributors including RPA (per above), and One-Eighty
Consulting Group (environmental, permitting and
social).
The Company cautions that the PEA is preliminary in nature in that
it includes Inferred Mineral Resources which are considered too
speculative geologically to have the economic considerations
applied to them that would enable them to be characterized as
mineral reserves, and there is no certainty that the PEA will be
realized. Mineral resources that are not mineral reserves do not
have demonstrated economic viability.
Forward Looking Information and Additional Cautionary Language
related to the PEA
Certain information contained in the above disclosure contains
forward-looking statements and information about the economic
analyses for the Homestake Ridge Gold Project and its potential for
development and expansion, the anticipated IRR and NPV for the
project, capital and operating costs, processing and recovery
estimates and strategies, proposed mining method and development
plans, mineral resource estimates and statements as to management's
expectations with respect to, among other things, the matters and
activities contemplated in this disclosure.
Such forward looking statements are necessarily based upon a number
of factors and assumptions that, while considered reasonable by the
Company as of the date of such statements, are inherently subject
to significant business, economic and competitive uncertainties and
contingencies. The assumptions made by the Company in preparing the
forward looking statements contained in this disclosure, which may
prove to be incorrect, include, but are not limited to: the
specific assumptions set forth above and in the Technical Report;
that the Company is able to develop the property in the manner set
out in the Technical Report; that the Company is able to advance
the property through to feasibility; that if viable, the Company is
able to obtain all necessary permits to develop the mine on the
property; that the Company is able to complete the consultation
with the Indigenous people in the area of that Homestake Ridge Gold
Project; that the exchange rate between the Canadian dollar, and
the United States dollar remain consistent with current levels or
as set out in this press release; that prices for gold and silver
remain consistent with the Company's expectations; that prices for
key mining supplies, including labour costs and consumables, remain
consistent with the Company's current expectations; that
Company’s current estimates of mineral resources, mineral
grades and mineral recovery are accurate; and that there are no
material variations in the current tax and regulatory environment.
Many factors, known and unknown, could cause the actual results to
be materially different from those expressed or
implied.
AURYN RESOURCES INC.
Management’s
Discussion and Analysis of Financial Condition and
Results
of Operations for the six months ended June 30, 2020
(In
thousands of Canadian dollars, unless otherwise noted)
1.2.5
Qualified persons and technical disclosures
(continued)
Forward Looking Information and Additional Cautionary Language
related to the PEA (continued)
By its nature, this information is subject to inherent risks and
uncertainties that may be general or specific and which give rise
to the possibility that expectations, forecasts, predictions,
projections or conclusions will not prove to be accurate, that
assumptions may not be correct and that objectives, strategic goals
and priorities will not be achieved. Factors that could cause
future results or events to differ materially from current
expectations expressed or implied by the forward-looking statements
include: availability of financing to fund the Company’s
exploration and development activities, the ability of the
Company’s exploration program to identify and expand mineral
resources, operational risks in exploration and development for
gold and silver, the Company’s ability to realize the PEA,
delays or changes in plans with respect to exploration or
development projects or capital expenditures, uncertainty as to
calculation of mineral resources, changes in commodity and power
prices, changes in interest and currency exchange rates, the
ability to attract and retain qualified personnel, inaccurate
geological and metallurgical assumptions (including with respect to
the size, grade and recoverability of mineral resources), changes
in development or mining plans due to changes in logistical,
technical or other factors, title defects, government approvals and
permits, cost escalation, changes in general economic conditions or
conditions in the financial markets, environmental regulation,
operating hazards and risks, delays, taxation rules, competition,
public health crises such as the COVID-19 pandemic and other
uninsurable risks, liquidity risk, share price volatility, dilution
and future sales of common shares, aboriginal claims and
consultation, cybersecurity threats, climate change, delays and
other risks described in the Company’s documents filed with
Canadian and U.S. securities regulatory authorities. Readers should
refer to the risks discussed in the Company’s Annual
Information Form and MD&A for the year ended December 31, 2019
and subsequent continuous disclosure filings with the Canadian
Securities Administrators available at www.sedar.com and the
Company’s registration statement on Form 40-F filed with the
United States Securities and Exchange Commission and available
at www.sec.gov.
Readers should not place undue reliance on forward looking
statements.
Cautionary Note to United States Investors concerning Estimates of
Measured, Indicated and Inferred Resource Estimates
This disclosure uses the terms “indicated mineral
resource” and “inferred mineral resource”, which
are Canadian mining terms as defined in and required to be
disclosed in accordance with National Instrument 43-101 –
Standards of Disclosure for Mineral Projects (“NI
43-101”), which references the guidelines set out in the
Canadian Institute of Mining, Metallurgy and Petroleum (the
“CIM”) – CIM Definition Standards on Mineral
Resources and Mineral Reserves (“CIM Standards”),
adopted by the CIM Council, as amended. However, these terms are
not defined terms under Industry Guide 7 (“Industry Guide
7”) under the United States Securities Act of 1933, as
amended, and, until recently, have not been permitted to be used in
reports and registration statements filed with the U.S. Securities
and Exchange Commission (the “SEC”). The SEC has
adopted amendments to its disclosure rules to modernize the mineral
property disclosure requirements for issuers whose securities are
registered with the SEC under the Exchange Act. These amendments
became effective February 25, 2019 (the “SEC Modernization
Rules”) with compliance required for the first fiscal year
beginning on or after January 1, 2021. The SEC Modernization Rules
replace the historical disclosure requirements for mining
registrants that were included in SEC Industry Guide
7.
United States investors are cautioned that there are differences in
the definitions under the SEC Modernization Rules and the CIM
Standards. Accordingly, there is no assurance any mineral reserves
or mineral resources that the Company may report as
“indicated mineral resources” and “inferred
mineral resources” under NI 43- 101 would be the same had the
Company prepared the reserve or resource estimates under the
standards adopted under the SEC Modernization Rules. United States
investors are also cautioned that while the SEC will now recognize
“indicated mineral resources” and “inferred
mineral resources”, investors should not assume that any part
or all of the mineralization in these categories will ever be
converted into a higher category of mineral resources or into
mineral reserves. Mineralization described using these terms has a
greater amount of uncertainty as to their existence and feasibility
than mineralization that has been characterized as reserves.
Accordingly, investors are cautioned not to assume that any
“indicated mineral resources” or “inferred
mineral resources” that the Company reports are or will be
economically or legally mineable. Further, “inferred mineral
resources” have a greater amount of uncertainty as to their
existence and as to whether they can be mined legally or
economically. Therefore, United States investors are also cautioned
not to assume that all or any part of the “inferred mineral
resources” exist. In accordance with Canadian securities
laws, estimates of “inferred mineral resources” cannot
form the basis of feasibility or other economic studies, except in
limited circumstances where permitted under NI 43-101. In addition,
United States investors are cautioned that a preliminary economic
assessment cannot support an estimate of either “proven
mineral reserves” or “probable mineral reserves”
and that no feasibility studies have been completed on the
Company’s mineral properties.
Accordingly, information contained in this disclosure describing
the Company’s mineral deposits may not be comparable to
similar information made public by U.S. companies subject to the
reporting and disclosure requirements under the United States
federal securities laws and the rules and regulations
thereunder.
Peruvian interests within a special economic zone
- Auryn holds certain interests in
Peru through Corisur Peru SAC, which controls (among other) certain
licenses (including the Huilacollo project) that are located within
a special legal zone which runs 50km back from the Peruvian border.
As a non-Peruvian company, Auryn’s right to ultimately
acquire title over the shares issued by Corisur Peru SAC and to own
and/or exploit these licenses requires approval from the Peruvian
government. While Auryn is in the process of submitting its
applications and does not foresee any legal reason why it would be
denied the approval, some risk of denial or delay should be assumed
to exist.
AURYN RESOURCES INC.
Management’s
Discussion and Analysis of Financial Condition and
Results
of Operations for the six months ended June 30, 2020
(In
thousands of Canadian dollars, unless otherwise noted)
1.3
Selected
annual financial information
|
|
Year
ended
|
Year
ended
|
Year
ended
|
|
|
December
31, 2019
|
December
31, 2018
|
December
31, 2017
|
|
|
|
|
(Restated1)
|
|
Comprehensive loss
for the period
|
$14,136
|
$17,389
|
$36,578
|
|
Net loss for the
period
|
$13,933
|
$17,674
|
$36,500
|
|
Basic and diluted
loss per share
|
$0.15
|
$0.21
|
$0.48
|
|
Total
assets
|
$42,962
|
$43,523
|
$43,759
|
|
Total long-term
liabilities
|
$2,134
|
$1,891
|
$1,662
|
1 Restated for change in
accounting policy as disclosed in note 4 of the
Company’s audited annual consolidated financial
statements for the year ended December 31, 2018.
The Company generated no revenues from operations during the above
periods.
1.4 Discussion of operations
Three months ended June 30, 2020 and 2019 (Q2 2020 vs. Q2
2019)
During the three months ended June 30, 2020, the Company reported a
loss of $2,575 and loss per share of $0.02, compared to a loss of
$5,045 and loss per share of $0.05 for the same period in 2019.
Significant variances within operating expenses and other expenses,
which in combination resulted in the $2,470 decrease in the current
period’s loss, are discussed as follows:
Operating expenses
(1)
Exploration and
evaluation costs in Q2 2020 were $893 compared to $2,425 in Q2
2019, a decrease of $1,532, driven almost entirely by the lower
activity as a result of COVID-19. The costs of spring mobilization
for exploration activities was seen in Q2 2019 which did not recur
in Q2 2020.
(2)
Following
expenditure rationalization in 2019, a lower volume of options were
issued and therefore the share based compensation and employee
bonus structure has reduced compared to previous
years.
Other expenses and income:
(3)
Finance expense of
$125 was recorded for the three months ended June 30, 2020 in
relation to the Amended Bridge Loan that was entered into in
September 2019, and amended in February 2020. There was no such
expense reported in Q2 2019.
(4)
During Q2 2020 the
Company recorded a gain of $226 on its investment in marketable
securities which is driven by the market price of the marketable
securities at each period end. There was a gain of $53 recorded on
its investment in marketable securities for Q2 2019.
Six months ended June 30, 2020 and 2019 (YTD 2020 vs. YTD
2019)
During the six months ended June 30, 2020, the Company reported a
net loss of $5,131 and loss per share of $0.05 compared to a net
loss of $6,971 and loss per share of $0.08 for the same period in
2019. The $1,840 decrease in net loss in the current period is
driven by a $1,375 decrease in the exploration and evaluation costs
and $1,098 decrease in fees, salaries and other employee benefits.
The drivers behind the significant variances for the six month
period in 2020 compared to 2019 is consistent with that described
above for the three-month period.
AURYN RESOURCES INC.
Management’s
Discussion and Analysis of Financial Condition and
Results
of Operations for the six months ended June 30, 2020
(In
thousands of Canadian dollars, unless otherwise noted)
1.4 Discussion of operations (continued)
Summary of Project Costs
During the six months ended June 30, 2020, the Company incurred
nominal mineral property acquisition costs and $1,825
in exploration and evaluation costs on
its projects.
|
|
Committee Bay & Gibson MacQuoid
|
Homestake Ridge
|
Peru
|
Total
|
|
Acquisition costs
|
|
|
|
|
|
Balance
as at December 31, 2019
|
$19,085
|
$16,060
|
$4,569
|
$39,714
|
|
Additions
|
-
|
-
|
2
|
2
|
|
Change
in estimate of provision for site
reclamation
and closure
|
186
|
-
|
-
|
186
|
|
Currency
translation adjustment
|
-
|
-
|
(190)
|
(190)
|
|
Balance as at June 30, 2020
|
$19,271
|
$16,060
|
$4,761
|
$40,092
|
|
|
Committee Bay & Gibson MacQuoid
|
Homestake Ridge
|
Peru
|
Total
|
|
Exploration and evaluation costs
|
|
|
|
|
|
Assaying
|
$20
|
$16
|
$10
|
$46
|
|
Exploration
Drilling
|
26
|
-
|
-
|
26
|
|
Camp
cost, equipment and field supplies
|
123
|
16
|
92
|
231
|
|
Geological
consulting services
|
2
|
173
|
93
|
268
|
|
Permitting,
environmental and community costs
|
25
|
7
|
309
|
341
|
|
Expediting
and mobilization
|
5
|
-
|
5
|
10
|
|
Salaries
and wages
|
195
|
81
|
376
|
652
|
|
Fuel
and consumables
|
-
|
-
|
2
|
2
|
|
Aircraft
and travel
|
-
|
2
|
49
|
51
|
|
Share
based compensation
|
38
|
16
|
144
|
198
|
|
Total for the six months ended June 30, 2020
|
$434
|
$311
|
$1,080
|
$1,825
|
Future operations and 2020 expenditure forecast
Following the announcement of the Agreement in July 2020, as
highlighted above, the Company is evaluating plans for the projects
in Canada and Peru to allocate the resources appropriately. As part
of the Agreement, the Peru projects will be spun out into separate
Canadian registered companies and the intention is that these will
re-list in the near future and will continue endeavours to advance
the projects as outlined in Auryn’s MD&A for the year
ended December 31, 2019.
The Company’s business objectives with respect to the
projects for the next twelve to eighteen months remain largely
unchanged from those disclosed in the annual reporting for the year
ended December 31, 2019, including expenditure plans for
approximately $12.5 million for the purpose of advancing the
exploration.
AURYN RESOURCES INC.
Management’s
Discussion and Analysis of Financial Condition and
Results
of Operations for the six months ended June 30, 2020
(In
thousands of Canadian dollars, unless otherwise noted)
1.4 Discussion of operations (continued)
Future operations and 2020 expenditure forecast
(continued)
The Company’s 2020 business objectives are outlined
below:
➢
Sombero:
During the 2020 year the Company will continue to work towards
completing its drill permit in order to commence drilling at the
Sombrero main target. Working with local communities to obtain
additional access agreements will also remain a focus for the
Company in order to initiate its surface work programs at the Nioc
and Good Lucky targets, and to complete screening work across other
parts of its expansive land package.
➢
Curibaya:
The focus for 2020 will be to advance the Curibaya project to
drill-ready stage through additional mapping, sampling and the
completion of both ground-based and airborne geophysical surveys.
Once the targeting is complete, the Company will apply for an FTA
drill permit at Curibaya which will allow for up to 20 drill
pads.
➢
Committee
Bay: The Company is getting close to completing its desktop
targeting work to identify areas for future ground based IP
surveying. A small field program may be completed during the
summer season in order to ground truth the preliminary targets
identified from the desktop study.
➢
Homestake
Ridge: Following on from the publication of the PEA in June 2020,
driving a coordinated drilling program for 2021, and incorporating
advanced geotechnology to create a complete metallurgical
analysis.
Assuming the successful completion of the acquisition of Eastmain
and related private placement financing of at least $15 million in
the coming months, the Company’s capital available for the
next 12 months will drive forward the exploration programs for the
projects in Canada as outlined above. The plan to transfer
ownership of the Peru projects to separate SpinCos includes an
allocation of approximately $7.5 million cash from Auryn which will
support the exploration activities going forward.
1.5 Summary of quarterly results
|
Three
months ended
|
Interest
income
|
Net
loss
|
Comprehensive
loss
|
Loss
per share
|
|
In
thousands of Canadian dollars except per share amounts
|
||||
|
|
$
|
$
|
$
|
$
|
|
June 30,
2020
|
19
|
2,575
|
2,756
|
0.02
|
|
March 31,
2020
|
32
|
2,556
|
2,171
|
0.03
|
|
December 31,
2019
|
10
|
2,990
|
3,072
|
0.03
|
|
September 30,
2019
|
14
|
3,918
|
3,871
|
0.04
|
|
June 30,
2019
|
19
|
5,045
|
5,139
|
0.05
|
|
March 31,
2019
|
1
|
1,926
|
2,000
|
0.02
|
|
December 31,
2018
|
33
|
2,351
|
2,166
|
0.03
|
|
September 30,
2018
|
31
|
7,488
|
7,545
|
0.08
|
|
June 30,
2018
|
34
|
4,372
|
4,281
|
0.05
|
|
|
|
|
|
|
During the last eight quarters, the Company’s net loss has
ranged between $7,488 and $1,926. In the time period reflected, the
largest losses are generally recorded in the second and third
quarters each year due to the timing of option grants, which
typically occur in the second quarter, and the Company’s
summer exploration programs at its Canadian projects, which occur
during the third quarter.
AURYN RESOURCES INC.
Management’s
Discussion and Analysis of Financial Condition and
Results
of Operations for the six months ended June 30, 2020
(In
thousands of Canadian dollars, unless otherwise noted)
1.6/1.7 Financial position and liquidity and capital
resources
|
|
June
30, 2020
|
December
31, 2019
|
|
Cash and restricted
cash and cash equivalents
|
$11,417
|
$775
|
|
Mineral property
interests
|
$40,092
|
$39,714
|
|
Current
liabilities
|
$4,391
|
$4,005
|
|
Non-current
liabilities
|
$2,337
|
$2,134
|
As at
June 30, 2020, the Company had unrestricted cash of $11,302
(December 31, 2019 - $660) and a working capital balance of $8,367
(December 31, 2019 working capital deficit - $2,293) which includes
cash and the Amended Bridge Loan obligation which was converted to
shares after the quarter ended. Contractual obligations as at June
30, 2020, are reflected in the table below and include accounts
payable and accrued liabilities of $1,280 and the Bridge Loan
payable, including interest accrued at the quarter end, which
totals $3,111.
|
Contractual Obligations as of June 30, 2020
|
Payment terms
|
Amount
|
|
Accounts
payable and accrued liabilities
|
Immediately
|
$
1,280
|
|
Bridge
loan and interest payable
|
By Sep
12, 2020
|
3,111
|
|
Total
|
|
$ 4,391
|
During
the three and six months ended June 30, 2020, the Company used cash
of $1,885 and $4,381, respectively, in operating activities
compared to $3,086 and $4,783, respectively, in the same periods in
2019. Although the cash outflow in the six month periods is
comparable, the cash outflow in the second quarter of 2020 is
substantially lower than the cash outflow in the second quarter of
2019 due to the lower exploration activity as detailed
above.
Cash
flows related to investing activities was minimal for both of the
comparable periods.
In
February 2020, the Company offered a non-brokered private placement
of shares for gross proceeds of $15,000, driving cash inflow from
financing activities for the first six months of 2020 of $14,972
compared to the same period in 2019 where a private placement
generated gross proceeds of $5,255 driving cash inflow from
financing activities for the first six months of 2019 of
$5,605.
For the
three months ended June 30, 2020, the Company used cash for
financing activities of $33 relating to proceeds from option
exercises which was more than offset by belated costs for the
February 2020 private placement share offering. This compares to
cash generated by financing activities of $38 in the same three
months in 2019 from the proceeds from option exercises
The
2020 Offering has allowed the Company to meet its short term
liquidity needs and the conversion by the Lender of the Amended
Bridge Loan to shares on July 7, 2020, has reduced the imminent
cash requirements of the Company, and is now
debt-free.
Despite
the cash injection from the 2020 Offering, the Company’s
ability to continue as a going concern remains dependent upon its
ability to obtain the necessary financing going forward and while
the Company has been successful at raising capital in the past,
there can be no assurance that the Company will have sufficient
financing to meet its future capital requirements or that
additional financing will be available on terms acceptable to the
Company in the future.
AURYN RESOURCES INC.
Management’s
Discussion and Analysis of Financial Condition and
Results
of Operations for the six months ended June 30, 2020
(In
thousands of Canadian dollars, unless otherwise noted)
Capital Resources
February 2020 Private Placement and Bridge Loan
Amendment
In February 2020, the Company closed a non-brokered private
placement for gross proceeds of $15,000 (“2020
Offering”) which was closed in two tranches and consisted of
9,375,000 common shares (the “2020 Shares”) priced at
CAD$1.60 per 2020 Share, and total insider participation of 271,875
Shares for proceeds of $435. A total of $59 was paid in commissions
for the 2020 Offering.
The Company intends to use the net proceeds from the 2020 Offering
to fund continued surface exploration at its Sombrero and Curibaya
projects located in southern Peru and for general working
capital and $8,367 of unrestricted cash and working capital
remains at June 30, 2020. Share issue costs related to the 2020
Offering totalled $239, which included $59 in commissions, and $180
in other issuance costs. A reconciliation of the impact of the 2020
Offering on share capital is as follows:
1.6/1.7 Financial position and liquidity and capital resources
(continued)
Capital Resources (continued)
|
|
Number
of common shares
|
Impact
on
share
capital
|
|
Common shares issued
at $1.60 per share9,375,000
|
|
$15,000
|
|
Cash share issue
costs
|
-
|
(239)
|
|
Proceeds net of
share issue costs
|
9,375,000
|
$14,761
|
Bridge Loan and Amendment
In
September 2019, the Company entered the Bridge Loan facility for
$3,000 which incurred interest at 10%, payable annually or on
repayment of the principal, and had a term of one year from the
date of advancement (the “Maturity Date”), however,
could be repaid without penalty at any time after 90 days of
advancement at the discretion of the Company. The Bridge Loan is
secured by a first charge general security agreement over all of
the Company’s present and future assets.
Concurrent
with the closing of the first tranche of the 2020 Offering, on
February 5, 2020, the Company entered the Bridge Loan Amendment
which provided mutual conversion rights to the lender and the
Company, and also reduced the annual interest rate from 10% to 5%
from the date of amendment. Under the terms of the Bridge Loan
Amendment, the lender had the right to convert the $3 million of
principal that has been advanced to-date, and $123 of interest that
had accrued to-date (the “Amended Bridge Loan”), into
common shares at the price of $1.60, while the Company has the
right to require conversion if the Company’s common shares
trade on the TSX at a price of $2.50 or more for any five
consecutive trading days prior to the loan’s maturity
date.
As
noted above, the Lender converted the Bridge Loan to equity on July
7, 2020, the arrangement was cancelled, and the related security
was discharged.
AURYN RESOURCES INC.
Management’s
Discussion and Analysis of Financial Condition and
Results
of Operations for the six months ended June 30, 2020
(In
thousands of Canadian dollars, unless otherwise noted)
Exercise of Share Options
During
the six months ended June 30, 2020, 125,000 shares were issued as a
result of share options being exercised with a weighted average
exercise price of approximately $1.37 for gross proceeds of $172.
Attributed to these share options, fair value of $94 was
transferred from the equity reserves and recorded against share
capital.
Other sources of funds
As at
June 30, 2020, the other sources of funds potentially available to
the Company are through the exercise of outstanding share options
and share purchase warrants with terms as follows:
Share
options
|
|
Outstanding
|
Exercisable
|
||||
|
Expiry
date
|
Number of
options
|
Exercise
price
|
Remaining contractual
life (years)
|
Number of
options
|
Exercise
price
|
Remaining contractual
life (years)
|
|
Aug 17,
2020
|
865,000
|
$1.30
|
0.13
|
865,000
|
$1.30
|
0.13
|
|
June 20,
2021
|
2,085,000
|
2.63
|
0.97
|
2,085,000
|
2.63
|
0.97
|
|
Jan 10,
2022
|
440,000
|
3.22
|
1.53
|
440,000
|
3.22
|
1.53
|
|
June 20,
2023
|
651,875
|
1.42
|
2.97
|
651,875
|
1.42
|
2.97
|
|
June 26,
2023
|
900,000
|
1.42
|
2.99
|
900,000
|
1.42
|
2.99
|
|
Feb 7,
2024
|
200,625
|
1.36
|
3.61
|
174,375
|
1.36
|
3.61
|
|
Apr 9,
2024
|
2,755,000
|
1.96
|
3.78
|
2,066,250
|
1.96
|
3.78
|
|
Aug 21,
2024
|
70,000
|
1.82
|
4.15
|
43,750
|
1.82
|
4.15
|
|
Nov 20,
2024
|
170,000
|
1.82
|
4.39
|
85,000
|
1.82
|
4.39
|
|
Jun 1,
2025
|
75,000
|
1.83
|
4.92
|
18,750
|
1.83
|
4.92
|
|
|
8,212,500
|
$2.01
|
2.43
|
7,330,000
|
$2.02
|
2.25
|
AURYN RESOURCES INC.
Management’s
Discussion and Analysis of Financial Condition and
Results
of Operations for the six months ended June 30, 2020
(In
thousands of Canadian dollars, unless otherwise noted)
1.6/1.7 Financial position and liquidity and capital resources
(continued)
Warrants
|
Expiry
date
|
Number of
warrants
|
Exercise
price
|
Remaining contractual
life (years)
|
|
September 12,
2022
|
500,000*
|
$2.00
|
2.2
|
*The
warrants have a term of three years from the date of issue however
they do not become exercisable until one year after the advancement
of the Bridge Loan.
1.8
Off-balance
sheet arrangements
The Company does not utilize off-balance sheet arrangements.
Earn-in arrangements are not viewed as off-balance sheet
arrangements, and there are no other commitments held by the
Company at the balance sheet date.
1.9
Transactions
with related parties
All
transactions with related parties have occurred in the normal
course of operations. All amounts are unsecured, non-interest
bearing and have no specific terms of settlement, unless otherwise
noted.
|
Three months ended June 30,
|
Six months ended June 30,
|
|||
|
|
2020
|
2019
|
2020
|
2019
|
|
Universal Mineral Services Ltd.
|
|
|
|
|
|
Exploration
and evaluation costs:
|
|
|
|
|
|
Committee
Bay and Gibson MacQuoid
|
$57
|
$86
|
$117
|
$167
|
|
Homestake
|
27
|
30
|
64
|
53
|
|
Peru
|
41
|
103
|
92
|
129
|
|
Fees,
salaries and other employee benefits
|
78
|
99
|
133
|
191
|
|
Insurance
|
-
|
-
|
-
|
-
|
|
Legal
and professional fees
|
4
|
-
|
11
|
-
|
|
Marketing
and investor relations
|
24
|
22
|
61
|
40
|
|
Office
and administration
|
100
|
105
|
187
|
199
|
|
Project
investigation costs
|
31
|
11
|
35
|
15
|
|
Total
transactions for the periods
|
362
|
456
|
$700
|
$794
|
Universal
Mineral Services Ltd., (“UMS”) is a private company
with certain directors and officers in common. Pursuant to an
agreement dated March 30, 2012 and as amended on December 30, 2015,
UMS provides geological, financial and transactional advisory
services as well as administrative services to the Company on an
ongoing, cost recovery basis. Having these services available
through UMS, on an as needed basis, allows the Company to maintain
a more efficient and cost-effective corporate overhead structure by
hiring fewer full time employees and engaging outside professional
advisory firms less frequently. The agreement has an indefinite
term and can be terminated by either party upon providing due
notice.
The
outstanding balance owing to UMS at June 30, 2020 was $136 (December 31, 2019
– $235). In addition, the Company had $150 on deposit with
UMS as at June 30, 2020
(December 31, 2019 -
$150).
1.10
Subsequent
events
As
noted above, on July 7, 2020, the Company announced the conversion
of the 2019 bridge loan (“Bridge Loan”) by the loan
holder into common shares, thereby leaving Auryn
debt-free.
1.11
Proposed
transactions
As
noted above, on July 29, 2020, the Company announced it had entered
into an Agreement to acquire Eastmain.
1.12
Critical
accounting estimates
The
preparation of the financial statements in conformity with IFRS
requires management to select accounting policies and make
estimates and judgments that may have a significant impact on the
consolidated financial statements. Estimates are continuously
evaluated and are based on management’s experience and
expectations of future events that are believed to be reasonable
under the circumstances.
AURYN RESOURCES INC.
Management’s
Discussion and Analysis of Financial Condition and
Results
of Operations for the six months ended June 30, 2020
(In
thousands of Canadian dollars, unless otherwise noted)
1.12
Critical
accounting estimates (continued)
Key
sources of estimation uncertainty that have a significant risk of
causing a material adjustment to the carrying amounts of assets and
liabilities are:
i.
Provisions
Provisions
recognized in the 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.
The
Company does not have any provisions recorded as at June 30, 2020
and December 31, 2019, other than that related to the reclamation
obligations which are discussed below.
ii.
Reclamation
obligations
Management assesses
its reclamation obligations annually and when circumstances suggest
that a material change to the obligations have occurred.
Significant estimates and assumptions are made in determining the
provision for rehabilitation and site restoration, as there are
numerous factors that will affect the ultimate liability payable.
These factors include estimates of the extent, the timing and the
cost of reclamation activities, regulatory change, cost increases,
and changes in discount rates. Those uncertainties may result in
actual expenditure differing from the amounts currently provided.
The provision at the reporting date represents management’s
best estimate of the present value of the future reclamation costs
required. Changes to estimated future costs are recognized in the
statement of financial position by adjusting the reclamation asset
and liability.
iii.
Financial
instruments
Financial
instruments are assessed upon initial recognition to determine
whether they meet the definition of a financial asset, financial
liability or equity instrument depending on the substance of the
contractual arrangement. Judgement is required in making this
determination as the substance of a transaction may differ from its
legal form. Once a determination is made, IFRS requires that
financial instruments be measured at fair value on initial
recognition. For financial instruments that do not have quoted
market prices or observable inputs, judgements are made in
determining what are appropriate inputs and assumptions to use in
calculating the fair value.
IFRS
also requires that an exchange between an existing borrower and
lender of debt instruments with substantially different terms, or a
substantial modification of the terms of an existing financial
liability or a part of it, be treated for as an extinguishment of
the original financial liability and the recognition of a new
financial liability, and as such, judgment is applied in
determining whether a modification is substantial.
Upon
initial recognition of the Bridge Loan and then again on the
initial recognition of the Amended Bridge Loan, management had to
estimate the Company’s effective interest rate which was
needed in order to fair value the debt component and determine the
residual amount to be allocated to the equity component. As result
of the Bridge Loan Amendment, management had to make an assessment
of whether the modification was substantial and thus be treated for
as an extinguishment of the original financial liability and the
recognition of a new financial liability.
iv.
Share-based
compensation
The
Company determines the fair value of share options granted using
the Black‐Scholes option pricing
model. This option pricing model requires the development of
market-based subjective inputs, including the risk-free interest
rate, expected price volatility and expected life of the option.
Changes in these inputs and the underlying assumption used to
develop them can materially affect the fair value
estimate.
AURYN RESOURCES INC.
Management’s
Discussion and Analysis of Financial Condition and
Results
of Operations for the six months ended June 30, 2020
(In
thousands of Canadian dollars, unless otherwise noted)
There
were 75,000 share-based options granted during the six months ended
June 30, 2020, and 2,995,000 share-based options granted during the
same period in 2019. The fair value of the share-based options
granted during the three and six months ended June 30, 2020 and
2019 were estimated using the Black-Scholes option valuation model
with the following weighted average assumptions:
|
|
Three
months ended June 30,
|
Six
months ended June 30,
|
||
|
|
2020
|
2019
|
2020
|
2019
|
|
Risk-free interest
rate
|
0.39%
|
1.59%
|
0.39%
|
1.61%
|
|
Expected dividend
yield
|
Nil
|
Nil
|
Nil
|
Nil
|
|
Share price
volatility
|
58%
|
62%
|
58%
|
63%
|
|
Expected forfeiture
rate
|
0%
|
0%
|
0%
|
0%
|
|
Expected life in
years
|
4.90
|
4.33
|
4.90
|
4.34
|
1.12
Critical
accounting estimates (continued)
v.
Deferred tax assets
and liabilities
Management judgment
and estimates are required in assessing whether deferred tax assets
and deferred tax liabilities are recognized in the consolidated
statements of financial position. Judgments are made as to whether
future taxable profits will be available in order to recognize
deferred tax assets. Assumptions about the generation of future
taxable profits depend on management’s estimates of future
cash flows. These depend on estimates of future production and
sales volumes, commodity prices, reserves, operating costs, and
other capital management transactions. These judgments and
assumptions are subject to risk and uncertainty and changes in
circumstances may alter expectations, which may impact the amount
of deferred tax assets and deferred tax liabilities recognized on
the consolidated statements of financial position and the benefit
of other tax losses and temporary differences not yet recognized.
The Company’s deferred tax assets and liabilities were
determined using a future income tax rate of 27% in Canada and
29.5% in Peru.
1.13
Changes
in accounting policies including initial adoption
The
Company has adopted the following amended accounting
standards and policies
effective January 1, 2020:
In
October 2018 the IASB issued Amendments to IAS 1 and IAS 8 to
clarify the definition of material in IAS 1 and align the
definition across the standards. The amendments are not intended to
alter the underlying concept of materiality in IFRS standards. The
concept of ‘obscuring’ material information with
immaterial information has been included as part of the new
definition. The threshold for materiality influencing users has
been changed from “could influence” to “could
reasonably be expected to influence”.
The
definition of material in IAS 8 has been replaced by a reference to
the definition of material in IAS 1. In addition, the IASB amended
other Standards and the Conceptual Framework that contain a
definition of material or refer to the term “material”
to ensure consistency.
AURYN RESOURCES INC.
Management’s
Discussion and Analysis of Financial Condition and
Results
of Operations for the six months ended June 30, 2020
(In
thousands of Canadian dollars, unless otherwise noted)
The
Company adopted the amendments to IAS 1 and IAS 8 effective January
1, 2020, which did not have a material impact on the
Company’s interim financial statements.
In
October 2018 the IASB issued narrow-scope amendments to IFRS 3 to
help entities determine whether an acquired set of activities and
assets is a business or not.
The
amendments, which are effective for annual reporting periods
beginning on or after January 1, 2020, clarify the minimum
requirements to be a business, remove the assessment of a market
participant’s ability to replace missing elements, narrow the
definition of outputs, add guidance to assess whether an acquired
process is substantive and introduce an optional concentration test
to permit a simplified assessment.
The
adoption of the amended standard did not have an immediate impact
on the Company’s condensed consolidated interim financial
statements but will be applied in assessing any future business
combination and asset acquisition scenarios.
1.14
Financial
instruments and other instruments
As at
June 30, 2020, the Company’s financial instruments consist of
cash, marketable securities, amounts receivable, deposits, accounts
payables and accrued liabilities and the Amended Bridge Loan. The
fair values of these financial instruments, other than the
marketable securities and the Amended Bridge Loan, approximate
their carrying values due to their short term to maturity. The
Company’s marketable securities, which were classified under
level 1 of the fair value hierarchy, are measured at fair value
using their quoted market price at period end. The Bridge Loan and
then the Amended Bridge Loan, on initial recognition, were measured
at fair value under level 2 of the fair value hierarchy and
subsequently measured at amortized cost.
The
Company’s financial instruments are exposed to certain
financial risks including, credit risk, currency risks, liquidity
risk, interest rate risk and capital risk. Details of the primary
risks that the Company is exposed to are laid out in the notes to
the Company’s condensed consolidated interim financial
statements.
AURYN RESOURCES INC.
Management’s
Discussion and Analysis of Financial Condition and
Results
of Operations for the six months ended June 30, 2020
(In
thousands of Canadian dollars, unless otherwise noted)
1.15
Other
requirements
Capital structure
Authorized: Unlimited number of common
shares
Number
of common shares issued and outstanding as at August 11, 2020:
107,613,234
Number
of common shares issued and outstanding as at June 30, 2020:
104,731,775
Share
based options as at August 11, 2020:
|
|
Outstanding
|
Exercisable
|
||||
|
Expiry
date
|
Number of
options
|
Exercise
price
|
Remaining contractual
life (years)
|
Number of
options
|
Exercise
price
|
Remaining contractual
life (years)
|
|
Aug 17,
2020
|
325,000
|
$1.30
|
0.02
|
325,000
|
$1.30
|
0.02
|
|
June 20,
2021
|
2,070,000
|
2.63
|
0.86
|
2,070,000
|
2.63
|
0.86
|
|
Jan 10,
2022
|
440,000
|
3.22
|
1.42
|
440,000
|
3.22
|
1.42
|
|
June 20,
2023
|
520,000
|
1.42
|
2.86
|
520,000
|
1.42
|
2.86
|
|
June 26,
2023
|
850,000
|
1.42
|
2.87
|
850,000
|
1.42
|
2.87
|
|
Feb 7,
2024
|
185,000
|
1.36
|
3.49
|
185,000
|
1.36
|
3.49
|
|
Apr 9,
2024
|
2,663,125
|
1.96
|
3.66
|
2,318,750
|
1.96
|
3.66
|
|
Aug 21,
2024
|
70,000
|
1.82
|
4.03
|
43,750
|
1.82
|
4.03
|
|
Nov 20,
2024
|
85,000
|
1.82
|
4.28
|
-
|
1.82
|
4.28
|
|
Jun 1,
2025
|
75,000
|
1.83
|
4.81
|
18,750
|
1.83
|
4.81
|
|
|
7,283,125
|
$2.08
|
2.44
|
6,771,250
|
$2.09
|
2.32
|
The Company has 500,000 share purchase warrants outstanding
as at August 11, 2020, as reflected in Section
1.6/1.7.
Controls and procedures
Disclosure
controls and procedures (“DC&P”) are designed to
provide reasonable assurance that material information related to
the Company, including its consolidated subsidiaries, is made known
to the Company’s certifying officers. The Company’s
Chief Executive Officer (“CEO”) and Chief Financial
Officer (“CFO”) are responsible for establishing and
maintaining adequate DC&P and have concluded that the DC&P
the Company have in place are effective in providing reasonable
assurance that information required to be disclosed under
applicable securities regulations is recorded, processed,
summarized and reported within the time periods
specified.
The
Company’s management, with the involvement of the CEO and
CFO, performs regular reviews of its DC&P to ensure they are
designed and operating effectively. As there are inherent
limitations in all control systems, any economically feasible
control system can only provide reasonable, not absolute, assurance
that the control system will prevent or detect all misstatements
due to error or fraud.
Management’s
most recent evaluation of the DC&P was conducted for the year
ended December 31, 2019 from which management concluded that the
Company’s DC&P are effective in providing reasonable
assurance that information required to be disclosed under
applicable securities regulations is recorded, processed,
summarized and reported within the required time
periods.
AURYN RESOURCES INC.
Management’s
Discussion and Analysis of Financial Condition and
Results
of Operations for the six months ended June 30, 2020
(In
thousands of Canadian dollars, unless otherwise noted)
1.15
Other
requirements (continued)
Internal control over financial reporting
Internal
control over financial reporting (“ICFR”) includes
those policies and procedures that:
●
pertain to the
maintenance of records that in reasonable detail accurately and
fairly reflect the transactions and dispositions of the assets of
the Company;
●
provide reasonable
assurance that transactions are recorded as necessary to permit
preparation of consolidated financial statements in accordance with
IFRS, and that receipts and expenditures of the Company are being
made only in accordance with authorizations of management and
directors of the Company; and
●
provide reasonable
assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the Company assets or incurring
liabilities or other obligations that could have a material effect
on the consolidated financial statements.
It is
management’s responsibility to establish and maintain
adequate ICFR to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
consolidated financial statements for external purposes in
accordance with IFRS.
As part
of its annual evaluation process, management engaged a third party
consultant to perform testing over the design and effectiveness of
ICFR as at December 31, 2019. This testing was done under the
supervision of the CEO and CFO to support management’s
evaluation of the key controls based on the framework in Internal
Control - Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission
(“COSO”). Management concluded that the Company’s
ICFR was effective as of that date. There have been no material
changes to the DC&P or the ICFR during the six months ended
June 30, 2020.
Additional
disclosures pertaining to the Company’s management
information circulars, material change reports, press releases and
other information are available on the SEDAR website at
www.sedar.com.
On behalf of the Board of Directors,
“Shawn
Wallace”
Shawn Wallace
President and Chief Executive Officer
August 11, 2020
Exhibit
99.3
Form 52-109F2
Certification of Interim Filings
Full Certificate
I,
Shawn Wallace, Chief Executive
Officer of Auryn Resources Inc., certify the
following:
1.
Review: I have reviewed the interim
financial report and interim MD&A (together, the “interim
filings”) of Auryn Resources
Inc. (the “issuer”) for the interim period ended
June 30, 2020.
2.
No
misrepresentations: Based on my knowledge, having
exercised reasonable diligence, the interim filings do not contain
any untrue statement of a material fact or omit to state a material
fact required to be stated or that is necessary to make a statement
not misleading in light of the circumstances under which it was
made, with respect to the period covered by the interim
filings.
3.
Fair
presentation: Based on my knowledge, having
exercised reasonable diligence, the interim financial report
together with the other financial information included in the
interim filings fairly present in all material respects the
financial condition, financial performance and cash flows of the
issuer, as of the date of and for the periods presented in the
interim filings.
4.
Responsibility: The
issuer’s other certifying officer(s) and I are responsible
for establishing and maintaining disclosure controls and procedures
(DC&P) and internal control over financial reporting (ICFR), as
those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’
Annual and Interim Filings, for the issuer.
5.
Design: Subject to
the limitations, if any, described in paragraphs 5.2 and 5.3, the
issuer’s other certifying officer(s) and I have, as at the
end of the period covered by the interim filings
(a)
designed DC&P,
or caused it to be designed under our supervision, to provide
reasonable assurance that
(i)
material
information relating to the issuer is made known to us by others,
particularly during the period in which the interim filings are
being prepared; and
(ii)
information
required to be disclosed by the issuer in its annual filings,
interim filings or other reports filed or submitted by it under
securities legislation is recorded, processed, summarized and
reported within the time periods specified in securities
legislation; and
(b)
designed ICFR, or
caused it to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with the issuer’s GAAP.
5.1
Control framework:
The control framework the issuer’s other certifying
officer(s) and I used to design the issuer’s ICFR is
based on Internal Control –
Integrated Framework (2013) published by the Committee of
Sponsoring Organizations of the Treadway
Commission.
5.2
ICFR – material
weakness relating to design: NA
5.3
Limitation on scope of
design: NA
6.
Reporting changes in
ICFR: The issuer
has disclosed in its interim MD&A any change in the
issuer’s ICFR that occurred during the period beginning on
April 1, 2020 and ended on
June 30, 2020 that has
materially affected, or is reasonably likely to materially affect,
the issuer’s ICFR.
Date:
August 11, 2020
Signed “Shawn Wallace”
_______________________
Shawn
Wallace
Chief
Executive Officer
Exhibit
99.4
Form 52-109F2
Certification of Interim Filings
Full Certificate
I,
Elizabeth Senez, Interim Chief
Financial Officer of Auryn Resources Inc., certify the
following:
1.
Review: I have reviewed the interim
financial report and interim MD&A (together, the “interim
filings”) of Auryn Resources
Inc. (the “issuer”) for the interim period ended
June 30, 2020.
2.
No
misrepresentations: Based on my knowledge, having
exercised reasonable diligence, the interim filings do not contain
any untrue statement of a material fact or omit to state a material
fact required to be stated or that is necessary to make a statement
not misleading in light of the circumstances under which it was
made, with respect to the period covered by the interim
filings.
3.
Fair
presentation: Based on my knowledge, having
exercised reasonable diligence, the interim financial report
together with the other financial information included in the
interim filings fairly present in all material respects the
financial condition, financial performance and cash flows of the
issuer, as of the date of and for the periods presented in the
interim filings.
4.
Responsibility: The
issuer’s other certifying officer(s) and I are responsible
for establishing and maintaining disclosure controls and procedures
(DC&P) and internal control over financial reporting (ICFR), as
those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’
Annual and Interim Filings, for the issuer.
5.
Design: Subject to
the limitations, if any, described in paragraphs 5.2 and 5.3, the
issuer’s other certifying officer(s) and I have, as at the
end of the period covered by the interim filings
(a)
designed DC&P,
or caused it to be designed under our supervision, to provide
reasonable assurance that
(i)
material
information relating to the issuer is made known to us by others,
particularly during the period in which the interim filings are
being prepared; and
(ii)
information
required to be disclosed by the issuer in its annual filings,
interim filings or other reports filed or submitted by it under
securities legislation is recorded, processed, summarized and
reported within the time periods specified in securities
legislation; and
(b)
designed ICFR, or
caused it to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with the issuer’s GAAP.
5.1
Control framework:
The control framework the issuer’s other certifying
officer(s) and I used to design the issuer’s ICFR is
based on Internal Control –
Integrated Framework (2013) published by the Committee of
Sponsoring Organizations of the Treadway
Commission.
5.2
ICFR – material
weakness relating to design: NA
5.3
Limitation on scope of
design: NA
6.
Reporting changes in
ICFR: The issuer
has disclosed in its interim MD&A any change in the
issuer’s ICFR that occurred during the period beginning on
April 1, 2020 and ended on
June 30, 2020 that has
materially affected, or is reasonably likely to materially affect,
the issuer’s ICFR.
Date:
August 11, 2020
Signed “Elizabeth Senez”
_______________________
Elizabeth
Senez
Interim
Chief Financial Officer