Integra Resources Corp 6-K, filed Nov 14, 2022
Integra Resources Corp. (ITRG)
About this 6-K
Integra Resources Corp filed this 6-K on November 14, 2022.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 or 15d-16 UNDER THE
SECURITIES EXCHANGE ACT OF 1934
For the month of November 2022.
Commission File Number 001-39372
INTEGRA RESOURCES CORP.
(Exact Name of Registrant as Specified in Charter)
1050-400 Burrard Street
Vancouver, British Columbia V6C 3A6
Canada
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F
Form 20-F ☐ Form 40-F ☒
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): ☐
Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.
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): ☐
Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant's "home country"), or under the rules of the home country exchange on which the registrant's securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant's security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.
EXPLANATORY NOTE
Exhibits 99.1, 99.2, 99.5 and 99.6 submitted with this Form 6-K are hereby incorporated by reference into Integra Resources Corp's Registration Statements on Form F-10, as amended (File No. 333-242483).
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.
| Integra Resources Corp. | |
| /s/ Andree St-Germain | |
| Date: November 14, 2022 | Andree St-Germain Chief Financial Officer |
INDEX TO EXHIBITS
Integra Resources Corp.
Management's Discussion and Analysis
For the Three and Nine-Month Periods Ended
September 30, 2022 and 2021
Expressed in US Dollars
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
This portion of this quarterly report provides Management's Discussion and Analysis ("MD&A") of the financial condition and results of operations, to enable a reader to assess material changes in financial condition and results of operations as at, and for the three and nine-month period ended September 30, 2022, in comparison to the corresponding prior-year periods. The MD&A is intended to help the reader understand Integra Resources Corp. ("Integra", "we", "our" or the "Company"), our operations, financial performance, and present and future business environment.
This MD&A has been prepared by management as at November 14, 2022 and should be read in conjunction with the unaudited interim condensed consolidated financial statements of Integra for the three and nine-month periods ended September 30, 2022 and 2021 and the Company's audited consolidated financial statements for the years ended December 31, 2021 and 2020 prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board (the "IASB"). Further information on the Company can be found on SEDAR at www.sedar.com and the Company's website, www.integraresources.com.
For the purposes of preparing our MD&A, we consider the materiality of information. Information is considered material if: (i) such information results in, or would reasonably be expected to result in, a significant change in the market price or value of our shares; or (ii) there is a substantial likelihood that a reasonable investor would consider it important in making an investment decision; or (iii) it would significantly alter the total mix of information available to investors. We evaluate materiality with reference to all relevant circumstances, including potential market sensitivity.
CORPORATE SUMMARY
Integra Resources Corp. is a mineral resources company engaged in the acquisition, exploration, and development of mineral properties in the Americas. The primary focus of the Company is advancement of its DeLamar gold and silver project ("DeLamar Project"), consisting of the neighboring DeLamar Deposit and Florida Mountain Deposit ("Florida Mtn" or "Florida Mountain") in the heart of the historic Owyhee County mining district in southwestern Idaho. The management team comprises the former executive team from Integra Gold Corp. The Company announced a positive Pre-Feasibility Study ("PFS") in February 2022.
As of November 14, 2022, the officers and directors of the Company were:
| George Salamis | President, Director and CEO |
| Andrée St-Germain | Chief Financial Officer |
| Max Baker | Vice President Exploration |
| Timothy Arnold | Chief Operating Officer |
| Joshua Serfass | Executive VP, Corporate Development and Investor Relations |
| Leanne Nakashimada | Corporate Secretary |
| Stephen de Jong | Chairman and Director |
| David Awram | Director |
| Timo Jauristo | Director |
| Anna Ladd-Kruger | Director |
| C.L. “Butch” Otter | Director |
| Carolyn Clark Loder | Director |
The Company is incorporated under the Business Corporations Act (British Columbia) (the "BCBCA").
The Company's head office is located at 1050 - 400 Burrard Street, Vancouver, BC V6C 3A6 and its registered office is located at 2200 HSBC Building, 885 West Georgia Street Vancouver, BC V6C 3E8.
The Company trades on the TSX Venture Exchange ("TSX-V"), under the trading symbol "ITR" and trades in the United States on the NYSE American under the stock symbol "ITRG".
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
The following diagram illustrates the intercorporate relationships among Integra and its subsidiaries, as well as the jurisdiction of incorporation of each entity.
Q3 2022 IN REVIEW AND RECENT EVENTS
CORPORATE
The Company concurrently closed on August 4, 2022 a $11 million brokered equity financing and a $20 million convertible loan with Beedie Capital. Please refer to the press releases dated August 4, 2022 for further details.
Russia-Ukraine military conflict
To date, the Russo-Ukrainian conflict has not had a direct impact on the Company, as it does not have any significant exposure in either Russia or Ukraine from a business or personnel perspective. However, the developing conflict may have an adverse impact on the Company's assets, liabilities, and overall financial condition as well as on the Company's project development and operational costs.
Please refer to the "Risk and Uncertainties" section below for further details.
EXPLORATION
DeLamar Drilling
The company announced on July 21, 2022 drill results from Sullivan Gulch (located on the eastern portion of the DeLamar Deposit) and Summercamp-Regan. These drill holes, which were part of a metallurgical drill program, demonstrate the strong continuity of gold-silver at the Project and also extend the known mineralization at Sullivan Gulch by 30 m.
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
The first 100 m of drill hole IDM-22-206 tested historic backfill and encountered strong AuEq grades that could further complement future heap leach plans, providing additional evidence that these low-grade stockpiles and backfill at DeLamar and Florida Mountain have the potential to increase the Oxide-Mixed resource at the Project.
A portion of the high-grade intercepts announced on July 21 continue to define the recently discovered high-grade Northwest striking gold-silver zone that underlies the bulk tonnage low-grade resource at Sullivan Gulch, with continuity in the North zone of 350 m and the South zone of 350 m.
Drill results from Sullivan Gulch and Summercamp-Regan announced on July 21, 2022 include*:
• IDM-22-204 - Sullivan Gulch
o 0.57 grams per tonne ("g/t") gold ("Au") and 131.29 g/t silver ("Ag") (2.26 g/t gold equivalent ("AuEq")) over 102.11 meters ("m")
◾ Including 0.78 g/t Au and 875.25 g/t Ag (12.05 g/t AuEq) over 6.09 m
◾ Including 1.30 g/t Au and 2,718 g/t Ag (36.28 g/t AuEq) over 1.53 m
◾ Including 0.46 g/t Au and 176.01 g/t Ag (2.73 g/t AuEq) over 12.19 m
• IDM-22-206 (the first 100 m is through historic Backfill) - Sommercamp-Regan (Main DeLamar Pit area)
o 0.27 g/t Au and 48.42 g/t Ag (0.89 g/t AuEq) over 110.64 m
• IDM-22-207
o 0.18 g/t Au and 24.36 g/t Ag (0.50 g/t AuEq) over 99.06 m
* Downhole thickness; true width varies depending on drill hole dip; most drill holes are aimed at intersecting the vein structures close to perpendicular therefore true widths are close to downhole widths (approximately 70% conversion ratio); Gold equivalent = g Au/t + (g Ag/t ÷ 77.70); Intervals reported are uncapped.
Florida Mountain Drilling
The company announced on October 20, 2022 drill results from Florida Mountain.
Drill results from Florida Mountain include*:
o FME-21-138 - 0.59 g/t Au and 15.01 g/t Ag (0.79 g/t AuEq) over 108.81 m
◾ Including 3.16 g/t Au and 131.00 g/t Ag (4.85 g/t AuEq) over 1.52 m
o FME-21-141 - 0.50 g/t Au and 41.50 g/t Ag (1.03 g/t AuEq) over 73.15 m
◾ Including 6.42 g/t Au and 745.00 g/t Ag (16.01 g/t AuEq) over 1.53 m
◾ Including 2.04 g/t Au and 539.00 g/t Ag (8.98 g/t AuEq) over 1.52 m
o FME-21-152 - 0.50 g/t Au and 31.63 g/t Ag (0.91 g/t AuEq) over 43.89 m
Approximately the first 100 m of the Florida Mountain deposit host oxide and transitional gold-silver mineralization that could be amenable to heap leaching. The drill results announced today continue to demonstrate the strong continuity and grade of the oxide and transitional material destined for the heap leach pad as demonstrated in the Company's 2022 PFS.
* Downhole thickness; true width varies depending on drill hole dip; most drill holes are aimed at intersecting the vein structures close to perpendicular therefore true widths are close to downhole widths (approximately 70% conversion ratio); Gold equivalent = g Au/t + (g Ag/t ÷ 77.70); Intervals reported are uncapped.
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
BlackSheep Drilling
The company announced on October 20, 2022 drill results from BlackSheep.
Drill results from BlackSheep include*:
o IGE-21-004 - 0.52 g/t Au and 110.58 g/t Ag (1.94 g/t AuEq) over 6.86 m
o LDE-21-005 - 0.59 g/t Au and 11.23 g/t Ag (0.73 g/t AuEq) over 48.77 m
◾ Including 8.62 g/t Au and 17.57 g/t Ag (8.85 g/t AuEq) over 1.52 m
The BlackSheep target is a highly prospective, 25 square kilometer greenfield exploration target northwest of the DeLamar Deposit. Integra has done very limited exploration drilling in BlackSheep to date; however, the initial drill results suggest that BlackSheep could contain multiple oxide and transitional gold-silver targets that could further complement DeLamar.
Generally, the first 40 m of material at BlackSheep is oxide and transitional and could be amenable heap leaching, subject to further metallurgical testwork. The Company also completed an extensive surface mapping and sampling program at BlackSheep, surface assay samples include:
o Lucky Days - 2.76 g/t Au and 586.00 g/t Ag (10.30 g/t AuEq)
o Georgianna - 13.33 g/t Au and 109.57 g/t Ag (14.74 g/t AuEq)
o Twin Peaks - 6.12 g/t Au and 330.00 g/t Ag (10.37 g/t AuEq)
* Downhole thickness; true width varies depending on drill hole dip; most drill holes are aimed at intersecting the vein structures close to perpendicular therefore true widths are close to downhole widths (approximately 70% conversion ratio); Gold equivalent = g Au/t + (g Ag/t ÷ 77.70); Intervals reported are uncapped.
Sampling and QA/QC Procedure
Thorough QA/QC protocols are followed on the DeLamar Project, including insertion of duplicate, blank and standard samples in the assay stream for all drill holes. The samples are submitted directly to AAL in Reno, Nevada for preparation and analysis. Analysis of gold is performed using fire assay method with atomic absorption ("AA") finish on a 1 assay ton aliquot. Gold results over 5 g/t are re-run using a gravimetric finish. Silver analysis is performed using ICP for results up to 100 g/t on a 5 acid digestion, with a fire assay, gravimetric finish for results over 100 g/t silver.
See "Properties - Sampling, Analysis and Data Verification" below with respect to the DeLamar Report.
DEVELOPMENT
Drilling:
Metallurgical Drilling: The Company continued its metallurgical drilling program in 2022 and drilled a total of 1,831 m this year.
Condemnation Drilling: The Company continued its condemnation drilling program in Q3 2022 and drilled a total of 1,753 m this quarter.
Permitting:
Integra continued to address comments from the agencies on the wildlife technical reports for baseline surveys completed in 2021. The End of Fish Point Studies for surface waters including macroinvertebrates that was initiated in June was completed in early July. The Geochemistry program continued for the third quarter of 2022 with analysis from the humidity cells and Meteoric Water Mobility Procedures ("MWMP"), Acid Based Accounting ("ABA") and Net Acid Generating ("NAG") testing being reviewed and prepared for a presentation to the agencies and National Environmental Policy Act ("NEPA") Third Party Contractor. The aforementioned meeting was held in July and the interim Humidity Cell Testing and the MWMP test results were discussed. Data interpretations, proposed modeling data gaps as well as next steps for the program were proposed with respect to humidity cell testing and specific cell termination procedures in preparation of Q4 results.
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
Integra advanced the groundwater hydrogeologic model by adding geology and large scale faulting, soils and surface soil water balance to the model constraints, as well as conducting the initial run on the geologic model. Continued monitoring of the Vibrating Wire Piezometers installed in select Metallurgical drill holes to monitor groundwater elevations below the proposed pits is being used to begin data refinement for underground workings and surface stream flows to further refine the model parameters. Comments from the 2021 Meteorological Station annual report and the Particulate Matter Q4 Data Summary Report were received from the agencies and Integra prepared and submitted a response to the comments in October.
Integra continued work on water rights transfers and potential groundwater or surface water locations to be use for future exploration and groundwater well drilling activities as well as conducted coordination with US Geological Survey ("USGS") and US Army Corps of Engineers ("USACE") on the USGS Gaging Station along Jordan and preparation for weir rehabilitation for monitoring water in Jordan Creek basin and engaged Idaho Department of Water Resources ("IDWR")on historic water rights and points of diversion and usage. Remaining vegetation sensitive plant, soils and cultural resource studies were completed for areas all areas that were included in the latest version of the proposed mine features. Integra completed Q3 surface water and groundwater sampling events in late July and submitted Q2 quarterly report to the agencies. Integra continued coordination with IDEQ, BLM, IDL, IDWR, USACE and Idaho Office of Energy and Mineral Resources ("OEMR") on select 2022 project studies and proposed timelines. Other items of coordination include:
- Vegetation and mammal annual sampling for Idaho Department of Environmental Quality ("IDEQ") water quality reporting to be submitted in early 2023
- Submittal of drill plan for drilling on historic stockpiles/dumps to Idaho Department of Lands
- Submittal of revised Plan of Operations Amendment for the Stone Cabin Mine Plan - for Geotech and Condemnation Drilling
- Submittal of revised Plan of Operations Amendment for the DeLamar Silver Mine Plan - for Geotech and Condemnation Drilling
- Coordination of Ethnographic Study with Westland
- Coordination on collecting surface water flow measurements for surface water calibrations
- Submittal of and acceptance of reconciliation reporting by Idaho Department of Lands on disturbances associated with private lands 2018-2020
- Developed Noxious weed Management Plan
- Developed Environmental Measures for Drilling Plan Standard Operating Procedures
Engineering/Metallurgical Work:
Third quarter efforts for the engineering group were largely focused on geotechnical and condemnation drilling to confirm facility locations from the PFS for the Mine Plan of Operations submittal. Both programs will likely continue into 2023 depending on permitting and weather conditions. A request for quote for the power supply study was also drafted in Q3 and will be sent to prospective bidders in Q4. A project update was presented at the SME Nevada Mineral Processors Division conference.
Metallurgical work and coordination with the geology team progressed in Q3 as both groups continue to improve the understanding of the deposit, ensure the best use of available data and materials, and to identify gaps. It was discovered that several DeLamar drill holes crossed recovery zone boundaries. These composites were re-allocated, and the recovery model updated. Significant, overall impacts to the Project are not anticipated from this work. Several bottle roll tests and column leach tests were initiated from both deposits to fill gaps from the PFS test work, better define the metallurgical boundaries, and to de-risk the recovery model. On the Albion front, individual composites from the master composites saw basic minerology analysis and variability flotation testing to better understand these materials before shelving the program, with results pending. Testing specific to the Albion process is on hold indefinitely.
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
Last, site support efforts included drafting an operating & maintenance manual for water management and treatment systems. Developing preventative maintenance programs, engineering drawings, SOP's, and bids for future control system upgrades were part of this effort.
SOCIAL AND ENVIRONMENTAL
In line with previous years, community relations activities in Q3 continue to be the busiest of the year. Meetings were held with both known and new stakeholders as the Company continues to listen to, learn from, inform, and register stakeholders in the areas where we operate. Staff continued attendance to non-Integra community meetings, and Integra participated in several community events. During the three-month period ended September 30, 2022, the Company met with local residents, community associations, secondary education institutions, higher education institutions, county-level environmentally focused groups, outdoor recreation groups, local health coalitions, civic and commerce groups, state and federal agencies, and elected officials. The 2nd annual DeLamar Day community appreciation event was held in August, with attendance growing by over 100% from the previous year. Meetings with Tribal Nations continued, and work commenced on the organization of Tribal Nation led cultural monitoring surveys set to take place in Q4. Representatives from Integra and a Tribal Nation worked together to organize support for an Elder Firewood Program.
Numerous site visits with stakeholders of the DeLamar Project were carried out over the course of Q3, including several large tours with various State Agencies that are or will be involved in the future permits being sought for the Project. The Integra Employee Culture Committee held its monthly meetings, focusing on culture and value integration and monitoring throughout the Company. The Committee selected the first recipients of the newly formed peer-to-peer value recognition program, as well as fulfilled their duties as the approval committee for donation requests received under the Company's Community Investment Policy.
Integra's Board of Directors ESG Committee met in July and covered a review of 2022 H1 Public Affairs, including stakeholder engagement, Tribal Nation outreach, government affairs, and a risk review. The Committee was also provided an overview of the results of the Materiality Assessment process conducted for the Sustainability Report, as well as an overview of how this data was used to drive the Operational Goal Setting exercise held in Boise with all Company managers in June.
Water treatment operations followed their regular course at the DeLamar Project, and no material environmental or health and safety incidents were reported.
2022 OUTLOOK
2022 Strategy
The Company announced on April 21, 2022 its strategy to advance permitting and development of a simple, low-cost heap leach stage as a stand-alone mine project capable of producing an average of 136,000 ozs per year of AuEq over seven years.
Integra expects many ancillary benefits by focusing on the heap leach stand-alone mine permitting, including:
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
- Mill expansion capital requirements will no longer be a project requirement, leading to a savings of over US$235 million on life of mine capital. In this scenario, estimated site level AISC costs also drop from US$955/oz to US$814/oz, on a co-product basis, thus significantly reducing future financing risk.
- Funds generated from the successful future operation of the heap leach only option will immediately reduce the financial payback period of the project. The mill expansion capital requirements will no longer be required, and those funds can be diverted to potentially expanding resource development.
- The heap leach stand-alone mine will no longer require the construction of a mill or a 97-hectare tailings storage facility, reducing land disturbance and reducing permits required for Phase I.
- The amount of waste rock produced from the heap leach stand-alone scenario will be materially lower.
- Significant reduction in tailings, waste dumps and potential pit lakes.
- Development of the heap leach only mine at DeLamar will lead to significant decreases in water and power usage, further simplifying development.
Exploration
As a result of our 2022 strategy, exploration efforts going forward will target potentially heap leachable oxide and transitional mineralization to expand the heap leach life-of-mine.
As highlighted in the 2022 PFS study, significant heap leachable Oxide and Mixed resource expansion potential exists in many areas of the project. Internal models generated by the Company demonstrate the tremendous leverage associated with increasing the heap leachable gold-silver resource and amplifying the mine plan accordingly. The Company has identified the potential to add Oxide and Mixed gold-silver mineralization for the heap leach in three areas: Florida Mountain West, approximately 300 m from the planned open pit, BlackSheep, adjacent to the Milestone open pit, and historic DeLamar low-grade stockpiles that are situated adjacent to planned mining and processing infrastructure.
The Company announced on September 12, 2022, the commencement of drilling on an estimated 60 Mt of low-grade, stockpiled gold-silver mineralized material at the DeLamar and Florida Mountain deposits. This material was stockpiled at surface by previous operators and has the potential, pending further drilling, to significantly increase the heap leach mine life and production rates at the Project. This drill program is designed to estimate grade and grade variability within the stockpiles as well as to obtain material for metallurgical testwork to further understand the potential inclusion of this material in future mine plans and heap leach processing. The total drill program will include 11,000 m of shallow, dual rotary reverse circulation drilling and sonic drilling.
The stockpile drilling program will be executed at 60 m collar spacing with select 30 m infill test holes. All drilling will be vertical through the entirety of the stockpiles. This drilling will be conducted by a combination of dual rotary RC and sonic drilling methods. Both these drilling methods will serve to maintain high sample quality through the drilling process. Additionally, the two sampling methods will provide a basis for comparison for continuity. Sampling will be conducted at 1.5 m intervals for the whole of the drilling with all samples sent to a third-party lab for analysis. These drilling methods provide the opportunity for various metallurgical tests, as well. Bottle rolls will be collected on crushed material and column testing is planned for select material obtained with the sonic drill. Once begun the drilling will take approximately three months to complete at 60 m spacings.
The Company has drilled through backfill and low-grade stockpiles on a number of occasions through normal course drilling on the Project since 2018. This drilling, in addition to historic drilling from previous operators, provides a strong case to substantiate the potential mineralization in these stockpiles and backfill.
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
Permitting and Engineering
Permitting and engineering work at DeLamar will continue and is focused on a fully developed stand-alone heap leach gold-silver operation. Baseline study work is ongoing to support the submittal of a Mine Plan of Operations in H2 2023.
PROPERTIES
(1) DeLamar Project, Idaho
The DeLamar Project consists of the neighboring DeLamar Deposit and Florida Mountain Deposit.
The bulk of the information in this section is derived from the "Technical Report and Preliminary Feasibility Study for the DeLamar and Florida Mountain Gold - Silver Project, Owyhee County, Idaho, USA", dated March 22, 2022 with an effective date of January 24, 2022 (the "DeLamar Report"). The DeLamar Report is available for review under the Company's issuer profile on SEDAR at www.sedar.com.
Project Description, Location and Ownership
The DeLamar Project includes of 790 unpatented lode, placer, and millsite claims, and 16 tax parcels comprised of patented mining claims, as well as certain leasehold and easement interests, that cover approximately 8,673 hectares (21,431 acres) in southwestern Idaho, about 80km (50 miles) southwest of Boise. The property is approximately centered at 43°00′48″N, 116°47′35″W, within portions of the historical Carson (Silver City) mining district, and it includes the formerly producing DeLamar mine last operated by Kinross Gold Corporation ("Kinross"). The total annual land-holding costs are estimated to be $473,244. All mineral titles and permits are held by DMC, an indirect, 100% wholly owned subsidiary of Integra that was acquired from Kinross through the DeLamar Purchase Agreement in 2017.
Of the 284 unpatented claims acquired from Kinross, 101 are subject to a 2.0% NSR royalty payable to a predecessor owner. This royalty is not applicable to the current project Mineral Resources and Reserves. There are also eight lease agreements covering 33 patented claims and five unpatented claims that require NSR payments ranging from 2.0% to 5.0%. One of these leases covers a small portion of the DeLamar Area Mineral Resources and one covers a small portion of the Florida Mountain Area Mineral Resources and Reserves, with 5.0% and 2.5% NSRs applicable to maximums of $50,000 and $650,000 in royalty payments, respectively. The DeLamar Project includes 1,561 hectares (3,857.2 acres) under seven leases from the State of Idaho, which are subject to a 5.0% NSR production royalty plus annual payments of $27,282. The State of Idaho leases include very small portions of both the DeLamar and Florida Mountain Area Mineral Resources and Reserves.
Kinross has retained a 2.5% NSR royalty (i.e. the "Kinross Royalty") that applies to those portions of the DeLamar Area claims that are unencumbered by the royalties outlined above. The Kinross Royalty applies to more than 90% of the current DeLamar Area Mineral Resources, but this royalty will be reduced to 1.0% upon Kinross receiving total royalty payments of C$10,000,000 (US$7.3 million). The Kinross Royalty was subsequently purchased by Maverix on December 19, 2019. DMC also owns mining claims and leased lands peripheral to the DeLamar Project described above. These landholdings are not part of the DeLamar Project, although some of the lands are contiguous with those of the DeLamar and Florida Mountain claims and State Leases. The DMC lands peripheral to the DeLamar Project have no Mineral Resources or Reserves.
The principal access to the DeLamar Project is from U.S. Highway 95 and the town of Jordan Valley, Oregon, proceeding east on Yturri Blvd. from Jordan Valley for 7.6km (4.7 miles) to the Trout Creek Road. It is then another 39.4km (24.5 miles) travelling east on the gravel Trout Creek Road to reach the DeLamar mine tailing facility and nearby site office building. Travel time by automobile via this route is approximately 35 minutes. Secondary access is from the town of Murphy, Idaho and State Highway 78, via the Old Stage Road and the Silver City Road. Travel time by this secondary route is estimated to be about 1.5 hours.
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
Environmental Liabilities and Permitting
The 1977 - 1998 DeLamar open-pit mining operations included the DeLamar and Florida Mountain Areas. The DeLamar Area mine facilities, specifically the historical Sommercamp and North DeLamar open pits, incorporate essentially all the historical underground mining features (adits and dumps) in the vicinity. In the Florida Mountain Area, many historical underground mining features remain to the north of the historical Florida Mountain Area open pits and waste rock dump, and several of these historical underground mining features are located within the DeLamar Project, including collapsed adits, dumps, and collapsed structures. None of these features have water discharging to the environment.
The DeLamar Project historical open-pit mine areas have been in closure since 2003. While a substantial amount of reclamation and closure work has been completed to date at the site, there remain ongoing water-management activities, monitoring, and reporting. A reclamation bond of $2,778,929 remains with the IDL, $100,000 bond remains with the IDEQ, and $1,262,800 bond remains with the BLM for exploration activities and groundwater well installation on public lands ($631,400 in BLM bonds were released in Q3 2022). There are also reclamation bonds with the IDL in the total amount of $139,900 for exploration activities on IDL leased lands.
The DeLamar Project holds the following primary permits: two Plans of Operation ("PoO"), one with IDL and the BLM (PoO #248), and one with IDL (PoO #936). In addition, DMC holds a Cyanidation Permit from the IDEQ, an Air Quality Permit from IDEQ, a Dam Safety Permit from the IDWR, and a 2015 Multi-Sector General Permit, Storm Water Permit, and a Ground Water Remediation Permit from the United States Environmental Protection Agency.
As of the date of the DeLamar Report, Integra is conducting a drilling program on patented and unpatented mining claims in the DeLamar and Florida Mountain Areas. This drilling is being undertaken under a notification from IDL, as well as two notices filed with the BLM. The exploration program recommended in the DeLamar Report includes proposed drilling in the Florida Mountain Area, as well as further drilling in the DeLamar Area. This proposed work would necessitate a modification to the existing notification for drilling in the DeLamar Area, and a new notification for Florida Mountain Area drilling performed on patented claims. A notice would need to be filed with the BLM if any of the recommended drilling is undertaken on unpatented claims. Separate notices would be filed with the BLM for each of the DeLamar and Florida Mountain Areas of unpatented claims.
History
Total production of gold and silver from the DeLamar Project area is estimated to be approximately 1.3 million ounces of gold and 70 million ounces of silver from 1891 through 1998, with an additional but unknown quantity produced at the DeLamar mill in 1999. From 1876 to 1891, an estimated 1.025 million ounces of gold and 51 million ounces of silver were produced from the original De Lamar underground mine and the later DeLamar open-pit operations. At the Florida Mountain Area, nearly 260,000 ounces of gold and 18 million ounces of silver were produced from the historical underground mines and late 1990s open-pit mining.
Mining activity began in the area of the DeLamar Project when placer gold deposits were discovered in early 1863 in Jordan Creek, a short distance upstream from what later became the town site of De Lamar. During the summer of 1863, the first silver-gold lodes were discovered in quartz veins at War Eagle Mountain, to the east of the Florida Mountain Area, resulting in the initial settlement of Silver City. Between 1876 and 1888, significant silver-gold veins were discovered and developed in the district, including underground mines at De Lamar Mountain and the Florida Mountain Area. A total of 553,000 ounces of gold and 21.3 million ounces of silver were reportedly produced from the De Lamar and Florida Mountain Area underground mines from the late 1800s to early 1900s.
The mines in the district were closed in 1914, following which very little production took place until gold and silver prices increased in the 1930s. Placer gold was again recovered from Jordan Creek from 1934 to 1940, and in 1938 a 181 tpd flotation mill was constructed to process waste dumps from the De Lamar underground mine. The flotation mill reportedly operated until the end of 1942. Including the Florida Mountain Area, the De Lamar - Silver City area is believed to have produced about 1 million ounces of gold and 25 million ounces of silver from 1863 through 1942.
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
During the late 1960s, the district began to undergo exploration for near-surface bulk-mineable gold-silver deposits, and in 1977 a joint venture operated by Earth Resources Corporation ("Earth Resources") began production from an open-pit, milling and cyanide tank-leach operation at De Lamar Mountain, known as the DeLamar mine. In 1981, Earth Resources was acquired by the Mid Atlantic Petroleum Company ("MAPCO"), and in 1984 and 1985 the NERCO Mineral Company ("NERCO") successively acquired the MAPCO interest and the entire joint venture to operate the DeLamar mine with 100% ownership. NERCO was purchased by the Kennecott Copper Corporation ("Kennecott") in 1993. Two months later in 1993, Kennecott sold its 100% interest in the DeLamar mine and property to Kinross, and Kinross operated the mine, which expanded to the Florida Mountain Area in 1994. Mining ceased in 1998, milling ceased in 1999, and mine closure activities commenced in 2003. Closure and reclamation were nearly completed by 2014, as the mill and other mine buildings were removed, and drainage and cover of the tailing facility were developed.
Total open-pit production from the DeLamar Project from 1977 through 1998, including the Florida Mountain Area operation, is estimated at approximately 750,000 ounces of gold and 47.6 million ounces of silver, with an unknown quantity produced at the DeLamar mill in 1999. From start-up in 1977 through to the end of 1998, open-pit production in the DeLamar Area totaled 625,000 ounces of gold and about 45 million ounces of silver. This production came from pits developed at the Glen Silver, Sommercamp - Regan (including North and South Wahl), and North DeLamar areas. In 1993, the DeLamar mine was operating at a mining rate of 27,216 tonnes (30,000 tons) per day, with a milling capacity of about 3,629 tonnes (4,000 tons) per day. In 1994, Kinross commenced open-pit mining at the Florida Mountain Area while continuing production from the DeLamar mine. The ore from the Florida Mountain Area, which was mined through 1998, was processed at the DeLamar facilities. Florida Mountain Area production in 1994 through 1998 totaled 124,500 ounces of gold and 2.6 million ounces of silver.
Historical Resource and Reserve Estimations
The estimates described in here are presented herein as an item of historical interest with respect to historical open-pit mining and exploration at the DeLamar Project property. The historical estimations presented below are considered relevant because they represent an "ore reserve" that formed the basis of the initial open-pit mining, "reserves" estimated at the time of Kinross' acquisition of the mining operations, and "resources" estimated at the time of closure of the open-pit mining operations. The classification terminology is presented as described in the original references, but these categories do not conform to the Measured, Indicated, and Inferred Mineral Resource classifications as set out in NI 43-101 and the Canadian Institute of Mining, Metallurgy and Petroleum (the CIM Definition Standards). There is insufficient information for the relevant author of the DeLamar Report to understand how these historical categories differ from CIM Definition Standards. In addition, the relevant author of the DeLamar Report has not completed sufficient work to classify these historical estimates as current Mineral Resources or Reserves, and Integra is not treating these historical estimates as current Mineral Resources or Reserves. The relevant author of the DeLamar Report is unaware of the key assumptions, parameters, and methods used to prepare the historical estimates. The historical estimates have been superseded by the current Mineral Resource and Reserve estimates described in the DeLamar Report and therefore they cannot be upgraded or verified as current Mineral Resources or Reserves. Accordingly, these estimates are relevant only for historical context and should not be relied upon.
The first reported historical "ore reserve" was presented in a 1974 feasibility study prepared by the Exploration Division of Earth Resources. A total of 4.124 million tonnes of "ore reserves" with average grades of 142.29 grams Ag/t and 1.58 grams Au/t, for about 18.8 million silver ounces and 210,000 gold ounces, were estimated for the Sommercamp and North DeLamar zones.
At the time of the Kinross acquisition of the DeLamar operations and properties in 1993, the end-of-year 1992 reserves for the DeLamar mine area were estimated by Elkin (1993) at approximately 9.335 million tonnes with average silver and gold grades of 55.86 grams Ag/t and 0.72 grams Au/t, respectively. Following the cessation of mining at the end of 1998 due to low metal prices, Kinross reported estimated resources and no reserves of 8.406 million tonnes with average silver and gold grades of 32.05 grams Ag/t and 1.25 grams Au/t, respectively.
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
In October 2017 Integra produced an initial Mineral Resource estimate on the DeLamar Project. The Company subsequently updated the Mineral Resource estimate in March 2018. In June 2019, Integra completed the 2019 Technical Report, including an updated Mineral Resource estimate for the DeLamar Project, which includes the DeLamar and Florida Mountain Area deposits. The 2019 PEA was based on the updated Mineral Resource estimate in the 2019 Technical Report. In March 2022, the Company filed the DeLamar Report including an updated Mineral Resource estimate and an initial Mineral Reserve estimate. The Mineral Resource and Reserve estimates are provided under the heading "Mineral Resources and Reserves" below and the PFS included in the DeLamar Report is based on the Mineral Reserve estimate.
Geological Setting and Mineralization
The DeLamar Project is situated in the Owyhee Mountains near the east margin of the mid-Miocene Columbia River - Steens flood-basalt province and the west margin of the Snake River Plain. The Owyhee Mountains comprise a major mid-Miocene eruptive center, generally composed of mid-Miocene basalt flows intruded and overlain by mid-Miocene rhyolite dikes, domes, flows and tuffs, developed on an eroded surface of Late Cretaceous granitic rocks.
The DeLamar mine area and mineralized zones are situated within an arcuate, nearly circular array of overlapping porphyritic and flow-banded rhyolite flows and domes that overlie cogenetic, precursor pyroclastic deposits erupted as local tuff rings. Integra interprets the porphyritic and banded rhyolite flows and latites as composite flow domes and dikes emplaced along regional-scale northwest-trending structures. At the Florida Mountain Area, flow-banded rhyolite flows and domes cut through and overlie a tuff breccia unit that overlies basaltic lava flows and Late Cretaceous granitic rocks.
Gold-silver mineralization occurred as two distinct but related types: (i) relatively continuous, quartz-filled fissure veins that were the focus of late 19th and early 20th century underground mining, hosted mainly in the basalt and granodiorite and to a lesser degree in the overlying felsic volcanic units; and (ii) broader, bulk-mineable zones of closely-spaced quartz veinlets and quartz-cemented hydrothermal breccia veins that are individually continuous for only a few meters/feet laterally and vertically, and of mainly less than 1.3cm (0.5 inches) in width - predominantly hosted in the rhyolites and latites peripheral to and above the quartz-filled fissures. This second style of mineralization was mined in the open pits of the late 20th century DeLamar and Florida Mountain Area operations, hosted primarily by the felsic volcanic units.
The fissure veins mainly strike north to northwest and are filled with quartz accompanied by variable amounts of adularia, sericite or clay, ± minor calcite. Vein widths vary from a few centimeters to several meters, but the veins persist laterally and vertically for as much as several hundreds of meters. Principal silver and gold minerals are naumannite, aguilarite, argentite, ruby silver, native gold and electrum, native silver, cerargyrite, and acanthite. Variable amounts of pyrite and marcasite with very minor chalcopyrite, sphalerite, and galena occur in some veins. Gold- and silver-bearing minerals are generally very fine grained.
Deposit Type
Based upon the styles of alteration, the nature of the veins, the alteration and vein mineralogy, and the geologic setting, the gold and silver mineralization at the DeLamar Project is best interpreted in the context of the volcanic-hosted, low-sulfidation type of epithermal model. This model has its origins in the De Lamar - Silver City district, where it was first developed by Lindgren (1900) based on his first-hand studies of the veins and altered wallrocks in the De Lamar and Florida Mountain mines. Various vein textures, mineralization, and alteration features, and the low contents of base metals in the district are typical of what are now known as low-sulfidation epithermal deposits world-wide. The host-rock setting of mineralization at the DeLamar Project is similar to the simple model shown in the figure below, with the lower basalt sequence occupying the stratigraphic position of the volcano-sedimentary rocks shown below. The Milestone portion of the district appears to be situated within and near the surficial sinter terrace in this model.
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
Schematic Model of a Low-Sulfidation Epithermal Mineralizing System
Many other deposits of this class occur within the Basin and Range province of Nevada, and elsewhere in the world. Some well-known low-sulfidation epithermal gold and silver properties with geological similarities to the DeLamar Project include the past-producing Rawhide, Sleeper, Midas, and Hog Ranch mines in Nevada. The Midas district includes selenium-rich veins similar to, but much richer in calcite, than the veins known in the DeLamar Project. At both the DeLamar Project and Midas, epithermal mineralization took place coeval with rhyolite volcanism, and shortly after basaltic volcanism, during middle Miocene time.
Exploration
Exploration work other than drilling has included topographic and geophysical surveys, airborne magnetic surveys, IP/Resistivity surveys, rock and soil geochemical sampling, geologic mapping, database development and checking and cross-sectional geologic modelling. The results of this work and interpretations were applied to the estimation of Mineral Resources in the DeLamar Report.
Drilling
As of the effective date of the DeLamar Report, the Mineral Resource database includes data from 2,836 holes, for a total of 337,268m (1,106,522 feet), that were drilled by Integra and various historical operators at the DeLamar and Florida Mountain Areas.
The historical drilling was completed from 1966 to 1998 and includes 2,625 holes for a total of 275,790m (904,821 feet) of drilling. Most of the historical drilling was done using RC and conventional rotary methods; a total of 106 historical holes were drilled using diamond-core ("core") methods for a total of 10,845m (35,581 feet). Approximately 74% of the historical drilling was vertical, including all historical conventional rotary holes. At DeLamar, a significant portion of the total meterage drilled historically was subsequently mined during the open-pit operations.
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
Integra commenced drilling in 2018. As of the end of December 2020, Integra had drilled a total of 60 RC holes, 140 core holes, and 11 holes commenced with RC and finished with core tails, for a total of 61,478 meters (201,699 feet) in the DeLamar and Florida Mountain Areas combined. All but one of the Integra holes were angled. Integra's drilling continued through 2021 but none of the 2021 drilling is included in the Mineral Resource database used to estimate the current Mineral Resources included in the DeLamar Report.
Of the historical holes for which the drilling method is known, 602 of the DeLamar Area holes were drilled by RC, 438 by conventional rotary, and 60 were core holes. 74% of the historical holes in the DeLamar Area were vertical. At the Florida Mountain Area, 961 of the historical holes were drilled by RC methods, 58 by conventional-rotary methods, and 46 by diamond core methods; less than 10% of the historical holes were vertical. None of the conventional rotary holes were angled in either area. A combined total of 106 holes were drilled using core methods for a total of 10,822m (35,505 feet), or 3.9% of the overall meterage drilled. The median down-hole depth of all historical holes in the DeLamar Area is 91m (298.6 feet), and the median depth in the Florida Mountain Area is 123m (403.5 feet).
Down-hole contamination is always a concern with holes drilled by rotary (RC or conventional) methods. Contamination occurs when material originating from the walls of the drill hole above the bottom of the hole is incorporated with the sample being extracted at the bit face at the bottom of the hole. The potential for down-hole contamination increases substantially if significant water is present during drilling, whether the water is from in-the-ground sources or injected by the drillers. Conventional rotary holes, in which the sample is returned to the surface along the space between the drill rods and the walls of the drilled hole, are particularly susceptible to down-hole contamination, although these concerns are limited at the DeLamar project due to the shallow depths and vertical orientation of the rotary holes, and the fact that a significant quantity of the rotary data was mined out during the historical mining operations.
Some of the drill-hole logs reviewed by Mine Development Associates, a division of RESPEC ("MDA") were found to have notations as to the presence of water during drilling, as well as occasional comments concerning drilling difficulties and sample sizes. Integra therefore comprehensively compiled sample quality information from the historical drill logs, and this information, which includes logged notes on intersected groundwater and/or drill-injected fluids, was used by MDA in the modeling of DeLamar Project Mineral Resources.
There is a complete lack of down-hole deviation survey data for the historical holes in the DeLamar Area database, and the Florida Mountain Area database includes deviation data for 33 RC and four core holes. While the paucity of such data is not unusual for drilling done prior to the 1990s, the lack of deviation data contributes a level of uncertainty as to the exact locations of drill samples at depth. However, in the DeLamar Area these uncertainties are mitigated to a significant extent by the vertical orientation of three-quarters of the drill holes, the generally shallow down-hole depths, and the likely open-pit nature of any potential future mining operation that is based in part on data derived from the historical holes. Such uncertainties, while still minor, are more pronounced in the Florida Mountain Area, where about 80% of the historical holes were inclined, and the holes were generally slightly longer than those in the DeLamar Area. In consideration of the fact that any potential future mining operation that would rely in part on the reliability of the historical drill data would entail open-pit methods, the potential inaccuracies in the locations of drill samples imparted by the lack of down-hole surveys is not considered to be a material issue.
Down-hole lengths of gold and silver intercepts derived from vertical holes, which were almost exclusively historical holes, can significantly exaggerate true mineralized thicknesses in cases where steeply dipping holes intersect steeply dipping mineralization, for example in portions of the Sommercamp area. This effect is entirely mitigated by the modeling techniques employed in the estimation of the current Mineral Resources, however, which constrain all intercepts to lie within explicitly interpreted domains that appropriately respect the known and inferred geologic controls and mineralized thicknesses.
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
The overwhelming majority of sample intervals in the DeLamar and Florida Mountain Area databases have a down-hole length of 1.52m (5.0 feet). This sample length is considered appropriate for the near-surface style of mineralization that characterizes the current Mineral Resources at both the DeLamar and Florida Mountain Areas.
Beyond the sample-quality noted above, which were identified and the affected samples removed from use in the estimation of the DeLamar Project Mineral Resources, the relevant author of the DeLamar Report is unaware of any sampling or sample-recovery factors that materially impact the accuracy and reliability of the drill-hole data, and believes that the drill samples are of sufficient quality for the purposes used in the DeLamar Report.
Sampling, Analysis and Data Verification
Historical Sampling, Analysis and Data Verification
The relevant authors of the DeLamar Report are not aware of sample-preparation procedures or sample-security protocols employed prior to the start-up of open-pit mining operations in 1977, although further detailed reviews of historical documentation may yield such information in the future.
According to one historical report from 1993, sample preparation procedures at the mine laboratory had remained relatively constant up to the date of such ore-reserve report. Drill cuttings were split at the drill site to obtain samples weighing approximately 4.5kg (10 pounds). When received at the mine laboratory, the samples were dried and crushed to -10 mesh. Splits of 150mm (9.15 cubic inch) volumes were then pulverized to pulps with 90% passing 100 mesh. At the date of the report, one-assay-ton (30-gram) (1.06-ounce) aliquots were taken from these pulps for assaying.
The relevant authors of the DeLamar Report are unaware of any specific sample-security protocols undertaken during the various historical drilling programs at the DeLamar Project. However, approximately 75% of the drill data in the DeLamar Area database and 98% of the holes in the Florida Mountain Area are derived from drilling undertaken after the open-pit mining operations had initiated. It is very likely that the drilling and sampling completed during the mining operations were undertaken in areas of controlled access.
Until 1988, in-house assays were done by MIBK AA methods. From approximately 1988 through to the end of the open-pit mining operations, all analyses by the mine laboratory were completed using standard fire-assay methods.
Integra Sampling, Analysis and Data Verification
Integra's RC and core samples were transported by the drilling contractor or Integra personnel from the drill sites to Integra's logging and core cutting facility at the DeLamar mine on a daily basis. The RC samples were allowed to dry for a few days at the drill sites prior to delivery to the secured logging and core-cutting facility.
The 2018, 2019 and 2020 core sample intervals were sawn lengthwise mainly into halves after logging and photography by Integra geologists and technicians in the logging and sample storage area. In some cases, the core was sawed into quarters. Sample intervals of either ½ or ¼ core were placed in numbered sample bags and the remainder of the core was returned to the core box and stored in a secure area on site. Core sample bags were closed and placed in a secure holding area awaiting dispatch to the analytical laboratory.
All of Integra's rock, soil and drilling samples were prepared and analyzed at American Assay Laboratories ("AAL") in Sparks, Nevada. AAL is an independent commercial laboratory accredited effective December 1, 2020 to the ISO/IEC Standard 17025:2017 for testing and calibration laboratories. The drilling samples were transported from the DeLamar mine logging and sample storage area to AAL by Integra's third-party trucking contractor.
The soil samples were screened to -80 mesh for multi-element analysis at AAL. MDA has no other information on the methods and procedures used for the preparation of Integra's soil and rock samples.
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
The same principal analytical methods were used at AAL for both soil and surface-rock samples collected by Integra. Gold was determined by fire-assay fusion of 60-gram (2.12-ounce) aliquots with an inductively coupled plasma optical-emission spectrometry ("ICP") finish. Silver and 44 major, minor and trace elements were determined by ICP and mass spectrometry ("ICP-MS") following a 5-acid digestion of 0.5-gram (0.018-ounce) aliquots. Rock samples that assayed greater than 10 g Au/t were re-analyzed by fire-assay fusion of 30-gram (1.06-ounce) aliquots with a gravimetric finish. Samples with greater than 100 g Ag/t were also re-analyzed fire-assay fusion of 30-gram aliquots with a gravimetric finish. Some rock samples were analyzed for gold using a metallic-screen fire assay procedure.
RC samples from the 2018 and 2019 drilling were dried upon arrival at AAL's Reno facility. The dry samples were crushed to a size of -6 mesh and then roll-crushed to -10 mesh. One-kilogram (2.205-pound) splits of the -10-mesh materials were pulverized to 95% passing -150 mesh. Sixty-gram aliquots of the one-kilogram pulps were analyzed at AAL for gold mainly by fire-assay fusion with an ICP finish. Silver and 44 major, minor, and trace elements were determined by ICP and ICP-MS following a 5-acid digestion of 0.5-gram aliquots. Samples that assayed greater than 10 g Au/t were re-analyzed by fire-assay fusion of 30-gram aliquots with a gravimetric finish. Samples with greater than 100 g Ag/t were also re-analyzed fire-assay fusion of 30-gram aliquots with a gravimetric finish. Selected RC samples were analyzed for gold using a metallic-screen fire assay procedure.
Integra's 2018, 2019 and 2020 core samples were prepared and assayed at AAL for gold, silver, and multi-elements using the identical methods used for Integra's RC samples.
Integra Quality Assurance/Quality Control Programs
Coarse blank material, certified reference materials ("CRMs"), and RC field duplicates were inserted into the drill-sample streams as part of Integra's quality assurance/ quality control procedures. The blank material consisted of coarse fragments of basalt that was inserted approximately every 10th sample. Commercial CRMs were inserted as pulps at a frequency of approximately every 10th sample.
Integra's sample preparation and analyses were performed at a well-known certified laboratory, and the sample security and assurance/quality control procedures were judged to be adequate by the relevant authors of the DeLamar Report.
Data Verification
The historical portions of the current resource drill-hole databases for the DeLamar and Florida Mountain Areas were created by MDA using original DeLamar mine digital database files, and this information was subjected to extensive verification measures by both MDA and Integra. The Integra portions of the drill-hole databases were directly created by MDA using original digital analytical certificates in the case of the assay tables and checking against original digital records in the case of the collar and down-hole deviation tables. Through these and numerous other verification procedures summarized in the DeLamar Report, the relevant author of the DeLamar Report has verified that the DeLamar Project data as a whole are acceptable as used in the DeLamar Report.
Mineral Processing and Metallurgical Testing
Useful information with respect to mineral processing of DeLamar Area gold-silver mineralization by milling and subsequent cyanide leaching is derived from mill production records from the historical open-pit mining operations from 1977 through to the end of 1992. All ore during this time period was mined from the DeLamar Area and was processed by crushing, grinding, and cyanide leaching, followed by precipitation with zinc dust and in-house smelting of the precipitate to produce silver-gold doré. After leaching, the solids were concentrated in a series of five thickening tanks and then pumped to a tailing impoundment. During mine closure the tailing were partially dewatered and capped with layers of clay and soil as part of the mine reclamation program.
The DeLamar Area produced 421,300 ounces of gold and about 26 million ounces of silver from 1977 through 1992 from 11.686 million tonnes of ore processed with average mill head grades of 1.17 grams Au/t and 87.1 grams Ag/t. The data relied upon indicated mill recoveries during the first 15 years of mine operation averaged 96.2% for gold and 79.5% for silver. It should be noted that Elkin (1993) surmised that, "Based on historical records and laboratory testing, the metallurgical recovery of gold is projected to be about 94 percent and 77 percent for silver."
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
Metallurgical testing by Integra, generally conducted at McClelland Laboratories during 2018 through 2021, has been used to select preferred processing methods and estimate recoveries for oxide, mixed and non-oxide mineralization from both the DeLamar and Florida Mountain Area. Samples used for this testing, primarily drill hole composites from 2018 through 2020 Integra drilling, were selected to represent the various material types contained in the current Mineral Resources from both the DeLamar and Florida Mountain Area. Composites were selected to evaluate effects of area, depth, grade, oxidation, lithology, and alteration on metallurgical response.
Bottle-roll and column-leach cyanidation testing on drill core composites from both the DeLamar and Florida Mountain Area and on bulk samples from the DeLamar Area have shown that the oxide and mixed material types from both deposits can be processed by heap-leach cyanidation. These materials generally benefit from relatively fine crushing to maximize heap-leach recoveries and a feed size of 80% -12.7mm (0.5 inches) was selected as optimum. Expected heap-leach gold recoveries for the oxide mineralization from both deposits (DeLamar and Florida Mountain Area) are consistently high (70% - 89%). Heap leach gold recoveries for the mixed mineralization are expected to average 72% for the Florida Mountain Area and to range from 45% to 63% for the DeLamar Area. Heap leach silver recoveries from the Florida Mountain Area oxide and mixed materials are expected to average 49% and 47%, respectively. Expected heap-leach silver recoveries from the DeLamar Area material are highly variable (11% to 74%), but generally low. A significant portion of the DeLamar Area oxide and mixed mineralization will require agglomeration pretreatment using cement, because of elevated clay content. None of the Florida Mountain Area heap-leach material is expected to require agglomeration.
Metallurgical testing (primarily flotation and agitated cyanidation) has shown that the DeLamar Area non-oxide materials respond well to flotation at a moderate grind size (150 microns) for recovery of gold and silver to a flotation concentrate. The resulting flotation concentrate responds well to cyanide leaching after very fine regrinding (20 microns) for recovery of contained silver. Some gold is also recovered by cyanide leaching of the reground flotation concentrate, but those recoveries generally are low. Mineralogical examination and metallurgical testing have shown that these materials contain significant amounts of gold that are locked in sulfide mineral particles, which require oxidative pretreatment of sulfide minerals (such as the Albion process) for liberation of gold before high cyanidation gold recoveries can be obtained. Expected recoveries from the DeLamar Area non-oxide mineralization in the planned mill circuit, consisting of grinding, flotation concentrate regrinding and cyanide leach, range from 28% to 39% for gold and from 64% to 87% for silver.
Metallurgical testing has shown that the non-oxide mineralization from the Florida Mountain Area responds well to upgrading by flotation at a moderate grind size (150 microns) and cyanidation gold and silver recoveries from the resulting concentrates can be maximized by very fine regrinding (20 microns). In contrast to the DeLamar Area non-oxide materials, oxidative pretreatment of contained sulfide minerals is not required to achieve high cyanidation gold recoveries from the Florida Mountain Area non-oxide feeds. Recoveries expected from the Florida Mountain Area non-oxide mineralization in the planned mill circuit vary with feed grade, but generally are high, with maximum recoveries of 87% gold and 77% silver.
The relevant author of the DeLamar Report has reviewed the historical metallurgical studies and the metallurgical studies conducted during 2018 through 2021 and concluded that the samples used during the 2018 through 2021 metallurgical studies are reasonably representative considering both the stage of the DeLamar Project development and the magnitude of the testing completed as of the effective date of the DeLamar Report. However, further testwork of samples collected from portions of the deposit, particularly those displaying high degrees of variability in metallurgical response, will be needed as the DeLamar Project advances. Other than as discussed herein and in the DeLamar Report, the relevant author of the DeLamar Report is not aware of any processing factors or deleterious elements that could have a significant effect on the potential economic extraction.
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
Mineral Resources and Reserves
Mineral Resource Estimate
Mineral Resources have been estimated for both the Florida Mountain and DeLamar Areas of the DeLamar Project. These gold and silver resources were modeled and estimated by:
-
Evaluating the drill data statistically and spatially to determine natural gold and silver populations;
-
Creating low-, medium-, and high-grade mineral-domain polygons for both gold and silver on sets of cross sections spaced at 30m (98.4-foot) intervals;
-
Projecting the sectional mineral-domain polygons horizontally to the drill data within each sectional window;
-
Slicing the three-dimensionally projected mineral-domain polygons along 6m-spaced horizontal planes at the DeLamar Area and 8m-spaced (26.3-foot) planes at the Florida Mountain Area and using these slices to recreate the gold and silver mineral-domain polygons on a set of level plans for each Mineral Resource area;
-
Coding a block model to the gold and silver mineral domains for each of the two deposit areas using the level-plan mineral-domain polygons;
-
Analyzing the modeled mineralization geostatistically to aid in the establishment of estimation and classification parameters; and
-
Interpolating gold and silver grades by inverse-distance to the third power into 6 x 6 x 6-meter (19.7 x 19.7 x 19.7-foot) blocks for the DeLamar Area and 6 x 8 x 8-meter (19.7 x 26.3 x 26.3-foot) blocks at the Florida Mountain Area, using the coded gold and silver mineral-domain percentages to explicitly constrain the grade estimations.
To meet the requirement of the in-pit resources having reasonable prospects for eventual economic extraction, pit optimizations for the DeLamar and Florida Mountain Areas were run using the parameters summarized in the below tables:
Pit Optimization Cost Parameters
| Parameter | DeLamar Area | Florida Mountain Area | Unit |
| Mining Cost | $2.00 | $2.00 | $/tonne mined |
| Heap Leach | |||
| Oxide Processing | $2.75 | $2.75 | $/tonne processed |
| Mixed Processing | $3.75 | $3.50 | $/tonne processed |
| Incremental Haulage | $0.20 | $0.20 | $/tonne processed |
| G&A | $0.40 | $0.40 | $/tonne processed |
| Mill - DeLamar Area | |||
| Non-Oxide Processing | $15.25 | $- | $/tonne processed |
| Incremental Haulage | $0.20 | $- | $/tonne processed |
| G&A Cost | $0.25 | $- | $/tonne processed |
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
| Mill - Florida Mountain Area | |||
| Non-Oxide Processing | $- | $9.00 | $/tonne processed |
| Incremental Haulage | - | $0.20 | $/tonne processed |
| G&A Cost | $- | $0.25 | $/tonne processed |
| Au Price | $1,800 | $1,800 | $/oz produced |
| Ag Price | $21 | $21 | $/oz produced |
| Au Refining Cost | $5.00 | $5.00 | $/oz produced |
| Ag Refining Cost | $0.50 | $0.50 | $/oz produced |
| Royalty | see above "Project Description, Location and Access" | see above "Project Description, Location and Access" | NSR |
Pit-Optimization Metal Recoveries by Deposit and Oxidation State
| DeLamar Area | Florida Mountain Area | |||||
| Process Type | Oxide | Mixed | Non-Oxide | Oxide | Mixed | Non-Oxide |
| Heap Leach - Au | 85% | 80% | - | 90% | 85% | - |
| Heap Leach - Ag | 45% | 40% | - | 65% | 55% | - |
| Mill - Albion - Glen Silver - Au | - | - | 78% | - | - | - |
| Mill - Albion - Glen Silver - Ag | - | - | 78% | - | - | - |
| Mill - Albion - Non-Glen Silver - Au | - | - | 87% | - | - | - |
| Mill - Albion - Non-Glen Silver - Ag | - | - | 87% | - | - | - |
| Mill - Agitated Leach - Au | - | - | - | - | - | 95% |
| Mill - Agitated Leach - Ag | - | - | - | - | - | 92% |
The DeLamar Project Mineral Resources were estimated to reflect potential open-pit extraction and processing by: crushing and heap leaching of oxide and mixed materials at both the DeLamar and Florida Mountain Areas; grinding, flotation, ultra-fine regrind of concentrates, and Albion cyanide-leach processing of the reground concentrates for the non-oxide materials at the DeLamar Area; and grinding, flotation, ultra-fine regrind of concentrates, and agitated cyanide-leaching of non-oxide materials at the Florida Mountain Area. To meet the requirement of having reasonable prospects for eventual economic extraction by open-pit methods, pit optimizations for the DeLamar and Florida Mountain Areas were run using the parameters summarized in the tables above, and the resulting pits were used to constrain the DeLamar Project Mineral Resources.
The pit shells created using these optimization parameters were applied to constrain the DeLamar Project Mineral Resources. The in-pit Mineral Resources were further constrained by the application of a gold-equivalent cutoff of 0.17 g/t to all model blocks lying within the optimized pits that are coded as oxide or mixed, a 0.3 g/t gold-equivalent cutoff for blocks coded as non-oxide at the DeLamar Area, and a 0.2 g/t cutoff for blocks coded as non-oxide at the Florida Mountain Area. Gold-equivalent grades, which were used solely for the purpose of applying the Mineral Resource cutoffs, are a function of metal prices and metal recoveries, with the recoveries varying by deposit and oxidation state (see above tables).
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
The total DeLamar Project Mineral Resources, including both the DeLamar and Florida Mountain Areas, are summarized in the below table. The DeLamar Project Mineral Resources are inclusive of the Mineral Reserves discussed herein. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.
Total DeLamar Project Gold and Silver Resources
| Classification | Tonnes | g Au/t | oz Au | g Ag/t | oz Ag |
| Measured | 29,043,000 | 0.47 | 438,000 | 28.0 | 26,128,000 |
| Indicated | 171,205,000 | 0.39 | 2,159,000 | 18.3 | 100,840,000 |
| Measured + Indicated | 200,248,000 | 0.40 | 2,597,000 | 19.7 | 126,968,000 |
| Inferred | 40,615,000 | 0.35 | 452,000 | 12.5 | 16,358,000 |
(1) The effective date of the Mineral Resources is March 1, 2021.
(2) Mineral Resources are reported inclusive of Mineral Reserves.
(3) Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.
(4) Rounding may result in slight discrepancies between tonnes, grade, and contained metal content.
(5) The estimate of Mineral Resources may be materially affected by geology, environment, permitting, legal, title, taxation, sociopolitical, marketing, or other relevant issues.
The gold and silver resources for the DeLamar and Florida Mountain Areas are reported separately in the table below.
Gold and Silver Resources of the DeLamar and Florida Mountain Areas
| Oxide | Mixed | Non-Oxide | ||||||||||
| Florida Mountain | Measured | Indicated | Meas+ Ind | Inferred | Measured | Indicated | Meas+ Ind | Inferred | Measured | Indicated | Meas+ Ind | Inferred |
| K Tonnes | 1,361 | 14,302 | 15,663 | 4,516 | 5,498 | 34,098 | 39,596 | 5,292 | 2,119 | 16,009 | 18,128 | 4,663 |
| g Au/t | 0.39 | 0.36 | 0.36 | 0.25 | 0.47 | 0.39 | 0.40 | 0.28 | 0.40 | 0.44 | 0.43 | 0.32 |
| K Ozs Au | 17 | 164 | 181 | 37 | 82 | 425 | 507 | 48 | 27 | 225 | 252 | 48 |
| g Ag/t | 13.7 | 9.7 | 10.1 | 6.6 | 14.6 | 10.1 | 10.7 | 6.6 | 10.9 | 10.5 | 10.5 | 9.0 |
| K Ozs Ag | 599 | 4,467 | 5,066 | 958 | 2,584 | 11,064 | 13,648 | 1,126 | 741 | 5,399 | 6,140 | 1,343 |
| DeLamar Deposit | ||||||||||||
| K Tonnes | 2,846 | 25,939 | 28,785 | 5,163 | 3,490 | 27,556 | 31,046 | 2,631 | 13,729 | 53,301 | 67,030 | 18,350 |
| g Au/t | 0.34 | 0.31 | 0.32 | 0.26 | 0.42 | 0.33 | 0.34 | 0.29 | 0.53 | 0.46 | 0.48 | 0.42 |
| K Ozs Au | 31 | 262 | 293 | 44 | 47 | 290 | 337 | 25 | 234 | 793 | 1,027 | 250 |
| g Ag/t | 17.7 | 17.0 | 17.1 | 11.1 | 37.3 | 23.0 | 24.6 | 11.4 | 37.2 | 26.5 | 28.7 | 17.2 |
| K Ozs Ag | 1,616 | 14,170 | 15,786 | 1,838 | 4,181 | 20,337 | 24,518 | 967 | 16,407 | 45,403 | 61,810 | 10,126 |
| Total DeLamar Project |
||||||||||||
| K Tonnes | 4,207 | 40,241 | 44,448 | 9,679 | 8,988 | 61,654 | 70,642 | 7,923 | 15,848 | 69,310 | 85,158 | 23,013 |
| g Au/t | 0.36 | 0.33 | 0.33 | 0.26 | 0.45 | 0.36 | 0.37 | 0.28 | 0.51 | 0.46 | 0.47 | 0.40 |
| K Ozs Au | 48 | 426 | 474 | 81 | 129 | 715 | 844 | 73 | 261 | 1,018 | 1,279 | 298 |
| g Ag/t | 16.4 | 14.4 | 14.6 | 9.0 | 23.4 | 15.8 | 16.8 | 8.2 | 33.7 | 22.8 | 24.8 | 15.5 |
| K Ozs Ag | 2,215 | 18,637 | 20,852 | 2,796 | 6,765 | 31,401 | 38,166 | 2,093 | 17,148 | 50,802 | 67,950 | 11,469 |
(1) The effective date of the Mineral Resources is March 1, 2021.
(2) Mineral Resources are reported inclusive of Mineral Reserves.
(3) Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.
(4) Rounding may result in slight discrepancies between tonnes, grade, and contained metal content.
(5) The estimate of Mineral Resources may be materially affected by geology, environment, permitting, legal, title, taxation, sociopolitical, marketing, or other relevant issues.
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
Mineral Reserve Estimate
Mineral Resources have been estimated for both the Florida Mountain and DeLamar Areas of the DeLamar Project. The relevant author of the DeLamar Report has used Measured and Indicated Mineral Resources as the basis to define Mineral Reserves for both the DeLamar and Florida Mountain Areas. Mineral Reserve definition was done by first identifying ultimate pit limits using economic parameters and pit optimization techniques. The resulting optimized pit shells were then used for guidance in pit design to allow access for equipment and personnel. The relevant author of the DeLamar Report then considered mining, processing, metallurgical, infrastructure, economic, marketing, legal, environmental, social, and governmental factors for defining the estimated Mineral Reserves.
The economic parameters and cutoff grades used in the estimation of the Mineral Reserves are shown in the table below. The overall leaching process rate is planned to be 35,000 tpd (38,581 tons) or 12,600,000 tonnes (13,889,123 tons) per year for both Florida Mountain and DeLamar Area oxide and mixed material. DeLamar Area leach processing will also include agglomeration. Initially only the oxide and mixed material will be processed, then starting in year 3, non-oxide will be processed through a plant constructed to operate at a rate of 6,000 tpd (6,614 tons) or 2,160,000 tonnes (2,380,992 tons) per year.
The cutoff grades applied reflect the cost to process material along with G&A and incremental haulage costs. Note that royalties are built into the block values and are considered in determining whether to process the material. While the DeLamar Area non-oxide breakeven cutoff grade would be $11.44/t according to the applicable costs, a cutoff of $15.00 was assigned to enhance the project's economic performance.
DeLamar and Florida Mountain Area Economic Parameters
| DeLamar | Florida Mnt | ||||||||||||||||||
| Oxide | Mixed | Non-Oxide | Oxide | Mixed | Non-Oxide | Units | |||||||||||||
| Mining Cost | $ | 2.00 | $ | 2.00 | $ | 2.00 | $ | 2.00 | $ | 2.00 | $ | 2.00 | $/t Mined | ||||||
| Incremental Ore Haulage | $ | 0.20 | $ | 0.20 | $ | 0.20 | $ | 0.20 | $ | 0.20 | $ | 0.20 | $/t Processed | ||||||
| Process Cost | $ | 3.00 | $ | 4.00 | $ | 11.02 | $ | 2.75 | $ | 3.50 | $ | 9.00 | $/t Processed | ||||||
| G&A | $ | 0.44 | $ | 0.44 | $ | 0.22 | $ | 0.45 | $ | 0.45 | $ | 0.25 | $/t Processed | ||||||
| GMV Breakeven COG | $ | 3.64 | $ | 4.64 | $ | 11.44 | $ | 3.40 | $ | 4.15 | $ | 9.45 | $/t Processed | ||||||
| GMV COG Used | $ | 3.65 | $ | 4.65 | $ | 15.00 | $ | 3.55 | $ | 4.20 | $ | 10.35 | $/t Processed | ||||||
| Final Process Costs | $ | 4.27 | $ | 4.29 | $ | 11.91 | $ | 2.98 | $ | 3.67 | $ | 10.60 | $/t Processed | ||||||
GMV = gross metal value; COG = cutoff grade.
Total Proven and Probable Mineral Reserves for the DeLamar Project from all pit phases are 123,483,000 tonnes at an average grade of 0.45 g Au/t and 23.27 g Ag/t, for 1,787,000 ounces of gold and 92,403,000 ounces of silver. The Mineral Reserves point of reference is the point where material is fed into the crusher.
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
Total Proven and Probable Mineral Reserves, DeLamar and Florida Mountain Area
| Classification | K Tonnes | g Au/t | K Ozs Au | g Ag/t | K Ozs Ag | Block Value | |||||||||||||
| Oxide | Proven | 3,295 | 0.39 | 41 | 17.39 | 1,842 | 19.34 | ||||||||||||
| Probable | 31,486 | 0.37 | 375 | 15.24 | 15,426 | 17.93 | |||||||||||||
| P&P | 34,782 | 0.37 | 416 | 15.44 | 17,268 | $ | 18.06 | ||||||||||||
| Mixed | Proven | 7,741 | 0.49 | 122 | 25.75 | 6,409 | 23.72 | ||||||||||||
| Probable | 49,718 | 0.40 | 637 | 17.29 | 27,632 | 18.29 | |||||||||||||
| P&P | 57,459 | 0.41 | 759 | 18.43 | 34,042 | $ | 19.02 | ||||||||||||
| Non-oxide | Proven | 7,321 | 0.65 | 153 | 53.15 | 12,511 | 39.33 | ||||||||||||
| Probable | 23,921 | 0.60 | 459 | 37.16 | 28,582 | 33.81 | |||||||||||||
| P&P | 31,243 | 0.61 | 612 | 40.91 | 41,093 | $ | 35.11 | ||||||||||||
| Total | Proven | 18,358 | 0.54 | 316 | 35.18 | 20,763 | $ | 29.16 | |||||||||||
| Probable | 105,126 | 0.44 | 1,471 | 21.20 | 71,640 | $ | 21.71 | ||||||||||||
| P&P | 123,483 | 0.45 | 1,787 | 23.27 | 92,403 | $ | 22.82 |
(1) All estimates of Mineral Reserves have been prepared in accordance with NI 43-101 and are included within the current Measured and Indicated Mineral Resources.
(2) Mineral Reserves are based on prices of $1,650 per ounce Au and $21.00 per ounce Ag. The Mineral Reserves were defined based on pit designs that were created to follow optimized pit shells created in Whittle.
(3) Mineral Reserves are reported using block value cutoff grades representing the cost of processing:
Florida Mountain Area oxide leach cutoff grade value of $3.55/t.
Florida Mountain Area mixed leach cutoff grade value of $4.20/t.
Florida Mountain Area non-oxide mill cutoff grade value of $10.35/t.
DeLamar Area oxide leach cutoff grade value of $3.65/t
DeLamar Area mixed leach cutoff grade value of $4.65/t.
DeLamar Area non-oxide mill cutoff grade value of $15.00/t.
(4) The Mineral Reserves point of reference is the point where is material is fed into the crusher.
(5) The effective date of the Mineral Reserves estimate is January 24, 2022.
(6) All ounces reported herein represent troy ounces, "g Au/t" represents grams per gold tonne and "g Ag/t" represents grams per silver tonne.
(7) Columns may not sum due to rounding.
(8) The estimate of Mineral Reserves may be materially affected by geology, environment, permitting, legal, title, taxation, sociopolitical, marketing or other relevant issues.
(9) Energy prices of US$2.50 per gallon of diesel and $0.065 per kWh were used.
Mining Operations
The PFS presented in the DeLamar Report considers open-pit mining of the DeLamar and Florida Mountain Areas. Mining will utilize 23-cubic meter (30-cubic yard) hydraulic shovels along with 13-cubic meter (16.7-cubic yard) loaders to load 136-tonne capacity haul trucks. The haul trucks will haul waste and ore out of the pit and to dumping locations. Due to the length of ore hauls, the ore will be stockpiled near the pits followed by loading into a Railveyor system which will convey the ore into a crusher. The Railveyor system will be supplemented with haul trucks on an as needed basis.
Waste material will be stored in waste-rock storage facilities ("WRSFs") located near each of the Florida Mountain and DeLamar Areas, as well as backfilled into pits where available. The exception is the Milestone pit, from which waste material will be fully utilized for construction material for the tailing storage facility ("TSF").
Production scheduling was completed using Geovia's MineSched™ (version 2021) software. Proven and Probable Mineral Reserves along with waste material inside pit designs were used to schedule mine production. The production schedule considers the processing of DeLamar and Florida Mountain Area oxide and mixed material by crushing and heap leaching, with some of the DeLamar Area material requiring agglomeration prior to leaching. DeLamar and Florida Mountain Area non-oxide material would be processed using flotation followed by cyanide leaching of the flotation concentrate.
An autonomous Railveyor light-rail haulage system will be used to transport ore from the open pits to the crusher facility. Utilizing the Railveyor system allows the opportunity to realize cost savings compared to typical truck haulage. This system, in conjunction with the planned solar and liquid natural gas electrical microgrid will reduce the overall fuel consumption and carbon footprint of the DeLamar Project.
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
The PFS has assumed owner mining instead of the more expensive contract mining. The production schedule was used along with additional efficiency factors, performance curves, and productivity rates to develop the first-principal hours required for primary mining equipment to achieve the production schedule. Primary mining equipment includes drills, loaders, hydraulic shovels, and haul trucks. Support, blasting, and mine maintenance equipment will be required in addition to the primary mining equipment.
Processing and Recovery Operations
Processing
The PFS envisions the use of two process methods for the recovery of gold and silver:
1. Lower-grade oxide and mixed materials will be processed by crushed-ore cyanide heap leaching; and
2. Non-oxide material will be processed using grinding followed by flotation, and very fine grinding of flotation concentrate for agitated cyanide leaching.
Heap-leach and milling ores will be coming from both the Florida Mountain and DeLamar Areas. Pregnant solutions from the heap-leach operation and from the milling operation will be processed by the same Merrill-Crowe zinc cementation plant. Processing will start with heap leaching in the first two years of operation. Milling of higher-grade non-oxide ore will start in the third year of operation.
Both Florida Mountain and DeLamar Area oxide and mixed ore types have been shown to be amenable to heap-leach processing following crushing. Material will be crushed in three stages to a nominal size of 80% finer than (P80) 12.7-millimeter (0.5 inches), at a rate of 35,000 tpd. About 45% of DeLamar Area ore is expected to require agglomeration.
Crushed and prepared ore will be transferred to the heap-leach pad using overland conveyors and stacked on the heap using portable or grasshopper conveyors and a radial stacking system. Pregnant leach solution will be collected at the base on the heap leach and transferred to the Merrill-Crowe processing plant for recovery of precious metals by zinc precipitation. The precipitate will be filtered, dried, and smelted to produce gold and silver doré bullion for shipment off site.
The milling process will start with primary crushing of the ore to a nominal P80 of 120 millimeter (4.72 inches), followed by grinding in a SAG mill-ball mill circuit to a P80 of 150 microns. The ball mill discharge will be pumped to hydrocyclones, with the hydrocyclone overflow advancing to flotation and the underflow returning to the ball mill. The mill will have a nominal capacity of 6,000 tpd.
The flotation circuit will produce a sulfide concentrate that will recover gold and silver from the ore. This flotation concentrate will be reground to a nominal P80 of 20 microns before being leached in agitated leach tanks. Pregnant solution will be separated using a CCD circuit that employs dewatering cyclones and thickeners. The pregnant solution is then sent to the Merrill-Crowe plant and gold smelting facility to produce gold and silver doré bullion.
The flotation tailing stream will be thickened and pumped to the tailing storage facility. The concentrate leach residue will be sent to cyanide destruction, then stored in a separate concentrate leach tailing storage facility.
Recovery
Recoveries were applied based on recommendations of the relevant author of the DeLamar Report. Recoveries are shown in the table below. The oxide and mixed recoveries assume crushed heap leaching for oxide and mixed material, and flotation milling for non-oxide material. Florida Mountain Area non-oxide material uses recovery Equation and Equation to estimate the recoveries based on gold and silver grades respectively.
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
DeLamar and Florida Mountain Area Recoveries
| Oxide | Mixed | Non-Oxide | ||||
| Recoveries by Area | Au | Ag | Au | Ag | Au | Ag |
| Florida Mountain | 89% | 49% | 72% | 47% | Eq. 1 | Eq. 2 |
| Sullivan Gulch | 86% | 20% | 61% | 39% | 38% | 73% |
| DeLamar | 78% | 11% | 61% | 42% | 39% | 87% |
| Sommercamp | 87% | 15% | 58% | 44% | 39% | 87% |
| Glen Silver | 70% | 18% | 63% | 30% | 28% | 64% |
| South Wahl | 77% | 37% | 50% | 74% | 39% | 87% |
| Milestone | 75% | 18% | 45% | 18% | 39% | 87% |
Equation 1 Florida Mountain Area Gold Recovery
Where: Maximum recovery = 87%
Equation 2 Florida Mountain Area Silver Recovery
Where: Maximum recovery = 77%
See "Mineral Processing and Metallurgical Testing" above.
Infrastructure, Permitting and Compliance Activities
Project Infrastructure
The infrastructure for the DeLamar Project has been developed to support mining and processing operations. This includes the access road to the facilities, power supply, Railveyor, communication, heap-leach pads, process plant, and ancillary buildings. This also includes haul roads within the mining area as well as the mine waste storage facilities.
The main access to the DeLamar Project is via gravel roads from Jordan Valley, Oregon, as used for previous mining at DeLamar. The existing DeLamar Project site access road is located on the east side of Henrietta Ridge extending from the DeLamar Road across Jordan Creek to the western side of the existing reclaimed Kinross tailing impoundment. This existing site access road is expected to become unusable due to its proximity to the proposed Milestone pit haul road and DeLamar West WRSF. Therefore, this PFS proposes relocating the site access road to the west side of Henrietta Ridge.
Haul road access between the DeLamar Area mine and Florida Mountain Area will need to be improved for use with the proposed mining equipment. This access will be utilized for delivery of all consumables, as well as any required construction materials and equipment. This will also be the primary access for all personnel working at the Florida Mountain Area.
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
The electrical power demand at the DeLamar Project facilities is currently estimated at 13.5 MW for initial heap-leach process operations, with an additional load of 9.8 MW for the mill circuit. The demand will vary according to the quantity of each ore type to be processed. The average load for the mine is forecast to be 11.6 MW (Table 18.1) with a peak demand of 23.4 MW. Lifetime electricity consumption is estimated to be 1.8 million MWh.
Existing electrical infrastructure on the DeLamar Project site consists of a 69 kV transmission line operated by Idaho Power Company. Significant upgrades to existing electrical infrastructure would be required to meet the anticipated load increase associated with the DeLamar Project, including construction of new 138 kV transmission lines, substations and tap station upgrades. To reduce capital expenditures of energy infrastructure, ensure power supply resilience and reduce emissions, Integra plans to power the project through an on-site microgrid with a solar electrical generation system and an LNG plant.
The DeLamar Project will utilize a Railveyor light rail haulage system to transport ore from the open pits to the crusher facility. The Railveyor system is an autonomous materials haulage system consisting of transport trains, light-rails, electrical drive stations, and materials loading and discharge stations. The system functions similar to a conveyor, but is designed to be modular and relocatable, allowing improved operational flexibility and lower cost. By leveraging the Railveyor system, the DeLamar Project has a unique opportunity to realize cost savings compared to typical truck haulage, while reducing its overall fuel consumption and carbon footprint and automating many essential functions that typically would require on-site personnel.
The heap-leach pads ("HLP" or "HLPs") will be located immediately north of the crushing facility in portions of Sections 3, 4, 9 and 10, Township 5 South, Range 4 West. The site slopes northerly toward Jordan Creek at an average gradient of 12.5 percent. The HLPs will be constructed in two phases. The phase 1 portion will be constructed on a feature locally identified as Jacobs Ridge and into an adjacent valley to the west (herein referred to as the "unnamed gulch" or the "valley"). The site is generally underlain with a basalt which is overlain with a thin veneer of colluvium derived from weathering of the basalt and interbeds of tuff. Upper portions of the HLPs are underlain with porphyritic latite lava flows. The northern extent of the Jacobs Ridge pad area is underlain by a Miocene age rhyolite dike or plug. Geotechnical drilling in the Jacobs Ridge portion of the site in 1988 identified discontinuous layers of weathered tuff that had low shear strength. An initial auger drilling program on the western side of the site did not encounter the tuffaceous material encountered on Jacobs Ridge.
Phase 2 portion of the HLP will consist of a westerly extension of the pad and tying in the area between the west side of the Jacobs Ridge pad and the east side of the phase 1 valley pad. Construction of phase 2 will begin two years ahead of when the extended pad is needed, assumed in year 3 of operation. Phase 2 construction will be performed in the same sequence of activities and will add approximately 30% to the pad footprint. The total volume of ore to be placed on the HLP is between 95 million tonnes and 100 million tonnes which may include up to 2 million tonnes placed at the southern end of the Jacobs Ridge portion of the phase 1 pad to minimize recovery time from the final ore placed on the pad.
The primary flotation TSF for the DeLamar Project will be located in Sections 30 and 31, Township 4 South, Range 4 West, and Sections 25 and 36, Township 4 South, Range 5 West, in Slaughterhouse Gulch, approximately 6.0 kilometers (3.7 miles) west of the new mill site. Slaughterhouse Gulch is a natural drainage that descends to the south primarily on State and BLM lands. The TSF will be a zoned earth and rockfill embankment that will be located where the valley narrows approximately 1km (0.6 miles) north of its confluence with Jordan Creek. The Slaughterhouse Gulch TSF will impound flotation tailing that have not been processed by cyanidation and therefore will not be lined in accordance with IDEQ Rules 58.01.013. The earth dam will be designed in accordance with Idaho dam safety regulation IDAPA 37 - DEPARTMENT OF WATER RESOURCES Water Allocations Bureau 37.03.05 - Mine Tailings Impoundment Structures.
The concentrate leach tailing storage facility ("CLTSF") will be a smaller, 26 hectare (64.2 acre) impoundment for containment of flotation concentrates from the milling process after they have been leached with cyanide to remove precious metals. To aid in settling, this fine material (P80 of 20 microns) will be blended with a small stream of coarser flotation tailing in roughly a 1:1 blend. The location of this CLTSF is immediately south of the HLP at the head of the unnamed drainage. The construction of the CLTSF in this location will involve placing fill from the Jacobs Ridge pad area to provide initial stormwater storage and then installing a liner system in year 2 that will meet the lining requirements of the IDEQ Rules 58.01.13 - Rules for Ore Processing by Cyanidation. In accordance with the regulation, the lining system will consist of 61 centimeters (24 inches) of compacted clay overlain with an 80-mil thick HDPE liner - or approved equivalent. The downstream side of the TSF will be constrained by crushed ore placed in the south end of the HLPs. A geotextile will be placed on the ore to allow drainage from the CLTSF into the ore to enhance consolidation of the tailing during operation and following closure. Excess fluids will be decanted from the surface of the impoundment and pumped back to a tank for re-introduction into the process water stream. Since this impoundment will be constructed in accordance with the IDEQ Cyanide Rules, in may also be used for temporary storage of excess fluids containing cyanide due to precipitation events on the HLP.
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
The proposed heap-leach facility will be located between the DeLamar and Florida Mountain Area pits. The primary crusher and process facilities will be located just south of the HLPs. Ore will be conveyed from the primary crusher to oxide or non-oxide coarse ore stockpiles accordingly.
WRSFs, along with backfill areas, have been designed for the PFS to contain the waste material mined from the different pit phases. A single WRSF design is planned for the Florida Mountain Area along with a two backfill dumps into the Florida Mountain Area phase 1 and 2 pits. Material from Florida Mountain Area phase 1 will be placed into the primary WRSF. Phase 2 waste material will also be placed into the primary WRSF except for some upper areas of the pit where some waste will be backfilled. Phase 3 waste material is planned to be placed into the backfill dump as available while the remaining waste material will be placed into the Florida Mountain Area WRSF. The total capacity of the WRSF is 32.2 million cubic meters (42.1 million cubic yards). The remaining 23.4 million cubic meters (30.6 million cubic yards) of waste material will be placed into backfill.
Three WRSF designs were created for the DeLamar Area which includes a West WRSF, East WRSF, and a North WRSF. The West and East WRSFs are intended for storage of material from the DeLamar Main phase 1 pit. Both dump designs include a roadway that will be built into the WRSFs to allow haulage through the main pit exits for both DeLamar Main and Sullivan Gulch pits. The East WRSF creates its haulage road through a valley to the south of the deeper Sullivan Gulch phase 2 pit. This road is anticipated to be in place well before the mining of Sullivan Gulch phase 2. The total West DeLamar WRSF total capacity is 5.9 million cubic meters (7.7 million cubic yards). After the roadway is completed, the East WRSF is to be expanded to the south. The total East DeLamar WRSF total capacity will be 50.0 million cubic meters (65.4 million cubic yards).
The North WRSF will be located in a valley to the north of the Main and Sullivan Gulch pits. This will be used for the Main pit phase 2 waste along with Sullivan Gulch pit waste. The designed capacity of the North WRSF is 26.4 million cubic meters (34.5 million cubic yards). As available, additional waste will be placed into the Main phase 1 pit and from the Main phase 2 pit as backfill. Additional backfill material will be placed into the Main phase 2 pit from Sullivan Gulch phase 1 mining.
Other buildings located on or near the process facilities pad include the administration/change building, a substation, assay lab, Merrill-Crowe plant, and water treatment plant.
It is anticipated that there will be several freshwater wells on-site that will provide the requirements of the DeLamar Project. Fresh water will be stored in a fresh/fire water tank that will have reserve storage dedicated for fire protection. The balance of the fresh/fire water volume will be utilized to supply the demands of the process as well as mine dust suppression.
Stormwater from the site will be managed as contact and non-contact stormwater. Non-contact stormwaters are the flows that do not come in contact with ore or mine processing facilities. Non-contact flows will be diverted and conveyed around the sites and directly discharged to existing stream channels. Contact stormwater will be utilized within the process to the greatest extent that allows the process to maintain a neutral balance. If there is excess contact water within the process, the excess will be routed to a water treatment plant. There is an existing water treatment plant at the project site. An allowance has been included for additional water treatment capacity consisting of a plant with solids separation and treatment, as required, to allow for discharge to existing stream channels or re-use in the process system.
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
Mine site personnel requirements are shown in the table below. This includes administrative, mining, and processing. In addition, there would be approximately 80 additional personnel working on-site during construction.
Mine, Process and Administrative Personnel
| Units | Pre-Prod | Yr_1 | Yr_2 | Yr_3 | Yr_4 | Yr_5 | Yr_6 | Yr_7 | Yr_8 | Yr_9 | Yr_10 | Yr_11 | Yr_12 | Yr_13 | Yr_14 | Yr_15 | Yr_16 | Yr_17 | Yr_18 | Max | |
| Administration | # | 24 | 27 | 24 | 24 | 24 | 24 | 24 | 24 | 24 | 24 | 24 | 24 | 17 | 14 | 14 | 14 | 14 | 14 | - | 27 |
| Mining Personnel | |||||||||||||||||||||
| Mine General Personnel | # | 22 | 22 | 22 | 22 | 22 | 22 | 22 | 22 | 22 | 22 | 22 | 22 | 15 | 15 | 15 | 15 | 15 | 11 | - | 22 |
| Operators | # | 60 | 97 | 113 | 117 | 117 | 117 | 117 | 97 | 91 | 91 | 91 | 91 | 60 | 44 | 36 | 32 | 32 | 28 | - | 117 |
| Mechanics | # | 30 | 49 | 59 | 59 | 59 | 59 | 59 | 51 | 47 | 47 | 47 | 47 | 31 | 23 | 19 | 15 | 15 | 13 | - | 59 |
| Maintenance | # | 25 | 25 | 25 | 25 | 25 | 25 | 25 | 25 | 25 | 25 | 25 | 25 | 15 | 15 | 15 | 15 | 15 | 14 | - | 25 |
| Total Mine Personnel | # | 137 | 193 | 219 | 223 | 223 | 223 | 223 | 195 | 185 | 185 | 185 | 185 | 121 | 97 | 85 | 77 | 77 | 66 | - | 223 |
| Process Personnel | |||||||||||||||||||||
| Process General Personnel | # | 7 | 7 | 7 | 14 | 14 | 14 | 14 | 14 | 14 | 14 | 14 | 14 | 14 | 14 | 14 | 14 | 14 | 14 | - | 14 |
| Operators | # | 10 | 21 | 21 | 46 | 46 | 46 | 46 | 46 | 46 | 46 | 46 | 46 | 46 | 46 | 46 | 46 | 46 | 46 | - | 46 |
| Assay Lab | # | 6 | 6 | 6 | 12 | 12 | 12 | 12 | 12 | 12 | 12 | 12 | 12 | 12 | 12 | 12 | 12 | 12 | 12 | - | 12 |
| Maintenance | # | 7 | 7 | 7 | 7 | 7 | 7 | 7 | 7 | 7 | 7 | 7 | 7 | 7 | 7 | 7 | 7 | 7 | 7 | - | 7 |
| Total Process Personnel | # | 30 | 41 | 41 | 79 | 79 | 79 | 79 | 79 | 79 | 79 | 79 | 79 | 79 | 79 | 79 | 79 | 79 | 79 | - | 79 |
| Total Project Personnel | # | 191 | 261 | 284 | 326 | 326 | 326 | 326 | 298 | 288 | 288 | 288 | 288 | 217 | 190 | 178 | 170 | 170 | 159 | - | 326 |
Environmental Studies
The review and approval process for the PoO by the BLM constitutes a federal action under the National Environmental Policy Act ("NEPA") and BLM regulations. Thus, for the BLM to process the PoO, the BLM is required to comply with the NEPA and prepare either an Environmental Assessment, or an Environmental Impact Statement ("EIS"). Based on discussions with the BLM, Integra anticipates an EIS will be required to comply with NEPA.
Integra has contracted qualified third parties to perform environmental adequacy reviews of all available existing environmental baseline reports and data compiled from 1979 through present. Additionally, an EA was approved in 1987 for the DeLamar Silver Mine and an EIS was approved in 1995 for the Stone Cabin Mine by previous operators for the site.
In 2020, Integra conducted a technical adequacy audit of all existing environmental information and began the collection of surface water hydrology and quality, ground water hydrology and quality, geochemistry, water rights and geotechnical/engineering.
Baseline studies for surface water were initiated in spring of 2020 and ground water studies were initiated in the spring of 2020. Geotechnical investigations for site features commenced in 2021 and geochemical fieldwork and kinetic testing commenced in 2020 and will continue into 2022/2023.
In 2021, Integra developed certain plans of study and, working closely with the BLM and state agencies, completed the review and approval of the initial environmental baseline work plans. Baseline surveys initiated in accordance with the 2021 plans of study and baseline technical reports are underway. Additional plans of studies and collection of data will be undertaken in 2022.
The data collection and technical reports are scheduled to be completed in the second half of 2022. The entire DeLamar mining district has been studied extensively, both historically and currently; therefore, ensuring scientific integrity of the methodologies and analysis used to collect the data and ultimately a meaningful analysis would be conducted allowing for a reasonable comparative assessment of the alternatives.
Permitting
The Mine Plan of Operations ("MPO") is submitted to the BLM for any surface disturbance in excess of five acres (2.02 hectares). The MPO describes the operational procedures for the construction, operation, and closure of the project. As required by the BLM, the MPO includes a waste-rock management plan, quality assurance plan, a storm water plan, a spill prevention plan, reclamation plan, a monitoring plan and an interim management plan. In addition, a reclamation report with a Reclamation Cost Estimate ("RCE") for the closure of the project is required. The content of the MPO is based on the mine plan design and the data gathered as part of the environmental baseline studies. The MPO includes all mine and processing design information and mining methods. The BLM determines the completeness of the MPO and, when the completeness letter is submitted to the proponent, the NEPA process begins. The RCE is reviewed by BLM and the bond is determined prior to the BLM issuing a decision on the MPO.
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
The MPO will be submitted for the DeLamar Project when operational and baseline surveys are complete and operations and design for the DeLamar Project are at a level where a MPO can be developed to the necessary level of detail. Submittal of the MPO is likely to occur in the first half of 2023.
Approval of any MPO and reclamation plan by the federal agencies for the DeLamar Project as well as accordance with Section 404 requires an environmental analysis under the NEPA. NEPA requires federal agencies study and consider the likely environmental impacts of the proposed action before taking whatever federal action is necessary for the project to proceed.
The purpose and need for the DeLamar Project would be to conduct open pit mining and ore processing, which would disturb over 809 hectares (2,000 acres) of unpatented and patented mining claims and state lands within the project area and complete reclamation and closure activities, as well as long-term water treatment, to produce silver and gold from mineralized material of the estimated mineral resources. As a result, Integra anticipates that an EIS will be required to meet agency NEPA requirements.
The BLM will be the lead federal agency for the preparation of the EIS, and other agencies will be cooperating agencies. The EIS and associated Record of Decision ("ROD") effectively drives the entire permitting process timeline.
Several other federal, state and local county authorizations and/or permits will be required.
Social and Community
The DeLamar Project is located in rural Owyhee County, close to the Oregon border. The closest substantial community is Jordan Valley, in Malheur County Oregon. This community is primarily an agricultural based economy. However, when the mine previously operated in the 1980s and 1990s many of the employees lived in Jordan Valley.
Capital and Operating Costs
Capital Costs
The table below summarizes the estimated capital costs for the DeLamar Project. The LOM total capital costs are estimated as $589.5 million, including $307.6 million in preproduction capital (including working capital and reclamation bond) and $281.8 million for expansion and sustaining capital. Sustaining capital includes $30.8 million in reclamation costs. The estimated capital costs are inclusive of sales tax, engineering, procurement and construction management ("EPCM") and contingency.
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
Capital Cost Summary
| Mine | Pre-Production | Sustaining | Total LOM | ||||||
| Yr 1 to Yr 17 | |||||||||
| Mining Equipment | $ | 28,859 | $ | 88,544 | $ | 117,403 | |||
| Pre-Stripping | $ | 12,712 | $ | - | $ | 12,712 | |||
| Other Mine Capital | $ | 1,919 | $ | 225 | $ | 2,144 | |||
| Sub-Total Mine | $ | 43,490 | $ | 88,769 | $ | 132,260 | |||
| Processing | |||||||||
| Leach Pad Construction Cost | $ | 42,296 | $ | 11,035 | $ | 53,331 | |||
| Oxide Plant Construction | $ | 165,198 | $ | 8,842 | $ | 174,040 | |||
| Non Oxide Mill Construction | $ | - | $ | 132,005 | $ | 132,005 | |||
| Tailings Storage Facility Construction | $ | 3,836 | $ | 58,793 | $ | 62,629 | |||
| Sub-Total Processing | $ | 211,330 | $ | 210,675 | $ | 422,005 | |||
| Infrastructure | |||||||||
| Power | $ | 3,500 | $ | - | $ | 3,500 | |||
| Access Road | $ | 8,957 | $ | - | $ | 8,957 | |||
| Other | $ | 7,652 | $ | 974 | $ | 8,626 | |||
| Sub-Total Infrastructure | $ | 20,109 | $ | 974 | $ | 21,083 | |||
| Owner's Costs | $ | 7,001 | $ | - | $ | 7,001 | |||
| SUB-TOTAL | $ | 281,930 | $ | 300,418 | $ | 582,349 | |||
| Other | |||||||||
| Working Capital | $ | 19,518 | $ | (19,518 | ) | $ | - | ||
| Cash Deposit for Reclamation Bonding | $ | 6,167 | $ | (6,167 | ) | $ | - | ||
| Salvage Value | $ | - | $ | (23,729 | ) | $ | (23,729 | ) | |
| TOTAL | $ | 307,615 | $ | 251,004 | $ | 558,620 | |||
| Reclamation | $ | - | $ | 30,835 | $ | 30,835 | |||
| Total Including Reclamation Costs | $ | 307,615 | $ | 281,839 | $ | 589,454 |
(1) Capital costs include contingency and EPCM costs.
(2) Mining equipment includes cost of Railveyor.
(3) Major mining equipment assumes financing by equipment vendor with 10% down; principal payments included under sustaining capital column and interest payments included in operating costs.
(4) Sustaining capital showed in this table includes expansion capital (non-oxide plant) and principal payment of mining equipment leases (see note 3 above).
(5) Working capital is returned in year 17.
(6) Cash deposit = 20% of bonding requirement. Released once reclamation is completed.
(7) Salvage value for mining equipment and plant.
The table below shows the estimated LOM operating costs for the DeLamar Project. Operating costs are estimated to be $12.93 per tonne processed for the LOM. This includes mining costs, which are estimated to be $1.90 per tonne mined. The total cash cost is estimated to be $923 per ounce of AuEq1 and site level AISC are estimated to be $955 per ounce of AuEq.
1 Gold equivalent = oz Au + (oz Ag ÷ 79.07)
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
Operating and Total Cost Summary
(1) By-Product costs are shown as US dollars per gold ounces sold with silver as a credit.
(2) Co-Product costs are shown as US dollars per gold equivalent ounce.
Economic Analysis
Economic highlights of the PFS for the DeLamar Project include:
-
Initial construction period is anticipated to be 18 months;
-
After-tax NPV (5%) of $407.8 million with a 27% after-tax IRR using $1,700 and $21.50 per ounce gold and silver prices, respectively;
-
After-tax payback period of 3.34 years;
-
Year 1 to 8 AuEq2 average production of 163,000 ounces (average 121,000 oz Au/year and 3,312,000 oz Ag/year);
-
Year 1 to 16 AuEq average production of 110,000 ounces (average 71,000 oz Au/year and 3,085,000 oz Ag/year);
-
After-tax LOM cumulative cash flow of $689.3 million; and
-
Average annual after-tax free cash flow of $59.8 million during production.
The below figures show (i) annual operating after-tax cash flow; (ii) AuEq production profile by process method; and (iii) AuEq profile by process metals.
2 Gold equivalent = oz Au + (oz Ag ÷ 79.07)
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
Annual Operating After-Tax Cash Flow
Gold Equivalent Production Profile by Process Method
Gold Equivalent Profile by Process Metals
Economic sensitivities of the DeLamar Project to changes in metal prices were evaluated based on constant gold to silver ratios as shown in the below table.
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
Project Sensitivity to Metal Prices
| $/oz Au | $/oz Ag | NPV (5%) | NPV (8%) | NPV (10%) | IRR | Payback | ||||||||||||||
| $ | 1,500 | $ | 18.97 | $ | 198,811 | $ | 123,406 | $ | 84,281 | 16% | 4.30 | |||||||||
| $ | 1,550 | $ | 19.60 | $ | 251,296 | $ | 167,213 | $ | 123,450 | 19% | 3.94 | |||||||||
| $ | 1,600 | $ | 20.24 | $ | 304,035 | $ | 211,159 | $ | 162,701 | 22% | 3.72 | |||||||||
| $ | 1,650 | $ | 20.87 | $ | 355,830 | $ | 254,247 | $ | 201,148 | 24% | 3.52 | |||||||||
| $ | 1,700 | $ | 21.50 | $ | 407,817 | $ | 297,519 | $ | 239,771 | 27% | 3.34 | |||||||||
| $ | 1,750 | $ | 22.13 | $ | 459,528 | $ | 340,561 | $ | 278,192 | 29% | 3.19 | |||||||||
| $ | 1,800 | $ | 22.76 | $ | 510,589 | $ | 383,015 | $ | 316,060 | 32% | 3.05 | |||||||||
| $ | 1,850 | $ | 23.40 | $ | 561,343 | $ | 425,183 | $ | 353,653 | 34% | 2.93 | |||||||||
| $ | 1,900 | $ | 24.03 | $ | 611,998 | $ | 467,275 | $ | 391,183 | 36% | 2.83 | |||||||||
| $ | 1,950 | $ | 24.66 | $ | 662,697 | $ | 509,428 | $ | 428,785 | 39% | 2.73 | |||||||||
| $ | 2,000 | $ | 25.29 | $ | 713,650 | $ | 551,851 | $ | 466,659 | 41% | 2.64 |
The after-tax sensitivity to revenues, capital, and operating costs is shown in the below figure.
After-Tax Sensitivity
Exploration and Development
Please see "2022 Outlook" section above for further details on the Company's current and contemplated exploration and development activities.
Opportunities
There is the potential to lower project capital costs by foregoing mill processing and instead operate a heap-leach only project. In this scenario, a high percentage of the current heap-leach reserves would be processed at the 35,000 tpd rate envisioned in the PFS. LOM capital expenditures would decrease significantly as expansion capital, such as non-oxide plant and tailing facilities, would not be required. A decision to construct and initiate mill processing (stage 2) could be exercised at any time, providing the flexibility to respond to changing market conditions and thereby reduce project risk.
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
A heap-leach only approach could reduce risk and provide greater flexibility to respond to the prevailing economic environment in connection with a decision to pursue a milling scenario later.
Please see the DeLamar Report on the Company's website at www.integraresources.com for additional details on potential opportunities.
(2) BlackSheep District, Idaho
On February 14, 2019, Integra announced the acquisition of a highly prospective trend of multiple epithermal centers 6 km to the northwest of the DeLamar Project, a trend now referred to as the BlackSheep District ("BlackSheep" or the "District"). The District was identified in part during site visits and research by renowned epithermal geologists Dr. Jeff Hedenquist and Dr. Richard Sillitoe. Dr. Sillitoe and Dr. Hedenquist, along with Integra's exploration team led by Dr. Max Baker, mapped the area and interpreted the District to have undergone very limited erosion since the mid-Miocene mineralization event, suggesting the productive zone of mineralization is potentially located approximately 200 m beneath the surface. Minimal historical exploration did encounter gold-silver in BlackSheep; however, historic drilling was shallow, less than 100 m vertical on average, and did not enter the theorized productive zone.
The BlackSheep District to the northwest of DeLamar is comparable in geographical size to both the DeLamar and Florida Mountain Deposits combined. The nature of the mineralization and alteration in BlackSheep includes extensive sinter deposits surrounding centers of hydrothermal eruption breccia vents associated with high-level coliform banded amorphous to chalcedonic silica with highly anomalous gold, silver arsenic, mercury, antimony and selenium values. In addition to some preliminary rock chip sampling, Integra completed an extensive soil geochemistry grid over the BlackSheep District showing highly anomalous gold and silver trends over significant lengths.
The Company commenced an extensive regional exploration program at BlackSheep in 2019. This regional exploration program included:
1. Additional rock-chip sampling and prospect scale mapping
2. A regional airborne magnetic and radiometric survey
3. Commissioning of the Idaho Geology Department to undertake 1:24,000 scale geological mapping of the DeLamar, Florida Mountain and BlackSheep Districts
4. Induced polarization ("IP") survey currently underway
See "Q3 2022 in Review" and "2022 Outlook" sections above for further details on recent exploration work.
(3) War Eagle Property, Idaho
On January 21, 2019, Integra announced that, through its wholly owned subsidiary, DeLamar Mining Company, it entered into an option agreement with Nevada Select Royalty, Inc. ("Nevada Select"), a wholly owned subsidiary of Ely Gold Royalties, Inc ("Ely Gold") to acquire Nevada Select's interest in a State of Idaho Mineral Lease encompassing the War Eagle gold-silver Deposit ("War Eagle") situated 3 km east of Integra's Florida Mountain Deposit. On June 21, 2021, Gold Royalty Corp. ("GRC") and Ely Gold announced that they have entered into a definitive agreement pursuant to which GRC will acquire all of the issued and outstanding common shares of Ely Gold by way of a statutory plan of arrangement under the Business Corporations Act (British Columbia). The transaction was completed on August 23, 2021.
In the War Eagle Mountain District, Integra had previously acquired the Carton Claim group comprising of six patented mining claims covering 45 acres and located 750 m north of the State Lease.
War Eagle Mountain has a rich history of high-grade gold-silver production dating back to the late 1800's. The War Eagle-Florida-DeLamar geological settings, all hosting low sulphidation epithermal gold-silver are genetically related to the same mineralization forming event that occurred roughly 16 million years ago. The local geology and ore mineralogy found within the low sulphidation epithermal veins on War Eagle Mountain are similar to the regimes found at DeLamar and Florida Mountain to the west. The key difference is the host rock. Historically mined gold and silver in high grade veins at War Eagle was predominately mined and hosted by late Cretaceous age granitic rock. It should be noted that historically, the veins of War Eagle Mountain were of far higher grade compared to any other mining operations in the district, including DeLamar and Florida Mountain. Past production on these high-grade vein systems has outlined strike lengths in excess of 1 km and depth extents of up to 750 meters or more.
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
The following table highlights several of the best intercepts drilled by previous explorers of War Eagle Mountain, as described in historic drill data tabulations.
| Drill Hole ID | From (m) | To (m) |
Interval (m) (1) |
g/t AuEq(2) |
| W14 Incl |
131.06 131.06 |
213.36 134.11 |
82.30 3.05 |
4.07 32.04 |
| W02 | 56.39 | 62.48 | 6.09 | 9.49 |
| W03 | 175.26 | 182.88 | 7.62 | 9.28 |
| W06 | 146.30 | 147.83 | 1.52 | 55.03 |
| W40 | 68.58 | 92.96 | 24.38 | 8.45 |
| W40 Incl |
152.40 166.12 |
195.07 176.78 |
42.67 10.67 |
8.83 19.19 |
| W51 | 124.97 | 132.59 | 7.62 | 8.04 |
1. The historic drill data reported in this release was developed by previous operators of the War Eagle Project prior to the introduction of NI43-101. Historic drill intersections are reported as drilled thicknesses. True widths of the mineralized intervals are estimated to be less than 75% of the reported widths. The historic drill data was sourced from historic reports by various operators' exploration and production data and reports. Integra Resources is providing this historic data for informational purposes only, and gives no assurance as to its reliability or relevance. Integra Resources has not completed any quality assurance program or applied quality control measures to the historic data. Accordingly, the historic data should not be relied upon.
2. Gold equivalent = g Au/t + (g Ag/t ÷ 85)
See "Q3 2022 in Review" and "2022 Outlook" sections above for further details on recent exploration work.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth selected consolidation information of the Company as of September 30, 2022, December 31, 2021, and December 31, 2020, prepared in accordance with IFRS. The selected consolidated financial information should be read in conjunction with the Company's audited annual consolidated financial statements and unaudited interim condensed consolidated financial statements for the three and nine-month periods ended September 30, 2022 and 2021.
| Nine-Month Period Ended September 30, 2022 $ |
Year Ended December 31, 2021 $ |
Year Ended December 31, 2020 $ |
|||||||
| Exploration and evaluation expenses | (8,260,713 | ) | (24,072,394 | ) | (12,774,217 | ) | |||
| Operating loss | (13,730,951 | ) | (31,702,931 | ) | (19,139,151 | ) | |||
| Other income (expense) | 128,650 | (1,230,714 | ) | (1,110,273 | ) | ||||
| Net loss | (13,602,301 | ) | (32,933,645 | ) | (20,249,424 | ) | |||
| Net loss per share | (0.21 | ) | (0.58 | ) | (0.41 | ) | |||
| Other comprehensive income (loss) | (822,736 | ) | 480,751 | 457,112 | |||||
| Comprehensive loss | (14,425,037 | ) | (32,452,894 | ) | (19,792,312 | ) | |||
| Cash and cash equivalents | 20,522,332 | 14,337,078 | 29,061,142 | ||||||
| Exploration and evaluation assets | 37,845,547 | 56,491,140 | 56,809,632 | ||||||
| Total assets | 63,090,340 | 75,160,191 | 89,211,595 | ||||||
| Total current liabilities | 13,860,655* | 5,719,241 | 5,691,634 | ||||||
| Total non-current liabilities | 22,136,089 | 40,365,947 | 41,693,819 | ||||||
| Working capital | 7,710,432* | 9,387,223 | 24,057,845 |
*September 30, 2022 current liabilities and working capital include the convertible debt liability; the Company's current liabilities and working capital, excluding the convertible debt, were $4,241,844 and $17,329,243, respectively (see "Convertible Debt Facility" section).
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
The Company has changed its presentation currency as of December 31, 2021 from the Canadian dollar to the US dollar, to better reflect the Company's business activities and as most of the Company's assets and liabilities are held in its US subsidiaries hence denominated in US dollars. As a result, comparative figures in the unaudited interim condensed consolidated financial statements have been translated into US dollars. No changes were made to the Company's functional currencies, as per the management's assessment based on the IAS 21 recommendations, which will be performed on a quarterly basis.
The operating losses for the nine-month period ended September 30, 2022 and the years ended December 31, 2021 and 2020 were mostly driven by exploration and evaluation expenses, as well as head office and site G&A expenses which includes compensation, office, professional fees, regulatory fees, and stock-based compensation (non-cash) expenses.
Other income for the nine-month period ended September 30, 2022 was mostly driven by the reclamation accretion expenses, interest and accretion expenses related to the convertible debt, partly offset by foreign exchange gain, interest and rent income, and change in fair value of derivatives (non-cash). Other expenses for the years ended December 31, 2021 and 2020 were mostly due to foreign exchange loss and reclamation accretion expenses, partly offset by interest and rent income.
Other comprehensive income amounts are related to the foreign exchange translation adjustment.
Total assets in the current nine-month period ended September 30, 2022 decreased compared to the year ended December 31, 2021, mostly due to a decrease in exploration and evaluation assets (resulting from a reclamation adjustment), partially off-set by an increase in cash. Total assets in the year ended December 31, 2021 decreased compared to the year ended December 31, 2020, due to a decrease in cash (mostly as a result of exploration/development activities and G&A) partially off-set by an increase in property, plant and equipment assets.
Working capital in the current nine-month period ended September 30, 2022 decreased compared to the year ended December 31, 2021 due to the convertible debt being classified as a current liability. The Company's working capital, excluding the convertible debt, was $17,329,243, which represents an increase compared to the year ended December 31, 2021, mostly due to an increase in cash in the current period, as a result of the Company's August 2022 equity financing and proceeds from convertible debt initial advance. Working capital in the year ended December 31, 2021 decreased compared to the year ended December 31, 2020 was also mostly due to a decrease in cash for the reasons as discussed above.
Total non-current liabilities decreased in the current nine-month period ended September 30, 2022 compared to the years ended December 31, 2021 and 2020 mostly due to a change in reclamation liability.
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
The following table outlines the exploration and evaluation assets break-down:
Exploration and Evaluation Assets Summary:
| Total | |||
| Balance at December 31, 2020 | $ | 56,809,632 | |
| Land acquisitions/option payments | 45,000 | ||
| Claim staking | 3,000 | ||
| Reclamation adjustment* | (424,038 | ) | |
| Depreciation** | (7,404 | ) | |
| Total | 56,426,190 | ||
| Advance minimum royalty | 64,950 | ||
| Balance at December 31, 2021 | 56,491,140 | ||
| Land acquisitions/option payments | 20,000 | ||
| Reclamation adjustment* | (18,722,405 | ) | |
| Depreciation** | (5,538 | ) | |
| Total | 37,783,197 | ||
| Advance minimum royalty | 62,350 | ||
| Balance at September 30, 2022 | $ | 37,845,547 |
*Reclamation adjustment is the change in present value of the reclamation liability, mainly due to changes to inflation rate and discount rate.
**A staff house building with a carrying value of $187,150 has been included in the DeLamar property. This building is being depreciated.
The following tables outline the Company's exploration and evaluation expense summary for the nine-month periods ended September 30, 2022 and 2021:
Exploration and Evaluation Expense Summary:
| September 30, 2022 | DeLamar deposit |
Florida Mountain deposit |
War Eagle deposit |
Other deposits |
Joint expenses |
Total | ||||||||||||
| Contract exploration drilling | $ | 489,656 | $ | - | $ | - | $ | - | $ | - | $ | 489,656 | ||||||
| Contract metallurgical drilling | 657,499 | - | - | - | - | 657,499 | ||||||||||||
| Contract condemnation drilling | 216,877 | - | - | - | - | 216,877 | ||||||||||||
| Exploration drilling - other drilling labour & related costs | 542,207 | 20,952 | 10,779 | - | - | 573,938 | ||||||||||||
| Metallurgical drilling - other drilling labour & related costs | 310,344 | - | - | - | - | 310,334 | ||||||||||||
| Condemnation drilling - other | 298,881 | - | - | - | - | 298,881 | ||||||||||||
| drilling labour & related costs | ||||||||||||||||||
| Other exploration expenses* | - | 11,159 | - | - | 740,468 | 751,627 | ||||||||||||
| Other development expenses** | - | - | - | - | 1,351,421 | 1,351,421 | ||||||||||||
| Land*** | 215,550 | 37,228 | 1,656 | 20,946 | 221,770 | 497,150 | ||||||||||||
| Permitting | - | - | - | - | 2,127,565 | 2,127,565 | ||||||||||||
| Metallurgical test work | 137,111 | 27,452 | - | - | - | 164,563 | ||||||||||||
| Technical reports and engineering | - | - | - | - | 624,665 | 624,665 | ||||||||||||
| Community engagement | - | - | - | - | 196,527 | 196,527 | ||||||||||||
| Total | $ | 2,868,125 | $ | 96,791 | $ | 12,435 | $ | 20,946 | $ | 5,262,416 | $ | 8,260,713 |
*Includes mapping, IP, sampling, payroll, exploration G&A expenses, consultants
**Includes development G&A expenses and payroll
***Includes BLM and IDL annual fees, consulting, property taxes, legal, etc. expenses
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
| September 30, 2021 | DeLamar deposit | Florida Mountain deposit | War Eagle deposit | Other deposits |
Joint expenses |
Total | ||||||||||||
| Contract exploration drilling | $ | 1,249,192 | $ | 4,277,932 | $ | 181,494 | $ | 1,071,786 | $ | - | $ | 6,780,404 | ||||||
| Contract metallurgical drilling | 424,819 | - | - | - | - | 424,819 | ||||||||||||
| Contract condemnation drilling | 226,752 | - | - | - | - | 226,752 | ||||||||||||
| Exploration drilling - other drilling labour & related costs | 731,234 | 2,179,211 | 188,572 | 585,443 | - | 3,684,460 | ||||||||||||
| Metallurgical drilling - other | 198,743 | - | - | - | - | 198,743 | ||||||||||||
| drilling labour & related costs | ||||||||||||||||||
| Condemnation drilling - other | 122,335 | - | - | - | - | 122,335 | ||||||||||||
| drilling labour & related costs | ||||||||||||||||||
| Other exploration expenses* | 135,518 | - | 17,232 | 217,385 | 1,102,895 | 1,473,030 | ||||||||||||
| Other development expenses** | - | - | - | - | 1,254,556 | 1,254,556 | ||||||||||||
| Land*** | 169,704 | 76,030 | 2,815 | 21,772 | 221,788 | 492,109 | ||||||||||||
| Permitting | - | - | - | - | 3,034,851 | 3,034,851 | ||||||||||||
| Metallurgy test work | 177,955 | 139,578 | - | - | - | 397,322 | ||||||||||||
| Technical reports and engineering | - | - | - | - | 1,108,471 | 1,108,471 | ||||||||||||
| Community engagement | - | - | - | - | 143,536 | 143,536 | ||||||||||||
| Total | $ | 3,436,252 | $ | 6,672,751 | $ | 390,113 | $ | 1,896,386 | $ | 6,866,097 | $ | 19,261,599 |
*Includes mapping, IP, sampling, payroll, exploration G&A expenses, consultants.
**Includes development G&A expenses and payroll
***Includes BLM and IDL annual fees, consulting, property taxes, legal, etc. expenses
RESULTS OF OPERATIONS
NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022
Net loss for the nine-month period ended September 30, 2022 was $13,602,301 and the comprehensive loss $14,425,037, compared to a net loss of $25,733,148 and a comprehensive loss of $25,394,736 for the comparative period.
Overall, operating expenses were lower in the current nine-month period mostly due to a decrease in exploration and development expenses. Other income in the current nine-month period was driven by foreign exchange gain, interest and rent income, and change in fair value of derivatives (non-cash), partially off-set by the reclamation accretion expenses, interest and accretion expenses related to the convertible debt. Other expenses in the comparative period were due to the foreign exchange loss and reclamation expense, partly offset by the interest and rent income. The variances between these two periods were primarily due to the following items:
- Exploration and evaluation expenses: the Company incurred $8,260,713 in exploration and development expenses during the current nine-month period (September 30, 2021 - $19,261,599). The difference is mostly due to decreased exploration drilling activities in the current nine-month period.
- Office and site administration: the Company incurred $897,417 in expenses during the nine-month period (September 30, 2021 - $1,079,114). The difference is mostly due to lower travel to the site, training, equipment repair, general site maintenance and health and safety expenses in the current period.
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
- Depreciation expenses related to the property, plant and equipment amounted to $415,124 in the current nine-month period (September 30, 2021 - $333,071), due to equipment additions since Q3 2021.
- Professional fees: for the current period totaled $254,150 (September 30, 2021 - $184,649). Professional fees include expenses such as legal, audit, accounting, tax, and miscellaneous consulting expenses. Professional fees were higher in the current period mostly due to higher legal and accounting fees in the current period. These fees were related to the legal review of the PFS, AIF, AGM, form 40-F, form S-8, and Equity incentive plan, as well as accounting fees related to the convertible debt facility.
- Corporate development and marketing: for the current year totaled $193,111 (September 30, 2021 - $222,490). The decrease was mostly due to the decrease in marketing activities in the current period.
- Other income (expense): amounted to $128,650 (other income) in the current nine-month period, compared to $884,587 (other expenses) in the comparative period. The variance is mostly due higher interest and rent income, change in fair value of derivatives (non-cash), and foreign exchange gain in the current period vs foreign exchange loss in the comparative period.
THREE-MONTH PERIOD ENDED SEPTEMBER 30, 2022
Net loss for the three-month period ended September 30, 2022 was $3,305,706 and the comprehensive loss $4,049,874, compared to a net loss of $9,538,606 and a comprehensive loss of $9,867,778 for the comparative period.
Overall, operating expenses were lower in the current three-month period mostly due to a decrease in exploration and development expenses. Other income was higher in the current three-month period mostly due to a higher foreign exchange gain, interest and rent income, and the change in fair value of derivatives (non-cash). The variances between these two periods were primarily due to the following items:
- Exploration and evaluation expenses: the Company incurred $2,216,830 in exploration and development expenses during the current quarter (September 30, 2021 - $7,593,669). The difference is mostly due to decreased exploration drilling activities in the current three-month period.
- Office and site administration: the Company incurred $254,824 in expenses during the three-month period (September 30, 2021 - $479,107). The difference is mostly due to lower travel to the site, training, equipment repair, general site maintenance and health and safety expenses in the current period.
- Stock-based compensation: the Company incurred $460,816 in stock-based compensation in the current three-month period (September 30, 2021 - $621,970). The variance is due to the timing of vesting of equity incentive awards granted from 2017 to 2021.
- Depreciation expenses related to the right-of-use assets amounted to $83,058 in the current three-month period (September 30, 2021 - $120,540), mostly due to a change of the head office lease estimate in the current quarter.
- Professional fees: for the current period totaled a credit balance of $32,816 (September 30, 2021 - $6,223). Professional fees include expenses such as legal, audit, accounting, tax, and miscellaneous consulting expenses. Legal and accounting services were higher in the current period. These fees were related to the legal review of the PFS, AIF, AGM, form 40-F, form S-8, and Equity incentive plan, as well as accounting fees related to the convertible debt facility. The credit balance in the current period is related to the reclassification of legal and consulting expenses related to the convertible debt facility (recorded in Q2 2022 as consulting expenses and reclassified to the convertible debt liability in Q3 2022).
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
- Other income: amounted to $475,608 in the current three-month period, compared to $123,843 in the comparative period. The variance is mostly due a higher foreign exchange gain, interest and rent income, and the change in fair value of derivatives (non-cash) in the current quarter.
Net cash used by the Company in operating activities for the nine-month period ended September 30, 2022 was $13,775,594 (September 30, 2021 - $22,174,561). The variance between these two periods was mostly driven by lower exploration and development expenditures in the current period.
Investing Activities
Net cash provided by investing activities for the current period was $19,180 compared to $1,033,911 used in investing activities in the comparative period. The difference was mostly due to a loan receivable paid back in the current period and higher additions to property, plant and equipment in the comparative period.
Financing Activities
Net cash provided by financing activities in the current period was $19,941,668, comparing to net cash flow provided by financing activities of $17,529,111 in the comparative period. The difference was mostly due to greater proceeds from financings in 2022, including proceed from the convertible liability.
The Company raised net proceeds of approximately $19.3 million (net) in August 2022 through a bought deal financing and a convertible loan. The table below summarized the expected use of proceeds:
| August 2022 Financing |
Expected Use of Proceeds ($M) Mid-August 2022 to May 2023 |
Actual Use of Proceeds ($M) (1) September 2022 to June 2023 |
Variance ($M) |
| Exploration work, including drilling | $6.1 | $6.0 | ($0.1) |
| Development work, including engineering and permitting | $7.1 | $7.1 | $0.0 |
| Other Site Costs (field costs, land acquisition, land holdings, site G&A, infrastructure, etc.) | $2.1 | $2.1 | $0.0 |
| Site Ongoing Environmental Monitoring / Water Treatment | $1.2 | $1.2 | $0.0 |
| Corporate G&A | $2.8 | $2.9 | $0.1 |
| Total | $19.3 | $19.3 | ($0.0) |
(1) Actual Use of Proceeds includes actual expenditures for September 2022 and estimated expenditures from October 2022 to June 2023.
The Company raised net proceeds of approximately $16.0 million (net) in September 2021 through a bought deal financing. The table below summarized the expected use of proceeds:
| September 2021 Financing | Expected Use of Proceeds ($M) September 2021 to May 2022 |
Actual Use of Proceeds ($M) (1) September 2021 to August 2022 |
Variance ($M) |
| Exploration work, including drilling | $7.0 | $3.5 | ($3.5) |
| Development work, including engineering and permitting | $4.9 | $5.7 | $0.8 |
| Other Site Costs (field costs, land acquisition, land holdings, site G&A, infrastructure, etc.) | $1.2 | $2.5 | $1.3 |
| Site Ongoing Environmental Monitoring / Water Treatment | $0.9 | $1.3 | $0.4 |
| Corporate G&A | $2.0 | $2.8 | $0.8 |
| Total | $16.0 | $15.8 | ($0.2) |
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
(1) Actual Use of Proceeds includes actual expenditures from September 2021 to August 2022.
SUMMARY OF SELECTED QUARTERLY INFORMATION
The following table sets forth selected quarterly financial information for each of the last eight quarters *.
| Quarter Ending | Revenue ($) |
Net Loss ($) |
Net Loss Per Share ($) |
||||
| September 30, 2022 | Nil | (3,305,706 | ) | (0.05 | ) | ||
| June 30, 2022 | Nil | (4,509,761 | ) | (0.07 | ) | ||
| March 31, 2022 | Nil | (5,786,834 | ) | (0.09 | ) | ||
| December 31, 2021 | Nil | (7,200,497 | ) | (0.11 | ) | ||
| September 30, 2021 | Nil | (9,538,606 | ) | (0.17 | ) | ||
| June 30, 2021 | Nil | (9,529,459 | ) | (0.18 | ) | ||
| March 31, 2021 | Nil | (6,665,083 | ) | (0.12 | ) | ||
| December 31, 2020 | Nil | (8,426,081 | ) | (0.16 | ) | ||
*Net loss per share data reflects the 2.5 to 1 consolidation on July 9, 2020 of the Company's issued and outstanding shares.
The net losses for all these quarters were mostly driven by exploration and development expenses, head office and site G&A expenses (such as compensation, corporate development and marketing, office and administration, professional, and regulatory fees), and stock-based compensation expenses (non-cash item), partly offset by interest and rent income in all those periods and by foreign exchange gain recorded in the second and third quarters of 2022 and third quarter of 2021.
LIQUIDITY AND CAPITAL RESOURCES
The Company does not have a mineral property in production and consequently does not receive revenue from the sale of precious metals. The Company currently has no operations that generates cash flow. The Company has financed its operations primarily through the issuance of share capital. The continued operations of the Company are dependent on its ability to complete sufficient public equity financing or generate profitable operations in the future.
The Company classified the convertible debt liability as a current liability, which meaningfully impacted the Company's working capital. The Company's working capital, including the convertible debts, as of September 30, 2022 was $7,710,432 (December 31, 2021 - $9,387,223). The Company's working capital, excluding the convertible debt liability, as of September 30, 2022 was $17,329,243. Working capital, excluding the convertible liability, increased in the current period comparing to the year ended December 31, 2021 mostly due to an increase in cash as a result of the Company's August 2022 financing and the initial advance of the convertible debt facility.
The Company actively manages its liquidity using budgeting based on expected cash flows to ensure there are appropriate funds for meeting short term obligations during the year.
FINANCIAL INSTRUMENTS
All financial instruments are required to be measured at fair value on initial recognition. The fair value is based on quoted market prices, unless the financial instruments are not traded in an active market. In this case, the fair value is determined by using valuation techniques like the Black-Scholes option pricing model or other valuation techniques. Measurement in subsequent periods depends on the classification of the financial instrument. A description of financial instruments and their fair value is included in the unaudited interim condensed consolidated financial statements for the three and nine-month periods ended September 30, 2022 and 2021, filed on SEDAR at www.sedar.com and on Integra's website at www.integraresources.com.
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
COMMITMENTS AND CONTRACTUAL OBLIGATIONS
Net Smelter Return
A portion of the DeLamar Project is subject to a 2.5% NSR payable to Maverix Metals Inc. ("Maverix"). The NSR will be reduced to 1.0% once Maverix has received a total cumulative royalty payment of C$10 million (US$7.3 million). Please see Note 10 for additional details.
Advance Minimum Royalties, Land Access Lease Payments, and Annual Claim Filings
The Company is required to make property rent payments related to its mining lease agreements with landholders and the Idaho Department of Lands ("IDL"), in the form of advance minimum royalties ("AMR"). There are multiple third-party landholders, and the royalty amounts due to each of them over the life of the Project varies with each property.
The Company's AMR obligation is expected to total $77,450 for 2022 (December 31, 2021 - $64,950) - of which $62,350 was paid in the current nine-month period ended September 30, 2022.
The Company's obligation related to land and road access lease payments, option payments and IDL rent payments is expected to total $383,669 for 2022 (December 31, 2021 - $329,331) - of which $258,173 was paid in the current nine-month period ended September 30, 2022.
The Company's obligation for BML claim fees is expected to total $192,225 for 2022 (December 31, 2021 - $191,565), paid in full in the current nine-month period ended September 30, 2022.
LEASES - RIGHT-OF-USE ASSETS AND LEASE LIABILITIES
Integra renewed its head office lease agreement on August 18, 2022, extending the lease term from January 31, 2023 to January 31, 2028. All balances related to the original right-of-use asset and lease liability were closed in the current period and replaced by the new right-of-use asset and lease liability amounts.
Summaries of the changes in right-of-use assets and the lease liabilities for the nine-month period ended September 30, 2022 and the year ended December 31, 2021 are included in the Company's unaudited interim condensed consolidated financial statements for the three and nine-month periods ended September 30, 2022 and 2021.
The Company subleased a portion of its head office to four companies for a rent income of $79,901, in the current nine-month period ended September 30, 2022 (September 30, 2021 - $51,547). The income is recognized in the consolidated statement of operations and comprehensive loss, under the "Rent income - sublease".
Operating Leases
The Company elected to apply recognition exemption under IFRS 16 on its short-term rent agreements related to its office and equipment rentals. For the nine-month period ended September 30, 2022, the Company expensed $57,156 (September 30, 2021 - $65,872) related to these operating leases. The Company's short-term lease commitment as of September 30, 2022 was $26,508 (December 31, 2021 - $19,068).
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
TRANSACTIONS WITH RELATED PARTIES
Related parties include the Board of Directors and officers and enterprises that are controlled by these individuals as well as certain consultants performing similar functions.
As September 30, 2022, $538,053 (December 31, 2021 - $693,344) was due to related parties for payroll expenses, consulting fees, bonuses accruals, vacation accruals and other expenses. Receivables from related parties (related to rent and office expenses) as of September 30, 2022 were $12,709 (December 31, 2021 - $Nil) and was recorded in receivables.
Key Management Compensation:
Key management personnel include those persons having authority and responsibility for planning, directing, and controlling the activities of the Company as a whole. The Company has determined that key management personnel consist of executive and non-executive members of the Company's Board of Directors and corporate officers.
Remuneration attributed to executives and directors for the nine-month periods ended September 30, 2022 and 2021 were as follows:
| September 30, 2022 |
September 30, 2021 |
|||||
| Short-term benefits* | $ | 1,230,308 | $ | 1,411,910 | ||
| Associate companies** | (13,498 | ) | (12,833 | ) | ||
| Stock-based compensation | 931,335 | 868,180 | ||||
| Total | $ | 2,148,145 | $ | 2,267,257 |
*Short-term employment benefits include salaries, consulting fees, vacation accruals and bonus accruals for key management. It also includes directors' fees for non-executive members of the Company's Board of Directors.
**Net of payable/receivable/GST due to/from entities for which Integra's directors are executives, mostly related to rent and office expenses.
In the current nine-month period ended September 30, 2022, the Company issued 122,947 deferred share units to certain directors, in lieu of their directors' fees, as elected by those directors. Each DSU has been fair valued at Integra's closing share price at the end of quarter. DSUs granted before December 2021 vested in full at the grant date. DSUs granted in December 2021 and going forward will vest in 12 months. The share-based payment related to these DSUs is included in the above table under stock-based compensation.
In the current nine-month period ended September 30, 2021, the Company issued 21,517 deferred share units to certain directors, in lieu of their directors' fees, as elected by those directors. Each DSU has been fair valued at Integra's closing share price at the end of quarter. DSUs granted before December 2021 vested in full at the grant date. DSUs granted in December 2021 and going forward will vest in 12 months. The share-based payment related to these DSUs is included in the above table under stock-based compensation.
The option to receive DSUs in lieu of cash directors' fees was introduced in 2021 in order to encourage insiders' ownership.
EQUIPMENT FINANCING
During the 2020 fiscal year, the Company's wholly owned subsidiary, DeLamar Mining Company, purchased a dozer and two small excavators and entered into a 48-month mobile equipment financing agreement in the amount of $0.6 million ("mm"). The mobile equipment financing is guaranteed by Integra Resources Corp.
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
During the quarter ended June 30, 2021, the Company's wholly owned subsidiary, DeLamar Mining Company, purchased a dozer and entered into a 48-month mobile equipment financing agreement in the amount of $0.3mm. The mobile equipment financing is guaranteed by Integra Resources Corp.
The equipment financing liability is initially measured at the present value of the payments to be made over the financing term, using the implicit interest rate of 7.0% per annum for the 2020 financing and the implicit interest rate of 6.5% for the financing incurred in the second quarter of 2021. Subsequently, equipment financing liability is accreted to reflect interest and the liability is reduced to reflect financing payments.
Summaries of the changes in the equipment financing liabilities and interest expenses for the nine-month period ended September 30, 2022 and the year ended December 31, 2021 are included in the Company's unaudited interim condensed consolidated financial statements for the three and nine-month periods ended September 30, 2022 and 2021.
CONVERTIBLE DEBT FACILITY
On July 28, 2022, the Company executed a credit agreement with Beedie Investment Ltd. (the "Lender"), for the issuance of a non-revolving term convertible debt facility (the "Convertible Facility") in the principal amount up to $20 million. On August 4, 2022, an initial advance of $10 million was drawn under this facility, with the Company having the option to draw "subsequent advances" in increments of at least $2.5 million, up to an additional $10 million, subject to certain conditions.
Maturity date of the loan is set as 36 months following the closing date (August 4, 2022), which could be extended for an additional 12 months, if certain conditions are met. The Convertible Facility is secured by the Company's material assets and guaranteed by the Company's subsidiaries.
The Company is required to pay standby fees, of 2% (annual rate), calculated on the undrawn portion of the Convertible Facility, calculated on a daily basis, compounded quarterly, and payable in arrears on each interest payment date following the effective date commencing September 30, 2022.
The Convertible Facility bears interest at 8.75% per annum. Prior to July 31, 2024, interest will be accrued and shall be compounded quarterly and added to the principal at the end of each quarterly interest period. Commencing with the quarterly interest period ending September 30, 2024, interest shall be paid quarterly either in cash or shares.
Summaries of the convertible debt facility for the nine-month period ended September 30, 2022 are included in the Company's unaudited interim condensed consolidated financial statements for the three and nine-month periods ended September 30, 2022 and 2021.
OUTSTANDING SHARE DATA
Share capital details are included in the Company's unaudited interim condensed consolidated financial statements for the three and nine-month periods ended September 30, 2022 and 2021.
The following table outlines the outstanding share data as of the date of this MD&A:
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
| November 14, 2022 |
|||
| Issued and outstanding common shares | 79,604,934 | ||
| Outstanding Options/RSUs/DSUs to purchase common shares | 4,758,188 | ||
| Issued and outstanding common shares (fully diluted) | 84,363,122 |
SUBSEQUENT EVENT
- Subsequent to the current nine-month period end, 1,461,600 stock options with the exercise price of $1.96 (C$2.50) and the expiry date November 3, 2022 expired unexercised.
CRITICAL ACCOUNTING JUDGMENTS AND ESTIMATES
The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions which affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the audited consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates are based on historical experience and other factors considered to be reasonable and are reviewed on an ongoing basis. Revisions to estimates and the resulting effects on the carrying amounts of the Company's assets and liabilities are accounted for prospectively.
Measurement uncertainties are described in the Company's audited consolidated financial statements for the year ended December 31, 2021 and the unaudited interim condensed consolidated financial statements for the three and nine-month periods ended September 30, 2022 and 2021.
CHANGES IN ACCOUNTING POLICIES
The Company's accounting policies are in accordance with IFRS and described in the Company's audited consolidated financial statements for the year ended December 31, 2021 and the unaudited interim condensed consolidated financial statements for the three and nine-month periods ended September 30, 2022 and 2021.
RISKS AND UNCERTAINTIES
The Company is subject to a number of risks and uncertainties due to the nature of its business. The Company's exploration activities expose it to various financial and operational risks that could have a significant impact on its level of operating cash flows in the future.
Readers are advised to study and consider risk factors disclosed in the Company's Annual Information Form for the fiscal year ended December 31, 2021, dated March 30, 2022 and available under the Company's issuer profile on SEDAR at www.sedar.com.
International Conflict
International conflict and other geopolitical tensions and events, including war, military action, terrorism, trade disputes, and international responses thereto have historically led to, and may in the future lead to, uncertainty or volatility in global commodity and financial markets and supply chains. Russia's invasion of Ukraine has led to sanctions being levied against Russia by the international community and may result in additional sanctions or other international action, any of which may have a destabilizing effect on commodity prices, supply chains, and global economies more broadly. Volatility in commodity prices and supply chain disruptions may adversely affect the Company's business, financial condition, and results of operations. The extent and duration of the current Russia-Ukraine conflict and related international action cannot be accurately predicted at this time and the effects of such conflict may magnify the impact of the other risks identified in this MD&A, the financial statements of the Company or the AIF, including those relating to commodity price volatility and global financial conditions. The situation is rapidly changing and unforeseeable impacts, including on shareholders of the Company, and third parties with which the Company relies on or transacts, may materialize and may have an adverse effect on the Company's business, results of operation, and financial condition.
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
Completion of Subsequent Advances
The obligation of Beedie Capital to fund advances to the Company under the Convertible Facility is subject to prior satisfaction of conditions by the Company. The Company must satisfy certain conditions in order to draw down on subsequent advances, including the filing of a Mining Plan of Operations for the Delamar Project. A failure to obtain Subsequent Advances in a timely manner as contemplated by the Company, whether in terms of its ability to meet relevant conditions or otherwise, may also be highly disruptive to the Company and the execution of its business plans.
Indebtedness
Integra is indebted to Beedie Capital and is required to use a portion of its cash flow to service principal and interest on the loan, which will limit the cash flow available for other business opportunities. The Company's ability to make scheduled payments of the principal of, to pay interest on, or to refinance indebtedness depends on its future performance, which is subject to economic, financial, competitive, and other factors beyond its control. The Company has yet to generate cash flow from operations and may not generate cash flow from operations in the future sufficient to service debt and make necessary capital expenditures. If the Company is unable to generate such cash flow, it may be required to adopt one or more alternatives, such as selling assets, restructuring debt, or obtaining additional equity capital on terms that may be onerous or highly dilutive. The Company's ability to refinance its indebtedness will depend on the capital markets and its financial condition at such time. The Company may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default.
The terms of the loan require the Company to satisfy various positive and negative covenants. These covenants require the Company to, among other things, maintain certain levels of cash or cash equivalents, obtain approvals from Beedie Capital of annual operating budgets, obtain prior approval from Beedie Capital of certain deviations from approved budgets and file a Mining Plan of Operations with the United States Bureau of Land Management respect to the DeLamar Project by March 31, 2024. The Company can provide no assurances that in the future, it will not be limited in its ability to respond to changes in its business or competitive activities or be restricted in its ability to engage in mergers, acquisitions or dispositions of assets. Furthermore, a failure to comply with these covenants would likely result in an event of default under the loan and would allow Beedie Capital to accelerate the debt, which could materially and adversely affect the Company's business, financial condition and results of operations.
CAUTIONARY NOTE TO US INVESTORS WITH RESPECT TO MINERAL RESOURCES
National Instrument 43-101 - Standards of Disclosure for Mineral Projects ("NI 43-101") is a rule of the Canadian Securities Administrators which establishes standards for all public disclosure an issuer makes of scientific and technical information concerning mineral projects. Technical disclosure contained in this MD&A has been prepared in accordance with NI 43-101 and the Canadian Institute of Mining, Metallurgy and Petroleum Classification System. These standards differ from the requirements of the U.S. Securities and Exchange Commission ("SEC") and resource information contained in this MD&A may not be comparable to similar information disclosed by domestic United States companies subject to the SEC's reporting and disclosure requirements.
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
NON-GAAP MEASURES
Alternative performance measures in this MD&A such as "cash cost", "AISC" "free cash flow" are furnished to provide additional information. These non-GAAP performance measures are included in this MD&A because these statistics are used as key performance measures that management uses to monitor and assess performance of the DeLamar Project, and to plan and assess the overall effectiveness and efficiency of mining operations. These performance measures do not have a standard meaning within International Financial Reporting Standards ("IFRS") and, therefore, amounts presented may not be comparable to similar data presented by other mining companies. These performance measures should not be considered in isolation as a substitute for measures of performance in accordance with IFRS. As the Company has yet to commence production, the equivalent historical non-GAAP financial measure is $0.
Cash Costs
Cash costs include site operating costs (mining, processing, site G&A), refinery costs and royalties. While there is no standardized meaning of the measure across the industry, the Company believes that this measure is useful to external users in assessing operating performance.
All-In Sustaining Cost ("AISC")
Site level AISC include cash costs (see description above) and sustaining capital but excludes head office G&A and exploration expenses. The Company believes that this measure is useful to external users in assessing operating performance and the Company's ability to generate free cash flow from current operations.
Free Cash Flow
Free cash flows are revenues net of operating costs, royalties, capital expenditures and cash taxes. The Company believes that this measure is useful to the external users in assessing the Company's ability to generate cash flows from the DeLamar Project.
TECHNICAL INFORMATION
The scientific and technical information contained in this MD&A has been reviewed and approved by E. Max Baker (F.AusIMM), Vice President Exploration, and Timothy Arnold (P.E.), Chief Operating Officer, who are a "Qualified Person" ("QP") as defined in National Instrument 43-101 - Standards of Disclosure for Mineral Projects.
CORPORATE GOVERNANCE
Management and the Board recognizes the value of good corporate governance and the need to adopt best practices. The Corporation is committed to continuing to improve its corporate governance practices in light of its stage of development and evolving best practices and regulatory guidance.
The Board has adopted a Board mandate outlining its responsibilities and defining its duties. The Board has five committees: the Audit Committee, the Compensation Committee, the Nomination and Corporate Governance Committee, the Technical and Safety Committee, and the Environmental Social Governance Committee. Each Committee has a committee charter, which outlines the Committee's mandate, procedures for calling a meeting, and provides access to outside resources.
The Board has also adopted a Code of Business Conduct and Ethics, which governs the ethical behavior of all employees, management, and directors. For more details on the Company's corporate governance practices, please refer to Integra's website (www.integraresources.com) and the statement of Corporate Governance contained in Integra's Management Information Circular dated May 14, 2021. The Management Information Circular is available on Integra's website (www.integraresources.com) and on SEDAR (www.sedar.com).
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
The Corporation's Directors have expertise in exploration, metallurgy, mining, financial reporting and accounting, M&A, financing, permitting and government relations, environmental considerations, human resources, governance, and relations with tribal nations and local communities. The Board meets at least four times per year.
CONTROL AND PROCEDURES
Disclosure Controls and Procedures
Disclosure controls and procedures are designed to provide reasonable assurance that material information is gathered and reported to management, as appropriate to allow for timely decisions about public disclosure. The Company has disclosure controls and procedures in place to provide reasonable assurance that any information required to be disclosed by the Company under securities legislation is recorded, processed, summarized, and reported within the applicable time periods and that required information is accumulated and communicated to the Company's management, so that decisions can be made about the timely disclosure of that information.
Management has evaluated the effectiveness of the design and operation of the Company's disclosure controls as of September 30, 2022 and concluded that the disclosure controls and procedures were effective.
Internal Controls over Financial Reporting
Management is responsible for establishing and maintaining adequate internal controls over financial reporting as such term is defined in the rules of the National Instrument 52-109 in Canada ("NI 52-109") and Rules 13a-15(f) and 15d-15(f) of the United States Securities Exchange Act of 1934, as amended. The Company's internal controls over financial reporting is designed to provide reasonable assurance regarding the reliability of the Company's financial reporting for external purposes in accordance with IFRS as issued by the IASB.
Based on the criteria set forth in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, the Company's internal controls over financial reporting include:
(a) Maintaining records, that in reasonable detail, accurately and fairly reflect our transactions and dispositions of the assets of the Company;
(b) Providing reasonable assurance that transactions are recorded as necessary for preparation of the consolidated financial statements in accordance with IFRS as issued by the IASB;
(c) Providing reasonable assurance that receipts and expenditures are made in accordance with authorizations of management and the directors of the Company; and
(d) Providing reasonable assurance that unauthorized acquisition, use or disposition of Company assets that could have a material effect on the Company's consolidated financial statements would be prevented or detected on a timely basis.
Management has evaluated the effectiveness of the internal controls over financial reporting as of September 30, 2022 and concluded that those controls were effective.
Limitation of Controls and Procedures
Management believes that any disclosure controls and procedures or internal control over financial reporting, no matter how well designed and operated, have their inherent limitations. Due to those limitations (resulting from unrealistic or unsuitable objectives, human judgment in decision making, human errors, management overriding internal control, circumventing controls by the individual acts of some persons, by collusion of two or more people, external events beyond the entity's control), internal control can only provide reasonable assurance that the objectives of the control system are met.
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
There were no changes in internal controls of the Company during the nine-month period ended September 30, 2022 that have materially affected, or are likely to materially affect, the Company's internal control over financial reporting.
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
Certain information set forth in this MD&A contains "forward-looking statements" or "forward-looking information" within the meaning of applicable Canadian and United States securities legislation (collectively, "forward-looking statements"). Forward-looking statements are included to provide information about management's current expectations and plans that allows investors and others to get a better understanding of the Company's operating environment, business operations and financial performance and condition.
Forward-looking statements include, but are not limited, to: statements regarding planned exploration and development programs and expenditures; the estimation of mineral resources; magnitude or quality of mineral deposits; anticipated advancement of mineral properties and programs; future exploration prospects; proposed exploration plans and expected results of exploration from the DeLamar Project; the development, operational and economic results of the pre-feasibility study for the DeLamar and Florida Mountain Areas, including cash flows, revenue potential, staged development, capital expenditures, development costs and timing thereof, extraction rates, life of mine projections and cost estimates; opportunity to pursue heap-leach only approach; anticipated advancement of the DeLamar Project mine plan; exploration expenditures, costs and timing of the development of new deposits; underground exploration potential; costs and timing of future exploration; the completion and timing of future development studies; estimates of metallurgical recovery rates, including prospective use of the Albion process; requirements for additional capital; Integra's ability to meet the conditions of the Convertible Facility; Integra's ability to obtain licenses, permits and regulatory approvals required to implement expected future exploration plans; government regulation of mining operations; environmental risks; the timing and possible outcome of pending regulatory matters; the realization of the expected economics of the DeLamar Project; future growth potential of the DeLamar Project; future development plans; changes in commodity prices and exchange rates; future growth potential of Integra; future development plans; and currency and interest rate fluctuations.. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, identified by words or phrases such as "expects", "is expected", "anticipates", "believes", "plans", "projects", "estimates", "assumes", "intends", "strategy", "goals", "objectives", "potential", "possible" or variations thereof or stating that certain actions, events, conditions or results "may", "could", "would", "should", "might" or "will" be taken, occur or be achieved, or the negative of any of these terms and similar expressions) are not statements of fact and may be forward-looking statements.
Forward-looking statements are necessarily based upon a number of factors and assumptions made by management and considered reasonable at the time such information is provided. Assumptions and factors include: the Company's ability to complete its planned exploration programs; the absence of adverse conditions at the DeLamar Project; no unforeseen operational delays; no material delays in obtaining necessary permits; the price of gold and silver remaining at levels that render the DeLamar Project economic; the Company's ability to continue raising necessary capital to finance operations; the ability to realize on the Mineral Resource and Reserve estimates; capital and operating costs will not increase significantly from current levels or as outlined in the DeLamar Report; key personnel will continue their employment with the Company and the Company will be able to recruit and retain additional qualified personnel, as needed, in a timely and cost efficient manner; no significant adverse changes in Canada/U.S. currency exchange or interest rates and stock markets; the timely receipt of required approvals and permits, including those approvals and permits required for successful project permitting, construction and operation of projects; and that there will be no significant changes in the ability of the Company to comply with environmental, safety and other regulatory requirements.
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
Forward-looking statements necessarily involve known and unknown risks and uncertainties, which may cause actual performance and financial results in future periods to differ materially from any projections of future performance or result expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to: general business, economic and competitive uncertainties; the actual results of current and future exploration activities; conclusions of economic evaluations; meeting various expected cost estimates; benefits of certain technology usage; changes in project parameters and/or economic assessments as plans continue to be refined; future prices of metals; uncertain nature of estimating Mineral Resources and Reserves; possible variations of mineral grade or recovery rates; the risk that actual costs may exceed estimated costs; geological, mining and exploration technical problems; failure of plant, equipment or processes to operate as anticipated; accidents, labour disputes and other risks of the mining industry; delays in obtaining governmental approvals or financing; the speculative nature of mineral exploration and development (including the risks of obtaining necessary licenses, permits and approvals from government authorities); title to properties; the impact of COVID-19 on the timing of exploration and development work and management's ability to anticipate and manage the foregoing factors and risks. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in the forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors that could cause actual events or results to differ from those expressed or implied. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Certain important factors that could cause actual results, performance or achievements to differ materially from those in the forward-looking statements include, among others: (i) access to additional capital; (ii) uncertainty and variations in the estimation of Mineral Resources and Reserves; (iii) health, safety and environmental risks; (iv) success of exploration, development and operations activities; (v) delays in obtaining or failure to obtain governmental permits, or non-compliance with permits; (vi) delays in getting access from surface rights owners; (vii) the fluctuating price of gold and silver; (viii) assessments by taxation authorities; (ix) uncertainties related to title to mineral properties; (x) the Company's ability to identify, complete and successfully integrate acquisitions; and (xi) volatility in the market price of Company's securities.
This list is not exhaustive of the factors that may affect any of the Company's forward-looking statements. Although the Company believes its expectations are based upon reasonable assumptions and have attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. Readers are advised to study and consider risk factors disclosed in the "Risks and Uncertainties" section above and in the Company's annual information form dated March 30, 2022 for the fiscal year ended December 31, 2021 and the Company's Form 40-F annual report for the year-ended December 31, 2021 for additional risk factors that could cause results to differ materially from forward-looking statements.
Investors are cautioned not to put undue reliance on forward-looking statements. The forward looking-statements contained herein are made as of the date of this MD&A and, accordingly, are subject to change after such date. The Company disclaims any intent or obligation to update publicly or otherwise revise any forward-looking statements or the foregoing list of assumptions or factors, whether as a result of new information, future events or otherwise, except in accordance with applicable securities laws. Investors are urged to read the Company's filings with Canadian securities regulatory agencies, which can be viewed online under the Company's profile on SEDAR at www.sedar.com.
MANAGEMENT’S DISCUSSION & ANALYSIS
For the Three and Nine-Month Periods Ended September 30, 2022 and 2021
MANAGEMENT'S RESPONSIBILITY
Management is responsible for all information contained in this MD&A. The unaudited interim condensed consolidated financial statements have been prepared in accordance with International Financial Reporting Standards and include amounts based on management's informed judgments and estimates. The financial and operating information included in this MD&A is consistent with that contained in the unaudited interim condensed consolidated financial statements in all material aspects.
Management maintains internal controls to provide reasonable assurance that financial information is reliable and accurate, and assets are safeguarded.
The Audit Committee has reviewed the unaudited interim condensed consolidated financial statements with management. The Board of Directors has approved these unaudited interim condensed consolidated financial statements on the recommendation of the Audit Committee.
George Salamis
President and CEO
November 14, 2022
Integra Resources Corp.
Unaudited Interim Condensed Consolidated Financial Statements
For the Three and Nine-Month Periods Ended
September 30, 2022 and 2021
Expressed in US Dollars
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
The accompanying unaudited interim condensed consolidated financial statements of Integra Resources Corp. are the responsibility of the management and Board of Directors of the Company.
The unaudited interim condensed consolidated financial statements have been prepared by management, on behalf of the Board of Directors, in accordance with the accounting policies disclosed in the notes to the financial statements. Where necessary, management has made informed judgments and estimates in accounting for transactions which were not complete at the statement of financial position date. In the opinion of management, the financial statements have been prepared within acceptable limits of materiality and are in accordance with International Financial Reporting Standards using accounting policies consistent with International Financial Reporting Standards appropriate in the circumstances.
Management has established systems of internal control over the financial reporting process, which are designed to provide reasonable assurance that relevant and reliable financial information is produced.
The Board of Directors is responsible for reviewing and approving the financial statements together with other financial information of the Company and for ensuring that management fulfills its financial reporting responsibilities. An Audit Committee assists the Board of Directors in fulfilling this responsibility. The Audit Committee meets with management to review the financial reporting process and the unaudited interim condensed consolidated financial statements together with other financial information of the Company. The Audit Committee reports its findings to the Board of Directors for its consideration in approving the unaudited interim condensed consolidated financial statements together with other financial information of the Company for issuance to the shareholders.
Management recognizes its responsibility for conducting the Company's affairs in compliance with established financial standards, and applicable laws and regulations, and for maintaining proper standards of conduct for its activities.
| "George Salamis" (signed) | "Andrée St-Germain" (signed) |
| George Salamis, President and CEO | Andrée St-Germain, CFO |
Integra Resources Corp.
Unaudited Interim Condensed Consolidated Financial Statements
For the Three and Nine-Month Periods Ended
September 30, 2022 and 2021
Table of Contents
Integra Resources Corp.
Unaudited Interim Condensed Consolidated Statements of Financial Position
(Expressed in US Dollars)
| |
September 30, 2022 |
December 31, 2021 |
||||
| Assets | ||||||
| Current Assets | ||||||
| Cash and cash equivalents (Note 5) | $ | 20,522,332 | $ | 14,337,078 | ||
| Receivables and prepaid expenses (Note 6) | 1,048,755 | 721,556 | ||||
| Loan receivable - current portion (Note 6) | - | 47,830 | ||||
| Total Current Assets | 21,571,087 | 15,106,464 | ||||
| Long-Term Deposits (Note 6) | 32,043 | 33,294 | ||||
| Restricted Cash (Note 7) | 45,646 | 18,147 | ||||
| Loan Receivable - Non-Current Portion (Note 6) | - | 119,608 | ||||
| Property, Plant and Equipment (Note 8) | 2,249,934 | 2,631,827 | ||||
| Right-of-Use Assets (Note 9) | 912,326 | 759,711 | ||||
| Exploration and Evaluation Assets (Note 10) | 37,845,547 | 56,491,140 | ||||
| Deferred Transaction Costs (Note 11) | 433,757 | - | ||||
| Total Assets | $ | 63,090,340 | $ | 75,160,191 | ||
| Liabilities | ||||||
| Current Liabilities | ||||||
| Trade and other payables (Note 13) | $ | 1,879,011 | $ | 2,487,332 | ||
| Current lease liability (Note 9) | 317,232 | 460,690 | ||||
| Current equipment financing liability (Note 14) | 213,225 | 202,577 | ||||
| Convertible debt facility - liability component (Note 15) | 8,130,811 | - | ||||
| Convertible debt facility - derivative component (Note 15) | 1,488,000 | - | ||||
| Current reclamation and remediation liability (Note 17) | 1,294,323 | 1,875,298 | ||||
| Due to related parties (Note 12) | 538,053 | 693,344 | ||||
| Total Current Liabilities | 13,860,655 | 5,719,241 | ||||
| Long-Term Lease Liability (Note 9) | 613,986 | 380,035 | ||||
| Long-Term Equipment Financing Liability (Note 14) | 233,684 | 394,960 | ||||
| Reclamation and Remediation Liability (Note 17) | 21,288,419 | 39,590,952 | ||||
| Total Liabilities | 35,996,744 | 46,085,188 | ||||
| Shareholders' Equity | ||||||
| Share Capital (Note 18) | 123,161,014 | 122,010,028 | ||||
| Reserves (Note 18) | 8,515,230 | 7,124,353 | ||||
| Accumulated Other Comprehensive Income | 9,291,862 | 212,831 | ||||
| Accumulated Deficit | (113,874,510 | ) | (100,272,209 | ) | ||
| Total Equity | 27,093,596 | 29,075,003 | ||||
| Total Liabilities and Equity | $ | 63,090,340 | $ | 75,160,191 |
Nature of Operations (Note 1); Commitments (Note 16); Subsequent event (Note 21) These unaudited interim condensed consolidated financial statements were authorized for issue by the Board of Directors on November 14, 2022. They are signed on the Company's behalf by:
| "Stephen de Jong" , Director | "Anna Ladd-Kruger" , Director |
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
Integra Resources Corp.
Unaudited Interim Condensed Consolidated Statements of Operations and Comprehensive Loss
(Expressed in US Dollars)
| Three-Month Periods Ended September 30, |
Nine-Month Periods Ended September 30, |
|||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||
| Operating Expenses | ||||||||||||
| General and Administrative Expenses | ||||||||||||
| Depreciation - property, plant and equipment (Note 8) | $ | (138,011 | ) | $ | (126,561 | ) | $ | (415,124 | ) | $ | (333,071 | ) |
| Depreciation - right-of-use assets (Note 9) | (83,058 | ) | (120,540 | ) | (320,227 | ) | (339,093 | ) | ||||
| Compensation and benefits | (551,948 | ) | (600,652 | ) | (1,830,008 | ) | (1,839,384 | ) | ||||
| Corporate development and marketing | (68,961 | ) | (91,067 | ) | (193,111 | ) | (222,490 | ) | ||||
| Office and site administration expenses | (254,824 | ) | (479,107 | ) | (897,417 | ) | (1,079,114 | ) | ||||
| Professional fees | 32,816 | (6,223 | ) | (254,150 | ) | (184,649 | ) | |||||
| Regulatory fees | (39,682 | ) | (22,660 | ) | (163,581 | ) | (183,730 | ) | ||||
| Stock-based compensation (Note 18) | (460,816 | ) | (621,970 | ) | (1,396,620 | ) | (1,405,431 | ) | ||||
| Total General and Administration Expenses | (1,564,484 | ) | (2,068,780 | ) | (5,470,238 | ) | (5,586,962 | ) | ||||
| Exploration and Evaluation Expenses (Note 10) | (2,216,830 | ) | (7,593,669 | ) | (8,260,713 | ) | (19,261,599 | ) | ||||
| Operating Loss | (3,781,314 | ) | (9,662,449 | ) | (13,730,951 | ) | (24,848,561 | ) | ||||
| Other Income (Expense) | ||||||||||||
| Interest income | 84,587 | 6,207 | 103,189 | 27,849 | ||||||||
| Interest income - loan receivable (Note 6) | - | - | 3,551 | 2,587 | ||||||||
| Rent income - sublease (Note 9) | 32,320 | 17,063 | 79,901 | 51,547 | ||||||||
| Interest expenses - leases (Note 9) | (14,435 | ) | (18,209 | ) | (38,221 | ) | (58,654 | ) | ||||
| Interest expenses - equipment financing (Note 14) | (8,166 | ) | (10,379 | ) | (27,076 | ) | (26,694 | ) | ||||
| Interest expense - convertible debt (Note 15) | (136,644 | ) | - | (136,644 | ) | - | ||||||
| Accretion expense - convertible debt (Note 15) | (71,804 | ) | - | (71,804 | ) | - | ||||||
| Accretion expenses - reclamation (Note 17) | (190,428 | ) | (194,510 | ) | (646,494 | ) | (579,467 | ) | ||||
| Change in fair value of derivatives (Note 15) | 131,000 | - | 131,000 | - | ||||||||
| Gain on equipment sold | 4,515 | 2,000 | 4,515 | 6,800 | ||||||||
| Gain on lease returned | 1,178 | - | 14,335 | - | ||||||||
| Foreign exchange income (loss) | 643,485 | 321,671 | 712,398 | (308,555 | ) | |||||||
| Total Other Income (Expense) | 475,608 | 123,843 | 128,650 | (884,587 | ) | |||||||
| Net Loss | (3,305,706 | ) | (9,538,606 | ) | (13,602,301 | ) | (25,733,148 | ) | ||||
| Other Comprehensive Income (Loss) | ||||||||||||
| Foreign exchange translation | 7,182,414 | 2,623,835 | 9,079,031 | 494,411 | ||||||||
| Presentation currency translation difference | (7,926,582 | ) | (2,953,007 | ) | (9,901,767 | ) | (155,999 | ) | ||||
| Other Comprehensive Income (Loss) | (744,168 | ) | (329,172 | ) | (822,736 | ) | 338,412 | |||||
| Comprehensive Loss | $ | (4,049,874 | ) | $ | (9,867,778 | ) | $ | (14,425,037 | ) | $ | (25,394,736 | ) |
| Net Loss Per Share | ||||||||||||
| - basic and diluted (Note 20) | $ | (0.05 | ) | $ | (0.17 | ) | $ | (0.21 | ) | $ | (0.47 | ) |
| Weighted Average Number of Shares (000's) | ||||||||||||
| - basic and diluted (000's) (Note 20) | 73,264 | 56,307 | 66,089 | 55,319 | ||||||||
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
Integra Resources Corp.
Unaudited Interim Condensed Consolidated Statements of Changes in Equity
(Expressed in US Dollars, except share numbers)
| Share Capital | Reserves | ||||||||||||||||||||
| Accumulated | |||||||||||||||||||||
| Equity | Other | ||||||||||||||||||||
| Number of |
Incentive | Comprehensive | |||||||||||||||||||
| Shares | Amount | Awards | Warrants | Income (Loss) | Deficit | Total | |||||||||||||||
| Balance at December 31, 2020 | 54,608,177 | $ | 103,147,710 | $ | 5,109,676 | $ | 724,874 | $ | 182,446 | $ | (67,338,564 | ) | $ | 41,826,142 | |||||||
| Share issued for cash - ATM (Note 18) | 516,950 | 1,674,621 | - | - | - | - | 1,674,621 | ||||||||||||||
| Share issued for cash - financing (Note 18) | 6,785,000 | 17,301,750 | - | - | - | - | 17,301,750 | ||||||||||||||
| Share issue cost - cash | - | (1,412,669 | ) | - | - | - | - | (1,412,669 | ) | ||||||||||||
| Share-based-payments - equity | |||||||||||||||||||||
| incentive awards | - | - | 1,405,431 | - | - | - | 1,405,431 | ||||||||||||||
| Options exercised | 193,066 | 602,374 | (229,625 | ) | - | - | - | (229,625 | ) | ||||||||||||
| RSUs vested - share issuance | 4,112 | 15,478 | (15,478 | ) | - | - | - | - | |||||||||||||
| RSU vested - cash redemption | - | - | (6,605 | ) | - | - | - | (6,605 | ) | ||||||||||||
| Presentation currency translation difference | - | (155,999 | ) | - | - | - | - | (155,999 | ) | ||||||||||||
| Other comprehensive income | - | - | - | - | 494,411 | - | 494,411 | ||||||||||||||
| Net loss | - | - | - | - | - | (25,733,148 | ) | (25,733,148 | ) | ||||||||||||
| Balance at September 30, 2021 | 62,107,305 | $ | 121,173,265 | $ | 6,263,399 | $ | 724,874 | $ | 676,857 | $ | (93,071,712 | ) | $ | 35,766,683 | |||||||
| Balance at December 31, 2021 | 62,170,212 | $ | 122,010,028 | $ | 6,399,479 | $ | 724,874 | $ | 212,831 | $ | (100,272,209 | ) | $ | 29,075,003 | |||||||
| Share issued for cash - ATM (Note 18) | 768,055 | 898,694 | - | - | - | - | 898,694 | ||||||||||||||
| Share issued for cash - financing (Note 18) | 16,666,667 | 11,000,000 | - | - | - | - | 11,000,000 | ||||||||||||||
| Share issue cost - cash | - | (845,941 | ) | - | - | - | - | (845,941 | ) | ||||||||||||
| Share-based-payments - equity | |||||||||||||||||||||
| incentive awards | - | - | 1,396,620 | - | - | - | 1,396,620 | ||||||||||||||
| RSUs vested - cash redemption | - | - | (5,743 | ) | - | - | - | (5,743 | ) | ||||||||||||
| Presentation currency translation difference | - | (9,901,767 | ) | - | - | - | - | (9,901,767 | ) | ||||||||||||
| Other comprehensive income | - | - | - | - | 9,079,031 | - | 9,079,031 | ||||||||||||||
| Net loss | - | - | - | - | - | (13,602,301 | ) | (13,602,301 | ) | ||||||||||||
| Balance at September 30, 2022 | 79,604,934 | $ | 123,161,014 | $ | 7,790,356 | $ | 724,874 | $ | 9,291,862 | $ | (113,874,510 | ) | $ | 27,093,596 | |||||||
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements
Integra Resources Corp.
Unaudited Interim Condensed Consolidated Statements of Cash Flows
(Expressed in US Dollars)
| Nine-Month Periods Ended September 30, | ||||||
| 2022 | 2021 | |||||
| Operations | ||||||
| Net loss | $ | (13,602,301 | ) | $ | (25,733,148 | ) |
| Adjustments to reconcile net loss to cash flow from operating activities: | ||||||
| Depreciation - property, plant and equipment (Note 8) | 415,124 | 333,071 | ||||
| Depreciation - right-of-use assets (Note 9) | 320,227 | 339,093 | ||||
| Lease interest expenses (Note 9) | 38,221 | 58,654 | ||||
| Convertible debt facility - accretion (Note 15) | 71,804 | - | ||||
| Deferred transaction costs (Note 15) | (433,757 | ) | - | |||
| Convertible debt facility - interest (Note 15) | 136,644 | - | ||||
| Change in fair value of derivatives (Note 15) | (131,000 | ) | - | |||
| Reclamation accretion expenses (Note 17) | 646,494 | 579,467 | ||||
| Reclamation expenditures (Note 17) | (807,597 | ) | (1,193,724 | ) | ||
| Unrealized foreign exchange (income) loss | (857,719 | ) | 360,892 | |||
| Share-based payment (Note 18) | 1,396,620 | 1,405,431 | ||||
| Net changes in non-cash working capital items: | ||||||
| Receivables, prepaid expenses, and other assets | (327,025 | ) | (115,740 | ) | ||
| Loan receivable (Note 6) | - | (35,638 | ) | |||
| Lease liabilities | 127,764 | (53,962 | ) | |||
| Trade and other payables | (613,802 | ) | 1,882,218 | |||
| Due to related parties | (155,291 | ) | (1,177 | ) | ||
| Cash flow used in operating activities | (13,775,594 | ) | (22,174,561 | ) | ||
| Investing | ||||||
| Additions to property, plant and equipment | (37,046 | ) | (975,754 | ) | ||
| Long-term investments (Note 7) | (28,862 | ) | 77 | |||
| Loan receivable - principal portion (Note 6) | 167,438 | 7,700 | ||||
| Property acquisition costs (Note 10) | (82,350 | ) | (65,932 | ) | ||
| Cash flow used in (provided by) investing activities | 19,180 | (1,033,911 | ) | |||
| Financing | ||||||
| Issuance of common shares - ATM & financing (Note 18) | 11,898,694 | 18,976,371 | ||||
| Issuance of common shares - cash received from exercise of | (5,743 | ) | 377,127 | |||
| options and used in RSU redemption (Note 18) | ||||||
| Share issue costs | (829,431 | ) | (1,377,531 | ) | ||
| Lease principal payments (Note 9) | (512,587 | ) | (337,205 | ) | ||
| Financing principal payments (Note 14) | (150,628 | ) | (109,651 | ) | ||
| Convertible debt facility - proceeds (Note 15) | 10,000,000 | - | ||||
| Convertible debt facility - transaction costs (Note 15) | (458,637 | ) | - | |||
| Cash flow provided by financing activities | 19,941,668 | 17,529,111 | ||||
| Increase (decrease) in cash and cash equivalents | 6,185,254 | (5,679,360 | ) | |||
| Cash and cash equivalents at beginning of period | 14,337,078 | 29,061,142 | ||||
| Cash and cash equivalents at end of period | $ | 20,522,332 | $ | 23,381,782 | ||
| Supplemental disclosure of non-cash activities in Note 19 | ||||||
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements
|
Integra Resources Corp. |
1. NATURE OF OPERATIONS
Integra Resources Corp. ("Integra" or the "Company"), formerly Mag Copper Limited, was incorporated on April 15, 1997 as Berkana Digital Studios Inc. On December 4, 1998, the name of the Company was changed to Claim Lake Resource Inc. and on March 31, 2005, the Company changed its name to Fort Chimo Minerals Inc. On January 1, 2009, the Company amalgamated with its wholly-owned subsidiary, Limestone Basin Exploration Ltd. The amalgamated company continued to operate as Fort Chimo Minerals Inc. On June 14, 2011, the Company changed its name to Mag Copper Limited and on August 11, 2017, the Company changed its name to Integra Resources Corp.
The Company's head office is located at 1050 - 400 Burrard Street, Vancouver, BC V6C 3A6 and its registered office is located at 2200 HSBC Building, 885 West Georgia Street Vancouver, BC V6C 3E8.
The Company trades on the TSX Venture under the trading symbol "ITR". The common shares of the Company began trading on the NYSE American under the ticker "ITRG" on July 31, 2020. The common shares ceased trading on the OTCQX concurrently with the NYSE American listing.
Integra is a development stage company engaged in the acquisition, exploration, and development of mineral properties in the Americas. The primary focus of the Company is advancement of its DeLamar Project, consisting of the neighboring DeLamar and Florida Mountain Gold and Silver Deposits
("DeLamar" or the "DeLamar Project") in the heart of the historic Owyhee County mining district in southwestern Idaho. The Company is currently focused on resource growth through brownfield and greenfield exploration and the start of feasibility level studies designed to advance the DeLamar Project towards a potential construction decision.
The COVID-19 global outbreak may have an impact on the Company's business. Management has put in place all necessary measures to protect its employees' safety and to secure essential site activities. The Company continues to monitor the situation and the impact the virus may have on the DeLamar Project. Should the virus spread or/and travel restrictions re-instated, the Company's ability to advance the DeLamar Project may be impacted. Similarly, the Company's ability to obtain financing and the ability of the Company's vendors, suppliers, consultants, and partners to meet obligations may be impacted as a result of COVID-19 and efforts to contain the virus.
2. BASIS OF PREPARATION
2.1 Statement of Compliance
These unaudited interim condensed consolidated financial statements, including comparatives, have been prepared in accordance with International Accounting Standards ("IAS") 34 'Interim Financial Reporting' ("IAS 34") using accounting policies consistent with the International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board ("IASB") and Interpretations of the International Financial Reporting Interpretations Committee ("IFRIC").
These unaudited interim condensed consolidated financial statements were authorized by the Board of Directors of the Company on November 14, 2022.
|
Integra Resources Corp. |
2. BASIS OF PREPARATION (continued)
2.2 Significant Accounting Policies
These unaudited interim condensed consolidated financial statements have been prepared on the basis of accounting policies and methods of computation consistent with those applied in the Company's December 31, 2021 audited consolidated annual financial statements, except for the Convertible debt facility policy and new pronouncements adopted in the current quarter (see details below).
Basis of Consolidation
These unaudited interim condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries: Integra Resources Holdings Canada Inc., Integra Resources Holdings U.S. Inc., and DeLamar Mining Company. All intercompany balances and transactions are eliminated upon consolidation.
Foreign Currency Translation
The functional currency is the currency of the primary economic environment in which the entity operates and has been determined for each entity within the Company. The functional currency of the Canadian parent company and its Canadian subsidiary is the Canadian dollar ("CAD"). The functional currency of the Company's two US subsidiaries is the US dollar ("USD").
The Company has changed its presentation currency as of December 31, 2021 from the Canadian dollar to the US dollar, to better reflect the Company's business activities and most of the Company's assets and liabilities are held in its US subsidiaries hence denominated in US dollars. As a result, comparative figures in these unaudited interim condensed consolidated financial statements have been translated into US dollars. No changes were made to the Company's functional currencies, as per the management's assessment based on the IAS 21 recommendations, which will be performed on a quarterly basis.
Foreign currency transactions are recorded initially at the exchange rates prevailing at the transactions' dates. At each subsequent reporting period:
- Foreign currency monetary items are reported at the closing rate at the date of the statement of financial position;
- Non-monetary items carried at historical rates are reported at the closing rate at transactions' dates;
- Non-monetary items carried at fair value are reported at the rates that existed when the fair values were determined.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in net income (loss), with one exception. Exchange differences arising from the translation of the net investment in foreign entities are recognized in a separate component of equity, foreign currency translation reserve. When a foreign operation is sold, such exchange differences are recognized in net income (loss) as part of the gain or loss on sale.
The operating results and statements of financial position of the parent company and its Canadian subsidiary which have the Canadian dollar as a functional currency have been translated into US dollars as follows:
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Integra Resources Corp. |
2. BASIS OF PREPARATION (continued)
2.2 Significant Accounting Policies (continued)
Foreign Currency Translation (continued)
i) Assets and liabilities are translated at the closing rate at the date of the consolidated statement of financial position; Share capital amounts are translated at the same rate, except for common shares issuance in USD dollars and resulting differences are reported in the "presentation currency translation difference" line in the consolidated statements of changes in equity;
ii) Revenue and expenses are translated at the average exchange rates, unless there is significant fluctuation in the exchange rates. In that case revenue and expenses are translated at the exchange rate at the date of transaction, except depreciation, depletion, and amortization, which are translated at the exchange rates applicable to the related assets; Reserve items are also translated at the average exchange rates.
iii) All resulting translation differences are recognized in other comprehensive income (loss).
When a foreign operation is disposed of, the cumulative amount of the exchange differences recognized in other comprehensive income (loss) and accumulated in the separate component of equity relating to that foreign operation shall be recognized in profit or loss when the gain or loss on disposal is recognized.
Convertible Debt Facility
Convertible instruments that consist of a loan (liability component) and an equity conversion option that allows the option holder to convert the loan into a fixed number ("fixed-for-fixed criteria") of borrower's shares (equity component) are classified as "compound instruments". Management determined that its convertible debt facility does not meet criteria for the compound instruments (no equity component is identified, as the fixed-for-fixed criteria was not met), hence it will be considered as a "hybrid instrument", which includes both a non-derivative host contract and one or more embedded derivatives.
IFRS 9 permits such a hybrid contract that contains one or more embedded derivatives meeting particular conditions may be designed at the entity's election, in its entirety, at fair value through profit or loss ("the fair value option"). Management decided not to elect the fair value option, resulting in the following approach:
The Company's convertible debt facility contains a financial liability (non-derivative host contract) and one or more embedded derivatives. The liability was initially recorded at residual value after first valuing the derivative component and is subsequently carried at amortized cost using the effective interest rate method; the liability is accreted to the face value over the term of the convertible debt. Accretion is expensed to the consolidated statement of income (loss) and comprehensive income (loss).
The conversion feature within the convertible debt facility has been determined to be an embedded derivative that is not closely related to the liability host, and it is bifurcated and accounted for separately, by first valuing the derivative component. At each reporting period, the derivative is fair valued with changes in fair value recorded as a gain or loss in the consolidated statement of income (loss) and comprehensive income (loss). The fair value of the derivative at the inception date and at each reporting period is calculated using the Finite Difference Method. The key assumptions used in the model are risk free rates, expected volatility, and credit spread. The expected volatility assumption is based on the historical volatility of the Company's stock over a term equal to the remaining term of corresponding debt instrument. The credit spread assumption in the model is based on the Company's cost of unsecured debt.
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Integra Resources Corp. |
2. BASIS OF PREPARATION (continued)
2.2 Significant Accounting Policies (continued)
Convertible Debt Facility (continued)
The Company early adopted IAS 1 amendments and classified the debt host as a "current" liability, as required by these amendments.
Fees paid to establish convertible debt facility (commitment, advisory, legal, technical, consulting, standby, and filling fees) are recognized as transaction costs. Management used relevant guidance and decided to allocate transaction costs exclusively to the non-derivative financial liability host. Transaction costs solely related to the initial advance will be included in full in the host's initial measurement. Transaction costs related to the initial advance and the subsequent advances will be allocated on a pro-rata basis. Transaction costs related to subsequent advance are deferred as an asset and will be deducted from the liability when subsequent advances are drawn.
2.3 Adoption of New Standards
New Accounting Pronouncements
Certain pronouncements were issued by the International Accounting Standards Board (IASB) that are mandatory for accounting periods on or after January 1, 2022. Integra adopted the following amendments in 2022.
IAS 1 Amendments - Classification of Liabilities as Current or Non-Current
In January 2020, the International Accounting Standards Board (IASB) issued amendments to IAS 1. The Accounting Standards Board (AcSB) completed its endorsement process and incorporated the amendments into Part I of the CPA Canada Handbook - Accounting in April 2020.
The amendments clarify the following: what is meant by a right to defer settlement, that a right to defer must exist at the end of the reporting period, that classification is unaffected by the likelihood that an entity will exercise its deferral right, and that only if an embedded derivative in a convertible liability is itself equity instrument would the terms of a liability not impact its classification. The amendments are effective for annual periods beginning on or after January 1, 2023. Earlier application is permitted.
In accordance with IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors, the Company applies the amendments retrospectively. These amendments had no impact on retrospective application and therefore the comparative information presented has not been restated.
The Company has classified the liability portion of the convertible loan ("debt host") as a "current" liability, in accordance with these amendments. As a result, the company will report lower working capital.
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Integra Resources Corp. |
2. BASIS OF PREPARATION (continued)
2.3 Adoption of New Standards (continued)
New Accounting Pronouncements (continued)
IAS 1 Amendments - Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgements
In February 2021, the International Accounting Standards Board (IASB) issued amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgements. The Accounting Standards Board (AcSB) completed its endorsement process and incorporated the amendments into Part I of the CPA Canada Handbook - Accounting in June 2021.
The amendments help entities provide accounting policy disclosures that are more useful to primary users of financial statements by replacing the requirement to disclose "significant" accounting policies under IAS 1 with a requirement to disclose "material" accounting policies. The amendments also provide guidance in IFRS Practice Statement 2 to explain and demonstrate the application of the four-step materiality process to accounting policy disclosures. These amendments will be applied prospectively. The amendments are effective for annual periods beginning on or after January 1, 2023. Earlier application is permitted. The Company is assessing its accounting policy information disclosure to ensure compliance with these amendments.
IAS 8 Amendments - Accounting Policies, Changes in Accounting Estimates and Errors
In February 2021, the International Accounting Standards Board (IASB) issued amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. The Accounting Standards Board (AcSB) completed its endorsement process and incorporated the amendments into Part I of the CPA Canada Handbook - Accounting in June 2021.
The amendments introduce a new definition of "accounting estimates" to replace the definition of "change in accounting estimates" and include clarifications intended to help entities distinguish changes in accounting policies from changes in accounting estimates. The amendments are effective for annual periods beginning on or after January 1, 2023. Earlier application is permitted. The Company is assessing the impact of these amendments on its financial statements.
2.4 Significant Accounting Estimates and Judgments
The preparation of the unaudited interim condensed consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions which affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the unaudited interim condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates are based on historical experience and other factors considered to be reasonable and are reviewed on an ongoing basis. Revisions to estimates and the resulting effects on the carrying amounts of the Company's assets and liabilities are accounted for prospectively.
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Integra Resources Corp. |
2. BASIS OF PREPARATION (continued)
2.4 Significant Accounting Estimates and Judgments (continued)
There have been some material additions to the nature and amount of judgments or estimates as reported in the Company's audited consolidated financial statements for the year ended December 31, 2021.
Accounting for Convertible Debt Facility
Upon entering a convertible debt facility transaction, management applies judgment in assessing the appropriate treatment. Management determined that its convertible debt facility does not meet the criteria for the compound instruments and as a result, will be considered as a hybrid instrument, which includes both a non-derivative host contract and one or more embedded derivatives.
The conversion feature within the convertible debt facility has been determined to be an embedded derivative that is not closely related to the liability host, and it is bifurcated and accounted for separately, by first valuing the derivative component. At each reporting period, the derivative is fair valued with changes in fair value recorded as a gain or loss in the statement of profit or loss. The Company estimates the fair value of its conversion option derivative using the Finite Difference method. The key assumptions used in the model are risk free rates, expected volatility, and credit spread. The expected volatility assumption is based on the historical volatility of the Company's stock over a term equal to the remaining term of corresponding debt instrument. The credit spread assumption in the model is based on the Company's cost of unsecured debt.
3. CAPITAL MANAGEMENT
The Company's capital management goals are to: ensure there are adequate capital resources to safeguard the Company's ability to continue as a going concern; maintain sufficient funding to support the acquisition, exploration, and development of mineral properties and exploration and evaluation activities; maintain investors' and market confidence; and provide returns and benefits to shareholders and other stakeholders.
The Company classified the convertible debt liability as a current liability, in accordance with the early adopted IAS 1 Amendments. This meaningfully impacts the Company's working capital. The Company's working capital, including the convertible debt liability, as of September 30, 2022 was $7,710,432 (December 31, 2021 - $9,387,223). The Company's working capital, excluding the convertible debt liability, as of September 30, 2022 was $17,329,243.
The Company's capital structure is adjusted based on the funds available to the Company such that it may continue exploration and development of its properties for the mining of minerals that are economically recoverable. The Board of Directors does not establish quantitative return on capital criteria, but rather relies on the expertise of management and other professionals to sustain future development of the business.
The Company's properties are in the exploration and development stage and, as a result, the Company currently has no source of operating cash flow. The Company intends to raise such funds as and when required to complete its projects.
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Integra Resources Corp. |
3. CAPITAL MANAGEMENT (continued)
There is no assurance that the Company will be able to raise additional funds on reasonable terms. The only sources of future funds presently available to the Company are through the exercise of options, convertible debt facility, the sale of equity capital of the Company or the sale by the Company of an interest in any of its properties in whole or in part. The ability of the Company to arrange such financing in the future will depend in part upon the prevailing capital market conditions as well as the business performance of the Company. There can be no assurance that the Company will be successful in its efforts to arrange additional financing, if needed, on terms satisfactory to the Company.
Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable. There were no changes in the Company's approach to capital management during the nine-month period ended September 30, 2022.
4. FINANCIAL INSTRUMENTS
All financial instruments are initially measured at fair value plus or minus transaction costs (in case of a financial asset or financial liability not at fair value through profit or loss). Subsequent measurements are designed either at amortized costs or fair value (gains and losses are either recognized in profit or loss (fair value through profit or loss, FVTPL), or recognized in other comprehensive income (fair value through other comprehensive income, FVTOCI)).
Fair Value
IFRS requires disclosures about the inputs to fair value measurements, including their classification within a hierarchy that prioritizes the inputs to fair value measurement. The three levels of the fair value hierarchy are:
Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities;
Level 2 - Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly;
and
Level 3 - Inputs that are not based on observable market data.
The Company's financial instruments are accounted for as follows under IFRS 9:
| FINANCIAL ASSETS: | CLASSIFICATION |
| Cash and cash equivalents | FVTPL |
| Receivables (excluding tax receivables) | Amortized cost, less any impairment |
| Loan receivable | Amortized cost, less any impairment |
| Restricted cash, long-term | Amortized cost, less any impairment |
| FINANCIAL LIABILITIES: | CLASSIFICATION |
| Trade and other payables | Other financial liabilities, measured at amortized cost |
| Due to related parties | Other financial liabilities, measured at amortized cost |
| Lease liability | Other financial liabilities, measured at amortized cost |
| Convertible debt facility - host liability | Other financial liabilities, measured at amortized cost |
| Convertible debt facility - derivative component | FVTPL |
| Equipment financing liability | Other financial liabilities, measured at amortized cost |
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Integra Resources Corp. |
4. FINANCIAL INSTRUMENTS (continued)
The following table summarizes the Company's financial instruments classified as FVTPL as at September 30, 2022 and December 31, 2021:
| Level | September 30, 2022 | December 31, 2021 | |||||
| FINANCIAL ASSETS: | |||||||
| Cash and cash equivalents | 1 | $ | 20,522,332 | $ | 14,337,078 |
| Level | September 30, 2022 | December 31, 2021 | |||||
| FINANCIAL LIABILITIES: | |||||||
| Convertible debt facility - derivative component | 3 | $ | 1,488,000 | $ | - |
Fair value estimates of all financial instruments are made at a specific point in time, based on relevant market information and information about financial instruments. These estimates are subject to and involve uncertainties and matters of significant judgment, therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
Lease liability, non-derivative host liability of the convertible debt and equipment financing liabilities are initially measured at the present value of the payments to be made over the lease or financing term, using the implicit interest rate (if available) or incremental borrowing rate for the present value determination. These liabilities are subsequently recorded at amortized cost using effective interest method. For restricted cash, lease liabilities, equipment financing liability and non-derivative host liability of convertible debt, the carrying values approximate their fair values at the period end because the interest rates used to discount host contracts approximate market interest rates. The non-derivative host liability related to the convertible debt facility is initially measured at fair value and is carried at amortized cost using the effective interest rate method. That liability is accreted to the face value over the loan term. The carrying values of other financial assets, trade and other payables and due to related parties approximate their fair values due to the short-term nature of these items.
A summary of the Company's risk exposures as it relates to financial instruments are reflected below:
i) Credit Risk
Credit risk is the risk of loss associated with a counter-party's inability to fulfill its payment obligations. The credit risk is attributable to various financial instruments, as noted below. The credit risk is limited to the carrying value amount carried on the consolidated statements of financial position.
a. Cash and cash equivalents - Cash and cash equivalents are held with major Canadian and U.S. banks and therefore the risk of loss is minimal.
b. Receivables and restricted cash - these financial assets are immaterial and therefore the risk of loss is minimal.
ii) Liquidity Risk
The Company's approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities as they become due. The Company intends on securing further financing to ensure that the obligations are properly discharged.
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Integra Resources Corp. |
4. FINANCIAL INSTRUMENTS (continued)
iii) Market Risk
Market risk is the risk of loss that may arise from changes in market factors such as interest rates, foreign exchange rates, commodity prices and/or stock market movements (price risk).
a. Interest Rate Risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate as a result of changes in market interest rates. The Company has interest-bearing assets, where the risk is limited to potential decreases on the interest rate offered on cash and cash equivalents held with a chartered Canadian and US financial institutions. The Company's significant financial instruments valued using fluctuating risk-free interest rates is the derivative component of the convertible debt facility. The Company's operating cash flows are mostly independent of changes in market interest rates. Management considers this risk immaterial.
b. Share Price Risk
At each reporting period, the convertible debt derivative liability is fair valued using the Finite Difference Method. The Company's share price is a key assumption used in this valuation, hence share price fluctuations can meaningfully impact the value of the derivative liability.
c. Foreign Exchange Risk
The Company is exposed to currency fluctuations given that most of its expenditures are incurred in the US dollars and its convertible debt facility is denominated in the US dollars. To manage this risk and mitigate its exposure to exchange rates fluctuation, the Company holds most of its cash and short-term investments in USD (see Note 5).
During the nine-month period ended September 30, 2022, the Company recognized a net foreign exchange income of $712,398. Based on the Company's net foreign currency exposure at September 30, 2022, depreciation or appreciation of US dollar against the Canadian dollar would have resulted in the following increase or decrease in the Company's net loss:
| At September 30, 2022 | Possible exposure* | Impact on net loss | Impact on net loss |
| US dollar | +/-5% | $ 1,548,475 | $ (1,548,475) |
*Possible exposure is based on management's best estimate of the reasonably possible fluctuations of foreign exchange rates in the next twelve months.
5. CASH AND CASH EQUIVALENTS
The balance at September 30, 2022 consists of $2,414,152 in cash and $18,108,180 held in short-term investments (December 31, 2021 - $3,294,174 in cash and $11,042,904 in short-term investments) on deposit with major Canadian and US banks. Short-term investments are redeemable on a monthly basis, with the annual interest rates ranging between 2.45% and 3.05%. As of September 30, 2022, the Company held approximately 99% (December 31, 2021 - 98%) of its cash and short-term investments in US dollars.
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Integra Resources Corp. |
6. RECEIVABLES, PREPAID EXPENSES, DEPOSITS, AND LOAN RECEIVABLE
| Receivables and Prepaid Expenses As at | September 30, 2022 | December 31, 2021 | ||||
| Receivables | $ | 91,468 | $ | 37,202 | ||
| Prepaid expenses | 957,287 | 684,354 | ||||
| Total Receivables and Prepaid Expenses | $ | 1,048,755 | $ | 721,556 |
| Long-Term Deposits As at | September 30, 2022 | December 31, 2021 | ||||
| Long-term security deposit* | $ | 32,043 | $ | 33,294 | ||
| Total Long-Term Deposits | $ | 32,043 | $ | 33,294 |
*Long-term security deposit is related to the head-office lease, Boise office lease, utility, equipment rental, and the campground lease security deposits.
At September 30, 2022 and December 31, 2021, the Company anticipates full recovery or full utilization of these amounts and therefore no impairment has been recorded against these receivables, prepaid expenses, and long-term deposits. The Company holds no collateral for any receivable amounts outstanding as at September 30, 2022 and December 31, 2021.
In August 2020, the Company extended a $140,000 loan to a local entrepreneur to complete the construction of a restaurant in Jordan Valley. The loan was subsequently increased from $140,000 to $175,000 in early 2021. The loan bore a 6.0% interest rate per annum for a five-year term and the monthly loan instalment was $3,383. The loan was fully secured by the premises and all property affixed or attached to or incorporated upon the premises.
The loan was fully repaid in the current nine-month period ended September 30, 2022, including $8,588 interest accrued up to May 31, 2022. Upon the loan repayment, the Company released its security on the premises and all property affixed or attached to or incorporated upon the premises.
A summary of the changes in the loan receivable for the nine-month period ended September 30, 2022 and the year ended December 31, 2021 is as follows:
| Loan receivable | |||
| Balance, December 31, 2020 | $ | 140,000 | |
| Loan receivable - addition | 35,000 | ||
| Principal payments | (7,562 | ) | |
| Balance, December 31, 2021 | $ | 167,438 | |
| Principal payments | (167,438 | ) | |
| Balance, September 30, 2022 | $ | - |
| September 30, 2022 | December 31, 2021 | |||||
| Loan receivable - current portion | $ | - | $ | 47,830 | ||
| Loan receivable - non-current portion | - | 119,608 | ||||
| Total Loan Receivable | $ | - | $ | 167,438 |
7. RESTRICTED CASH
The Company's restricted cash at September 30, 2022 consists of $45,646 (December 31, 2021 - $18,147), in credit card security deposits.
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Integra Resources Corp. |
8. PROPERTY, PLANT AND EQUIPMENT
| Computers and software |
Office furniture and equipment |
Vehicles | Buildings, well, road, and buildings improvements |
Equipment | Total | |||||||||||||
| Cost | ||||||||||||||||||
| Balance at December 31, 2020 | 213,512 | 43,078 | 94,875 | 702,394 | 1,093,032 | 2,146,891 | ||||||||||||
| Additions (adjustments) | 28,489 | - | 124,391 | 740,405 | 555,510 | 1,448,795 | ||||||||||||
| Translation difference | 253 | 160 | - | 240 | - | 653 | ||||||||||||
| Balance at December 31, 2021 | 242,254 | 43,238 | 219,266 | 1,443,039 | 1,648,542 | 3,596,339 | ||||||||||||
| Additions (adjustments) | 1,928 | - | - | 16,522 | 13,772 | 32,222 | ||||||||||||
| Translation difference | (5,098 | ) | (2,831 | ) | - | (4,242 | ) | - | (12,171 | ) | ||||||||
| Balance at September 30, 2022 | $ | 239,084 | $ | 40,407 | $ | 219,266 | $ | 1,455,319 | $ | 1,662,314 | $ | 3,616,390 | ||||||
| Accumulated Depreciation | ||||||||||||||||||
| Balance at December 31, 2020 | (124,851 | ) | (22,791 | ) | (41,584 | ) | (76,251 | ) | (238,687 | ) | (504,164 | ) | ||||||
| Depreciation | (53,667 | ) | (8,536 | ) | (40,573 | ) | (73,223 | ) | (284,053 | ) | (460,052 | ) | ||||||
| Translation difference | (185 | ) | (85 | ) | - | (26 | ) | - | (296 | ) | ||||||||
| Balance at December 31, 2021 | (178,703 | ) | (31,412 | ) | (82,157 | ) | (149,500 | ) | (522,740 | ) | (964,512 | ) | ||||||
| Depreciation | (28,556 | ) | (5,978 | ) | (42,765 | ) | (84,861 | ) | (246,652 | ) | (408,812 | ) | ||||||
| Translation difference | 4,190 | 2,076 | - | 602 | - | 6,868 | ||||||||||||
| Balance at September 30, 2022 | $ | (203,069 | ) | $ | (35,314 | ) | $ | (124,922 | ) | $ | (233,759 | ) | $ | (769,392 | ) | $ | (1,366,456 | ) |
| Carrying amounts | ||||||||||||||||||
| December 31, 2020 | $ | 88,661 | $ | 20,287 | $ | 53,291 | $ | 626,143 | $ | 854,345 | $ | 1,642,727 | ||||||
| December 31, 2021 | $ | 63,551 | $ | 11,826 | $ | 137,109 | $ | 1,293,539 | $ | 1,125,802 | $ | 2,631,827 | ||||||
| September 30, 2022 | $ | 36,015 | $ | 5,093 | $ | 94,344 | $ | 1,221,560 | $ | 892,922 | $ | 2,249,934 |
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Integra Resources Corp. |
9. LEASES - RIGHT-OF-USE ASSETS AND LEASE LIABILITIES
A summary of the changes in right-of-use assets for the nine-month period ended September 30, 2022 and the year ended December 31, 2021 is as follows:
| Right-of-Use Assets | Head office rent (5-year term) |
Vehicles (3 & 4-year term) |
Equipment (3-year term) |
DeLamar office rent (3.7 and 5-year terms) |
Total | ||||||||||
| Balance, December 31, 2020 | 381,564 | 229,412 | 77,898 | 163,768 | 852,642 | ||||||||||
| Additions | 1,508 | 208,538 | 712 | 152,896 | 363,654 | ||||||||||
| Depreciation | (179,457 | ) | (147,260 | ) | (40,300 | ) | (91,193 | ) | (458,210 | ) | |||||
| Translation differences | 1,625 | - | - | - | 1,625 | ||||||||||
| Balance, December 31, 2021 | 205,240 | 290,690 | 38,310 | 225,471 | 759,711 | ||||||||||
| Additions (change of estimate) | 516,580 | (38,928 | ) | - | - | 477,652 | |||||||||
| Depreciation | (92,584 | ) | (108,000 | ) | (30,226 | ) | (78,820 | ) | (309,630 | ) | |||||
| Translation differences | (15,407 | ) | - | - | - | (15,407 | ) | ||||||||
| Balance, September 30, 2022 | $ | 613,829 | $ | 143,762 | $ | 8,084 | $ | 146,651 | $ | 912,326 |
A summary of the changes in lease liabilities for the nine-month period ended September 30, 2022 and the year ended December 31, 2021 is as follows:
| Lease Liabilities | Head office rent |
Vehicles | Equipment | DeLamar office rent |
Total | ||||||||||
| Balance, December 31, 2020 | 453,633 | 219,169 | 81,829 | 180,240 | 934,871 | ||||||||||
| Short-term lease liability at initial recognition | - | 65,679 | - | 41,699 | 107,378 | ||||||||||
| Long-term lease liability at initial recognition | 3,158 | 142,859 | - | 111,197 | 257,214 | ||||||||||
| Payments - principal portion | (177,986 | ) | (143,628 | ) | (40,122 | ) | (86,793 | ) | (448,529 | ) | |||||
| Adjustments (rent adjustments & final payment reconciliations) | (9,798 | ) | (1,576 | ) | - | (768 | ) | (12,142 | ) | ||||||
| Translation differences | 1,933 | - | - | - | 1,933 | ||||||||||
| Balance, December 31, 2021 | 270,940 | 282,503 | 41,707 | 245,575 | 840,725 | ||||||||||
| Short-term lease liability at initial recognition (change of estimate) | 99,315 | - | - | - | 99,315 | ||||||||||
| Long-term lease liability at initial recognition (change of estimate) | 524,105 | - | - | - | 524,105 | ||||||||||
| Payments - principal portion | (139,490 | ) | (100,572 | ) | (32,646 | ) | (79,289 | ) | (351,997 | ) | |||||
| Adjustments (rent adjustments & final payment reconciliations) | (116,477 | ) | (42,199 | ) | - | (1,914 | ) | (160,590 | ) | ||||||
| Translation differences | (20,340 | ) | - | - | - | (20,340 | ) | ||||||||
| Balance, September 30, 2022 | $ | 618,053 | $ | 139,732 | $ | 9,061 | $ | 164,372 | $ | 931,218 |
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Integra Resources Corp. |
9. LEASES - RIGHT-OF-USE ASSETS AND LEASE LIABILITIES (continued)
Integra renewed its head office lease agreement on August 18, 2022, extending the lease term from January 31, 2023 to January 31, 2028. This has been accounted for as change of estimate of lease liabilities under IFRS 16. All balances related to the original right-of-use asset and lease liability were closed in the current period and replaced by the new right-of-use asset and lease liability amounts.
Right-of-use assets are initially measured at cost, which comprise the initial amount of lease liabilities, adjusted for lease prepayments, lease incentive received, lease initial direct costs, and an estimate of restoration, removal, and dismantling costs. Those right-of-use assets are depreciated on a straight-line basis, over the lease terms.
Lease liabilities are initially measured at the present value of the lease payments to be made over the lease terms, using the effective interest method for the present value determination. When the rate implicit in the lease cannot be readily determined, the Company applied an estimated incremental borrowing rate. The applied interest rates in these leases ranged between 6.34% and 10.00%. Lease liability calculations were based on the assumption that no purchase option will be exercised at the end of the lease terms.
Carrying lease liabilities amounts are as follows:
| |
Current lease liability |
Long-term lease liability |
Total lease liabilities |
||||||
| Balance, December 31, 2021 | 460,690 | 380,035 | 840,725 | ||||||
| Balance, September 30, 2022 | $ | 317,232 | $ | 613,986 | $ | 931,218 |
Lease interest expenses for the nine-month periods ended September 30, 2022 and 2021 are as follows:
| Lease Interest expenses | |||
| Balance, September 30, 2021 | $ | 58,654 | |
| Balance, September 30, 2022 | $ | 38,221 |
The Company subleased a portion of its head office to four companies for a rent income of $79,901, in the current nine-month period ended September 30, 2022 (September 30, 2021 - $51,547). The income is recognized in the consolidated statement of operations and comprehensive loss, under the "Rent income - sublease".
Operating Leases
The Company elected to apply recognition exemption under IFRS 16 on its short-term rent agreements related to its office and equipment rentals. For the nine-month period ended September 30, 2022, the Company expensed $57,156 (September 30, 2021 - $65,872) related to these operating leases. The Company's short-term lease commitment as of September 30, 2022 was $26,508 (December 31, 2021 - $19,068).
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Integra Resources Corp. |
10. EXPLORATION AND EVALUATION ASSETS
The DeLamar Project consists of the neighbouring DeLamar and Florida Mountain Gold and Silver Deposits, located in the heart of the historic Owyhee County mining district in south western Idaho.
DeLamar Gold and Silver Deposit
On November 3, 2017, the Company acquired 100% of interest in Kinross DeLamar Mining Company, a wholly-owned subsidiary of Kinross Gold Corporation ("Kinross"), which owned the DeLamar Deposit for $5.9 million ("mm") in cash and the issuance of 2,218,395 common shares of the Company that is equal to 9.9% of all of the issued and outstanding shares of the Company upon closing of the October 2017 $21.3mm financing. The 2,218,395 common shares issued were valued at $3.7mm on the closing date. The Company paid $2.0mm cash at closing of the acquisition transaction and issued a $3.5mm promissory note, which was originally due in May 2019. In February 2019, the maturity date of the promissory note was extended to November 3, 2019, and the promissory note was paid in full on October 31, 2019.
That payment represents payment-in-full for all amounts owing under the promissory note agreement and all obligations under the agreement with Kinross USA Inc. have been fully performed. As a result, Kinross USA Inc. has released its security on 25% of the shares of DeLamar Mining Company.
A portion of the DeLamar Project was subject to a 2.5% NSR payable to Kinross. In December 2019, Kinross Gold USA Inc. informed DeLamar that its affiliate Kinross has entered a Royal Purchase and Sale Agreement dated December 1, 2019, whereby Kinross agreed to sell, assign, transfer, and convey to Maverix Metals (Nevada) Inc. and Maverix Metals Inc. all of Kinross' or its applicable subsidiaries' rights, titles, and interests in a portfolio of royalties, including the net smelter returns royalty governed by the Royalty Agreement. The Maverix royalty applies to more than 90% of the current DeLamar area resources, but this royalty will be reduced to 1.0% upon Maverix receiving total royalty payments of $7.3mm (C$10mm).
Florida Mountain Gold and Silver Deposit
Integra executed in December 2017 Purchase and Sale Agreements with two private entities (Empire and Banner) to acquire patented claims in the past-producing Florida Mountain Gold and Silver Deposit ("Florida Mountain") for a total consideration of $2.0mm in cash. The Company completed the purchase of the Florida Mountain Empire claims in January 2018 and paid $1.6mm at closing. The Company completed the acquisition of the Florida Mountain Banner claims in the second quarter of 2018 and paid $0.4mm at closing.
War Eagle Gold-Silver Deposit
In December 2018, the Company has entered into an option agreement with Nevada Select Royalty Inc. ("Nevada Select"), a wholly owned subsidiary of Ely Gold Royalties Inc. ("Ely Gold") to acquire Nevada Select's interest in a State of Idaho Mineral Lease (the "State Lease") encompassing the War Eagle gold-silver Deposit ("War Eagle") situated in the DeLamar District, southwestern Idaho. Upon exercise of the option, Nevada Select will transfer its right, title and interest in the State Lease, subject to a 1.0% net smelter royalty on future production from the deposit payable to Ely Gold, to DeLamar Mining. Under the option agreement, Integra will pay Nevada Select $200,000 over a period of four years in annual payments, as per the following schedule:
- $20,000 cash at execution of the option agreement (paid in December 2018);
- $20,000 cash on the six-month anniversary (paid in June 2019);
- $30,000 cash on the one-year anniversary (paid in December 2019);
- $30,000 cash on the second anniversary (paid in December 2020);
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Integra Resources Corp. |
10. EXPLORATION AND EVALUATION ASSETS (continued)
War Eagle Gold-Silver Deposit (continued)
- $30,000 cash on the third anniversary (paid in December 2021); and
- $70,000 cash on the fourth anniversary.
Integra has the right to accelerate the payments and exercise of the option at anytime prior to the fourth-year anniversary. The State Lease is subject to an underlying 5.0% gross royalty payable to the State of Idaho.
On June 21, 2021, Gold Royalty Corp. ("GRC") and Ely Gold announced that they have entered into a definitive agreement pursuant to which GRC will acquire all of the issued and outstanding common shares of Ely Gold by way of a statutory plan of arrangement under the Business Corporations Act (British Columbia). The transaction was subsequently completed on August 23, 2021, with no impact on the option agreement the Company signed with Nevada Select. In the War Eagle Mountain District, Integra had previously acquired the Carton Claim group comprising of six patented mining claims covering 45 acres and located 750m north of the State Lease.
BlackSheep District
The Company staked a number of the BlackSheep claims in 2018. The staking was completed in early 2019.
Exploration and Evaluation Assets Summary:
| Total | |||
| Balance at December 31, 2020 | $ | 56,809,632 | |
| Land acquisitions/option payments | 45,000 | ||
| Claim staking | 3,000 | ||
| Reclamation adjustment* | (424,038 | ) | |
| Depreciation** | (7,404 | ) | |
| Total | 56,426,190 | ||
| Advance minimum royalty (Note 16) | 64,950 | ||
| Balance at December 31, 2021 | 56,491,140 | ||
| Land acquisitions/option payments | 20,000 | ||
| Reclamation adjustment* | (18,722,405 | ) | |
| Depreciation** | (5,538 | ) | |
| Total | 37,783,197 | ||
| Advance minimum royalty (Note 16) | 62,350 | ||
| Balance at September 30, 2022 | $ | 37,845,547 |
*Reclamation adjustment is the change in present value of the reclamation liability, mainly due to changes to inflation rate and discount rate. Also see Note 17.
**A staff house building with a carrying value of $187,150 has been included in the DeLamar property. This building is being depreciated.
The Company spent $8,260,713 in exploration and evaluation activities during the nine-month period ended September 30, 2022 (September 30, 2021 - $19,261,599).
The following tables outline the Company's exploration and evaluation expense summary for the nine-month periods ended September 30, 2022 and 2021:
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Integra Resources Corp. |
10. EXPLORATION AND EVALUATION ASSETS (continued)
Exploration and Evaluation Expense Summary:
| September 30, 2022 | DeLamar deposit |
Florida Mountain deposit |
War Eagle deposit |
Other deposits |
Joint expenses |
Total | ||||||||||||
| Contract exploration drilling | $ | 489,656 | $ | - | $ | - | $ | - | $ | - | $ | 489,656 | ||||||
| Contract metallurgical drilling | 657,499 | - | - | - | - | 657,499 | ||||||||||||
| Contract condemnation drilling | 216,877 | - | - | - | - | 216,877 | ||||||||||||
| Exploration drilling - other drilling labour & related costs | 542,207 | 20,952 | 10,779 | - | - | 573,938 | ||||||||||||
| Metallurgical drilling - other drilling labour & related costs | 310,344 | - | - | - | - | 310,334 | ||||||||||||
| Condemnation drilling - other | 298,881 | - | - | - | - | 298,881 | ||||||||||||
| drilling labour & related costs | ||||||||||||||||||
| Other exploration expenses* | - | 11,159 | - | - | 740,468 | 751,627 | ||||||||||||
| Other development expenses** | - | - | - | - | 1,351,421 | 1,351,421 | ||||||||||||
| Land*** | 215,550 | 37,228 | 1,656 | 20,946 | 221,770 | 497,150 | ||||||||||||
| Permitting | - | - | - | - | 2,127,565 | 2,127,565 | ||||||||||||
| Metallurgical test work | 137,111 | 27,452 | - | - | - | 164,563 | ||||||||||||
| Technical reports and engineering | - | - | - | - | 624,665 | 624,665 | ||||||||||||
| Community engagement | - | - | - | - | 196,527 | 196,527 | ||||||||||||
| Total | $ | 2,868,125 | $ | 96,791 | $ | 12,435 | $ | 20,946 | $ | 5,262,416 | $ | 8,260,713 |
*Includes mapping, IP, sampling, payroll, exploration G&A expenses, consultants
**Includes development G&A expenses and payroll
***Includes BLM and IDL annual fees, consulting, property taxes, legal, etc. expenses
| September 30, 2021 |
DeLamar deposit |
Florida Mountain deposit |
War Eagle deposit |
Other deposits |
Joint expenses |
Total | ||||||||||||
| Contract exploration drilling | $ | 1,249,192 | $ | 4,277,932 | $ | 181,494 | $ | 1,071,786 | $ | - | $ | 6,780,404 | ||||||
| Contract metallurgical drilling | 424,819 | - | - | - | - | 424,819 | ||||||||||||
| Contract condemnation drilling | 226,752 | - | - | - | - | 226,752 | ||||||||||||
| Exploration drilling - other drilling labour & related costs | 731,234 | 2,179,211 | 188,572 | 585,443 | - | 3,684,460 | ||||||||||||
| Metallurgical drilling - other | 198,743 | - | - | - | - | 198,743 | ||||||||||||
| drilling labour & related costs | ||||||||||||||||||
| Condemnation drilling - other | 122,335 | - | - | - | - | 122,335 | ||||||||||||
| drilling labour & related costs | ||||||||||||||||||
| Other exploration expenses* | 135,518 | - | 17,232 | 217,385 | 1,102,895 | 1,473,030 | ||||||||||||
| Other development expenses** | - | - | - | - | 1,254,556 | 1,254,556 | ||||||||||||
| Land*** | 169,704 | 76,030 | 2,815 | 21,772 | 221,788 | 492,109 | ||||||||||||
| Permitting | - | - | - | - | 3,034,851 | 3,034,851 | ||||||||||||
| Metallurgy test work | 177,955 | 139,578 | - | - | - | 397,322 | ||||||||||||
| Technical reports and engineering | - | - | - | - | 1,108,471 | 1,108,471 | ||||||||||||
| Community engagement | - | - | - | - | 143,536 | 143,536 | ||||||||||||
| Total | $ | 3,436,252 | $ | 6,672,751 | $ | 390,113 | $ | 1,896,386 | $ | 6,866,097 | $ | 19,261,599 |
*Includes mapping, IP, sampling, payroll, exploration G&A expenses, consultants.
**Includes development G&A expenses and payroll
***Includes BLM and IDL annual fees, consulting, property taxes, legal, etc. expenses
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Integra Resources Corp. |
11. DEFERRED TRANSACTION COSTS
Fees paid to establish the convertible debt facility (see Note 15) are recognized as transaction costs. These costs include fees such as commitment fees, advisory, legal, and technical due diligence fees. Management determined that the transaction costs are all attributable to the initial advance and subsequent advances and as a result, decided to allocate the transaction costs exclusively to the non-derivative financial liability host.
Transaction costs solely related to the initial advance are included in full in the host's initial measurement. Transaction costs related to both the initial advance and the subsequent advances are allocated on a pro-rata basis. As a result, 50% of the costs are included in the host's initial measurement (included in the effective interest rate calculation on the residual financial liability) and the other 50% is deferred as an asset (included in the non-current asset line "Deferred transaction costs" in the statement of the financial position) and will be deducted from the liability pro-rata subsequent advances when such advances are drawn.
Standby fees (see Note 15) related to the undrawn portion of the convertible debt facility are also included in the deferred transaction costs.
12. RELATED PARTY TRANSACTIONS AND KEY MANAGEMENT COMPENSATION
Related parties include the Board of Directors and officers and enterprises that are controlled by these individuals as well as certain consultants performing similar functions.
As September 30, 2022, $538,053 (December 31, 2021 - $693,344) was due to related parties for payroll expenses, consulting fees, bonuses accruals, vacation accruals and other expenses. Receivables from related parties (related to rent and office expenses) as of September 30, 2022 were $12,709 (December 31, 2021 - $Nil) and was recorded in receivables.
Key Management Compensation:
Key management personnel include those persons having authority and responsibility for planning, directing, and controlling the activities of the Company as a whole. The Company has determined that key management personnel consist of executive and non-executive members of the Company's Board of Directors and corporate officers.
Remuneration attributed to executives and directors for the nine-month periods ended September 30, 2022 and 2021 were as follows:
| September 30, 2022 | September 30, 2021 | |||||
| Short-term benefits* | $ | 1,230,308 | $ | 1,411,910 | ||
| Associate companies** | (13,498 | ) | (12,833 | ) | ||
| Stock-based compensation | 931,335 | 868,180 | ||||
| Total | $ | 2,148,145 | $ | 2,267,257 |
*Short-term employment benefits include salaries, consulting fees, vacation accruals and bonus accruals for key management. It also includes directors' fees for non-executive members of the Company's Board of Directors.
**Net of payable/receivable/GST due to/from entities for which Integra's directors are executives, mostly related to rent and office expenses.
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Integra Resources Corp. |
12. RELATED PARTY TRANSACTIONS AND KEY MANAGEMENT COMPENSATION (continued)
In the current nine-month period ended September 30, 2022, the Company issued 122,947 deferred share units to certain directors, in lieu of their directors' fees, as elected by those directors. Each DSU has been fair valued at Integra's closing share price at the end of quarter. DSUs granted before December 2021 vested in full at the grant date. DSUs granted in December 2021 and going forward will vest in 12 months. The share-based payment related to these DSUs is included in the above table under stock-based compensation.
In the current nine-month period ended September 30, 2021, the Company issued 21,517 deferred share units to certain directors, in lieu of their directors' fees, as elected by those directors. Each DSU has been fair valued at Integra's closing share price at the end of quarter. DSUs granted before December 2021 vested in full at the grant date. DSUs granted in December 2021 and going forward will vest in 12 months. The share-based payment related to these DSUs is included in the above table under stock-based compensation.
The option to receive DSUs in lieu of cash directors' fees was introduced in 2021 in order to encourage insiders' ownership.
13. TRADE AND OTHER PAYABLES
Trade and other payables of the Company are principally comprised of amounts outstanding for trade purchases relating to exploration activities and amounts payable for operating and financing activities. The usual credit period taken for trade purchases is 30 days. The majority of the Company's payables relates to development and exploration expenditures, legal and office expenses, and consulting fees.
The following is a breakdown of the trade and other payables:
| As at |
September 30, 2022 |
December 31, 2021 |
||||
| Total Accounts Payable | $ | 898,680 | $ | 1,531,901 | ||
| Accrued Liabilities | 980,331 | 955,431 | ||||
| Total Trade and Other Payables | $ | 1,879,011 | $ | 2,487,332 |
Accrued liabilities at September 30, 2022 and December 31, 2021, include mostly accruals for project exploration and development expenditures, payroll, bonus, vacation, professional services, and office expenses.
14. EQUIPMENT FINANCING
During the 2020 fiscal year, the Company's wholly owned subsidiary, DeLamar Mining Company, purchased a dozer and two small excavators and entered into a 48-month mobile equipment financing agreement in the amount of $0.6mm. The mobile equipment financing is guaranteed by Integra Resources Corp.
During the second quarter of 2021, the Company's wholly owned subsidiary, DeLamar Mining Company, purchased a dozer and entered into a 48-month mobile equipment financing agreement in the amount of $0.3mm. The mobile equipment financing is guaranteed by Integra Resources Corp.
The equipment financing liability is initially measured at the present value of the payments to be made over the financing term, using the implicit interest rate of 7.0% per annum for the 2020 financing and the implicit interest rate of 6.5% for the 2021 financing. Subsequently, equipment financing liability is accreted to reflect interest and the liability is reduced to reflect financing payments.
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Integra Resources Corp. |
14. EQUIPMENT FINANCING (continued)
A summary of the changes in the equipment financing liability for the nine-month period ended September 30, 2022 and the year ended December 31, 2021 is as follows:
| Equipment Financing Liability | |||
| Balance, December 31, 2020 | $ | 493,058 | |
| Addition | 260,685 | ||
| Principal payments | (156,206 | ) | |
| Balance, December 31, 2021 | 597,537 | ||
| Principal payments | (150,628 | ) | |
| Balance, September 30, 2022 | $ | 446,909 |
Carrying equipment financing liability amounts are as follows:
| September 30, 2022 | December 31, 2021 | |||||
| Current equipment financing liability | $ | 213,225 | $ | 202,577 | ||
| Long-term equipment financing liability | 233,684 | 394,960 | ||||
| Total equipment financing liability | $ | 446,909 | $ | 597,537 |
Equipment financing interest expenses for the nine-month periods ended September 30, 2022 and 2021 are as follows:
| Equipment Financing Interest Expenses | |||
| Balance, September 30, 2021 | $ | 26,694 | |
| Balance, September 30, 2022 | $ | 27,076 |
15. CONVERTIBLE DEBT FACILITY
On July 28, 2022, the Company executed a credit agreement with Beedie Investment Ltd. (the "Lender"), for the issuance of a non-revolving term convertible debt facility (the "Convertible Facility") in the principal amount up to $20 million. Maturity date of the loan is set as 36 months following the closing date (August 4, 2022), which could be extended for an additional 12 months, if certain conditions are met. On August 4, 2022, an initial advance of $10 million was drawn under this facility, with the Company having the option to draw "subsequent advances" in increments of at least $2.5 million, up to an additional $10 million, subject to certain conditions. The Convertible Facility is secured by the Company's material assets and guaranteed by the Company's subsidiaries. Pursuant to the Convertible Facility agreement, the Company is required to keep a minimum unrestricted cash balance of $2 million.
The Company's Convertible Facility contains a financial liability (non-derivative host contract) and one or more embedded derivatives. The liability was initially recorded at fair value and is subsequently carried at amortized cost using the effective interest rate method; the liability is accreted to the face value over the term of the convertible debt. All accretion was expensed to the statement of income (loss) and comprehensive income (loss).
The conversion feature within the convertible facility has been determined to be an embedded derivative that is not closely related to the liability host, and it is bifurcated and accounted for separately, by first valuing the derivative component.
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Integra Resources Corp. |
15. CONVERTIBLE DEBT FACILITY (continued)
The Company is required to pay standby fees, of 2% (annual rate), calculated on the undrawn portion of the Convertible Facility, calculated on a daily basis, compounded quarterly, and payable in arrears on each interest payment date following the effective date commencing September 30, 2022. Those fees are deferred in full (and included in deferred transaction costs (see Note 11).
The Convertible Facility bears interest at 8.75% per annum. Prior to July 31, 2024, interest will be accrued and shall be compounded quarterly and added to the principal at the end of each quarterly interest period. Commencing with the quarterly interest period ending September 30, 2024, interest shall be paid quarterly either in cash or shares.
If for a period of 30 consecutive trading days, the Company's volume weighted average trading price ("VWAP") of the common shares measured on the close of the trading on each such day equals or exceeds a 50% premium above the initial advance conversion price or the subsequent advance conversion price for any subsequent advance, the Company shall, provided no event of default occurred and be continuing, be entitled to have a onetime right to elect to cause the lender to convert up to 50% of the outstanding principal amount.
The Company may, at any time so long as an event of default has not occurred and it is continuing, make a prepayment of the outstanding advances, a make whole fee equal to the interest that would have accrued on such principal amount being prepaid from the date such advance was made up to the earlier of the date that is 30 months following the date of such advance and the maturity date then in effect at the rate of interest applicable thereto less the amount of interest paid to date on such outstanding principal amount being prepaid; if the prepayment of any advance occurs after the date that is 30 months following the date such advance, a prepayment fee equal to 2% of the principal amount of such advance being prepaid; and all of other outstanding obligations if the Convertible Facility is prepaid in full.
At any or more times prior to repayment of the outstanding principal amount, the lender will be entitled to elect to convert all or any portion of the principal amount (together with all outstanding standby fees and interest) into such number of common shares in the capital of the Company at a conversion price of a) for the initial advance C$1.22 b) for the subsequent advance conversion price (equal to the higher of a) closing price on the trading day immediately prior to the date of the advance or b) a 20% premium on the 30-day VWAP immediately prior to the date of the advance).
A summary of the changes in the convertible facility for the nine-month period ended September 30, 2022 is as follows:
| |
Convertible facility - liability component |
Convertible facility - derivative component |
Total convertible debt facility |
||||||
| Balance, December 31, 2021 | $ | - | $ | - | $ | - | |||
| Fair value at initial recognition on August 4, 2022 | 8,381,000 | 1,619,000 | 10,000,000 | ||||||
| Transaction costs amortization | (458,637 | ) | - | (458,637 | ) | ||||
| Interest expense accrual | 136,644 | - | 136,644 | ||||||
| Accretion | 71,804 | - | 71,804 | ||||||
| Change in fair value of derivatives | - | (131,000 | ) | (131,000 | ) | ||||
| Balance, September 30, 2022 | $ | 8,130,811 | $ | 1,488,000 | $ | 9,618,811 |
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Integra Resources Corp. |
15. CONVERTIBLE DEBT FACILITY (continued)
Upon the occurrence of an event of default which is continuing, all obligations shall at the option of the lender be accelerated and become immediately due and payable.
The assumptions used in this valuation model and the resulting fair value of the embedded derivatives at August 4, 2022 were as follows:
| Maturity date: | August 4, 2025 |
| Risk-free rate: | 2.26% - 3.05% (three years) |
| Exchange rate: | 1.2854 |
| Share price: | $0.66 (Integra's August 4, 2022 closing share price) |
| Expected volatility: | 56.3% |
| Dividend yield: | %Nil |
| Annual interest rate: | 8.75% |
| Conversion price: | $0.94912 (C$1.22) per share |
| Conversion price cap: | $1.45215 |
| Credit spread: | 12.62% |
The assumptions used in this valuation model and the resulting fair value of the embedded derivatives at September 30, 2022 were as follows:
| Maturity date: | August 4, 2025 |
| Risk-free rate: | 2.99% - 4.27% (three years) |
| Exchange rate: | 1.3752 |
| Share price: | $0.54 (Integra's September 30, 2022 closing share price) |
| Expected volatility: | 57.5% |
| Dividend yield: | %Nil |
| Annual interest rate: | 8.75% |
| Conversion price: | $0.88714 (C$1.22) per share |
| Conversion price cap: | $1.35733 |
| Credit spread: | 15.26% |
16. COMMITMENTS AND CONTRACTUAL OBLIGATIONS
Net Smelter Return
A portion of the DeLamar Project is subject to a 2.5% NSR payable to Maverix Metals Inc. ("Maverix"). The NSR will be reduced to 1.0% once Maverix has received a total cumulative royalty payment of C$10 million (US$7.3 million). Please see Note 10 for additional details.
Advance Minimum Royalties, Land Access Lease Payments, and Annual Claim Filings
The Company is required to make property rent payments related to its mining lease agreements with landholders and the Idaho Department of Lands ("IDL"), in the form of advance minimum royalties ("AMR"). There are multiple third-party landholders, and the royalty amounts due to each of them over the life of the Project varies with each property.
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Integra Resources Corp. |
16. COMMITMENTS AND CONTRACTUAL OBLIGATIONS (continued)
The Company's AMR obligation is expected to total $77,450 for 2022 (December 31, 2021 - $64,950) - of which $62,350 was paid in the current nine-month period ended September 30, 2022.
The Company's obligation related to land and road access lease payments, option payments and IDL rent payments is expected to total $383,669 for 2022 (December 31, 2021 - $329,331) - of which $258,173 was paid in the current nine-month period ended September 30, 2022.
The Company's obligation for BML claim fees is expected to total $192,225 for 2022 (December 31, 2021 - $191,565), paid in full in the current nine-month period ended September 30, 2022.
17. RECLAMATION AND REMEDIATION LIABILITIES
The Company conducts its operations so as to protect the public health and the environment, and to comply with all applicable laws and regulations governing protection of the environment. The site has been reclaimed by the former owner, Kinross, and the Company's environmental liabilities consist mostly of water treatment, general site maintenance and environmental monitoring costs.
The reclamation and remediation obligation represents the present value of the water treatment and environmental monitoring activities expected to be completed over the next 70 years. The cost projection has been prepared by an independent third party with expertise in mining site reclamation. Water treatment costs could be reduced in the event that mining at DeLamar resumes in the future. The Company's cost estimates do not currently assume any future mining activities. Assumptions based on the current economic environment have been made, which management believes are a reasonable basis upon which to estimate the future liability.
These estimates are reviewed regularly to take into account any material changes to the assumptions. However, actual water treatment and environmental monitoring costs will ultimately depend upon future market prices for the required activities that will reflect market conditions at the relevant time.
For the year ended December 31, 2021, the Company reviewed and revised some of its December 31, 2020 assumptions and estimates. The discount rate assumption changed in 2021, as it is based on the US Treasury rate. As a result, the discount rate increased from 1.65% to 1.90% in 2021, which decreased the present value of the reclamation liability. The inflation rates have been revised to 0% for 2022, as short-term inflation had already been factored in the 2022 cost estimates, and 2.3% for the following years. The Company applied 0% market risk premium for 2022, 2.5% for 2023 and 2024, and 5% for the following years.
For the nine-month period ended September 30, 2022, the Company reviewed and revised some of its December 31, 2021 assumptions and estimates. The discount rate assumption changed in 2022, as it is based on the US Treasury rate. As a result, the discount rate increased from 1.90% to 3.79% in the current period, which decreased the present value of the reclamation liability. The inflation rates have been revised to 3.0% for 2023, 2.5% for 2024, and 2.0% for the following years. Market premium risk and future costs assumptions did not require adjustments.
Changes resulting from the reclamation assumptions revision are recognized as a change in the carrying amount of the reclamation liability and the related asset retirement cost capitalized as part of the carrying amount of the related long-lived asset (see Note 10).
|
Integra Resources Corp. |
17. RECLAMATION AND REMEDIATION LIABILITIES (continued)
The following table details the changes in the reclamation and remediation liability.
| Water Treatment, General Site Maintenance and Environmental Monitoring | $ | ||
| Liability balance at December 31, 2020 | 42,687,825 | ||
| Reclamation spending | (1,585,396 | ) | |
| Accretion expenses | 787,859 | ||
| Reclamation adjustment | (424,038 | ) | |
| Liability balance at December 31, 2021 | 41,466,250 | ||
| Reclamation spending | (807,597 | ) | |
| Accretion expenses | 646,494 | ||
| Reclamation adjustment | (18,722,405 | ) | |
| Balance at September 30, 2022 | 22,582,742 |
| September 30, 2022 | December 31, 2021 | |||||
| Current reclamation and remediation liability | $ | 1,294,323 | $ | 1,875,298 | ||
| Non-current reclamation and remediation liability | 21,288,419 | 39,590,952 | ||||
| Total reclamation and remediation liability | $ | 22,582,742 | $ | 41,466,250 |
As at September 30, 2022, the current portion of the reclamation and remediation obligation of $1,294,323 represents the total estimated water treatment, general site maintenance and environmental monitoring costs estimated to be incurred from January 1, 2022 - December 31, 2022. The Company has incurred $807,597 reclamation spending during the nine-month period ended September 30, 2022.
Regulatory authorities in certain jurisdictions require that security be provided to cover the estimated reclamation and remediation obligations.
The Company's reclamation and remediation bonds as of September 30, 2022 amount to $3.7mm.
| Reclamation and Remediation Bonds | September 30, 2022 | December 31, 2021 | ||||
| Idaho Department of Lands | 2,918,829 | 2,893,829 | ||||
| Idaho Department of Environmental Quality | 100,000 | 100,000 | ||||
| Bureau of Land Management - Idaho State Office | 631,400 | 631,400 | ||||
| Total | $ | 3,650,229 | $ | 3,625,229 |
The Company's reclamation and remediation obligations are secured with surety bonds, which are subject to a 2.5% management fee. These surety bonds originally had a 50% cash collateral requirement. The cash collateral requirement decreased from 50% to 0% and the cash collateral was returned to the Company in 2020.
|
Integra Resources Corp. |
18. SHARE CAPITAL
Share Capital
The Company is authorized to issue an unlimited number of common shares without par value. As at September 30, 2022, the number of total issued and outstanding common shares is 79,604,934 (December 31, 2021 - 62,170,212).
Activities during the nine-month period ended September 30, 2022
At the Market ("ATM") Sales
In the first quarter of 2022, the Company sold 427,997 shares under its ATM at an average price of $1.57 for gross proceeds of $674,016 and paid 2.75% brokers' fee in commission.
In the third quarter of 2022, the Company sold 340,058 shares under its ATM at an average price of $0.66 for gross proceeds of $224,678 and paid 2.75% brokers' fee in commission.
Equity Financings
On August 4, 2022, the Company completed a public bought deal of 16,666,667 common shares with a syndicate of underwriters, at an issue price of $0.66 per share for aggregate gross proceeds of $11,000,000. The Company paid $400,004 in brokers' fee and $367,521 for various other expenses (mostly legal and filing fees) in connection with this public bought deal.
Equity Incentives
In January 2022, the Company approved a cash redemption of 1,371 vested RSUs, and as a result, no shares have been issued related to this transaction.
In June 2022, the Company approved a cash redemption of 3,000 vested RSUs, and as a result, no shares have been issued related to this transaction.
Activities during the year ended December 31, 2021
ATM Sales
In the first quarter of 2021, the Company sold 41,000 shares under its ATM at an average price of $3.90 for gross proceeds of $159,713 and paid 2.75% brokers' fee in commission.
In the second quarter of 2021, the Company sold 320,950 shares under its ATM at an average price of $3.30 for gross proceeds of $1,057,951 and paid 2.75% brokers' fee in commission.
In the third quarter of 2021, the Company sold 155,000 shares under its ATM at an average price of $2.95 for gross proceeds of $456,957 and paid 2.75% brokers' fee in commission.
|
Integra Resources Corp. |
18. SHARE CAPITAL (continued)
Activities during the year ended December 31, 2021 (continued)
Equity Financings
On September 17, 2021, the Company completed a public bought deal of 6,785,000 common shares with a syndicate of underwriters, at an issue price of $2.55 per share for aggregate gross proceeds of $17,301,750. The Company paid $921,918 in brokers' fee and $375,278 for various other expenses (mostly legal and filing fees) in connection with this public bought deal.
Equity Incentives
In February 2021, the Company issued 144,400 common shares related to 144,400 exercised options, for gross proceeds of $292,330.
In March 2021, the Company issued 19,445 common shares related to 15,333 exercised options, for gross proceeds of $35,759, and 4,112 vested RSUs.
In May 2021, the Company approved a cash redemption of 2,056 vested RSUs, and as a result, no shares have been issued related to this transaction.
In June 2021, the Company issued 30,000 common shares related to 30,000 exercised options, for gross proceeds of $52,960.
In July 2021, the Company issued 2,000 common shares related to 2,000 exercised options, for gross proceeds of $4,628.
In September 2021, the Company issued 1,333 common shares related to 1,333 exercised options, for gross proceeds of $3,042.
In December 2021, the Company issued 62,907 shares related to its RSU December 15, 2020 grant.
In December 2021, the Company approved cash redemption of 16,494 vested RSUs, and as a result, no shares have been issued for these RSUs.
Equity Incentive Awards
The Company has an equity incentive plan ("the Equity Incentive Plan") whereby the Company's Board of Directors, within its sole discretion, can grant to directors, officers, employees and consultants, stock options to purchase shares of the Company, restricted share units ("RSU") and deferred share units ("DSU") (together the "Awards"). The Equity Incentive Plan provides for the issuance of Awards to acquire up to 10% of the Company's issued and outstanding capital. The Equity Incentive Plan is a rolling plan as the number of shares reserved for issuance pursuant to the grant of Awards will increase as the Company's issued and outstanding share capital increases. As at September 30, 2022, the Company had 1,732,791 (December 31, 2021 - 77,096) awards available for issuance.
|
Integra Resources Corp. |
18. SHARE CAPITAL (continued)
Equity Incentive Awards (continued)
In addition, the aggregate number of shares that may be issued and issuable under this Equity Incentive Plan (when combined with all of the Company's other security-based compensation arrangements, as applicable):
(a) to any one participant, within any one-year period shall not exceed 5% of the Company's outstanding issue, unless the Company has received disinterested shareholder approval;
(b) to any one consultant (who is not otherwise an eligible director), within a one-year period shall not exceed 2% of the Company's outstanding issue;
(c) to eligible persons (as a group) retained to provide investor relations activities, within a one-year period shall not exceed 2% of the Company's outstanding issue;
(d) to insiders (as a group) shall not exceed 10% of the Company's outstanding issue from time to time;
(e) to insiders (as a group) within any one-year period shall not exceed 10% of the Company's outstanding issue; and
(f) to any one insider and his or her associates or affiliates within any one-year period shall not exceed 5% of the Company's outstanding issue from time to time.
In no event will the number of shares that may be issued to any one participant pursuant to Awards under this Equity Incentive Plan (when combined with all of the Company's other security-based compensation arrangement, as applicable) exceed 5% of the Company's outstanding issue from time to time.
Stock Options
A summary of the changes in stock options for the nine-month period ended September 30, 2022 and the year ended December 31, 2021 is as follows:
| Options | September 30, 2022 Weighted Average Exercise Price |
Options | December 31, 2021 Weighted Average Exercise Price |
|||||||||
| Outstanding at the beginning of period | 5,093,283 | $ | 2.11 | 4,816,029 | $ | 2.08 | ||||||
| Granted | - | - | 491,510 | 2.31 | ||||||||
| Exercised | - | - | (193,066 | ) | 1.94* | |||||||
| Forfeited/Expired | (6,000 | ) | 2.18 | (21,190 | ) | 2.37 | ||||||
| Outstanding at the end of period | 5,087,283 | $ | 2.11 | 5,093,283 | $ | 2.11 |
*The weighted average share price on the date stock options were exercised during the year ended December 31, 2021 was $3.37.
|
Integra Resources Corp. |
18. SHARE CAPITAL (continued)
Stock Options (continued)
The following table provides additional information about outstanding stock options as September 30, 2022:
| No. of options outstanding |
Weighted average remaining life (Years) |
Exercise price |
No. of options currently exercisable |
Expiration date | |
| 1,461,600 | $1.96 | 1,461,600 | November 3, 2022* | ||
| 90,000 | $2.60 | 90,000 | February 1, 2023 | ||
| 100,000 | $2.30 | 100,000 | February 28, 2023 | ||
| 60,000 | $1.68 | 60,000 | August 29, 2023 | ||
| 40,000 | $1.65 | 40,000 | September 10, 2023 | ||
| 731,400 | $1.51 | 731,400 | November 23, 2023 | ||
| 100,000 | $1.50 | 100,000 | December 13, 2023 | ||
| 40,000 | $1.64 | 40,000 | January 11, 2024 | ||
| 50,000 | $1.62 | 50,000 | January 16, 2024 | ||
| 100,000 | $2.47 | 100,000 | September 16, 2024 | ||
| 1,374,567 | $2.18 | 1,053,935 | December 17, 2024 | ||
| 80,000 | $1.40 | 53,334 | March 16, 2025 | ||
| 40,000 | $3.39 | 26,667 | September 22, 2025 | ||
| 40,000 | $3.33 | 13,333 | October 5, 2025 | ||
| 288,206 | $3.70 | 125,235 | December 15, 2025 | ||
| 100,000 | $3.38 | 66,667 | February 24, 2026 | ||
| 391,510 | $2.04 | 43,998 | December 16, 2026 | ||
| Total | 5,087,283 | 1.57 | $2.11 | 4,156,169 |
*Those stock options expired unexercised on November 3, 2022 (see Note 21).
Share-based payments - stock options
A summary of the changes in the Company's reserve for share-based payments related to the stock options for the nine-month periods ended September 30, 2022 and 2021 is set out below:
| September 30, 2022 | September 30, 2021 | |||||
| Balance at beginning of period | $ | 5,470,552 | $ | 4,767,433 | ||
| Share-based payments - options | 352,471 | 720,488 | ||||
| Share-based payments - options exercised | - | (229,625 | ) | |||
| Balance at the end of period | $ | 5,823,023 | $ | 5,258,296 |
Total share-based payments related to the stock options included in the consolidated statements of operations and comprehensive loss and the consolidated statements of changes in equity in the nine-month period ended September 30, 2022 was $352,471 (September 30, 2021 - $720,488).
During the year ended December 31, 2021, 193,066 stock options were exercised for total gross proceeds of $376,153, and 21,190 stock options were canceled.
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Integra Resources Corp. |
18. SHARE CAPITAL (continued)
Share-based payments - stock options (continued)
On December 16, 2021, the Company granted 391,510 options to its directors, officers, employees, and contractors, at an exercise price of $2.04 per option, with the expiry date December 16, 2026. The options were granted in accordance with the Company's Equity Incentive Plan and are subject to vesting provisions. The share-based payment related to these options was calculated as $305,773 (C$392,255), to be amortized over the options vesting period.
On February 24, 2021, the Company granted 100,000 options to its new director, at an exercise price of $3.38 per option, with the expiry date February 24, 2026. The options were granted in accordance with the Company's Equity Incentive Plan and are subject to vesting provisions. The share-based payment related to these options was calculated as $124,878 (C$160,197), to be amortized over the options vesting period.
The following assumptions were used for the Black-Scholes valuation of stock options granted during the nine-month periods ended September 30, 2022 and 2021:
| September 30, 2022 | September 30, 2021 | |||||
| Dividend rate | - | 0% | ||||
| Expected annualized volatility | - | 51.81% | ||||
| Risk free interest rate | - | 0.53% | ||||
| Expected life of options | - | 3.5yr | ||||
| Weighted average of strike price of options granted | - | $3.38 |
Restricted Share Units
Restricted share units are the equity settled units, granted under the Company's Equity Incentive Plan and are accounted for based on the market value of the underlying shares on the date of grant and vest in equal installments annually over three years. The aggregate maximum number of shares available for issuance from treasury underlying restricted share units under the Equity Incentive Plan was increased in the current period from 1,200,000 to 2,000,000 shares. These units are exercisable into one common share once vested, for no additional consideration. They can be redeemed in cash, at the Company's discretion.
A summary of the changes in restricted share units for the nine-month period ended September 30, 2022 and the year ended December 31, 2021 is as follows:
| Restricted share units |
Weighted average grant date FV |
|||||
| Outstanding, December 31, 2020 | 358,203 | $ | 3.70 | |||
| Vested - shares issued | (80,676 | ) | $ | 3.70 | ||
| Vested - cash redemption (no shares issued) | (18,550 | ) | $ | 3.70 | ||
| Forfeited/Expired | (16,859 | ) | $ | 3.70 | ||
| Granted | 488,856 | $ | 2.08 | |||
| Outstanding, December 31, 2021* | 730,974 | $ | 2.81 | |||
| Vested - cash redemption (no shares issued) | (4,371 | ) | $ | 3.70 | ||
| Forfeited/Expired | (24,799 | ) | $ | 2.08 | ||
| Outstanding, September 30, 2022* | 701,804 | $ | 2.75 |
*Included in the outstanding RSUs are 18,667 vested RSUs for which the settlement has been deferred.
|
Integra Resources Corp. |
18. SHARE CAPITAL (continued)
Share-based payments - restricted share units
A summary of the changes in the Company's reserve for share-based payments related to the restricted share units for the nine-month periods ended September 30, 2022 and 2021 is set out below:
| September 30, 2022 | September 30, 2021 | |||||
| Balance at beginning of period | $ | 528,810 | $ | 35,020 | ||
| Share-based payments - RSUs | 696,670 | 628,528 | ||||
| Share-based payments - RSUs vested | (5,743 | ) | (22,083 | ) | ||
| Balance at the end of period | $ | 1,219,737 | $ | 641,465 |
Total share-based payments related to the restricted share units included in the consolidated statements of operations and comprehensive loss and the consolidated statements of changes in equity in the nine-month period ended September 30, 2022 was $696,670 (September 30, 2021 - $628,528).
During the current nine-month period ended September 30, 2022, a total of 4,371 RSUs vested (cash-redemption) and 24,799 RSUs were canceled.
During the year ended December 31, 2021, a total of 117,893 RSUs vested (including 18,667 RSUs for which the settlement was deferred to another year) and 16,859 RSUs were canceled.
On December 16, 2021, the Company granted 488,856 RSUs to its officers and employees. The share-based payment related to these units was calculated as $1,013,662 (C$1,300,357), to be amortized over the unit three-year vesting period.
Deferred Share Units
Deferred share units are equity settled units, granted under the Company's Equity Incentive Plan and are accounted for based on the market value of the underlying shares on the date of grant. DSUs granted before Q4 2021 vested immediately. DSUs granted from Q4 2021 onward will vest one year post grant. The aggregate maximum number of shares available for issuance from treasury underlying deferred share units under the Equity Incentive Plan was increased in the current period from 400,000 to 1,000,000 shares. These units are exercisable into one common share during the period commencing on the business day immediately following the retirement date and ending on the ninetieth day following the retirement date providing a written redemption notice to the Company, for no additional consideration. In the event a participant resigns or is otherwise no longer an eligible participant during the year, then any grant of DSUs that are intended to cover such year, the participant will only be entitled to a pro-rated DSU payment. These units can be redeemed in cash, at the Company's discretion.
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Integra Resources Corp. |
18. SHARE CAPITAL (continued)
Deferred Share Units (continued)
A summary of the changes in deferred share units for the nine-month period ended September 30, 2022 and the year ended December 31, 2021 is as follows:
| Deferred share units |
Weighted average grant date FV |
Vested | Not vested | |||||||||
| Outstanding, December 31, 2020 | 87,500 | $ | 3.70 | 87,500 | - | |||||||
| Granted | 228,168 | $ | 2.17 | 21,517 | 206,651 | |||||||
| Outstanding, December 31, 2021 | 315,668 | $ | 2.61 | 109,017 | 206,651 | |||||||
| Granted | 122,947 | $ | 0.76 | - | 21,922 | |||||||
| Outstanding, September 30, 2022 | 438,615 | $ | 2.05 | 109,017 | 228,573 |
Share-based payments - deferred share units
A summary of the changes in the Company's reserve for share-based payments related to the deferred share units for the nine-month periods ended September 30, 2022 and 2021 is set out below:
| September 30, 2022 | September 30, 2021 | |||||
| Balance at beginning of period | $ | 400,117 | $ | 307,223 | ||
| Share-based payments - DSUs | 347,479 | 56,415 | ||||
| Balance at the end of period | $ | 745,596 | $ | 363,638 |
Total share-based payments related to the deferred share units included in the consolidated statements of operations and comprehensive loss and the consolidated statements of changes in equity in the nine-month period ended September 30, 2022 was $347,479 (September 30, 2021 - $56,415).
In the current nine-month period ended September 30, 2022, the Company issued 122,947 deferred share units to certain directors, in lieu of their directors' fees, as elected by those directors. Each DSU has been fair valued at Integra's closing share price at the end of quarter. These DSUs will vest 12 months post grant. The share-based payment related to these DSUs was calculated as $93,808 (C$120,339), to be amortized over 12 months.
In the year ended December 31, 2021, the Company issued 30,168 deferred share units to certain directors, in lieu of their directors' fees, as elected by those directors. Each DSU has been fair valued at Integra's closing share price at the end of each quarter. DSUs granted in the previous periods vested in full at the grant date. DSUs granted in December 2021 will vest 12 months post grant. The share-based payment related to these DSUs was calculated as $73,371 (C$94,122), to be amortized over 12 months.
On December 16, 2021, the Company granted 198,000 DSUs to its directors, and these units will vest in 12 months. The total share-based payment related to these DSUs was calculated as $410,561 (C$526,680), to be amortized over 12 months.
|
Integra Resources Corp. |
18. SHARE CAPITAL (continued)
Share-based payments - summary
A summary of the changes in the Company's reserve for all share-based payment arrangements for the nine-month periods ended September 30, 2022 and 2021 is set out below:
| September 30, 2022 | September 30, 2021 | |||||
| Balance at beginning of period | $ | 6,399,479 | $ | 5,109,676 | ||
| Share-based payments - options | 352,471 | 720,488 | ||||
| Share-based payments - RSUs | 696,670 | 628,528 | ||||
| Share-based payments - DSUs | 347,479 | 56,415 | ||||
| Options exercised | - | (229,625 | ) | |||
| RSUs vested | (5,743 | ) | (22,083 | ) | ||
| Balance at the end of period | $ | 7,790,356 | $ | 6,263,399 |
Total share-based payments related to the stock options, RSUs, and DSUs included in the consolidated statements of operations and comprehensive loss and the consolidated statements of changes in equity in the nine-month periods ended September 30, 2022 and 2021 was $1,396,620 (September 30, 2021 - $1,405,431).
19. SUPPLEMENTAL CASH FLOW INFORMATION
Non-cash activities conducted by the Company during the nine-month periods ended September 30, 2022 and 2021 are as follows:
Nine-month periods ended September 30, 2022 and 2021:
Changes in non-cash operating activities:
| September 30, 2022 | September 30, 2021 | |||||
| Convertible debt facility - accretion (Note 15) | $ | 71,804 | - | |||
| Change in fair value of derivatives (Note 15) | $ | (131,000 | ) | - |
20. NET LOSS PER SHARE
| September 30, 2022 | September 30, 2021 | |||||
| Net loss for the period | $ | (13,602,301 | ) | $ | (25,733,148 | ) |
| Basic weighted average numbers of share outstanding (000's) | 66,089 | 55,319 | ||||
| Diluted weighted average numbers of shares outstanding (000's) | 66,089 | 55,319 | ||||
| Loss per share: | ||||||
| Basic | $ | (0.21 | ) | $ | (0.47 | ) |
| Diluted* | $ | (0.21 | ) | $ | (0.47 | ) |
*Basic loss per share is computed by dividing net loss (the numerator) by the weighted average number of outstanding common shares for the period (the denominator). Options, RSUs, and DSUs outstanding have been excluded from computing diluted loss per share because they are anti-dilutive or not in the money.
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Integra Resources Corp. |
21. SUBSEQUENT EVENT
- Subsequent to the current nine-month period end, 1,461,600 stock options at an exercise price of $1.96 (C$2.50) and the expiry date November 3, 2022 expired unexercised.
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE
I, George Salamis, Chief Executive Officer of Integra Resources Corp., certify the following:
1. Review: I have reviewed the interim financial report and interim MD&A (together, the "interim filings") of Integra Resources Corp. (the "issuer") for the interim period ended September 30, 2022.
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 the Internal Control - Integrated Framework (2013) (COSO Framework) published by The Committee of Sponsoring Organizations of the Treadway Commission (COSO).
5.2 ICFR - material weakness relating to design: N/A
5.3 Limitation on scope of design: N/A
6. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer's ICFR that occurred during the period beginning on July 1, 2022 and ended on September 30, 2022 that has materially affected, or is reasonably likely to materially affect, the issuer's ICFR.
Date: November 14, 2022
| /s/ George Salamis |
| George Salamis |
| Chief Executive Officer |
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE
I, Andree St-Germain, Chief Financial Officer of Integra Resources Corp., certify the following:
1. Review: I have reviewed the interim financial report and interim MD&A (together, the "interim filings") of Integra Resources Corp. (the "issuer") for the interim period ended September 30, 2022.
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 the Internal Control - Integrated Framework (2013) (COSO Framework) published by The Committee of Sponsoring Organizations of the Treadway Commission (COSO).
5.2 ICFR - material weakness relating to design: N/A
5.3 Limitation on scope of design: N/A
6. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer's ICFR that occurred during the period beginning on July 1, 2022 and ended on September 30, 2022 that has materially affected, or is reasonably likely to materially affect, the issuer's ICFR.
Date: November 14, 2022
| /s/ Andree St-Germain |
| Andree St-Germain |
| Chief Financial Officer |
CONSENT OF EDWARD MAX BAKER
The undersigned hereby consents to:
(1) the inclusion in this Current Report on Form 6-K of Integra Resources Corp. (the "Company") of the scientific and/or technical information contained in the Company's Management's Discussion and Analysis dated November 14, 2022 (the "Technical Information") being filed with the United States Securities and Exchange Commission (the "SEC") under cover of Form 6-K; and
(2) the filing of this consent under cover of Form 6-K with the SEC and of the incorporation by reference of this consent, the use of my name and the Technical Information into the Company's Registration Statement on Form F-10 (No. 333-242483), and any amendments thereto, filed with the SEC.
| /s/ Edward Max Baker | ||
| Name: | Edward Max Baker (F.AusIMM) | |
| Title: | Vice President, Exploration, Integra Resources Corp. | |
| Date: November 14, 2022 | ||
CONSENT OF TIMOTHY ARNOLD
The undersigned hereby consents to:
(1) the inclusion in this Current Report on Form 6-K of Integra Resources Corp. (the "Company") of the scientific and/or technical information contained in the Company's Management's Discussion and Analysis dated November 14, 2022 (the "Technical Information") being filed with the United States Securities and Exchange Commission (the "SEC") under cover of Form 6-K; and
(2) the filing of this consent under cover of Form 6-K with the SEC and of the incorporation by reference of this consent, the use of my name and the Technical Information into the Company's Registration Statement on Form F-10 (No. 333-242483), and any amendments thereto, filed with the SEC.
| /s/ Timothy Arnold | ||
| Name: | Timothy Arnold (P.E.) | |
| Title: | Chief Operating Officer, Integra Resources Corp. | |
| Date: November 14, 2022 | ||