Integra Resources Corp 6-K, filed May 14, 2021
Integra Resources Corp. (ITRG)
About this 6-K
Integra Resources Corp filed this 6-K on May 14, 2021.
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 May 2021.
Commission File Number 001-39372
| INTEGRA RESOURCES CORP. |
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| (Exact Name of Registrant as Specified in Charter) |
| 1050-400 Burrard Street<br><br> <br>Vancouver, British Columbia V6C 3A6<br><br> <br>Canada |
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| (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 | ☒ |
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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. |
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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. |
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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. | |
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| Date: May 14, 2021 | /s/ Andree St-Germain<br><br> <br>Andree St-Germain<br><br> <br>Chief Financial Officer |
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INDEX TO EXHIBITS
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Integra Resources Corp.: Exhibit 99.1 - Filed by newsfilecorp.com
Integra Resources Corp.
Management's Discussion and Analysis
For the Three-Month Periods Ended
March 31, 2021 and 2020
Expressed in Canadian Dollars
| MANAGEMENT’S DISCUSSION & ANALYSIS For the Three-Month Periods Ended March 31, 2021 and 2020 |
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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-month period ended March 31, 2021, 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 May 14, 2021 and should be read in conjunction with the unaudited interim condensed consolidated financial statements of Integra for the three-month periods ended March 31, 2021 and 2020 and the Company's audited consolidated financial statements of Integra for the years ended December 31, 2020 and 2019 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 south western Idaho. The management team comprises the former executive team from Integra Gold Corp. The Company announced in September 2019 a positive Preliminary Economic Assessment ("PEA") and expects completing a Pre-Feasibility Study ("PFS") in late 2021.
As of May 14, 2021, the directors and officers of the Company were:
George Salamis President, Director and CEO
Andrée St-Germain CFO and Corporate Secretary
Max Baker Vice President Exploration
Timothy Arnold Chief Operating Officer
Joshua Serfass Executive VP, Corporate Development and Investor Relations
Stephen de Jong Chairman and Director
David Awram Director
Timo Jauristo Director
Anna Ladd-Kruger Director
C.L. "Butch" Otter Director
Carolyn 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-Month Periods Ended March 31, 2021 and 2020 |
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The following diagram illustrates the intercorporate relationships among Integra and its subsidiaries, as well as the jurisdiction of incorporation of each entity.
Q1 2021 IN REVIEW
CORPORATE
For the safety of all employees, the Company closed its corporate office (Vancouver, BC) in mid-March 2020 as a result of the COVID-19 global outbreak. All corporate employees continue to work remotely from home, with some employees now working periodically at the office under safe COVID-19 protection protocols. One of the most impacted activities at the corporate level has been the ability to travel due to travel bans and safety risks. The Company has however remained extremely active on the investor relations and marketing fronts through virtual media forums both with investors and at multiple industry conferences.
Corporate Matters
On February 25, 2021, the Company announced the appointment of Carolyn Clark Loder to the Board.
Financings
The Company sold 41,000 shares through its "At-The-Market" facility ("ATM") for gross proceeds of US$159,713 (C$204,061) and paid 2.75% commission.
DEVELOPMENT
The development activities in Q1 2021 were not greatly impacted by the COVID-19 pandemic.
| MANAGEMENT’S DISCUSSION & ANALYSIS For the Three-Month Periods Ended March 31, 2021 and 2020 |
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Permitting:
The Company announced in August of 2020 a Memorandum of Understanding ("MOU") to facilitate the hiring of a dedicated mineral specialist Project Manager in the Marsing, Idaho U.S. Bureau of Land Management ("BLM") office. That transition began in January 2021 and the BLM Project Manager became full time in April 2021. The Project Manager has been a steady and efficient point of contact for Integra through Q1 2021 and will become the focal communication point for the BLM moving forward. The BLM project manager will be responsible for all the DeLamar Project permitting work and will help the BLM manage increased workloads from current and anticipated future applications for mineral notices, operations plans/amendment approvals and environmental analyses reviews. This funding effort provided by Integra is intended to increase the capacity of the local BLM office allowing staff to work on DeLamar Project related applications and project requests on a priority basis, while not burdening the BLM with the cost of this increased workload.
The BLM selected SWCA Environmental Consultants ("SWCA") as the third party environmental impact study ("EIS") contractor in support of the DeLamar Project to act as an extension of BLM staff to review and ensure Integra submitted baseline plans of study are deemed adequate and defensible for subsequent inclusion in the draft and final EIS. During early Q2 we will further solidify and complete our engagement with the BLM by finalizing third party contracting and cost recovery with BLM and MOU with cooperating agencies.
Surface water and the newly drilled and installed 2020 groundwater wells were sampled during Q1 of 2021. Additional consultants and contractors were brought on board by Integra to support the submittal of aquatic resources, wildlife, wetlands, vegetation, cultural resources, geochemistry and soils plans of study that have been submitted to the agency and SWCA for subsequent review and approval.
Integra brought on two additional permitting personnel to support the project. Tricia LaRue has 20 years of NEPA permitting experience associated with Mining and Linear Project Development for public, private and government agencies acting in both the First Party and Third Party roles. Ms. LaRue will be primarily focusing on the oversight and review of contractor submitted Plans of Studies and field activities in support of NEPA process. Alyssa Veatch has over 5 years of permitting experience in support of hydrogeology and groundwater drilling, and well installation as well as field efforts in multiple baseline field activities in support of the NEPA process. Ms. Veatch will be primarily focusing on oversight of surface water and groundwater sampling as well as the proposed 2021 groundwater well installation program.
Metallurgical Engineering and Pre-Feasibility Study:
Column leach tests on Florida Mountain oxide and transitional materials progressed in Q1, with several tests completing their leach cycle. These tests are aimed at de-risking recovery estimates and comparing 2 inch to ½ inch heap leach feed sizes, including a single higher grade transitional material master composite at ¼ inch.
Grind size optimization testing on Florida Mountain Unoxidized Material and trade off studies to investigate heap leach size sensitivity aimed at improving metal recoveries are ongoing.
Variability composite selection for bottle roll tests on oxide and transitional ore from DeLamar was completed, identifying around 40 discrete tests. Column leach test compositing will follow the completion of this program. Efforts to identify unoxidized composites for mill testing on DeLamar material were initiated in during the first quarter.
Heap Leach flow sheets advanced steadily, as did the site access road design. Economic and greenhouse gas evaluations on ore haulage options progressed during Q1.
As part of Integra's ESG commitment to prioritizing environmental stewardship & responsible modern mining at every stage of the project life cycle, the Company has engaged Warm Springs Consulting of Boise, Idaho, as the consulting/engineering firm to evaluate several sustainability-driven option studies that will potentially be incorporated into the 2021 PFS.
| MANAGEMENT’S DISCUSSION & ANALYSIS For the Three-Month Periods Ended March 31, 2021 and 2020 |
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The PFS remains on schedule, with results currently expected in the 4th quarter of 2021.
EXPLORATION
The exploration activities in Q1 2021 were not greatly impacted by the COVID-19 pandemic.
Drilling
The Company completed a total of 6,035 m of core drilling in Q1 2021, including 3,220 m at Florida Mtn, 1,886 m at DeLamar deposit, and 929 m at BlackSheep.
Florida Mtn Drilling
The Company announced in its April 8, 2021 press release drilling results from Florida Mountain. The results continued to demonstrate high-grade gold-silver mineralization continuity, in some cases 300 m outside of the resource model.
Florida Mountain drill highlights included*:
• Drill hole FME-21-106 o 12.90 g/t Au and 1,675.00 g/t Ag (34.46 g/t AuEq) over 1.52 m o 15.17 g/t Au and 250.00 g/t Ag (18.39 g/t AuEq) over 0.92 m
• Drill hole FME-21-107 o 16.86 g/t Au and 2472.00 g/t Ag (48.67 g/t AuEq) over 1.25 m
• Drill hole FME-21-104 o 0.49 g/t Au and 125.72 g/t Ag (2.10 g/t AuEq) over 16.92 m
The intercepts reported on April 8, 2021 consist of mineralization with wide-spread low-grade gold-silver values, crosscut and underlain by narrower high-grade, steeply dipping low-sulphidation quartz-adularia veins. Widespread intercepts from both historic shallow oxide and transitional resource definition drilling and recent deeper drilling to vertical depths up to 400 m below surface (and 250 m below the base of the current resource) conducted by Integra over the previous two years has confirmed potentially mineable widths and grades for these high-grade structures.
BlackSheep District Drilling
The Company announced in its February 18, 2021 press release that results from the initial 4 drill holes from Georgianna, Lucky Days and Milestone, targets within the BlackSheep District, have intersected thick sections of low-sulphidation epithermal gold-silver mineralization, including several high-grade intercepts. BlackSheep is a 30 square kilometer under-explored district that represents a new area of resource exploration potential several kilometers northwest of the DeLamar Deposit.
Drilling highlights include*:
• Drill highlights from the Georgianna and Lucky Days targets, include:
o Drill hole IGE-20-002
◾ 0.66 g/t Au and 117.25 g/t Ag (2.17 g/t Au Eq) over 10.67 m, including 1.48 g/t Au and 351.00 g/t Ag (5.99 g/t AuEq) over 3.05 m
| MANAGEMENT’S DISCUSSION & ANALYSIS For the Three-Month Periods Ended March 31, 2021 and 2020 |
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◾ Broader low-grade intercepts include 0.30 g/t Au and 10.87 g/t Ag (0.44 g/t AuEq) over 41.76 m
• The Company intersected one of the highest-grade intercepts to date from the Milestone Deposit situated at the base of the existing resource and interpreted as indicating the location of the postulated higher-grade 'feeder zone' below, with highlights including*:
o Drill hole IMS-20-015
◾ 0.44 g/t Au and 77.60 g/t Ag (1.43 g/t AuEq) over 78.94 m
◾ Including 0.38 g/t Au and 488.00 g/t Ag (6.66 g/t AuEq) over 1.52 m;
◾ Including 0.28 g/t Au and 290.82 g/t Ag (4.02 g/t AuEq) over 1.68 m;
◾ Including 0.39 g/t Au and 288.00 g/t Ag (4.10 g/t AuEq) over 1.52 m;
◾ Including 1.12 g/t Au and 176.00 g/t Ag (3.39 g/t AuEq) over 1.83 m;
◾ Including 3.11 g/t Au and 172.00 g/t Ag (5.32 g/t AuEq) over 2.59 m.
The Company announced in its April 8, 2021 press release further drill results for the Lucky Days target, including a large, low-grade gold-silver intercept from the recently discovered Lucky Days target*:
• Drill hole LDE-21-002
o 0.50 g/t Au and 41.15 g/t Ag (1.03 g/t AuEq) over 25.15 m, including 2.13 g/t Au and 213.28 g/t Ag (4.87 g/t AuEq) over 2.13 m
Drill hole LDE-21-002, released on April 8, 2021, was designed to intercept a vein structure at a shallow depth (25-30 m), and the high silver intersected at this interval along with the shallow-level vein textures indicate the potential for high-grade mineralization at depth. In addition, this drill hole clipped the southern end of an extensive zone of lower grade stockwork vein mineralization delineated by soil and rock-chip geochemistry and IP geochemistry. The 25.15 m intercept averaging 1.03g/t AuEq at the southern end of this 250 m x 100 m stockwork zone is a very encouraging indication of low-grade open pit potential.
* 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 60%-70% conversion ratio); Intervals reported are uncapped; Gold equivalent = g Au/t + (g Ag/t ÷ 77.70); For the intervals that were previously mined / stopped and were therefore unrecoverable and unverifiable, a grade of 0 g/t Au was inserted for compositing.
43-101 Resource Update
The 43-101 resource update is advancing as scheduled. All modelling is well advanced, and the NI-43-101 resource update is currently expected in late Q2 2021, on track with previous guidance.
SOCIAL AND ENVIRONMENTAL
The Company hired a Community Affairs Manager, Ms. Emily Hendrickson, in early March. Ms. Hendrickson brings significant experience in mining-specific community relations and will play a critical role in our community outreach and will be responsible for maintaining relationships with our key stakeholders.
Stakeholder meetings continued throughout the quarter where possible, either by video conference or in socially distanced settings where COVID-19 protocols were respected. This quarter the Company engaged with youth groups, conservation groups, local city & community councils, and specific interest groups. The Company continues to build relationships with surrounding communities that future operations may touch.
| MANAGEMENT’S DISCUSSION & ANALYSIS For the Three-Month Periods Ended March 31, 2021 and 2020 |
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Meetings with Tribal Nations Rightsholders with historic ties to the lands surrounding DeLamar began in Q1, after being postponed in 2020 due to COVID-19. After introductory meetings, Integra is focusing on establishing effective mechanisms for communication, and researching opportunities for respectful involvement.
As part of Integra's ESG commitment to prioritizing environmental stewardship & responsible modern mining at every stage of the project life cycle, the Company has engaged Warm Springs Consulting of Boise, Idaho, as the consulting/engineering firm to evaluate several sustainability-driven option studies that will potentially be incorporated into the 2021 PFS.
The Company also signed a Memorandum of Understanding with Trout Unlimited, thus creating a partnership that has the goal of helping to identify and prioritize potential future voluntary off-site reclamation projects in the Jordan Creek watershed where the DeLamar Project is located.
In 2020, the Company extended a loan to a local business person to complete the construction of a restaurant in the local community of Jordan Valley, Oregon, after the only restaurant in the community shut down. Renovations were finalized in February 2021 and the restaurant opened shortly thereafter, serving the local community and the Company's employees and contractors.
Water treatment operations followed their regular course at the DeLamar Project, with system updates to the water treatment facility completed and in operation, allowing for more efficient water filtration and less bi-product waste creation in the process.
No material environmental or health and safety incidents were reported in Q1 2021.
2021 OUTLOOK
Although management has put in place all necessary measures to protect its employees' safety and to secure essential site activities, should the virus spread, or travel bans remain in place or should one of the Company's staff members or consultants become infected, the Company's ability to advance the DeLamar Project may be impacted. The Company continues to monitor the situation and the impact the virus may have on the DeLamar Project.
All corporate employees continue to work remotely from home, with some employees now working periodically at the office under safe COVID protection protocols.
The Company will continue its dual track strategy for 2021, consisting of exploration drilling designed to expand the mineral resource base and development study and permitting work designed to de-risk the DeLamar Project.
DEVELOPMENT
A key objective for 2021 will be to complete the PFS in the 4th quarter. To achieve this goal, extensive metallurgical test work will be carried out in the first half of the year to de-risk and improve project economics. There will also be significant condemnation, geotechnical and groundwater drilling programs in 2021. On the permitting front, surface, groundwater, geochemistry, wetlands, wildlife, aquatic, cultural and associated baseline studies, along with the management of these efforts, will extend throughout the year.
Several key trade-off studies are currently under-way, aimed to define the cost-benefit of higher metal recoveries in future development scenarios at DeLamar.
| MANAGEMENT’S DISCUSSION & ANALYSIS For the Three-Month Periods Ended March 31, 2021 and 2020 |
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Recent metallurgical test work since the 2019 PEA is being analyzed for opportunities to improve metal recovery with an enhanced focus on silver. A deeper evaluation into the size sensitivity of both gold and silver recovery is underway, to be included in this year's PFS. This includes consideration of High Pressure Grinding Rolls ("HPGR") technology in the final stage of the crushing circuit for the heap leach process and/or implementation of a larger milling and agitated leach circuit for higher grade transitional mineralization, both of which would effectively produce finer crushed material with enhanced gold and silver recovery potential. Processing additional transitional mineralization through a mill circuit could potentially yield greater overall metal recovery than through placement of crushed material on the leach pad.
Florida Mountain unoxidized material is processed through the existing milling scenario in the PEA. The Company is completing additional test work on the DeLamar unoxidized mineralization which was not included in the PEA. This test work includes various pre-cyanidation treatments options, including fine grinding and pre-aeration, and will be re-evaluated with current metal prices and better defined costs.
EXPLORATION
The Company decided to increase its 2021 exploration program given the promising drilling results to date. The Company added two core drill rigs in March and April 2021, and as a result now has four core drill rigs at site. The Company also expects to complete additional geophysical surveys, soil sampling and geological mapping and prospecting.
The drilling program will focus on the following areas:
The Florida Mountain Deposit:
Drilling at Florida Mountain will be dual-focused, including follow-up exploration on the high-grade shoots and structures below the existing mineral resource and expanding the existing low-grade mineral resource through drilling geochemical and geophysical anomalies to the east and west of the existing mineral resource.
The Company has identified multiple high-grade gold-silver shoots at Florida Mountain. Integra's exploration team has modeled 7 high-grade vein structures that appear similar in size and orientation to the historically productive high-grade Trade Dollar - Black Jack vein system. Most historic underground production stemmed from the Trade Dollar - Black Jack vein, while the remaining 6 veins saw limited production up until mining operations ceased with the start of World War I. The identified vein zones have an aggregate strike length of over 7,000 m. Within these vein zones are steeply dipping high-grade shoots with strike lengths of up to 200 m and down dip extensions of up to 300 m which are interpreted as having developed at structural intersections. Based on recent drill intercepts, the Company anticipates that the high-grade shoots are likely to have widths of between 1 m and 8 m.
Drilling is also planned to take place in the Florida Keys area, a large geochemical anomaly located immediately to the east of the mineral resource that has seen limited drilling. The Florida Keys geochemical anomaly is of similar strength and size to the existing mineral resource estimate footprint at the Florida Mountain Deposit. The Company also intends to drill in Rich Gulch, a target located in a large zone of IP chargeability that was identified to the west of Florida Mountain as part of a 2020 geophysical survey. Based on limited historic drilling and the presence of historic underground workings in this area the Company sees potential for both additional low-grade and high-grade underground mineralization.
War Eagle Mountain:
During the 2019 and 2020 drill programs at War Eagle, the Company intersected high-grade gold-silver mineralization within the volcanic unit overlying the entire area. In 2020, the Company identified a second high-grade shoot 400 m to the north of the 2019 drill holes. This second structure is interpreted over a strike length of approximately 550 m south-southeast and is largely untested. The geochemical soil anomaly that led the Company to this new structure is interpreted as being lateral leakage outward along the base of the latite flow, presumably emanating from the eastern most structure identified in the 2020 drill program.
| MANAGEMENT’S DISCUSSION & ANALYSIS For the Three-Month Periods Ended March 31, 2021 and 2020 |
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Drilling in 2021 will continue to test these parallel structures at War Eagle. In addition, the Company plans on completing a detailed geophysical program to generate targets within a large geochemical anomaly to the east of the 2019 and 2020 drill holes locations.
BlackSheep and DeLamar (Henrietta Ridge):
Core Drilling:
The drill campaign at BlackSheep will focus on the Georgianna, Milestone and Lucky Days targets. BlackSheep is host to extensive areas of sinter and opaline silica cut by high-level epithermal veining and brecciation. Due to the shallow level of erosion at BlackSheep, very limited exploration drilling completed by previous operators was shown to be too shallow to properly evaluate the potential for high-grade vein style mineralization.
Two shallow drill holes have been completed at the Georgianna target to better define the structures controlling mineralization. Deeper, follow-up drill holes are planned at the Georgianna target for this year to test the productive zone at approximately 200 m below the current surface.
The Company is currently drilling the Henrietta Ridge. Henrietta Ridge is located between the DeLamar Deposit and the BlackSheep area. Historic drilling completed by previous operators along with geophysical surveys suggest mineralization from the DeLamar Deposit extends along a northwest corridor from the current mineral resource through Henrietta Ridge.
Reverse Circulation Drilling:
A reverse circulation ("RC") drill program is planned for early summer to test broad zones of stockwork vein mineralization at both Georgianna and Lucky Days. A similar sized zone of stockwork vein mineralization is located approximately 1 km to the north at Lucky Days North. The area of poor outcrop in-between these two areas correspond with a high-chargeability zone associated with soil arsenic ("As") and Au anomalies. Additional surface work is planned to delineate future drill targets in this central portion of Lucky Days.
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 Economic Assessment for the DeLamar and Florida Mountain Gold - Silver Project, dated October 22, 2019 (the "Report" or the "PEA"). 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 consists of 748 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 8,100 hectares in southwestern Idaho, about 80 kilometers 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. The total annual land-holding costs are estimated to be US$321,626. All mineral titles and permits are held by the DeLamar Mining Company ("DMC"), an indirect, 100% wholly owned subsidiary of Integra that was acquired from Kinross through a Stock Purchase Agreement in 2017.
| MANAGEMENT’S DISCUSSION & ANALYSIS For the Three-Month Periods Ended March 31, 2021 and 2020 |
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A total of 284 of the unpatented claims were acquired from Kinross, 101 of which are subject to a 2.0% net smelter returns royalty ("NSR") payable to a predecessor owner. This royalty is not applicable to the current project mineral resources.
There are also six lease agreements covering 26 patented claims and one unpatented claim that require NSR payments ranging from 2.5% to 5.0%. One of these leases covers a small portion of the DeLamar area resources and one covers a small portion of the Florida Mountain area resources, with 5.0% and 2.5% NSRs applicable to maximums of US$50,000 and US$650,000 in royalty payments, respectively.
The property includes 1,355 hectares under six leases from the State of Idaho, which are subject to a 5.0% production royalty of gross receipts plus annual payments of US$23,252. One of these leases has been issued and five are pending issuance. The State of Idaho leases include very small portions of both the DeLamar and Florida Mountain resources.
Kinross has retained a 2.5% NSR royalty that applies to those portions of the DeLamar area claims that are unencumbered by the royalties outlined above (the "Kinross Royalty"). The Kinross Royalty was subsequently purchased by Maverix Metals Inc ("Maverix") on December 19, 2019. 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 C$10,000,000.
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 DeLamar project historical open-pit mine areas have been in closure since 2003. Even though a substantial amount of reclamation and closure work has been completed to date at the site, there remain ongoing water-management activities and monitoring and reporting. A reclamation bond of US$2,886,629 remains with the Idaho Department of Lands ("IDL") and a reclamation bond of US$100,000 remains with the Idaho Department of Environmental Quality. A reclamation bond in the amount of US$569,500 has been placed with the U.S. Bureau of Land Management ("BLM") for exploration activities on public lands.
Exploration and Mining History
Total production of gold and silver from the DeLamar - Florida Mountain 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 unknown quantity produced at the DeLamar mill in 1999, and recorded production may have occurred from 1876 to 1891. This includes an estimated 1.025 million ounces of gold and 51 million ounces of silver produced from the original De Lamar underground mine and the later DeLamar open-pit operations. At Florida Mountain, 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 1863 in Jordan Creek, just 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 Florida Mountain, 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 Florida Mountain. 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 underground mines from the late 1800s to early 1900s.
The mines in the district were closed in 1914 and very little production took place until the gold and silver prices increased in the1930s. Placer gold was again recovered from Jordan Creek from 1934 to 1940, and in 1938 a 181 tonne-per-day 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 Florida Mountain, 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-Month Periods Ended March 31, 2021 and 2020 |
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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 Company ("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 Company ("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 tailings facility were developed.
Total open-pit production from the DeLamar project from 1977 through 1998, including the Florida Mountain 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 per day, with a milling capacity of about 3,629 tonnes per day. In 1994, Kinross commenced open-pit mining at Florida Mountain while continuing production from the DeLamar mine. The ore from Florida Mountain, which was mined through 1998, was processed at the DeLamar facilities. Florida Mountain production in 1994 through 1998 totaled 124,500 ounces of gold and 2.6 million ounces of silver.
Geological 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 Florida Mountain, 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 feet laterally and vertically, and of mainly less than 1.3 centimeters 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 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.
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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. Various vein textures, mineralization, alteration features, and the low contents of base metals in the district are typical of shallow low-sulfidation epithermal deposits worldwide.
Drilling, Database and Data Verification
As of the effective date of this report, the resource database includes data from 2,718 holes, for a total of 306,078 meters, 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 275,790 meters of drilling. Most of the historical drilling was done using reverse-circulation ("RC") and conventional rotary methods; a total of 106 historical holes were drilled using diamond-core ("core") methods for a total of 10,845 meters. Approximately 74% of the historical drilling was vertical, including all historical conventional rotary holes.
Integra commenced drilling in 2018. As of the end of April 2019, Integra had drilled a total of 55 RC holes, 36 core holes, and 11 holes commenced with RC and finished with core tails, for a total of 33,573 meters in the DeLamar and Florida Mountain areas combined. All but one of the Integra holes were angled.
The historical portions of the current resource drill-hole databases for the DeLamar and Florida Mountain deposit areas were originally created by MDA using original DeLamar mine digital database files, and this information was subjected to various verification measures by both MDA and Integra. The Integra portion of the drill-hole databases was directly created by MDA using original digital analytical certificates in the case of the assay tables, or it was checked against original digital records in the case of the collar and down-hole deviation tables. Through these and other verification procedures summarized herein, the authors have verified that the DeLamar data as a whole are acceptable as used in this report.
Metallurgical Testing
Available results from ongoing metallurgical testing by Integra, at McClelland Laboratories (2018-2019) have been used to select preferred processing methods and estimate recoveries for oxide and transitional material types from both the DeLamar and Florida Mountain deposits, as well as unoxidized (sulfide) material type from the Florida Mountain deposit. Metallurgical testing has also been conducted on unoxidized (sulfide) material from the DeLamar deposit, but that testing has not yet progressed to the level required for processing of that material to be included in the PEA.
Samples used for this 2018-2019 testing, primarily composites of 2018 and 2019 drill core, were selected to represent the various material types contained in the current resources from both the DeLamar and Florida Mountain deposits. Composites were selected to evaluate effects of area, depth, grade, oxidation, lithology, and alteration on metallurgical response. In general, test results indicate that materials from each of the DeLamar and Florida Mountain deposits can most usefully be evaluated by considering the oxidation state (oxidized, transitional, or unoxidized).
Bottle-roll and column-leach cyanidation testing on drill core composites from both the DeLamar and Florida Mountain deposits and on bulk samples from the DeLamar deposit have shown that the oxide and transitional material types from both deposits can be processed by heap-leach cyanidation. Testing on drill core composites from the Florida Mountain deposit has shown that the unoxidized material from that deposit is not amenable to heap leach cyanidation but can be leached using cyanide after grinding. The Florida Mountain unoxidized material also responds well to bulk sulfide flotation treatment, and the resulting flotation concentrate is amenable to agitated cyanide leaching. Highest recoveries from the Florida Mountain unoxidized material were obtained by grinding, followed by gravity concentration and flotation of the gravity tailings, with regrind and agitated cyanidation of the flotation concentrate.
Available metallurgical test results indicate that gold recoveries in the range of 75% to 80%, and silver recoveries of about 30%, can be expected from the DeLamar oxide and transitional material types, by heap leaching at a crush size of 80% -13mm. Agglomeration pretreatment of this material is currently planned, because of the potential for processing of some materials with elevated clay content. Heap leach cyanide consumptions are expected to be reasonably low (about 0.3 - 0.4 kg NaCN/tonne).
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In the case of the Florida Mountain oxide and transitional material types, gold recoveries of 85% to 90%, and silver recoveries of about 40%, are expected for heap leaching at an 80% -38mm feed size. Agglomeration pretreatment is not considered to be necessary for these material types. Heap leach cyanide consumptions are expected to be reasonably low (about 0.4 kg NaCN/tonne).
Planned processing of the Florida Mountain unoxidized material type includes grinding, followed by gravity concentration and flotation of the gravity tailings, with regrind and agitated cyanidation of the flotation concentrate. Expected recoveries are about 90% gold and 80% silver. Cyanide consumption for the concentrate leaching is expected to be equivalent to about 0.2 kg NaCN/tonne, on a mill feed basis.
In the case of the unoxidized material from the DeLamar deposit, 2018-2019 testing has shown that this material type is not amenable to heap-leach cyanidation and is highly variable with respect to response to grinding followed by agitated cyanidation. Reasons for the generally poor and highly variable grind-leach recoveries from this material type are poorly understood at present. Additional testing and mineralogy studies are in progress to gain a better understanding of the observed variability in recoveries. Further testing is also planned to better define what portion of the DeLamar unoxidized material type might be economically processed by simple grind-leach processing. Metallurgical testing has also shown that the DeLamar unoxidized material generally responds well to upgrading by gravity and flotation processing. Testing to evaluate subsequent processing of the resulting concentrate is in progress, but has not been completed as of the effective date of this report. It is expected that flotation concentrate produced from a significant portion of the DeLamar unoxidized materials will not be amenable to agitated leach (cyanidation). It is expected that for these flotation concentrates, some form of oxidative pre-treatment (such as pressure oxidation or roasting) will be required to maximize gold recovery by cyanidation. Alternatively, these concentrates could be shipped off site for toll processing.
Mineral Resources
Mineral resources have been estimated for both the Florida Mountain and DeLamar areas of the DeLamar project. The gold and silver resources were modeled and estimated by:
evaluating the drill data statistically;
creating low- (domain 100), medium- (domain 200) and high-grade (domain 300) mineral-domain polygons for both gold and silver on sets of cross sections spaced at 30-meter intervals;
projecting the sectional mineral-domain polygons three-dimensionally to the drill data within each sectional window;
slicing the three-dimensional mineral-domain polygons along 6-meter-spaced horizontal and vertical planes and using these slices to recreate the gold and silver mineral-domain polygons on level plans and long sections, respectively;
coding a block model to the gold and silver domains for each of the two deposit areas using the level-plan and long-section mineral-domain polygons;
analyzing the modeled mineralization geostatistically to aid in the establishment of estimation and classification parameters; and
using inverse-distance to the third power to interpolate grades into models comprised of 6x6x6-meter blocks using the gold and silver mineral domains to explicitly constrain the grade estimations.
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Parameters used in the estimation of gold and silver grades are summarized in Table 1.
Table 1 - Summary of DeLamar Area Grade Estimation Parameters
| Estimation Pass - Au + Ag Domain | Search Ranges (meters) | Composite Constraints | ||||
|---|---|---|---|---|---|---|
| Major | Semi-Major | Minor | Min | Max | Max/Hole | |
| Pass 1 + 2 - Doman 100 | 60 | 60 | 30 | 2 | 12 | 4 |
| Pass 1 + 2 - Doman 200 + 300 + 0 | 60 | 60 | 30 | 2 | 20 | 4 |
| Pass 3 - Doman 0 + 100 + 200 +300 | 170 | 170 | 170 | 1 | 20 | 4 |
| Restrictions on Search Ranges | ||||||
| --- | --- | --- | --- | |||
| Domain | Search Restriction Threshold | Search Restriction Distance | Estimation Pass | |||
| Au 100 | >0.7 g Au/t | 40 meters | 1, 2 | |||
| Au 300 | >20 g Au/t | 35 meters | 1, 2, 3 | |||
| Ag 300 | >400 g Ag/t | 35 meters | 1, 2, 3 | |||
| Au 0 | >0.5 g Au/t | 6 meters | 1, 2, 3 | |||
| Ag 0 | >34.29 g Ag/t | 9 meters | 1, 2, 3 |
The estimation passes were performed independently for each of the mineral domains, so that only composites coded to a particular domain were used to estimate grade into blocks coded by that domain. The estimated grades for each gold and silver domain coded to a block were then coupled with the partial percentages of those mineral domains in the block, as well as the outside, dilutionary, domain 0 grades and volumes, to enable the calculation of a single volume-averaged gold and a single volume-averaged silver grade for each block. These single resource block grades, and their associated resource tonnages, are therefore fully block-diluted using this methodology.
The search restrictions place limits on the maximum distances from a block that high-grade population composites can be 'found' and used in the interpolation of gold and/or silver grades into a block. To further avoid the smearing of outlier high grades that are sporadically present in the low-grade gold and silver domains, the maximum number of composites allowed for the estimation in Pass 1 and Pass 2 are less than that used for the higher-grade interpolations.
The gold and silver mineralization commonly exhibits multiple orientations, which led to the use of a number of search orientations to control both the DeLamar and Florida Mountain estimations.
Grade interpolation was completed using length-weighted 3.05-meter (10-foot) composites. The estimation passes were performed independently for each of the mineral domains, so that only composites coded to a particular domain were used to estimate grade into blocks coded to that domain. Blocks coded as having partial percentages of more than one gold and/or silver domain had multiple grade interpolations, one for each domain coded into the block for each metal. The estimated grades for each gold and silver domain coded to a block were coupled with the partial percentages of those mineral domains in the block, as well as any outside, dilutionary, domain 0 grades and volumes, to enable the calculation of a single volume-averaged gold and a single volume-averaged silver grade for each block. These single final resource block grades, and their associated resource tonnages, are therefore fully block-diluted using this methodology.
The DeLamar project mineral resources have been estimated to reflect potential open-pit extraction and processing by a combination of heap leaching, milling / agitated leaching, and flotation. To meet the requirement of the in-pit resources having reasonable prospects for eventual economic extraction, pit optimizations for the DeLamar and Florida Mountain deposit areas were run using the parameters summarized in Table 2 and Table 3.
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Table 2 - Pit Optimization Cost Parameters (US$)
Table 3 - Pit-Optimization Metal Recoveries by Deposit and Oxidation State
The pit shells created using these optimization parameters were applied to constrain the project resources of both the DeLamar and Florida Mountain deposit areas. The in-pit resources were further constrained by the application of a gold-equivalent cutoff of 0.2 g/t to all model blocks lying within the optimized pits that are coded as oxidized or transitional, and 0.3 g/t for blocks coded as unoxidized. Gold equivalency, as used in the application of the resource cutoffs, is a function of metal prices (Table 2) and metal recoveries, with the recoveries varying by deposit and oxidation state (Table 3).
The total DeLamar project resources, which include the resources for both the DeLamar and Florida Mountain areas, are summarized in Table 4. Mineral resources that are not mineral reserves do not have demonstrated economic viability.
Table 4 - Total DeLamar Project Gold and Silver Resources
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1. Mineral Resources are comprised of all oxidized and transitional model blocks at a 0.2 g AuEq/t cutoff and all unoxidized blocks at a 0.3 g AuEq/t that lie within optimized pits
The effective date of the resource estimations is May 1, 2019
Mineral resources that are not mineral reserves do not have demonstrated economic viability
Rounding may result in apparent discrepancies between tonnes, grade, and contained metal content
The gold and silver resources for the DeLamar and Florida Mountain areas are reported separately in Table 5 and Table 6, respectively.
Table 5 - DeLamar Deposit Gold and Silver Resources
1. Mineral Resources are comprised of all oxidized and transitional model blocks at a 0.2 g AuEq/t cutoff and all unoxidized blocks at a 0.3 g AuEq/t that lie within optimized pits
The effective date of the resource estimations is May 1, 2019
Mineral resources that are not mineral reserves do not have demonstrated economic viability
Rounding may result in apparent discrepancies between tonnes, grade, and contained metal content
Table 6 - Florida Mountain Deposit Gold and Silver Resources
1. Mineral Resources are comprised of all oxidized and transitional model blocks at a 0.2 g AuEq/t cutoff and all unoxidized blocks at a 0.3 g AuEq/t that lie within optimized pits
The effective date of the resource estimations is May 1, 2019
Mineral resources that are not mineral reserves do not have demonstrated economic viability
Rounding may result in apparent discrepancies between tonnes, grade, and contained metal content
Mining Methods
The PEA considers open-pit mining of the DeLamar and Florida Mountain gold-silver deposits. Note that a PEA is preliminary in nature and includes Inferred mineral resources that are considered too speculative geologically to have the economic considerations applied that would enable them to be classified as mineral reserves. There is no certainty that the economic results of the PEA will be realized.
The methodology used for mine planning to define the economics for the PEA includes definition of economic parameters, pit optimization, creation of pit and waste rock facility designs, creation of production schedules, definition of personnel and equipment requirements, estimation of capital and operating costs, and performance of an economic analysis.
Pit optimization assumed processing of Florida Mountain and DeLamar oxide and transition resources as heap leach, and unoxidized Florida Mountain resources as milled using floatation followed by cyanidation of the concentrates on site. Leach material would be processed at 27,000 tonnes per day and mill material would be processed at 2,000 tonnes per day. Processing of the DeLamar material will require crushing and agglomeration prior to heap leaching.
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The resulting pit optimizations were used as the basis for pit designs. The designs used an inner-ramp slope of 45°. DeLamar pit designs utilized five pit phases to establish a mining sequence and Florida Mountain pit designs were completed using three pit phases.
Waste management facility designs were created for the PEA to contain the waste material mined from both the DeLamar and Florida Mountain areas. Some waste material may also be stored in the form of backfill where and when space is available, although this has not been assumed for the PEA and therefore this is a potential opportunity for the project.
Production scheduling was completed with leaching starting with Florida Mountain material and DeLamar leach material being processed starting in year 5 at the same rate as Florida Mountain leach material. Florida Mountain unoxidized material will be stockpiled until the flotation mill is constructed. The start of the 2,000 tonne per day mill will be in year 3 and it will operate at a rate of 720,000 tonnes per year until unoxidized material is exhausted.
The total project mining rate is given a reasonable ramp-up that starts at 2,000 tonnes per day and increases to a life-of-mine maximum of 90,000 tonnes per day in later years.
The PEA has assumed owner mining in order to keep operating costs lower than it would be with contract mining. The production schedule was used along with additional efficiency factors, cycle times, and productivity rates to develop the first-principle hours required for primary mining equipment to achieve the production schedule. Mining anticipates 136-tonne capacity haul trucks loaded by hydraulic shovels. Personnel requirements have been estimated based on the number of people required to operate, supervise, maintain, and plan for operations to achieve the production schedule.
Processing and Recovery Methods
The PEA envisions the use of two process methods for the recovery of gold and silver:
1) Lower-grade oxide and transition materials from both DeLamar and Florida Mountain will be processed by crushed-ore cyanide heap leaching with stacking on a central heap leach by conveyor, followed by Merrill-Crowe zinc precipitation.
2) Higher-grade unoxidized material from Florida Mountain will be processed using grinding followed by gravity and flotation concentration, with the concentrates processed by regrinding, agitated-cyanide leaching, counter-current decantation ("CCD"), and Merrill-Crowe zinc precipitation. Flotation tailings will be thickened, filtered, and dry stacked at the tailings storage facility. Concentrate-leach tailings will be added to the heap-leach circuit for further recovery of gold and silver.
Both Florida Mountain and DeLamar oxide and transition ore types have been shown to be amenable to heap-leach processing following crushing. Material will be crushed in two stages to a nominal 100 millimeter size at a rate of 27,000 tonnes per day. Initially, for the Florida Mountain materials, the product of the secondary circuit will be a nominal size of 38 millimeters. Transitioning to DeLamar ore types will require the addition of a tertiary crushing circuit with tertiary screens and cone crushers operating in closed circuit to produce a nominal 13-millimeter product followed by cement agglomeration. Lime will be added to the crushed ore for pH control at a dosage of 1 kilogram/tonne. Cement will be added at 3 kilograms/tonne for agglomeration as required.
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. 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 zinc precipitate will be filtered, dried, and smelted to produce a precious metal doré product for shipment off site.
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Gold and silver recoveries are expected to be 90% and 40%, respectively, for the Florida Mountain oxide heap-leach material. The DeLamar oxide recoveries used in this study are 80% for gold and 30% for silver. Cyanide consumptions for the oxide ore types are 0.4 kilograms/tonne and 0.3 kilograms/tonne for Florida Mountain and DeLamar, respectively.
Transition material gold recoveries are projected to be 85% for Florida Mountain and 75% for DeLamar. Silver recoveries for the transition material are projected to be 40% and 30% for Florida Mountain and DeLamar, respectively. Projected cyanide consumption is 0.4 kilograms per tonne for both the Florida Mountain and DeLamar transition material types.
Higher-grade Florida Mountain unoxidized material will be processed by crushing, grinding, gravity, and flotation concentration, followed by cyanide leaching of the concentrates using CCD and Merrill-Crowe precipitation. This circuit is scheduled to operate at a nominal production rate of 2,000 tonnes per day. For this process, the final crusher product will have a nominal particle size of 6 millimeters and will be fed to the ball mill via two belt feeders at a nominal ore production rate of 88 tonnes per hour. The ball mill discharge will be pumped to a set of two hydrocyclones, one operating and one standby, with the cyclone overflow reporting to the flotation conditioning tank. The cyclone underflow will report to a centrifugal gravity concentrator. Concentrator rejects then reports back to the ball mill for additional grinding. The gravity concentrate will report to the concentrate regrind mill for subsequent processing in the leach circuit.
The flotation feed from the conditioning tank will report to the flotation circuit for sulfide concentration. The flotation concentrate will report to a regrind circuit where it will be ground to a nominal 37 µm before being leached in a conventional leach tank and CCD circuit. The flotation tailings are to be thickened and filtered with the filter cake reporting to the dry stacked tailings storage facility.
Leach solid residue and the pregnant leach solution are separated in the CCD circuit. The pregnant leach solution will report to the heap leach Merrill-Crowe circuit where it will be processed using zinc precipitation for the recovery of gold and silver. The leached residue will be thickened to 60% solids and added to the heap leach material before it is stacked on the heap, thus allowing for additional processing and mitigating the need for a cyanide-rated tailings storage facility.
Recoveries from the Florida Mountain milling/concentrator circuit are expected to be 90% for gold and 80% for silver. Sodium cyanide and lime consumptions are both expected at 0.2 kilograms per tonne of material feed.
Capital and Operating Costs
Table 7 summarizes the estimated life-of-mine ("LOM") capital costs for the project. The LOM total capital costs are estimated at US$270.3 million, including US$161.0 million in preproduction capital (including working capital) and US$109.3 million for sustaining capital (which includes US$20.0 million in reclamation costs).
Table 8 shows the estimated LOM operating costs for the project, which are estimated to be US$7.82 per tonne processed. This includes mining costs which are estimated to be US$2.00 per tonne mined. The total cash cost is estimated to be US$619 per ounce of gold equivalent and all-in sustaining costs are estimated to be US$742 per ounce of gold equivalent. See "Non-GAAP Measures" disclosure at the end of this MD&A.
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Table 7 Capital Cost Summary (US$)
| Sustaining | Total | |||||||
|---|---|---|---|---|---|---|---|---|
| Mine | Pre-Production (1) | Yr 1 to Yr 10 (1) | LOM (1) | |||||
| Mining Equipment | $ | 32,980 | $ | 52,014 | $ | 84,994 | ||
| Pre-Stripping | $ | 7,514 | $ | - | $ | 7,514 | ||
| Other Mine Capital | $ | 6,027 | $ | 746 | $ | 6,773 | ||
| Sub-Total Mine | $ | 46,521 | $ | 52,760 | $ | 99,281 | ||
| Processing | ||||||||
| Heap Leach Pad | $ | 14,130 | $ | 19,178 | $ | 33,308 | ||
| Heap leach Plant (Incl Crushing and Stacking) | $ | 48,449 | $ | - | $ | 48,449 | ||
| Heap leach: Agglomeration / Crushing (DeLamar Ore) | $ | - | $ | 20,518 | $ | 20,518 | ||
| Florida Mill: Plant | $ | - | $ | 34,354 | $ | 34,354 | ||
| Florida Mill: Dry Stack Tailings | $ | - | $ | 6,990 | $ | 6,990 | ||
| Sub-Total Processing | $ | 62,579 | $ | 81,039 | $ | 143,618 | ||
| Infrastructure | ||||||||
| Power | $ | 21,714 | $ | - | $ | 21,714 | ||
| Assay Lab | $ | 2,804 | $ | - | $ | 2,804 | ||
| Other | $ | 2,552 | $ | 974 | $ | 3,526 | ||
| Sub-Total Infrastructure | $ | 27,070 | $ | 974 | $ | 28,044 | ||
| Owner's Costs | $ | 5,819 | $ | - | $ | 5,819 | ||
| SUB-TOTAL | $ | 141,989 | $ | 134,773 | $ | 276,761 | ||
| Other | ||||||||
| Working Capital(2) | $ | 13,024 | $ | (13,024 | ) | $ | - | |
| Cash Deposit for Reclamation Bonding(3) | $ | 6,000 | $ | (6,000 | ) | $ | - | |
| Salvage Value(4) | $ | - | $ | (26,426 | ) | $ | (26,426 | ) |
| TOTAL | $ | 161,013 | $ | 89,323 | $ | 250,336 | ||
| Reclamation | $ | - | $ | 20,000 | $ | 20,000 | ||
| Total Including Reclamation Costs | $ | 161,013 | $ | 109,323 | $ | 270,336 |
(1) Capital costs include contingency and EPCM costs;
(2) Working capital is returned in year 11;
(3) Cash deposit = 30% of bonding requirement. Released once reclamation is completed;
(4) Salvage value for mining equipment and plant; and
(5) Reclamation costs listed here are treated as operating costs in the economic evaluation.
Table 8 Operating and Total Cost Summary (US$)
| / Tonne | ||||
|---|---|---|---|---|
| LOM Operating Costs | Mined | Processed | ||
| Mining | $ | 2.00 | $ | 4.18 |
| Processing | $ | 3.08 | ||
| G&A | $ | 0.55 | ||
| Total Site Costs | $ | 7.82 | ||
| LOM Cash Costs and All-in Sustaining Costs | By-Product (1) | Co-Product (2) | ||
| Mining | $ | 380 | $ | 317 |
| Processing | $ | 280 | $ | 233 |
| G&A | $ | 50 | $ | 42 |
| Total Site Costs | $ | 711 | $ | 592 |
| Transport & Refining | $ | 13 | $ | 11 |
| Royalties | $ | 17 | $ | 14 |
| Total Cash Costs | $ | 741 | $ | 617 |
| Silver By-Product Credits | $ | (272 | $ | - |
| Total Cash Costs Net of Silver by-Product | $ | 469 | $ | 617 |
| Sustaining Capital | $ | 131 | $ | 109 |
| Reclamation | $ | 19 | $ | 16 |
| All-in Sustaining Costs | $ | 619 | $ | 742 |
All values are in US Dollars.
(1) By-Product costs are shown as US dollars per gold ounces sold with silver as a credit; and
(2) Co-Product costs are shown as US dollars per gold equivalent ounce.
Preliminary Economic Analysis
MDA has prepared this PEA for the DeLamar mining project, which includes operations at both the DeLamar and Florida Mountain deposits. A summary of the PEA results is shown in Table 9.
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Table 9 Preliminary Economic Analysis Summary
| After-tax NPV (5%) | K USD | $357,572 |
|---|---|---|
| After-tax NPV (8%) | K USD | $284,448 |
| After-tax NPV (10%) | K USD | $244,454 |
| After-tax IRR | % | 43% |
| After-Tax Payback Period | Years | 2.35 |
Note that a preliminary economic assessment is preliminary in nature and it includes Inferred mineral resources that are considered too speculative geologically to have the economic considerations applied that would enable them to be classified as mineral reserves. There is no certainty that the PEA will be realized. Mineral resources that are not mineral reserves do not have demonstrated economic viability.
Some economic highlights include:
- Initial construction period is anticipated to be 18 months;
- After-tax net present value ("NPV") (5%) of US$358 million with a 43% after-tax internal rate of return ("IRR") using US$1,350 and US$16.90 per ounce gold and silver prices, respectively;
- After-tax payback period of 2.35 years;
- Year 2 to 6 gold equivalent production of 148,000 ounces (126,000 oz Au and 1,796,000 oz Ag); and
- Year 1 to 10 gold equivalent average production of 124,000 ounces (103,000 oz Au and 1,660,000 oz Ag);
- After-tax LOM cumulative cash flows of US$528 million; and
- Average annual after-tax free cash flow of US$61 million once in production.
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:
- Additional rock-chip sampling and prospect scale mapping
- A regional airborne magnetic and radiometric survey
- Commissioning of the Idaho Geology Department to undertake 1:24,000 scale geological mapping of the DeLamar, Florida Mountain and BlackSheep Districts
- Induced polarization ("IP") survey currently underway
See "Q1 2021 in Review" and "2021 Outlook" sections above for further details on recent exploration work.
| MANAGEMENT’S DISCUSSION & ANALYSIS For the Three-Month Periods Ended March 31, 2021 and 2020 |
|---|
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 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.
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.
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<br>(m) | Interval<br>(m) **** ^(1)^ | g/t AuEq^(2)^ |
|---|---|---|---|---|
| W14<br><br> <br>incl | 131.06<br><br> <br>131.06 | 213.36<br><br> <br>134.11 | 82.30<br><br> <br>3.05 | 4.07<br><br> <br>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<br><br> <br>incl | 152.40<br><br> <br>166.12 | 195.07<br><br> <br>176.78 | 42.67<br><br> <br>10.67 | 8.83<br><br> <br>19.19 |
| W51 | 124.97 | 132.59 | 7.62 | 8.04 |
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.
Gold equivalent = g Au/t + (g Ag/t ÷ 85)
See "Q1 2021 in Review" and "2021 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 March 31, 2021, December 31, 2020, and December 31, 2019, prepared in accordance with IFRS. The selected consolidated financial information should be read in conjunction with the Company's audited annual consolidated financial statements.
| MANAGEMENT’S DISCUSSION & ANALYSIS For the Three-Month Periods Ended March 31, 2021 and 2020 | |||
|---|---|---|---|
| **** | Three-Months Ended March 31, 2021 | Year Ended December 31, 2020 | Year Ended December 31, 2019 |
| --- | --- | --- | --- |
| Exploration and evaluation expenses | (5,568,628 | (17,135,991 | (13,433,489 |
| Operating loss | (7,809,755 | (25,674,240 | (20,281,662 |
| Other income (expense) | (628,563 | (1,489,377 | (1,371,387 |
| Net loss | (8,438,318 | (27,163,617 | (21,653,049 |
| Net loss per share | (0.15 | (0.54 | (0.64 |
| Other comprehensive income (loss) | (206,946 | (170,070 | (861,523 |
| Comprehensive loss | (8,645,264 | (27,333,687 | (22,514,572 |
| Cash and cash equivalents | 28,344,680 | 37,000,648 | 31,323,346 |
| Restricted cash, long-term | 23,143 | 23,100 | 1,928,641 |
| Exploration and evaluation assets | 60,148,114 | 72,330,024 | 61,348,921 |
| Total assets | 93,219,584 | 113,584,204 | 97,714,711 |
| Total current liabilities | 6,588,602 | 7,246,586 | 4,445,062 |
| Total non-current liabilities | 40,936,347 | 53,084,571 | 42,710,061 |
| Working capital | 22,929,549 | 30,630,454 | 27,587,579 |
All values are in US Dollars.
The operating losses for the three-months ended March 31, 2021, and the years ended December 31, 2020 and December 31, 2021 were mostly driven by exploration and evaluation expenses, as well as head office expenses such as compensation, office, professional fees, regulatory fees, and stock-based compensation (non-cash) expenses.
Other expenses for the three-months ended March 31, 2021, and the years ended December 31, 2020 and December 31, 2021 were mostly due to foreign exchange losses and reclamation accretion expenses, partly offset by interest and rent income.
Other comprehensive income (loss) amounts are related to the foreign exchange translation adjustment.
Total assets in the current three-month period ended March 31, 2021 decreased compared to the year ended December 31, 2020, mostly due to cash decrease (mostly as a result of exploration and development activities) and a decrease in exploration and evaluation assets (resulting from a reclamation adjustment). Total assets in the year ended December 31, 2020 increased compared to the year ended December 31, 2019, mostly due to cash increase (as a result of the Company's September 2020 financing), and an increase in exploration and evaluation assets (resulting from a reclamation adjustment), and property, plant and equipment additions.
Working capital in the current three-month period decreased compared to the year ended December 31, 2020 due to a decrease in cash in the current period. Working capital in the year ended December 31, 2020 increased compared to the year ended December 31, 2019, mostly due to an increase in cash, partially off-set by greater payables.
Total current liabilities decreased compared to the year ended December 31, 2020 due to decreased payables. Total current liabilities increased in the year ended December 31, 2020 comparing to the year ended December 31, 2019, due to increased payables, leases liabilities, and equipment financing liability. Total non-current liabilities decreased in the current three-month period compared to the year ended December 31, 2020 due to a change in reclamation liability (resulting from a change in discount rate). Total non-current liabilities increased in the year ended December 31, 2020 compared to the year ended December 31, 2019, mostly due to a change in reclamation liability (resulting from a change in discount rate and exchange rate) and equipment financing liability incurred in fiscal 2020.
| MANAGEMENT’S DISCUSSION & ANALYSIS For the Three-Month Periods Ended March 31, 2021 and 2020 |
|---|
The following table outlines the exploration and evaluation assets break-down:
Exploration and Evaluation Assets Summary:
| **** | Total | ||
|---|---|---|---|
| Balance at December 31, 2019 | $ | 61,348,921 | |
| Land acquisitions/option payments | 45,835 | ||
| Claim Staking | 69,550 | ||
| Legal expenses | 5,559 | ||
| Title review and environment | 8,678 | ||
| Reclamation adjustment* | 12,000,190 | ||
| Depreciation** | (9,453 | ) | |
| Translation difference*** | (1,209,218 | ) | |
| Total | 72,260,062 | ||
| Advance minimum royalty | 69,962 | ||
| Balance at December 31, 2020 | 72,330,024 | ||
| Land acquisitions/option payments | 12,575 | ||
| Reclamation adjustment* | (11,344,102 | ) | |
| Depreciation** | (2,295 | ) | |
| Translation difference*** | (891,912 | ) | |
| Total | 60,104,290 | ||
| Advance minimum royalty | 43,824 | ||
| Balance at March 31, 2021 | $ | 60,148,114 |
*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 US$187,150 (C$235,341) has been included in the DeLamar property. This building is being depreciated.
***December 31, 2019 closing balance of US$47,235,080 (C$61,348,921), translated to C$ with the December 31, 2020 exchange rate equals to $60,139,703, resulting in a $1,209,218 translation difference; December 31, 2020 closing balance of US$56,809,633 (C$72,330,024), translated to C$ with the March 31, 2021 exchange rate equals to $71,438,112, resulting in a $891,912 translation difference.
The following tables outline the Company's exploration and evaluation expense summary for the three-month period ended March 31, 2021 and 2020:
Exploration and Evaluation Expense Summary:
| **** March 31, 2021 | DeLamar deposit | Florida Mountain deposit | War Eagle deposit | Other<br> deposits | Joint <br>expenses | Total | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Contract exploration drilling | $ | 504,629 | $ | 994,960 | $ | - | $ | 358,431 | $ | - | $ | 1,858,020 | ||
| Contract metallurgical drilling | - | - | - | - | - | - | ||||||||
| Exploration drilling - other drilling labour & related costs | 438,444 | 734,515 | 142 | 296,520 | - | 1,469,621 | ||||||||
| Metallurgical drilling - other drilling labour & related costs | (6,169 | ) | - | - | - | - | (6,169 | ) | ||||||
| Other exploration expenses* | - | - | - | - | 354,762 | 354,762 | ||||||||
| Other development expenses** | - | - | - | - | 520,396 | 520,396 | ||||||||
| Land*** | 67,751 | 14,929 | 2,932 | 27,354 | 12,415 | 125,381 | ||||||||
| Permitting | - | - | - | - | 548,190 | 548,190 | ||||||||
| Metallurgy test work | 37,761 | 56,269 | - | - | - | 94,030 | ||||||||
| Technical reports and studies | - | - | - | - | 560,452 | 560,452 | ||||||||
| Community engagement | - | - | - | - | 43,945 | 43,945 | ||||||||
| Total | $ | 1,042,416 | $ | 1,800,673 | $ | 3,074 | $ | 682,305 | $ | 2,040,160 | $ | 5,568,628 |
*Includes mapping, IP, sampling, payroll, exploration G&A expenses, consultants
**Includes development G&A expenses and payroll
***Includes compliance, consulting, property taxes, legal, etc. expenses
| MANAGEMENT’S DISCUSSION & ANALYSIS For the Three-Month Periods Ended March 31, 2021 and 2020 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| **** March 31, 2020 | DeLamar deposit | Florida Mountain deposit | Other<br> deposits | Joint <br>expenses | Total | |||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Contract exploration drilling | $ | 313,426 | $ | - | $ | - | $ | - | $ | 313,426 |
| Contract metallurgical drilling | 456,841 | - | - | - | 456,841 | |||||
| Exploration drilling - other drilling labour & related costs | 307,799 | 3,465 | 4,472 | - | 315,736 | |||||
| Metallurgical drilling - other drilling labour & related costs | 240,413 | - | - | - | 240,413 | |||||
| Other exploration expenses* | - | - | 80,258 | 336,777 | 417,035 | |||||
| Other development expenses** | - | - | - | 177,959 | 177,959 | |||||
| Land*** | 49,652 | 22,032 | 2,675 | - | 74,359 | |||||
| Permitting | - | - | - | 154,257 | 154,257 | |||||
| Metallurgy test work | 158,126 | 37,167 | - | - | 195,293 | |||||
| Technical reports and studies | - | - | - | 30,592 | 30,592 | |||||
| Community, safety & other | - | - | - | 37,163 | 37,163 | |||||
| Total | $ | 1,526,257 | $ | 62,664 | $ | 87,405 | $ | 736,748 | $ | 2,413,074 |
*Includes mapping, IP, sampling, payroll, exploration G&A expenses, consultants
**Includes development G&A expenses and payroll
***Includes compliance, consulting, property taxes, legal, etc. expenses
RESULTS OF OPERATIONS
THREE-MONTH PERIOD ENDED MARCH 31, 2021
Net loss for the three-month period ended March 31, 2021 was $8,438,318 and the comprehensive loss $8,645,264, compared to a net loss of $3,116,967 and a comprehensive loss of $1,276,417 for the comparative period in 2020.
Overall, operating expenses were higher in the current three-month period mostly due to an increase in exploration and development expenses, compensation, office and site administration, regulatory, stock-based compensation (non-cash item), and depreciation (non-cash item) expenses; other non-operating loss was higher in the current three-month period, mostly due to the foreign exchange loss in the current period vs a foreign exchange gain in the comparative period. The variances between these two periods were primarily due to the following items:
Exploration and evaluation expenses: the Company incurred $5,568,628 in exploration and development expenses during the current quarter (March 31, 2020 - $2,413,074). The difference is mostly due to increased exploration and development activities in the current three-month period.
Compensation and benefits: these expenses amounted to $774,080 in the current three-month period (March 31, 2020 - $517,865). The increase is mostly due to new hires since March 31, 2020 and bonus accruals (the Company did not accrue bonuses in the comparative period)
Office and site administration: the Company incurred $404,013 in expenses during the three-month period (March 31, 2020 - $204,291), mostly due to increased IT expenses, new DeLamar's Boise office expenses, training, health and safety, and insurance expenses in the current period.
Corporate development and marketing: for the three-month period totaled $76,083 (March 31, 2020 - $167,887). The decrease was mostly due to significant decrease in travel expenses in the current period, resulting from COVID-19 travel restrictions.
| MANAGEMENT’S DISCUSSION & ANALYSIS For the Three-Month Periods Ended March 31, 2021 and 2020 |
|---|
Regulatory fees: for the current period totaled $110,426 (March 31, 2020 - $36,689). Regulatory fees, which also include filing fees and transfer agent fees, were higher in the current period mostly due to the Company's NYSE American listing. The Company listed on the NYSE American in July 2020, which resulted in higher annual regulatory and filling fees.
Stock-based compensation: the Company incurred $525,875 in stock-based compensation in the current three-month period (March 31, 2020 - $461,085). The variance is due to the timing of vesting of options granted from 2017 to 2020 and new equity incentive awards granted in the current period.
Depreciation expenses related to the property, plant and equipment amounted to $125,607 in the current three-month (March 31, 2020 - $66,773), due to equipment additions since Q1 2020.
Depreciation expenses related to the right-of-use assets amounted to $127,734 in the current three-month period (March 31, 2020 - $83,798), due to lease additions since Q1 2020.
Other income (expense): amounted to $628,563 (other expenses) in the current three-month period, compared to $947,154 (other income) in the comparative period. The variance is mostly due a foreign exchange loss in the current period versus a foreign exchange gain in the comparative period. Interest income was also higher in Q1 2020 than Q1 2021.
Net cash used by the Company in operating activities for the three-month period ended March 31, 2021 was $8,561,596 (March 31, 2020 - $2,941,854). The variance between these two periods was mostly driven by exploration and development expenditures, compensation, office and site administration, and regulatory fees.
Investing Activities
Net cash used in investing activities for the three-month period ended March 31, 2021 was $335,226 (March 31, 2020 - $113,411). The difference was mostly due to higher additions in PP&E in the current quarter.
Financing Activities
Net cash provided by financing activities in the current period was $240,854, comparing to net cash flow used from financing activities of $85,582 in the comparative period. The current period cash was provided by exercise of stock options and issuance of shares under the ATM. Net cash flow used from financing activities in the comparative period was mostly related to the principal lease payments.
The Company raised net proceeds of approximately $12.0 million in August 2019 through a non-brokered financing. The table below summarized the expected use of proceeds and the actual use of proceeds:
| August 2019 Financing<br><br> <br>(Expenditures from July 2019 to December 2019) ^(1)^ | August 2019 Expected Use of Proceeds (C$M) | Actual Use of Proceeds (C$M) ^(1)^ | Variance (C$M) |
|---|---|---|---|
| Corporate G&A | $0 | $0 | $0 |
| Drilling (Core and RC) | $7.4 (15,000m of core and RC drilling) | $5.4 (12,200m of core and RC drilling) | ($2.0)^(2)^ |
| Other Exploration (magnetics, spectrometry, mapping, travels, etc.) | $0.6 | $1.5 | $0.9 ^(3)^ |
| Development | $1.4 | $1.1 | ($0.3) |
| Other (field costs, geology work, land acquisition, land holdings, site G&A, infrastructure, etc.) | $1.7 | $2.2 | $0.5 ^(4)^ |
| Site Ongoing Environmental Monitoring / Water treatment | $0.9 | $1.3 | $0.4 |
| Total | $12.0 | $11.5 | ($0.5) ^(5)^ |
| MANAGEMENT’S DISCUSSION & ANALYSIS For the Three-Month Periods Ended March 31, 2021 and 2020 | |||
| --- |
(1) Actual Use of Proceeds includes actual costs from July to December 2019.
(2) Variance can be explained due to a lesser amount of meters drilled (12,200m vs. original 15,000m planned).
(3) Variance can be explained by additional exploration work such as geochemistry, mapping, IP and spectrometry.
(4) Variance can be explained by the re-allocation of capital items (infrastructure) from "Development" to "Other".
(5) The overall variance vs use of proceeds is not material.
The Company raised net proceeds of approximately $29.8 million in November and December 2019 through concurrent brokered and non-brokered financings. The table below summarized the expected use of proceeds (as of the date of the financings) and the actual use of proceeds (as of December 31, 2020):
| November/December 2019 Financings<br><br> <br>(Expenditures from January 2020 to December 2020) ^(1)^<br><br> <br>**** | Nov/Dec 2019 Expected Use of Proceeds (C$M) | Actual Use of Proceeds (C$M) ^(1)^ | Variance (C$M) |
|---|---|---|---|
| Exploration Drilling (Core) | $7.4 | $7.6 | $0.2 |
| Metallurgical Drilling (Core) | $3.5 | $2.1 | ($1.4) ^(2)^ |
| Other Exploration | $3.4 | $2.8 | ($0.6) ^(^^3^^)^ |
| Development | $6.4 | $4.2 | ($2.2) ^(^^4^^)^ |
| Other (field costs, land acquisition, land holdings, site G&A, infrastructure, etc.) | $2.7 | $2.3 | ($0.4) |
| Site Ongoing Environmental Monitoring/Water treatment | $2.4 | $2.2 | ($0.2) |
| Corporate G&A | $4.0 | $4.3 | $0.3 |
| Total | $29.8 | $25.5 | ($4.3) ^(^^5^^)^ |
(1) Actual Use of Proceeds includes actual costs from January 1, 2020 to December 31, 2020.
(2) Variance can be explained due to a lesser amount of metallurgical meters drilled (2,763m vs. original 7,500m planned). The company did not require to drill as much as originally planned. The Company also spent ~US$0.5mm on ground water drilling.
(3) Variance can be explained by less labour costs than budgeted and decision not to proceed with the construction of a new core shack. Partially-off set by a greater IP program than originally budgeted.
(4) Variance can be explained by lower permitting and engineering expenses than originally budgeted. These expenses will be rolled over in 2021.
(5) Overall variance due to development expenses, as the Company did not spend as much as originally budgeted towards permitting and engineering expenses. The Company do not believe that the variance will have an impact on its development timeline.
The Company raised net proceeds of approximately C$28.1 million (US$21.3 million) in September 2020 through a brokered financing. The table below summarized the expected use of proceeds:
| September 2020 Financing<br><br> <br>(Expenditures from January 2021 to Q4 2021) ^(1)^<br><br> <br>**** | September 2020 Expected Use of Proceeds (US$M) ^(1)^ | September 2020 Expected Use of Proceeds (C$M) ^(1)^ |
|---|---|---|
| Exploration work, including drilling | US$6.4 | C$8.4 |
| Pre-Feasibility Study work, including engineering and permitting | US$9.0 | C$11.9 |
| Other<br>(field costs, land acquisition, land holdings, site G&A, infrastructure, etc.) | US$1.7 | C$2.2 |
| Site Ongoing Environmental Monitoring / Water Treatment | US$1.4 | C$1.9 |
| Corporate G&A | US$2.8 | C$3.7 |
| ****<br><br> <br>Total | <br><br> <br>US$21.3<br><br> <br> | ****<br><br> <br>C$28.1 |
(1) The Company does not currently expect the actual use of proceeds to differ materially from the expected use of proceeds.
SUMMARY OF SELECTED QUARTERLY INFORMATION
The following table sets forth selected quarterly financial information for each of the last eight quarters *.
| Quarter Ending | Revenue<br><br> <br>($) | Net Loss<br><br> <br>($) | Net Loss <br>Per Share ($) |
|---|---|---|---|
| March 31, 2021 | Nil | (8,438,318) | (0.15) |
| December 31, 2020 | Nil | (11,153,886) | (0.21) |
| September 30, 2020 | Nil | (7,658,156) | (0.15) |
| June 30, 2020 | Nil | (5,234,608) | (0.11) |
| March 31, 2020 | Nil | (3,116,967) | (0.07) |
| December 31, 2019 | Nil | (7,437,800) | (0.19) |
| September 30, 2019 | Nil | (5,648,539) | (0.17) |
| June 30, 2019 | Nil | (4,557,202) | (0.15) |
*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, 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 in the third and first quarter of 2020.
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 had a working capital of $22,929,549 at March 31, 2021 (December 31, 2020 - $30,630,454). Working capital decreased in the current period comparing to the year ended December 31, 2020 mostly due to a decrease in cash.
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 audited consolidated financial statements for the year ended December 31, 2020, filed on SEDAR at www.sedar.com and on Integra's website at www.integraresources.com.
| MANAGEMENT’S DISCUSSION & ANALYSIS For the Three-Month Periods Ended March 31, 2021 and 2020 |
|---|
LOAN RECEIVABLE
In August 2020, the Company extended a US$140,000 (C$178,248) loan to a local resident to complete the construction of a restaurant in the local community of Jordan Valley, Oregon. This restaurant, which opened in March 2021, is serving the local community and the Company's employees and contractors. The loan bears a 6.0% interest rate per annum for a five-year term, and the first payment, which was originally due on January 31, 2021, was subsequently deferred to April 30, 2021. The loan is fully secured by the premises and all property affixed or attached to or incorporated upon the premises. At the beginning of the current period, the loan was increased from US$140,000 (C$178,248) to US$175,000 (C$220,063).
The first loan payment was received post quarter end. An impairment test based on the expected credit loss model is being performed quarterly, and management assessed that the credit risk related to the loan as low.
Summaries of the changes in the loan receivable and interest income for the current three-month period ended March 31, 2021 and the year ended December 31, 2020 are included in the Company's unaudited interim condensed consolidated financial statements for the three-month periods ended March 31, 2021 and 2020.
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.
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 US$64,950 (C$81,675) for 2021 (December 31, 2020 - US$54,950 (C$69,962)) - US$34,850 (C$43,824) was paid in the current quarter.
The Company's obligation related to land and road access lease payments, option payments and IDL rent payments is expected to total US$224,831 (C$282,725) for 2021 (December 31, 2020 - US$195,193 (C$248,520)) - US$78,448 (C$98,648) was paid in the current quarter.
The Company's obligation for BML claim fees is expected to total US$200,000 (C$251,500) for 2021 (December 31, 2020 - US$191,651 (C$244,010)).
The increase in land related payments from 2020 to 2021 is not material and it is mostly a result of the Company's increased land position.
| MANAGEMENT’S DISCUSSION & ANALYSIS For the Three-Month Periods Ended March 31, 2021 and 2020 |
|---|
Other Commitments
The Company's commitments and contractual obligations at March 31, 2021, are as follows:
| Commitments and contractual obligations | Less than one<br><br> <br>year commitment | 1 - 3 years commitment | 3 - 5 years commitment | Over 5 years commitment | Total |
|---|---|---|---|---|---|
| Contractual obligations* | 3,128,871 | 544,548 | 256,416 | - | 3,929,835 |
| Total | $ 3,128,871 | $ 544,548 | $ 256,416 | $ - | $ 3,929,835 |
*Contractual obligations are related to various exploration and development commitments.
LEASES - RIGHT-OF-USE ASSETS AND LEASE LIABILITIES
Summaries of the changes in right-of-use assets and the lease liabilities for the three-month period ended March 31, 2021 and the year ended December 31, 2020 are included in the Company's unaudited interim condensed consolidated financial statements for the three-month periods ended March 31, 2021 and 2020.
The Company subleased a portion of its head office to three companies for a total rent income of $25,500 in the current three-month period ended March 31, 2021 (March 31, 2020 - $25,500). The income is recognized in the 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 equipment rentals. For the three-month period ended March 31, 2021, the Company expensed $22,360 (March 31, 2020 - $72,694) related to these operating leases. March 31, 2020 expensed amount was related to the short-term office rent and equipment rental agreements. The Company's short-term lease commitment as of March 31, 2021 was $23,522 (December 31, 2020 - $15,877).
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 March 31, 2021, $432,572 (December 31, 2020 - $816,811) 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 March 31, 2021 amounted to $9,803 (December 31, 2020 - $9,516) and was recorded in receivables. These receivables were settled subsequent to the period end.
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.
| MANAGEMENT’S DISCUSSION & ANALYSIS For the Three-Month Periods Ended March 31, 2021 and 2020 |
|---|
Remuneration attributed to executives and directors for the three-month periods ended March 31, 2021 and 2020 were as follows:
| **** <br>March 31, 2021 | March 31, 2020 | |||||
|---|---|---|---|---|---|---|
| Short-term benefits* | $ | 596,067 | $ | 383,210 | ||
| Associate companies** | (5,353 | ) | (8,042 | ) | ||
| Stock-based compensation | 340,258 | 320,551 | ||||
| Total | $ | 930,972 | $ | 695,719 |
*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.
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.
The following tables show the break-down of the compensation and short-term benefits attributed to key management and associate companies for the three-month periods ended March 31, 2021 and 2020*.
| **** | Three-Months Ended | |||
|---|---|---|---|---|
| Related Parties | March 31, 2021 | March 31, 2020 | ||
| George Salamis, Director, CEO & President | $ | 171,999 | $ | 82,256 |
| Stephen de Jong, Director | 26,667 | 30,000 | ||
| David Awram, Director | - | 9,000 | ||
| Timo Jauristo, Director | 3,589 | 9,000 | ||
| Anna Ladd-Kruger, Director | 11,477 | 9,000 | ||
| C.L. "Butch" Otter, Director | 11,424 | 12,231 | ||
| Andree St-Germain, CFO | 78,459 | 51,598 | ||
| Max Baker, VP Exploration | 97,616 | 77,763 | ||
| Joshua Serfass | 76,332 | - | ||
| Carolyn Loader, Director** | 3,773 | - | ||
| Timothy Arnold, COO | 114,731 | 102,362 | ||
| Total | $ | 596,067 | $ | 383,210 |
*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.
** Mrs. Carolyn Loader became a related party in February 2021.
| Associate companies - March 31, 2021 | Paid to | Received from | Net total | |||||
|---|---|---|---|---|---|---|---|---|
| VRify Technology Inc. (1) | $ | 4,000 | $ | - | $ | 4,000 | ||
| Contact Gold Corp. (2) | - | (9,353 | ) | (9,353 | ) | |||
| Total | $ | 4,000 | $ | (9,353 | ) | $ | (5,353 | ) |
| Associate companies - March 31, 2020 | Paid to | Received from | Net total | |||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| VRify Technology Inc. (1) | $ | 2,000 | $ | - | $ | 2,000 | ||
| Contact Gold Corp. (2) | - | (10,042 | ) | (10,042 | ) | |||
| Total | $ | 2,000 | $ | (10,042 | ) | $ | (8,042 | ) |
(1) Stephen de Jong, Chairman of the Company, is the CEO of VRify Technology Inc. ("VRify"). The Company paid VRify fees for its virtual reality services.
(2) George Salamis, president and CEO of the Company, is a director of Contact Gold ("Contact Gold"). Contact Gold paid the Company rent and office expenses.
| MANAGEMENT’S DISCUSSION & ANALYSIS For the Three-Month Periods Ended March 31, 2021 and 2020 |
|---|
On March 31, 2021, the Company issued 6,921 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 March 31, 2021 closing share price of $3.40. Those units vested in full at the grant date. The share-based payment related to these DSUs was calculated as $23,531, expensed on March 31, 2021. The following table shows the break-down of the DSUs issued on March 31, 2021:
| March 31, 2021 | Quarterly Retainer | % Paid DSUs | Value base | Number of DSUs | ||
|---|---|---|---|---|---|---|
| **** | **** | **** | (Share-based payment) | **** | ||
| Stephen de Jong | $ | 30,000 | 20% | $ | 5,998 | 1,764 |
| David Awram | 10,250 | 100% | 10,248 | 3,014 | ||
| Timo Jauristo | 10,875 | 67% | 7,285 | 2,143 | ||
| Total | $ | 51,125 | **** | $ | 23,531 | 6,921 |
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 US$0.6mm (C$0.8mm). 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. 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 liability and interest expenses for the three-month period ended March 31, 2021 and the year ended December 31, 2020 are included in the Company's unaudited interim condensed consolidated financial statements for the three-month periods ended March 31, 2021 and 2020.
OUTSTANDING SHARE DATA
Share capital details are included in the Company's unaudited interim condensed consolidated financial statements for the three-month periods ended March 31, 2021 and 2020.
The following table outlines the outstanding share data as of the date of this MD&A:
| May 14, 2021 | |
|---|---|
| Issued and outstanding common shares | 54,813,022 |
| Outstanding Options/RSUs/DSUs to purchase common shares | 5,194,696 |
| Issued and outstanding common shares (fully diluted) | 60,007,718 |
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 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.
| MANAGEMENT’S DISCUSSION & ANALYSIS For the Three-Month Periods Ended March 31, 2021 and 2020 |
|---|
Measurement uncertainties are described in the Company's audited consolidated financial statements for the year ended December 31, 2020.
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, 2020.
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, 2020, dated March 12, 2021 and available under the Company's issuer profile on SEDAR at www.sedar.com.
CAUTIONARY NOTE TO US INVESTORS WITH RESPECT TO MINERAL RESOURCES
The SEC has adopted amendments to its disclosure rules to modernize the mineral property disclosure requirements for issuers whose securities are registered with the SEC. These amendments became effective February 25, 2019 (the "SEC Modernization Rules") and, following a two-year transition period, the SEC Modernization Rules will replace the historical property disclosure requirements for mining registrants that are included in Industry Guide 7. Following the transition period, as a foreign private issuer that files its annual report on Form 40-F with the SEC pursuant to the multi-jurisdictional disclosure system, the Company is not required to provide disclosure on its mineral properties under the SEC Modernization Rules and will continue to provide disclosure under NI 43-101 and the CIM Definition Standards. If the Company ceases to be a foreign private issuer or loses its eligibility to file its annual report on Form 40-F pursuant to the multi-jurisdictional disclosure system, then the Company will be subject to the SEC Modernization Rules which differ from the requirements of NI 43-101 and the CIM Definition Standards.
NON-GAAP MEASURES
Alternative performance measures in this document such as "cash cost" and "AISC" 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 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.
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.
| MANAGEMENT’S DISCUSSION & ANALYSIS For the Three-Month Periods Ended March 31, 2021 and 2020 |
|---|
STATEMENT OF 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 four committees: the Audit Committee, the Human Resources and Compensation Committee, the Nomination and Corporate Governance Committee, and the Technical, Safety, Environment and Sustainability 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 will be made available on Integra's website (www.integraresources.com) and on SEDAR (www.sedar.com) on or before May 20, 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 March 31, 2021 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:
| MANAGEMENT’S DISCUSSION & ANALYSIS For the Three-Month Periods Ended March 31, 2021 and 2020 |
|---|
• Maintaining records, that in reasonable detail, accurately and fairly reflect our transactions and dispositions of the assets of the Company;
• 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;
• Providing reasonable assurance that receipts and expenditures are made in accordance with authorizations of management and the directors of the Company; and
• 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 March 31, 2021 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.
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 three-month period ended March 31, 2021 that have materially affected, or are likely to materially affect, the Company's internal control over financial reporting.
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This MD&A contains "forward-looking information" and "forward-looking statements" (collectively, "forward-looking statements") within the meaning of the applicable Canadian and United States securities legislation. All statements, other than statements of historical fact, are forward-looking statements and are based on expectations, estimates and projections as at the date of this MD&A. Any statement that involves discussion with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions, future events or performance (often, but not always using phrases such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", or "believes" or variations (including negative variations) of such words and phrases, or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved) are not statements of historical fact and may be forward-looking statements.
In this MD&A, forward-looking statements relate, but are not limited, to: the development, operational and economic results of the PEA, including cash flows, capital expenditures, development costs, extraction rates, life of mine cost estimates; estimation of mineral resources; magnitude or quality of mineral deposits; anticipated advancement of the DeLamar Project mine plan; future operations; future exploration prospects; the completion and timing of future development studies, including a pre-feasibility study; future growth potential of DeLamar and future development plans; planned exploration and development programs and expenditures; proposed exploration plans and expected results of exploration and drilling from the DeLamar Project; submission of, and anticipated results of, permitting applications; planned environmental studies; Integra's ability to obtain licenses, permits and regulatory approvals required to implement expected future exploration plans; changes in commodity prices and exchange rates; currency and interest rate fluctuations and impact of COVID-19 on the timing of exploration work and development studies.
| MANAGEMENT’S DISCUSSION & ANALYSIS For the Three-Month Periods Ended March 31, 2021 and 2020 |
|---|
Forward-looking statements are necessarily based upon a number of factors and assumptions that, if untrue, could cause actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such statements. Forward-looking statements are based upon a number of estimates and assumptions that, while considered reasonable by the Company at this time, are inherently subject to significant business, economic and competitive uncertainties and contingencies that may cause the Company's actual financial results, performance, or achievements to be materially different from those expressed or implied herein. Some of the material factors or assumptions used to develop forward-looking statements include, without limitation, the future price of gold and silver, anticipated costs and the Company's ability to fund its programs, the Company's ability to carry on exploration and development activities, the timing and results of drilling programs, the discovery of additional mineral resources on the Company's mineral properties, the timely receipt of required approvals and permits, including those approvals and permits required for successful project permitting, construction and operation of projects, the costs of operating and exploration expenditures, the Company's ability to operate in a safe, efficient and effective manner, the Company's ability to obtain financing as and when required and on reasonable terms and the impact of COVID-19 and the resumption of business.
Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such factors include, among others: risks related to the speculative nature of the Company's business; the Company's formative stage of development; the Company's financial position; possible variations in mineralization, grade or recovery rates; actual results of current exploration activities; actual results of reclamation activities; conclusions of future economic evaluations; business integration risks; fluctuations in general macroeconomic conditions; fluctuations in securities markets; fluctuations in spot and forward prices of gold, silver, base metals or certain other commodities; fluctuations in currency markets (such as the Canadian dollar to United States dollar exchange rate); change in national and local government, legislation, taxation, controls regulations and political or economic developments; risks and hazards associated with the business of mineral exploration, development and mining (including environmental hazards, industrial accidents, unusual or unexpected formation pressures, cave-ins and flooding); inability to obtain adequate insurance to cover risks and hazards; the presence of laws and regulations that may impose restrictions on mining; employee relations; relationships with and claims by local communities and indigenous populations; availability of increasing costs associated with mining inputs and labour; the speculative nature of mineral exploration and development (including the risks of obtaining necessary licenses, permits and approvals from government authorities); and title to properties.
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. See the section entitled "Risk Factors" above for additional risk factors that could cause results to differ materially from forward-looking statements.
Forward-looking statements contained herein are made as of the date of this MD&A and the Company disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or results, except as may be required by applicable securities laws. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on 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-Month Periods Ended March 31, 2021 and 2020 |
|---|
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
May 14, 2021
Integra Resources Corp.: Exhibit 99.2 - Filed by newsfilecorp.com
Integra Resources Corp.
Unaudited Interim Condensed Consolidated Financial Statements
For the Three-Month Periods Ended
March 31, 2021 and 2020
Expressed in Canadian 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 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 |
2
Integra Resources Corp.
Unaudited Interim Condensed Consolidated Financial Statements
For the Three-Month Periods Ended
March 31, 2021 and 2020
Table of Contents
| Description | Page |
|---|---|
| Unaudited Interim Condensed Consolidated Statements of Financial Position | 4 |
| Unaudited Interim Condensed Consolidated Statements of Operations and Comprehensive Loss | 5 |
| Unaudited Interim Condensed Consolidated Statements of Changes in Equity | 6 |
| Unaudited Interim Condensed Consolidated Statements of Cash Flows | 7 |
| Notes to Unaudited Interim Condensed Consolidated Financial Statements | 8 - 33 |
Integra Resources Corp.
Unaudited Interim Condensed Consolidated Statements of Financial Position
(Expressed in Canadian Dollars)
| **** <br> **** | March 31, 2021 | ||
|---|---|---|---|
| **** | |||
| Assets | |||
| Current Assets | |||
| Cash and cash equivalents (Note 5) | 28,344,680 | 37,000,648 | |
| Receivables and prepaid expenses (Note 6) | 1,134,563 | 844,877 | |
| Loan receivable - current portion (Note 6) | 38,908 | 31,515 | |
| Total Current Assets | 29,518,151 | 37,877,040 | |
| Long-Term Deposits (Note 6) | 47,634 | 30,204 | |
| Restricted Cash (Note 7) | 23,143 | 23,100 | |
| Loan receivable - non-current portion (Note 6) | 181,155 | 146,733 | |
| Property, Plant and Equipment (Note 8) | 2,239,042 | 2,091,519 | |
| Right-of-Use Assets (Note 9) | 1,062,345 | 1,085,584 | |
| Exploration and Evaluation Assets (Note 10) | 60,148,114 | 72,330,024 | |
| Total Assets | 93,219,584 | 113,584,204 | |
| Liabilities | |||
| Current Liabilities | |||
| Trade and other payables (Note 12) | 3,157,441 | 3,346,166 | |
| Current reclamation and remediation liability (Note 15) | 2,337,881 | 2,444,386 | |
| Current lease liability (Note 9) | 491,347 | 470,713 | |
| Current equipment financing liability (Note 13) | 169,361 | 168,510 | |
| Due to related parties (Note 11) | 432,572 | 816,811 | |
| Total Current Liabilities | 6,588,602 | 7,246,586 | |
| Long-Term Lease Liabilities (Note 9) | 689,850 | 719,566 | |
| Long-Term Equipment Financing Liability (Note 13) | 410,134 | 459,252 | |
| Reclamation and Remediation Liabilities (Note 15) | 39,836,363 | 51,905,753 | |
| Total Liabilities | 47,524,949 | 60,331,157 | |
| Shareholders' Equity | |||
| Share Capital (Note 16) | 132,149,892 | 131,327,665 | |
| Reserves (Note 16) | 7,723,178 | 7,458,553 | |
| Accumulated Other Comprehensive Loss | (1,226,679 | ) | (1,019,733 |
| Accumulated Deficit | (92,951,756 | ) | (84,513,438 |
| Total Equity | 45,694,635 | 53,253,047 | |
| Total Liabilities and Equity | 93,219,584 | 113,584,204 |
All values are in US Dollars.
Nature of Operations (Note 1); Commitments (Notes 14)
These unaudited interim condensed consolidated financial statements were authorized for issue by the Board of Directors on May 14, 2021. 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 Canadian Dollars)
| **** | Three-Month Periods Ended | |
|---|---|---|
| **** | March 31, 2021 | March 31, 2020 |
| **** | ||
| Operating Expenses | ||
| General and Administrative Expenses | ||
| Depreciation - Property, plant and equipment (Note 8) | (125,607 | (66,773 |
| Depreciation - Right-of-use assets (Note 9) | (127,734 | (83,798 |
| Compensation and benefits | (774,080 | (517,865 |
| Corporate development and marketing | (76,083 | (167,887 |
| Office and site administration expenses | (404,013 | (204,291 |
| Professional fees | (97,309 | (112,659 |
| Regulatory fees | (110,426 | (36,689 |
| Stock-based compensation (Note 16) | (525,875 | (461,085 |
| **** | (2,241,127 | (1,651,047 |
| Exploration and Evaluation Expenses (Note 10) | (5,568,628 | (2,413,074 |
| Operating Loss | (7,809,755 | (4,064,121 |
| Other Income (Expense) | ||
| Interest income | 15,550 | 120,783 |
| Lease interest expenses (Note 9) | (23,789 | (23,336 |
| Financing interest expenses (Note 13) | (10,687 | - |
| Rent income - sublease (Note 9) | 25,500 | 25,500 |
| Reclamation accretion expenses (Note 15) | (256,807 | (274,165 |
| Gain on equipment sold | 5,697 | 471 |
| Foreign exchange loss (gain) | (384,027 | 1,097,901 |
| Total Other Income (Expense) | (628,563 | 947,154 |
| Net Loss | (8,438,318 | (3,116,967 |
| Other Comprehensive Income (Loss) | ||
| Foreign exchange translation | (206,946 | 1,840,550 |
| Other Comprehensive Income (Loss) | (206,946 | 1,840,550 |
| Comprehensive Loss | (8,645,264 | (1,276,417 |
| Net Loss Per Share (Note 17) | ||
| - basic and diluted | (0.15 | (0.07 |
| Weighted Average Number of Shares (000's) | ||
| - basic and diluted (000's) (Note 17) | 54,740 | 47,823 |
All values are in US Dollars.
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 Canadian Dollars, except share numbers)
| ****** | Share Capital | Reserves **** | **** | **** | **** | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Number of Shares* | Amount | Equity Incentive Awards | Warrants | **** <br>Accumulated <br>Other <br>Comprehensive Income (Loss) | Deficit | Total | ||||||||||||
| Balance at December 31, 2019 | 47,823,177 | $ | 103,572,785 | $ | 4,353,229 | $ | 833,058 | $ | (849,663 | ) | $ | (57,349,821 | ) | $ | 50,559,588 | |||
| Share-based payments - options | - | - | 461,085 | - | - | - | 461,085 | |||||||||||
| Other comprehensive income | - | - | - | - | 1,840,550 | - | 1,840,550 | |||||||||||
| Net loss | - | - | - | - | - | (3,116,967 | ) | (3,116,967 | ) | |||||||||
| Balance at March 31, 2020 | 47,823,177 | 103,572,785 | 4,814,314 | 833,058 | 990,887 | (60,466,788 | ) | 49,744,256 | ||||||||||
| Balance at December 31, 2020 | 54,608,177 | 131,327,665 | 6,625,495 | 833,058 | (1,019,733 | ) | (84,513,438 | ) | 53,253,047 | |||||||||
| Shares issued for cash | 41,000 | 204,061 | - | - | - | - | 204,061 | |||||||||||
| Share issue cost - cash | - | (48,243 | ) | - | - | - | - | (48,243 | ) | |||||||||
| Share-based payments - equity | ||||||||||||||||||
| incentive awards | - | - | 525,875 | - | - | - | 525,875 | |||||||||||
| Options exercised | 159,733 | 647,041 | (241,882 | ) | - | - | - | 405,159 | ||||||||||
| RSUs vested | 4,112 | 19,368 | (19,368 | ) | - | - | - | - | ||||||||||
| Other comprehensive loss | - | - | - | - | (206,946 | ) | - | (206,946 | ) | |||||||||
| Net loss | - | - | - | - | - | (8,438,318 | ) | (8,438,318 | ) | |||||||||
| Balance at March 31, 2021 | 54,813,022 | $ | 132,149,892 | $ | 6,890,120 | $ | 833,058 | $ | (1,226,679 | ) | $ | (92,951,756 | ) | $ | 45,694,635 |
*Number of shares outstanding reflects the 2.5 to 1 consolidation on July 9, 2020 of the Company's issued and outstanding shares.
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 Canadian Dollars) ****
| Three-Month Periods Ended | ||
|---|---|---|
| March 31, 2021 | March 31, 2020 | |
| Operations | ||
| Net loss | (8,438,318 | (3,116,967 |
| Adjustments to reconcile net loss to cash flow<br> from operating activities: | ||
| Depreciation - Property, plant and equipment (Note 8) | 125,607 | 66,773 |
| Depreciation - Right-of-use assets (Note 9) | 127,734 | 83,798 |
| Lease interest expenses (Note 9) | 23,789 | 23,336 |
| Financing interest expenses (Note 13) | 10,687 | - |
| Reclamation accretion expenses (Note 15) | 256,807 | 274,165 |
| Reclamation expenditures (Note 15) | (416,668 | (454,664 |
| Unrealized foreign exchange loss | 11,881 | 32,162 |
| Share-based payment (Note 16) | 525,875 | 461,085 |
| Net change in non-cash working capital items: | ||
| Receivables, prepaid expenses and other assets | (301,836 | (29,955 |
| Loan receivable (Note 6) | (39,617 | - |
| Lease liabilities | (9,474 | (62,177 |
| Financing liabilities | (10,687 | - |
| Trade and other payables | (43,135 | 49,641 |
| Due to related parties | (384,241 | (269,051 |
| Cash flow used in operating activities | (8,561,596 | (2,941,854 |
| Investing | ||
| Additions to property, plant and equipment | (278,768 | (66,312 |
| Long-term investments (Note 7) | (43 | (4,092 |
| Property acquisition costs | (56,415 | (43,007 |
| Cash flow used in investing activities | (335,226 | (113,411 |
| Financing | ||
| Issuance of common shares - ATM (Note 16) | 204,061 | - |
| Issuance of common shares - Options (Note 16) | 405,159 | - |
| Share issue costs | (214,901 | (27,036 |
| Lease principal payments (Note 9) | (112,940 | (58,546 |
| Financing principal payments (Note 13) | (40,525 | - |
| Cash flow provided by (used in) financing activities | 240,854 | (85,582 |
| Decrease in cash and cash equivalents | (8,655,968 | (3,140,847 |
| Cash and cash equivalents at beginning of period | 37,000,648 | 31,323,346 |
| Cash and cash equivalents at end of period | 28,344,680 | 28,182,499 |
All values are in US Dollars.
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
**Integra Resources Corp.**Notes to the Unaudited Interim Condensed Consolidated Financial StatementsFor the Three-Month Periods Ended March 31, 2021 and 2020(Expressed in Canadian Dollars)
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 south western 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, travel bans remain in place or should one of the Company's team members or consultants become infected, 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 May 14, 2021.
**Integra Resources Corp.**Notes to the Unaudited Interim Condensed Consolidated Financial StatementsFor the Three-Month Periods Ended March 31, 2021 and 2020(Expressed in Canadian Dollars)
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, 2020 audited consolidated annual financial statements.
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. The functional currency of the Company's two US subsidiaries is the US dollar. The presentation currency of the Company is the Canadian dollar.
Foreign currency transactions and balances
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.
When a foreign currency transaction involves an advance payment or receipt, the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income is the date on which an entity initially recognized the non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration.
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, 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 as part of the gain or loss on sale.
**Integra Resources Corp.**Notes to the Unaudited Interim Condensed Consolidated Financial StatementsFor the Three-Month Periods Ended March 31, 2021 and 2020(Expressed in Canadian Dollars)
2. BASIS OF PREPARATION (continued)
2.2 Significant Accounting Policies (continued)
Foreign Currency Translation (continued)
Translation of subsidiary results into the presentation currency
The operating results and statements of financial position of the Company's subsidiaries which have the US dollar as a functional currency have been translated into Canadian dollars as follows:
i) Assets and liabilities are translated at the closing rate at the date of the statement of financial position;
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;
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.
2.3 Adoption of New Standards
New Accounting Pronouncements
Certain pronouncements were issued by the International Accounting Standards Board (IASB) that will be mandatory for accounting periods on or after January 1, 2021.
Interest Rate Benchmark Reform Phase II - IFRS 9 Financial Instruments, IAS 39 Financial Instruments, IFRS 7 Financial Instruments Disclosures, IFRS 4, Insurance Contracts, and IFRS 16, Leases - Amendments: In August 2020, IASB issued the second phase of this reform, addressing the effects of the reform on a company's financial statements that arise when an interest rate benchmark used to calculate interest on loans, leases, and hedge contracts is replaced with an alternative benchmark rate. It provides guidance on how to treat financial asserts and financial liabilities where the basis for determining the contractual cash flows changes due to the reform. No reinstatements of prior periods are required, except there could be some potential reinstatements of hedge relationships that were discontinued due to changes directly required by the reform.
The amendments are effective for annual periods beginning on or after January 1, 2021. Integra will adopt these amendments in 2021 and currently expects the adoption has no impact on its consolidated financial statements.
**Integra Resources Corp.**Notes to the Unaudited Interim Condensed Consolidated Financial StatementsFor the Three-Month Periods Ended March 31, 2021 and 2020(Expressed in Canadian Dollars)
2. BASIS OF PREPARATION (continued)
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.
There have been no material revisions 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, 2020.
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's working capital as of March 31, 2021 was $22,929,549 (December 31, 2020 - $30,630,454 working capital). 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. 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, 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 three-month period ended March 31, 2021.
**Integra Resources Corp.**Notes to the Unaudited Interim Condensed Consolidated Financial StatementsFor the Three-Month Periods Ended March 31, 2021 and 2020(Expressed in Canadian Dollars)
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 |
| Equipment financing liability | Other financial liabilities, measured at amortized cost |
The following table summarizes the Company's financial instruments classified as FVTPL as at March 31, 2021 and December 31, 2020:
| Level | March 31, 2021 | December 31, 2020 | |||
|---|---|---|---|---|---|
| FINANCIAL ASSETS: | |||||
| Cash and cash equivalents | 1 | $ | 28,344,680 | $ | 37,000,648 |
Fair value estimates 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.****
**Integra Resources Corp.**Notes to the Unaudited Interim Condensed Consolidated Financial StatementsFor the Three-Month Periods Ended March 31, 2021 and 2020(Expressed in Canadian Dollars)
4. FINANCIAL INSTRUMENTS (continued)
The Company's lease liability and equipment financing liability are recorded at amortized costs using effective interest rate method. Lease liability and equipment financing liabilities are initially measured at the present value of the payments to be made over the lease (financing) term, using the implicit interest rate (if available) or incremental borrowing rate for the present value determination. Fair values of trade and other payables and due to related parties are determined from transaction values which were derived from observable market inputs. Fair values of other financial assets are based on current bid prices at the balance sheet date.
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 (excluding tax receivables) - The Company is not exposed to significant credit risk as its receivables are insignificant.
c. Loan receivable - An impairment test based on the expected loss model is being performed quarterly, and management assessed that the credit risk related to the loan receivable is low (see Note 6).
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.
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 future cash flows will fluctuate as a result of changes in market interest rates. There is no interest rate risk related to the Company's financing liability. Interest rate 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 considers this risk to be immaterial.
**Integra Resources Corp.**Notes to the Unaudited Interim Condensed Consolidated Financial StatementsFor the Three-Month Periods Ended March 31, 2021 and 2020(Expressed in Canadian Dollars)
4. FINANCIAL INSTRUMENTS (continued)
iii) Market Risk (continued)
b. Foreign Exchange Risk
The Company is exposed to currency fluctuations given that most of its expenditures are incurred in the US. 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 three-month period ended March 31, 2021, the Company recognized a net foreign exchange loss of $384,027. Based on the Company's net foreign currency exposure at March 31, 2021, 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 March 31, 2021 | Possible exposure* | Impact on net loss | Impact on net loss | |||
|---|---|---|---|---|---|---|
| US dollar | +/-5% | $ | 1,200,919 | $ | (1,200,919 | ) |
*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 March 31, 2021 consists of $27,301,946 in cash and $1,042,734 held in short-term investments (December 31, 2020 - $35,209,012 in cash and $1,791,636 in short-term investments) on deposit with major Canadian and US banks. Short-term investments are redeemable on a monthly basis, with the annual interest rates ranging between 0.20% (investments in US$) and 0.25% (investments in C$). As of March 31, 2021, the Company held approximately 93% (December 31, 2020 - 93%) of its cash and short-term investments in US dollar.
6. RECEIVABLES, PREPAID EXPENSES, DEPOSITS, AND LOAN RECEIVABLE
| Receivables and Prepaid Expenses As at | March 31, 2021 | December 31, 2020 | ||
|---|---|---|---|---|
| Receivables | $ | 68,390 | $ | 40,864 |
| Prepaid expenses | 1,066,173 | 804,013 | ||
| Total receivables and prepaid expenses | $ | 1,134,563 | $ | 844,877 |
| Long-Term Deposits As at | March 31, 2021 | December 31, 2020 | ||
| --- | --- | --- | --- | --- |
| Long-term security deposit* | $ | 47,634 | $ | 30,204 |
| Total Long-Term Deposits | $ | 47,634 | $ | 30,204 |
*Long-term security deposit is related to the head-office lease, Boise office lease, utility, equipment rental, and the campground lease security deposits.
At March 31, 2021 and December 31, 2020, the Company anticipates full recovery of these amounts and therefore no impairment has been recorded against these receivables and long-term deposits. The Company holds no collateral for any receivable amounts outstanding as at March 31, 2021 and December 31, 2020.
**Integra Resources Corp.**Notes to the Unaudited Interim Condensed Consolidated Financial StatementsFor the Three-Month Periods Ended March 31, 2021 and 2020(Expressed in Canadian Dollars)
6. RECEIVABLES, PREPAID EXPENSES, DEPOSITS, AND LOAN RECEIVABLE (continued)
Loan receivable
In August 2020, the Company extended a US$140,000 (C$178,248) loan to a local resident to complete the construction of a restaurant in Jordan Valley. This restaurant will serve the local community and the Company's employees and contractors. The loan bears a 6.0% interest rate per annum for a five-year term. The first payment was originally due on January 31, 2021 but was subsequently deferred to April 30, 2021. The principal and interest repayment has been deferred to April 2021. The loan is fully secured by the premises and all property affixed or attached to or incorporated upon the premises. At the beginning of the current period, the loan was increased from US$140,000 (C$178,248) to US$175,000 (C$220,063).
A summary of the changes in the loan receivable for the current three-month period ended March 31, 2021 and the year ended December 31, 2020 is as follows:
| **** **** | Loan receivable | ||
|---|---|---|---|
| Balance, December 31, 2019 | $ | - | |
| Loan receivable | 178,248 | ||
| Principal payments | - | ||
| Balance, December 31, 2020 | $ | 178,248 | |
| Loan receivable - addition | 44,013 | ||
| Principal payments | - | ||
| Translation | (2,198 | ) | |
| Balance, March 31, 2021 | $ | 220,063 | |
| Current portion | $ | 38,908 | |
| Non-current portion | $ | 181,155 |
Interest income in the current quarter was nil. The impairment test has been performed quarterly, based on the expected credit loss model. Management assessed the credit risk related to the loan as low (Note 4(i)).
The first loan payment was received subsequent to the quarter end.
7. RESTRICTED CASH
The Company's restricted cash at March 31, 2021 consists of $23,143 (December 31, 2020 - $23,100), in credit card security deposits. The December 31, 2020 balance was related to the same item.
**Integra Resources Corp.**Notes to the Unaudited Interim Condensed Consolidated Financial StatementsFor the Three-Month Periods Ended March 31, 2021 and 2020(Expressed in Canadian Dollars)
8. PROPERTY, PLANT AND EQUIPMENT
| **** | **** <br>Computers and software | Office furniture and equipment | **** <br> **** <br>Vehicles | Buildings, well, road, and buildings improvements | **** <br> **** <br>Equipment | **** <br>Total | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Cost | **** | **** | **** | **** | **** | **** | ||||||||||||
| Balance at December 31, 2019 | $ | 221,187 | $ | 51,383 | $ | 75,129 | $ | 887,995 | $ | 466,016 | $ | 1,701,710 | ||||||
| Additions (adjustments) | 50,614 | 3,606 | 47,146 | 22,385 | 934,819 | 1,058,570 | ||||||||||||
| Translation difference | 42 | (142 | ) | (1,481 | ) | (16,091 | ) | (9,186 | ) | (26,858 | ) | |||||||
| Balance at December 31, 2020 | 271,843 | 54,847 | 120,794 | 894,289 | 1,391,649 | 2,733,422 | ||||||||||||
| Additions (adjustments) | 8,241 | - | - | 39,113 | 247,161 | 294,515 | ||||||||||||
| Translation difference | (2,419 | ) | (87 | ) | (1,490 | ) | (10,144 | ) | (17,161 | ) | (31,301 | ) | ||||||
| Balance at March 31, 2021 | $ | 277,665 | $ | 54,760 | $ | 119,304 | $ | 923,258 | $ | 1,621,649 | $ | 2,996,636 | ||||||
| Accumulated Depreciation | ||||||||||||||||||
| Balance at December 31, 2019 | $ | (85,504 | ) | $ | (18,893 | ) | $ | (20,390 | ) | $ | (35,104 | ) | $ | (105,742 | ) | $ | (265,633 | ) |
| Depreciation | (71,366 | ) | (10,164 | ) | (32,958 | ) | (62,585 | ) | (200,236 | ) | (377,309 | ) | ||||||
| Translation difference | (2,091 | ) | 40 | 404 | 603 | 2,083 | 1,039 | |||||||||||
| Balance at December 31, 2020 | (158,961 | ) | (29,017 | ) | (52,944 | ) | (97,086 | ) | (303,895 | ) | (641,903 | ) | ||||||
| Depreciation | (19,375 | ) | (2,649 | ) | (8,727 | ) | (15,400 | ) | (76,365 | ) | (122,516 | ) | ||||||
| Translation difference | 1,276 | 42 | 653 | 1,107 | 3,747 | 6,825 | ||||||||||||
| Balance at March 31, 2021 | $ | (177,060 | ) | $ | (31,624 | ) | $ | (61,018 | ) | $ | (111,379 | ) | $ | (376,513 | ) | $ | (757,594 | ) |
| Carrying amounts | ||||||||||||||||||
| December 31, 2019 | $ | 135,683 | $ | 32,490 | $ | 54,739 | $ | 852,891 | $ | 360,274 | $ | 1,436,077 | ||||||
| December 31, 2020 | $ | 112,882 | $ | 25,830 | $ | 67,850 | $ | 797,203 | $ | 1,087,754 | $ | 2,091,519 | ||||||
| March 31, 2021 | $ | 100,605 | $ | 23,136 | $ | 58,286 | $ | 811,879 | $ | 1,245,136 | $ | 2,239,042 |
**Integra Resources Corp.**Notes to the Unaudited Interim Condensed Consolidated Financial StatementsFor the Three-Month Periods Ended March 31, 2021 and 2020(Expressed in Canadian Dollars)
9. LEASES - RIGHT-OF-USE ASSETS AND LEASE LIABILITIES
All leases are accounted for in accordance with the IFRS 16, Leases.
A summary of the changes in right-of-use assets for the three-month period ended March 31, 2021 and the year ended December 31, 2020 is as follows:
| **** <br>Right-of-Use Assets | Head office rent<br> (5-year term) | **** <br>Vehicles<br> (3 & 4-year term) | **** <br>Equipment<br> (3-year term) | DeLamar office rent<br> (5-year term) | **** <br> Total | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance, December 31, 2019 | $ | 708,122 | $ | 86,523 | $ | 152,665 | $ | - | $ | 947,310 | |||||
| Additions | 5,200 | 295,210 | 834 | 242,141 | 543,385 | ||||||||||
| Depreciation | (227,515 | ) | (87,940 | ) | (51,310 | ) | (33,631 | ) | (400,396 | ) | |||||
| Translation differences | - | (1,705 | ) | (3,010 | ) | - | (4,715 | ) | |||||||
| Balance, December 31, 2020 | 485,807 | 292,088 | 99,179 | 208,510 | 1,085,584 | ||||||||||
| Additions | 4,003 | 107,410 | - | - | 111,413 | ||||||||||
| Depreciation | (56,879 | ) | (37,778 | ) | (12,669 | ) | (19,930 | ) | (127,256 | ) | |||||
| Translation differences | - | (3,602 | ) | (1,223 | ) | (2,571 | ) | (7,396 | ) | ||||||
| Balance, March 31, 2021 | $ | 432,931 | $ | 358,118 | $ | 85,287 | $ | 186,009 | $ | 1,062,345 |
A summary of the changes in lease liabilities for the three-month period ended March 31, 2021 and the year ended December 31, 2020 is as follows:
| **** <br>Lease Liabilities | Headoffice rent | **** <br> Vehicles | **** <br>Equipment | DeLamar <br>office rent | **** <br>Total | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance, December 31, 2019 | $ | 781,479 | $ | 87,867 | $ | 153,334 | $ | - | $ | 1,022,680 | |||||
| Short-term lease liabilities at initial recognition | - | 88,005 | - | 84,310 | 172,315 | ||||||||||
| Long-term lease liabilities at initial recognition | (2,642 | ) | 207,206 | - | 157,830 | 362,394 | |||||||||
| Payments - principal portion | (203,397 | ) | (102,300 | ) | (46,127 | ) | (12,658 | ) | (364,482 | ) | |||||
| Adjustments | 2,126 | - | - | - | 2,126 | ||||||||||
| Translation differences | - | (1,732 | ) | (3,022 | ) | - | (4,754 | ) | |||||||
| Balance, December 31, 2020 | 577,566 | 279,046 | 104,185 | 229,482 | 1,190,279 | ||||||||||
| Short-term lease liabilities at initial recognition | - | 30,983 | - | - | 30,983 | ||||||||||
| Long-term lease liabilities at initial recognition | 4,003 | 76,427 | - | - | 80,430 | ||||||||||
| Payments - principal portion | (54,326 | ) | (42,134 | ) | (12,154 | ) | (19,091 | ) | (127,705 | ) | |||||
| Adjustments | 14,766 | - | - | - | 14,766 | ||||||||||
| Translation differences | - | (3,441 | ) | (1,285 | ) | (2,830 | ) | (7,556 | ) | ||||||
| Balance, March 31, 2021 | $ | 542,009 | $ | 340,881 | $ | 90,746 | $ | 207,561 | $ | 1,181,197 |
**Integra Resources Corp.**Notes to the Unaudited Interim Condensed Consolidated Financial StatementsFor the Three-Month Periods Ended March 31, 2021 and 2020(Expressed in Canadian Dollars)
9. LEASES - RIGHT-OF-USE ASSETS AND LEASE LIABILITIES (continued)
Carrying lease liabilities amounts and the interest expense changes are as follows:
| **** <br> **** | **** <br>Current lease liabilities | **** <br>Long-term leaseliabilities | **** <br>Total leaseliabilities | **** <br>Interest <br>expenses | ||||
|---|---|---|---|---|---|---|---|---|
| Balance, December 31, 2019 | $ | 305,638 | $ | 717,042 | $ | 1,022,680 | $ | 88,466 |
| Balance, December 31, 2020 | 470,713 | 719,566 | 1,190,279 | 92,271 | ||||
| Balance, March 31, 2021 | $ | 491,347 | $ | 689,850 | $ | 1,181,197 | $ | 23,789 |
The Company subleased a portion of its head office to three companies for a rent income of $25,500 in the current three-month period ended March 31, 2021 (March 31, 2020 - $25,500). The income is recognized in the 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 equipment rentals. For the three-month period ended March 31, 2021, the Company expensed $22,360 (March 31, 2020 - $72,694) related to these operating leases. March 31, 2020 expensed amount was related to the short-term office rent and equipment rental agreements. The Company's short-term lease commitment as of March 31, 2021 was $23,522 (December 31, 2020 - $15,877).
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 $7.5 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 $27.3mm financing. The 2,218,395 common shares issued were valued at $4,714,089 on the closing date. The Company paid $3.0mm cash at closing of the acquisition transaction and issued a $4.5mm 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 C$10,000,000.
**Integra Resources Corp.**Notes to the Unaudited Interim Condensed Consolidated Financial StatementsFor the Three-Month Periods Ended March 31, 2021 and 2020(Expressed in Canadian Dollars)
10. EXPLORATION AND EVALUATION ASSETS (continued)
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 US$2mm (C$2.5mm) in cash. The Company completed the purchase of the Florida Mountain Empire claims in January 2018 and paid US$1.6mm (C$2.0mm) at closing. The Company completed the acquisition of the Florida Mountain Banner claims in the second quarter of 2018 and paid US$0.4mm (C$0.5mm) 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 US$200,000 over a period of four years in annual payments, as per the following schedule:
- US$20,000 cash at execution of the option agreement (C$27,284 - paid in December 2018);
- US$20,000 cash on the six-month anniversary (C$26,486 - paid in June 2019);
- US$30,000 cash on the one-year anniversary (C$38,964 - paid in December 2019);
- US$30,000 cash on the second anniversary (C$38,196 - paid in December 2020);
- US$30,000 cash on the third anniversary; and
- US$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.
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.
**Integra Resources Corp.**Notes to the Unaudited Interim Condensed Consolidated Financial StatementsFor the Three-Month Periods Ended March 31, 2021 and 2020(Expressed in Canadian Dollars)
10. EXPLORATION AND EVALUATION ASSETS (continued)
Exploration and Evaluation Assets Summary:
| **** | Total | ||
|---|---|---|---|
| Balance at December 31, 2019 | $ | 61,348,921 | |
| Land acquisitions/option payments | 45,835 | ||
| Claim Staking | 69,550 | ||
| Legal expenses | 5,559 | ||
| Title review and environment | 8,678 | ||
| Reclamation adjustment* | 12,000,190 | ||
| Depreciation** | (9,453 | ) | |
| Translation difference*** | (1,209,218 | ) | |
| Total | 72,260,062 | ||
| Advance minimum royalty | 69,962 | ||
| Balance at December 31, 2020 | 72,330,024 | ||
| Land acquisitions/option payments | 12,575 | ||
| Reclamation adjustment* | (11,344,102 | ) | |
| Depreciation** | (2,295 | ) | |
| Translation difference*** | (891,912 | ) | |
| Total | 60,104,290 | ||
| Advance minimum royalty | 43,824 | ||
| Balance at March 31, 2021 | $ | 60,148,114 |
*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 15.
**A staff house building with a carrying value of US$187,150 (C$235,341) has been included in the DeLamar property. This building is being depreciated.
***December 31, 2019 closing balance of US$47,235,080 (C$61,348,921), translated to C$ with the December 31, 2020 exchange rate equals to $60,139,703, resulting in a $1,209,218 translation difference; December 31, 2020 closing balance of US$56,809,633 (C$72,330,024), translated to C$ with the March 31, 2021 exchange rate equals to $71,438,112, resulting in a $891,912 translation difference.
The Company spent $5,568,628 in exploration and evaluation activities during the three-month period ended March 31, 2021 (March 31, 2020 - $2,413,074).
**Integra Resources Corp.**Notes to the Unaudited Interim Condensed Consolidated Financial StatementsFor the Three-Month Periods Ended March 31, 2021 and 2020(Expressed in Canadian Dollars)
10. EXPLORATION AND EVALUATION ASSETS (continued)
The following tables outline the Company's exploration and evaluation expense summary for the three-month periods ended March 31, 2021 and 2020:
Exploration and Evaluation Expense Summary:
| **** <br>March 31, 2021 | DeLamar deposit | Florida Mountaindeposit | War Eagledeposit | Other<br> deposits | Joint <br>expenses | **** <br>Total | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Contract exploration drilling | $ | 504,629 | $ | 994,960 | $ | - | $ | 358,431 | $ | - | $ | 1,858,020 | ||
| Contract metallurgical drilling | - | - | - | - | - | - | ||||||||
| Exploration drilling - other drilling labour & related costs | 438,444 | 734,515 | 142 | 296,520 | - | 1,469,621 | ||||||||
| Metallurgical drilling - other drilling labour & related costs | (6,169 | ) | - | - | - | - | (6,169 | ) | ||||||
| Other exploration expenses* | - | - | - | - | 354,762 | 354,762 | ||||||||
| Other development expenses** | - | - | - | - | 520,396 | 520,396 | ||||||||
| Land*** | 67,751 | 14,929 | 2,932 | 27,354 | 12,415 | 125,381 | ||||||||
| Permitting | - | - | - | - | 548,190 | 548,190 | ||||||||
| Metallurgical test work | 37,761 | 56,269 | - | - | - | 94,030 | ||||||||
| Technical reports and studies | - | - | - | - | 560,452 | 560,452 | ||||||||
| Community engagement | - | - | - | - | 43,945 | 43,945 | ||||||||
| Total | $ | 1,042,416 | $ | 1,800,673 | $ | 3,074 | $ | 682,305 | $ | 2,040,160 | $ | 5,568,628 |
*Includes mapping, IP, sampling, payroll, exploration G&A expenses, consultants
**Includes development G&A expenses and payroll
***Includes compliance, consulting, property taxes, legal, etc. expenses
| **** <br>March 31, 2020 | DeLamar deposit | Florida Mountain deposit | Other<br> deposits | Joint <br>expenses | **** <br>Total | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| Contract exploration drilling | $ | 313,426 | $ | - | $ | - | $ | - | $ | 313,426 |
| Contract metallurgical drilling | 456,841 | - | - | - | 456,841 | |||||
| Exploration drilling - other drilling labour & related costs | 307,799 | 3,465 | 4,472 | - | 315,736 | |||||
| Metallurgical drilling - other drilling labour & related costs | 240,413 | - | - | - | 240,413 | |||||
| Other exploration expenses* | - | - | 80,258 | 336,777 | 417,035 | |||||
| Other development expenses** | - | - | - | 177,959 | 177,959 | |||||
| Land*** | 49,652 | 22,032 | 2,675 | - | 74,359 | |||||
| Permitting | - | - | - | 154,257 | 154,257 | |||||
| Metallurgical test work | 158,126 | 37,167 | - | - | 195,293 | |||||
| Technical reports and studies | - | - | - | 30,592 | 30,592 | |||||
| Community, safety & other | - | - | - | 37,163 | 37,163 | |||||
| Total | $ | 1,526,257 | $ | 62,664 | $ | 87,405 | $ | 736,748 | $ | 2,413,074 |
*Includes mapping, IP, sampling, payroll, exploration G&A expenses, consultants
**Includes development G&A expenses and payroll
***Includes compliance, consulting, property taxes, legal, etc. expenses
**Integra Resources Corp.**Notes to the Unaudited Interim Condensed Consolidated Financial StatementsFor the Three-Month Periods Ended March 31, 2021 and 2020(Expressed in Canadian Dollars)
11. 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 March 31, 2021, $432,572 (December 31, 2020 - $816,811) 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 March 31, 2021 amounted to $9,803 (December 31, 2020 - $9,516) and was recorded in receivables. These receivables were settled subsequent to the period end.
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 three-month periods ended March 31, 2021 and 2020 were as follows:
| **** <br>March 31, 2021 | March 31, 2020 | |||||
|---|---|---|---|---|---|---|
| Short-term benefits* | $ | 596,067 | $ | 383,210 | ||
| Associate companies** | (5,353 | ) | (8,042 | ) | ||
| Stock-based compensation | 340,258 | 320,551 | ||||
| Total | $ | 930,972 | $ | 695,719 |
*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.
On March 31, 2021, the Company issued 6,921 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 March 31, 2021 closing share price of $3.40. Those units vested in full at the grant date. The share-based payment related to these DSUs was calculated as $23,531, expensed on March 31, 2021 (included in the above table under stock-based compensation).
12. 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 between 30 to 90 days. The majority of the Company's payables relates to development and exploration expenditures, legal and office expenses, and consulting fees.
The following is an aged analysis of the trade and other payables:
**Integra Resources Corp.**Notes to the Unaudited Interim Condensed Consolidated Financial StatementsFor the Three-Month Periods Ended March 31, 2021 and 2020(Expressed in Canadian Dollars)
12. TRADE AND OTHER PAYABLES (continued)
| ****** <br>As at | March 31, <br>2021 | December 31, <br>2020 | ||
|---|---|---|---|---|
| <30 days | $ | 1,593,190 | $ | 2,640,967 |
| 31 - 60 days | 6,484 | 5,613 | ||
| 61 - 90 days | - | 344 | ||
| >90 days | - | 3,820 | ||
| Total Accounts Payable | 1,599,674 | 2,650,744 | ||
| Accrued Liabilities | 1,557,767 | 695,422 | ||
| Total Trade and Other Payables | $ | 3,157,441 | $ | 3,346,166 |
Accrued liabilities at March 31, 2021 and December 31, 2020 include mostly accruals for project exploration and development expenditures, payroll, bonuses, vacation, professional services, regulatory, and office expenses.
13. EQUIPMENT FINANCING
During the previous fiscal year, the Company's wholly owned subsidiary, DeLamar Mining Company, purchased a dozer and two small excavators and entered a 48-month mobile equipment financing agreement in the amount of US$0.6mm (C$0.8mm). 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. Subsequently, equipment financing liability is accreted to reflect interest and the liability is reduced to reflect financing payments.
A summary of the changes in the equipment financing liability and the interest expenses for the three-month period ended March 31, 2021 and the year ended December 31, 2020 is as follows:
| **** <br> **** | Financing Liability<br>Equipment | ||
|---|---|---|---|
| Balance, December 31, 2019 | $ | - | |
| Financing liabilities at initial recognition | 720,763 | ||
| Principal payments | (93,001 | ) | |
| Balance, December 31, 2020 | 627,762 | ||
| Principal payments | (40,525 | ) | |
| Translation | (7,742 | ) | |
| Balance, March 31, 2021 | $ | 579,495 | |
| Less: Current liability portion | $ | 169,361 | |
| Long-Term liability portion | $ | 410,134 | |
| **** **** | Interest expenses | ||
| --- | --- | --- | |
| Balance, December 31, 2020 | $ | 29,307 | |
| Balance, March 31, 2021 | $ | 10,687 |
**Integra Resources Corp.**Notes to the Unaudited Interim Condensed Consolidated Financial StatementsFor the Three-Month Periods Ended March 31, 2021 and 2020(Expressed in Canadian Dollars)
14. 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.
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 US$64,950 (C$81,675) for 2021 (December 31, 2020 - US$54,950 (C$69,962)) - US$34,850 (C$43,824) was paid in the current quarter.
The Company's obligation related to land and road access lease payments, option payments and IDL rent payments is expected to total US$224,831 (C$282,725) for 2021 (December 31, 2020 - US$195,193 (C$248,520)) - US$78,448 (C$98,648) was paid in the current quarter.
The Company's obligation for BML claim fees is expected to total US$200,000 (C$251,500) for 2021 (December 31, 2020 - US$191,651 (C$244,010)).
The increase in land related payments from 2020 to 2021 is not material and it is mostly a result of the Company's increased land position.
Other Commitments
The Company's commitments and contractual obligations at March 31, 2021, are as follows:
| Commitments and contractual obligations | Less than one<br>year commitment | 1 - 3 yearscommitment | 3 - 5 yearscommitment | Over 5 years commitment | Total | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| Contractual obligations* | 3,128,871 | 544,548 | 256,416 | - | 3,929,835 | |||||
| Total | $ | 3,128,871 | $ | 544,548 | $ | 256,146 | $ | - | $ | 3,929,835 |
*Contractual obligations are related to various exploration and development commitments.
15. 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.
**Integra Resources Corp.**Notes to the Unaudited Interim Condensed Consolidated Financial StatementsFor the Three-Month Periods Ended March 31, 2021 and 2020(Expressed in Canadian Dollars)
15. RECLAMATION AND REMEDIATION LIABILITIES (continued)
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, 2020, the Company reviewed and revised some of its December 31, 2019 assumptions and estimates. The discount rate assumption changed significantly in 2020 as it is based on the US Treasury rate. As a result, the discount rate decreased from 2.39% to 1.65% in the year ended December 31, 2020, which increased the present value of the reclamation liability. The inflation rates have been revised to 1.50% for 2021 and 2.0% for the following years. The Company maintained the same market risk premium for the year ended December 31, 2020.
For the quarter ended March 31, 2021, the Company reviewed and revised some of its December 31, 2020 assumptions and estimates. The discount rate assumption changed significantly in 2021 as it is based on the US Treasury rate. As a result, the discount rate increased from 1.65% to 2.41% in the current period, which decreased the present value of the reclamation liability. The inflation rates have not been revised in the current period, due to minor changes in the current quarter. The Company applied 0% market risk premium for the current year, 2.5% for 2022 and 2023, and 5% for the following years.
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).
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, 2019
44,312,159
Reclamation spending
(1,985,571
)
Accretion expenses
944,850
Reclamation adjustment
12,000,190
Translation difference
(921,489
)
Liability balance at December 31, 2020
54,350,139
Reclamation spending
(416,668
)
Accretion expenses
256,807
Reclamation adjustment
(11,344,102
)
Translation difference
(671,932
)
Balance at March 31, 2021
42,174,244
Current portion at March 31, 2021
2,337,881
Non-current portion at March 31, 2021
39,836,363
**Integra Resources Corp.**Notes to the Unaudited Interim Condensed Consolidated Financial StatementsFor the Three-Month Periods Ended March 31, 2021 and 2020(Expressed in Canadian Dollars)
15. RECLAMATION AND REMEDIATION LIABILITIES (continued)
As at March 31, 2021, the current portion of the reclamation and remediation obligation of $2,337,881 represents the total estimated water treatment, general site maintenance and environmental monitoring costs to be incurred from January 1, 2021 - December 31, 2021. The Company has incurred $416,668 in expenses during the three-month period ended March 31, 2021.
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 March 31, 2021 amount to US$3.6mm (C$4.5mm).
| Reclamation and Remediation Bonds | March 31, 2021 | December 31, 2020 | |||
|---|---|---|---|---|---|
| **** | C | US | C | US$ | |
| Idaho Department of Lands | 3,629,936 | 2,886,629 | 3,651,065 | 2,867,629 | |
| Idaho Department of Environmental Quality | 125,750 | 100,000 | 127,320 | 100,000 | |
| Bureau of Land Management - Idaho State Office | 716,146 | 569,500 | 725,088 | 569,500 | |
| Total | $ | 4,471,832 | 3,556,129 | 4,503,473 | 3,537,129 |
All values are in US Dollars.
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.
16. SHARE CAPITAL
As required by IFRS, all references to share capital, common shares outstanding and per share amounts in these consolidated financial statements and the accompanying notes have been restated retrospectively to reflect a 2.5 to 1 share consolidation from July 9, 2020. The Company's outstanding options were adjusted on the same basis as the common shares, with proportionate adjustment being made to the exercise prices.
Share Capital
On July 9, 2020, the Company completed a share consolidation on a 2.5 to 1 basis. The share consolidation reduced the number of outstanding common shares from 119,557,943 to 47,823,177. No fractional common shares have been issued pursuant to the consolidation and any fractional common shares that would have otherwise been issued have been rounded down to the nearest whole number and cancelled.
The Company is authorized to issue an unlimited number of common shares without par value. As at March 31, 2021, the number of total issued and outstanding common shares is 54,813,022 (December 31, 2020 - 54,608,177).
**Integra Resources Corp.**Notes to the Unaudited Interim Condensed Consolidated Financial StatementsFor the Three-Month Periods Ended March 31, 2021 and 2020(Expressed in Canadian Dollars)
16. SHARE CAPITAL (continued)
Activities during the three-month period ended March 31, 2021
In January 2021, the Company sold 41,000 shares under its At-The-Market offering ("ATM") for gross proceeds of US$159,713 (C$204,061) and paid 2.75% commission.
In February 2021, the Company issued 144,400 common shares related to 144,400 exercised options, for gross proceeds of $361,000.
In March 2021, the Company issued 19,445 common shares related to 15,333 exercised options for gross proceeds of $44,159 and 4,112 vested RSUs.
Activities during the year ended December 31, 2020
In February 2020, the Company announced that it had graduated to Tier 1 of the TSX-V and the remaining 966,563 common shares of Integra held in escrow were released. The number of outstanding common shares of the Company has not change as a result of the escrow release.
On September 14, 2020, the Company completed a public bought deal of 6,785,000 common shares with a syndicate of underwriters, at an issue price of US$3.40 (C$4.48) per share for aggregate gross proceeds of US$23,069,000 (C$30,393,408). The Company paid $1,579,640 in brokers' fee and $842,783 for various other expenses (mostly legal and filing fees) in connection with this public bought deal and the filing of a base shelf prospectus in August 2020.
In December 2020, the Company established an At-The-Market ("ATM") offering and filed a prospectus supplement on December 30, 2020. In the current three-month period ended March 31, 2021, the Company issued its first shares under the ATM.
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 March 31, 2021, the Company had 284,550 (December 31, 2020 - 199,086) awards available for issuance.
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):
**Integra Resources Corp.**Notes to the Unaudited Interim Condensed Consolidated Financial StatementsFor the Three-Month Periods Ended March 31, 2021 and 2020(Expressed in Canadian Dollars)
16. SHARE CAPITAL (continued)
Equity Incentive Awards (continued)
(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 three-month period ended March 31, 2021 and the year ended December 31, 2020 is as follows:
| March 31, 2021 | December 31, 2020 | |||||||
|---|---|---|---|---|---|---|---|---|
| Weighted | Weighted | |||||||
| Average | Average | |||||||
| Options | Exercise Price | Options | Exercise Price | |||||
| Outstanding at the beginning of period | 4,816,029 | $ | 2.70 | 4,373,300 | $ | 2.55 | ||
| Granted | 100,000 | 4.24 | 450,729 | 4.18 | ||||
| Exercised | (159,733 | ) | 2.54 | - | - | |||
| Forfeited/Expired | (6,000 | ) | 2.88 | (8,000 | ) | 2.88 | ||
| Outstanding at the end of period | 4,750,296 | $ | 2.74 | 4,816,029 | $ | 2.70 |
**Integra Resources Corp.**Notes to the Unaudited Interim Condensed Consolidated Financial StatementsFor the Three-Month Periods Ended March 31, 2021 and 2020(Expressed in Canadian Dollars)
16. -SHARE CAPITAL (continued)
Stock Options (continued)
The following table provides additional information about outstanding stock options as March 31, 2021:
| **** | ****<br><br> <br>No. of options outstanding | Weighted average remaining life (Years) | ****<br><br> <br>Exercise price | No. of options currently exercisable | ****<br><br> <br>Expiration date |
|---|---|---|---|---|---|
| 1,461,600 | $2.50 | 1,461,600 | November 3, 2022 | ||
| 90,000 | $3.20 | 90,000 | February 1, 2023 | ||
| 100,000 | $2.95 | 100,000 | February 28, 2023 | ||
| 90,000 | $2.18 | 60,000 | August 29, 2023 | ||
| 40,000 | $2.18 | 26,667 | September 10, 2023 | ||
| 731,400 | $2.00 | 540,933 | November 23, 2023 | ||
| 100,000 | $2.00 | 100,000 | December 13, 2023 | ||
| 40,000 | $2.18 | 26,667 | January 11, 2024 | ||
| 50,000 | $2.15 | 33,333 | January 16, 2024 | ||
| 100,000 | $3.28 | 66,667 | September 16, 2024 | ||
| 1,396,567 | $2.88 | 601,963 | December 17, 2024 | ||
| 80,000 | $1.95 | 26,667 | March 16, 2025 | ||
| 40,000 | $4.51 | - | September 22, 2025 | ||
| 40,000 | $4.42 | - | October 5, 2025 | ||
| 290,729 | $4.71 | 29,165 | December 15, 2025 | ||
| 100,000 | $4.24 | 33,333 | February 24, 2026 | ||
| Total | 4,750,296 | 2.85 | $2.74 | 3,196,995 | **** |
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 three-month periods ended March 31, 2021 and 2020 is set out below:
| March 31, 2021 | March 31, 2020 | ||||
|---|---|---|---|---|---|
| Balance at beginning of period | $ | 6,166,392 | $ | 4,353,229 | |
| Share-based payments - options | 345,600 | 461,085 | |||
| Share-based payments - options exercised | (241,882 | ) | - | ||
| Balance at the end of period | $ | 6,270,110 | $ | 4,814,314 |
Total share-based payments related to the stock options included in the statements of operations and comprehensive loss and the statements of changes in equity in the three-month period ended March 31, 2021 was $345,600 (March 31, 2020 - $461,085).
During the current three-month period ended March 31, 2021, 159,733 stock options were exercised for total gross proceeds of $405,159, and 6,000 stock options were canceled.
Integra Resources Corp.Notes to the Unaudited Interim Condensed Consolidated Financial StatementsFor the Three-Month Periods Ended March 31, 2021 and 2020(Expressed in Canadian Dollars)
16. SHARE CAPITAL (continued)
Share-based payments - stock options (continued)
On February 24, 2021, the Company granted 100,000 options to its new director, at an exercise price of $4.24 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 $160,197, to be amortized over the options vesting period.
On December 15, 2020, the Company granted 290,729 options to its directors, officers, and contractors, at an exercise price of $4.71 per option, with the expiry date December 15, 2025. 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 $525,331, to be amortized over the options vesting period.
On October 5, 2020, the Company granted 40,000 options to a new employee, at an exercise price of $4.42 per option, with the expiry date October 5, 2025. 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 $96,056, to be amortized over the options vesting period.
On September 22, 2020, the Company granted 40,000 options to a new employee, at an exercise price of $4.51 per option, with the expiry date September 22, 2025. 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 $98,394, to be amortized over the options vesting period.
On March 16, 2020, the Company granted 80,000 options to two new employees, at an exercise price of $1.95 per option, with the expiry date March 16, 2025. 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 $76,856, to be amortized over the options vesting period.
The following assumptions were used for the Black-Scholes valuation of stock options granted during the three-month periods ended March 31, 2021 and 2020:
| **** | March 31, 2021 | March 31, 2020 | ||
|---|---|---|---|---|
| Dividend rate | 0% | 0% | ||
| Expected annualized volatility | 51.81% | 58.17% | ||
| Risk free interest rate | 0.53% | 0.63% | ||
| Expected life of options | 3.5 yr | 5 yr | ||
| Weighted average of strike price of options granted | $ | 4.24 | $ | 0.78 |
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 shall not exceed 600,000 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.
**Integra Resources Corp.**Notes to the Unaudited Interim Condensed Consolidated Financial StatementsFor the Three-Month Periods Ended March 31, 2021 and 2020(Expressed in Canadian Dollars)
16. SHARE CAPITAL (continued)
Restricted Share Units (continued)
A summary of the changes in restricted share units for the three-month period ended March 31, 2021 and the year ended December 31, 2020 is as follows:
| Restricted share units | Weighted average grant date FV | |||
|---|---|---|---|---|
| Outstanding at beginning of year | - | $ | - | |
| Granted | 358,203 | $ | 4.71 | |
| Outstanding, December 31, 2020 | 358,203 | $ | 4.71 | |
| Vested | (4,112 | ) | $ | 4.71 |
| Forfeited/Expired | (2,056 | ) | $ | 4.71 |
| Outstanding/unvested at the end of period | 352,035 | $ | 4.71 |
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 three-month periods ended March 31, 2021 and 2020 is set out below:
| March 31, 2021 | March 31, 2020 | ||||
|---|---|---|---|---|---|
| Balance at beginning of period | $ | 46,978 | $ | - | |
| Share-based payments - RSUs | 156,744 | - | |||
| Share-based payments - RSUs vested | (19,368 | ) | - | ||
| Balance at the end of period | $ | 184,354 | $ | - |
Total share-based payments related to the restricted share units included in the statements of operations and comprehensive loss and the statements of changes in equity in the three-month period ended March 31, 2021 was $156,744 (March 31, 2020 - $Nil).
During the current three-month period ended March 31, 2021, 4,112 RSUs were vested and 2,056 RSUs were canceled.
On December 15, 2020, the Company granted 358,203 RSUs to its officers and employees, with an expiry date December 15, 2025, and subject to vesting provisions in accordance with the Company's Equity Incentive Plan. The share-based payment related to these units was calculated as $1,687,136, to be amortized over the unit vesting period.
The Company did not issue RSUs prior to 2020.
**Integra Resources Corp.**Notes to the Unaudited Interim Condensed Consolidated Financial StatementsFor the Three-Month Periods Ended March 31, 2021 and 2020(Expressed in Canadian Dollars)
16. SHARE CAPITAL (continued)
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 and vest immediately. The aggregate maximum number of shares available for issuance from treasury underlying deferred share units under the Equity Incentive Plan shall not exceed 200,000 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.
A summary of the changes in deferred share units for the three-month period ended March 31, 2021 and the year ended December 31, 2020 is as follows:
| Deferred shareunits | Weighted average grant date FV | ||
|---|---|---|---|
| Outstanding at beginning of year | - | $ | - |
| Granted | 87,500 | $ | 4.71 |
| Outstanding, December 31, 2020 | 87,500 | $ | 4.71 |
| Granted | 6,921 | $ | 3.40 |
| Outstanding/vested at the end of period | 94,421 | $ | 4.61 |
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 three-month periods ended March 31, 2021 is set out below:
| March 31, 2021 | March 31, 2020 | |||
|---|---|---|---|---|
| Balance at beginning of period | $ | 412,125 | $ | - |
| Share-based payments - DSUs | 23,531 | - | ||
| Balance at the end of period | $ | 435,656 | $ | - |
Total share-based payments related to the deferred share units included in the statements of operations and comprehensive loss and the statements of changes in equity in the three-month period ended March 31, 2021 was $23,531 (March 31, 2020 - $Nil).
On March 31, 2021, the Company issued 6,921 DSUs to certain directors in lieu of their directors' fees, as elected by those directors (March 31, 2020 - Nil). Each DSU has been fair valued at Integra's March 31, 2021 closing share price of $3.40. Those units vested in full at the grant date. The share-based payment related to these DSUs was calculated as $23,531, expensed on March 31, 2021.
**Integra Resources Corp.**Notes to the Unaudited Interim Condensed Consolidated Financial StatementsFor the Three-Month Periods Ended March 31, 2021 and 2020(Expressed in Canadian Dollars)
16. SHARE CAPITAL (continued)
Share-based payments - deferred share units (continued)
On December 15, 2020, the Company granted 87,500 DSUs to its directors and these units vested in full at the grant date. The share-based payment related to these DSUs was calculated as $412,125, expensed on December 15, 2020.
The Company did not issue DSUs prior to 2020.
Share-based payments - summary
A summary of the changes in the Company's reserve for all share-based payment arrangements for the three-month periods ended March 31, 2021 and 2020 is set out below:
| March 31, 2021 | March 31, 2020 | ||||
|---|---|---|---|---|---|
| Balance at beginning of period | $ | 6,625,495 | $ | 4,353,229 | |
| Share-based payments - options | 345,600 | 461,085 | |||
| Share-based payments - RSUs | 156,744 | - | |||
| Share-based payments - DSUs | 23,531 | - | |||
| Options exercised | (241,882 | ) | - | ||
| RSUs vested | (19,368 | ) | - | ||
| Balance at the end of period | $ | 6,890,120 | $ | 4,814,314 |
Total share-based payments related to the stock options, RSUs, and DSUs included in the statements of operations and comprehensive loss and the statements of changes in equity in the three-month period ended March 31, 2021 was $525,875 (March 31, 2020 - $461,085).
17. NET LOSS PER SHARE
| **** | March 31, 2021 | March 31, 2020 | ||||
|---|---|---|---|---|---|---|
| Net loss for the period | $ | (8,438,318 | ) | $ | (3,116,967 | ) |
| Basic weighted average numbers of share outstanding (000's) | 54,740 | 47,823 | ||||
| Diluted weighted average numbers of shares outstanding (000's) | 54,740 | 47,823 | ||||
| Loss per share: | **** | |||||
| Basic | $ | (0.15 | ) | $ | (0.07 | ) |
| Diluted* | $ | (0.15 | ) | $ | (0.07 | ) |
*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.
Integra Resources Corp.: Exhibit 99.3 - Filed by newsfilecorp.com
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE
I, George Salamis, Chief Executive Officer of Integra Resources Corp., certify the following:
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 March 31, 2021.
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.
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.
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.
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
- 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 January 1, 2021 and ended on March 31, 2021 that has materially affected, or is reasonably likely to materially affect, the issuer's ICFR.
Date: May 14, 2021
/s/ George Salamis
George Salamis
Chief Executive Officer
Integra Resources Corp.: Exhibit 99.4 - Filed by newsfilecorp.com
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
FULL CERTIFICATE
I, Andree St-Germain, Chief Financial Officer of Integra Resources Corp., certify the following:
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 March 31, 2021.
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.
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.
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.
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
- 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 January 1, 2021 and ended on March 31, 2021 that has materially affected, or is reasonably likely to materially affect, the issuer's ICFR.
Date: May 14, 2021
/s/ Andree St-Germain
Andree St-Germain
Chief Financial Officer
Integra Resources Corp.: Exhibit 99.5 - Filed by newsfilecorp.com
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 May 14, 2021 (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: May 14, 2021 |
Integra Resources Corp.: Exhibit 99.6 - Filed by newsfilecorp.com
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 May 14, 2021 (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: May 14, 2021 |