Lion Copper Corp 6-K, filed Aug 30, 2022
Lion Copper Corp. (LCGMF)
About this 6-K
Lion Copper Corp filed this 6-K on August 30, 2022.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of August 2022
Commission File Number: 0-55139
LION COPPER & GOLD CORP.
(Translation of registrant's name into English)
1100-1199 West Hastings Street
Vancouver, BC V6E 3T5 Canada
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
[ x ] Form 20-F [ ] Form 40-F
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): [ ]
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): [ ]
SUBMITTED HEREWITH
Exhibits
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| LION COPPER & GOLD CORP. | ||
| (Registrant) | ||
| Date: August 29, 2022 | By: | /s/ Stephen Goodman |
| Stephen Goodman | ||
| Title: | Chief Financial Officer | |
Lion Copper and Gold Corp.
(Formerly Quaterra Resources Inc.)
Condensed Interim Consolidated Financial Statements
For the three and six months ended June 30, 2022 and 2021
UNAUDITED
(Expressed in thousands of U.S. Dollars)
NOTICE OF NO AUDITOR REVIEW OF CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited condensed interim consolidated financial statements for Lion Copper and Gold Corp. (the "Company") have been prepared by management in accordance with International Financing Reporting Standards ("IFRS"). These condensed interim consolidated financial statements, which are the responsibility of management, are unaudited and have not been reviewed by the Company's auditors. The Company's Audit Committee and Board of Directors have reviewed and approved these condensed interim consolidated financial statements. In accordance with the disclosure requirements of National Instrument 51-102 released by the Canadian Securities Administrators, the Company's independent auditors have not performed a review of these condensed interim consolidated financial statements.
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Lion Copper and Gold Corp. |
| Note | June 30, 2022 |
December 31, 2021 |
|||||
| (unaudited) | (audited) | ||||||
| ASSETS | |||||||
| Current assets | |||||||
| Cash | $ | 2,790 | $ | 842 | |||
| Other receivables | 11 | 6 | |||||
| Prepaid and deposit | 73 | 43 | |||||
| 2,874 | 891 | ||||||
| Mineral properties | 4,11 | 32,037 | 32,203 | ||||
| Reclamation bonds | 28 | 35 | |||||
| Investment in associate | 5 | 1,875 | - | ||||
| Total assets | $ | 36,814 | $ | 33,129 | |||
| LIABILITIES | |||||||
| Current liabilities | |||||||
| Accounts payable and accrued liabilities | $ | 538 | $ | 1,358 | |||
| Rio Tinto Deposit | 6 | 2,281 | - | ||||
| Derivative liabilities | 7 | 165 | 55 | ||||
| 2,984 | 1,413 | ||||||
| Convertible dentures | 7,8,11 | 905 | |||||
| Total liabilities | 3,889 | 1,413 | |||||
| Shareholders' equity | |||||||
| Share capital | 9 | 105,170 | 104,340 | ||||
| Contributed surplus | 10 | 22,599 | 22,012 | ||||
| Obligation to issue shares | 10,11 | 93 | - | ||||
| Deficit | (94,937 | ) | (94,636 | ) | |||
| Total shareholders' equity | 32,925 | 31,716 | |||||
| Total liabilities and shareholders' equity | $ | 36,814 | $ | 33,129 |
NATURE OF OPERATIONS AND GOING CONCERN (Note 1)
COMMITMENTS (Note 13)
CONTINGENCIES (Note 14)
SUBSEQUENT EVENTS (Note 17)
Approved on behalf of the Board of Directors on August 29, 2022:
| /s/ "Travis Naugle" | /s/ "Stephen Goodman" |
| Chief Executive Officer | President & Chief Financial Officer |
The accompanying notes form an integral part of these condensed interim consolidated financial statements.
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Lion Copper and Gold Corp. |
| Three months ended June 30, | Six months ended June 30, | ||||||||||||
| Note | 2022 | 2021 | 2022 | 2021 | |||||||||
| General administrative expenses | |||||||||||||
| General office | $ | 64 | $ | 18 | $ | 74 | $ | 31 | |||||
| Insurance | 16 | 24 | 21 | 24 | |||||||||
| Investor relations and corporate development | 15 | 26 | 29 | 41 | |||||||||
| Professional fees | 127 | 43 | 330 | 49 | |||||||||
| Rent | 4 | 22 | 7 | 30 | |||||||||
| Salaries and benefits | 11 | 199 | 234 | 519 | 440 | ||||||||
| Share-based payments | 11 | 409 | 732 | 695 | 732 | ||||||||
| Transfer agent and regulatory | 37 | 17 | 72 | 44 | |||||||||
| Travel | 28 | - | 30 | - | |||||||||
| Operating loss | (899 | ) | (1,116 | ) | (1,777 | ) | (1,391 | ) | |||||
| Fair value (loss) gain on derivative liabilities | 7 | (2 | ) | (38 | ) | 35 | (57 | ) | |||||
| Foreign exchange gain (loss) | (4 | ) | 15 | 12 | 18 | ||||||||
| Gain on settlement of debt | 9 | 6 | - | 6 | - | ||||||||
| Accretion expense | 8 | (4 | ) | - | (4 | ) | - | ||||||
| Gain on sale of Butte Valley | 4,11 | 1,208 | - | 1,208 | - | ||||||||
| NSR buy-down | 4,11 | 250 | - | 250 | - | ||||||||
| Share of loss of investment in associate | 5 | (31 | ) | - | (31 | ) | - | ||||||
| General exploration | - | - | - | (12 | ) | ||||||||
| Unrealized gain on marketable securities | - | 397 | - | 268 | |||||||||
| 1,423 | 374 | 1,476 | 217 | ||||||||||
| Income (loss) and comprehensive income (loss) for the period |
$ | 524 | $ | (742 | ) | $ | (301 | ) | $ | (1,174 | ) | ||
| Income (loss) per share, basic and diluted | $ | 0.00 | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.01 | ) | ||
| Weighted average number of shares outstanding - basic |
303,908,809 | 223,102,753 | 301,101,944 | 221,244,554 | |||||||||
The accompanying notes form an integral part of these condensed interim consolidated financial statements.
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Lion Copper and Gold Corp. |
| Common shares | Share capital | Obligation to Issue Shares |
Contributed surplus |
Deficit | Total equity | |||||||||||||
| Balance at December 31, 2020 | 218,715,610 | $ | 101,553 | $ | - | $ | 19,406 | $ | (91,612 | ) | $ | 29,347 | ||||||
| Stock options and warrants exercised | 5,300,000 | 461 | - | (182 | ) | - | 279 | |||||||||||
| Share-based payments | - | - | - | 732 | - | 732 | ||||||||||||
| Net loss for the period | - | - | - | - | (1,174 | ) | (1,174 | ) | ||||||||||
| Balance at June 30, 2021 | 224,015,610 | $ | 102,014 | $ | - | $ | 19,956 | $ | (92,786 | ) | $ | 29,184 | ||||||
| Balance at December 31, 2021 | 293,806,611 | $ | 104,340 | $ | - | $ | 22,012 | $ | (94,636 | ) | $ | 31,716 | ||||||
| Shares issued for mineral properties | 9,500,000 | 625 | - | - | - | 625 | ||||||||||||
| Shares issued to settle debt | 800,000 | 56 | - | - | - | 56 | ||||||||||||
| Shares issued for warrants exercised | 2,000,000 | 149 | - | (49 | ) | - | 100 | |||||||||||
| Conversion feature on convertible debt | - | - | - | 34 | - | 34 | ||||||||||||
| Grant of RSUs | - | - | 93 | - | - | 93 | ||||||||||||
| Share-based payments | - | - | - | 602 | - | 602 | ||||||||||||
| Net loss for the period | - | - | - | - | (301 | ) | (301 | ) | ||||||||||
| Balance at June 30, 2022 | 306,106,611 | $ | 105,170 | $ | 93 | $ | 22,599 | $ | (94,937 | ) | $ | 32,925 |
The accompanying notes form an integral part of these condensed interim consolidated financial statements.
| Lion Copper and Gold Corp. Condensed Interim Consolidated Statements of Cash Flow For the six months ended June 30, 2022 and 2021 (Unaudited - In thousands of U.S. Dollars) |
| For the six months ended June 30, | ||||||
| 2022 | 2021 | |||||
| Cash flows used in operating activities | ||||||
| Loss for the period | $ | (301 | ) | $ | (1,174 | ) |
| Non-cash transactions: | ||||||
| Interest expense | 5 | - | ||||
| Gain on settlement of debt | (6 | ) | - | |||
| Accretion expense | 4 | - | ||||
| Fair value loss (gain) on derivative liabilities - warrants | (35 | ) | 57 | |||
| Gain on sale of Butte Valley | (1,208 | ) | - | |||
| Share of loss of investment in associate | 31 | - | ||||
| Unrealized gain on marketable securities | - | (268 | ) | |||
| Share-based payments | 695 | 732 | ||||
| Changes in operating assets and liabilities: | ||||||
| Other receivables | (5 | ) | - | |||
| Trade payables and other liabilities | (1,137 | ) | (63 | ) | ||
| Prepaid and deposit | (30 | ) | - | |||
| Rio Tinto deposit | (1,719 | ) | - | |||
| Water rights sale obligation | - | 1,000 | ||||
| Net cash used in operating activities | (3,706 | ) | 284 | |||
| Cash flows used in investing activities | ||||||
| Expenditures on mineral properties | (21 | ) | (643 | ) | ||
| Sale of Butte Valley property | 500 | - | ||||
| Proceeds from Rio Tinto agreement | 4,000 | - | ||||
| Net cash used in investing activities | 4,479 | (643 | ) | |||
| Cash flows provided by financing activities | ||||||
| Convertible debentures | 1,075 | - | ||||
| Exercise of warrants | 100 | - | ||||
| Shares issued for cash | - | 279 | ||||
| Net cash provided by financing activities | 1,175 | 279 | ||||
| Increase (decrease) in cash | 1,948 | (80 | ) | |||
| Cash, beginning of period | 842 | 701 | ||||
| Cash, end of period | $ | 2,790 | $ | 621 | ||
| Supplemental cash flow information | ||||||
| Exploration expenditures included in accounts payable | $ | 387 | $ | 370 | ||
| Shares issued to settle debt | 62 | - | ||||
| Shares issued for mineral properties | 625 | - | ||||
The accompanying notes form an integral part of these condensed interim consolidated financial statements.
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Lion Copper and Gold Corp. |
1. NATURE OF OPERATIONS AND GOING CONCERN
Lion Copper and Gold Corp. (together with its subsidiaries, "Lion CG" or the "Company") is a Canadian-based company advancing its Mason Valley, Nevada copper assets with Rio Tinto America, Inc. in addition to advancing its exploration projects including the Chaco Bear and Ashton properties in highly prospective regions in British Columbia, Canada, and the Blue Copper Prospect in Montana, USA. The Company is incorporated in British Columbia, Canada. Its registered and records offices are located at 1200 - 750 West Pender Street, Vancouver, British Columbia, Canada, V6C 2T8. On November 22, 2021, the Company changed its name from Quaterra Resources Inc. to Lion Copper and Gold Corp. The shares of the Company commenced trading under the new name at the open of trading on November 23, 2021. The Company's common shares are listed on the TSX Venture Exchange ("TSXV") under the symbol "LEO" and trade on the OTCQB Market under the symbol "LCGMF".
The Company acquires its mineral properties through option or lease agreements and capitalizes all acquisition, exploration and evaluation costs related to the properties. The underlying value of the amounts recorded as mineral properties does not reflect current or future values. The Company's continued existence depends on discovering the economically recoverable mineral reserves and obtaining the necessary funding to complete the development of these properties.
These condensed interim consolidated financial statements are prepared on a going concern basis, which contemplates that the Company will be able to meet its commitments, continue operations and realize its assets and discharge its liabilities in the normal course of business for at least twelve months from June 30, 2022. The Company has incurred ongoing losses and expects to incur further losses in the advancement of its business activities. For the six months ended as of June 30, 2022 and 2021, the Company incurred a net loss of $301 (2021 - $1,174). As at June 30, 2022, the Company had cash of $2,790 (December 31, 2021 - $842), working capital deficit of $110 (December 31, 2021 - $522) and an accumulated deficit of $94,937 (December 31, 2021 - $94,636).
The Company continues to incur losses, has limited financial resources, and has no current source of revenue or cash flow generated from operating activities. To address its financing requirements, the Company plans to seek financing through, but not limited to, debt financing, equity financing and strategic alliances. However, there is no assurance that such financing will be available. If adequate financing is not available or cannot be obtained on a timely basis, the Company may be required to delay, reduce the scope of or eliminate one or more of its exploration programs or relinquish some or all of its rights under the existing option and acquisition agreements. The above factors give rise to material uncertainties that may cast significant doubt on the Company's ability to continue as a going concern.
If the going concern assumptions were not appropriate for these condensed interim consolidated financial statements, then adjustments would be necessary to the carrying values of assets, liabilities, the reported expenses, and the consolidated statement of financial position classifications used. Such adjustments could be material.
2. BASIS OF PRESENTATION
Statement of compliance
These condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"), effective for financial year ended December 31, 2022.
These condensed interim consolidated financial statements have been prepared on a historical cost basis except for certain financial instruments which are measured at fair value. In addition, these condensed interim consolidated financial statements have been prepared using the accrual basis of accounting, except for the cash flow information.
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Lion Copper and Gold Corp. |
2. BASIS OF PRESENTATION (continued)
Statement of compliance (continued)
The Company consolidates an entity when it has power over that entity, is exposed, or has rights, to variable returns from its involvement with that entity and can affect those returns through its control over that entity. All material intercompany transactions, balances and expenses are eliminated on consolidation.
These condensed interim consolidated financial statements include the financial statements of Lion Copper and Gold Corp., and its wholly owned subsidiaries: Quaterra Alaska Inc. (Quaterra Alaska), Singatse Peak Services, LLC ("SPS") and Blue Copper LLC. On March 30, 2022, Six Mile Mining Company, was dissolved and its assets were transferred to Quaterra Alaska Inc.
These condensed interim consolidated financial statements follow the same accounting policies and methods of application as the annual audited consolidated financial statements for the year ended December 31, 2021. The changes in accounting policies are also expected to be reflected in the Company's consolidated financial statements as at and for the year ending December 31, 2022.
These condensed interim consolidated financial statements were approved and authorized for issuance by the Board of Directors of the Company on August 29, 2022.
3. SIGNIFICANT ACCOUNTING POLICIES
These condensed interim consolidated financial statements do not include all note disclosures required by IFRS for annual financial statements and, therefore, should be read in conjunction with the annual financial statements for the year ended December 31, 2021. In the opinion of management, all adjustments considered necessary for fair presentation of the Company's financial position, results of operations and cash flows have been included. Operating results for the three and six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.
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Lion Copper and Gold Corp. |
4. MINERAL PROPERTIES
Total mineral property maintenance and exploration costs are listed in the table below:
| Singatse Peak Services | Lion CG | Quaterra Alaska | |||||||||||||||||||||||||
| MacArthur | Yerington | Bear | Wassuk | Chaco Bear and Ashton Property |
Groundhog | Butte Valley |
Blue Copper |
Total | |||||||||||||||||||
| Balance December 31, 2020 | $ | 18,828 | $ | 3,569 | $ | 1,460 | $ | 1,470 | $ | - | $ | 2,522 | $ | 387 | $ | - | $ | 28,236 | |||||||||
| Property maintenance | $ | 159 | $ | 69 | $ | 193 | $ | 305 | $ | - | $ | 98 | $ | 247 | $ | 401 | $ | 1,472 | |||||||||
| Drilling | 892 | - | - | 47 | - | - | 500 | - | 1,439 | ||||||||||||||||||
| Geological & mapping | 22 | - | - | - | - | - | - | 16 | 38 | ||||||||||||||||||
| Geophysical surveys | 20 | - | 63 | - | - | - | 47 | 15 | 145 | ||||||||||||||||||
| Technical study | 276 | 11 | - | - | - | 1 | - | - | 288 | ||||||||||||||||||
| Assay & labs | 231 | - | - | - | - | - | - | - | 231 | ||||||||||||||||||
| Environmental | 43 | 142 | - | - | - | - | - | - | 185 | ||||||||||||||||||
| Field support & other | 46 | 5 | - | 3 | - | 67 | 1 | 47 | 169 | ||||||||||||||||||
| Total additions for the year | 1,689 | 227 | 256 | 355 | - | 166 | 795 | 479 | 3,967 | ||||||||||||||||||
| Balance December 31, 2021 | $ | 20,517 | $ | 3,796 | $ | 1,716 | $ | 1,825 | - | $ | 2,688 | $ | 1,182 | $ | 479 | $ | 32,203 | ||||||||||
| Property maintenance | $ | - | $ | - | $ | 43 | $ | - | $ | 526 | $ | - | $ | 2 | $ | 190 | $ | 761 | |||||||||
| Geological & mapping | - | - | - | - | 8 | - | - | 15 | 23 | ||||||||||||||||||
| Geophysical surveys | - | - | - | - | - | - | 11 | 16 | 27 | ||||||||||||||||||
| Technical study | 114 | - | - | - | - | - | - | - | 114 | ||||||||||||||||||
| Environmental | - | 17 | - | - | - | - | - | - | 17 | ||||||||||||||||||
| Field support & other | 10 | 4 | - | - | - | 36 | 3 | 37 | 90 | ||||||||||||||||||
| Assignment of Butte Valley | - | - | - | - | - | - | (1,198 | ) | - | (1,198 | ) | ||||||||||||||||
| Total additions (disposals) for the year |
124 | 21 | 43 | - | 534 | 36 | (1,182 | ) | 258 | (166 | ) | ||||||||||||||||
| Balance June 30, 2022 | $ | 20,641 | $ | 3,817 | $ | 1,759 | $ | 1,825 | $ | 534 | $ | 2,724 | $ | - | $ | 737 | $ | 32,037 | |||||||||
The Company owns a 100% interest in the MacArthur and Yerington properties. It has an option to earn a 100% interest in the Bear and Wassuk properties in Nevada, a 100% interest in the Blue Copper Project in Montana, a 100% interest in the Chaco Bear and Ashton property in British Columbia, and a 90% interest in the Groundhog property in Alaska. During the six months ended June 30, 2022, the Company sold and assigned the Butte Valley option agreements to a related Company.
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Lion Copper and Gold Corp. |
4. MINERAL PROPERTIES (continued)
a) MacArthur and Yerington Properties, Nevada
On February 24, 2021, the Company entered into a purchase and sale agreement to sell certain primary groundwater rights to Desert Pearl Farms LLC ("Desert Pearl"), a Yerington-based company involved in agriculture, for $2,910 (the "Purchase and Sale Agreement"). In early March, 2021, the Company filed an application with the State of Nevada Division of Water Resources ("NDWR") to change the manner of use of the water rights from mining to agriculture and their place of use ("Change Application"). Under the terms of the Purchase and Sale Agreement, Desert Pearl made a $1,000 initial payment to the Company on March 5, 2021. The Purchase and Sale Agreement is subject to the NDWR's final approval of the Change Application. The primary water rights covered under the Purchase and Sale Agreement are one of the water rights that are the subject of forfeiture, as discussed in the next paragraph.
On July 23, 2021, the Company received a notice from the State of Nevada that three water rights permits had been forfeited. Further, that the application for an extension of time to prevent forfeiture of a fourth certificate was denied. The permits affected are components of the Purchase and Sale Agreement announced on February 24, 2021.
On August 20, 2021, the Company filed a Petition for Judicial Review of the Forfeiture Notice and has retained legal counsel to initiate and vigorously undertake the appeal process.
On May 25, 2022, the Company reached an amicable agreement with Desert Pearl Farms to terminate the contract on the sale of the Company's water rights. As a consequence of the termination, the Company returned the $1,000 deposit to Desert Pearl Farms on June 20, 2022.
b) Bear Deposit, Nevada
The Company has five option agreements, entered from March 2013 to May 2015, to acquire a 100% interest in private land in Yerington, Nevada, collectively known as the Bear deposit. Under the terms of these option agreements, as amended, the Company is required to make $5,673 in cash payments over 15 years ($5,122 paid) to maintain the exclusive right to purchase the land, mineral rights, and certain water rights and to conduct mineral exploration on these properties. Two of the properties are subject to a 2% NSR upon commencing commercial production, which can be reduced to a 1% NSR in consideration of $1,250 total.
Outstanding payments to keep the five option agreements current are as follows, by year:
- $193 due 2022 ($43 paid);
- $201 due in 2023;
- $50 due in years 2024 to 2028.
Outstanding purchase payments under the five option agreements are as follows:
- $1,115 for Taylor, purchase option expiring in 2023;
- $250 for Chisum, purchase option expiring in 2023;
- $5,000 for Yerington Mining, purchase option expiring in 2024;
- $8,000 for Circle Bar N, purchase option expiring in 2024;
- $18,020 for Desert Pearl Farms, purchase option expiring in 2029.
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Lion Copper and Gold Corp. |
4. MINERAL PROPERTIES (continued)
c) Wassuk, Nevada
The Wassuk property consists of 310 unpatented lode claims totaling approximately 6,400 acres on lands administered by the BLM.
The Company has completed all requirements to earn a 100% interest in certain unpatented mining claims in Lyon County, Nevada, ($1,405 in cash payments and a work commitment of $50). During 2021, two final option payments were paid and form part of the total payments of $1,405. The Company has now satisfied all conditions required to execute the option to purchase.
The property is subject to a 3% NSR upon commencing commercial production, which can be reduced to a 2% NSR royalty in consideration of $1,500.
d) Groundhog, Alaska
On April 20, 2017, the Company entered a lease with option to purchase agreement with Chuchuna Minerals Company ("Chuchuna") to earn a 90% interest in the Groundhog copper prospect, located two hundred miles southwest of Anchorage, Alaska.
During the year ended December 31, 2021, the lease agreement was further extended from six to seven years, providing the Company more time to make the required exploration expenditures and lump sum payment. To earn the 90% interest, the Company must fund a total of $5,000 ($2,724 funded) of exploration expenditures and make a lump sum payment to Chuchuna of $3,000 by the end of April 20, 2024. The Company can terminate the Agreement at its discretion.
The property is subject to a 1.75% NSR upon commencing commercial production, which can be reduced to a 0.875% NSR royalty in consideration of $25,000.
e) Butte Valley Prospect, Nevada
On January 26, 2022, the Company entered into a property acquisition agreement to sell and assign its options to acquire the Butte Valley property to Falcon Butte Minerals Corp. (formerly 1301666 B.C. Ltd, or "Falcon Butte.") which is a private British Columbia company established to acquire mineral resource properties.
Pursuant to the agreement, Lion CG's 100% owned subsidiary Quaterra Alaska was granted an equity position in Falcon Butte (Note 5). In addition, Quaterra Alaska will maintain a 1.5% NSR on each of the Butte Valley optioned properties, which is subject to a buy-down to a 1.0% NSR in exchange for a payment of $7,500 per property.
On April 5, 2022, the Company completed the assignment of the two option agreements for the Butte Valley Property and the Company received 16,049,444 common shares of Falcon Butte with a fair value of $1,907 and $500 cash for the property, resulting in a gain on sale of $1,208 (Note 5, 11).
On April 13, 2022, the Company amended the agreement. Pursuant to the addendum Falcon Butte will pay a total of $500 in exchange for a 0.5% buy-down and retirement of certain NSRs held by the company. As of June 30, 2022, the Company has received $250. Subsequent to the period, the remaining $250 was received on August 11, 2022 (Note 17).
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Lion Copper and Gold Corp. |
4. MINERAL PROPERTIES (continued)
f) Chaco Bear and Ashton Properties, British Columbia
On August 25, 2021, the Company entered into a non-binding letter of intent (the "LOI") with Houston Minerals Ltd. ("Houston") setting forth the terms of an option whereby the Company may acquire a 100% interest in the Chaco Bear Property located directly east of the Golden Triangle of British Columbia, and the Ashton Property located near Lytton, British Columbia (Collectively, the "Properties").
Under the terms of the LOI, the Company and Houston proposed to enter into a definitive agreement whereby the Company can earn up to a 100% interest in the Properties by making the following issuances and payments over a four-year period:
- issuing 8,000,000 common shares of the Company on closing (issued on March 17, 2022);
- making annual lease payments on the Properties after 2021;
- incurring CAD$150 of exploration expenditures on the Chaco Bear Property and CAD$50 of exploration expenditures on the Ashton Property before the end of 2021 for CAD$200 (paid);
- incurring exploration expenditures of at least the value of the annual assessment multiplied by 1.5 for periods after 2021 (claims were renewed and extended through to early 2025, resulting in no obligation on exploration expenditures until 2024);
- paying CAD$1,500 for the Chaco Bear Property and CAD$1,000 for the Ashton Property on or before 4 years from the closing, which amounts are payable in cash or common shares of the Company; and
- making annual advance royalty payments in the fourth and fifth year from the closing in the amounts of CAD$250 on the Chaco Bear Property and CAD$150 on the Ashton Property.
On September 17, 2021, the parties agreed to an amendment to the LOI to include a 2.5% NSR on each property. Prior to feasibility, the Company may reduce the NSR to 1.0% on the Chaco Bear Property in consideration for a payment of CAD$6,000 and 1.0% on the Ashton Property for a payment of CAD$3,000. Post feasibility, the Company may purchase the remaining 1.0% NSR on the Chaco Bear Property for CAD$12,000 and the remaining 1.0% NSR on the Ashton Property for CAD$6,000.
On January 26, 2022, the Company entered into an option agreement with Houston Minerals Ltd. to replace the LOI dated August 25, 2021. Pursuant to the terms of the option agreement, the Company may acquire a 100% interest in the Chaco Bear Property located directly east of the Golden Triangle of British Columbia, and the Ashton Property located near Lytton, British Columbia, subject to a 2.5% net smelter returns royalty.
The terms of the option agreement are unchanged from the LOI except that the term of the option has changed from a four year period to a ten year period and annual advance royalty payments in the amounts of CAD$250 on the Chaco Bear Property and CAD$150 on the Ashton Property are to be paid starting on the fifth year from
closing through to the ninth year from closing instead of only in the fourth and fifth years from the closing. All other consideration terms remain unchanged.
In addition, commencing on January 31, 2022, and on January 31 of each year thereafter during the Option Period, Lion CG shall pay the following option maintenance fees to Houston: (a) CAD$60 in respect of the Chaco Bear Property; and (b) CAD$40 in respect of the Ashton Property (Note 17(b)).
Lion CG funded an initial work program in 2021 of CAD$200 on the Properties in consideration for the grant of the Option, and on March 16, 2022, the transaction was closed. The Company may exercise the Option for a period of up to ten years to acquire (i) the Chaco Bear property by paying CAD$1,500 to Houston, in cash or in common shares of the Company at the Company's option; and/or (ii) the Ashton Property by paying CAD$1,000 to Houston in cash or in common shares of the Company at the Company's option, and in either case common
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Lion Copper and Gold Corp. |
4. MINERAL PROPERTIES (continued)
shares will be valued using the volume weighted average trading price of the Company's common shares for the twenty trading day period ending three trading days prior to the date of issuance of such Lion CG shares, with such cash payments being subject to a discount of between 5% and 15% based on the timing of exercise and cumulative exploration expenditures incurred as at the time of exercise. Houston will retain a 2.5% net smelter returns royalty on any of the Properties for which an Option has been exercised by the Company.
g) Blue Copper Prospect, Montana
During the year ended as of December 31, 2021, Blue Copper LLC (the Company's 100% owned subsidiary) acquired and staked a district scale exploration and resource discovery opportunity (the "Blue Copper Prospect"), comprising more than 7,430 acres in Powell County and Lewis & Clark County in Montana, USA. The area is prospective for high grade copper-gold skarns and porphyry copper-gold mineralization. The claim block encompasses a group of more than fourteen historic small mines that produced high grade gold, copper, and tungsten.
As a part of the transaction, Blue Copper LLC entered into a purchase agreement with Four O Six Mining & Exploration LLC to acquire certain existing and additional unpatented mining claims. In exchange for the unpatented mining claims, as part of the closing of the transaction, the Company issued 1,500,000 common shares of the capital of the Company (Note 9) and provided a NSR of 2.0% with a buy-down of 1% NSR for $1,500.
Blue Copper LLC has staked an additional 131 claims to expand the Blue Copper Prospect. The Company has provided a NSR of 2% with a buy-down of 1% NSR for $600 to Four O Six Mining & Exploration LLC for these claims.
On February 14, 2022, as a part of the Blue Copper Prospect transaction, the Company issued 1,500,000 common shares as part of the closing of the transaction (Note 9).
h) Option to Earn-in Agreement with Rio Tinto
On March 18, 2022, the Company entered into an Option to Earn-in Agreement with Rio Tinto America Inc. ("Rio Tinto") to advance studies and exploration at Lion CG's copper assets in Mason Valley, Nevada. Under the agreement, Rio Tinto has the option to earn a 65% interest in the assets, comprising 34,494 acres of land, including the historic Yerington mine, greenfield MacArthur Project, Wassuk property, the Bear deposit, and associated water rights (the "Mining Assets"). In addition, Rio Tinto will evaluate the potential commercial deployment of its Nuton™ technologies at the site. Nuton™ offers copper heap leaching technologies developed by Rio Tinto to deliver greater copper recovery from mined ore and access new sources of copper
such as low-grade sulphide resources and reprocessing of stockpiles and mineralized waste. The technologies have the potential to deliver leading environmental performance through more efficient water usage, lower carbon emission, and the ability to reclaim mine sites by reprocessing waste.
The stages of the Agreement are set out below.
Stage 1
Rio Tinto will pay up to four million U.S. dollars ($4,000) for an exclusive earn-in option and agreed-upon Mason Valley study and evaluation works to be completed by Lion CG no later than December 31, 2022 (paid) (Note 6).
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Lion Copper and Gold Corp. |
4. MINERAL PROPERTIES (continued)
Stage 2
Within forty-five (45) days of the completion of Stage 1, Rio Tinto will provide notice to Lion CG whether Rio Tinto elects to proceed with Stage 2, upon which Rio Tinto will pay up to five million U.S. dollars ($5,000) for agreed-upon Mason Valley study and evaluation works to be completed by Lion CG within 12 months from the date that the parties agree upon the scope of Stage 2 work.
Stages 1 and 2 may be accelerated at Rio Tinto's option.
Stage 3 - Feasibility Study
Within sixty (60) days of the completion of Stage 2, Rio Tinto shall provide notice to Lion CG whether Rio Tinto will exercise its Option and fund a Feasibility Study based on the results of the Stage 1 and Stage 2 work programs. Rio Tinto will fully-fund the Feasibility Study and ancillary work completed by Lion CG in amount not to exceed fifty million U.S. dollars ($50,000).
Investment Decision
Upon completion of the Feasibility Study, Rio Tinto and Lion CG will decide whether to create an investment vehicle into which the Mining Assets will be transferred, with Rio Tinto holding not less than a 65% interest in the investment vehicle.
• If Rio Tinto elects to not to create the investment vehicle, then Lion CG shall grant to Rio Tinto a 1.5% NSR on the Mining Assets.
• If Rio Tinto elects to create the investment vehicle but Lion CG elects not to create the investment vehicle, then, at Rio Tinto's option, Lion CG shall create the investment vehicle and Rio Tinto will purchase Lion CG's interest in the investment vehicle for fair market value.
Project Financing
• Following the formation of the investment vehicle, any project financing costs incurred will be funded by Rio Tinto and Lion CG in proportion to their respective ownership interest in the investment vehicle.
• Rio Tinto may elect to fund up to sixty million U.S. dollars ($60,000) of Lion CG 's project financing costs in exchange for a 10% increase in Rio Tinto's ownership percentage. In addition, upon mutual agreement of Rio Tinto and Lion CG, Rio Tinto may fund an additional forty million U.S. dollars ($40,000) of Lion CG's project financing costs in exchange for an additional 5% increase in Rio Tinto's ownership percentage.
• If Lion CG's ownership percentage in the investment vehicle is diluted to 10% or less, then Lion CG's ownership interest will be converted into a 1% uncapped NSR.
On April 27, 2022, the Company TSX Venture Exchange approved the Company's Option to Earn-in Agreement with Rio Tinto America Inc.
On May 17, 2022, Rio Tinto approved the Stage 1 Work Program and provided $4,000 to the Company for the development of the Mason Valley projects, which are currently in progress (Note 6).
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Lion Copper and Gold Corp. |
5. INVESTMENT IN ASSOCIATE
On April 5, 2022, the Company received 16,049,444 shares in Falcon Butte Minerals Corp. (formerly 1301666 BC Ltd., "Falcon Butte"), which is a private British Columbia company established to acquire mineral resource properties, in connection with a property acquisition agreement to assign the Company's options to acquire the Butte Valley property (Note 4). At the time of acquisition, the 16,049,444 shares represented 25.54% of shares outstanding, or 20.48% of the potential voting rights of Falcon Butte which includes unexercised warrants, and as at June 30, 2022, the Company's share ownership was reduced to 22.77%, and potential voting rights were diluted to 17.14%. The Company and Falcon Butte have common directors and managerial personnel, as such, management has assessed that the Company has significant influence over Falcon Butte and that the investment should be accounted for using the equity method of accounting.
The opening balance of the in investment was determined to be $1,906 ($2,374 CAD) which represents the fair value of the shares received. The value of the shares was determined based on Falcon Butte's financing that closed concurrently with the property acquisition. The Company's share of net loss for the period was $31. The portion of net loss attributable to the Company was determined using the percentage of voting rights held by the Company throughout the period.
A continuity of the Company's investment in associate is as follows:
| Balance December 31, 2021 | $ | - | |
| Initial investment | 1,906 | ||
| Company's share of net loss | (31 | ) | |
| Balance June 30, 2022 | $ | 1,875 |
6. RIO TINTO DEPOSIT
On June 7, 2022, the Company received $4,000 in connection to Stage 1 of the option to Earn-in Agreement with Rio Tinto America Inc (Note 4). The Company and Rio Tinto America mutually agreed on the Stage 1 program of work and the balance of the deposit will be applied against the Company's Yerington, MacArthur, Wassuk property, and Bear mineral properties as work progresses.
A continuity of the Company's Rio Tinto deposit is as follows:
| Balance December 31, 2021 | $ | - | |
| Addition | 4,000 | ||
| Work performed | (1,719 | ) | |
| Balance June 30, 2022 | $ | 2,281 |
7. DERIVATIVE LIABILITIES
a) Warrants
The Company has certain outstanding share purchase warrants that are exercisable in a different currency from the Company's functional currency. These warrants are classified as derivative liabilities and carried at fair value and revalued at each reporting date.
b) Conversion option on convertible debentures
During the six months ended June 30, 2022, the Company closed the first tranche of its non-brokered private placement of unsecured convertible debentures (Note 8). The debentures allow the holder the option to elect to be repaid in kind at any time prior to maturity by way of shares the Company holds in Falcon Butte, or its successor, at a rate of $0.25 per Falcon Butte share. These conversion options are classified as derivative liabilities and carried at fair value and revalued at each reporting date.
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Lion Copper and Gold Corp. |
7. DERIVATIVE LIABILITIES (continued)
As of June 30, 2021, and December 31, 2021, the derivative liabilities were related to 769,230 warrants with an exercise price denominated in Canadian dollars and $1,075 in convertible debentures with the option to be converted into 4,300,000 shares of Falcone Butte. The warrants were revalued using the weighted average assumptions: volatility of 121.76% (2021 - 141%), expected term of 0.22 years (2020 - 0.72 years), a discount rate of 3.09% (2021-1.01%) and a dividend yield of 0% (2021 - 0%). The resulting fair value of these derivative liabilities at June 30, 2022, is $20 (December 31, 2021 $55). The conversion option was valued using the weighted average assumptions: volatility of 100% (2021 - nil%), expected term of 1.67 years (2021 - nil years), a discount rate of 3.20% (2021 - nil%) and a dividend yield of 0% (2021 - 0%). The resulting fair value of these derivative liabilities at June 30, 2022, is $145 (December 31, 2021 $nil).
A reconciliation of the changes in the derivative liability during the period is as follows:
| Balance December 31, 2020 | $ | 51 | |
| Change in fair value | 4 | ||
| Balance December 31, 2021 | 55 | ||
| Change in fair value - warrants | (35 | ) | |
| Derivative related to convertible debentures | 145 | ||
| Balance June 30, 2022 | $ | 165 |
8. CONVERTIBLE DEBENTURES
On June 17, 2022, the company closed the first tranche of its non-brokered private placement of unsecured convertible debentures for gross proceeds of $1,075 (Note 11). The debentures bear interest at a rate of 14% per annum and mature on February 17, 2024 and are convertible into shares of the Company at $0.067 per share until June 17, 2023 and thereafter at $0.078 per share. The holder also has the option to elect at any time prior to the election date to be repaid by way of shares the Company owns of Falcon Butte (Note 5) at the rate of $0.25 per Falcon Butte share. The option to be repaid in Falcon Butte shares represents a derivative liability as the holder has the option to convert the debt into a financial asset of the Company (Note 7).
In conjunction with the convertible debt financing, the Company issued 16,044,774 warrants. The warrants are exercisable into one common share of the Company at $0.067 per share and expire on February 17, 2024.
The convertible debentures were determined to be a financial instrument comprising an embedded derivative liability classified conversion feature with a host debt component. On initial recognition, the Company used the residual value method to allocate the principal amount of the debentures between the two components. The fair value of the debt was valued first, followed by the fair value of the conversion option to Falcon Butte shares or Lion Copper and Gold shares with the residual allocated to the warrants based on their relative fair values. The fair value of the debt was estimated using the prevailing market interest rate for a similar non-convertible instrument, estimated to be 11% per annum. A total amount of $145 was allocated to the conversion option, with remaining amount of $34 allocated to warrants.
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Lion Copper and Gold Corp. |
8. CONVERTIBLE DEBENTURES (continued)
The fair value of the conversion feature was determined based on the Black-Scholes Option Pricing Model using the assumptions set out as follows:
| At initial recognition | |||
| Risk-free interest rate | 3.20% | ||
| Expected volatility | 100% | ||
| Dividend yield | 0% | ||
| Expected life | 1.67 years |
A continuity schedule of the Company's convertible debt is as follows:
| June 30, 2022 | |||
| Balance as at January 1, 2022 | $ | - | |
| Issued | 1,075 | ||
| Derivative liability | (145 | ) | |
| Fair value of warrants | (34 | ) | |
| Accretion | 4 | ||
| Interest | 5 | ||
| Balance as at June 30, 2022 | $ | 905 |
$5 in accrued interest was owing on the convertible debt as of June 30, 2022 (2021- $Nil).
9. SHARE CAPITAL
The Company is authorized to issue an unlimited number of common shares without par value.
Six months ended June 30, 2022
a) On February 17, 2022, as a part of the Blue Copper Prospect transaction, the Company issued 1,500,000 common shares with a fair value of $119 as part of the closing of the transaction (Note 4(g)).
b) On March 17, 2022, the Company issued 8,000,000 common shares with a fair value of $506 as part of the option agreement with Houston Minerals Ltd. to acquire a 100% interest in the Chaco, and the Ashton Properties (Note 4(f)).
c) On April 25, 2022, the Company issued 800,000 common shares with a fair value of $56 to settle debt in the amount of $62 (CAD$80).
d) On June 29, 2022, the Company issued 2,000,000 common shares in connection with warrants exercised for proceeds of $100 (Note 11).
Six months ended June 30, 2021
a) During the period ended June 30, 2021, the Company issued 5,300,000 common shares in connection with options and warrants exercised for proceeds of $461.
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Lion Copper and Gold Corp. |
10. EQUITY RESERVES
a) Stock options
The Company has a stock option plan under which the Company is authorized to grant stock options of up to 10% of the number of common shares issued and outstanding of the Company at any given time.
Stock option activity during the six months ended June 30, 2022 is summarized below:
i. On May 25, 2022, the Company granted 9,000,000 stock options with an exercise price of $0.085 CAD and an expiry date of May 25, 2027. 25% of these stock options vested immediately upon grant, and 25% of the stock options vest every 3 months over a period of 9 months.
The continuity of the number of stock options issued and outstanding as of June 30, 2022, and December 31, 2021 is as follows:
| As at June 30, 2022 | As at December 31, 2021 | |||||||||||
| Number of options |
Weighted average exercise price (CAD) |
Number of options |
Weighted average exercise price (CAD) |
|||||||||
| Outstanding, beginning of year | 19,915,000 | 0.12 | 14,690,000 | 0.08 | ||||||||
| Granted | 9,000,000 | 0.09 | 12,900,000 | 0.16 | ||||||||
| Expired | (1,695,000 | ) | 0.10 | (275,000 | ) | 0.65 | ||||||
| Cancelled | - | - | (2,515,000 | ) | 0.15 | |||||||
| Exercised | - | - | (4,885,000 | ) | 0.07 | |||||||
| Outstanding, end of period, year | 27,220,000 | 0.11 | 19,915,000 | 0.12 | ||||||||
As of June 30, 2022, and December 31, 2021, the number of stock options outstanding and exercisable were:
| Expiry date | Exercise price (CAD) |
Number of options outstanding |
Remaining contractual life in years |
Number of options exercisable |
||||||||
| September 20, 2023 | 0.06 | 1,470,000 | 1.22 | 1,470,000 | ||||||||
| June 21, 2024 | 0.07 | 1,900,000 | 1.98 | 1,900,000 | ||||||||
| August 8, 2024 | 0.06 | 500,000 | 2.11 | 500,000 | ||||||||
| June 20, 2025 | 0.08 | 2,450,000 | 2.98 | 2,450,000 | ||||||||
| June 18, 2026 | 0.25 | 3,950,000 | 3.97 | 3,950,000 | ||||||||
| September 17, 2026 | 0.11 | 4,500,000 | 4.22 | 4,500,000 | ||||||||
| October 21, 2026 | 0.09 | 2,700,000 | 4.31 | 2,025,000 | ||||||||
| December 12, 2026 | 0.12 | 750,000 | 4.45 | 562,500 | ||||||||
| May 25, 2027 | 0.085 | 9,000,000 | 4.90 | 2,250,000 | ||||||||
| Outstanding, June 30, 2022 | 27,220,000 | 19,607,500 |
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Lion Copper and Gold Corp. |
10. EQUITY RESERVES (continued)
| Expiry date | Exercise price (CAD) |
Number of options outstanding |
Remaining contractual life in years |
Number of options exercisable |
||||||||
| June 23, 2022 | 0.10 | 1,695,000 | 0.48 | 1,695,000 | ||||||||
| September 20, 2023 | 0.06 | 1,470,000 | 1.72 | 1,470,000 | ||||||||
| June 21, 2024 | 0.07 | 1,900,000 | 2.47 | 1,900,000 | ||||||||
| August 8, 2024 | 0.06 | 500,000 | 2.61 | 500,000 | ||||||||
| June 20, 2025 | 0.08 | 2,450,000 | 3.47 | 2,450,000 | ||||||||
| June 18, 2026 | 0.25 | 3,950,000 | 4.47 | 1,975,000 | ||||||||
| September 17, 2026 | 0.11 | 4,500,000 | 4.72 | 2,250,000 | ||||||||
| October 21, 2026 | 0.09 | 2,700,000 | 4.81 | 675,000 | ||||||||
| December 12, 2026 | 0.12 | 750,000 | 4.95 | 187,500 | ||||||||
| Outstanding, December 31, 2021 | 19,915,000 | 13,102,500 |
During the period ended June 30, 2022, an amount of $695 (2021 - $732) was expensed as share-based payments. The portion of share-based payments recorded is based on the vesting schedule of the options. The following weighted average assumptions were applied using the Black-Scholes Option Pricing model used to estimate the weighted average fair value of stock options granted during the six months ended June 30, 2022, and 2021:
| Six months ended June 30, 2022 |
Six months ended June 30, 2021 |
|||||
| Risk-free interest rate | 2.58% | 0.97% | ||||
| Expected life (years) | 5 | 5 | ||||
| Annualized volatility | 147.41% | 101.40% | ||||
| Dividend yield | 0% | 0% |
b) Share purchase warrants
Warrant activity during the six months ended June 30, 2022, is summarized below:
i. On June 17, 2022, the Company granted 16,044,774 warrants with an exercise price of $0.067 and an expiry date of February 17, 2024.
ii. On June 29, 2022, the Company issued 2,000,000 common shares in connection with the exercise of warrants with an exercise price of $0.05 for proceeds of $100 (Note 11).
The continuity of the number of share purchase warrants outstanding as of June 30, 2022, and December 31, 2021, is as follows:
| June 30, 2022 | December 31, 2021 | |||||||||||
| Number of warrants |
Weighted average exercise price |
Number of warrants |
Weighted average exercise price |
|||||||||
| Outstanding, beginning of year | 83,083,504 | $ | 0.09 | 12,769,230 | $ | 0.05 | ||||||
| Issued | 16,044,774 | 0.067 | 71,314,274 | 0.10 | ||||||||
| Exercised | (2,000,000 | ) | 0.05 | (1,000,000 | ) | 0.05 | ||||||
| Outstanding, end of period/year | 97,128,278 | $ | 0.09 | 83,083,504 | $ | 0.09 | ||||||
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Lion Copper and Gold Corp. |
10. EQUITY RESERVES (continued)
The following table summarizes warrants outstanding as of June 30, 2022, and December 31, 2021:
| Expiry date | Currency | Exercise price | June 30, 2022 |
December 31, 2021 |
||||||
| August 28, 2022 | $ | 0.05 | 9,000,000 | 11,000,000 | ||||||
| September 20, 2022 | CAD | 0.07 | 769,230 | 769,230 | ||||||
| September 13, 2024 | $ | 0.10 | 26,488,733 | 26,488,733 | ||||||
| September 27, 2024 | $ | 0.10 | 13,152,909 | 13,152,909 | ||||||
| October 21, 2024 | $ | 0.10 | 31,672,632 | 31,672,632 | ||||||
| February 17, 2024 | $ | 0.07 | 16,044,774 | - | ||||||
| Outstanding at the end of the period/year | 97,128,278 | 83,083,504 | ||||||||
c) Restricted share units
At the 2022 Annual General Meeting, the Company's shareholders approved issuance of common shares from treasury pursuant to the Company's Amened 2021 Restricted Share Unit Plan (the "RSU Plan") and reserved 30,330,661 shares for issuance under the RSU Plan. Under the RSU Plan, if the Company divests its interests, including the option to purchase, absent a merger, sale or similar transaction in a) one of either the Chaco Bear or Ashton projects, then 50% of the total RSUs that have not vested will be cancelled, or b) both the Chaco Bear or Ashton projects, then 100% of the total RSUs that have not vested will be cancelled.
Restricted share units ("RSU") activity during the six months ended June 30, 2022, is summarized below:
i. On June 3, 2022, the Company issued 8,000,000 RSUs to the CEO and the President/CFO of the Company. 33.33% of the RSUs vested on June 3, 2022, 33.33% vest on the first anniversary and 33% vest on the second anniversary (Note 11).
ii. On June 3, 2022, 1,333,333 RSUs were released. The RSUs were converted into shares subsequent to the period on July 28, 2022 (Note 11).
iii. On June 3, 2022, 1,333,333 RSUs were cancelled (Note 11).
The continuity of the number of RSUs issued and outstanding as of June 30, 2022, and December 31, 2021 is as follows:
| Number of RSUs |
|||
| Outstanding at December 31, 2021 | - | ||
| Granted | 8,000,000 | ||
| Released | (1,333,333 | ) | |
| Cancelled | (1,333,333 | ) | |
| Outstanding at June 30, 2022 | 5,333,334 |
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Lion Copper and Gold Corp. |
11. RELATED PARTY TRANSACTIONS
The Company's related parties include its directors and officers whose remuneration was as follows, subject to change of control provisions for officers:
| Three months ended June | Six months ended June | |||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||
| Salaries | $ | 136 | $ | 163 | $ | 274 | $ | 262 | ||||
| Directors' fees | - | 9 | 13 | 18 | ||||||||
| Share-based payments | 517 | 325 | 530 | 325 | ||||||||
| Interest on convertible debenture | 1 | - | 1 | - | ||||||||
| $ | 654 | $ | 818 | $ | 818 | $ | 605 | |||||
a) On January 26, 2022, the Company entered into a property acquisition agreement to assign its options to acquire the Butte Valley property to Falcon Butte, which is a private British Columbia company established to acquire mineral resource properties. Falcon Butte was founded by two individuals that are also directors and officers of Lion CG and as such the transaction is a non-arm's length transaction under TSXV rules.
On April 5, 2022, the Company completed the assignment of the two option agreements for the Butte Valley property. Pursuant to the assignment agreement, Lion CG received 16,049,444 common shares of Falcon Butte (Note 5). In addition, the Company received a payment of $500 from Falcon Butte, as a reimbursement of exploration expenditures and related costs incurred by the Company on the Butte Valley Property. The Company recorded a gain of $1,208 on the sale of the Butte Valley property (Note 4(e)).
On April 13, 2022, the Company amended the agreement. Pursuant to the addendum Falcon Butte will pay a total of $500 in exchange for a 0.5% buy-down and retirement of certain NSRs. As of June 30, 2022, the Company has received $250 (Note 4(e)).
b) As per their agreements with the Company, the CEO and President/CFO are entitled to receive an annual grant of options under the Stock Option Plan of the Company on each Annual Review Date. The number of options will be determined by the Board based on a minimum of 50% and maximum of 150% of the annual base compensation. The exercise price per common share of the Company will be equal to the Market Price (as defined in the TSXV policies) of the Company's common shares as at the Annual Review Date, subject to a minimum exercise price per share of CAD$0.05. The applicable percentage on the annual base salary will be determined by the Board based on an assessment of the performance of the CEO and President/CFO in achieving the Annual Objectives for the relevant Annual Review Period. On May 25, 2022, the CEO and President/ CFO were issued a combined 3,300,000 bonus options with an exercise price of $0.085 and an expiry date of May 25, 2027 (Note 10(a)). The CFO was granted 1,470,000 stock options and the CEO was granted 1,830,000 stock options.
c) On June 29, 2022, a director of the Company exercised 2,000,000 warrants with an exercise price of $0.05/ share for gross proceeds of $100 (Note 9,10 (b)).
d) As per their agreements with the Company, the CEO and President/ CFO were each granted 4 million Restricted Stock Units ("RSUs") on October 21, 2021, which were granted subject to vesting in three equal installments over three years. The grant of RSUs is subject to shareholder approval and further subject to Exchange approval of the RSU Plan and the aforementioned grant thereunder. Pursuant to Exchange policies, RSUs granted prior to shareholder approval of the RSU Plan must be specifically approved by a vote of shareholders excluding the votes of the holders of the Restricted Share Units. The Company's shareholders approved the grant of 4 million RSUs to both the CEO and President/ CFO at the AGM on May 18, 2022 and the Exchange approved the RSU Plan on June 3, 2022, resulting in 8,000,000 RSUs granted on June 3, 2022 (Note 10 (c)).
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Lion Copper and Gold Corp. |
11. RELATED PARTY TRANSACTIONS (continued)
e) On June 3, 2022, 1,333,333 RSUs issued to the CEO were released. The RSUs were converted into shares subsequent to the period ended on July 28, 2022 and are included in obligation to issue shares as at June 30, 2022 ((Note 10 (c)).
f) As of June 30, 2022, 1,333,333 RSUs issued to the President/CFO were cancelled ((Note 10 (c)).
g) During the six months ended June 30, 2022, a director of the Company subscribed for $250 of unsecured convertible debentures (Note 8). The debentures bear interest at a rate of 14% per annum and mature on February 17, 2024 and are convertible into shares of the Company at $0.067 per share until June 17, 2023, and thereafter at $0.078 per share. As of June 30, 2022, the Company accrued $1 in interest related to the convertible debentures.
12. SEGMENTED INFORMATION
The Company operates in one reportable operating segment, being mineral exploration. Geographic segment information of the Company as at and for the period ended June 30, 2022, and the year ended December 31, 2022 is as follows:
| June 30, 2022 | December 31, 2021 | |||||||||||||||||
| Canada | USA | Total | Canada | USA | Total | |||||||||||||
| Non-current assets | $ | 554 | $ | 33,386 | $ | 33,940 | $ | - | $ | 32,238 | $ | 32,238 | ||||||
| Total assets | $ | 5,030 | $ | 31,784 | $ | 36,814 | $ | 790 | $ | 32,339 | $ | 33,129 | ||||||
| Non-current liabilities | $ | (905 | ) | - | $ | (905 | ) | $ | - | $ | - | - | ||||||
| Total liabilities | $ | (1,138 | ) | $ | (2,751 | ) | $ | (3,889 | ) | $ | (196 | ) | $ | (1,217 | ) | $ | (1,413 | ) |
| Six months ended June 30, 2022 | Six months ended June 30, 2022 | |||||||||||||||||
| Canada | USA | Total | Canada | USA | Total | |||||||||||||
| Net income (loss) | $ | (9,380 | ) | $ | 9,079 | $ | (301 | ) | $ | (1,141 | ) | $ | (33 | ) | $ | (1,174 | ) | |
13. COMMITMENTS
To acquire certain mineral property interests as per Note 4, the Company must make optional acquisition expenditures to satisfy the terms of existing option agreements, failing which the rights to such mineral properties will revert to the property vendors.
14. CONTINGENCIES
On July 23, 2021, the Company received notice from the State of Nevada that the State has not approved extensions of three water rights permits purchased by its subsidiary, SPS in 2011. The State also advised that a fourth permit would not be extended after a period of an additional year.
On August 20, 2021, the Company filed a Petition for Judicial Review of the Forfeiture Notice and has retained legal counsel to initiate and vigorously undertake the appeal process. This appeal process is ongoing.
On May 26, 2022, the Company and Desert Pearl amicably terminated the Purchase and Sale Agreement between the parties in light of the Company's agreement with Rio Tinto. As a consequence of the termination, the Company retains the water permit that is subject to forfeiture and designated for mining and milling use. The $1,000 deposit was returned to Desert Pearl Farms on June 20, 2022.
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Lion Copper and Gold Corp. |
15. CAPITAL MANAGEMENT
The Company considers its capital to be equity, comprising share capital, reserves, and deficit. The Company's objectives are to ensure sufficient financial flexibility to achieve its ongoing business objectives, including the funding of future growth opportunities, the pursuit of accretive acquisitions, and to maximize shareholder return through enhancing the share value.
The Company manages capital through its budgeting and forecasting processes. The Company reviews its working capital and forecasts its future cash flows based on operating expenditures and other investing and financing activities.
To maintain its objectives, the Company may issue new shares, adjust capital spending, acquire, or dispose of assets. There is no assurance that these initiatives will be successful.
There was no change in the Company's approach to capital management during the period ended June 30, 2022. The Company is not subject to any externally imposed capital requirements.
16. FINANCIAL INSTRUMENT RISKS
The board of directors has overall responsibility for establishing and oversight of the Company's risk management framework. The Company examines the various financial instrument risks to which it is exposed and assesses the impact and likelihood of those risks. Financial instruments consist of cash and cash equivalents, investments, accounts payable and derivative liabilities.
Financial instruments recorded at fair value on the consolidated statements of financial position are classified using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. 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 activities expose it to financial risks of varying degrees of significance, which could affect its ability to achieve its strategic objectives for growth and shareholder returns. The principal financial risks to which the Company is exposed are, liquidity risk, currency risk, interest rate risk, credit risk and commodity price risk. The Board of Directors has overall responsibility for the establishment and oversight of the Company's risk management framework and reviews the Company's policies on an ongoing basis.
The investment in associate is considered to represent a level 3 fair value measurement.
a) Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company manages liquidity risk through the management of its capital structure. To mitigate this risk, the Company has a planning and budgeting process in place to determine the funds required to support its ongoing operations and capital expenditures. The Company ensures that sufficient funds are raised from equity offerings or debt financings to meet its operating requirements, after considering existing cash and expected exercise of stock options and share purchase warrants. See Note 1 for further discussion.
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Lion Copper and Gold Corp. |
16. FINANCIAL INSTRUMENT RISKS (continued)
b) Currency risk
Foreign exchange risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company operates in the United States and Canada; therefore, it is exposed to currency risk from transactions denominated in CAD. Currently, the Company does not have any foreign exchange hedge programs and manages its operational CAD requirements through spot
purchases in the foreign exchange markets. Based on CAD financial assets and liabilities' magnitude, the Company does not have material sensitivity to CAD to USD exchange rates.
c) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market interest rates. The Company is exposed to the interest rate risk on its liabilities through its outstanding borrowings and the interest earned on cash balances. The Company monitors its exposure to interest rates and maintains an investment policy that focuses primarily on the preservation of capital and liquidity.
d) Credit risk
Credit risk is the risk of a financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Company is exposed to credit risk through its cash and cash equivalents. Cash and cash equivalents are held in large Canadian financial institutions that have high credit ratings assigned by international credit rating agencies.
17. SUBSEQUENT EVENTS
a) On July 7, 2022, the Company closed its second and final tranche of its non-brokered private placement of unsecured debentures for gross proceeds of $925, and for aggregate gross proceeds of $2,000. The debentures bear interest at a rate of 14% per annum and mature on March 8, 2024. The debentures may be converted into shares of the company at $0.067 per share until July 8, 2023, and thereafter at $0.078 per share. The holder has the option to elect to be repaid in kind at any time prior to maturity of the debentures by way of shares the company owns of Falcon Blue (Note 5), or its successor, at the rate of $.025 per Falcon Butte share.
In connection with the sale of the debentures, the company issued to the purchasers one detachable warrant for every $0.067 of principal amount of the debentures. The company issued 13,805,964 warrants in connection with the second tranche of the debenture financing. Each warrant entitles the holder to acquire a common share of the Company at a price of $0.067 for a period of 20 months.
b) On July 7, 2022, the Company issued 1,212,121 common shares of the Company for a deemed price of $0.0825 per share to settle $100 of annual maintenance fees to Houston Minerals Ltd. for the Chaco Bear and Ashton Properties.
c) On July 28, 2022, the TSX Venture Exchange accepted filing for the Company to issue 915,910 shares at a price of $0.067 ($0.085CAD) to settle outstanding debt of $61 ($78 CAD). The shares were issued on August 23, 2022.
d) On July 28, 2022, the Company issued 1,333,333 common shares of the Company to the CEO for the first tranche of RSUs that vested on June 3, 2022 (Note 10(c)).
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17. SUBSEQUENT EVENTS (continued)
e) On August 11, 2022, the Company received $250 from Falcon Butte for the final royalty buy-down and retirement of certain NSRs relating to the Butte Valley property.
f) On August 20, 2022, the Company granted 2,394,283 incentive stock options to consultants and one director of the Company, exercisable at a price of USD$0.055 (CAD$0.072) for a period of three years.
g) Under U.S. federal securities laws, issuers must assess their foreign private issuer status as of the last business day of their second fiscal quarter. It was announced that more than 50% of the Company's common shares are held by U.S. shareholders, and the Company no longer meets the definition of a foreign private issuer under the United States securities laws. As a result, commencing in 2023, the Company will be required to use forms and rules prescribed for U.S. domestic companies, including the requirement that financial statements be presented in accordance with U.S. GAAP instead of IFRS. The Company's common shares will continue to be listed on the TSX Venture Exchange and quoted on the OTCQB.
Lion Copper and Gold Corp.
(Formerly Quaterra Resources Inc.)
Management's Discussion and Analysis
For the six months ended June 30, 2022
Dated: August 29, 2022
(In U.S. dollars)
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Lion Copper and Gold Corp. |
This Management's Discussion and Analysis ("MD&A") of Lion Copper and Gold Corp. and its wholly owned subsidiaries (collectively, "Lion CG" or the "Company"), dated August 29, 2022, should be read in conjunction with the condensed interim consolidated financial statements for the six months ended June 30, 2022 and the audited consolidated financial statements for the year ended December 31, 2021, and related notes thereto which have been prepared under International Financial Reporting Standards issued by the International Accounting Standards Board ("IFRS"). All dollar amounts in this MD&A are United States dollars unless otherwise noted.
Additional information about the Company, including the Company's press releases, quarterly and annual reports, and Form 20-F, is available through the Company's filings with the securities regulatory authorities in Canada at www.sedar.com or the United States Securities Exchange Commission at www.sec.gov/edgar. Information about mineral resources, as well as risks associated with investing in the Company's securities is contained in the Company's most recently filed 20-F.
On November 22, 2021, the Company changed its name from Quaterra Resources Inc. to Lion Copper and Gold Corp. The shares of the Company commenced trading under the new name at the open of trading on November 23, 2021. The Company's common shares are listed on the TSX Venture Exchange ("TSXV") under the symbol "LEO" and traded on the OTCQB Market under the symbol "LCGMF".
Forward-Looking Statements
Certain statements made and information contain "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and "forward-looking information" within the meaning of applicable Canadian securities legislation (collectively, "Forward-Looking Statements").
Other than statements of historical fact, all statements that address activities, events, or developments that the Company believes, expects or anticipates will, may, could or might occur in the future are Forward-Looking Statements. The words such as "believe", "anticipate", "expect", "estimate", "strategy", "plan", "intend", "may", "could", "would", "should", or similar expressions are intended to identify Forward-Looking Statements.
The 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, but are not limited to, general business and economic uncertainties; exploration and resource extraction risks; uncertainties relating to surface rights; the actual results of current exploration activities; the outcome of negotiations; conclusions of economic evaluations and studies; future prices of natural resource based commodities; increased competition in the natural resource industry for properties, equipment and qualified personnel; risks associated with environmental compliance and permitting, including those created by changes in environmental legislation and regulation; the risk of arbitrary changes in law; title risks; and the risk of loss of key personnel.
The foregoing lists of factors and assumptions are not exhaustive. The reader should also consider carefully the matters discussed under the heading "Risks Factors and Uncertainties" elsewhere in this MD&A. Forward-Looking Statements contained herein are made as of the date hereof (or as of the date of a document incorporated herein by reference, as applicable). No obligation is undertaken to update publicly or otherwise revise any Forward-Looking Statements or the foregoing lists of factors and assumptions, whether as a result of new information, future events or results or otherwise, except as required by law. Because Forward-Looking Statements are inherently uncertain, readers should not place undue reliance on them. The Forward-Looking Statements contained herein are expressly qualified in their entirety by this cautionary statement.
Company Profile
Lion Copper and Gold Corp. is a Canadian-based company advancing its Mason Valley, Nevada copper assets with Rio Tinto America, Inc., in addition to advancing its exploration projects including the Chaco Bear and Ashton properties in highly prospective regions in British Columbia, Canada, and the Blue Copper Prospect in Montana, USA.
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The Company also looks for opportunities to acquire projects on reasonable terms that have the potential to host large mineral deposits attractive to major mining companies. The Company is incorporated in British Columbia, Canada. Its registered and records offices are located at 1200 - 750 West Pender Street, Vancouver, British Columbia, Canada, V6C 2T8.
Mineral Properties
The following table summarizes the balance of exploration and evaluation assets as at June 30, 2022 and December 31, 2021 and the changes in exploration and evaluation assets for the years then ended.
| Singatse Peak Services | Lion CG | Quaterra Alaska | |||||||||||||||||||||||||
| (In thousands of U.S dollars) | MacArthur | Yerington | Bear | Wassuk | Chaco Bear and Ashton Property |
Groundhog | Butte Valley |
Blue Copper |
Total | ||||||||||||||||||
| Balance December 31, 2020 | $ | 18,828 | $ | 3,569 | $ | 1,460 | $ | 1,470 | $ | - | $ | 2,522 | $ | 387 | $ | - | $ | 28,236 | |||||||||
| Property maintenance | $ | 159 | $ | 69 | $ | 193 | $ | 305 | $ | - | $ | 98 | $ | 247 | $ | 401 | $ | 1,472 | |||||||||
| Drilling | 892 | - | - | 47 | - | - | 500 | - | 1,439 | ||||||||||||||||||
| Geological & mapping | 22 | - | - | - | - | - | - | 16 | 38 | ||||||||||||||||||
| Geophysical surveys | 20 | - | 63 | - | - | - | 47 | 15 | 145 | ||||||||||||||||||
| Technical study | 276 | 11 | - | - | - | 1 | - | - | 288 | ||||||||||||||||||
| Assay & labs | 231 | - | - | - | - | - | - | - | 231 | ||||||||||||||||||
| Environmental | 43 | 142 | - | - | - | - | - | - | 185 | ||||||||||||||||||
| Field support & other | 46 | 5 | - | 3 | - | 67 | 1 | 47 | 169 | ||||||||||||||||||
| Total additions for the year | 1,689 | 227 | 256 | 355 | - | 166 | 795 | 479 | 3,967 | ||||||||||||||||||
| Balance December 31, 2021 | $ | 20,517 | $ | 3,796 | $ | 1,716 | $ | 1,825 | - | $ | 2,688 | $ | 1,182 | $ | 479 | $ | 32,203 | ||||||||||
| Property maintenance | $ | - | $ | - | $ | 43 | $ | - | $ | 526 | $ | - | $ | 2 | $ | 190 | $ | 761 | |||||||||
| Geological & mapping | - | - | - | - | 8 | - | - | 15 | 23 | ||||||||||||||||||
| Geophysical surveys | - | - | - | - | - | - | 11 | 16 | 27 | ||||||||||||||||||
| Technical study | 114 | - | - | - | - | - | - | - | 114 | ||||||||||||||||||
| Environmental | - | 17 | - | - | - | - | - | - | 17 | ||||||||||||||||||
| Field support & other | 10 | 4 | - | - | - | 36 | 3 | 37 | 90 | ||||||||||||||||||
| Assignment of Butte Valley | - | - | - | - | - | - | (1,198 | ) | - | (1,198 | ) | ||||||||||||||||
| Total additions (disposals) for the year | 124 | 21 | 43 | - | 534 | 36 | (1,182 | ) | 258 | (166 | ) | ||||||||||||||||
| Balance June 30, 2022 | $ | 20,641 | $ | 3,817 | $ | 1,759 | $ | 1,825 | $ | 534 | $ | 2,724 | $ | - | $ | 737 | $ | 32,037 | |||||||||
During the six months ended June 30,2022, the balance of mineral properties decreased by $166,000. The decrease is mainly due to the Company entering into a property acquisition agreement to sell and assign its options to acquire the Butte Valley property to Falcon Butte Minerals Corp. (formerly 1301666 B.C. Ltd "Falcon Butte."), as a result the Company derecognized the property value of $1,198,000. The decrease is offset by the purchase of the Chaco Bear and Ashton Property from Houston Minerals Inc. on August 25, 2021, for 8,000,000 shares with a fair market value of $506,000.
Furthermore, On March 18, 2022, the Company entered into an Option to Earn-in Agreement with Rio Tinto America Inc. ("Rio Tinto") to advance studies and exploration at the Company's copper assets in Mason Valley, Nevada, see Option to Earn-in Agreement with Rio Tinto below for further details. In connection with Stage 1 of the agreement, the Company received $4,000,000 for an exclusive earn-in option and agreed-upon Mason Valley study and evaluation works. During the six months ended June 30,2022, the Company incurred expenditures of $1,719,000 in connection with the work program.
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On February 24,2022, the Company filed a technical report titled "Mineral Resource Estimate" for its MacArthur Project, which can be found on the SEDAR website at www.sedar.com and on the Company's website. Refer to Mineral Resource Estimate below for a summary of the report.
MacArthur Copper Project and Yerington Mine Property, Nevada
Located in the historic copper district of Yerington, Nevada, the Company's Yerington Copper Projects include the MacArthur Copper Project and Yerington Mine Property, which are 100% owned by Singatse Peak Services LLC, a wholly-owned subsidiary of Lion CG.
The MacArthur Property consists of 897 unpatented lode claims totaling approximately 18,500 acres on lands administered by the U.S. Department of Interior - Bureau of Land Management (BLM).
Lion CG has a National Instrument 43-101 compliant resource and has released a preliminary economic assessment for the MacArthur Project.
The MacArthur Project is subject to a 2% net smelter return royalty (the "NSR") upon commencing commercial production, which can be reduced to a 1% NSR in consideration of $1,000,000.
The Yerington Mine Property covers approximately 11 square miles centered on the former Anaconda open pit copper mine. This includes 2,768 acres of fee simple parcels and patented mining claims as well as 208 unpatented lode and placer claims totaling approximately 4,300 acres on lands administered by the BLM.
Lion CG has a National Instrument 43-101 compliant resource for the Yerington Mine Property and believes that the project has potential for additional copper resources. Historic and current drilling data indicate that horizontal and vertical limits to the mineralization at the Yerington Mine Property have not yet been found.
The Yerington Mine Property is subject to a 2% NSR upon commencing commercial production. The total lifetime royalty is capped at $7,500,000.
Bear Deposit, Nevada
The Bear deposit consists of approximately 2,300 acres of private land located to the northeast of the Yerington Mine Property.
The Company has five option agreements, entered from March 2013 to May 2015, to acquire a 100% interest in private land in Yerington, Nevada, collectively known as the Bear deposit. Under the terms of these option agreements, as amended, the Company is required to make $5,673,290 in cash payments over 15 years ($5,122,290 paid) to maintain the exclusive right to purchase the land, mineral rights, and certain water rights and to conduct mineral exploration on these properties. Two of the properties are subject to a 2% NSR upon commencing commercial production, which can be reduced to a 1% NSR in consideration of $1,250,000 total.
Outstanding payments to keep the five option agreements current are as follows, by year:
- $193,000 due 2022 ($43,000 paid);
- $201,000 due in 2023;
- $50,000 due in years 2024 to 2028.
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Outstanding purchase payments under the five option agreements are as follows:
- $1,115,000 for Taylor, purchase option expiring in 2023;
- $250,000 for Chisum, purchase option expiring in 2023;
- $5,000,000 for Yerington Mining, purchase option expiring in 2024;
- $8,000,000 for Circle Bar N, purchase option expiring in 2024;
- $18,020,000 for Desert Pearl Farms, purchase option expiring in 2029.
Wassuk, Nevada
The Wassuk property consists of 310 unpatented lode claims totaling approximately 6,400 acres on lands administered by the BLM.
On December 19, 2007, the Company entered into a Mining Lease with Option to Purchase, as further amended, to earn a 100% interest in certain unpatented mining claims in Lyon County, Nevada, and was required to make $1,405,000 in cash payments (paid) and incur a work commitment of $50,000 by December 31, 2021 (completed). During 2021, two final option payments were paid and form part of the total payments of $1,405,000. The Company has now satisfied all conditions required to execute the option to purchase.
The property is subject to a 3% NSR royalty upon commencing commercial production, which can be reduced to a 2% NSR in consideration of $1,500,000.
Groundhog Project, Alaska
On April 20, 2017, the Company signed an agreement (the "Agreement") with Chuchuna Minerals Company, an Alaska corporation, giving it an option to purchase a 90% interest in the Groundhog copper prospect, a 40,000-acre property located on an established copper porphyry belt, two hundred miles southwest of Anchorage, Alaska.
The Groundhog claims cover the northern extension of a structural zone that hosts a number of porphyry copper-gold prospects, including the large Pebble porphyry copper, gold and molybdenum project, which is three miles south of the Groundhog claim boundary. To earn the 90% interest, the Company must fund a total of $5,000,000 ($2,724,000 funded) of exploration expenditures and make a lump sum payment to Chuchuna of $3,000,000 by the end of April 20, 2024. During the year ended December 31, 2021, the lease agreement was further extended from six to seven years, providing the Company more time to make the required exploration expenditures and lump sum payment. The Company can terminate the Agreement at its discretion.
The property is subject to a 1.75% NSR upon commencing commercial production, which can be reduced to a 0.875% NSR royalty in consideration of $25,000,000.
Butte Valley Prospect, Nevada
On January 26, 2022, the Company entered into a property acquisition agreement to sell and assign its options to acquire the Butte Valley property to Falcon Butte Minerals Corp. (formerly 1301666 B.C. Ltd., or "Falcon Butte") which is a private British Columbia company established to acquire mineral resource properties.
Pursuant to the agreement, Lion CG's 100% owned subsidiary Quaterra Alaska will be granted an equity position in Falcon Butte. In addition, Quaterra Alaska will maintain a 1.5% NSR on each of the Butte Valley optioned properties, which is subject to a buy-down to a 1.0% NSR in exchange for a payment of $7,500,000 per property.
On April 5, 2022, the Company completed the assignment of the two option agreements for the Butte Valley Property.
On April 13, 2022, the Company amended the assignment agreement. Pursuant to the addendum Falcon Butte will pay a total of $500,000 in exchange for a 0.5% buy-down and retirement of certain NSRs held by the Company. As of June 30, 2022, the Company has received $250,000. Subsequent to the period, the remaining $250,000 was received on August 11, 2022.
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Chaco Bear and Ashton Properties, British Columbia
On August 25, 2021, the Company entered into a non-binding letter of intent (the "LOI") with Houston Minerals Ltd. ("Houston") setting forth the terms of an option whereby the Company may acquire a 100% interest in the Chaco Bear Property located directly east of the Golden Triangle of British Columbia, and the Ashton Property located near Lytton, British Columbia (Collectively, the "Properties").
Under the terms of the LOI, the Company and Houston propose to enter into a definitive agreement whereby the Company can earn up to a 100% interest in the Properties by making the following share issuances and cash payments over a four-year period:
- issuing 8,000,000 common shares of the Company on closing (issued on March 17, 2022);
- making annual lease payments on the Properties after 2021;
- incurring CAD$150,000 of exploration expenditures on the Chaco Bear Property and CAD$50,000 of exploration expenditures on the Ashton Property before the end of 2021 (paid);
- incurring exploration expenditures of at least the value of the annual assessment multiplied by 1.5 for periods after 2021 (claims were renewed and extended through to early 2025, resulting in no obligation on exploration expenditures until 2024);
- paying CAD$1,500,000 for the Chaco Bear Property and CAD$1,000,000 for the Ashton Property on or before 4 years from the closing, which amounts are payable in cash or common shares of the Company; and
- making annual advance royalty payments in the fourth and fifth year from the closing in the amounts of CAD$250,000 on the Chaco Bear Property and CAD$150,000 on the Ashton Property.
On September 17, 2021, the parties agreed to an amendment to the LOI to include a 2.5% NSR on each property. Prior to feasibility, the Company may reduce the NSR to 1.0% on the Chaco Bear Property in consideration for a payment of CAD$6,000,000 and 1.0% on the Ashton Property for a payment of CAD$3,000,000. Post feasibility, the Company may purchase the remaining 1.0% NSR on the Chaco Bear Property for CAD$12,000,000 and the remaining 1.0% NSR on the Ashton Property for CAD$6,000,000.
On January 26, 2022, the Company entered into an option agreement with Houston to replace the LOI. The consideration terms under the LOI are unchanged except that the term of the option has changed from a four-year period to a ten-year period and annual advance royalty payments in the amounts of CAD$250,000 on the Chaco Bear Property and CAD$150,000 on the Ashton Property are to be paid starting on the fifth year from closing through to the ninth year from closing instead of only in the fourth and fifth years from the closing. All other consideration terms remain unchanged.
In addition, commencing on January 31, 2022, and on January 31 of each year thereafter during the Option Period, Lion CG shall pay the following option maintenance fees to Houston: (a) CAD$60,000 in respect of the Chaco Bear Property; and (b) CAD$40,000 in respect of the Ashton Property.
Lion CG funded an initial work program in 2021 of CAD$200 on the properties in consideration for the grant of the option, and on March 16, 2022, the transaction was closed. The Company may exercise the Option for a period of up to ten years to acquire (i) the Chaco Bear property by paying CAD$1,500,000 to Houston, in cash or in common shares of the Company at the Company's option; and/or (ii) the Ashton Property by paying CAD$1,000,000 to Houston in cash or in common shares of the Company at the Company's option, and in either case common shares will be valued using the volume weighted average trading price of the Company's common shares for the twenty trading day period ending three trading days prior to the date of issuance of such Lion CG shares, with such cash payments being subject to a discount of between 5% and 15% based on the timing of exercise and cumulative exploration expenditures incurred as at the time of exercise. Houston will retain a 2.5% net smelter returns royalty on any of the Properties for which an Option has been exercised by the Company.
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Blue Copper Prospect, Montana
During the year ended as of December 31, 2021, Blue Copper LLC (the Company's 100% owned subsidiary) acquired and staked a district scale exploration and resource discovery opportunity (the "Blue Copper Prospect"), comprising more than 7,430 acres in Powell County and Lewis & Clark County in Montana, USA. The area is prospective for high grade copper-gold skarns and porphyry copper-gold mineralization. The claim block encompasses a group of more than 14 historic small mines that produced high grade gold, copper and tungsten.
The Blue Copper Prospect, located approximately 25 miles WNW of Helena, Montana, is centered on the Late Cretaceous Blackfoot City Stock (the "BCS"), which was intruded into the Black Mountain syncline, composed primarily of a Paleozoic sequence of limestone, dolomite, shale and sandstone. The BCS crystallized at the same time as the nearby Boulder batholith, which is host to the world-famous Butte copper mines. The area is prospective for high grade copper-gold skarns and porphyry copper-gold mineralization.
The claim block encompasses a group of more than 14 historic small mines that produced high grade gold, copper and tungsten. Importantly, the streams draining the BCS have a recorded production of almost 200,000 ounces of placer gold through 1959, although the actual production was most likely much higher. Despite the extensive placer production, only one lode gold mine operated historically and produced less than 10,000 ounces. Several major companies conducted exploration programs in the area during the late 1980s and early 1990s. The Company is currently acquiring, compiling and interpreting historic data to develop a 2022 work plan which will be provided when available.
As a part of the Blue Copper Prospect, Blue Copper LLC entered into a purchase agreement with Four O Six Mining & Exploration LLC to acquire certain existing and additional unpatented mining claims. In exchange for the unpatented mining claims, as part of the closing of the transaction, the Company issued 1,500,000 common shares of the capital of the Company and provided a NSR of 2% with a buy-down of 1% NSR for $1,500,000.
Blue Copper LLC has staked an additional 131 claims to expand the Blue Copper Prospect. The Company has provided a NSR of 2% with a buy-down of 1% NSR for $600,000 to Four O Six Mining & Exploration LLC for these claims.
On February 14, 2022, as a part of the Blue Copper Prospect transaction, the Company issued 1,500,000 common shares as part of the closing of the transaction.
Option to Earn-in Agreement with Rio Tinto
On March 18, 2022, the Company entered into an Option to Earn-in Agreement with Rio Tinto to advance studies and exploration at Lion CG's copper assets in Mason Valley, Nevada. Under the agreement, Rio Tinto has the option to earn a 65% interest in the assets, comprising 34,494 acres of land, including the historic Yerington mine, greenfield MacArthur Project, Wassuk property, the Bear deposit, and associated water rights (the "Mining Assets"). In addition, Rio Tinto will evaluate the potential commercial deployment of its Nuton™ technologies at the site. Nuton™ offers copper heap leaching technologies developed by Rio Tinto to deliver greater copper recovery from mined ore and access new sources of copper such as low-grade sulphide resources and reprocessing of stockpiles and mineralized waste. The technologies have the potential to deliver leading environmental performance through more efficient water usage, lower carbon emission, and the ability to reclaim mine sites by reprocessing waste.
The stages of the Agreement are set out below.
Stage 1
Rio Tinto will pay up to four million U.S. dollars ($4,000,000) for an exclusive earn-in option and agreed-upon Mason Valley study and evaluation works to be completed by Lion CG no later than December 31, 2022 (paid).
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Lion Copper and Gold Corp. |
Stage 2
Within forty-five (45) days of the completion of Stage 1, Rio Tinto will provide notice to Lion CG whether Rio Tinto elects to proceed with Stage 2, upon which Rio Tinto will pay up to five million U.S. dollars ($5,000,000) for agreed-upon Mason Valley study and evaluation works to be completed by Lion CG within 12 months from the date that the parties agree upon the scope of Stage 2 work.
Stages 1 and 2 may be accelerated at Rio Tinto's option.
Stage 3 - Feasibility Study
Within sixty (60) days of the completion of Stage 2, Rio Tinto shall provide notice to Lion CG whether Rio Tinto will exercise its Option and fund a Feasibility Study based on the results of the Stage 1 and Stage 2 work programs. Rio Tinto will fully-fund the Feasibility Study and ancillary work completed by Lion CG in amount not to exceed fifty million U.S. dollars ($50,000,000).
Investment Decision
Upon completion of the Feasibility Study, Rio Tinto and Lion CG will decide whether to create an investment vehicle into which the Mining Assets will be transferred, with Rio Tinto holding not less than a 65% interest in the investment vehicle.
• If Rio Tinto elects to not to create the investment vehicle, then Lion CG shall grant to Rio Tinto a 1.5% NSR on the Mining Assets.
• If Rio Tinto elects to create the investment vehicle but Lion CG elects not to create the investment vehicle, then, at Rio Tinto's option, Lion CG shall create the investment vehicle and Rio Tinto will purchase Lion CG's interest in the investment vehicle for fair market value.
Project Financing
• Following the formation of the investment vehicle, any project financing costs incurred will be funded by Rio Tinto and Lion CG in proportion to their respective ownership interest in the investment vehicle.
• Rio Tinto may elect to fund up to sixty million U.S. dollars ($60,000,000) of Lion CG 's project financing costs in exchange for a 10% increase in Rio Tinto's ownership percentage. In addition, upon mutual agreement of Rio Tinto and Lion CG, Rio Tinto may fund an additional forty million U.S. dollars ($40,000,000) of Lion CG's project financing costs in exchange for an additional 5% increase in Rio Tinto's ownership percentage.
• If Lion CG's ownership percentage in the investment vehicle is diluted to 10% or less, then Lion CG's ownership interest will be converted into a 1% uncapped NSR.
On April 27, 2022, the Company TSX Venture Exchange approved the Company's Option to Earn-in Agreement with Rio Tinto America Inc.
On May 17, 2022, Rio Tinto approved the Stage 1 Work Program and provided $4,000,000 to the Company for the development of the Mason Valley projects, which are currently in progress.
Performance Highlights
- Mason Valley Stage 1 Work Program
In May 2022, the Company commenced on the Stage 1 Work Program which included the following scopes and is expected to continue through to the end of 2022:
• Project Permitting and Baseline Studies
o Minor Modification to Exploration Plan of Operations
o Hydrology (pre-work to support future groundwater model)
o Geochemistry (focused on the oxide ore zone)
o Wildlife surveys (selected species only)
o Pre-Plan of Operations to kickoff future Mine Plan of Operations with the agencies
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Lion Copper and Gold Corp. |
o Stakeholder engagement strategy
o Permitting Plan/Strategy document
• Metallurgical Testing of MacArthur and Yerington Samples
o Testing of Oxide, Transitional and Primary Copper Sulphide samples with NutonTM technologies
• Engineering Studies
o Yerington Pit dewatering evaluation
o Yerington Starter Facility infrastructure evaluation
o MacArthur Project and Execution Planning including a refresh of the 2021 study with NutonTM technologies
o Limited Internal Scoping Study for Yerington to include NutonTM
• Exploration
o Drilling beneath the Yerington Pit; one drill hole with depth of 1,793 ft
o Montana-Yerington Prospect, one drill hole with depth of 688 ft
o MacArthur Project; three drill holes with depths of 678-925 ft
o Surface trenching and mapping of the Mason Pass Prospect
On May 12, 2022, the Company initiated the Project environmental permitting process with the U.S. Bureau of Land Management, a first step in formalizing the Company's permitting efforts.
The Company delivered a bulk metallurgical sample to Rio Tinto's NutonTM labs, where comprehensive metallurgical testing and optimization studies are being undertaken on oxide, transitional and sulphide material sourced from both the MacArthur and Yerington deposits.
- MacArthur Copper Project Resource Estimate
On February 25, 2022, the Company announced the results of an updated mineral resource estimate for the MacArthur Copper Project located in Mason Valley, Nevada. The mineral resource estimate was prepared pursuant to NI 43-101 by Independent Mining Consultants of Tucson, Arizona.
The resource estimate includes total contained copper within a pit shell using a variable recovery of four relevant oxidation material types.
Highlights:
a) Measured and Indicated Resource: 300,331,000 tons, grading 0.167% TCu containing 1,000,408,000 pounds of total copper.
b) Inferred Resource: 156,450,000 tons, grading 0.151% TCu containing 471,714,000 pounds of total copper
c) The updated mineral resource estimate results in an increase of over 55% of the Measured and Indicated Resource compared to the prior resource estimate as constrained within the 2014 PEA pit design (MacArthur Copper Project Amended NI 43-101 Technical Report Preliminary Economic Assessment, January 17, 2014).
d) The oxide and transition mineralized envelope of the deposit is confirmed to be open to the south-southeast. Additional sulfide mineralization remains open to the north and east.
- Mineral Resource Estimate
The updated Measured and Indicated and Inferred Resources for the MacArthur Copper Project are reported in Table 1 as set out below. The changes to the mineral resource are based on the 2021 infill drill and assay program, updated geology shapes, and updated metallurgical review and analyses.
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Lion Copper and Gold Corp. |
Table 1: Mineral Resource Estimate
Measured + indicated resources
February 25, 2022
| Material Type | Cutoff Grade | Ktons | Average Grade | Contained Copper | ||||||||
| % TCu | (lbs x 1000) | |||||||||||
| Leach Cap | 0.06 | 15,610 | 0.12 | 37,482 | ||||||||
| Oxide | 0.06 | 226,524 | 0.159 | 718,692 | ||||||||
| Transition | 0.06 | 43,382 | 0.213 | 185,049 | ||||||||
| Sulphide | 0.06/0.08 | 14,815 | 0.2 | 59,185 | ||||||||
| Total | 300,331 | 0.167 | 1,000,408 |
Inferred resources
February 25, 2022
| Material Type | Cutoff Grade | Ktons | Average Grade | Contained Copper | ||||||||
| % TCu | (lbs x 1000) | |||||||||||
| Leach Cap | 0.06 | 18,579 | 0.085 | 31,486 | ||||||||
| Oxide | 0.06 | 105,525 | 0.146 | 309,149 | ||||||||
| Transition | 0.06 | 23,283 | 0.202 | 94,137 | ||||||||
| Sulphide | 0.06/0.08 | 9,063 | 0.204 | 36,942 | ||||||||
| Total | 156,450 | 0.151 | 471,714 |
(%) = percent, TCu = total copper, lbs = pounds, Ktons = short tons x 1000
1. The cutoff grades used for reporting the mineral resources are at or above the internal cutoff grades of between 0.03% and 0.06% TCu for the Leach Cap, Oxide and Transition zones. The sulphide zone internal cutoff grades are 0.06% TCu for the MacArthur and North zones and 0.08% TCu for Gallagher because of a higher acid consumption.
2. Mr. Herbert E. Welhener, MMSA-QPM, an employee of Independent Mining Consultants, Inc. is the Qualified Person for the Mineral Resource estimate.
3. The "reasonable prospects for eventual economic extraction" shape has been created based on a copper price of US$3.75/lb, employment of heap leach extraction methods, processing costs of US$1.56 or $2.20 per short ton, and mining costs of $1.92/short ton for rock and $1.46/short ton alluvium, a variable copper recovery, and tonnage factor of 12.5 cubic feet per short ton for in situ rock.
4. Rounding as required by Best Practices established by the CIM reporting guidelines may result in slight apparent differences between tonnes, grade and contained metal content.
Cautionary Note to Investors
While the terms "measured (mineral) resource," "indicated (mineral) resource" and "inferred (mineral) resource" are recognized and required by National Instrument 43-101 - Standards of Disclosure for Mineral Projects, investors are cautioned that except for that portion of mineral resources classified as mineral reserves, mineral resources do not have demonstrated economic viability. Investors are cautioned not to assume that all or any part of measured or indicated mineral resources will ever be upgraded into mineral reserves. Additionally, investors are cautioned that inferred mineral resources have a high degree of uncertainty as to their existence, as to whether they can be economically or legally mined or will ever be upgraded to a higher category.
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Lion Copper and Gold Corp. |
- Resource Estimate Methodology
Drill Hole Database
The resource estimate was completed using data from 747 drill holes for a total of 299,045 feet drilled. These holes include 23 holes drilled in 2021; 10 as infill holes and 13 holes drilled for metallurgical samples. The total of core drilling is 64,681 ft in 102 holes and the total rotary drilling is 234,360 ft in 636 holes.
Geologic Model
The MacArthur Project is an oxidized portion of a porphyry copper system that has been subjected to several weathering, oxidization and enrichment cycles. The copper mineralization is hosted in altered and weathered Middle Jurassic granodiorite and quartz monzonite intruded by west-northwesterly-trending, moderate to steeply north-dipping quartz porphyry dike swarms.
The geology of the deposit has been interpreted on forty-one north-south sections and on thirty-three east-west sections. The deposit was interpreted into four mineral type zones and definition completed as three-dimensional digital models.
Both lithology and oxidization states have been incorporated into the block model based upon geologic domains developed from the drill hole geologic logs. The oxidization zones of leach cap, oxide, transition, and sulphide have been incorporated into the block model and are used as boundaries for the estimation of total copper grades using an inverse distance cubed estimation method. Surfaces of the oxidation zones have been used to create domain boundaries and used to code the assay, composite, and block model. The block model has been created to encompass all of the drill holes available, within 25ft x 25ft x 25ft (vertical) blocks. In plan view, the resource block model covers an area of 14,500 ft in the north-south direction and 18,100 ft in the east-west direction. The block model encompasses three copper mineralization deposits: MacArthur, North Area and Gallagher.
The mineral resource is tabulated within a defined open pit shell based on economic inputs developed from the metallurgical test work and engineering completed on the project to date. The pit shell economics are based on the premise that the Project will employ a heap leach, SX-EW recovery process. The shapes created by open pit optimization software used the following parameters:
• Copper price = US$3.75/lb
• Leach Cap - recovery of total copper grade = 60%
• Oxide zone - recovery of total copper grade = 71%
• Transition zone - recovery of total copper grade = 65%
• Sulphide zone - recovery of total copper grade = 40%
Block Model Validation
The model was validated through comparisons of grades, grade distribution and tonnage-grade curves of the ID grades with the distribution of drill hole composited grades.
- Water Rights Sale
On February 24, 2021, the Company announced a purchase and sale agreement to sell certain primary groundwater rights to Desert Pearl Farms LLC ("Desert Pearl"), a Yerington-based company involved in agriculture, for $2,910,000 (the "Purchase and Sale Agreement"). In early March 2021, the Company filed an application with the State of Nevada Division of Water Resources ("NDWR") to change the manner of use of the water rights from mining to agriculture and their place of use ("Change Application"). Under the terms of the Purchase and Sale Agreement, Desert Pearl made a $1,000,000 initial payment to the Company on March 5, 2021. The Purchase and Sale Agreement was subject to the NDWR's final approval of the Change Application. The primary water rights covered under the Purchase and Sale Agreement are one of the water rights that are the subject of forfeiture, as discussed in the next paragraph.
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Lion Copper and Gold Corp. |
On July 23, 2021, the Company received a notice from the State of Nevada that three water rights permits had been forfeited. Further, that the application for an extension of time to prevent forfeiture of a fourth certificate was denied. The permits affected are components of the Purchase and Sale Agreement announced on February 24, 2021.
On August 20, 2021, the Company filed a Petition for Judicial Review of the Forfeiture Notice and has retained legal counsel to initiate and vigorously undertake the appeal process. The appeal process is ongoing.
On May 25, 2022, the Company and Desert Pearl amicably terminated the Purchase and Sale Agreement between the parties in light of the Company's agreement with Rio Tinto. As a consequence of the termination, the Company retains the water permit that is subject to forfeiture and designated for mining and milling use. The $1,000,000 deposit was returned to Desert Pearl Farms on June 20, 2022.
- Investment in associate
On April 5, 2022, the Company received 16,049,444 shares in Falcon Butte Minerals Corp. (formerly 1301666 BC Ltd., "Falcon Butte"), which is a private British Columbia company established to acquire mineral resource properties, in connection with a property acquisition agreement to assign the Company's options to acquire the Butte Valley property. At the time of acquisition, the 16,049,444 shares represented 25.54% of shares outstanding, or 20.48% of the potential voting rights of Falcon Butte which includes unexercised warrants, and as at June 30, 2022, the Company's share ownership was reduced to 22.77%, and potential voting rights were diluted to 17.14%. The Company and Falcon Butte have two common directors and executives, as such, management has assessed that the Company has significant influence over Falcon Butte and that the investment should be accounted for using the equity method of accounting.
The opening balance of the investment was determined to be $1,906,000 ($2,374,000 CAD) which represents the fair value of the shares received. The value of the shares was determined based on Falcon Butte's financing that closed concurrently with the property acquisition. The Company's share of net loss for the period was $31,000. The portion of net loss attributable to the Company was determined using the percentage of voting rights held by the Company throughout the period.
Proposed Transactions
The Company has no proposed transactions other than as disclosed in this MD&A.
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Lion Copper and Gold Corp. |
Results of Operations
The following table summarizes the Company's financial results for the six months ended June 30, 2022 and 2021.
| Six months ended June 30, (In thousands of U.S dollars) |
2022 $ |
2021 $ |
Change $ |
Change % |
||||||||
| Operating expenses | ||||||||||||
| General Office | 74 | 31 | 43 | 139 | ||||||||
| Insurance | 21 | 24 | (3 | ) | (13 | ) | ||||||
| Investor Relations | 29 | 41 | (12 | ) | (29 | ) | ||||||
| Professional fees | 330 | 49 | 281 | 573 | ||||||||
| Rent | 7 | 30 | (23 | ) | (77 | ) | ||||||
| Salaries and benefits | 519 | 440 | 79 | 18 | ||||||||
| Share-based payments | 695 | 732 | (37 | ) | (5 | ) | ||||||
| Transfer agent and regulatory | 72 | 44 | 28 | 64 | ||||||||
| Travel | 30 | - | 30 | 100 | ||||||||
| Operating loss | 1,777 | 1,391 | 386 | 28 | ||||||||
| Fair value gain (loss) on derivative liabilities | 35 | (57 | ) | 92 | 161 | |||||||
| Unrealized gain on foreign exchange | 12 | 18 | (6 | ) | (33 | ) | ||||||
| Gain on settlement of debt | 6 | - | 6 | 100 | ||||||||
| Accretion expense | (4 | ) | - | (4 | ) | (100 | ) | |||||
| Gain on sale of Butte Valley | 1,208 | - | 1,208 | 100 | ||||||||
| NSR buy-down | 250 | - | 250 | 100 | ||||||||
| Share of loss of investment in associate | (31 | ) | - | (31 | ) | (100 | ) | |||||
| General exploration | - | (12 | ) | 12 | 100 | |||||||
| Unrealized gain on marketable securities | - | 268 | (268 | ) | (100 | ) | ||||||
| Loss and comprehensive loss | (301 | ) | (1,174 | ) | 873 | (74 | ) |
For the six months ended June 30,2022, the Company incurred a net loss of $301,000 compared to a net loss of $1,174,000 for the same period in the prior year. The decrease in net loss of $873,000 is primarily due to the sale of the Butte Valley property to Falcon Butte. The Company received 16,049,444 common shares of Falcon Butte with a fair value of $1,906,000 and $500 cash for the property, resulting in a gain on sale of $1,208,000. Pursuant to an addendum to the agreement with Falcon Butte, Falcon Butte will pay a total of $500,000 in exchange for a 0.5% buy-down and retirement of certain NSR, as of June 30, 2022, $250,000 has been received and included in loss and comprehensive loss for the period. The increase is partially offset by the $268,000 unrealized gain on marketable securities recorded in the six months ended June 30, 2021, due to an increase in the fair value of the Company's investment in Grande Portage Resources Ltd; the investment was sold during the 2021-year end; therefore, there is no similar gain or loss in the current quarter. Variances within expense items are summarized as follows:
- Increase in General office of $43,000 is due to fees incurred in connection to website upgrades and use of geological modelling software and increased administrative costs.
- Increase in professional fees of $281,000 is primarily due to legal fees incurred in connection with the purchase of the Chaco Bear and Ashton property, sale of the Butte Valley property, and option to earn-in agreement with Rio Tinto America Inc. The Company also incurred fees for the valuation of the Butte Valley property and transaction based strategic consulting.
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Lion Copper and Gold Corp. |
The following table summarizes the Company's financial results for the three months ended June 30, 2022 and 2021.
| Three months ended June 30, (In thousands of U.S dollars) |
2022 $ |
2021 $ |
Change $ |
Change % |
||||||||
| Operating expenses | ||||||||||||
| General Office | 64 | 18 | 46 | (256 | ) | |||||||
| Insurance | 16 | 24 | (8 | ) | (33 | ) | ||||||
| Investor Relations | 15 | 26 | (11 | ) | (42 | ) | ||||||
| Professional fees | 127 | 43 | 84 | 195 | ||||||||
| Rent | 4 | 22 | (18 | ) | (82 | ) | ||||||
| Salaries and benefits | 199 | 234 | (35 | ) | (15 | ) | ||||||
| Share-based payments | 409 | 732 | (323 | ) | (44 | ) | ||||||
| Transfer agent and regulatory | 37 | 17 | 20 | 118 | ||||||||
| Travel | 28 | - | 28 | 100 | ||||||||
| Operating loss | 899 | 1,116 | (217 | ) | (18 | ) | ||||||
| Fair value gain (loss) on derivative liabilities | (2 | ) | (38 | ) | 36 | (95 | ) | |||||
| Unrealized gain on foreign exchange | (4 | ) | 15 | (19 | ) | (127 | ) | |||||
| Gain on settlement of debt | 6 | - | 6 | 100 | ||||||||
| Accretion expense | (4 | ) | - | (4 | ) | (100 | ) | |||||
| Gain on sale of Butte Valley | 1,208 | - | 1,208 | 100 | ||||||||
| NSR buy-down | 250 | - | 250 | 100 | ||||||||
| Share of loss of investment in associate | (31 | ) | - | (31 | ) | (100 | ) | |||||
| Unrealized gain on marketable securities | - | 397 | (397 | ) | (100 | ) | ||||||
| Income (loss) and comprehensive income (loss) | 524 | (742 | ) | 1,266 | (171 | ) |
For the three months ended June 30, 2022, the Company incurred a net income of $524,000 compared to a net loss of $742,000 for the same period in the prior year. The increase in net income of $1,266,000 is primarily due to the sale of the Butte Valley property to Falcon Butte. The Company received 16,049,444 common shares of Falcon Butte with a fair value of $1,906,000 and $500,000 cash for the property, resulting in a gain on sale of $1,208,000. Pursuant to an addendum to the agreement with Falcon Butte, Falcon Butte will pay a total of $500,000 in exchange for a 0.5% buy-down and retirement, as of June 30, 2022, $250,000 has been received and included in loss and comprehensive loss for the period. The increase is partially offset by the $397,000 unrealized gain on marketable securities recorded in the three months ended June 30, 2021, due to an increase in the fair value of the Company's investment in Grande Portage Resources Ltd. The investment was sold during the 2021-year end; therefore, there is no similar gain or loss in the current quarter. Variances within expense items are summarized as follows:
- Increase in General office of $46,000 is due to is due use of geological modelling software and increased administrative costs.
- Increase in professional fees of $84,000 is due to legal fees incurred in connection with the sale of the Butte Valley property to Falcon Butte and transaction based strategic consulting.
- Decrease in share-based payments of $323,000 is due to the Company granting 9,000,000 options with an exercise price $0.095 in the three months ended June 30, 2022, compared to 4,950,000 options with an exercise price of $0.245 during the three months ended June 30, 2021.
Summary of Quarterly Financial Information
The scale and nature of the Company's corporate and administrative activity have remained consistent over the periods presented, except for Q3 and Q4 2021 in which the increase in general and administration expenses is due to the hiring of executives, consultants, and the increase of marketing activity. The Company entered into a number of transactions during the current quarter which resulted in a net income for the period ended June 30, 2022. During the three months ended June 30,2022, the Company sold its' Butte Valley property to Falcon Butte for 16,049,444 common shares of Falcon Butte with a fair value of $1,906,000 and $500,000 cash for the property, resulting in a gain on sale of $1,208,000. Pursuant to an addendum to the agreement with Falcon Butte, Falcon Butte will also pay a total of $500,000 in exchange for a 0.5% buy-down and retirement, as of June 30, 2022, $250,000 has been received and included in loss and comprehensive loss for the period. These gains have partially been offset by a loss in investment in associate of $31,000 which is the portion of Falcon Butte's loss that is attributable to the Company, see Performance Highlights for further details.
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Lion Copper and Gold Corp. |
The following table sets out the quarterly financial information for each of the last eight quarters:
| (In thousands of U.S dollars except for per share amount) | Q2'22 | Q1'22 | Q4'21 | Q3'21 | Q2'21 | Q1'21 | Q4'20 | Q3'20 | ||||||||||||||||
| General administration | (899 | ) | (878 | ) | (943 | ) | (676 | ) | (1,116 | ) | (275 | ) | (298 | ) | (329 | ) | ||||||||
| Fair value (loss) gain on derivative liabilities | (2 | ) | 37 | (31 | ) | 84 | (38 | ) | (19 | ) | 11 | (1 | ) | |||||||||||
| Foreign exchange gain (loss) | (4 | ) | 16 | (38 | ) | 31 | 15 | 3 | (2 | ) | 24 | |||||||||||||
| Other expenses | - | - | (97 | ) | (101 | ) | - | (12 | ) | (51 | ) | (127 | ) | |||||||||||
| Loss on settlement of convertible notes | - | - | - | - | - | - | - | (26 | ) | |||||||||||||||
| Gain on settlement of debt | 6 | - | - | - | - | - | - | - | ||||||||||||||||
| Accretion | (4 | ) | - | - | - | - | - | - | - | |||||||||||||||
| Gain on sale of Butte Valley | 1,208 | - | - | - | - | - | - | - | ||||||||||||||||
| NSR buy-down | 250 | - | - | - | - | - | - | - | ||||||||||||||||
| Share of loss of investment in associate | (31 | ) | - | - | - | - | - | - | - | |||||||||||||||
| Gain (loss) on marketable securities | - | - | (9 | ) | (70 | ) | 397 | (129 | ) | (87 | ) | 222 | ||||||||||||
| Net loss | 524 | (825 | ) | (1,118 | ) | (732 | ) | (742 | ) | (432 | ) | (427 | ) | (237 | ) | |||||||||
| Basic income (loss) per share | 0.00 | (0.00 | ) | (0.00 | ) | (0.00 | ) | (0.00 | ) | (0.00 | ) | (0.00 | ) | (0.00 | ) |
Liquidity and Capital Resources
The Company is an exploration stage company that has not earned any production revenue. Its operations have been dependent mainly on the option agreement with Rio- Tinto and private placements in the last few years without diluting shareholders' value. The Company may have capital requirements in excess of its currently available resources. In the event the Company's plans change, its assumptions change or prove inaccurate, or its capital resources in addition to projected cash flow, if any, prove to be insufficient to fund operations, the Company may be required to seek additional financing. There can be no assurance that the Company will have sufficient financing to meet its future capital requirements or that additional financing will be available on terms acceptable to the Company in the future.
The following table summarizes the Company's cash flows for the six months ended June 30, 2022 and 2021:
| (In thousands of U.S dollars) | Six Months ended June 30, 2022 |
Six Months ended June 30, 2022 |
||||
| Cash used in operating activities | $ | (3,706 | ) | $ | 284 | |
| Cash used in investing activities | 4,479 | (643 | ) | |||
| Cash provided by (used in) financing activities | 1,175 | 279 | ||||
| Increase (decrease) in cash | 1,948 | (80 | ) | |||
| Cash, beginning of period | 842 | 701 | ||||
| Cash, end of period | $ | 2,790 | $ | 621 |
As at June 30,2021, the Company had cash of $2,790,000 (December 31,2021 - $ 842,000) and a working capital deficit of $110,000 (December 31,2021 - $522,000). The decrease in working capital deficit of $412,000 during the six months ended June 30, 2022, is primarily due to the increase in cash of $1,948,000 and decrease in accounts payable of $1,137,000. The increase cash is primarily due to the $4,000,000 received from Rio Tinto under Option to Earn-in agreement and the $1,075,000 cash proceeds raise under the Company's private placement of unsecured convertible debentures. These increases are partially offset by $2,281,000 of the Rio Tinto proceeds that have yet to be spent on the Stage 1 work program (Rio Tinto Deposit).
|
Lion Copper and Gold Corp. |
As of June 30, 2022, the Company had convertible debentures with a fair value of $1,075,000 and a book value of $905,000. The debentures bear interest at a rate of 14% per annum and mature on February 17, 2024 and are convertible into shares of the Company at $0.067 per share until June 17, 2023 and thereafter at $0.078 per share. The holder also has the option to elect at any time prior to the election date to be repaid by way of shares the Company owns of Falcon Butte at the rate of $0.25 per Falcon Butte share.
The Company has no operating revenues and therefore must utilize its cashflows from financing transactions to maintain its capacity to meet ongoing operating activities.
Related Party Information
The Company's related parties include its directors and officers whose remuneration was as follows, subject to change of control provisions for officers:
| (In thousands of U.S dollars) | Six months ended June 30, 2022 |
Six months ended June 30, 2021 |
||||
| Salaries (1) | $ | 274 | $ | 262 | ||
| Director's fees (2) | 13 | 18 | ||||
| Share-based payments (3) | 530 | 325 | ||||
| Interest on convertible debenture (4) | 1 | - | ||||
| $ | 818 | $ | 605 |
(1) Charles Travis Naugle, CEO - $125 (2021 - $37); Stephen Goodman, President, CFO and Corporate Secretary - $99 (2021 - $30); Thomas Patton, Director - $50 (2021 - $50), Gerald Prosalendis, former President and CEO - $Nil (2021 - $49), Lei Wang, former CFO - $Nil (2021 - $37), Lawrence Page, former Corporate Secretary - $Nil (2021 - $59).
(2) Thomas Pressello, Director - $13 (2021 - $Nil), John Kerr, former director - $Nil (2021 - $5.5), Leroy Wilkes, former director - $Nil (2021 - $5.5), Terence Eyton, former director - $Nil (2021 - $7).
(3) Charles Travis Naugle, CEO - $186 (2021 - $73); Stephen Goodman, President, CFO and Corporate Secretary- $196 (2021 - $72); Thomas Patton, director $21 (2021 - $30); Thomas Pressello, director - $46 (2021 - $Nil); Tony Alford, director - $81 (2021 - $Nil), Lei Wang, former CFO - $Nil (2021 - $30), John Kerr, former director - $Nil (2021 - $30), Leroy Wilkes, former director - $Nil (2021 - $30), Terence Eyton, former director - $Nil (2021 - $30), Lawrence Page, former Corporate Secretary - $Nil (2021 - $30).
(4) Tony Alford, director - $1 (2021 - $Nil)
a) On January 26, 2022, the Company entered into a property acquisition agreement to assign its options to acquire the Butte Valley property to Falcon Butte, which is a private British Columbia company established to acquire mineral resource properties. Falcon Butte was founded by two individuals that are also directors and officers of Lion CG and as such the transaction is a non-arm's length transaction under TSXV rules.
On April 5, 2022, the Company completed the assignment of the two option agreements for the Butte Valley property. Pursuant to the assignment agreement, Lion CG received 16,049,444 common shares of Falcon Butte. In addition, the Company received a payment of $500,000 from Falcon Butte, as a reimbursement of
exploration expenditures and related costs incurred by the Company on the Butte Valley Property. The Company recorded a gain of $1,208,000 on the sale of the Butte Valley property.
On April 13, 2022, the Company amended the agreement. Pursuant to the addendum Falcon Butte will pay a total of $500,000 in exchange for a 0.5% buy-down and retirement of certain NSRs. As of June 30, 2022, the Company has received $250,000.
b) As per their agreements with the Company, Charles Travis Naugle, CEO and Stephen Goodman President and CFO are entitled to receive an annual grant of options under the Stock Option Plan of the Company on each Annual Review Date. The number of options will be determined by the Board based on a minimum of 50% and maximum of 150% of the annual base compensation. The exercise price per common share of the Company will be equal to the Market Price (as defined in the TSXV policies) of the Company's common shares as at the Annual Review Date, subject to a minimum exercise price per share of CAD$0.05. The applicable percentage on the annual base salary will be determined by the Board based on an assessment of their performance in achieving the Annual Objectives for the relevant Annual Review Period. On May 25, 2022, Charles Travis Naugle, CEO was issued 1,830,000 bonus options and Stephen Goodman, President and CFO, was granted 1,470,000 bonus options. The bonus options have an exercise price of $0.085 and an expiry date of May 25, 2027.
|
Lion Copper and Gold Corp. |
c) On June 29, 2022, Thomas Patton a director of the Company exercised 2,000,000 warrants with an exercise price of $0.05/ share or gross proceeds of $100,000.
e) As per their agreements with the Company, Charles Travis Naugle, CEO and Stephen Goodman President and CFO were each granted 4 million Restricted Stock Units ("RSUs") on October 21, 2021, which were granted subject to vesting in three equal installments over three years. The grant of RSUs is subject to shareholder approval and further subject to Exchange approval of the RSU Plan and the aforementioned grant thereunder. Pursuant to Exchange policies, RSUs granted prior to shareholder approval of the RSU Plan must be specifically approved by a vote of shareholders excluding the votes of the holders of the Restricted Share Units. As a result of these pending approvals, the RSUs cannot commence vesting any earlier than on date of receipt of the same. If at any point the Company divests its interests, including the option to purchase, absent a merger, sale or similar transaction in a) one of either the Chaco Bear or Ashton projects, then 50% of the total RSUs that have not vested will be cancelled, or b) both the Chaco Bear or Ashton projects, then 100% of the total RSUs that have not vested will be cancelled.
On May 18, 2022, at AGM, Charles Travis Naugle, CEO and Stephen Goodman President and CFO were each granted 4 million RSUs.
f) On June 3, 2022, 1,333,333 RSU's issued to the Charles Travis Naugle, CEO, were released. The RSUs were converted into shares subsequent to the period ended on July 28,2022 and are included in obligation to issue shares as at June 30,2022.
g) As of June 30,2022, 1,333,333 RSUs issued to the Stephen Goodman President and CFO were voluntarily cancelled.
h) During the six months ended June 30, 2022, Tony Alford, director, subscribed for $250,000 of unsecured convertible debentures. The debentures bear interest at a rate of 14% per annum and mature on February 17, 2024 and are convertible into shares of the Company at $0.067 per share until June 17, 2023 and thereafter at $0.078 per share. As of June 30, 2022, the Company accrued $1,000 in interest related to the convertible debentures.
Outstanding Share Information at Date of Report
Authorized: Unlimited number of common shares
Number of common shares issued and outstanding as of August 29, 2022: 309,567,975
Number of stock options outstanding as of August 29, 2022: 29,614,283
Number of warrants outstanding as of August 29, 2022: 110,934,242
Number of restricted share units outstanding as of August 29, 2022: 5,333,334
|
Lion Copper and Gold Corp. |
As of June 30, 2022 and December 31, 2021 the number of stock options outstanding and exercisable were:
| Expiry date | Exercise price (CAD) |
Number of options outstanding |
Remaining contractual life in years |
Number of options exercisable |
||||||
| September 20, 2023 | 0.06 | 1,470,000 | 1.22 | 1,470,000 | ||||||
| June 21, 2024 | 0.07 | 1,900,000 | 1.98 | 1,900,000 | ||||||
| August 8, 2024 | 0.06 | 500,000 | 2.11 | 500,000 | ||||||
| June 20, 2025 | 0.08 | 2,450,000 | 2.98 | 2,450,000 | ||||||
| June 18, 2026 | 0.25 | 3,950,000 | 3.97 | 3,950,000 | ||||||
| September 17, 2026 | 0.11 | 4,500,000 | 4.22 | 4,500,000 | ||||||
| October 21, 2026 | 0.09 | 2,700,000 | 4.31 | 2,025,000 | ||||||
| December 12, 2026 | 0.12 | 750,000 | 4.45 | 562,500 | ||||||
| May 25, 2027 | 0.085 | 9,000,000 | 4.90 | 2,250,000 | ||||||
| Outstanding, June 30, 2022 | 27,220,000 | 19,607,500 |
| Expiry date | Exercise price (CAD) |
Number of options outstanding |
Remaining contractual life in years |
Number of options exercisable |
||||||
| June 23, 2022 | 0.10 | 1,695,000 | 0.48 | 1,695,000 | ||||||
| September 20, 2023 | 0.06 | 1,470,000 | 1.72 | 1,470,000 | ||||||
| June 21, 2024 | 0.07 | 1,900,000 | 2.47 | 1,900,000 | ||||||
| August 8, 2024 | 0.06 | 500,000 | 2.61 | 500,000 | ||||||
| June 20, 2025 | 0.08 | 2,450,000 | 3.47 | 2,450,000 | ||||||
| June 18, 2026 | 0.25 | 3,950,000 | 4.47 | 1,975,000 | ||||||
| September 17, 2026 | 0.11 | 4,500,000 | 4.72 | 2,250,000 | ||||||
| October 21, 2026 | 0.09 | 2,700,000 | 4.81 | 675,000 | ||||||
| December 12, 2026 | 0.12 | 750,000 | 4.95 | 187,500 | ||||||
| Outstanding, December 31, 2021 | 19,915,000 | 13,102,500 |
The following table summarizes warrants outstanding as of June 30, 2022 and December 31, 2021:
| Expiry date | Currency | Exercise price | June 30, 2022 | December 31, 2021 | ||||||
| August 28, 2022 | $ | 0.05 | 9,000,000 | 11,000,000 | ||||||
| September 20, 2022 | CAD | 0.07 | 769,230 | 769,230 | ||||||
| September 13, 2024 | $ | 0.10 | 26,488,733 | 26,488,733 | ||||||
| September 27, 2024 | $ | 0.10 | 13,152,909 | 13,152,909 | ||||||
| October 21, 2024 | $ | 0.10 | 31,672,632 | 31,672,632 | ||||||
| February 17, 2024 | $ | 0.07 | 16,044,774 | - | ||||||
| Outstanding at the end of the period/year | 97,128,278 | 83,083,504 | ||||||||
The following table summarizes Restricted share units outstanding as of June 30, 2022 and December 31, 2021:
| Number of RSUs |
|||
| Outstanding at December 31, 2021 | - | ||
| Granted | 8,000,000 | ||
| Released | (1,333,333 | ) | |
| Cancelled | (1,333,333 | ) | |
| Outstanding at June 30, 2022 | 5,333,334 |
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Lion Copper and Gold Corp. |
Risks Factors and Uncertainties
The Company is subject to many risks and uncertainties, each of which could have an adverse effect on the results, business prospects or financial position.
The board of directors has overall responsibility for establishing and oversight of the Company's risk management framework. The Company examines the various financial instrument risks to which it is exposed and assesses the impact and likelihood of those risks. Financial instruments consist of cash and cash equivalents, investments, accounts payable and derivative liabilities.
Financial instruments recorded at fair value on the consolidated statements of financial position are classified using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. 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 activities expose it to financial risks of varying degrees of significance, which could affect its ability to achieve its strategic objectives for growth and shareholder returns. The principal financial risks to which the Company is exposed are, liquidity risk, currency risk, interest rate risk, credit risk and commodity price risk. The Board of Directors has overall responsibility for the establishment and oversight of the Company's risk management framework and reviews the Company's policies on an ongoing basis.
The investment in Falcon Bute is considered to represent a level 3 fair value measurement.
a) Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company manages liquidity risk through the management of its capital structure. To mitigate this risk, the Company has a planning and budgeting process in place to determine the funds required to support its ongoing operations and capital expenditures. The Company ensures that sufficient funds are raised from equity offerings or debt financings to meet its operating requirements, after considering existing cash and expected exercise of stock options and share purchase warrants.
b) Currency risk
Foreign exchange risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company operates in the United States and Canada; therefore, it is exposed to currency risk from transactions denominated in CAD. Currently, the Company does not have any foreign exchange hedge programs and manages its operational CAD requirements through spot
purchases in the foreign exchange markets. Based on CAD financial assets and liabilities' magnitude, the Company does not have material sensitivity to CAD to USD exchange rates.
c) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market interest rates. The Company is exposed to the interest rate risk on its liabilities through its outstanding borrowings and the interest earned on cash balances. The Company monitors its exposure to interest rates and maintains an investment policy that focuses primarily on the preservation of capital and liquidity.
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Lion Copper and Gold Corp. |
d) Credit risk
Credit risk is the risk of a financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Company is exposed to credit risk through its cash and cash equivalents. Cash and cash equivalents are held in large Canadian financial institutions that have high credit ratings assigned by international credit rating agencies.
Subsequent Events
a) On July 7, 2022, the Company closed its second and final tranche of its non-brokered private placement of unsecured debentures for gross proceeds of $925,000, and for aggregate gross proceeds of $2,000,000. The debentures bear interest at a rate of 14% per annum and mature on March 8, 2024. The debentures may be converted into shares of the company at $0.067 per share until July 8, 2023, and thereafter at $0.078 per share. The holder has the option to elect to be repaid in kind at any time prior to maturity of the debentures by way of shares the company owns of Falcon Blue, or its successor, at the rate of $.025 per Falcon Butte share.
In connection with the sale of the debentures, the company issued to the purchasers one detachable warrant for every $0.067 of principal amount of the debentures. The company issued 13,805,964 warrants in connection with the second tranche of the debenture financing. Each warrant entitles the holder to acquire a common share of the Company at a price of $0.067 for a period of 20 months.
b) On July 7, 2022, the Company issued 1,212,121 common shares of the Company for a deemed price of $0.0825 per share to settle $100,000 of annual maintenance fees to Houston Minerals Ltd. for the Chaco Bear and Ashton Properties.
c) On July 28, 2022, the TSX Venture Exchange accepted filing for the Company to issue 915,910 shares at a price of $0.067 ($0.085CAD) to settle outstanding debt of $61,366 ($77,852 CAD). The shares were issued on August 23, 2022.
d) On July 28, 2022, the Company issued 1,333,333 common shares of the Company to the CEO for the first tranche of RSUs that vested on June 3, 2022.
e) On August 11, 2022, the Company received $250,000 from Falcon Butte for the final royalty buy-down and retirement of certain NSRs relating to the Butte Valley property.
f) On August 20, 2022, the Company granted 2,394,283 incentive stock options to consultants and one director of the Company, exercisable at a price of USD$0.055 (CAD$0.072) for a period of three years.
g) Under U.S. federal securities laws, issuers must assess their foreign private issuer status as of the last business day of their second fiscal quarter. It was announced that more than 50% of the Company's common shares are held by U.S. shareholders, and the Company no longer meets the definition of a foreign private issuer under the United States securities laws. As a result, commencing in 2023, the Company will be required to use forms and rules prescribed for U.S. domestic companies, including the requirement that financial statements be presented in accordance with U.S. GAAP instead of IFRS. The Company's common shares will continue to be listed on the TSX Venture Exchange and quoted on the OTCQB.
Off - Balance Sheet Arrangements
The Company has not entered any off-balance sheet arrangements.
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Lion Copper and Gold Corp. |
Significant Accounting Policies
The accounting policies followed by the Company are set out in note 3 to the audited annual financial statements for the year ended December 31, 2021 and to the condensed consolidated interim financial statements for the six months ended June 30, 2022.
Critical Accounting Judgements and Key Sources of Estimation Uncertainty
Full disclosure of the Company's accounting policies and significant accounting estimates and judgements in accordance with IFRS can be found in note 3 of its audited consolidated financial statements as at December 31, 2021.
Changes in Accounting Policies
The Company has not made changes to its accounting policies.
Accounting Standards Issued but Not Yet Effective
IAS 12 Income Taxes
On May 7, 2021, IASB issued amendments to IAS 12 which require companies to recognize deferred tax on transactions that, on initial recognition, give rise to equal amounts of taxable and deductible temporary differences. The amendments are effective for annual reporting periods beginning on or after 1 January 2023. The impacts of the above amendments to IAS 12 on the Company's consolidated financial statements have not yet been evaluated.
Disclosure controls and procedures and internal controls over financial reporting
Disclosure controls and procedures are intended to provide reasonable assurance that information required to be disclosed is recorded, processed, summarized, and reported within the time periods specified by securities regulations and that the information required to be disclosed is accumulated and communicated to management. Internal controls over financial reporting are intended to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. In connection with National Instrument 52-109 (Certificate of Disclosure in Issuer's Annual and Interim Filings) ("NI 52-109"), the Chief Executive Officer and Chief Financial Officer of the Company have filed a Venture Issuer Basic Certificate with respect to the financial information contained in the unaudited condensed interim consolidated financial statements for the six months ended June 30, 2022 and 2021, and this accompanying MD&A (together, the "Interim Filings").
In contrast to the full certificate under NI 52-109, the Venture Issuer Basic Certificate does not include representations relating to the establishment and maintenance of disclosure controls and procedures and internal control over financial reporting, as defined in NI 52-109. For further information, the reader should refer to the Venture Issuer Basic Certificates filed by the Company on SEDAR at www.sedar.com.
Form 52-109FV2
Certification of Interim Filings
Venture Issuer Basic Certificate
I, Charles Travis Naugle, Chief Executive Officer of Lion Copper and Gold Corp., certify the following:
1. Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Lion Copper and Gold Corp. (the “issuer”) for the interim period ended June 30, 2022.
2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
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NOTE TO READER In contrast to the certificate required for non-venture issuers under National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings (NI 52-109), this Venture Issuer Basic Certificate does not include representations relating to the establishment and maintenance of disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as defined in NI 52-109. In particular, the certifying officers filing this certificate are not making any representations relating to the establishment and maintenance of i) controls and other procedures designed to provide reasonable assurance that information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and ii) a process 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. The issuer’s certifying officers are responsible for ensuring that processes are in place to provide them with sufficient knowledge to support the representations they are making in this certificate. Investors should be aware that inherent limitations on the ability of certifying officers of a venture issuer to design and implement on a cost effective basis DC&P and ICFR as defined in NI 52- 109 may result in additional risks to the quality, reliability, transparency and timeliness of interim and annual filings and other reports provided under securities legislation.
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Form 52-109FV2
Certification of Interim Filings
Venture Issuer Basic Certificate
I, Stephen Goodman, Chief Financial Officer of Lion Copper and Gold Corp., certify the following:
1. Review: I have reviewed the interim financial report and interim MD&A (together, the "interim filings") of Lion Copper and Gold Corp. (the "issuer") for the interim period ended June 30, 2022.
2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
Date: Aug 29 2022
Stephen Goodman
Chief Financial Officer
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NOTE TO READER In contrast to the certificate required for non-venture issuers under National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings (NI 52-109), this Venture Issuer Basic Certificate does not include representations relating to the establishment and maintenance of disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as defined in NI 52-109. In particular, the certifying officers filing this certificate are not making any representations relating to the establishment and maintenance of i) controls and other procedures designed to provide reasonable assurance that information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and ii) a process 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. The issuer’s certifying officers are responsible for ensuring that processes are in place to provide them with sufficient knowledge to support the representations they are making in this certificate. Investors should be aware that inherent limitations on the ability of certifying officers of a venture issuer to design and implement on a cost effective basis DC&P and ICFR as defined in NI 52- 109 may result in additional risks to the quality, reliability, transparency and timeliness of interim and annual filings and other reports provided under securities legislation.
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